Why Insmed Could Still Double

The driver for Insmed is a simple U.S. Securities and Exchange Commission (SEC) filing of less than 100 words that said that the U.S. Food and Drug Administration (FDA) granted Arikace, its liposomal amikacin for inhalation, a breakthrough therapy designation for the treatment of adult patients with nontuberculous mycobacterial lung disease who are treatment refractory. This was based on findings from Insmed’s Phase 2 clinical trial of Arikace, and the company has plans to meet with the FDA to discuss the regulatory pathway ahead.

As far as the analysts calling for a double, there were two very positive reports. Leerink expected an announcement regarding breakthrough status for the drug with huge upside, especially if no Phase 3 study is required. They had a $30 price target on the stock as of last weekend. Piper Jaffray had an astronomical $51 price target as of last weekend, which was so high that we had to confirm it with the firm.

Over the weekend we noted that the company had provided a spring interim update from the CLEAR-110 study, an ongoing, two-year, open-label extension study of once-daily Arikace. We said:

These data are from 98 patients who have completed the first 12 months of the CLEAR-110 extension study. The data were collected as part of a scheduled data safety monitoring board review of the CLEAR-110 extension study. The data showed that Arikace was well tolerated, and there was a sustained improvement from baseline level in Forced Expiratory Volume in One Second.

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The consensus figure still screens as $33.40, and that is after a 36% gain to $17.03 in Wednesday trading. Insmed shares were at $12.12 late on Friday, and its 52-week range is $9.00 to $22.29. Even after a 36% gain, the expectation is that Insmed could still double – or more!