Is Insmed Stock Overvalued at $98?
Insmed Inc (NASDAQ: INSM) was nothing short of a juggernaut last month, skyrocketing 45%, while the S&P500 index gained 3% during the same period. What’s fueling the fire? Insmed announced that its Phase IIb trial for treprostinil palmitil inhalation powder (TPIP) in pulmonary arterial hypertension (PAH) met both primary and all secondary endpoints. Industry coverage noted the product as a “home run” compared to competitors like United Therapeutics (NASDAQ:UTHR),which fell 11% during the last month.
But here’s the catch: Insmed trades at 35x sales. Flip that, and you get a paltry 2.8% sales yield. For comparison, United Therapeutics—yes, the company marketing multiple FDA approved drugs targeting PAH, trades at a lower sales multiple of 5x and is generating operating profits of close to 50% as compared to the losses of Insmed. So yes, Insmed has made a medical breakthrough. But at $98 per share, this is a premium valuation chasing a growth story that is yet to be proved. And when the growth doesn’t live up to the hype? That’s when gravity kicks in. See Buy or Sell Insmed stock?
Also, history paints a more nuanced picture of Insmed stock. During the 2008 global financial crisis, its shares fell nearly 78%. In the early stages of the Covid pandemic in 2020, they dropped 60%. And in 2022, amid surging inflation and consumer pressure, the stock stumbled again with a 63% decline. Hardly bulletproof—yet today, the stock trades at a premium valuation.
What’s Driving the Premium?
Insmed’s stock premium is primarily driven by the strong Phase 2b trial results of its inhaled therapy TPIP for pulmonary arterial hypertension (PAH), which exceeded expectations and positions it as a potential best-in-class treatment. This clinical success, combined with a $750 million capital raise to fund pipeline expansion, has sparked investor optimism, pushing the stock well above its fair value estimates.
Backing from major institutions and robust revenue growth add to the bullish case, though its steep valuation—trading at over 35× price-to-sales—means continued execution and progress toward Phase 3 trials will be crucial to sustaining this momentum.
What’s Next?
Insmed forecasts 2025 global revenues for ARIKAYCE at $405 million to $425 million, reflecting 11–17% growth over 2024. Continued R&D investment for pipeline products (brensocatib, TPIP) means Insmed will remain unprofitable into 2026.
In the near term, FDA outcome for brensocatib in August could move the stock significantly. Additionally, initiation of Phase 3 trials for TPIP and further clinical readouts will be key validation points. In the longer term, execution success in Phase 3 and eventual commercial launches of both brensocatib and TPIP will determine whether INSM can sustain its current premium valuation.
Why It’s Not All Bad News
Insmed’s rally reflects a blend of strong clinical momentum, bullish investor sentiment, and solid financial trajectory. However, the high valuation (P/S ~35×) suggest that future milestones—like Phase 3 design and trial initiation—will be critical in justifying this premium. Without them, the stock may face pullbacks or sideways action.
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