Insmed Inc (INSM) 2003 Q3 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the Insmed Incorporated third-quarter earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

At the request of the Company, we will open the conference up for questions and answers after the presentation.

I will now turn the conference over to Baxter Phillips of Insmed.

Again, good morning, ladies and gentlemen. Thank you all for participating in and welcome to today's third-quarter earnings conference call.

Joining us this morning on today's call from Insmed are Geoffrey Allan, President and Chief Executive Officer, and Kevin Tully, Principal Financial Officer.

Earlier today, we released financial results for the third quarter of 2003 and currently, we posted this release on our Web site at www.Insmed.com.

We will shortly be presenting Insmed's results for the third quarter of 2003, along with the current outlook for the Company. Before that, I'd like to start off by reading the safe Harbor statement, which is as follows -- this call may contain forward-looking statements with uncertainties that may cause our actual results, performance, achievements or industry results to be materially different from any projection of future results or achievements expressed or implied by these forward-looking statements, including those outlined in the Securities and Exchange Commission filings.

In an effort to provide useful information to our investors, our comments today may also include certain non-GAAP financial measures. For details on these measures, including why we employ them and a reconciliation to comparable GAAP measures, please refer to our filings for our earnings release in Form 8-K that has been furnished to the SEC, both of which are available on our website again at www.Insmed.com.

It is now my pleasure to turn the call over to Insmed Incorporated's Chairman and Chief Executive Officer, Geoffrey Allan.

Thank you, Baxter. Good morning, everyone, and welcome to our end-of-quarter conference call. As usual, the purpose of this call is twofold -- first, to present our financial results for the third quarter of 2003; and second, to give you a report on our Company's progress toward meeting its long-term strategic goals.

Therefore, first, we will begin with our Principal Financial Officer, Kevin Tully, who will take you through the financials.

Thank you, Geoff, and good morning, everyone. As in normal in our quarterly conference calls, I will first give you an overview of our results for the three and nine-month period ending September 30, 2003 and compare them with the corresponding periods of 2002. I will then provide some details on results. Finally, I will close with some brief guidance for the balance of 2003 and into 2004.

As for the overview, in the third quarter ending September 30, 2003, our reported revenues were 27,000, as compared to the 1,757,000 reported for the third quarter of 2002. The net loss for the latest quarter was 2.4 million, or 6 cents per share, versus a loss of 4.7 million, or 14 cents per share, in the same period for 2002.

For the first nine months of 2003, reported revenues were 123,000, as compared to 1,929,000 in the first nine months of 2002.

The net loss for the nine months ending September 30, 2003 was 7.8 million, or 23 cents per share, as compared to losses of 17.9 million, or 54 cents per share for the same period in 2002.

Looking into these results in more detail, for the three months ended September 30, 2003, a 1.7 million drop in reported revenue, as compared to the same period in 2002, was entirely due to the elimination of international licensees for our earlier drug candidate, INS-1. As the INS-1 program was discontinued in September, 2002, all of the deferred revenue relating to prepaid license fees for the program were fully recognized in the prior year.

The 4.1 million improvement in our operating expenses for the latest quarter, as compared to the corresponding quarter for 2002, arose from the elimination of an operational and restructuring charge of 2.5 million in 2002 and a reduction of 1.6 million in R&D spending. The 2002 restructuring charge covered the costs associated with the discontinuance of our INS-1 program, while the reduced R&D spending mainly resulted from a shift in our clinical trial activity to focus on the pivotal Phase III trial of our current lead candidate, the IGF-1 IGFBP-3 complex in the treatment of Growth Hormone Insensitivity Syndrome.

The other areas of expense and income were basically in line quarter-on-quarter with G&A coming in 73,000 higher while interest income declined by 56,000.

In looking at the analysis of the nine months ended September 30, 2003 as compared with the same period for 2002, many of the same factors, which impacted the quarterly results, were again evident in the nine months' comparison. The 1.8 million decline in reported revenues was due to the previously mentioned elimination of the international licensees for INS-1, while the 12.1 million drop in operating expenses primarily arose from a combination of the refocused chemical effort, which resulted in a 10.1 million reduction in R&D spending, the elimination of the 2.5 million restructuring charge, which occurred in 2002, and an increased G&A spend of 0.5 million. The 245,000 reduction in interest income year-to-date was again due to the lower interest rates, which also impacted the third quarter.

Turning to our cash position, the cash used to fund operations for both the current quarter and year-to-date ended September 30, 2003 declined by 45 percent and 60 percent respectively from the same periods in 2002, and we ended the current quarter with 32.2 million of cash on hand.

