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(Reuters) - Insmed Inc's shares plunged after its experimental drug to treat a form of bacterial lung infection failed the main goal of a trial, but the stock clawed back much of its early losses after analysts said positive secondary data was more relevant.
Insmed's shares were down 12 percent in afternoon trading, recovering from a 34 percent plunge in premarket trading.
The company said the inhaled antibiotic, Arikayce, failed to reduce bacterial density, a measure of change in infection, significantly enough in patients with treatment-resistant nontuberculous mycobacterial(NTM) lung infections.
But the sputum cultures of 11 of the 44 patients given the drug did not show bacteria, meeting the mid-stage trial's secondary goal of culture conversion, Insmed said.
Analysts said the secondary data was a more relevant measure of the drug's efficacy and would be more meaningful to the U.S. Food and Drug Administration and doctors.
"What today's news does is eliminate any debate about the clinical meaningfulness of the data," said Andrew Fein, an analyst with HC Wainwright & Co.
"The initial belief was, given the short duration of the study, that showing culture conversion would be impossible."
The culture conversions were seen even after the study was extended beyond its scheduled 84 days, said Renu Gupta, Insmed's chief medical officer.
NTM lung infections are caused by a type of bacteria found in soil as well as water and are characterized by cough, fever and blood in the mucus. There is no approved treatment for these infections.
Fein estimated Arikayce, if approved, could generate sales of about $500 million by 2025 in the United States alone.
Insmed gave patients Arikayce along with a standard treatment in the trial and compared the results with patients given a placebo and the standard treatment.
Patients treated with Arikayce experienced a greater number of adverse events, including throat irritation, than those given the placebo, Insmed said.
The company, however, added that the adverse events were consistent with those seen in patients receiving inhaled antibiotics.
Insmed's shares were down 12 percent at $16.06 in afternoon trading. More than 6 million shares changed hands, putting the stock among the most heavily traded on the Nasdaq on Wednesday. The stock hit a low of $12.00 in premarket trading.
Editing by Savio D'Souza