Wolfe Research Starts Insmed (INSM) at Outperform, 'we predict highly favorable risk/reward'

Wolfe Research analyst Andy Chen initiates coverage on Insmed (NASDAQ: INSM) with a Outperform rating, PT $42.00.

The analyst comments "We initiate coverage of INSM with an Outperform rating. The focal point of our thesis is that we predict highly favorable risk/reward for the brensocatib Ph3 ASPEN readout likely in Q2. Possibly due to the somewhat ‘weak’ Ph2 readout, the market appears to be only valuing brensocatib at 35% POS. With our sum of the parts (SOTP) analysis, we estimate that upside/downside of the upcoming readout to be +$34/share vs. ($19)/share. This is a risk we are willing to take given our stance of 75% POS for ASPEN, which implies a PT of $42 In addition, the base business Arikayce has durability and growth potential. We foresee organic growth in the US and favorable currency tailwind driving revenue in Japan. NTM is an infectious lung disease and epidemiology studies suggest that the market likely doubles every 7-10 years – we see possibility (or inevitability) that Insmed will revise market potential upward in the future. We are in line with guidance for 2024 and model $2B peak for this product Potential upside from early-stage research focusing on gene therapy. Notably the team is almost entirely led by ‘the Zolgensma team’ from AveXis (acquired by Novartis for its gene therapy in SMA). Additional details will be needed in 2024, but this team could potentially further boost investor confidence Our DCF valuation model assumes INSM is a two-asset company with zero terminal value (Arikayce with 50% POS in broader NTM; brensocatib at 75% POS; flattened R&D tail; all other programs fail; -100% terminal value). We appropriately penalize INSM on share count because an additional $1B debt or equity issuance may be required to become cash-generative (we conservatively assume ~37M more shares will be raised)."

For an analyst ratings summary and ratings history on Insmed click here. For more ratings news on Insmed click here.

Shares of Insmed closed at $26.60 yesterday.

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