Insmed Inc (INSM) 2005 Q1 法說會逐字稿

Welcome to the Insmed first quarter 2005 results conference call. [OPERATOR INSTRUCTIONS] It is now my pleasure to introduce your host, Ms. Ritu Baral (ph) of the Trapp Group. Thank you, Ms. Baral you may begin..

Thank you and good morning. We apologize for the delay. Thank you all for joining in today's first quarter conference call. Day before yesterday after market closed we released our financial results for the first quarter 2005. Concurrently we posted this release on our website at www.Insmed.com. In this call we will be presenting Insmed's results for the first quarter of 2005 along with the current review of the Company.

Before we begin let me remind you that during this 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, financing plans, future financial and business performance, operating plans, goals and objectives of management, plans to utilize the protein manufacturing facility that we leased in Boulder, Colorado, plans for manufacturing Avecia and regulatory plans. Listeners are cautioned that these statements are neither promises nor guarantees but are subject to risks and uncertainties that could actual -- 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 abilities to successfully enroll patients in our clinical trials, our ability to manufacture sufficient quantities of our product candidate for our clinical and commercial production needs, whether we will be able to 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, require recovery approval, 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 and our periodic reports filed to the SEC, including but not limited to our annual report form on Form 10-K for the year ended December 31, 2004 and subsequent forms 10-Q. We undertake no obligation to update or revise the information provided in this call, whether as a result of new information, future events, or circumstances, or otherwise.

I'd like to introduce today's participants on the call from New York, we have Dr. Geoffrey Allan, our Chairman and CEO, and Phil Young, our Chief Business Officer. And from our facility in Richmond, Virginia we have Kevin Tully, our Chief Financial Officer. I'd like to now turn the call over to Dr. Allan.

Thank you, Ritu and good morning, ladies and gentlemen. The purpose of today's call is to review with you our business and financial results for the first quarter 2005. Before Kevin reviews the financials I'd like to highlight some important milestones we've achieved so far this year.

This has been an active few months for the Company in which we have met several critically important milestones. We entered the second quarter of 2005 with three product candidates, targets in the IGF pathway in clinical trials and one NDA under review by the FDA. The importance of the IGF pathway in human disease has been well established and we are very pleased to be at the forefront of developing new and novel therapies through our research and development. As you know our lead product candidate is SomatoKine, a novel IGF-1 replacement therapy which is initially being developed for the treatment of growth hormone in sensitivity syndrome. We submitted the NDA for SomatoKine for this indication on January 3, of this year. The NDA was accepted for review by the FDA and has been granted priority review. The PDUFA date for the NDA now stands at July 3, 2005. We look forward to continuing to work with the agency while they finalize their review for granting SomatoKine marketing authorization. We are very pleased with the quality of the data that we have submitted to the FDA from our pivotal program and we plan to release it within the next several weeks. We will then provide a more detailed discussion of the entire data set in the fall during the joint U.S. and European pediatric endocrine meetings in France.

In mid-March we announced the completion of the $35 million financing. These funds will be used to support the Company's ongoing operations well into 2006. We were very pleased to add several new well-known and respected Biotech investors. We believe that their diligence in evaluating the Company prior to the financing provides an added endorsement, and we appreciate their support to our focused plan for achieving success. Recently we announced the initiation of several new clinical studies as we move towards our ultimate goal of establishing SomatoKine as a significant product for hormone replacement therapy.

We have initiated Phase II trials with SomatoKine for HIV-associated lipodystrophy and Type A extreme insulin resistance. The Phase II lipodystrophy clinical study is designed to evaluate the safety and efficacy of SomatoKine for 12 weeks in subjects with HIV-associated lipodystrophy. The primary goal of the study is to determine the effects of SomatoKine on visceral fat and insulin sensitivity. Since the advent of highly active antiretroviral therapy, or HAART, there has been a marked increase in adverse metabolic effects in the HIV-positive population. Effects such as insulin resistance, hypoglycemia, dyslipidemia, and changes in body fat distribution that include syndromes of both central fat accumulation and fat loss in the limbs. Recent studies suggest that nearly 50% of the individuals on HAART developed features of this syndrome, therefore we feel that this is a promising market where SomatoKine could be extremely beneficial to patients' well-being.

