Business context and reporting period
Insmed Incorporated is a global biopharmaceutical company. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2023. ARIKAYCE is its only approved commercial product; brensocatib, TPIP and early-stage programs are in development.
Financial performance and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Product revenue | $77.2 | $65.2 | $142.4 | $118.3 |
| Operating loss | $(235.5) | $(88.3) | $(383.7) | $(178.1) |
| Net loss | $(244.8) | $(95.6) | $(404.6) | $(190.3) |
| Net loss per share, basic and diluted | $(1.78) | $(0.80) | $(2.95) | $(1.60) |
| Net cash used in operating activities | Not separately presented | Not separately presented | $(269.1) | $(207.5) |
Q2 revenue grew 18.4% year over year; first-half revenue grew 20.4%. For the first half, U.S. sales were $106.7 million, Japan $28.7 million and Europe/rest of world $7.0 million. Cost of product revenue, excluding intangible amortization, was 21.5% of revenue in Q2 and 21.4% in the first half, versus 25.1% and 24.2%, respectively, a year earlier.
Research and development expense was $197.0 million in Q2 and $324.8 million in the first half; SG&A was $84.4 million and $164.3 million, respectively. Q2 investment income was $11.2 million and interest expense $20.6 million; first-half figures were $21.7 million and $40.6 million.
At June 30, cash and cash equivalents were $612.9 million and marketable securities $304.9 million, totaling $917.8 million. Working capital was $848.2 million. Current assets were $1,052.4 million and current liabilities $204.3 million. Long-term debt was $1,139.8 million, comprising convertible notes and the secured term loan; the royalty financing liability was another $152.0 million. Shareholders’ equity was a deficit of $155.7 million.
Material changes versus the prior comparable period
- ARIKAYCE sales rose across the U.S. and Europe/rest of world in Q2; Japan sales were slightly lower. First-half sales increased in all three reported regions.
- First-half operating cash use increased to $269.1 million from $207.5 million. The cash balance declined from $1,074.0 million at year-end, partly as the company shifted funds into marketable securities, which increased from $74.2 million to $304.9 million.
- R&D expense rose substantially, including $76.5 million of non-cash expense for the Adrestia asset acquisition in Q2 and first-half non-cash acquisition costs of $86.7 million, including Vertuis. Higher clinical-development and personnel costs also contributed.
- SG&A increased, primarily due to brensocatib commercial-readiness spending, external professional fees and increased headcount. Interest expense rose following the 2022 term loan and royalty financing.
- Q2 included a $13.5 million expense from changes in fair value of deferred and contingent consideration, versus a $12.6 million gain in Q2 2022. First-half 2023 included a $4.0 million expense versus a $24.2 million gain in the prior-year period.
- Insmed issued 2.0 million shares through its ATM program in the first half, receiving $38.0 million net, and issued 3.43 million shares as Adrestia acquisition consideration. Shares outstanding were 142.75 million at June 30, versus 135.65 million at year-end.
Outlook, commentary and risks
Management expects continued operating losses and substantial future cash requirements, but stated that available funds were sufficient for at least the next 12 months. It may seek additional capital depending on business progress and market conditions. Management expects 2023 R&D and SG&A expenses to increase versus 2022, reflecting clinical trials, research and brensocatib launch-readiness work. No revenue or earnings guidance was provided.
- Management anticipated ARISE topline data in Q3 2023 and ENCORE enrollment completion by year-end 2023; brensocatib ASPEN topline data in Q2 2024; and TPIP interim blinded safety/tolerability data in the second half of 2023 and PH-ILD topline results in the first half of 2024. These were forward-looking expectations in the filing.
- ARIKAYCE has accelerated U.S. approval; full approval depends on the confirmatory post-marketing program, including ENCORE. Risks include trial results, safety, regulatory requirements and maintaining commercial uptake and reimbursement.
- The term loan bears interest at SOFR, subject to a 2.5% floor, plus 7.75%; up to half of interest during the first 24 months may be paid in kind. The OrbiMed arrangement receives a share of ARIKAYCE sales and, if approved, brensocatib sales, subject to minimum-payment and capped-return terms.
- Other disclosed risks include dependence on a limited number of customers and third-party manufacturers, clinical and regulatory uncertainty, competition, financing and debt obligations, acquisition integration, and potential supply constraints. Three customers represented 36%, 35% and 17% of first-half gross product revenue, respectively.
- Adrestia consideration included 3.43 million shares valued at $72.4 million, plus potential contingent cash payments of up to $326.5 million and royalties. The company expensed $76.5 million for acquired R&D. Management said ordinary-course legal matters were not expected to materially affect results.
Most important facts for investors to verify
- ARIKAYCE sales trajectory by geography and the sustainability of reported product-cost ratios.
- Upcoming ARISE, ENCORE, ASPEN and TPIP trial results, timing and any implications for regulatory approval or commercialization.
- Cash burn, marketable-security availability, management’s stated 12-month liquidity runway and potential need for additional financing.
- Debt and royalty-financing costs, covenants, repayment terms and the potential dilution from equity issuance, convertible notes and acquisition-related shares.
- Actual and potential future acquisition obligations, including Adrestia milestone payments and royalties, and the effect of one-time acquisition R&D charges on reported losses.