Insmed Inc (INSM) 2006 Q1 法說會逐字稿

Thank you for standing by and welcome to Insmed's first quarter 2006 conference call. [OPERATOR INSTRUCTIONS] At this time, I'd like to turn the conference over to Mr. Tim Ryan for opening remarks and introductions. Please go ahead.

Thank you, Mark. Good afternoon, ladies and gentlemen. My name is Tim Ryan. Thank you all for participating in today's 2006 first quarter conference call. Today, after market close, we released our financial results for our first quarter of 2006. 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 2006, along with a current review of the Company. Before we begin, let me remind you that, during the call, certain matters we discuss today consist of forward-looking statements relating to, among other things our expectations concerning the results of clinical trials for IPLEX, approvability of IPLEX for indications beyond severe IGF; future financial and business performance, operating plans, goals and objectives of management, and plans to utilize the protein manufacturing facility that we lease in Boulder, Colorado. 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; our ability to manufacture sufficient quantities for our product candidate for our clinical and commercial production needs at our protein manufacturing facility, Insmed Therapeutic located 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, requiring regulatory approval, may not be received on a timely basis or at all. And those other risks contained in our most recent press release, announcing our results and our periodic results filed with the SEC, including, but not limited to, our annual report on Form 10-K for the year ended December 31, 2005 and our subsequent Form 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's my pleasure to introduce you to the participants in today's call. Mr. Philip Young, Insmed's Chief Business Officer, Dr. Kenneth Attie, Vice President-Medical Affairs,Tom Keuer, Senior Vice President of Insmed Therapeutic Proteins, Kevin Tully, the Chief Financial Officer, and Ronald Gunn, Executive Vice President and Chief Operating Officer. It's my pleasure to turn the call over to Phil Young. Phil?

Thank you, Tim, and thank you all for joining us today. Geoffrey Allan, our Chairman and CEO, sends his regards; however, since he's feeling under the weather, he'll not be joining us today. The team assembled here in Richmond and out in Boulder will update you on the Company's activities in the first quarter of 2006. I will start with a brief update on the commercial and launch activities and then Dr. Ken Attie will discuss clinical development, followed by Thomas Keuer who will update you on our manufacturing program and last, but not least, Kevin Tully will review the quarterly financials. When Kevin's finished, we will open up for questions and answers.

So, to start, the commercial team has been extremely busy the first five months of this year. We have been able to initiate, and to a large extent, conclude the transformation of Insmed from it a research-focused Company to a fully-integrated biopharmaceutical Company, including manufacturing, clinical development and commercialization disciplines. We began building the commercial team the week after the FDA approval of IPLEX, and the staffing is nearing completion. Everyone hired, to date, has had significant success in specialty biopharmaceutical markets. In fact, the majority of the commercial team we have assembled has direct experience selling, managing and marketing to the pediatric endocrine specialty audience. This experience has allowed us to accelerate the typical commercial launch planning and execution from the usual 1-1/2 to two years to just a matter of months. As we continue to hire additional personnel, we will maintain our focus and only bring in the talent and experience that complements the group we have on board now.

Customer feedback from one-on-one meetings and market research has been positive and informative. Individual pediatric endocrinologists are providing us with insights into their planning, patient identification and treatment strategies for IGF-1 therapy. Market research has provided us with specific market information and potential prescribing trends that have been useful in crafting strategy and identifying new opportunities. It's important to note that we are launching a new company into the marketplace, as well as a new innovative therapy. The sales and managed care team have been in the field, introducing Insmed and IPLEX to the various target audiences. The teams have held meetings with a majority of the top prescribing pediatric endocrinologists and healthcare insurers. The rigorous clinically-focused sales training program has been completed by everyone in the field. The sales team's preparing to work with the pediatric endocrine community to facilitate the fulfillment of prescriptions for IPLEX for patients already identified for therapy, and the managed care team is actively meeting with payors to properly position IPLEX and obtain formulary status. In fact, IPLEX has already been added to several major formulary lists.

Our marketing and medical affairs and medical communications team has done a tremendous job of preparing the initial key marketing and educational tools. One example is our significant presence at the Pediatric Research Society's meeting and Lawson Wilkins meeting the first week in May. In a few short months, the team was able to assemble a convention booth, sales material and sponsor an online CME program. Over the next few months, we will be able to supplement the existing materials with new educational information for physicians, nurses, pharmacists and payors.