The Phase II extreme insulin resistance trial is an open label dose ranging study designed to evaluate the safety and efficacy of SomatoKine for 16 weeks in patients with type A extreme insulin resistance. The primary efficacy end points of this trial are improvements in glycemic control, insulin sensitivity, reduction in hemoglobin A1C, and improvement in body composition. Syndromes of insulin resistance result from genetic defects of the insulin receptor or the insulin resignaling pathways. Individuals with this syndrome develop HAART diabetes, require large doses of subcutaneous insulin, sometimes in excess of 200 units per day. They in addition require oral hypoglycemic agents and insulin sensitizers. Despite this intense regimen glycemic control remains poor and these patients are at high risk as the complications of diabetes such as cardiovascular disease, nephropathy, retinopathy, and neuropathy. Previous clinical studies completed with SomatoKine in Type I and Type II diabetic patients have shown improved glycemic control, improved insulin sensitivity as well as reduction in daily insulin consumption. SomatoKine has Orphan drug designation in both the United States and Europe for this indication.

We also continue to develop and explore opportunities for our oncology compounds BP-3 and INSM-18. We have clearly demonstrated in preclinical studies the unique properties of each of these drugs and we look forward to generating data on their use in multiple clinical trials. INSM-18 a small molecule IGF-1 tyrosine kinase inhibitor will soon be investigated in a Phase II clinical study in patients with relapsed prostate cancer. We are completing early Phase I work with BP-3 in advance of initiating and expanding oncology program for this compound.

In addition to strengthening our oncology program we recently announced that we have entered into an exclusive option agreement with the University of California-San Francisco for access to a series of patented IGF-1 receptor antagonists. Initially we will evaluate the compounds as a treatment for prostate cancer. All combined we believe that our focused approaches to interrupting the IGF-1 pathway in multiple cancers represents an exciting opportunity for Insmed and the many patients affected by the various kinds of cancers we are targeting.

In summary, we believe we have started 2005 in a very positive fashion, meeting promised milestones as well as managing and working to resolve some unexpected challenges. SomatoKine is poised to gain FDA approval for GHIS, our label expansion program is on track with several new studies recently initiated and a couple more set to be initiated over the next months. The oncology program is taking shape and provides us with multiple opportunities for developing and partnering needed treatments for cancer. 2005 will continue to be an exciting and challenging year and we look forward to reporting our progress to you. That concludes my overview remarks, and I will now pass off to Kevin who will discuss in more detail our financial results at year end. 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 31, 2005, and comparing them with the corresponding period of 2004. I will then provide some details on the results, finally, high-level guidance for the balance of 2005.

As for the overview, in the first quarter ended March 31, 2005, our reported revenues were 57,000 as compared to the 61,000 reported for the first quarter of 2004. The net loss for the latest quarter was 5.8 million or $0.13 per share versus a net loss of 4.8 million or $0.12 per share in the same period in 2004. Looking into these results in more detail the 1 million increase in our net loss for the first quarter of 2005 as compared with the same period of 2004 resulted from a 0.7 million increase in operating expense and a 0.3 million increase in interest expense. The higher operating expenses were driven by a 0.4 million rise in research and development spending and an 0.3 million escalation in general and administration expenses. The rise in R&D expenses resulted from increased registry costs in support of our NDA together with higher clinical trial costs as we progressed our clinical trial of SomatoKine and the GHS indication and initiated two additional clinical trials with SomatoKine in Type A severe insulin resistance and HIV associated lipodystrophy. The G&A increase was mainly due to additional external service costs in support of our business.

The higher interest expense of an 0.3 million relates solely to the convertible debt which was finalized on March 15. Interest on these notes amounted to 80,000 for the period and the balance of the 225,000 resulted from the accretion of the debt discount and deferred operating costs covering the period March 15, through to March 31, quarter end. Both the debt discount which uses the Black-Scholes valuation model, and the deferred operating costs are prospective noncash items and are calculated and amortized in accordance with GAAP. The combined total of the debt discount in deferred operating costs is 18.4 million which is being amortized over 60 months, the term of the convertible notes. As for cash we ended the quarter with 35.8 million of cash on hand, during the quarter we successfully finalized the convertible debt financing on March 15, which after deducting operating costs, netted approximately 32.6 million and we used 6.3 million of cash to fund operations.

