Insmed Inc (INSM) 2004 Q3 法說會逐字稿

Good day and welcome to today's Insmed third quarter earnings results conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Baxter Phillips. Mr. Phillips, please go ahead.

Thank you, Deborah. Thank you and good morning, ladies and gentlemen, and thank you all for participating in today's third quarter conference call. Yesterday, after market close, we released our financial results for the third quarter of 2004. Concurrently, we have posted this release on our website at www.insmed.com. In this call we will be presenting Insmed's results for the third quarter of 2004 along with the current outlook for the company. Before we begin, let me remind you that during the call 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 SomatoKine, plans to submit an NDA to the FDA for the GHIS indication of this product by the end of this year; 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 leased in Boulder, Colorado; plans for manufacturing at Avecia; and regulatory plans.

Listeners are cautioned that these statements are neither promises nor guarantees but are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. In particular, the risks and uncertainties include, among other things, risks that product candidates may fail in clinical trials or may not be successfully marketed; our ability to successfully enroll patients in our clinical trials on a timely basis; our ability to successfully enroll patients in our clinical trials; our ability to scale up and manufacture sufficient quantities of our product candidates for our clinical and commercial production needs; whether we will be able to recommission and utilize the protein manufacturing facility in Boulder, Colorado; 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; required regulatory approvals may not be received on a timely basis or at all; and those other risk factors contained in our most recent press release announcing our recent results in our periodic reports filed to the SEC including but not limited to our annual report on Form 10-K for the year ended December 31, 2003, and subsequent Forms 10-Q. We undertake no obligation to update or advise 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 Dr. Geoffrey Allan, president and CEO of Insmed. Geoff?

Thank you, Baxter. Good morning, ladies and gentlemen. Thank you for listening to the conference call this morning. As you know, we have two critical activities for the success of Insmed, moving forward. Firstly, the submission of an NDA for SomatoKine, our lead product, and, secondly, the commercial launch of this product. In the last few months we have recruited two key individuals to execute on these tasks, Mr. Phil Young and Dr. Ken Attie, and I am going to pass the call over to these individuals to review with you these key activities. First I would like to invite Phil Young, our chief business officer, to review with you our sales and marketing plans for SomatoKine. As I have mentioned before, we are very pleased that Phil chose to come to work an Insmed. As you may know, while at Pharmacia and Genentech, Phil was very successfully in establishing sales forces for these companies respective drove home on products. As a result of this extensive experience, Phil has a thorough understanding of the pediatric endocrinology arena and, most importantly, a track record of success, which we will rely on next year as we approach our launch date. And so now I am pleased to pass over to Phil for a review of our sales and marketing strategy. Phil?

Thanks, Geoff. Let me start by saying that I am very happy to have joined the Insmed team and I'm looking forward to the preparation and launch of SomatoKine. Initial indication for SomatoKine, as you know, is Growth Hormone and Sensitivity Syndrome, which I believe is an excellent opportunity for Insmed to be introduced into the pediatric endocrinology community. Having personally spent many years during my career building the growth hormone businesses at both Genentech and Pharmacia, I am intimately familiar with the marketplace, and I am well connected with the thought leaders in the U.S. and Europe. The pediatric endocrinology market in the United States is well defined and can be effectively covered with a small, focused sales force of our own. We will spend the majority of 2005 setting the stage for the product launch, which we currently anticipate will be the beginning of 2006. Should the FDA act more rapidly on the approval, we will be able to move forward our timeline to meet that opportunity.

Initial market research has helped us gather important data, which we will use as we progress in our launch planning. When we present the clinical data for SomatoKine publicly at international meetings in 2005, it will become apparent why it will be the preferred therapy for Growth Hormone and Sensitivity Syndrome. In addition, we will initiate properly designed and well-controlled clinical trials and several new indications for label-expansion purposes. Studies are planned in several insulin resistance, myotonic muscular dystrophy, which, as you know, SomatoKine benefited from a $6.5 million NIH and Muscular Dystrophy Foundation grant. We will also plan to initiate controlled trials designed to expand the Growth Hormone and Sensitivity label.