PLEX Point, our single point of contact customer support system, or SPOC, has been designed and built. It will be fully functional in several weeks, when we will begin filling and shipping our first prescriptions for IPLEX. Through a single 800 number or a dedicated website, www.go-iplex.com, all of our various stakeholders and customers will be able to reach a qualified associate or information they require to assist them with their individual questions or concerns. The website will be constantly updated, as the FDA reviews and approves our launch material. As we work to establish IPLEX and Insmed in the pediatric endocrinology community, it is our goal to make PLEX Point the leader in providing single point of contact service for all customers.

We have finalized our work on the pricing of IPLEX and will make it available at the time of launch. All of our plans are progressing according to schedule and we will launch IPLEX in the next several weeks. During the next months, we will have commercial and medical presence at major meetings for pediatric endocrinology nurses, the Endocrine Society at the end of June, and the European Society for Pediatric endocrinology the first week of July. We believe that IPLEX's once-daily dosing, along with is demonstrated efficacy and safety profile in treating children with severe primary IGFD will allow our commercial and medical teams to suses -- successfully establish it as a preferred IGF-1 replacement therapy for children with this disease. The entire Company is making great strides in working to accomplish this goal and I look forward to updating you, as we progress with our launch throughout the remainder of 2006, into 2007.

So, with that, I'd like to turn the podium over to Dr. Ken Attie to give you a brief update on the clinical program.

Thank you, Phil. And with that upcoming launch of IPLEX for severe primary IGF-1 deficiency, the medical affairs group here at Insmed has been very busy preparing presentations of the clinical data that led to FDA approval for this indication. This included an abstract and platform presentation on May 1 at the recent Pediatric Academic Society's meeting in San Francisco, where we presented our positive first-year efficacy and safety data in severe primary IGF-1 deficiency. We've also been awarded oral presentations regarding the pivotal study at the two upcoming international meetings that Phil mentioned, the Endocrine Society meeting in Boston on June 27 and the European Society for Pediatric Endocrinology meeting in Rotterdam on July 31. We've prepared a number of educational programs for healthcare workers and managed care institutions which includes talks, written materials and web-based programs. We've made considerable progress with our filing of an application for European approval of IPLEX for severe primary IGFD, and we remain on track for the filing of our application to the EMEA in the third quarter of 2006.

As we gather information regarding the safety, efficacy and pharmacological properties of IPLEX, we have a growing list of positive attributes for this product and these include the following. With respect to pharmaco kinetics, the gradual absorption and prolonged clearance of IPLEX in the bloodstream results in sustained IGF-1 levels throughout the day, with fewer peaks and troughs. This will greatly simplify physician's ability to monitor the drug and to titrate the dose using IGF-1 blood levels. This pharmaco kinetic profile also confirms the adequacy of once-daily dosing in patients with severe IGFD and this dose regimen was associated with 95% compliance with injections in our pivotal study. We believe certain side effects, such as hypoglycemia, are likely to be associated with burst of free unbound IGF-1, and IPLEX effectively avoids such bursts by delivering the IGF-1 bound to its binding protein IGFBP-3, which regulates its bio activity. Thus, taking into consideration these pharmacologic properties, IPLEX can be given any time of day, once a day, and need not necessarily to be timed to be given with meals. Patients will be advised to avoid missing meals and to have a balanced diet.

Another attribute of IPLEX is that it is currently formulated with no preservative as a frozen liquid that requires no reconstitution, and judging from the low reported incidence of injection site pain in our IPLEX studies, it appears that the drug is unlikely to cause notable discomfort upon injection. Now, IPLEX is indicated for the treatment of growth failure due to severe primary IGF deficiency, and this can only be successfully accomplished with several years of treatment. The FDA-approved labeling imposes no time restriction for treatment with IPLEX, apart from ceasing therapy at the end of puberty, which is when growth is expected to stop.

