Insmed's Arikace Fast Track Designation and Phase III Results Fail to Impress Investors

Andrew Klips |

Insmed Inc. (INSM) on Monday morning delivered information on its investigational lung antibiotic, called Arikace, that while optimistic, sent shares into an early nosedive.

On a U.S. point, the Monmouth Junction, New Jersey-based biotech said that the Food and Drug Administration designated Arikace as a Qualified Infectious Disease Product, or QIDP, for the treatment of non-tuberculous mycobacteria lung infections. The FDA granted Insmed Fast Track designation for Arikace for the treatment of that indication as well.

A Fast Track designation is meant to expedite the review process of new drugs that may serve an area of unmet medical need in serious conditions or diseases.

Insmed is currently enrolling patients in the U.S. and Canada in a Phase II clinical trial of Arikace to treat non-tuberculous mycobacteria lung infections. 81 of the targeted 100 patients have been enrolled to date.

Outside the U.S., Insmed reported on its Phase III clinical trial conducted at 70 European and Canadian clinical sites pitting Arikace against Novartis' (NVS) FDA-approved inhalant TOBI to treat Pseudomonas aeruginosa, or Pa, in 302 cystic fibrosis patients. Arikace is a once-a-day treatment, while TOBI, considered the gold standard in treating Pa lung infections, is a twice-a-day therapy.

Insmaed was looking to prove non-inferiority of Arikace to TOBI based upon a primary endpoint of relative change in forced expiratory volume, or FEV, in one second, measured at the end of the third treatment cycle (24 weeks) as compared to baseline. Insmed and the European Medicines Agency agreed upon parameters of 5-percnet non-inferiority margin with 80-percent power as statistically equal.

Arikace met that primary endpoint of non-inferiority to TOBI for relative change in FEV from baseline to end of study.

Secondary endpoints, such as relative changes in FEV at other time points, time to and number of pulmonary exacerbations, time to antibiotic rescue treatment and more, showed comparability of Arikace with TOBI consistent with the primary endpoint of the study.

The safety profiles of Arikace and TOBI were comparable as with no unexpected adverse events reported and no difference between each arm of the study in reporting adverse events.

Insmed intends to use the Phase III data to seek marketing approval for Arikace in Canada and Europe in the first half of 2014. More clinical research will be needed before Insmed could seek regulatory approval in the U.S.

Apparently, investors were looking for a superior performance from Arikace compared to TOBI, not just results that fell within the acceptable parameters for statistical equivalency. Shares gapped significantly lower to start trading down by more than 20 percent and even fell as low as $9.00 per share from Friday's closing price of $11.96. Shares have recovered a portion of the losses one hour into the trading day, climbing back near $10.50 each to remain down about 12 percent.

Insmed was added to the Russell 3000 on June 28 when Russell Investments reconstituted its set of U.S. and global equity indexes. UBS initiated coverage on Insmed two weeks ago with a "buy" rating and a price target of $17.50, with analyst Matthew Harrison saying that he believes Arikace has "a solid chance of success in its primary indication of cystic fibrosis patients with underlying lung infections given its differentiated lipid delivery technology and its once-daily dosing (compared to 2-3x daily for the competition)."

Through Friday's close, shares were ahead nearly 80 percent in 2013.

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