Insmed Inc (INSM) 2004 Q1 法說會逐字稿

Good morning, and welcome, ladies and gentlemen, to the Insmed Incorporated First Quarter 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. Please go ahead, sir.

Thank you, Tiffany. Again, good morning, ladies and gentlemen. Thank you all for participating in today's first quarter conference call. Joining us today in this conference call from Insmed are Geoffrey Allan, President and Chief Executive Officer; Ronald Gunn, Executive Vice-President and Chief Operating Officer; and Kevin Tully, Principal Financial Officer.

Yesterday evening, we released financial results for the first quarter of 2004. Concurrently, we posted this release on our Web site at www.insmed.com. In this call, we will be presenting Insmed's results for the first quarter of 2004, along with the current outlook for the company.

Before we begin, let me remind you that, during this call-- this call will contain certain matters we will discuss today, consist of forward-looking statements relating to, among other things, our expectations concerning the results of our clinical trials for our recombinant human IGF-1/IGFBP3 product, also called SomatoKine, plans to submit an NDA to the FDA for the GHIS indication of this product by the end of this year, our financing plans, future financial and business performance, operating plans, goals and objectives of management, plans to recommission and utilize the protein manufacturing facility that we recently leased in Boulder, Colorado, and regulatory plans. Listeners are cautioned these statements are neither promises nor guarantees, but are subject to risk and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements.

In particular, these risks and uncertainties include, among other things, risks that product candidates may fail in the clinic or may not be successfully marketed; our ability to successfully enroll patients in our clinical trials; whether we will be able to recommission and utilize the protein manufacturing facility in Boulder, Colorado that we recently leased; whether such facility, along with production at Avecia, our current contract manufacturer, will meet our clinical and commercial production needs for the foreseeable future; whether we will be able to successfully scale up production; the company may lack financial resources to complete development of product candidates and may not be able to raise additional financing on commercially reasonable terms; competing products may be more successful; demand for new pharmaceutical products may decrease; the biopharmaceutical industry may experience negative market trends; regulatory approvals may not be received; and those other risk factors contained in our press release announcing our most recent results and in our periodic reports filed with the Securities and Exchange Commission including but not limited to our annual report on form 10-K for the year ended December 31st, 2003 and subsequent forms 10-Q. We undertake no obligation to update or revise the information provided in this call, whether as the result of new information, future events or circumstances or otherwise.

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

Well, good morning, everyone. As Baxter has indicated, the purpose of this call is to present our financial results for the first quarter 2004 and to provide you with an update of our programs. We will begin today with our Principal Financial Officer, Kevin Tully, who will take you through the financials. Our Executive Vice-President and Chief Operating Officer, Ronald Gunn, will then provide you with an overview of our newly acquired manufacturing facility, and then I will provide a progress report on Insmed's ongoing pivotal phase III clinical trial in the GHIS indication. So, let's proceed with the financial results, and I will now pass over to Kevin.

Thank you, Geoff, and good morning everyone. I will begin the financial review today by first giving a brief overview of our results for the three-month period ending March 31st, 2004, and comparing them with the corresponding period 2003. I will then provide some details on the results, and finally, I will close with some high-level [ph] guidance for 2004.

As for the overview, in the first quarter ended March 31st, 2004, our reported revenues were $61,000 as compared to the $62,000 reported for the first quarter of 2003. The net loss for the latest quarter was $4.8m, or 12 cents per share, versus a net loss of $2.2m, or seven cents per share in the same period 2003.

Looking into these results in more detail, in the first quarter of 2004, our results were in line with our expectations. Preparations were made for the planned IGF-1/IGFBP-3 manufacturing campaign at Avecia, which is now underway, and our pivotal phase III trial in the Growth Hormone Insensitivity Syndrome indication continued to progress. Much of the $2.6m increase in our net loss for the first quarter 2004 as compared to the corresponding quarter of 2003 was linked to these two key strategic initiatives, as our research and development expenses were $2.3m higher.

On the manufacturing front, during the first quarter of this year, in addition to continuing our scale-up and development effort, we also incurred the normal upfront equipment and raw material costs in support of the planned manufacturing activity at Avecia. Also in the first quarter, clinical operations saw an increase in activity, as our previously mentioned phase III trial continued. As a comparison, the first quarter of 2003 saw minimal impact from both manufacturing and clinical trial activity, as at that time we were relatively early in our program cycle.

In the general and administration area, our expenses rose to $1mfor the first quarter 2004 as compared to not $.8 million for the first quarter of 2003. The major share of this upward movement resulted from an increase in the costs associated with being a public company. Our expenses for both external legal and accounting services rose as we proactively dealt with the corporate governance and other compliance matters required by the Sarbanes-Oxley Act of 2002 and new rules and regulations enacted by the SEC and NASDAQ.