Looking ahead at the final quarter of 2003, I believe that we're right on track to meet our previously-indicated operational cash expenditure targets.

I mentioned, during our last quarterly conference call, that I expected our operational cash spend would be close to 12 million for the year. This remains in line with current projections.

In terms of looking further down the road into 2004, I do expect a planned pick-up in our spending pattern, as we increase manufacturing expenses to scale-up production in support of getting our lead drug candidate approved by the FDA.

This concludes my review of the results. I will be available at the end of the call to answer any questions. Now, I will hand back to Geoff to continue the business review.

Thank you, Kevin. Let me spend, now a few moments, as Kevin said, reviewing our business activities -- this year, 2003 and the year 2004, moving forward. As you know, the principle goal of the Company is to apply for FDA approval for our lead product, recombinant IGF-1 complex to recombinant IGF-1 BP-3, and introduce this product into clinical use. As you know, we have initiated the pivotal Phase III trial with this product, targeted towards an indication called Growth Hormone Insensitivity Syndrome, or GHIS for short. We initiated this trial in June of 2003. This is an international, multi-centered trial which is being conducted in 12 countries all over the world at 17 different clinical sites.

We are very pleased to have three clinical investigators who we consider to be among the top investigators in this clinical field and they all (indiscernible) as our principle investigators in this trial, namely Professor Martin Savage and Cecilia (indiscernible) of St. Bartholomew's hospital in London, and Professor Lewis Underwood (ph) at the University of North Carolina Medical School here in the United States.

This clinical trial is intended to generate data of approximately 30 patients. All of these patients have been very carefully screened and in the majority of these patients, we have identified the genetic defect responsible for their IGF deficiency.

The primary clinical endpoint is a change in the linear height velocity. This measurement is commonly expressed in centimeters per year. Historically, without treatment, these children would typically grow, on average, approximately 3 centimeters per year. We have each child's historical growth chart demonstrating this.

Along with metabolic dysfunction, these children probably will reach an average adult height of no greater than 4 feet. Previous experience with IGF replacement therapy demonstrates that linear height velocity reaches, on average, 8 centimeters annually and therefore, this 5 centimeters per year difference is both statistically significant and clinically relevant.

The data we collect next year for this Phase III trial will be used to support the regulatory filing for market approval, which we are hopeful to submit by the end of 2004.

Accompanying our Phase III trial data will be the safety data generated from our special license (indiscernible) patient program, our extensive set of safety and efficacy data that we've acquired over the over the years with this product in over 200 subjects, and the eight years of IGF-1 safety and efficacy data in GHIS that we obtained from Pharmacia.

I believe, with the active year we've had so far and all the milestones we have been able to meet, we have demonstrated diligence and an ability to execute, which we intend to continue. The initiation of our pivotal Phase III clinical trial in GHIS was one of these major milestones that was set for ourselves, and I'm very pleased that we've met this milestone.

I would now like to spend a few minutes to review with you some of the other accomplishments this year. We have presented seven scientific abstracts to five scientific conferences. These include three poster presentations to ASCO (ph) and AACR, where we revealed our findings that supports the use of recombinant IGF BP-3 as a novel anti-tumor agent. We presented a poster to the ADA demonstrating the safety and efficacy of our IGF-1 therapy in adolescent type 1 diabetes. We presented a poster to the Endocrine Society Annual Meeting, where we showed the pharmacal (ph) kinetic (ph) data with our IGF-1 therapy and in GHIS children. We also have two podium presentations to the European Society of Pediatric Endocrinology, one where we discussed our GHIS data and one where we discussed our diabetes data.

During this period, we also obtained orphan drug designation in Europe for the product in GHIS.

I'm also pleased to tell you that we will end this year every bit as active as it we have been in the past. Among the activities on our schedule, we have upcoming presentations to three council conferences. The first will be this weekend in New York, where we present our data to the Prostate Cancer Foundation. The second is the American Association of Cancer Research meeting in Boston, which will be held later this month. The third is the San Antonio Breast Cancer Symposium, which will be held in December.

At all of these conferences, we will present data that continues to support the use of recombinant IGF BP-3 as a novel anti-tumor agent. Next year, our goal is to bring recombinant IGF BP-3 into the clinic. As I stated previously, we remain consistent in the fact that we will intend to partner this product with a company that has the experience and resources to fully develop this promising cancer treatment.

