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Insmed (NASDAQ:INSM) released their fiscal 2009 results and the results are as I expected – not much different to Q3 results.

I first started following INSM back in November of 2009 because the company was trading below its net net value with the majority of its assets in cash. That was when the stock price was $0.78. The stock price is now $1.20, a 50% gain from November, but nothing has changed with the company since then, but there have been some major developments which I’ll get to later.

But onto the financials first. I went through the annual report filed on March 16th and it reads the same as the previous quarterly reports.

The major difference in financial data to the previous year is the cash from the sale of the FOB (follow-on-biologics) to Merck (NYSE:MRK) for $130m. Due to this difference, comparing annual numbers isn’t important. It will only give you a false picture. Instead, you have to look at the company on a quarterly basis.

Balance Sheet Analysis

Above, I put the Q3 and Q4 balance sheet together to get a better view and the image below is the Q3 and Q2 comparison.

From my notes in the images above you can see how there are no red flags and INSM is doing a fine job of keeping things in check. To be frank, INSM has no operations and so expenses must continually be lowered.

Additional Quick Points from the Financials

The all important cash burn has also stopped. With no manufacturing facility, low headcount and so much cash, INSM is earning a healthy amount of interest to more than offset the expenses.

Throughout 2010 cash burn should be neutral.

But Why is INSM at $1.20 Now?

It started with the Merck CEO mentioning INSM during the JPM healthcare conference. You can view the previous post on this development if you missed it.

Feb 15 was the day INSM started seeing huge volume and there were no press releases or any major news to cause such a run up until I received some information that test results performed by ALS worldwide for IPLEX was leaked. Thanks to reader RTN for this info.

We are pleased to present the Interim Report of the Investigational New Drug trial on the use of Iplex (mecasermin rinfabate) by middle-to-late stage Amyotrophic Lateral Sclerosis patients. This trial was conducted under the direction of Principal Investigator Michael E. Schafer, MD and Medical Director of ALS WORLDWIDE, with our assistance. We are hopeful the results will be informative and will serve to facilitate the future use of Iplex for others within the ALS community. While this is a small study, it has provided relevant results for the period from April 2009 through November 2009. For more detailed information, please review the information at the following links.

Results:
During the 30-week period of Iplex usage that comprised the first half (26 week study period and follow-up four-week confirmation period) of the one year authorized investigational new drug trial, there was a remarkable parity between the apparent responsiveness of the individual patients compared to the aggregated group of patients at large. Symptoms monitored for their absence, presence, or their degree of severity included the following: Hyperreflexia; Tongue Movement; Swallow; Hand Strength; Shoulder Strength; Fatigue; Clonus; Nausea; Atrophy; Breathing; Lability; Lower Arm Strength; Fasciculations; Dizziness; Cramps/Pain; Weakness; Balance; Speech; Upper Arm Strength; Tremor/Palsy; Rigidity; Libido. In the consolidated 30 week period, individual symptoms showed a maximum decline of 9% (Balance) followed by 6% (Tremor/Palsy). The maximum improvement of an individual symptom was 39% (Fasciculations) followed by 28% (Fatigue). The critical function (Swallowing) improved by 25% and Breathing improved by 1%.

Links to the pdf reports can be found here.

After the Q4 results were announced, the stock price dropped 10% but this was good. Ever since the big increase in volume, many short term momentum players jumped on to make a buck but as the Q4 earnings announcement was flat (as expected) many of the same people sold out.

This was another good opportunity to buy when prices were falling, which is what I did.

Net Net Valuation

INSM is no longer a net net, but with the catalyst building up, it looks like the intrinsic value of $2 to 2.50 can be achieved.

Remember too that the company is still undergoing a strategic review where value could be unlocked even further. There are lots of possible “ifs” but far more on the positive side than the negative.

At the current price, looks like a 100% gain is still possible.

Disclosure: Long INSM

Source: Insmed Year End, 2009 Update