Moving forward, we have a number of Phase II studies ongoing with IPLEX in a variety of potential new indications. These include studies in severe insulin resistance, AIDS-lipo dystrophy and myotonic muscular dystrophy. All three of these studies continue to enroll and treat subjects, and are on track for providing data in the near future. To begin with, at the Endocrine Society meeting in Boston, on June 27, we have been awarded an oral presentation of our compelling preliminary data for IPLEX treatment in patients with severe insulin resistance. As regards to the use of IPLEX for growth indications, we are progressing with our study of IPLEX in children with growth failure due to Noonan's Syndrome.

As we have previously described, Noonan's Syndrome is a relatively common genetic disorder affecting between one in a thousand and one in 2,000 males and females, and causing growth failure which we now know is likely due to a genetic defect in the growth hormone receptor signaling pathway. As such, this is an ideal indication for IPLEX, since it is characterized by low IGF-1 levels and is particularly unresponsive to growth hormone therapy,when the patients have their gene mutation. We continue to see this as a potential indication for first line therapy with IPLEX. We've assembled a group of top pediatric endocrinologists across the United States to participate in this study treating these short children with IPLEX, and we are fortunate to have renowned experts on Noonan's Syndrome serving as advisors to the study.

Let me conclude by saying that we are very encouraged by the support and enthusiasm of the pediatric endocrinologists we have spoken to in anticipation of the launch of IPLEX, and we will continue to provide the clinical information necessary to facilitate and support the use of this product commercially.

So, I would like to now turn the call over to Tom for a manufacturing update. Tom?

Thank you, Ken. As I mentioned to all of you during our year-end conference call, Insmed acquired a biopharmaceutical manufacturing facility in Boulder, Colorado, from Baxter Healthcare in the spring of 2004, which we now call Insmed Therapeutic Proteins or ITP. This facility is dedicated to the production of IPLEX and has been inspected and approved by the FDA for the commercial manufacture of IPLEX. Our internal capabilities at ITP include GMP manufacturing, process and formulation development, quality control, quality assurance, stability testing, facility engineering, purchasing, logistics, and strategic planning. These integrated capabilities allow Insmed to have direct control over the manufacture of IPLEX drug substance, to ensure the quality of our product and to ensure we have an adequate supply to meet our clinical and commercial demand.

In addition to a 24/7 manufacturing operation, we've established process and formulation development teams, with the objective of continuous improvement of our manufacturing process to optimize yields, reduce production costs and also to optimize the formulation and delivery system for IPLEX. The improvements are ongoing and they were initiated with careful evaluation and developmental of plans and priorities in concert with our external experts, and I'm happy to report that we're on track with the execution of these plans. We're confident this will result in ITP having adequate capacity that meet market demand for several years, and will provide us with a product that is even more user-friendly to patients and their families. More specifically, we expect to complete the optimization of an improved shelf-stable non-frozen formulation within the next several months and to file a data package to the FDA by early next year, and we remain on track with this objective.

We've also entered into development agreements, such as the one we have with Dow Pharmaceuticals, to examine cutting-edge technologies that could have a major positive impact our longer-term production capacities. This will allow us to address product demands associated with future label expansion into other indications. So, in summary, we believe we have a strategic advantage by directly controlling the manufacture of IPLEX, we're right on track with the execution of plans to optimize our manufacturing process and the product itself, we're exploring cutting edge technologies to address future demand,and we look forward to updating you on the progress in the future.

With that, I'll now turn the call over to Kevin for a financial summary. Kevin?

Thank you. Tom, and good afternoon, everyone. For the financial review today, I will begin by giving a brief overview of our results for the three-month period ended March 31, 2006, comparing them with the corresponding period of 2005. I will then provide some details on the results and, finally, I will close with high-level guidance for the balance of 2006. From a financial perspective, we started the year well. We were successful in raising close to $43 million in net cash and an over-subscribed stock offering, which closed on March 15. And I'm pleased to announce that our overall expenses for the first quarter were lower than our internal targets for the period, while we established the required resources to under-pin our commercial launch of IPLEX, which is planned and on track for the second quarter of 2006.

In comparing the first quarter of 2006 with the same period of 2005, I think it's important to note that we're a different Company now than we were a year ago. We've begun to transform Insmed from merely a developer of drugs with market potential to a true commercial entity with a developmental pipeline which offers the promise of expansion in both products and indications. As part of this move, we are adding a team of experienced professionals to market and sell our FDA-approved product, IPLEX, in the severe primary IGFD market. We are also instituting a planned phased investment to our production facility in Boulder, Colorado, which we believe will yield the appropriate capacity and cost to under-pin our commercial requirements for the next several years. Both of these initiatives require the outlay of cash ahead of the expected return, resulting in a rise in our losses for this quarter as compared to 2005, as we seed our business through the fruits of the future.