As for interest income, the $16,000 increase in the first quarter of 2004 as compared to the same quarter in 2003 was due entirely to a combination of declining interest rates and a lowering of our average cash balance. In terms of cash, we ended the quarter with $24.9m of cash on hand. This represents a $4.6m use of cash during the first quarter 2004, which is on track with our projections. During our last conference call, I stated in my guidance that we anticipated a planned increase in our operational spending in 2004 from the levels seen in 2003, as we would continue to scale up our manufacturing capability and progress in our pivotal clinical trial in support of submitting an NDA for the GHIS indication by the end of 2004. This is what transpired during the first quarter of this year.

The increase in the use of our cash is directly related to the planned progression of our strategy, and I'm pleased to report that, on all financial fronts, we are where we expected to be at this juncture, and the goal of submitting the NDA for the GHIS indication by the end of this year remains on track.

With the first quarter of the current year progressing according to plan, we have taken advantage of a unique opportunity to accelerate the execution of our strategy. In a press release on April the 14th, we announce the acquisition from Baxter International of a building lease, including all contained equipment, relating to a protein manufacturing facility in Boulder, Colorado. The acquisition of this facility, which Ron will elaborate on later, adds a key strategic asset and resource to our company. We believe this investment represents an important move to help mitigate production risk and underpin our development and commercial strategy.

In the short term, our cash use will increase as the costs of recommissioning at the site and the setup of collateral letters of credit will overlap with the costs of our planned manufacturing campaign at Avecia. Consequently, I expect our operational cash usage in the second quarter of 2004 to increase significantly from the first quarter of this year, and we will likely see a cash balance approaching $12 million by midyear. Although our operational use of cash will moderate for the second half of 2004 as the Avecia campaign concludes, we believe the expenses associated with the Boulder facility, including the continued associated recommissioning costs, will require Insmed to raise additional funds by year-end to support our operations through the FDA approval process of our lead compound in the GHIS indication.

The acceleration of our program to take timely advantage of the Boulder facility is further proof of our commitment to our strategy. It represents an investment for the future, which we believe will allow the company a solid dual sourcing platform for the continued development and potential commercialization of our drug candidates.

This concludes my review of the financial results. I will be available at the end of the call to answer any questions. I will now turn the call over to Ron to provide you with a bit more detail about the acquisition of the new Insmed manufacturing facility in Boulder.

Thank you, Kevin. As Kevin mentioned, in April we announced that Insmed acquired a lease to a recombinant protein manufacturing facility, including all equipment, formerly operated by Baxter International. The lease has an initial term expiring in February 2008, with an option to extend the term to February 2013. As part of this acquisition, we have provided two letters of credit, the first in the amount of $1.6m to cover lease payments through February 2008, and the second for $2m to cover Insmed's obligation to remove our laboratories and manufacturing equipment and restore the facility if we terminate the lease.

This manufacturing facility in Boulder, Colorado consists of approximately 25,000 square feet, and was operated by Baxter Hemoglobin Therapeutics to make their e.coli-derived recombinant hemoglobin product from 1998 to 2003. In 2002, the facility underwent a major $12m CGMP upgrade and now consists of a well-equipped process development laboratory, quality control laboratory and CGMP production train. The process development laboratory includes multiple 15-liter fermenters and a 600-liter fermenter, all with associated recovery trains and downstream purification. The CGMP production train includes a 1500-liter fermenter, recovery train and downstream purification.

In addition to obtaining a facility well suited to manufacture SomatoKine, Insmed has been fortunate to attract key executives formerly responsible for upgrading and running this recombinant manufacturing facility. We believe this will allow Insmed to expedite our recommissioning of the site with a target of being in production by the end of 2004. It is anticipated that this facility, along with production at Avecia, our current contract manufacturer, will meet our clinical and commercial production needs for the foreseeable future and significantly reduce the risk of possible product shortages.

We see this acquisition of this lease and equipment as a rare opportunity to accomplish what few biotechnology companies are able to do: take control of their recombinant manufacturing protein program for a relatively small investment. Although, as Kevin mentioned, the acquisition of the Boulder asset will accelerate our spending program this year, we believe that it will yield significant economic advantages in 2005 and beyond.

I will now turn the call back to Geoff to conclude our business review.

OK. Thank you, Ron, and thank you, Kevin. I would now like to make a very few brief comments regarding a major milestone for Insmed, and that is our ongoing clinical trial, which will be used to support an NDA submission for the use of SomatoKine in the treatment of GHIS. After those very brief remarks, I will turn the call back for questions.

