Insmed Inc (INSM) 2005 Q3 法說會逐字稿

Welcome to the Insmed third-quarter financial update conference call. This call is being recorded. At this time for opening remarks I'd like to turn the call over to the Vice President of investor relations, Mr. Baxter Phillips, please go ahead, sir.

Good afternoon, ladies and gentlemen, thank you all for joining in today's third-quarter conference call review. Today after the market closed we released our financial results for the third quarter of 2005. Concurrently we posted this release on our website www.Insmed.com. In this call we will be presenting Insmed financial results for the third quarter of 2005 along with a 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 the approvability of our NDA for Severe Primary IGF deficiency, future financial and business performance, operating plans, goals and objectives of management, plans to utilize our protein manufacturing facility 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 of the forward-looking statements.

The Company may lack financial resources to complete development of product candidates and may not be able to raise additional financing or commercially reasonable terms. Competing products may be more successful, require regulatory approval that may not be received on a timely basis or at all, and those other risk factors contained in our most recent press release mapping our recent results and our periodic reports filed with the SEC. Including but not limited to our annual report 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.

It is now my pleasure to introduce to you the participants on today's call. Joining us our recently appointed principal financial officer, Mr. Michael Duncan, Philip Young, our chief business officer and Executive Vice President, and our Chief Executive Officer and President, Geoffrey Allan. So I will now turn the call over for opening remarks.

Thank you, Baxter, and good afternoon ladies and gentlemen. Before we review the financials I would like to make a few brief remarks focused on our various programs relating to our lead product iPlex. As you know we have an active clinical development program designed to support the use of iPlex in several indications. I would like to first of all give you a brief update on our lead program where we are studying the use of iPlex in an ongoing program for the treatment of Severe Primary IGF-1 deficiency.

As you know we submitted our NDA in January of this year and as we announced in September we received an approvable letter from the FDA for the treatment of Severe Primary IGF deficiency with our drug product iPlex on a once-daily IGF-1 therapy. The FDA's letter to Insmed contained requests for clarifications, specific chemistry, manufacturing and controlled questions and for Insmed's agreement to a proposed final package insert and a patient package insert, as well as the submission of the final product carton and bio label.

As we discussed in our conference call in September we indicated that we would be able to literally question installation in a very short period of time which we did in the matter of two weeks, subsequently we received notification that the FDA considers our submission as a complete Class One response. The FDA has established December 12, 2005 as its target to complete its review of the iPlex (indiscernible) application. Importantly the FDA is not requiring Insmed to conduct additional preclinical or clinical studies.

As of today the FDA has not yet determined whether the approvals and granting orphan exclusivity for Increlex, the primary IGF-1 deficiency will block the approval of iPlex. The agency is still considering this issue. We have always believed that iPlex has multiple therapeutic opportunities and that the short (indiscernible) market represents the first of many of these opportunities.

Along with our Severe Primary IGFD program we currently have additional clinical studies underway in several important disease conditions all of which currently lack therapeutic options. We have ongoing Phase II clinical trials of iPlex treatment HIV associated lipodystrophy which we are conducting at the University of California San Francisco. Additional studies studying the effect of iPlex in the treatment of extreme insulin resistance are underway at the University of Cambridge in the United Kingdom, and we look forward to reporting data from these trials early next year at the Endocrine Society annual meeting.

In addition to these two Phase II clinical studies we will initiate a Phase II trial with iPlex for the treatment of myotonic muscular dystrophy by the end of this year. And we are also evaluating additional opportunities in the short stature market. We are very excited by the market's potential of all of these programs and we look forward to updating you as they progress further.

Our commercial launch planning is progressing, we are still targeting a 2006 launch of iPlex pending a positive outcome in December. We plan to launch iPlex as quickly as possible and we do not believe that the short delay in the iPlex launch will impact the eventual market share that iPlex will attain. And in our upcoming calls we will provide you with more detail regarding the specific sales and marketing plans that we have underway.

The next few quarters will mark a heightened transition as we move from a research and development company to an integrated commercial operation as we launch the iPlex product; this is the treatment of Severe Primary IGF-1 deficiency. And I'm looking forward to updating you as events and programs progress. Still with those brief introductory remarks, I will now pass the call over to Michael Duncan to review with you our financials.

