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Insmed Incorporated Message Board

  • fudfighter3 fudfighter3 Feb 4, 2014 8:48 AM Flag

    A reality check on the current share price

    The market cap is now approx $20 x 40 million shares = $800 million.

    Even if Arikace was priced at $5,000 for a four-week course Insmed would still be earning approx $32,500 per year for each Cystic Fibrosis patient.

    Allowing a 20% discount for each additional year of elapsed time, and a market valuation of five times sales, Insmed would only have to be supplying Arikace to 7,692 Cystic Fibrosis patients in two years' time for the shares to be worth $20 today -

    $32,500 x 7,692 x 5 x 0.8 x 0.8 = $799,968,000.

    Once-daily Arikace proved non-inferior to twice-daily Tobi in its EMA Phase III study, and there are an estimated 35,000 with Cystic Fibrosis in Europe. 20% of 35,000 = 7,000.

    Arikace could comprehensively FAIL the NTM study, and anybody paying $20 a share today will almost certainly still be making a good investment provided over 20% of EU CF patients are taking Arikace in two years' time.

    I personally have little doubt that the FDA will approve Arikace on the strength of the data from the EMA study - increasing that target population from 35,000 to 65,000. 12% of 65,000 = 7,800.

    It seems likely that virtually all patients currently on Tobi - either the inhaled solution (involving a mains-powered compressor twice a day) or the more convenient but less lung-friendly inhaled powder (involving four capsules twice a day) - will switch to Arikace as their main antibiotic.

    Furthermore the availability of Arikace - the first once-daily inhaled antibiotic, and the only antibiotic promising a sustained improvement in lung function - will generate far more interest from this patient population.

    Could the current market sell-off take the price significantly lower than $20? Possibly.

    However when the buying starts in anticipation of favourable results due this quarter from the NTM study - how many shareholders will be prepared to sell shares at a price which reflects no future sales of Arikace for mycobacterial lung infections such as NTM and MDR-TB?

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    • Btw - I should also have noted that once-daily Arikace proved as effective as twice-daily Tobramycin inhalation solution in treating Cystic Fibrosis patients infected with Pseudomonas.

      Not every Cystic Fibrosis sufferer has that infection. The likelihood increases with age, with approx 70% of adults thought to be infected.

      The bad news is that this could effectively reduce the target populations - 35,000 in Europe and 30,000 in the US - by half.

      The other news is that the infection is generally acknowledged to significantly reduce both quality of life and life expectancy.

      No antibiotic currently available to this patient population has demonstrated efficacy in improving lung function beyond two or three cycles of therapy - hence my confidence that there will be far greater demand for Arikace than exists for the antibiotics currently available.

      Can anybody realistically argue that there is ANY potential good news from the NTM study reflected in the current share price?

      With an estimated 110,000 patients treated in the US, Europe and Japan each year for pulmonary NTM infection - currently with off-label therapies (including amikacin injection) - I fail to see how $20 a share could reflect anticipated sales for both CF and NTM.

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