Marketing work and sales-force buildup will be carefully managed to maximize their impact and timing. Since we will be focused on launching SomatoKine ourselves in the United States, we felt it was best to identify an appropriate partner for the European market as well as other markets around the world. Discussions have been initiated and are progressing nicely with some of the top companies in Europe, and it's our goal to have a European partnership for SomatoKine completed early in 2005. We are also talking with several other companies from around the globe who are interested in licensing SomatoKine for specific geographies.

It is clear from the discussions I have had around the world that SomatoKine is viewed as a very valuable product and a drug that has potential to be a major therapeutic success in multiple indications. That is evidenced by the approval for name patient program in many countries in Europe where we are receiving more than $150,000 per year per patient, and we are expanding that program via our partnership with Tzamal in Israel.

So, to summarize, we are making progress on many fronts as we prefer for launch of SomatoKine. One, market preparations are underway, and we'll spend a majority of 2005 finalizing our strategy, developing the tactics needed to successfully launch the product. Secondly, label expansion trials and diseases with unmet medical needs will be initiated. Third, the partnership discussions should lead to the announcement of a European partner and partners in other geographies.

As I mentioned, SomatoKine is being very well received for treatment of numerous diseases, and this is validated by the number of top-tier companies that we are in discussions with. I am looking forward to all the hard work involved in planning and launching SomatoKine, and the job will be especially fun and rewarding now that I'll be able to collaborate with my former associate and friend from my days at Genentech, Dr. Ken Attie. As you know, Dr. Attie is a highly regarded authority in the field of pediatric endocrinology and growth disorders, and he has been charged with leading our clinical team as the company continues to prepare our upcoming regulatory filings and plans for future clinical trials designed for label expansion. Dr. Attie was a senior clinical scientist at Genentech, where he played a crucial role in development and commercial expansion of Genentech's successful growth hormone franchise. He was directly involved in the efforts that led to the approval of growth hormone use in children with Turner Syndrome and chronic renal insufficiency. Further, he was intimately involved with the successful filing of multiple NDAs for Genentech and subsequent presentations and negotiations with the FDA. We will certainly rely on this extensive regulatory and clinical experience to assist us as we move forward.

With that, I'll pass it over to Ken to give you a synopsis of where we stand with our upcoming NDA filing and pivotal Phase III clinical trial. Ken.

Thank you, Phil, for the kind introduction. First, let me say that I am very excited to join the Insmed team in their endeavor to bring a safe and effective IGF-1 replacement therapy to market. SomatoKine certainly fits this description, having listed a statistically significant and clinically significant growth response in the GHIS children in our pivotal clinical trial while demonstrating and acceptable safety profile.

As Phil pointed out, I have established a rapport with the FDA division through my various presentations and negotiations involving growth hormone during my tenure at Genentech. Having now reviewed our correspondence with the FDA from the past 18 months or so, I feel that we have complied with what the FDA has asked of us with respect to clinical development for this orphan indication.

I am comfortable with our strategy, and I am particularly confident that we are addressing effectively a broad range of efficacy and safety issues with our prospective Phase III clinical trial design. I am pleased to confirm that we are currently on track for filing the NDA for GHIS by the end of this year. Our regulatory submission will be based on the six-month data analysis, which we reported on this past summer. As a reminder, this analysis reported that SomatoKine significantly increased height velocity in these children and, in addition, was well tolerated and had an acceptable safety profile in this young patient population.

From a physician's perspective, it is this desirable safety profile and once-a-day dosing regimen that I think will likely make SomatoKine stand out from other competing products. As you know, the GHIS clinical trial is ongoing, and I can report that the data continues to demonstrate both efficacy and safety with longer-term treatment. Based on my experience in this area, I believe that we have an approvable product for our initial indication of Growth Hormone and Sensitivity Syndrome and certainly looking forward to the hard work that will be involved in planning and initiating additional clinical trials in new indications that address important unmet medical needs.