Thank you, Jeff, and good afternoon everyone. My financial review today will be a brief overview of our results for the three and nine-month period ended September 30, 2005, and a comparison with the corresponding periods of 2004. I will also provide some details on the results. As for the overview in the third quarter ended September 30, 2005, our reported revenues were 22,000 as compared to the 24,000 reported for the third quarter of 2004. The net loss for the latest quarter was 13.8 million or $0.29 per share. However, this included a 5.7 million of non-cash debt discount amortization. Without this GAAP required amortization the net loss would have been 8.1 million versus a net loss of 7.6 million or $0.20 per share for the same period in 2004. For the nine months ended September 30, 2005, revenues were 107,000 versus 114,000 in the corresponding period in 2004. The net loss for the first nine months of 2005 was 28 million or $0.61 per share; this also included 7.3 million of non-cash debt discount amortization. Again without this GAAP required amortization the net loss would have been 20.7 million compared to a net loss of 21.4 million or $0.56 per share for the first nine months of 2004.

Looking into these results in more detail, during the latest quarter research and development expenses were 6.7 million versus 6.8 million for the corresponding period of 2004. The decline in 2005 is principally due to reduced developments and manufacturing costs of iPlex which were partially offset by increased litigation costs in support of our patent position.

General and administrative costs for the latest quarter were 1.2 million as compared to .9 million for the same period in 2004. The rise in 2005 results from a combination of increased registration and filing costs related to our recent financings and additional external service costs in support of our business.

Interest income was 236,000 for the latest quarter versus 51,000 in 2004, with the increased interest income in 2005 stemming from a higher average cash balance and improved investment returns. Interest expense for the last quarter was 6.1 million versus zero for the same period in 2004, this is solely due to the financial obligation arising from the March 2005 convertible debt offering. Of this 6.1 million some 5.7 million is a non-cash expense resulting from the accretion of the debt discount, with the balance of .4 million arising in cash interest incurred on the debt.

For the nine months ending September 30, 2005, research and development expenses were 16.4 million as compared to 18.4 million in 2004. The 2 million reduction in 2005 is again manly due to lower development and manufacturing costs for iPlex, which were partially offset by increased litigation costs in support of our ongoing events. General and administrative costs for the first nine months of 2005 were 4.1 million versus 3.2 million in 2004 with the increase again resulting from the additional reporting and filing requirements associated with our recent financing, combined with increased external consulting fee services in support of our business.

Interest income for the nine-month period ended September 30, 2005 was 0.6 million as compared to 0.2 million in 2004, while interest expense was 8.2 million for the first nine months of 2005 and zero in 2004, and the period differences again attributable to financial obligations arising from the March 2005 financing.

As for cash we ended the third quarter with 20.7 million of cash and cash equivalents on hand. During the third quarter we utilized 7.8 million of cash to fund operations. For the nine months ended September 30, 2005, the net cash used in operating activities was 21.6 million. This concludes my review of the results and now I will hand the call back over to Jeff for closing comments.

Okay, thank you, Mike. That essentially concludes our remarks for today. As you can recognize our efforts are all focused on towards gaining NDA approval for iPlex. We have an ongoing exciting growing clinical program, our PDUFA date is set for December the 12th, we continue to believe we've provided all the data required for NDA approval and we look forward to providing you with an update on the FDA's action letter when it is issued.

That concludes our remarks and I will now pass the session over to the operator for questions and answers.

(OPERATOR INSTRUCTIONS) Matt Osborne with Lazard.

Good afternoon, thanks for taking the question. Just a question on the non-cash interest expense item if you could explain that again in terms of the convertible debt we will start there.

Good afternoon, Matt, and I think I will pass that question on to Mike and let him have a shot at it.

Basically GAAP required us to amortize a debt discount that we recognized when we issued the convertible note to the holders. For the six months ended 5.7 million was a non-cash amortization of that discount. It doesn't affect the company in any regard in cash but it does have to be recognized as an expense on the financial statements.

That seems higher than other quarters. Was that due to some of the redemption of the debt?

Oh, yes, sorry. The convertible note as you've probably been made aware of through our various 8-K filings we've converted some of the convertible debt so far. We had to recognize additional amortization when those notes became converted into shares.

