Insmed Inc (NASDAQ: INSM) had an impressive month last month, with its stock price jumping 45%. This is much higher than the S&P 500 index, which only went up by 3% during the same time. The main reason for this big rise was the company’s announcement that its Phase IIb clinical trial for a new drug called treprostinil palmitil inhalation powder (TPIP), used to treat pulmonary arterial hypertension (PAH), was very successful.
The drug met all its main and secondary goals, and experts called it a “home run.” This was especially impressive compared to a competitor, United Therapeutics (NASDAQ: UTHR), whose stock fell by 11% last month.
Even with this good news, investors should be careful because Insmed’s stock price is very high right now. The company’s stock trades at about 35 times its sales, which means the return on sales is only 2.8%. On the other hand, United Therapeutics trades at 5 times sales and is making almost 50% profit from its operations. Insmed is still losing money.
So, even though Insmed has made great medical progress, the current stock price of around $98 expects big future growth that is not yet guaranteed. If that growth doesn’t happen, investors could lose money. This makes it important to think carefully: should you buy or sell Insmed stock now?
Looking at the past, Insmed’s stock has been quite unstable during tough times. During the 2008 global financial crisis, the stock dropped nearly 78%. When the COVID-19 pandemic started in early 2020, it fell 60%, and in 2022, because of inflation and economic problems, it dropped another 63%. Despite these ups and downs, the company’s stock is still priced very high now, which could be risky if they don’t meet expectations.
In the future, Insmed expects its ARIKAYCE drug to earn between $405 million and $425 million in 2025, which is an 11–17% increase from 2024. But the company is still spending a lot on research and development for new drugs like brensocatib and TPIP, so it will probably continue to lose money until at least 2026.
Soon, an important event for Insmed will be the FDA’s decision on brensocatib, expected in August. Also, starting Phase 3 trials for TPIP and getting updates from these trials will be very important to prove the company’s potential. In the long run, success in these trials and selling these new drugs will be key for Insmed to keep its high stock price.
There is some positive news too. Insmed’s recent stock rise shows strong progress in its drug research, more confidence from investors, and a clear financial plan. But because the stock price is very high (with a price-to-sales ratio near 35), the company needs to reach important goals soon to keep this value. If not, the stock price might fall or stay the same.
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