Insmed Incorporated — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Insmed is a biopharmaceutical company whose commercial product is ARIKAYCE; its clinical pipeline includes brensocatib and TPIP. Amounts below are in U.S. dollars.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net product revenue | $65.2 million | $45.4 million | $118.3 million | $85.6 million |
| Operating loss | $88.3 million | $88.6 million | $178.1 million | $172.4 million |
| Net loss | $95.6 million | $117.3 million | $190.3 million | $209.0 million |
| Basic and diluted loss per share | $0.80 | $1.07 | $1.60 | $1.97 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $207.5 million | $203.7 million |
Q2 product revenue rose 43.8%, led by U.S. growth and ARIKAYCE sales in Japan. U.S. revenue increased 13.0% to $47.2 million; Japan contributed $15.8 million. Europe and rest-of-world revenue declined 39.6% to $2.2 million. For the first half, revenue increased 38.3% year over year.
Q2 cost of product revenue was 25.1% of revenue versus 23.9% a year earlier, implying a product gross margin of approximately 74.9% versus 76.1%. First-half cost was 24.2% of revenue in both years. R&D increased 36.9% in Q2 to $88.5 million and 37.2% in the first half to $172.9 million, reflecting clinical-trial, manufacturing, and staffing costs. SG&A increased 4.9% in Q2 to $60.0 million and 7.4% in the first half to $116.7 million.
Liquidity, debt and balance sheet
- At June 30, 2022, cash and cash equivalents were $416.1 million and marketable securities were $148.6 million, totaling $564.7 million. Cash and cash equivalents were $716.8 million at December 31, 2021; the decline primarily reflected operating cash use and purchases of securities.
- Working capital was $560.9 million, down from $701.9 million at year-end 2021. Current assets were $674.7 million and current liabilities $113.8 million.
- Long-term debt carrying value was $784.0 million, against $800.0 million principal outstanding: $225.0 million of 1.75% convertible notes due 2025 and $575.0 million of 0.75% notes due 2028. No principal repayments were scheduled for 2022–2024; $225.0 million is due in 2025.
- Shareholders’ equity was $44.2 million versus $410.5 million at year-end. The change includes the January 2022 adoption of ASU 2020-06, which reduced additional paid-in capital by $264.6 million and adjusted accumulated deficit by $50.2 million, as well as the period’s net loss and other movements.
Material changes and unusual items
- Operating loss was nearly unchanged in Q2 despite revenue growth, as higher R&D and selling costs largely offset the additional product revenue.
- Net loss improved year over year, partly due to a $12.6 million noncash gain from changes in the fair value of deferred and contingent acquisition consideration. The six-month gain was $24.2 million.
- Interest expense fell to $3.4 million in Q2 from $10.3 million, and to $6.6 million in the first half from $17.9 million, following adoption of ASU 2020-06 and cessation of debt-discount accretion. This accounting change affects comparability.
- First-half investing cash outflow of $104.3 million mainly reflected purchases of marketable securities. Financing provided $12.8 million, compared with $604.3 million in the prior-year period, which included debt and equity issuance.
Outlook, commentary and risks
- Management said available funds were sufficient for at least the next 12 months, while noting that future cash needs are substantial and additional capital may be sought opportunistically. Management expected R&D and SG&A expenses to continue increasing in 2022, including for trials and potential brensocatib commercial readiness. No numerical revenue or earnings guidance was provided.
- Expected development milestones included ASPEN Phase 3 brensocatib enrollment completion in Q1 2023; ARIKAYCE ARISE enrollment completion by year-end 2022 with data expected during 2023; and ENCORE enrollment completion by year-end 2023. Results from the CFTR-modulator arm of the brensocatib CF study were anticipated by year-end 2022.
- ARIKAYCE is FDA-approved under accelerated approval; full U.S. approval depends on the confirmatory program, including ENCORE and validation of the patient-reported outcome tool. Development and regulatory outcomes for brensocatib and TPIP remain uncertain.
- Insmed reported it had not reached a German price agreement for ARIKAYCE; from September 1, 2022, patient supply in Germany was to be enabled through imports from other EU countries while discussions continued.
- Three customers represented 87% of gross product revenue in the first half of 2022 (36%, 32%, and 19%). The company relies on a limited number of third-party manufacturers; disruption or noncompliance could affect supply and results.
- Other disclosed risks include reimbursement and market uptake, clinical-trial execution and safety, regulatory approval, competition, ability to obtain future financing, and uncertainty about COVID-19’s future effects. Management said COVID-19 had not materially affected results through June 30, 2022. Ordinary-course legal matters were not expected to have a material adverse effect.
Important facts for investors to verify
- ARIKAYCE sales growth and the contribution and sustainability of Japan revenue, alongside the decline in Europe and rest-of-world revenue.
- Enrollment and timelines for ASPEN, ARISE, ENCORE, and TPIP studies, and the consequences of delays or unfavorable results.
- Cash consumption, expected funding runway, and whether additional financing becomes necessary.
- Convertible-note terms, potential dilution, and the effect of ASU 2020-06 when comparing reported interest expense and equity across periods.
- German reimbursement and supply developments, customer concentration, and the resilience of third-party manufacturing capacity.