Another major issue to consider when comparing quarters is the impact to the accelerated debt discount, resulting from the conversion of some of the March 2005 convertible notes into shares during the first quarter of 2006. This item affects the P&L, but has no impact at all on our cash flow. In the first quarter of 2006, a number of note holders from the March 2005 financing decided to exercise their right to convert their notes into Insmed shares. This decision triggered an acceleration of the debt discount to match the conversion date of the notes, resulting in a noncash interest charge for the first quarter of $2.7 million. The remaining debt discounts on the note, which presently stand at $2.5 million, is currently set to be amortized through February 2010. If, however, the notes are exercised earlier, then the discount amortization will be accelerated to match the conversion date. Again, to reiterate, these interest charges do not utilize our cash reserves and are purely reported in compliance with current accounting practice.

Moving on to the results themselves, for the first quarter ended March 31, 2006, our reported revenue were $54,000, as compared to the $57,000 reported for the first quarter of 2005. The net loss for the latest quarter was $13.4 million or $0.17 per share versus a net loss of $5.8 million or $0.13 per share in the same period of 2005. The $7.7 million increase in the net loss for the first quarter of 2006, as compared to the corresponding quarter of 2005. was due to increases of $2.9 million in research and development expense, $2.5 million in selling, general and administration expense and $2.5 million in interest expense. These increases were partially offset by a $0.2 million rise in interest income. The increases in R&D and SG&A expenses resulted, primarily, from higher marketing and production expenses in support of our planned Q2 2006 IPLEX product launch, which remains on track, plus additional expenses related to the ongoing patent infringements and unfair business practices litigation. With regard to the patent infringement litigation, our Markman briefs have been prepared and are now on file with the U.S. District Court for the Ninth District of California. We believe we have presented a logical argument and provided a strong line of evidence to the court. It is now up to Judge Wilkins to decide.

The increase in interest expense, all of which is noncash, is due entirely to the acceleration of the debt discount on that March 2005 convertible notes, a number of which were converted during the first quarter of 2006. The increased investment income results mainly from higher cash balance available for investment in the first quarter of 2006 as compared to the corresponding period of 2005. Turning to cash, as of March 31, 2006, we had total cash and cash equivalents of $59.2 million, which representing an increase of $40.4 million from December 31, 2005. This increase is due to the $52.1 million in net cash provided by a financing activity during the quarter, which include $43 million in the recent sale of equity, $8.8 million in cash from recent warrant exercises and $0.3 million in the reduction of a restricted letter of credit. This inflow of cash was partially offset by the use $11.7 million in support of our business operations.

Looking forward to the balance of 2006, my guidance remains unchanged. Our projected cash required to fund operations for the full calendar year of 2006 remains in the $45 million to $48 million range. At this early stage, I'm refraining from giving guidance as to revenues for 2006 because I believe it is wise to wait until we've had actual data on which we can base our external revenue forecast. My operational cash guidance for the year, therefore, does not take into account, at this stage, any cash from sales, indicating that, based on our current operational cash burn, we have sufficient funds to support our business at least through mid-year 2007. I think it's safe to say there's a collected excitement here at Insmed about the potential prospects of our Company. We have a drug approved with a launch date approaching and on track. We have attracted top notch personnel to propel our growth. We have a proven production facility, with a cost-effective plan to meet our drug needs through the next several years, and we have a deep clinical pipeline with multiple indications and product opportunities, which continue to show promise and reaffirm our belief in the science.

This completes my overview of the financial picture. I will now hand the call back to Phil to conclude the review.

Thank you, Kevin, Tom and Ken. Appreciate the update. Now, operator, I think we'll go to questions.

Thank you very much. [ OPERATOR INSTRUCTIONS ] Our first question today will come from Matt Osborne with Lazard.

