Sometimes in the biotechnology sector one company can provide investors with multiple opportunities to make money while limiting risk. This week, we have decided to revisit a very successful trade that we covered a couple of months ago. With a catalyst data approaching and the stock undergoing some consolidation, we feel it is ready to run again.
Insmed Incorporated (INSM) is a biopharmaceutical company that discovers and develops targeted inhaled therapies for those suffering from orphan lung diseases, such as cystic fibrosis patients with non-tuberculosis mycobacterial (NTM) lung infections. We covered the company in early May 2013 for a catalyst run up into the Phase III clinical trial results for ARIKACE in treating pseudomonas aeruginosa in cystic fibrosis patients. From our $8.50 call, the stock rallied to 52-week highs to $14.30 after several analyst upgrades and institutional buying. Afterwards, Insmed reported positive Phase III results and also did an offering to raise cash for future clinical trials. ARIKACE met the primary endpoint of non-inferiority to Novartis' (NVS) drug TOBI. We believe it is time to revisit this successful trade because new catalysts are approaching for different indications.
Insmed's lead product ARIKACE is in clinical trials for several indications. The company is working on treatments for patients with pseudomonas aeruginosa lung infections in cystic fibrosis, nontuberculous mycobacteria lung infections and pseudomonas aeruoginosa lunch infections in non-cystic fibrosis bronchiectasis. ARIKACE uses amikacin, which is a Food and Drug Administration (FDA) approved antibiotic for gram-negative infections. For a detailed explanation of ARIKACE and the Insmed platform, we would like to direct you to our previous article that highlights it in great detail.
The most pertinent indication is for patients with NTM lung infections. According to the Insmed presentation, there are about 50,000 patients diagnosed in the United States, growing at a rate of 8% per year. Even though these infections are quite prevalent, no approved treatments are available.
NTM lung infections can be quite serious. Patients require 7.6 courses of antibiotics and 40% of patients over 65 die from the infection. Since this is an unmet need, the FDA granted ARIKACE orphan status for this indication. ARIKACE also has Fast Track Designation and Qualified Infectious Disease Product (QIDP) for this indication. Insmed would have a long period of exclusivity because QIDP grants the drug 5 years of exclusivity and Orphan Status another 7 years. Since regulatory exclusivity is additive, Insmed would have 12 years of exclusivity on the market.
In order to get some indication of how ARIKACE would work against strains of NTM bacteria, Insmed did several studies before entering Phase II trials. Insmed conducted two different studies, one in vitro (taking place in a test tube) and one in vivo (in an organism).
From above, we can see that ARIKACE has produced positive results for In Vitro studies. ARIKACE was tested against amikacin for 5 different strains of the NTM bacterium M. Avium complex (MAC). At an equivalent concentration, ARIKACE showed greater activity against all 5 strains. Additionally, ARIKACE did not show any toxicity.