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We view the 16% decline in Insmed’s (INSM.NASDAQ) stock as an overreaction to results from a pivotal Phase III study of Arikace (inhaled amikacin) in treating Pseudomonas aeruginosa in cystic fibrosis (CF) patients. The CLEAR-108 study in 302 CF patients showed non-inferiority in lung function for once-daily Arikace compared to twice-daily TOBI (tobramycin), the standard of care with FY12 global sales of $317m. The headline efficacy and safety data suggest Arikace is an approvable drug, with filings in Europe and Canada planned for H114, although the US situation needs to be resolved.

Focus on end-of-treatment cycle effect
On the study’s primary efficacy end point, relative change from baseline in forced expiratory volume in one second (FEV1) at wk 24, Arikace was non-inferior (p=0.48; 5% non-inferiority margin with 80% power) to TOBI (Δ1%). Conducted in Europe and Canada, the data show numerically smaller improvements in FEV1 for Arikace vs TOBI at each reading, which may have disappointed some investors hoping Arikace would outperform TOBI. However, we suggest this is an artefact of less frequent Arikace dosing and note the minimal (Δ ≤1%) differences between Arikace and TOBI at the end of each four-week treatment cycle at weeks 12 and 20.

Dosing advantage
Secondary efficacy end points: time to/number of pulmonary exacerbations, time to antibiotic rescue treatment, change in P. aeruginosa density in sputum, respiratory hospitalisations, as well as adverse events, were comparable between Arikace and TOBI. Assuming the detailed results confirm head-to-head comparability, Arikace’s once-daily dosing (13 mins/dose) vs TOBI’s twice-daily (20 mins/dose) should enhance patient convenience and therefore compliance. CF patients have a high daily treatment burden, so a once-daily option could be an attractive alternative.

A qualified product
The FDA has designated Arikace as a qualified infectious disease product (QIDP) for non-tuberculous mycobacteria (NTM) lung infections and awarded it fast-track status. QIDP provides an additional five years of market exclusivity (10 years in total) and a 100-patient US Phase II study in NTM should complete in H213.

Valuation: Undemanding $257m EV
With end-Q113 cash of $82m (sufficient to H214) and $19m debt, Insmed’s $257m EV appears undemanding given Arikace’s potential approvals in Europe and Canada, and dosing advantages over TOBI and Cayston ($425m combined FY12 WW sales). Final data and determining a US regulatory pathway are key catalysts.

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