Written by: Ankit Desai (@ankitdesai6) & Shruti DesaiInsmed (NASDAQ: INSM) is a biopharmaceutical company focused on developing inhaled therapies for patients with serious orphan lung diseases. Insmed has leading drug candidate ARIKACE® (liposomal amikacin for inhalation) which is to treat rare lung infections due to Cystic Fibrosis and Non-tuberculosis mycobacteria.
What is Cystic Fibrosis?
Cystic Fibrosis (CF) is an autosomal recessive genetic disease that affects many organs in the body, most commonly the lungs, pancreas and sweat glands. CF is caused by mutation in a single gene on chromosome 7 which encodes for cystic fibrosis transmembrane conductance regulator also known as CFTR. These ion channels are primarily responsible for regulating the movement of chloride (Cl-) ions across the cell surface membrane. The primary symptom of CF, resulting from abnormal transport of chloride anions in lung epithelia, is the accumulation of thick, adhesive mucous in the airway. The production of adhesive secretions leads to chronic respiratory infection then to pulmonary exacerbations and eventually respiratory failure.
Market Potential
Recent data suggests there are 30,000 adults and children in the U.S. and 70,000 patients worldwide suffering from CF. As mentioned earlier, nearly 10-20 million people in the U.S. carry the defective CFTR gene. This reflects a huge growth opportunity in the future market as new therapies are being developed. The global market size for CF was nearly $1.1 billion in 2010, which is estimated to reach $2.5 billion by 2018 (assumed growth rate of 10%). The current CF market is dominated by three major players: Novartis (TOBI inhalation solution), Genentech/Roche (Pulmozyme) and Vertex Pharmaceutical (Kalydeco).
Chronic Lung Infections in CF patients
All patients eventually develop repeated acute bacterial and viral infections that cause host inflammatory response and airway injury. There are 3 most common microorganisms: Staphylococcus aureus (also Methicillin resistant S.aureus), Haemophilus influenzae, and Pseudomonas aeruginosa (Pseudomonas). The H.influenzae is more prevalent in children (20-30%) whereas Pseudomonas is prevalent in 25% of children and >80% of adults. Since Pseudomonas is responsible for majority of chronic lung infection in CF population, most investigational drugs are being developed to eradicate Pseudomonas and prevent exacerbations.
Currently Marketed Products
Currently, there are only two FDA approved inhaled therapies for patients with chronic Pseudomonas infection: TOBI (tobramycin inhalation solution) by Novartis and Cayston (aztreonam inhalation solution) by Gilead. In clinical trials, both TOBI and Cayston have been shown to improve lung functions, respiratory symptoms and reduce hospitalizations. Both medications have its pros and cons. Cayston needs a special device and administered three times a day versus twice a day administration for TOBI. Cayston requires 3 minutes of administration time compared to 15 minutes for TOBI. There are many reasons why new inhaled treatment options for chronic Pseudomonas infections are warranted. First, some patients are not able to stay compliant with complex schedule and administration requirements. Second, some patients are not able to tolerate current treatment options due to allergic reactions or side effects.
ARIKACE:
Insmed’s Arikace (Liposomal amikacin) for inhalation is a sustained release formulation of amikacin encapsulated in liposomes.
Arikace provides:
- Improved compliance (once daily dosing)
- Increased efficacy (localized infiltration)\
- Increased duration of effect (effects seen even after 28 day cycle)
- Increased safety (due to localized effects and less drug needed to achieve same results)
In clinical studies, it has been shown to have better delivery and prolonged therapeutic effect in lungs. Insmed is currently conducting Phase 3 trials in Europe and Canada with results expected in mid-2013. In August 2011, FDA placed a clinical hold on US Phase 3 program based on review of the long-term rat inhalation carcinogenicity study. In May 2012, Insmed has reached agreement with FDA on a revised CF clinical trial population consisting of adult patients who have chronic Pseudomonas lung infections and FEV-predicted between 25% and 75%. The Company is continuing discussions with the FDA in an effort to finalize additional details of the cystic fibrosis program in the US.
Drug Safety:
Combined data from the two Phase 1/2 clinical trials (TR02-106 and TR02-105) indicated that Arikace was well tolerated and generally safe as adverse events were similarly distributed across Arikace and placebo groups. There were four discontinuations in the Arikace cohorts and one in the placebo group. Finally, it was reported that there was a trend towards mild to moderate dysphonia (8%) in the high dose Arikace group.
Phase 2 Trials:
The Phase 2 trials were carried out at 33 sites in the US and Europe were done to seek out an optimal dose of Arikace and overall safety/tolerability. Initially, trial TR02-106 included 70mg and 140mg cohorts; however DSMB review and the FDA recommended dropping lower treatment groups and continuing to monitor patients on a 1 x daily 560mg dose. Trial TR02-105 included patients treated at 280mg and 560mg doses of Arikace. All cohorts were compared to placebo.
The treatment stage for these trials was for 28 days, followed by 28 days off of treatment. Patient data was recorded weekly during the treatment stage and at days 36, 42, 49, and 56 after treatment.
