Stock to watch: Insmed (INSM)

Insmed Incorporated (Public, NASDAQ:INSM)broke $1 today, rising 13% to $1.02. We normally don't cover many penny stocks here at the Stockmasters, but Insmed has caught our eye as having a lot of potential.

This is due to their news on IPLEX: The Food and Drug Administration is sharing with the public its decision to allow patients with Amyotrophic Lateral Sclerosis, a fatal neurodegenerative disease also known as Lou Gehrig's Disease, or ALS, to have access to a drug called Iplex under an Investigational New Drug application.

Iplex, is a combination of two substances: human insulin-like growth factor 1 and human insulin-like growth factor-binding protein-3. Iplex is approved by the FDA only for the treatment of growth failure in children with severe primary IGF-1 deficiency or with growth hormone gene deletion who have developed neutralizing antibodies to GH.

In February, Merck & Co. said it will buy some biotech drug candidates and a manufacturing facility from Insmed Inc. for $130 million.

Insmed agreed to sell its pipeline of "biosimilars," or "follow-on biologic drugs" — drugs that are attempted copies of biotech drugs, which are made using living cells. In the deal, Merck gains products including INS-19 and INS-20. The drugs are designed to prevent infections in cancer patients who are receiving chemotherapy.

Late-stage trials of INS-19 are being planned, and INS-20 is in early-stage testing. Merck will pay Insmed $10 million upfront for the drugs, and will make the rest of its payment when the deal closes. It will not owe any milestone or royalty payments.

The manufacturing plant is a 50,000 square-foot facility in Boulder, Colo., for the making and analysis of biologic drugs.

The drugs will be managed by Merck's new BioVentures business.

Richmond, Va.-based Insmed maintains ownership of its protein-based drug candidates, including two cancer treatments in early development, and a group of candidates based on its drug Iplex. Iplex received Food and Drug Administration approval in 2005 for use in children with growth failure due to primary IGF-I deficiency, or insulin-like growth factor deficiency.

INSM Chart