Here's a tough one for biotech investors: sometimes the drug just doesn't work. Insmed Incorporated (INSM) shared the results from its Phase 2b CEDAR study for brensocatib on Tuesday, and they weren't good. The study, which was testing the drug in adults with moderate to severe hidradenitis suppurativa (a chronic skin condition), didn't hit its main goal or any of the secondary ones for efficacy.
The outcome was so clear that Insmed is pulling the plug on its entire hidradenitis suppurativa program. In fact, the data showed something you really don't want to see in a drug trial: the group of patients who got a placebo did better than the groups who got the actual drug.
Here are the numbers that spelled the end for the program. By week 16 of the study, patients in the brensocatib 10 mg arm saw a 45.5% reduction from their baseline count of abscesses and inflammatory nodules. Those on the 40 mg dose saw a 40.3% reduction. That sounds okay, until you see that the placebo group saw a 57.1% reduction. When the sugar pill is beating your drug by a wide margin, it's time to go back to the drawing board. The one silver lining was on safety—the treatment was well-tolerated, with no new safety signals popping up, even at the highest dose.
Analysts Saw This Coming
If you're an Insmed investor, this news might be disappointing, but it probably shouldn't be shocking. Analysts at William Blair wrote that "the failure of the CEDAR study does not come as a surprise, given the challenges in HS clinical trials (particularly due to high placebo response rates) and the lack of preclinical evidence to support DPP1 inhibition in the indication."
Analyst Matt Phipps added that, considering these factors and a prior failure of a related study in a different condition, investor expectations for this readout were "very low" to begin with.
So, where does Insmed go from here? William Blair is sticking with an Outperform rating on the stock. Their view is that the real story for Insmed isn't this failed HS program, but the commercial launch of its drug Brinsupri for bronchiectasis and the continued progress of its other products. They believe execution on that front can keep driving the stock higher.
That optimism isn't coming from nowhere. Just last month, Insmed's Phase 3b ENCORE study for its lung infection therapy Arikayce successfully met its primary goal and all key secondary endpoints. So, while one door closes, others are very much open.
A Competitive Market Heats Up
Insmed's exit from the HS race highlights how competitive this therapeutic area has become. While Insmed's candidate faltered, another company, MoonLake Immunotherapeutics (MLTX), is charging ahead. In March, MoonLake reported long-term results from its Phase 3 trials for its HS drug, sonelokimab. The company announced that 62% of patients treated achieved a high level of response by Week 40, which it says sets a new standard for long-term control of the condition. The contrast between the two companies' recent news couldn't be starker.
What Are the Analysts Saying?
Despite the clinical setback, Wall Street's overall view on Insmed remains positive. The stock carries a consensus Buy rating, with an average price target of $206.81. Recent analyst actions show continued confidence:
- Barclays: Overweight rating, raised price target to $237.00 (April 1)
- Morgan Stanley: Upgraded to Overweight, raised price target to $212.00 (March 30)
- HC Wainwright & Co.: Buy rating, raised price target to $245.00 (March 26)
As for the stock's immediate reaction? Insmed shares were up 0.86% at $164.44 during premarket trading on Wednesday, according to market data. It seems the market had already priced in the bad news and is now looking ahead to what's next for the company.