Looking forward, I expect our operating expenses for the full year 2005 to be broadly in line with the levels seen in the same period for 2004. Our interest expense will be affected by the finance charges associated with the convertible debt. The accounting treatment of the debt discounts and deferred offering costs both noncash items, will increase our interest expense by some 4 million for the balance of the year, and the actual interest incurred on the debt will defer 1.5 million to interest charges this year. In terms of cash with the additional funding in place we believe we are well positioned to advance our SomatoKine program through the approval of our NDA and the GSH indication and expand it into new indications supported by additional clinical trials. We believe this latest investment is a further validation of our strategy and provides us with a strong platform to advance our business. This concludes my review of the results. I will now hand over to Geoff for the remainder of the overview.

Thank you, Kevin. I think we can now open the call to questions.

[OPERATOR INSTRUCTIONS] Our first question comes from Matt Osborne with Unterberg Towbin. Please state your question.

Good morning, gentlemen. Thanks for taking the question. Just in terms of the data that we expect at the upcoming endo meeting, either presentable and submitted for abstract presentations or around that event. Then if you can talk about your current expectations in terms of time lines for preapproval inspections of either Avecia or the Boulder facility, and if an inspection is required at Boulder prior to an approval, or an approvable, and then just an update on the patent litigation, if there was any outcome from the 417 patent review in the U.K. this week.

Okay. Good morning, Matt. Thanks for those questions. Let's see if I can remember them all. First, with respect to data release, I think, as you indicated, the endocrine society meeting is taking place the first week of June in San Diego. We would like to be positioned to freely talk about the data at that meeting with select -- well, with investigators, clinical investigators, the pediatric endocrinology community. We are not presenting any of the data in a formal fashion at that meeting. So in order to allow us that freedom we will probably put a press release out sometime before that meeting to publicize all of the data. We then will have presentations at the joint pediatric endocrinology societies, the European and the U.S. ones, which are in Leon, France, later in this year, September.

I think your second point related to time lines and PAI's for our manufacturing program. As you know, for this type of product it would be typical to have a PAI sometime before the finalization of the review process. The PDUFA date is July 3, and, therefore, we're expecting that PAI to take place any time between now and July 3. It has not yet taken place.

You mentioned Boulder. We are rapidly bringing our Boulder facility -- or rapidly putting our Boulder facility in place to be a supplier of this product in the commercial markets to come, and as we unfold that program further, we'll decide when is the appropriate time to provide the information to the FDA. With respect to litigation, Kevin, could I pass over to you and ask you to comment briefly on litigation, recognizing that there's not a great deal we can actually say at this point.

Just in answer to your question, Matt, the 417 patent in the U.K. is actually being -- today, and we're likely to get some kind of a decision in two to four weeks.

Terrific. Thank you.

Thank you, Matt.

[OPERATOR INSTRUCTIONS] Our next question comes from Tom Shrader with Harris Nesbitt. Please state your question.

Good morning. Thanks for providing the update. I had a question that's just kind of been a nagging question as I've followed your story. Your submission for SomatoKine is accepted March 10, but you announced priority review April 15. What's the mechanism there? I've honestly never seen that before, and I'm just wondering if you can walk us through what the communications were with the FDA that led to priority review being granted after acceptance for review.

Good morning, Tom. Well, actually, it was very much a situation where the agency had indicated they would be considering this product for priority review. Obviously we had requested priority review when we made the application. They said they would consider it, and basically that's the length of time it took them to consider it.

So this isn't unusual, is what you're saying?

I've never really done my homework to find out what kind of -- what the statistics are on this, so I really can't comment on it, but it was just -- it was a very simple dialogue with the FDA. Are we going to have priority review or not? Then eventually they said, yes, we're going to grant it based on this indication.

So they didn't ask for more data or anything?

No, there was nothing linking it with the decision. The granting priority review was based simply on the indication, GHIS, the unmet medical need, and had nothing to do with the data set that we had provided.

Okay. If I can follow-up on Matt's question, in terms of Avecia, where are you with three conformance lots and stability lots? Is that all done?

We've provided the information in our CMC-section to the FDA, and we're simply now waiting for an inspection or the review of that CMC, we've had a certain amount of dialogue go back and forth as part of the review, and everything appears to be on track.

So the stability lots and things like that are done?

Yes. It fulfills the needs of our program.

And what is the expected stability? Is it six months for a product like this?

Oh, the absolute shelf life that we'll be putting on the product, I'm not sure if we've made that final determination but we have stability data that takes this product back several years.

Thanks.

It clearly has to be stored under distinct conditions.

Understood, understood.

Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference back over to your host to conclude.

Well, thank you, ladies and gentlemen, for listening in to this call this morning, and I look forward to keeping you updated on our progress, and with that I will say thank you and good morning.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you all for your participation.