Hi, guys, thanks for taking the question. I actually have a few. Can you, Phil, I guess reiterate, it sounded like you mentioned a commercial launch in the next few weeks, if can you reiterate that, if that was the exact take-way? And perhaps the filing strategy in Europe, you mentioned you would file in the third quarter. At that time do you expect to announce either a partner or is that something that may take a little more time? And then in terms of the marketplace, you mentioned, also, some internal market data. Can you give us a sense of how -- from that data how the petendos will incorporate both IPLEX and Increlex and also growth hormone in their treatment regimen for patients with short stature?

Okay, thank you, Matt. Thanks for calling and thanks for your questions. First off, yes, you are correct. We do plan to launch and fill our first prescriptions for IPLEX over the next several weeks,and we are on track for doing that. The EU strategy is pretty straight forward. Once we received FDA approval and were able to focus on the European market, we decided that filing in the EU would give us more leverage and a better bargaining chip with potential partners in the European sector. So our goal now is to file the application in the third quarter and then focus on whether we partner or do it ourselves. We'll be taking those discussions and those decisions over the second half of this year and then moving forward with that. As we've said in the past, we have had discussions with several potential partners over there, but we've decided not to pull the trigger on any activity now, until we get the file completed and accepted for review by the EMEA authorities.

And your third question revolves around the market research and I read your report this morning with some interest, as the data you uncovered is very similar to the data we have been uncovering through our blinded market research through independent third parties, as well as our one-on-one conversations with pediatric endocrinologists. We have found that pediatric endocrinologists are very favorably impressed by the product profile IPLEX presents with them and, certainly, the once-daily dosing is very attractive. What we have found from the surveys is very similar to the numbers you presented, and we feel more confident than ever that the product acceptance and uptake will be very rapid and that the patient population and the physicians will benefit from it.

Okay. And then on the sales rep, on the head count, can you remind us what the number of sales reps that you have in house now and, perhaps, what you will go to in the next 16 to 12 months?

Sure. All of our sales folks are based externally out in the field in their various territories. We have now 17 -- 19 folks out in the field. We will probably will end up staffing up through the year to 25 or so, maybe to 30, depending upon coverage. But as we sit today, we have got 100% of the top prescribing pediatric endocrinologists covered, and they have been called on, or have been called on in the last month. So, we will continue to add as we need over the next several months.

And is it your interpretation on some of the formularies, are you being listed also where Increlex is or is there any decision from the formularies that they're choosing one or the other?

Not -- they're not doing that, at this point. I think what you're seeing is universal acceptance when they're accepting of both products. I think the market will then decide whether or not there's going to be a preferred product or not.

Okay, thank you. And then, Ken, a couple of questions on the insulin-resistance data. Can you remind us of the design of this study, perhaps how many patients we'll see at the -- I guess it was the oral presentation? And have you begun enrolling patients in Noonan's?

Well, thank you, Matt. Yes, our study in severe insulin resistance hits a single center trial, Phase II clinical trial at the University of Cambridge with doctors David Dunger and Fiona Regan and others. And in addition, we'll be presenting data for two patients we've treated with a severe form of insulin resistance called Leprochanism, where they actually have mutations in the insulin receptor. So, that'll be a total of five patients we're presenting data for at this meeting. We have treated further patients since the submission of this abstract, but I think you will see compelling data, the efficacy end points involve improvement of glyceric control, improvement of insulin sensitivity, reduction in hemoglobin A1C, and improvement in body composition. So the planned enrollment, I believe, is 12 patients, and they're being treated for four months in the trial, so you'll see come compelling data there.

With regards to the Noonan Syndrome study, we have identified the centers. They've been initiated in the protocol and all of the workings of it and they've lined up patients. So, we will be informing you in the very near future of first enrolled patient. And our plan is to enroll patients over the next few months so that we will get you that preliminary growth data, the primary end point being the six-month annualized height velocity change, in some time of the first half of next year.

Great, thank you.

You're welcome.

Thanks, Matt.

Next we will hear from Andrew Fine with CE Unterberg Tobin.

Hi, everybody.

Hi, Andrew.

Just wanted to know if you could sort of walk us through the HIV lipo-dystrophy trial? What's the exact design of the trial? What's the primary end point? And what would be the next steps be? I guess just one other quick question on that, in terms of the entry criteria into the trial, is it patients who are insensitive to growth hormone or all comers?

Ken, why don't you take that?