From a clinical perspective let's assume in the worst-case scenario either the approval does not come or orphan designation is not, co-exclusivity is not granted, which of the three indications you mentioned currently in fees to either the severe insulin resistance, HIV, dystrophy or myotonic dystrophy? Which of those three I guess depending on the results would lead you towards the fastest path toward another filing?

Matt, I think you clearly recognize the answer yourself there, it really depends on the results from those types of trials. So clearly you've got three trials going on here somewhat in parallel, myotonic dystrophy is a little way behind. And as we would generate data from the trials which we'd hope to have some early data that we hope would provide a good signal in the early part of next year and that would then allow us to focus down upon which indication to pursue first. All that being said obviously we're working very hard and we are very confident towards getting iPlex approved for Severe Primary IGFD.

Of the three then I guess, which would have the earliest data point?

I'm not sure if I can give you a precise outcome to that, Matt. We've got these trials ongoing, we've got some data points already generated in severe insulin resistance, in the HIV indication. And I think in the early part of next year as we gain more data points I will be much more comfortable in telling you which one we would sort of be going for first.

Okay, thank you.

Michael Brown (ph) with ICM Asset Management.

I have a few questions; there have been some things that have been out in various forums that have made me confused, my background is not biology so I apologize in advance if these are remedial questions. But I'm hoping you can clear them up for me. There was a report out that talked about your drug being simply IGF with binding protein floating -- just thrown in a vial together, the conclusion being that the FDA would see that as being the same drug. Is that correct or if not can you clear that up?

I'm not quite sure what you are asking me to correct. iPlex is a combination of two proteins, IGF-1 and BP3 and iPlex mimics the way in which IGF-1 would normally circulate in the bloodstream. IGF-1 has a very high affinity for this specific binding protein BP3 has extremely high affinity. And what we do is we manufacture the two individual proteins in a recombinant -- by recombinant means, and then as a result of high affinity association we have a complex in the vial which is essentially a single molecular entity as a result of this high affinity association between the two proteins. So they are not floating around the vial as individual components.

Okay, that is what I was asking you to correct. So thank you. The next one is that I'm sure you are familiar that sometime back I believe it was in the May timeframe, Tercica put out an 8-K thing that the FDA had told them that your drug and their drug were essentially the same drug. But when the FDA, after they approved Increlex in their documentation what they actually say is that they determined that IGF-1 is the active moray (ph) of interest in this case, not explicitly saying that they are the same drug. Are those two statements synonymous?

I can't really comment on what other statements you are referring to, all I can say as I said a few moments ago that the FDA has not yet determined whether the approval and granting of orphan exclusivity for Increlex for this particular indication will block the approval of iPlex. And the agency is still considering this issue.

Okay, fair enough. A couple of others. Is IGF-1 produced in the yeast the same or different than IGF-1 produced in E. coli, are they exactly the same?

We produce our IGF-1 in E. coli and that is the only system we are particularly interested in at this time. We have had very little experience if any in the production of IGF in yeast. So I really can't comment on what the differences would likely be.

In some of your marketing presentations you cite a paper by Clements and I believe you're actually one of the authors on that paper, was the IGF used in that produced in E. coli?

I'm sorry, I'm not sure what paper you are referring to. (multiple speakers) a very recent paper by Dr. Clemmons?

Yes, by Dr. Clemmons, Moses, Sommer, Jacobsen, --

Sorry, that paper the studies were described in that paper utilized our iPlex product, yes. And that was produced in E. coli.

And the slide I'm referring to actually talks about there being a very, very highly significant difference in the occurrence of severe adverse affects with the SomatoKine being much, much lower than free IGF, am I reading that correctly?

I have not looked at that paper for sometime; I believe Dr. Clements did make, did draw conclusions of that nature.

Okay. Because what I'm getting at is that I have heard some statements that there is no scientific evidence that your drug is, has a better safety profile than free IGF. But there is actually a paper out in the literature that does say that and you are one of the authors, so I was hoping you could provide some color on that.

We have provided our NDA and the data sent to the FDA and they will make that determination.

Okay, that is it for me. Thanks.

Ladies and gentlemen, this will conclude today's question and answer session. At this time I like to turn the conference back to the speakers for any additional or closing remarks.

Once again, ladies and gentlemen, thank you for listening and we as always look forward to informing you of our activities and will do so on the next conference call. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. We appreciate your participation and you may disconnect your phone lines at this time.