Insmed's Mixed Lung Infection Data Will be Debated by Bulls and Bears

Insmed's ( INSM) inhaled antibiotic Arikayce failed to demonstrate a clinical benefit in patients with a serious lung infection, even though the primary endpoint of the study -- reduction of bacterial density -- was custom designed by the company to better showcase the drug's efficacy. 

But Insmed insists the Arikace study was a success because the antibiotic demonstrated a benefit on a key secondary endpoint -- culture conversion -- which was supposed to be harder to achieve and doctors believe is more clinically meaningful for patients. 

Based on these results, Insmed is super encouraged about the future potential of Arikayce as the first treatment for nontuberculous mycobacterial (NTM) lung infections and will ask the FDA to bless the antibiotic with Breakthrough Therapy Designation. 

Insmed shares were down as much as 25% in pre-market trading Wednesday but have now rallied somewhat and are down 10% to $16.30. Analysts are urging investor to buy the stock on weakness because the negative Arikayce study was really positive.

Biotech investing can be confusing but never boring. Let's dig in. 

Insmed enrolled 90 patients with treatment-resistant NTM lung infections, randomizing half to treatment with inhaled Arikayce plus a standard  course of antibiotics while the other half received a placebo and standard treatment. Following three months of treatment, the primary endpoint of the study was a "semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84)."  Insmed created this scale for use as the study's primary endpoint -- which essentially measures a reduction in the density of bacteria in the lungs -- because the company believed demonstrated complete eradication of bacteria would be too difficult given the recalcitrant nature of the infection in these patients. 

Insmed was wrong. Eighteen Arikayce patients showed a cumulate 36-point reduction in bacterial density compared to 13 placebo patients with a 21-point reduction in bacterial density. The analysis trended in Arikayce's direction but was not statistically significant. Based on the negative primary endpoint, the Arikayce study failed.

Or not. Insmed says the study achieved statistical significance on a key secondary endpoint of the study -- culture conversion, or the number of patient who had no evidence of infection following treatment. Eleven Arikayce-treated patients achieved culture conversion compared to three placebo patients. 

Insmed didn't use culture conversion as the primary endpoint of the Arikayce study because it was supposed to be too difficult to achieve with just three months of treatment. 

Let the debate rage on. Insmed bulls will argue that the culture conversion result is more clinically meaningful and demonstrates Arikayce's benefit for patients with treatment-resistant NTM infections. Sure, the primary endpoint failed but as Insmed pointed out on the call, the scoring system used was overly harsh and probably skewed the statistical analysis against Arikayce. There are no approved treatments for treatment-resistant NTM, so FDA will cut Insmed slack and the antibiotic might be approvable. 

Insmed bears will counter with a failed study is a failed study, regardless of the spin applied. You can't argue the statistical significance of a secondary endpoint when the primary endpoint doesn't work, especially when that endpoint was designed to make the drug look better. There is no way FDA will approve Arikayce without Insmed conducting another study using culture conversion as the primary endpoint, especially since the antibiotic yielded q uestionable data in a previous study involving cystic fibrosis patients

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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