I will give it a try. The study, which is being undertaken by Dr. [Morey Shamwood] and his colleagues at U.C. San Francisco will recruit patients with this syndrome, which is the consequence of the anti-retro viral therapy that they receive; it involves fat redistribution, fat accumulation intra-abdominally and in the back. And as you've pointed out, a number of them, some 40%, maybe, have lipid and/or carbohydrate disorders. So, it's true that these patients have typically been excluded from studies involving growth hormone or growth hormone-related products. So, they don't have to face the potential worsening of that condition given the growth hormone product.

So, we hope that IPLEX will not have that restriction. Dr. Shamwood is interested in seeing how patients fare on IPLEX, because we don't have to be concerned about them having insulin resistance or glucose intolerance. If anything, IPLEX could be helpful in that situation. So, the planned population, I believe, is 12 patients. They're being treated for a three-month treatment period and it's certainly our plan to continue collecting data so that, if we have some top-line data to share with you fourth quarter, we hope we'll be able to do that.

And if top-line data was good in the fourth quarter, what would the next step be?

Well, besides completing this trial and presenting it in the appropriate places, I think you can look at how some of the trials were performed in these other products and just get an idea of the scope of what a Phase III trial might look like in this indication. And we would plan for moving forward, if we get that positive data. A somewhat larger trial, in other words.

Right. You'd do that on your own or you would probably seek a partner at that point?

Well, you know, these are doable studies. We have been building our clinical development group. We're doing multi-center trials. We are working with contract research organizations, where necessary. So, I'm not sure what you mean by partner, if we plan to do a multinational study. We've also been able to do that without a European partner, but we would certainly welcome one, if that was the case.

Hey, Andrew, it's Phil. Yeah, clearly we have the capacity internally to do studies of the magnitude that we've seen the growth hormone companies and others do in that marketplace, so we would take that at the time of the decision of Phase III program which way to proceed, but we certainly have the capacity and willingness to do it internally.

Okay. And then just another follow-up question for Phil, on the Markman hearing. If you can just tell us what we should be expecting out of that and if you have any details about the timing of when it takes place that'd be helpful. Thanks.

Okay. Let me let Kevin answer that and he can give you a little bit more detail on it.

Yes, I think we're basically going to expect some plain language and some guidance, and probably some-- summary judgment from Judge Wilkins, especially for guidance going into the trial, which we show scheduled for November of 2006.

So, it's really nothing more than we've discussed previously, is that she will give us her interpretation and rule on motions we've made as [inaudible].

Do you know when it takes place on the 19th?

I think it's -- there's a three-hour window that's been set aside on the judge's docket. I think between 11:00 and 1:00 or 10:00 and 1:00, and we don't have any finer detail than that. That was just posted on her website calendar last week.

Okay, great. Thank you very much.

Thanks, Andrew.

Our next question will come from [Jeffery Bennison] with Little Jim Life Science.

Hello, everybody.

Hey, Jeff, how are you?

I'm okay. I have a question regarding the myotonic muscular dystrophy trials. Years ago they had done trials with free IGF-1 in myotonic muscular dystrophy, and some of the people did show improvement but there were side effects regarding the drug. I was wondering -- and that's like a proof of principal to me of what's -- what could be happening. Could you talk about why IPLEX -- or the rationale for IPLEX treatment in that group of people?

Sure, I will let Ken -- Dr. Attie respond to that.

Phil, you sure you don't want to take that one? [LAUGHTER] No, just kidding. Well, there was a study done -- I think it was published back in 1995 or so, and it did use IGF-1 in the unbound formulation, of course, and showed some positive results which is what has been encouraging physicians here to use it. They had metabolic improvements, they had muscle improvements. If I recall correctly, the adverse events in that study included -- I'm trying to remember a number of things. There were a couple of patients who required discontinuation of the drug. They had things like dizziness, light headedness, [tacticardia], this is sometime's described with IDF-1 treatment in adults. They had patients developing edema, for example, and jaw pain. Also side effects that are described for IGF-1.

Now, we don't have direct comparison in this population with respect to those things, like jaw pain, edema and things. However, when we compare studies done in like populations, such as diabetes, with IGF-1 alone or IGF-1 bound to IGFBP-3, we do find specifically things like edema and jaw pain and some of the side effects are much less frequent, with our products. So, we're at least hopeful that we won't see some of these side effects, and certainly the initial patients treated in the study are tolerating the drug quite well.

