On June 25th Insmed released the results of a Phase II study on Iplex as a potential therapy for MMD.

The data evidenced no significant difference in endurance in the patients taking Iplex compared with those taking a placebo. But with a disease which progresses over a period of fifty or sixty years, was it any great surprise that a study over a period of just six months did not evidence significant efficacy in endurance endpoints?

The data DID evidence significant efficacy with insulin resistance – enough to warrant the possibility of further funding by the MDA for a study with that subset of patients.

It was only a Phase II study – and only for a label expansion on a drug which is already FDA-approved. The earliest we could have expected to see extra revenue from an MMD label expansion had now probably been put back from 2011/12 to 2012/13 - and as all MMD patients suffer from insulin resistance the amount of potential revenue was unaffected.

Company valuations/share prices are primarily driven by earnings, or anticipated earnings. Insmed was already expected to have positive earnings from current operations, as there had been a substantial reduction in expenses with the sale of the FOB operation. And Insmed was also sitting on $125 million in hard cash, with the stated aim of using it to bring a new revenue stream on board in the near term. The MMD news was simply no big deal.

Yet on June 25 the share price hit a low of $0.98 – against a high on June 24 of $2.39.

And on June 26 the funds which ‘follow’ the Russell Index took possession of at least 25 million shares at $1.15 – an overall saving of around thirty million dollars.

The share price stayed around a dollar. Has anybody here EVER seen an accumulation in the course of a couple of days of at least 20% of a company’s outstanding shares which did not occasion a massive UPWARDS movement in the share price? At the very least, the buying pressure from the funds should have balanced the selling pressure from those investors who had lost sight of the fundamentals, and resulted in a share price of well over $2.

The good old boys who have given so freely of their time in recent years to warn us of the dangers of investing in INSM are keen to have us believe that ‘the share price says it all’. That the current share price is simply an indication of negligible interest from buyers due to lack of confidence in the stock. But they conveniently overlook two crucial factors in this case – the maneuver which repositioned the share price at the current level, and the fact that buying interest can be managed – if somebody is prepared to pay people to camp out on message boards, pretending to be good old boys who are interested only in our welfare.

I don’t know of a single bio with positive earnings which has a valuation of anywhere near $100 million. And as for a company which has a further year and a half of positive earnings ‘in the bag’, and $125 million with which to bring in a new revenue stream …..

If you believe, as I do, that INSM was the victim of blatant manipulation by professional investors, who abused the MMD development to save themselves around thirty million dollars, then perhaps you should consider the following possibilities -

1. Having succeeded in repositioning the share price at an unnaturally-low level, the manipulators have maintained their stranglehold – enabling continued accumulation by professional investors and ensuring that retail investors have continued to be hoodwinked by the fact that the share price is at the current level.

2.We have only seen the first part of a two-part maneuver. Just as the manipulators were able to abuse the MMD development to take INSM to an unnaturally-low level, they will use the basis of the true picture of Insmed’s fundamentals to paint the news of the next deal in the best possible light, and take the value of the shares they have now acquired to many times their current level.