Is Insmed Stock Overvalued After The 45% Jump?

Forbes

16-06-2025

POLAND - 2025/01/18: In this photo illustration, the Insmed company logo is seen displayed on a ... More smartphone screen. (Photo Illustration by Piotr Swat/SOPA Images/LightRocket via Getty Images)
Insmed Inc (NASDAQ: INSM) was nothing short of a powerhouse last month, soaring 45%, while the S&P 500 index rose 3% in the same timeframe. What's driving this surge? Insmed revealed that its Phase IIb trial for treprostinil palmitil inhalation powder (TPIP) in pulmonary arterial hypertension (PAH) achieved both its primary and all secondary endpoints. Industry reports described the product as a 'home run' in contrast to competitors like United Therapeutics (NASDAQ: UTHR), which experienced an 11% decline over the last month.
However, there's a caveat: Insmed is trading at 35 times sales. Turn that around, and you arrive at a meager 2.8% sales yield. In comparison, United Therapeutics—yes, the company with multiple FDA-approved drugs targeting PAH—trades at a lower sales multiple of 5 times and is generating operating profits of nearly 50%, in stark contrast to the losses reported by Insmed. So, while Insmed has achieved a significant medical breakthrough, at $98 per share, this represents a premium valuation pursuing an unproven growth narrative. When the anticipated growth fails to materialize, that's when reality strikes. Check Buy or Sell Insmed stock?
Moreover, history tells a more complex story about Insmed stock. During the 2008 global financial crisis, its shares plummeted by nearly 78%. In the early days of the Covid pandemic in 2020, they fell by 60%. Then in 2022, with escalating inflation and consumer pressure, the stock stumbled again with a 63% drop. It's hardly invulnerable—yet today, the stock is trading at a premium valuation.
Insmed's stock premium is mainly driven by the impressive Phase 2b trial results of its inhaled therapy TPIP for pulmonary arterial hypertension (PAH), which surpassed expectations and positions it as a possible best-in-class treatment. This clinical achievement, alongside a $750 million capital raise to facilitate pipeline expansion, has ignited investor optimism, causing the stock to rise significantly above its fair value estimates.
Support from major institutions and strong revenue growth contribute to the bullish outlook, though its high valuation—trading at over 35 times price-to-sales—means that continued execution and progress toward Phase 3 trials will be vital for maintaining this momentum.
Insmed projects global revenues for ARIKAYCE in 2025 to be between $405 million and $425 million, reflecting growth of 11–17% compared to 2024. Ongoing research and development investments for pipeline products (brensocatib, TPIP) mean that Insmed is expected to remain unprofitable into 2026.
In the short term, the FDA's decision on brensocatib in August could significantly impact the stock. Additionally, the launch of Phase 3 trials for TPIP and further clinical updates will act as critical validation benchmarks. In the long run, successful execution during Phase 3 and eventual commercial launches of both brensocatib and TPIP will be key in determining whether INSM can uphold its current premium valuation.
Insmed's surge reflects a combination of strong clinical progress, positive investor sentiment, and a solid financial path. However, the elevated valuation (P/S ~35×) signifies that upcoming milestones—such as the design and initiation of Phase 3 trials—will be essential in justifying this premium. Without these achievements, the stock may encounter pullbacks or merely sideways movement.
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