As seen above, the pooled Phase 2 results showed statistically significant and clinically significant improvement in pulmonary function throughout 28 day treatment period. In addition, the effect was sustained in the off week (additional 28 days). Interestingly, one should observe the dip in mean relative change in FEV1% predicted at day 36 and 42, followed by a strong recovery by day 56 in the off treatment phase. The drop may be more indicative of the actual efficacy of Arikace, while the late recovery may just be noise in the data. It is interesting that Arikace presents this data at later presentations by removing all off treatment data except for the final day 56 data as seen below:
More encouraging data is seen in the open label extension of the TR02-105 study. In this extension, all patients randomized in the main study, who were compliant, continued to be monitored for six treatment cycles (28 days on, 56 days off) over 18 months. The data below indicates a continuous improvement in mean FEV1 % predicted vs. baseline.
While this open-label extension should be taken with a grain of salt the sustained efficacy over multiple treatment cycles is quite positive. This is primarily because the main competitors of Arikace, TOBI (Novartis) and Cayston (Gilead) appear to show diminishing improvement of FEV1% predicted over time. This is evident from the chart below, which depicts data comparing Cayston to Tobi over three treatment cycles from the Cayston Phase 3 clinical trial:
Phase 3 trial
In November 2012, Insmed has announced the completion of enrollment in the pivotal Phase 3 trial in Europe and Canada for Arikace in CF patients with Pseudomonas infection. The results are to be available in mid-2013.
There are approximately 300 patients who were randomized 1:1 to Arikace or TOBI (Novartis). It is randomized and open label study, which is appropriate since similar drug candidate are being evaluated. The Primary endpoint is relative change in FEV1 from baseline at the end of study (end of 24 weeks). In this trial, patients with history of chronic infection with pseudomonas (sputum confirmed) and FEV1≥ 25% at screening were included. This is an appropriate inclusion criterion due to increasing resistance to TOBI. According to Novartis (TOBI inhalation and TOBI Podhaler), resistance to TOBI has nearly doubled since 1999 which is nearly 85% increase. Arikace does not get inactivated by aminoglycoside-inactivating enzyme responsible for acetylation of amino group and adenylation or phosphorylation of hydroxyl group which provides a significant advantage over TOBI.
To achieve 80% power, nearly 260 patients will have to show non-inferiority to TOBI. Since TOBI only improves FEV1 by 7%, the bar is already set low to achieve non-inferiority. In Phase 2 ITT analysis, there was an average of 11% FEV1 improvement.
The reasons why I think the Phase 3 pivotal trial will succeed are:
- For EMA approval, Arikace has to show non-inferiority to TOBI
- Patients are allowed to continue AZI, DNAse and/or hypertonic saline which allows better baseline FEV1 analysis
- Arikace is not inactivated by aminoglycoside-modifying enzyme
While I expect Arikace to display non-inferiority to TOBI (and potentially superiority) there is also good reason to believe Arikace will have commercial success. CF patients are burdened with daily administration of various therapies that can take up to 3 hours in total to complete. The 1x daily dose of Arikace requires about 13 minutes to administer compared to the 40 minutes required to complete the TOBI administration. This time doesn’t even include what is required to clean and sterilize all of the parts of the TOBI nebulizer equipment. Additionally, the nebulizer used to deliver TOBI is cumbersome, electric powered, and not discreet. The nebulizer used for Arikace delivery is battery powered and more portable, which could lead to improved compliance, a reduction in exacerbations, and in the long run a reduction in total cost of care.
Two upcoming barriers for Arikcace adoption include the eventual approval of the TOBI podhaler and the liklihood of generic TOBI in late 2014. While the TOBI podhaler is more portable and doesn’t require a power source it still requires 2 daily treatment sessions and the administration of 8 total caplets of the dry powder tobramycin formulation. Additionally, the efficacy of TOBI podhaler appeared to be slightly worse when compared to nebulized TOBI
Near term catalyst
According to the CEO, Insmed is expecting the topline Phase 3 pivotal results in mid-2013 (my prediction: July/August). They also have additional catalyst near end of 2013 which is a Phase 2 results from Non-TB mycobacteria (NTM) lung infections. In terms of Arikace’s IP and exclusivity, it has 3 orange book patents that are protected until 2029. It is also hard for generic manufacturers to manufacture liposomal product so I do not foresee any major competition from generic manufacturers.
Financial health of Insmed:
As of September 30, 2012, Insmed had total cash, cash equivalents, short-term investments, and certificate of deposits on hand totaling $91.9 million, consisting of $89.7 million in cash and short-term investments and $2.1 million in a certificate of deposit. This also include direct offering of 6.3 million shares of its common stock to Ayer Capital, RA Capital and Quaker Partners at $4.07/share. According to Whalewisdom.com the largest 13F filers holding Insmed stock include Fidelity, RA Capital, Ayer Capital, Deerfield Co., Vanguard, Blackrock, Broadfin, Palo Alto Investors and Baker Brothers Advisors.
Price Target:
$8.50*
*(Based on DCF model and conservative assumption)
Disclosure: No position – May initiate position in next 72 hours
References:
- Insmed Investor Relations
- 31st Annual JP Morgan Healthcare Conference (Jan 10, 2013)
- PubMed
- ClinicalTrial.gov
- Whalewisdom.com
- Cystic Fibrosis Foundation (www.cff.org)
- DCF Model: Damodaran NYU Sterm School of Business, New York, NY
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