Has growth hormone been tried in myotonic muscular dystrophy?

I believe it was and I believe there was some disappointment with the results, not recalling why exactly, but, again, one of the underlying problems is the striking insulin resistance the patients have, particularly in muscle. And so, this could be, if anything, be worsened with growth hormone therapy and so, clearly, an IGF-1 therapy would be preferred here.

So, with growth hormone, growth hormone is used to increase IGF-1 levels. Do BP3 levels increase when you use a growth hormone, also?

The IGFBP-3 levels do tend to increase along with IGF-1, because they are both growth-hormone dependent. IGF-1 is a little bit more growth hormone dependent in a sense, so IGFBP-3 dont't -- may not rise quite as much, but they do tend to rise together, that's correct.

Is that why there may be a tendency that, when you use growth hormone you won't get -- the people will have more side effects, let's say, where they have more insulin resistance than what you think would happen with IGF-1 bound to the BP-3, because you're giving the BP-3 in the right ratio?

It's certainly helpful, but, again, you would improve insulin resistance even giving IGF-1 alone, so there are other advantages to giving IGF-1 with BP-3. I think the reason that growth hormone is not going to work here is that it worsens sensitivity by a different mechanism, independent of IGF-1 and IGFBP-3. First of all it's a counter regulatory hormone to insulin, so It tends to raise your glucose anyway, but also seems to affect your insulin sensitivity, and I'm not sure we even know all the ways in which it does that.

And Jeff, let me summarize by saying we're very excited about the opportunity that the myotonic muscular dystrophy represents for the patient. because there is no therapeutic option for the people right now and there's 40,000 patients affected myotonic dystrophy in the United States, so we're very much engaged and looking forward to generating the data and hopefully proving that IPLEX has a positive impact in the patients. And we'll then, certainly, initiate the next steps in development and label expansion.

Because that would be a very big market for you guys.

Exactly.

The last thing I just wanted to ask about, I noticed that in -- that some of the doctors, the endocrinologists are trying to up the growth hormone dose in the children who aren't -- you know, the children who aren't helped immediately by growth hormone, instead of giving them IGF-1 therapies, maybe they're thinking of increasing growth hormone doses even higher. seWouldn't that cause some of these problems that Ken just mentioned as far as maybe it'll cause growth -- insulin resistance or glucose intolerance in some of those kids?

I will comment on that. I think it depends on the patients you do that with. I've done dose response studies with growth hormone in adolescence, and they tend to tolerate these increased doses. But that doesn't mean to say that all patients would, and younger patients may not, for example. Patients that are being treated with growth hormone who may have a predisposition to insulin resistance pr glucose intolerance, and there are quite a few patients we treat these days,where that's the case. You have the small [inaudible] aged children, children on steroids, children with various conditions, where there's a predisposition. So I think there's a number of conditions where you would be hesitant or weary about going up too high on the dose, not to mention just, you know, the other factors involved with having to give doubling the dose or so of growth hormone. But one of the things you're going to think about is -- is this a child that I want to aggravate or -- we know the insulin levels will go up, do we want to do that chronically.

Okay, thank, Jeff. We have to get to other questions.

Thank you.

I appreciate it.

Bye.

Our next question will come from [Jill Wolightner] with ICMS Asset Management.

Hi.

Hi, good afternoon, Jill.

Same to you. My questions have all been answered, so I'll let you guys go. Thank you very much.

Okay, thank you for asking. [ LAUGHTER]

You're welcome, bye-bye.

Okay.

And that concludes our question and answer session. I will now turn the conference back over to Mr. Philip Young for any closing or additional remarks.

Well, very good. Thank you very much for your time and attention this afternoon. And I hope you can appreciate the strides the Company is making towards achieving our strategic goals for 2006 and beyond. We are well into launching IPLEX, completing new clinical development programs that represent significant market expansion and revenue opportunities, in addition to the severe primary IGF deficiency market. We are maintaining and solidifying control over all facets of our manufacturing to ensure a plentiful supply of IPLEX for clinical and commercial needs, and using our financial resources effectively to support our goals. We look forward to updating you as this year and the next year progress, and thank you once again. Goodbye.

And that conclude our conference call. Thank you for joining us today.