It has been a year of two halves for Insmed. One of the top small biotech performers for the first six months of 2011, the New Jersey group’s shares plummeted 31% yesterday to $3.01 on news that the FDA has maintained a hold on clinical trials of cystic fibrosis (CF) treatment Arikace while the company conducts a nine-month safety study in dogs (Pharmasset success story leads small caps in first half of 2011, July 5, 2011).
With a $94m cash pile at June 30, Insmed may be able to withstand the delay to its lead programme, especially given that its R&D costs will shrink as it puts its 700-patient phase III programme on the back burner. But fears that the cancer signal first announced in August could shelve the inhaled antibiotic will likely depress its shares for at least the next year in the absence of any other news flow.
Announcement that the clinical hold will be extended had a feel of the other shoe dropping. In August, Insmed announced the regulator had taken initial action to delay recruitment and enrolment in two trials to treat chronic pseudomonas aeruginosa infections and a trial in non-tuberculous mycobacteria based on two-year rat carcinogenicity data.
Following discussions with the FDA, the company confirmed that the additional study in dogs will be necessary to assess the risk and identify a potential cystic fibrosis (CF) subpopulation in which the benefits would outweigh any risk of cancer. The company said no patients had been dosed in the phase III trials.
CF is a genetic disease that causes the mucus to become very thick and sticky, leading to accumulation of fluid that allows bacteria to grow and infections to spread. Respiratory failure is the most common cause of death in CF, and thus effective treatments to prevent infections are sought after.
There are no disease modifying agents; according to EvaluatePharma data, the top-selling branded products in the indication in 2016 will consist of anti-infectives, expectorants and pancreatic enzyme products, which assist in digestion as patients also experience blockages in their pancreatic ducts.
Arikace is an inhaled formulation of the intravenous antibiotic amikacin, which is used to treat gram-negative infections such as pseudomonas species and escherichia coli. Insmed had been hoping that an inhalled formulation would avoid the kidney toxicity issues that have arisen from systemic exposure to amikacin. However, inhaled drugs have their own safety challenges.
Optimism was warranted earlier this year. The merger with privately held Transave last December brought on board Arikace, which gave Insmed a phase III ready product to supplement its earlier stage pipeline.
Through the end of July, Insmed’s shares were up 82% on the year, and equity analysts forecast that they were sufficiently funded to complete the phase III programme, which would allow it to retain much of the value of Arikace as it sought big pharma partners. But the shares lost half of their value on August 2, to $5.39, following the initial news of the clinical hold. With this latest slump the company's market value is now lower than its cash balance.
With Arikace its lead product – amyotrophic lateral sclerosis treatment Iplex has been shelved, and the company says it intends develop its oncology pipeline only through a partnership – Insmed will be faced with some difficult choices as it awaits news from the dog trial.
R&D costs will indeed be lower than expected, but with a large cash pile it will be tempting to put the money to work to acquire another product in a bid to restore investor confidence. This may be especially true as many investors may wonder why the risk of a cancer signal was not clearly identified before the merger.
In a two-product scenario - should it in-license another product - the group could find its R&D cup running over if Arikace is cleared for phase III trials next year. Steady nerves may be called for in Insmed’s executive suite as it awaits the Arikace news