01—Abstract
Summary
Summary of the 10-K filed February 25, 2016. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated is a global biopharmaceutical company focused on rare diseases.
Its lead candidate, ARIKAYCE (liposomal amikacin for inhalation, LAI), is in late-stage development for nontuberculous mycobacteria (NTM) lung disease caused by Mycobacterium avium complex (MAC). The company has no meaningful revenue: it recorded no product revenue in 2015 or 2014, and the only revenue reported in the period was an $11.5 milliona one-time payment in 2013 from Premacure. The net loss was $118.2 million in 2015 (($2.02) per share), versus $79.2 million in 2014, and the accumulated deficit reached $589.0 million.
Cash and cash equivalents were $282.9 millionb at December 31, 2015, following net proceeds of $222.9 million from an April 2015 offering. Management states that this cash is sufficient to fund operations for at least the next twelve months. The near-term catalysts are regulatory and clinical.
The European Medicines Agency's CHMP is reviewing the marketing authorization application for ARIKAYCE, with a 180-day list of outstanding issues expected in the first quarter of 2016 and a CHMP opinion expected around the middle of 2016. The global phase 3 CONVERT study is expected to complete enrollment in the second half of 2016, and the company plans to prepare a US NDA based on its results. The earlier phase 2 (112) study missed its primary endpoint on mycobacterial density (p=0.072) but showed a key secondary endpoint of culture conversion at Day 84 with p=0.003.
Management expects research and development and general and administrative expenses to rise in 2016. The filing also highlights risks. Commercial success depends entirely on regulatory approval of ARIKAYCE, and the company has a very small sales organization and limited commercial experience.
Manufacturing relies on sole or limited third-party suppliers, including Althea, Therapure and PARI for the nebulizer. The company carries a $25.0 millionc Hercules loan at 9.25% with covenants restricting debt, liens and dividends.
02—Key points
Key Highlights
- Net loss of $118.2 million in 2015 versus $79.2 million in 2014; operating loss of $117.5 million; basic and diluted loss of ($2.02) per share
- No meaningful revenue in 2015 or 2014; the company's only recent revenue was an $11.5 million payment received in 2013 from Premacure (now Shire plc)
- Cash and cash equivalents of $282.9 million at December 31, 2015, up from $159.2 million, after $222.9 million net proceeds from an April 2015 public offering of 11.5 million shares
- Research and development expenses rose to $74.3 million in 2015 from $56.3 million, driven mainly by the ARIKAYCE phase 3 CONVERT study; general and administrative expenses rose to $43.2 million from $31.1 million
- EMA's CHMP is reviewing the ARIKAYCE marketing authorization application for MAC lung disease, with a 180-day list of outstanding issues expected in Q1 2016 and an opinion expected around mid-2016
- CONVERT phase 3 study expected to complete patient enrollment in the second half of 2016; the company is preparing a US NDA based on its results
- $25.0 million Hercules term loan at 9.25% with restrictive covenants; principal repayments begin October 2016 and maturity is January 1, 2018
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 25, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $0— | — |
| R&D Expenses | $74.28M$56.29M | +31.9% |
| Operating Expenses | $117.49M$87.36M | +34.5% |
| Operating Income | -$117.49M-$87.36M | −34.5% |
| Interest Expense | $2.89M$2.42M | +19.6% |
| Net Income | -$118.18M-$79.16M | −49.3% |
| EPS (Basic) | $-2.02$-1.84 | −9.8% |
| Shares Outstanding (Basic) | 58.63M43.09M | +36.1% |
| Shares Outstanding (Diluted) | 58.63M43.09M | +36.1% |
05—Questions
Frequently Asked Questions
What is the main driver of value for Insmed investors?
The filing indicates that the company's near-term prospects depend heavily on ARIKAYCE. The company says it is investing substantially all of its efforts and financial resources in developing it, and that it does not expect ARIKAYCE or any other product candidate to be commercially available in any market until it receives approval from the EMA, FDA or an equivalent regulator. The company also states it has no committed sources of capital.
How much cash does Insmed have, and is it enough?
Insmed reported cash and cash equivalents of $282.9 million as of December 31, 2015, and working capital of $265.9 million. Net cash used in operating activities was $100.7 million in 2015. Management believes current funds are sufficient to meet financial needs for at least the next twelve months, but it may raise additional capital and says future funding may be necessary.
What are the key regulatory milestones for ARIKAYCE in 2016?
The company expects to receive the CHMP's 180-day list of outstanding issues in the first quarter of 2016, to respond to it and participate in an oral hearing in the second quarter, and expects a CHMP opinion around the middle of 2016. In the US, it plans to prepare an NDA based on CONVERT results, and it states that if the Month 6 culture conversion endpoint is met, it believes it would be eligible to submit an NDA under accelerated approval.
What did the phase 2 (112) study show?
The primary efficacy endpoint, change in mycobacterial density at Day 84, did not meet the pre-specified level for statistical significance, though the filing describes a positive trend (p=0.072) in favor of ARIKAYCE. The key secondary endpoint of culture conversion to negative at Day 84 had a p-value of 0.003 in favor of ARIKAYCE. The filing also reports serious adverse events in 18.2% of ARIKAYCE subjects versus 8.9% of placebo subjects in the double-blind phase.
What are the main risks to Insmed's business?
Risks the filing highlights include the possibility that regulators will not approve ARIKAYCE or will limit its indication, dependence on a small number of third-party manufacturers and suppliers (Althea, Therapure and PARI for the nebulizer), a very small sales organization with limited commercial experience, the possibility that enrollment in CONVERT takes longer than expected, and a rodent carcinogenicity finding of lung carcinomas at high doses that the filing says may still affect ARIKAYCE's labeling.
06—Continue