Insmed Incorporated — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited consolidated results. Insmed is a biopharmaceutical company commercializing ARIKAYCE and developing brensocatib and TPIP.
Financial highlights
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Net product revenue | $40.2 million | $36.9 million; up 9.1% |
| Cost of product revenue, excluding intangible amortization | $9.8 million | $8.4 million; up 16.7% |
| Gross margin on product revenue | 75.5% | 77.1% |
| Research and development | $61.4 million | $36.2 million; up 69.7% |
| Selling, general and administrative | $51.6 million | $51.3 million; up 0.4% |
| Operating loss | $83.8 million | $60.4 million |
| Net loss / loss per share | $91.6 million / $0.89 | $66.4 million / $0.74 |
| Net cash used in operating activities | $128.3 million | $57.9 million |
Cash and cash equivalents were $409.8 million at March 31, down from $532.8 million at year-end 2020. Working capital was $419.6 million. Total assets were $692.4 million and shareholders’ equity was $201.6 million. The company reported $450 million principal amount of 1.75% convertible notes due 2025; their carrying value, net of unamortized discount and issuance costs, was $361.6 million. Current liabilities were $81.4 million. Management stated that existing funds were sufficient for at least the next 12 months, while noting that additional capital may be needed.
Material changes and drivers
- Revenue growth reflected higher ARIKAYCE sales, including European commercial sales; Japan approved ARIKAYCE in March 2021. Three customers represented 73% of gross product revenue combined (26%, 25% and 22%).
- R&D rose $25.2 million, principally from ARIKAYCE frontline studies and the Phase 3 ASPEN brensocatib trial, plus higher manufacturing and personnel costs. Management expected R&D expense to increase in 2021.
- Operating cash use increased by $70.3 million year over year. Management cited higher clinical-trial spending and working-capital movements, including clinical-trial deposits and a $12.5 million AstraZeneca milestone payment related to first dosing in ASPEN.
- Interest expense was $7.6 million versus $7.4 million. Net loss increased, while weighted-average shares rose to 103.0 million from 89.8 million.
Business outlook, risks and contingencies
- ARIKAYCE had U.S. accelerated approval, European approval and Japanese approval. The company planned a Japan launch around mid-2021 and further European launches subject to local reimbursement. ARISE and ENCORE were enrolling; these parallel trials are intended to satisfy the U.S. post-marketing requirement and support potential full approval. Failure to complete the studies successfully could put U.S. full approval at risk.
- Brensocatib’s Phase 3 ASPEN trial was enrolling. Management also planned a CF pharmacokinetics study in mid-2021 and expected STOP-COVID19 results in Q2 2021. Development remains subject to clinical safety and efficacy risk.
- Following generally well-tolerated Phase 1 results for TPIP, the company planned a PAH proof-of-mechanism study, with preliminary data expected in the second half of 2021, and a 16-week PAH study planned to start in Q4 2021. These are prospective plans, not established outcomes.
- COVID-19 had not materially affected Q1 financial results or operations, but limited access to prescribers and future effects remained uncertain. Other key risks include ARIKAYCE uptake, reimbursement and supply; third-party manufacturing dependence; clinical-trial execution; regulatory approval; and access to future capital.
- The company had an at-the-market equity sales agreement allowing up to $250 million in gross proceeds; no shares had been sold under it by March 31. Ordinary-course legal proceedings were disclosed, and management did not expect their resolution to materially harm financial position, results or cash flows.
Important facts for investors to verify
- ARIKAYCE sales growth, launch progress, payer access and the effect of customer concentration on revenue.
- Enrollment, timing and outcomes of ARISE, ENCORE and ASPEN, including implications for regulatory approval.
- Cash burn and runway against planned clinical, commercial and manufacturing spending; whether the ATM or other financing is used.
- Convertible-note terms and potential dilution, as well as the company’s ability to meet the 2025 maturity.
- Third-party manufacturing capacity and supply continuity, including planned capacity expansion.