Insmed Incorporated — Q1 2022 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2022. Insmed is a biopharmaceutical company whose only marketed product is ARIKAYCE, approved in the U.S., Europe and Japan for specified MAC lung disease populations. Its clinical-stage pipeline includes brensocatib and TPIP. Results are unaudited.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparator |
|---|---|---|
| Net product revenue | $53.1 million | $40.2 million; up 32.1% |
| Cost of product revenue, excluding amortization | $12.2 million; 23.0% of revenue | $9.8 million; 24.5% of revenue |
| Research and development expense | $84.4 million | $61.4 million |
| Selling, general and administrative expense | $56.7 million | $51.6 million |
| Operating loss | $89.8 million | $83.8 million |
| Net loss | $94.6 million; $0.80 per share | $91.6 million; $0.89 per share |
| Net cash used in operating activities | $105.2 million | $128.3 million |
U.S. revenue was $40.8 million, up 9.5%; Japan contributed $10.7 million versus no reported revenue in Q1 2021; Europe and rest-of-world revenue declined 44.3% to $1.6 million. The filing attributes overall growth to the Japan launch and U.S. sales growth.
At March 31, 2022, cash and cash equivalents were $515.7 million and marketable securities were $149.0 million. Working capital was $630.9 million. Cash and cash equivalents declined $201.1 million from year-end, primarily due to operating cash use and purchases of marketable securities. Total assets were $1.153 billion and total liabilities were $1.033 billion.
Long-term debt carrying value was $783.2 million, representing $800.0 million principal of convertible notes, net of issuance costs. The notes comprise $225.0 million due in 2025 at 1.75% and $575.0 million due in 2028 at 0.75%. Finance and operating lease liabilities are additional obligations.
Material changes and unusual items
- R&D expense rose $23.0 million, primarily from clinical development and research, including the brensocatib Phase 3 ASPEN study and ARIKAYCE frontline trials, as well as higher staffing and manufacturing costs.
- SG&A expense increased $5.2 million, primarily from commercial activity and higher compensation-related costs.
- A $11.6 million noncash gain from the change in fair value of deferred and contingent acquisition consideration reduced reported operating expenses; the change was attributed primarily to the company’s share price.
- Interest expense fell to $3.3 million from $7.6 million, mainly because adoption of ASU 2020-06 ended accretion of debt discount. The accounting adoption also materially changed the balance-sheet presentation of convertible debt and equity; it did not represent cash proceeds.
- Three customers accounted for 36%, 32% and 17% of gross product revenue, respectively, compared with 25%, 22% and none reported for the corresponding prior period.
Outlook, management commentary and risks
Management expects continued operating losses and R&D expense growth in 2022, principally due to ASPEN, ARIKAYCE confirmatory trials, TPIP studies and translational research. The company said it believes available funds are sufficient for at least the next 12 months, while noting it may seek additional capital and could delay or reduce programs if adequate financing is unavailable.
- Management anticipated ARISE enrollment completion in 2022 and top-line data in the first half of 2023; ENCORE enrollment completion by the end of 2023. ASPEN enrollment was expected to complete in early 2023. These are forward-looking expectations, not reported outcomes.
- Key risks include ARIKAYCE commercialization and reimbursement, completing confirmatory studies for U.S. full approval, clinical safety and efficacy outcomes for brensocatib and TPIP, dependence on third-party manufacturers, customer concentration, and potential financing needs.
- The filing says COVID-19 did not materially affect Q1 results or operations, but future impacts remained uncertain. Management did not expect ordinary-course legal proceedings to have a material adverse effect.
Important facts for investors to verify
- Subsequent ARIKAYCE sales by geography, particularly whether U.S. growth offsets the reported decline in Europe and rest of world.
- Enrollment, timing and results for ASPEN, ARISE and ENCORE, including implications for brensocatib development and ARIKAYCE’s U.S. approval status.
- Cash burn, liquidity and any financing plans relative to the company’s stated minimum 12-month funding outlook.
- Customer concentration and continuity of supply from the limited number of third-party manufacturers.
- Convertible-note terms, potential dilution and the effects of future fair-value changes in acquisition consideration.