Now, going back to our activities with IGF-1 deficiency, allow me to quickly remind you that our IGF-1 therapy is simply designed to replace IGF-1 levels to age-related levels in a safe and tolerable matter where an IGF-1 deficiency has been identified.

As you know, GHIS is the most severe form of IGF deficiency, as these children have almost no circulating IGF-1 and, as a result, have very abnormal growth and metabolism.

As we continue to move forward with the clinical development of our therapy, we intend to remain active in clinical development in different disease indications where an IGF-1 deficiency clearly exists. These diseases include severe insulin resistance in diabetes, recovery from severe burn injury and trauma and retinopathy (indiscernible). These are all indications where we believe we will be able to expand our potential market label for this very exciting product in the future in order to build on our company's long-term growth strategy.

So, with that being said, I would like to thank you once again for listening in on this morning's conference call. I will now open the session for questions and answers.

Thank you. The question-and-answer session will begin at this time. (OPERATOR INSTRUCTIONS). Our first question comes from Kevin McKenna from RBC Capital Markets.

I got on the call a little bit late. I apologize. My question is regarding, first of all, on the interaction with receptin (ph) -- if you could talk about that at all?

Well, good morning, first of all. We're going to be presenting that data in the abstract at the forthcoming meetings that I mentioned in the conference call.

Basically, there has been a lot of interest in combination strategies for different growth factor -- for growth factor modulation. We have completed have completed some very early stage studies where we've looked at combinations of receptin (ph) with our recombinant BP-3 product to demonstrate either the synergy or the additive effects of both products in these various tumor models. I think the data has shown to be positive and we look forward to presenting that data in more detail to the scientific forum.

Have you worked with other compounds other than receptin (ph)?

In our various animal models -- the preclinical animal models that we presented at ASCO (ph) and AACR, in all of these animal models, you tend to look at the standard of care therapy and the effect that recombinant BP-3 has, either as monotherapy or in addition to the standard of care.

So just to give an example there, in our colorectal model, we look at the (indiscernible) of care therapy (indiscernible). We have demonstrated that if you combine (indiscernible) and recombinant BP-3, we can see an overall better tumor suppression then with either single agent. So, we've replicated that using different drugs in the various different animal models.

All right, thank you. Also, if you could comment on Tercia Medica (ph) and what they're doing and where you are in terms with where they are in treatment?

I can't really comment on that, Kevin. I think, you know, they are obviously developing a program where they believe IGF-1 replacement therapy is important. We understand they are conducting clinical trials in this area and I don't have any other comment today.

They are using IGF-1 and you're using IGF -- (Multiple Speakers).

Sorry. They are using IGF-1; we are using the complex with BP-3.

All right, thank you.

Our next question comes from Kate Winkler from Merriman Curhan Ford and Company.

Hi, folks. My question, Geoff, is, first of all, on the timeline of when you expect results from your GHIS pivotal study. I know you said next year you'll be filings. I'm just curious if you are looking at annual growth rates, what number of months you're measuring that over and where you stand in terms of enrollment.

Also, then related to that, what you're looking at in terms of the magnitude of your increased spending that you projected for next year.

Good morning, Kate. Let me talk a little bit about the clinical trial. I not prepared to go into a great deal of detail, but as I said, we're looking at high velocity measured as centimeters per year as the primary efficacy outcome. Based on historical data in this population, we believe that 5 centimeters per year, which has been demonstrated previously with IGF-1 replacement therapy, is achievable. That growth velocity occurs over a twelve-month period. That will obviously be the duration of our clinical trial. We believe that (inaudible) will be a position to obtain all of that data and have it ready for filing by the end of next year.

I will pass it over to Kevin, who can talk little bit about how we plan to increase this spend to accommodate manufacturing.

Hi, Kate. Again, looking forward, we generally don't go into the details on the spend profile but what I will say will be the same as we've had it in the past; it will be controlled. It will probably too speculative to talk about in detail at the moment, but we are in full control of our finances; we've got 32 million of cash on hand and we can see well ahead on how to utilize that. But I'm not really prepared to go into the details on spend at the moment, and I'm sure you can understand that.

(OPERATOR INSTRUCTIONS).

Okay. There doesn't appear to be any more questions, so I'd like to thank all of you that did listen in -- once more for listening in. As always, you can contact us directly if you would like further clarification on our activities. So with that, I would like to wish you a good day.

Ladies and gentlemen, if you wish to access the replay for this, call you may do so by dialing 800-428-6051, or 973-709-2089 with an ID number of 311554. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.