01—Abstract
Summary
Summary of the 10-K filed February 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated, a Virginia corporation, is a global biopharmaceutical company focused on rare diseases.
Its lead product candidate, amikacin liposome inhalation suspension (ALIS), is in late-stage development for adult patients with treatment refractory nontuberculous mycobacteria (NTM) lung disease caused by Mycobacterium avium complex (MAC). The company reported top-line CONVERT study results in September 2017, stating the study met its primary endpoint of culture conversion at month six, with 29%a of patients in the ALIS plus current guideline-based therapy arm achieving culture conversion versus 9% in the GBT-only arm (p<0.0001). Insmed plans to file a New Drug Application with the FDA by the end of March 2018 under Subpart H accelerated approval, and expects a six-month priority review.
Financially, the company reported no revenue for 2017 and a net loss of $192.6 millionb, compared with $176.3 million in 2016. Research and development expenses were $109.7 million and general and administrative expenses were $79.2 million, the latter increasing due to pre-commercial planning activities. Cash and cash equivalents were $381.2 million at December 31, 2017, and the accumulated deficit was $957.9 million.
In January 2018, the company completed a $450.0 millionc offering of 1.75% convertible senior notes due 2025, with net proceeds of approximately $435.8 million, and it notified Hercules it would repay its $55.0 million loan in full on February 28, 2018. Management stated it expects operating expenses to be significantly higher in 2018 as it prepares for a potential US launch of ALIS in late 2018. Key risks include the possibility that full CONVERT and 312 study data differ from top-line and interim results, uncertainty over FDA acceptance of the Subpart H pathway, dependence on a small number of third-party manufacturers and a sole nebulizer supplier (PARI), and a securities class action that was dismissed without prejudice on February 15, 2018, with the lead plaintiff having until March 19, 2018 to file a second amended complaint.
02—Key points
Key Highlights
- ALIS CONVERT Phase 3 study met its primary endpoint: 29% of ALIS plus GBT patients achieved culture conversion versus 9% of GBT-only patients (p<0.0001) at month six.
- NDA submission to the FDA under Subpart H planned by end of March 2018, with an expected six-month priority review; ALIS holds orphan, breakthrough therapy and QIDP designations.
- Net loss widened to $192.6 million in 2017 from $176.3 million in 2016, with no material revenue in either year.
- R&D expenses were $109.7 million in 2017 versus $122.7 million in 2016, which included a $30.0 million AstraZeneca upfront payment in 2016; G&A rose to $79.2 million from $50.7 million, driven by pre-commercial planning.
- Cash and cash equivalents of $381.2 million at December 31, 2017, plus approximately $435.8 million in net proceeds from the January 2018 convertible notes offering.
- Hercules term loan of $55.0 million to be repaid in full on February 28, 2018 for approximately $58.0 million including fees and penalty.
- Securities class action (Hoey v. Insmed) was dismissed without prejudice on February 15, 2018; the lead plaintiff has until March 19, 2018 to file a second amended complaint.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 23, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $0$0 | — |
| Cost of Revenue | $0$0 | — |
| Gross Profit | $0$0 | — |
| R&D Expenses | $109.75M$122.72M | −10.6% |
| Operating Expenses | $188.92M$173.40M | +9.0% |
| Operating Income | -$188.92M-$173.40M | −9.0% |
| Interest Expense | $5.92M$3.50M | +69.4% |
| Net Income | -$192.65M-$176.27M | −9.3% |
| EPS (Basic) | $-2.89$-2.85 | −1.4% |
| Shares Outstanding (Basic) | 66.58M61.89M | +7.6% |
| Shares Outstanding (Diluted) | 66.58M61.89M | +7.6% |
05—Questions
Frequently Asked Questions
What is the key clinical result that supports Insmed's planned ALIS filing?
The CONVERT study, which enrolled 336 adult patients with treatment refractory NTM lung disease caused by MAC, met its primary endpoint based on top-line results. Culture conversion by month six was 29% in the ALIS plus GBT arm versus 9% in the GBT-only arm (p<0.0001). The company notes these are top-line results that may differ from the full six-month data.
When does Insmed expect to file for approval and could ALIS launch?
Insmed plans to file a New Drug Application with the FDA by the end of March 2018 under Subpart H accelerated approval and expects a six-month priority review. The filing states the company is pursuing a potential launch of ALIS in the US in late 2018.
How is Insmed funding its operations and what debt changes occurred?
At December 31, 2017, the company had $381.2 million in cash and cash equivalents. In January 2018 it completed a $450.0 million offering of 1.75% convertible senior notes due 2025, with net proceeds of approximately $435.8 million. It also notified Hercules it will repay the $55.0 million A&R Loan Agreement in full on February 28, 2018, for approximately $58.0 million. The company states it believes current funds are sufficient for at least the next 12 months.
What are the main risks to the ALIS program identified in the filing?
Risks include the possibility that full six-month CONVERT data and 312 study data differ from interim results, FDA acceptance uncertainty for the Subpart H pathway and the IVRT test method, reliance on a small number of third-party manufacturers and PARI as the sole nebulizer supplier, and the potential for confirmatory study requirements or withdrawal of approval. The company also cites a securities class action that was dismissed without prejudice.
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