Thank you again, and I will now pass it back to Geoff.

Thank you, Ken. Ladies and gentlemen, as Ken has stated, I believe the activities conducted over the last 18 months by the company with regards to our clinical trial and with our FDA discussions are in complete alignment. I strongly believe we have a robust package to submit to the FDA next month. As I am sure you are aware, yesterday we completed an $8 million financing. As Phil pointed out, we are in the midst of negotiating with potential partners in Europe for the sales and marketing of SomatoKine. We believe these additional funds will be valuable in providing us the time to negotiate the best partnership terms for the company's assets. I will now pass over to Kevin, our principal financial officer, to review our financial results for the third quarter. 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 September 30, 2004, and comparing them with the corresponding period in 2003. I will then provide some details on the results and, finally, I will close with some high-level guidance for the balance of 2004.

As for the overview, in the third quarter ended September 30, 2004, our reported revenues were $24,000 as compared to the $27,000 reported for the third quarter of 2003. The net loss for the latest quarter was $7.6 million, or 20 cents per share versus a net loss of $2.4 million, or 6 cents per share in the same period 2003. Looking into these results in more detail, in the third quarter 2004, our results were again in line with our expectations. Our pivotal Phase III trial of SomatoKine and the Growth Hormone Insensitivity Syndrome indication continue to progress, and our plan for SomatoKine manufacturing company, Avecia, was successfully completed.

We also advanced the validation to our manufacturing facility in Boulder, Colorado, in anticipation of the initial manufacturing of SomatoKine at the site during the fourth quarter of this year. Much of the $5.2 million increase in our net loss in the third quarter of 2004 as compared to the corresponding quarter of 2003 was linked to the increased activity surrounding the manufacture of SomatoKine. This was reflected in our research and development expenses, which were $5 million higher due to the combination of the planned peak of our manufacturing activity at Avecia, and the anticipated escalation of validation efforts at our Insmed therapeutic protein facility in Boulder, Colorado. As a comparison, the third quarter 2003 saw minimal impact from manufacturing as, at that time, we were relatively early in our program cycle.

In the general and admin area, our expenses rose to $0.9 million for the third quarter of 2004 as compared to an $0.7 million for third quarter of 2003 due to the anticipated increase in external service costs and planned additional personnel costs to support our business strategy. As for interest income, the $19,000 decrease in the third 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 analyzing the nine months ended September 30 of 2004 with the corresponding period at 2003, the fact is which impacted the third quarter comparison were again evidenced. The $13.5 million increase in our net loss the first nine months of 2004 as compared with the first nine months of 2003 resulted from a $12.8 million escalation in research and development costs and an $0.7 million rise in general and admin expenses, the former resulting from the increased manufacturing activity at both Avecia and our ITP Boulder facility and the latter due to higher business support costs.

Turning to cash, we ended the quarter with $7.5 million of cash on hand, which represents a reduction of $6.5 million from the cash on hand at June 30, 2004, as funds were utilized to support our planned operational activities, particularly in the manufacturing arena. As you will have seen from our announcement yesterday, we were successfully in raising additional funding to further bolster our activities. We expect this latest round of financing to provide approximately $8.2 million, after commissions, to support our business. We believe this influx of cash at this critical juncture will provide a solid interim platform to underpin the business as we enter the critical phase of our NDA submission strategy.

Looking forward, I expect the loss for the final quarter of 2004 to show an improvement over recent quarters, as our plan appeared of heavy spending for the current year has peaked. As for cash, with the additional funding in place, we believe we are well positioned to advance our SomatoKine program through the submission of our NDA for the GHIS indication and beyond. Based on the anticipated decline in our burn rate over the coming months, we believe that this latest financing, together with our cash on hand at the end of the third quarter, will be sufficient to support our business requirements, moving forward. As our business needs continue to grow, we do anticipate raising further funds in 2005 to maintain the momentum of our key strategic initiatives.

This concludes my review of the financial results. I will now turn the call back to Geoff to conclude the business review.

