Insmed Incorporated — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance-sheet figures are as of March 31, 2017, compared with December 31, 2016. Insmed is a clinical-stage biopharmaceutical company focused on rare diseases. It reported no revenue.
Key financial metrics
| Metric | Q1 2017 / March 31, 2017 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $0 in Q1 2016 |
| Research and development expense | $22.3 million | $20.5 million in Q1 2016 |
| General and administrative expense | $13.7 million | $12.5 million in Q1 2016 |
| Operating loss | $36.0 million | $33.1 million in Q1 2016 |
| Net loss / loss per share | $37.4 million / $0.60 | $33.5 million / $0.54 in Q1 2016 |
| Operating cash flow | $(36.9) million | $(29.5) million in Q1 2016 |
| Cash and cash equivalents | $125.8 million | $162.6 million at December 31, 2016 |
| Working capital | $108.4 million | $140.4 million at December 31, 2016 |
| Debt | $55.0 million principal; $55.0 million net carrying amount, approximately | $55.0 million principal at March 31, 2017 |
Net loss increased by $3.9 million year over year. R&D expense rose $1.7 million, primarily due to higher compensation and headcount; G&A expense rose $1.2 million, principally from pre-commercial planning and increased compensation. Interest expense increased $0.9 million to $1.5 million, mainly reflecting borrowings added in 2016. Cash declined $36.8 million during the quarter, primarily from operating activities. The filing does not present a meaningful operating margin given the absence of revenue.
Business developments and outlook
- ARIKAYCE: The lead candidate is in the Phase 3 CONVERT study for treatment-refractory NTM lung disease caused by MAC. Enrollment objectives were achieved in Q4 2016. Management expected top-line results for the Month 6 primary endpoint in the second half of 2017. If successful, Insmed intended to seek accelerated US approval and pursue approvals in certain other countries.
- INS1007: Licensed from AstraZeneca in 2016, this oral DPP1 inhibitor is being developed initially for non-CF bronchiectasis. Insmed planned to submit an IND and start a Phase 2 study in the second half of 2017.
- INS1009: The Phase 1 study was completed. The company was evaluating options to advance development; no specific next milestone was stated.
- Management said existing funds were expected to cover financial needs for at least the next 12 months, but also said it would seek additional capital within that period. Future cash needs depend on clinical and regulatory progress, commercial preparation, manufacturing, and other development costs. Insmed cautioned that financing may not be available on favorable terms, or at all.
Debt, liquidity, risks, and contingencies
- The Hercules loan has $55.0 million outstanding, a stated 9.25% rate subject to the agreement’s rate formula, and a maturity date of October 1, 2020. Interest-only payments were extended through November 1, 2018, subject to possible extension under specified conditions. The lender holds a first-priority lien on company assets other than intellectual property. A $25.0 million minimum-cash covenant applies until specified financing or study-data conditions are met.
- The company’s cash balance substantially exceeded the stated minimum-cash covenant at quarter-end. Management identified continuing cash needs and potential additional financing as important considerations; no revenue-generating commercialization was assured.
- A securities class action alleges misstatements regarding ARIKAYCE’s European regulatory prospects and the company’s 2015 offering disclosures. Insmed moved to dismiss the amended complaint and said it would defend the case; the outcome was uncertain and damages sought were unspecified.
- Other key risks include clinical-trial failure or delay, regulatory approval and reimbursement uncertainty, manufacturing and third-party reliance, intellectual-property protection, financing availability, commercialization execution, and litigation. The company reported no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- CONVERT Month 6 results, the primary endpoint, and the timing and basis for any planned ARIKAYCE regulatory filing.
- Cash burn, cash runway, and whether additional financing is obtained on acceptable terms.
- Hercules loan terms and covenant status, including the applicable interest-rate formula and repayment schedule.
- Progress on the INS1007 IND and Phase 2 plans, and any decision regarding further development of INS1009.
- Developments in the securities litigation and any resulting financial exposure.