recurve,
You have thoughtfully summarized the views of many longs.
In my view, there are at least 3 basic reasons INSM remains a very sound long term investment:
1. TRCA has extremely little chance of putting Insmed out of the market. The worst case IMO is a settlement, where TRCA gets to mooch off Iplex success through a royalty. The $$$ TRCA would have to expend to completely prevail against any marketing of Iplex - including probably a couple of years of appeals prosecution - is not likely to be worth nearly as much as the royalty revenues they may get by settlement. So Insmed may have to part with 10% (or less) of its profits. Not a big deal long term. And, trying to put Iplex completely out of the market would be a huge PR mess for Tercica - pediatric endos would take a very dim view. Tercica's obvious win-win with a settlement looks very good by comparison. Physicians don't care if companies exchange court settlement moneys, but they do care when one company removes another company's important medication from their practice for no good medical reason - and in fact may worsen the safety profile for their patients.
2. Alternate indications. Insmed has multiple much larger markets/indications than TRCA, due to the success in FDA-approved production of the IGF-1/IGFBP3 complex. Higher doses with acceptable safety profile are clearly established by what FDA has already approved. The upper daily dose FDA approved for Iplex is 75% higher than that for Increlex, in terms of IGF-1 content (0.24 mg/kg vs 0.42 mg/kg). This enables multiple uses Tercica can approach only with serious difficulties on the safety front.
3. Europe. Although this is the longest term INSM advantage, it is an important one. Europe is a market equal to North America, including both size & the capacity of the nationalized health provider systems to approve & pay for unique and expensive therapies. Insmed has already neutralized some preliminary court actions against E.U. patent attacks by Tercica. Although Tercica will undoubtedly come back for more mayhem, they are a long way from creating similar road blocks in Europe as they have in California court venues. And, Insmed is doing well in the new indication orphan exclusivity races against Tercica in Europe.
Any objective investor should admit that the Tercica success in literal infringement findings on June 30th was a short term blow to pps value, and, conceivably, a future profits drag. Insmed pps growth will probably be more restrained between now and November 2006 due to deterrence of a larger investor base while the final patent cases are argued. However, good revenues & earnings for Insmed between now and Nov 2006 will mitigate the drag on pps.
The above only adds some detail to the sound basic points you have made. We appreciate the long view you have stated.
cheers
