Insmed Incorporated — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. Insmed is a clinical-stage biopharmaceutical company focused primarily on ARIKAYCE for serious lung infections; it reported no revenue.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $17.2 million | $11.4 million |
| General and administrative expense | $9.5 million | $6.7 million |
| Operating loss | $26.7 million | $18.1 million |
| Net loss | $27.4 million; $0.55 per share | $14.3 million; $0.36 per share |
| Net cash used in operations | $24.9 million | $12.6 million |
| Cash and cash equivalents | $134.6 million | $159.2 million at Dec. 31, 2014 |
| Debt | $25.0 million principal; 9.25% fixed rate | $25.0 million principal |
| Working capital | $99.1 million | Not stated for the comparable date |
Q1 cash used in investing was $1.3 million, mainly for the Bridgewater headquarters and laboratory build-out; financing provided $1.5 million, principally from option exercises. Gross margin is not applicable because there were no revenues. The debt was classified as current at quarter-end; the filing gives a January 1, 2016 maturity date and describes an option to extend to January 1, 2018 if specified financing conditions are met and a fee is paid.
Material changes versus Q1 2014
- Net loss increased by $13.1 million. R&D expense rose $5.8 million, primarily with the global ARIKAYCE NTM trial and manufacturing scale-up; G&A rose $2.8 million, including higher stock-based compensation and pre-commercial spending.
- Q1 2014 included a $4.4 million tax benefit from a New Jersey tax-loss sale; there was no comparable tax benefit in Q1 2015.
- Operating cash use increased year over year. Excluding the $4.4 million tax-loss-sale proceeds received in 2014, the filing compares cash used in operations of $24.9 million in Q1 2015 with $17.0 million in Q1 2014.
Business developments, outlook and risks
- ARIKAYCE—NTM: The EMA validated the European marketing application in February 2015. Insmed began a global Phase 3 confirmatory study, targeting about 300 patients at more than 80 sites. Management expected enrollment to take about a year and preliminary top-line results in mid-2016. The earlier Phase 2 study did not meet its prespecified primary endpoint for statistical significance; its secondary culture-conversion result favored ARIKAYCE.
- ARIKAYCE—CF/Pseudomonas: The completed Phase 3 study met its primary non-inferiority endpoint versus twice-daily Tobi. Insmed expected to complete the open-label safety study in mid-2015 and anticipated Canadian applications in the second half of 2015. European review was underway; approval was not assured.
- INS1009: Preclinical and toxicology work was ongoing. Subject to results, management targeted an IND filing and Phase 1 start in the second half of 2015; the potential 505(b)(2) pathway was not assured.
- Spending and funding: Management expected R&D and G&A expenses to increase in 2015, including for the NTM study, INS1009 work and commercial readiness. It said funds were sufficient for 2015 and did not expect material revenue for at least two years. On April 6, 2015, after quarter-end, Insmed raised approximately $223 million net in an offering of 11.5 million shares.
- Key risks and contingencies: Development, clinical-trial, manufacturing and regulatory outcomes remain uncertain. A long-term rat inhalation study found lung tumors in 2 of 120 rats at the highest dose; the relevance to humans is unknown. The Hercules loan has restrictive covenants and is secured by company assets, excluding intellectual property. Ordinary-course legal matters were not expected by management to have a material adverse effect.
Important facts for investors to verify
- Progress, enrollment and endpoint results for the Phase 3 NTM study, including whether results support an FDA filing.
- EMA review status and timing, and the anticipated Canadian submission and CF safety-study milestones.
- Actual cash burn and runway after the April 2015 offering, alongside growing development and pre-commercial expenses.
- Whether Insmed exercises the Hercules maturity-extension option and satisfies its conditions and fee requirements.
- Regulatory assessment of the rat tumor findings and any resulting impact on ARIKAYCE development or labeling.