FDA lifts hold on Insmed's lung disease drug

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(Global Markets) - Insmed Inc (INSM.O) said U.S. health regulators lifted a clinical hold on its lead drug to treat a form of lung disease that currently has no approved cure, sending the biopharmaceutical company's shares soaring 45 percent.

The U.S. Food and Drug Administration lifted a clinical hold on the drug Arikace for treating non-tuberculous mycobacteria (NTM) lung disease, paving the way for the company to continue a mid-stage study.

The regulator had put the drug on clinical hold for treating NTM lung disease and cystic fibrosis (CF) based on an initial review of results from a long-term rat carcinogenicity study.

The FDA, however, retained the hold on the drug for the treatment of CF.

Wedbush Securities analyst Gregory Wade expects health regulators to lift the hold on cystic fibrosis as well in the next 2-3 months.

Wade said NTM lung disease could represent a $400 million market, a $100 million larger opportunity than CF.

The analyst expects Insmed to restart mid-stage trials for NTM lung disease in the first half of the year, and post results from the study in 2013.

The company said it would move ahead with the drug's 9-month dog inhalation toxicity study as previously requested by FDA, to determine if the findings of the rat inhalation carcinogenicity study are also observed in a non-rodent.

NTM are mycrobacteria widely found in the environment, particularly in wet regions, and its most common manifestation is lung disease.

CF is an inherited disease that affects about 30,000 people in the United States and about 70,000 worldwide. The drug would compete against Novartis' (NOVN.VX) Tobi and Gilead's (GILD.O) Cayston for the indication.

Insmed shares, which have lost about 55 percent of their value since the hold in August, were up 34 percent at $5.09 in midday trade, making them the top percentage gainers on the Nasdaq.

(Reporting by Balaji Sridharan in Bangalore; Editing by Sriraj Kalluvila, Viraj Nair)