01—Abstract
Summary
Summary of the 10-K filed March 6, 2014. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated (Virginia corporation, Nasdaq: INSM) is a biopharmaceutical company developing inhaled therapies for serious lung diseases.
Its lead candidate, ARIKAYCE (liposomal amikacin for inhalation, LAI), is in a phase 2 trial for non-tuberculous mycobacteria (NTM) lung infections, with top-line results expected in March 2014, and has completed a phase 3 trial in cystic fibrosis (CF) patients with Pseudomonas lung infections in Europe and Canada, with regulatory filings planned for mid-2014. The company estimates the combined global market for these two orphan indications at approximately $1 billiona. The company has no approved products and no material revenue: 2013 revenue was $11.5 million, a one-time payment from Premacure (now Shire plc) for its royalty rights, compared with no revenue in 2012.
Financially, net loss attributable to common stockholders was $56.1 millionb ($1.60 per share) in 2013, up from $41.4 million in 2012, driven mainly by higher research and development expense ($44.3 million vs. $29.8 million) and general and administrative expense ($22.2 million vs. $12.7 million). Cash and cash equivalents were $113.9 million at December 31, 2013, and the company stated it believes it has sufficient funds for 2014, though it may need additional capital. The accumulated deficit was $391.6 million.
Debt consisted of $20.0 millionc of secured notes under a Hercules loan agreement, and the company completed a public offering in July 2013 with net proceeds of $67.0 million. Key risks include dependence on ARIKAYCE's success, sole-source suppliers (Althea for drug product and PARI for the nebulizer), a rat carcinogenicity finding that led to FDA clinical holds in 2011 (lifted in 2012), competition from Novartis's Tobi products in CF, and a pending appraisal action by former Transave stockholders with trial scheduled for April 2014.
02—Key points
Key Highlights
- Lead product candidate ARIKAYCE targets two orphan indications: NTM lung infections (phase 2 top-line results expected March 2014) and Pseudomonas lung infections in CF patients (phase 3 completed in 2013, with EMA and Health Canada filings planned for mid-2014).
- The company estimates the combined global market potential for its two orphan indications at approximately $1 billion, and the CF Pseudomonas market at approximately $500 million.
- 2013 total revenue was $11.5 million, a one-time payment from Premacure (now Shire plc) for the right to royalties; no revenue was recognized in 2012.
- Net loss attributable to common stockholders widened to $56.1 million ($1.60 per share) in 2013 from $41.4 million ($1.56 per share) in 2012, as R&D rose to $44.3 million and G&A rose to $22.2 million.
- Cash and cash equivalents were $113.9 million at December 31, 2013; the company raised $67.0 million net from a July 2013 public offering and stated it believes it has sufficient funds for 2014.
- Accumulated deficit was $391.6 million and the company had $20.0 million of secured notes outstanding under a Hercules loan agreement with a 9.25% interest rate.
- The company relies on sole-source third-party suppliers, including Althea for ARIKAYCE manufacturing and PARI for the nebulizer, and signed a contract manufacturing agreement with Therapure Biopharma in February 2014.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed March 6, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $11.50M$0 | — |
| R&D Expenses | $44.28M$29.78M | +48.7% |
| Operating Expenses | $66.52M$42.44M | +56.7% |
| Operating Income | -$55.02M-$42.44M | −29.6% |
| Interest Expense | $2.41M$763K | +216.1% |
| Net Income | -$56.07M-$41.37M | −35.5% |
| EPS (Basic) | $-1.60$-1.56 | −2.6% |
| Shares Outstanding (Basic) | 34.98M26.55M | +31.8% |
| Shares Outstanding (Diluted) | 34.98M26.55M | +31.8% |
05—Questions
Frequently Asked Questions
What is the status of Insmed's lead product, ARIKAYCE?
ARIKAYCE is not yet approved in any market. The NTM phase 2 trial completed enrollment of 90 patients, with top-line results expected in March 2014. The CF Pseudomonas phase 3 trial in Europe and Canada achieved its non-inferiority primary endpoint versus Tobi, and filings with the EMA and Health Canada are planned for mid-2014. The company also received orphan drug designation in the US and Europe, and FDA Fast Track and QIDP designations for the NTM indication.
How much cash does Insmed have and will it need more?
As of December 31, 2013, the company had $113.9 million of cash and cash equivalents. It stated it believes it has sufficient funds to meet its financial needs for 2014, but it has no committed sources of capital and may need to raise additional funds for commercialization and development, potentially through equity or debt offerings that could dilute shareholders.
Why did the net loss increase in 2013?
The net loss increased by $14.7 million, primarily due to a $14.5 million increase in research and development expenses from the CF phase 3 study, the two-year open-label safety study, and the NTM phase 2 study, and a $9.6 million increase in general and administrative expenses, including higher compensation and consulting costs. These were partially offset by $11.5 million of other revenue from the Premacure payment.
What are the main risks for investors?
Key risks include the company's near-term dependence on ARIKAYCE gaining regulatory approval, which may not occur for at least a year or two if ever; reliance on sole-source suppliers for the drug and nebulizer; a rat carcinogenicity study that led to FDA clinical holds in 2011 (lifted in 2012); and the company's history of operating losses, with no meaningful revenue source until a product is approved. Insmed also faces a pending appraisal action by former Transave stockholders, with trial scheduled for April 2014.
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