Thank you, Kevin. In the near term we have several major milestones upcoming for the company, which we believe should add significant value and attract interest in the company. As we have stated today and on previous occasions, we have mapped our course for approval of SomatoKine. We firmly believe, and I think you would agree, that the signs and market opportunity are there, and now for Insmed it is only a matter of execution. We have an excellent team of scientists in place, diligently working to finalize our NDA submission.

Apart from SomatoKine, we have also recently announced the initiation of the Phase I clinical trial with our second product, BP3. Those trials are ongoing, and next year we look forward to entering Phase II clinical trials and developing a partnership for this product, moving forward.

And on that summary, I would like to thank you for listening, good morning, and open the call for questions.

(OPERATOR INSTRUCTIONS)

We do have our first question from Sean Wu at Rodman and Renshaw.

Hello, Geoff. Thank you very much for taking my call. I have two questions. The first one is in the middle of the year you discovered 10 more patients -- how are 10 more patients doing. Are they part of your program and were you using the data from those 10 patients for the FDA filing?

Good morning, Sean. As we pointed out, the clinical trial is ongoing, and we are on a timeline to submit the NDA by the end of this year, and that's about all we'd like to say at this point about the program.

Okay, so a second one -- it is very good that you (indiscernible) million dollars, but as per your call (ph) you're going to initiate (indiscernible) and data trials, so I actually don't see your cash burn to go down significantly. So when do you think you need to use (ph) more money, and do you think -- how long do you think the money will last you and what's your financing strategy, coming forward?

Our first objective this year, or remaining objective this year, is to get this NDA filed, and as you've heard today we fell very confident that program is clearly on track, and we've got an excellent team of people that are working to get the NDA filed. Kevin will provide guidance in the next quarter as to our spend for 2005. Clearly, we do have a very interesting opportunity, moving forward, for us. We do plan to initiate the clinical studies. As Phil pointed out, we've got a several insulin resistance trial that we are eager to initiate. A lot of the planning for that trial has been concluded -- investigators identified, et cetera -- protocols written. We have a muscular dystrophy study -- similar situation -- investigators identified, clinical trial protocols in progress, and we've got partial funding or virtual funding to complete that study. So, in short, we have a very exciting clinical program, moving forward, and we feel we can conduct this program in a very fiscally responsible way and develop a lot of value for it. So Kevin will provide guidance for the budget and our plans for financing in the next quarter.

And, ladies and gentlemen, we will now go to Jessica Hanover at Robert W. Baird and Company.

Hi, good morning, thank you for taking my call. Just one question -- you indicated that your NDA filing later this year would be based on the six-month data from the SomatoKine pivotal trial, and it just seemed like you might have more than six-month data by that time since you announced those results a while ago, and I'm just wondering if there is potential for you to make your filing with longer-term data than just six-month data.

Jessica, the initial filing will be with the six-month data. This trial is an ongoing trial and, clearly, we're developing longer-term information as we proceed. Kevin, would you like to add anything to that?

Yes, I think whatever data we have in hand at the time we "lock the database," as we put it, we will be submitting those data to the FDA. But it is through the agreements that we have had with FDA through our correspondence with FDA that the majority of the data that they will be looking at are the six-month data.

Okay, so FDA is expecting to see six-month data, then, from --

That's correct.

Ladies and gentlemen, this does conclude our question-and-answer session. I'd like to let you know that a re-broadcast of today's call will be available beginning at 11:30 Eastern, 10:30 Central, and running until November 15, 2004. To access the re-broadcast, you can dial 888-203-1112 or internationally you can dial 719-457-0820 and used access code 235319. Again, that replay will be available beginning today at 11:30 Eastern and running until November 15, 2004, at midnight. And now I'd like to turn the call back to our speakers for additional closing remarks.

Thank you, again, ladies and gentlemen, and if you have any questions, we are always available to answer your phone calls. Good morning.

Ladies and gentlemen, this does conclude our conference for today, and you may now disconnect.