01—Abstract
Summary
Summary of the 10-K filed February 23, 2017. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated (INSM) is a global biopharmaceutical company focused on rare diseases, and its lead product candidate is ARIKAYCE (liposomal amikacin for inhalation, LAI), in late-stage development for adult patients with treatment refractory NTM lung disease caused by MAC.
The company reports it achieved its enrollment objective for the phase 3 CONVERT study in the fourth quarter of 2016 and expects top-line results for the Month 6 primary endpoint in the second half of 2017. If the study meets its primary endpoint, Insmed intends to seek accelerated marketing approval in the US. The company's pipeline also includes INS1007, an oral DPP1 inhibitor in-licensed from AstraZeneca in October 2016 for a $30.0 milliona upfront payment, with a phase 2 study in non-CF bronchiectasis expected to begin in 2017, and INS1009, an inhaled treprostinil prodrug nanoparticle formulation for rare pulmonary disorders including PAH.
Financially, Insmed had no material revenue in 2016, 2015 or 2014. Net loss was $176.3 millionb, or $2.85 per share, in 2016, up from $118.2 million in 2015, driven mainly by the $30.0 million AstraZeneca payment and higher clinical trial and compensation costs. Research and development expenses were $122.7 million and general and administrative expenses were $50.7 million.
Cash and cash equivalents fell to $162.6 millionc at December 31, 2016 from $282.9 million, the accumulated deficit reached $765.2 million, and the company stated it has no committed sources of capital. Borrowings under the Hercules A&R Loan Agreement totaled $55.0 million, with a minimum cash liquidity covenant of $25.0 million. Management believes current funds are sufficient for at least the next 12 months.
The filing also discloses risks including a securities class action filed July 15, 2016 (Hoey v. Insmed Incorporated), a withdrawn European MAA for ARIKAYCE in June 2016, and a rat carcinogenicity finding that the company notes may affect ARIKAYCE's approvability or labeling.
02—Key points
Key Highlights
- Lead asset ARIKAYCE completed enrollment in the phase 3 CONVERT study in Q4 2016; top-line Month 6 primary endpoint results are expected in 2H 2017.
- ARIKAYCE holds FDA orphan drug, breakthrough therapy and QIDP designations; the filing says approval would provide 12 years of US marketing exclusivity.
- Net loss widened to $176.3 million ($2.85 per share) in 2016 from $118.2 million ($2.02 per share) in 2015, with no material revenue in any year presented.
- Cash and cash equivalents declined to $162.6 million at December 31, 2016 from $282.9 million, and the company reports no committed sources of capital.
- Debt rose to $55.0 million under the Hercules A&R Loan Agreement, which carries a $25.0 million minimum cash liquidity covenant and a maturity date of October 1, 2020.
- The $30.0 million upfront AZ License Agreement for INS1007 (AZD7986) added to R&D expense; further milestones of up to $85.0 million plus $42.5 million for a second indication are contingent.
- A securities class action (Hoey v. Insmed Incorporated) was filed July 15, 2016, and an amended complaint in December 2016 added Securities Act claims; the company intends to defend it vigorously.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 23, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $0$0 | — |
| Cost of Revenue | $0— | — |
| Gross Profit | $0— | — |
| R&D Expenses | $122.72M$74.28M | +65.2% |
| Operating Expenses | $173.40M$117.49M | +47.6% |
| Operating Income | -$173.40M-$117.49M | −47.6% |
| Interest Expense | $3.50M$2.89M | +21.1% |
| Net Income | -$176.27M-$118.18M | −49.2% |
| EPS (Basic) | $-2.85$-2.02 | −41.1% |
| Shares Outstanding (Basic) | 61.89M58.63M | +5.6% |
| Shares Outstanding (Diluted) | 61.89M58.63M | +5.6% |
05—Questions
Frequently Asked Questions
When will Insmed know whether ARIKAYCE's CONVERT study met its primary endpoint?
The company expects to report top-line results for the Month 6 primary endpoint in the second half of 2017. If the primary endpoint is met, Insmed intends to seek accelerated marketing approval for ARIKAYCE in the US.
How much cash does Insmed have and how long will it last?
Cash and cash equivalents were $162.6 million at December 31, 2016. The company believes its current funds are sufficient to meet financial needs for at least the next 12 months, but it states it has no committed sources of capital and will need to raise additional funds.
Why did the net loss increase in 2016?
The net loss increased by $58.1 million to $176.3 million, primarily due to a $30.0 million upfront payment to AstraZeneca for INS1007, a $10.3 million rise in external clinical development expenses tied to CONVERT, and a $9.8 million increase in compensation and related expenses from higher headcount.
What happened with ARIKAYCE's European marketing application?
Insmed filed an MAA with the EMA in the fourth quarter of 2014. After an oral explanation meeting in May 2016, the CHMP concluded the data did not provide enough evidence to support approval, and Insmed withdrew the MAA in June 2016. It intends to resubmit when sufficient clinical data are available.
What legal risks does Insmed face?
Insmed and certain executives and directors are defendants in a securities class action filed July 15, 2016, which alleges misleading statements about ARIKAYCE's development and European approval prospects. An amended complaint added Securities Act claims related to the March 31, 2015 public offering. The filing says the company believes the claims are without merit and intends to move to dismiss, with the response due by March 1, 2017.
06—Continue