As you may have gathered, we are preparing for a successful future, as evidenced by our strategic investment in the Boulder manufacturing facility. As Kevin and Ron both indicated, we are confident that we will submit our NDA to the FDA by the end of this calendar year. I would like to provide you with a general idea for the reasons we are confident. However, I must point out that the results that we have seen to date are preliminary and should be considered as such. As we all know from the history of drug development, many events can happen which are out of the company's control that may cause unexpected delays in manufacturing, or change the final outcome of the clinical trial.

However, with that being said, our phase three clinical trial is progressing as expected. We met with our steering committee last week. This committee consists principally of Professor Louis Underwood [ph] of the University of North Carolina, and Professor Martin Savage [ph] of the University of London. Collectively, Lou and Martin have studied and treated probably more children with this condition than any other physicians in the world. In fact, Professor Underwood still maintains an active, compassionate treatment program where he has treated children for up to 10 years with IGF-1, and I think therefore you will agree this represents a great deal of experience with this type of therapy.

The conclusions drawn from our steering committee review were that SomatoKine is displaying the therapeutic profile that we would expect to see in this population with this duration of dosing. I am confident that, if the trial continues to move forward as it has, we will have a data set sufficient for our NDA application. I look forward to providing you with top-line data from this clinical trial in the third quarter of this year, and at that time I will be prepared to discuss the clinical trial in more detail. But until then, for competitive reasons, I will not comment any further on the specifics of this clinical trial.

As I said, I would be brief, and I will now turn the call back to the operator to field questions.

+++ q-and-a

Thank you, sir. The question and answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star, one on your pushbutton telephone. If you would like to withdraw your question, please press star, two. Your question will be taken in the order that it is received. Please stand by for your first question.

Once again, ladies and gentlemen, if you wish to ask a question, please press star, one on your pushbutton telephones.

Our first question comes from Navdeep Jaikaria with Rodman Renshaw. Please state your question.

Hello. Actually, this is Shaun Wu [ph]. I'm standing in for Navdeep today. I have small question about your projection for the middle year. You said the cash balance will be only $12m? So, does this mean you will actually earn [ph] about 12m for the second quarter? Is this right?

That's correct. It's basically due to the overlap of the provision of the letters of credit, which Ron referred to, and the main costs associated with our Avecia campaign, which is in high gear in the second quarter.

So, it's more for-- I mean, [inaudible] it's all for R&D.

Yes, it is.

OK, thanks.

The next question comes from Jessica Hanover [ph] with Robert Baird. Please state your question.

Hi, good morning. Just a quick question about your ongoing pivotal trial for SomatoKine. I'm just wanted-- was wondering if you could provide some detail as to what your target enrollment for that trial is and where your enrollment is at this point, and when. I think you said you have-- still planning to file by year-end, so what your timing expectations for completing enrollment would be.

As I said in the-- my brief comments, Jessica, I'm not prepared to say anything more at this time. We're pleased with the progression of the trial. We are pleased with the data we have seen to date, and we still believe we are on target to file the NDA by the end of this year, and we are prepared to spend more time in the third quarter to discuss the precise detail of the design and the data at that point.

Thanks very much.

Thank you.

Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question at this time, please press star, followed by one on your pushbutton telephones.

If there are no further questions, I will turn the conference back to Dr. Allan.

OK. Once again, thank you very much, ladies and gentlemen, for listening into the call this morning. This was the end of first quarter call in 2004, and we hope to update you as we go throughout the year. If you have any questions at all, you can speak with Baxter Phillips.

Operator, I see one more question from Rodman Renshaw.

Mr. Jaikaria, your line is live.

Shaun Wu. Hello, yes. I ask [inaudible] million your other [inaudible] program, you disclosed some time ago you may do something in that chain, insulin resistance or in the myotonic dystrophy. Are you planning to initiate any kind of trial any time soon?

Oh yes, Shaun, sorry. I deliberately kept my comments brief this morning and focused on GHIS, but as you know, we have several other indications that we're interested in exploring the effects of SomatoKine in. Myotonic dystrophy is one such indication, severe insulin resistance is another such indication, and the company still is targeting towards the end of this year for initiation of trials in those various different indications.

Thank you very much.

At this time, Dr. Allan, there are no further questions in queue.

OK. So, once again, I'll just reiterate what I said a few moments ago. Thank you very much for listening, and we'll speak to you all soon. Thank you.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051, or 973-709-2089, with an ID number of 353287. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.