Insmed Inc (INSM) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Insmed Incorporated first quarter conference call.

[OPERATOR INSTRUCTIONS]

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Haris Tajyar. Please go ahead, sir.

Thank you, and good morning. I want to thank everyone for participating on today's call.

We will shortly be presenting Insmed's financial results for the first quarter ended March 31, 2007, followed by an update on the Company's financing and on its recent progress in developing new market opportunities for its principal drug, IPLEX.

Before we begin, I would like to remind you that during this call certain matters that we will discuss today may consist of forward-looking statements relating to, among other things, our expectations for the results of our clinical trials of IPLEX and approvability for IPLEX for indications beyond severe primary IGF-1 deficiency. We will be discussing possible financing plans, future financial and business performance, operating plans, goals and objectives of management and plans concerning the protein manufacturing facility that we have leased in Boulder, Colorado.

We also caution 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. These risks and uncertainties include, among other things, the risk that product candidates may fail in clinical trials or may not be successfully marketed, that we may be unable to successfully enroll our patients in clinical trials, that we may be unable to manufacture sufficient quantities of product candidates for our clinical and commercial production needs of our protein manufacturing facility and Insmed Therapeutic Proteins, or that we may fail to prevail in ongoing investigations.

Moreover, the Company may lack financial resources to complete the development of product candidates, and it may not be able to raise additional financing on commercially reasonable terms. Competing products may be more successful. Required regulatory approval may not be received on a timely basis or received at all. Additional risk factors are noted in our most release press release announcing our recent results and in our periodic reports with the Securities and Exchange Commission, including, but not limited to, our Annual Report on Form 10-K for the Year Ended December 31, 2006 and a prior 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 otherwise.

It is now my pleasure to introduce you to today's participants in on the call -- Dr. Geoffrey Allan, the President and Chief Executive Officer of Insmed; Kevin Tully, our Chief Financial Officer; and Ronald Gunn, our Chief Operating Officer.

With that, I will turn the call over now to Geoff.

Good morning, Geoff.

Thank you, Haris, and good morning, everyone.

We will start today by going over Insmed's financial results, which we released earlier today by press release, for the most recent quarter. Our Chief Financial Officer, Kevin Tully, will provide the details on this topic. I will then talk about our recent developments in our effort to bring our lead drug, IPLEX, to market as a therapy for HIV-related adipose redistribution syndrome, which we refer to as HARS, and myotonic muscular dystrophy, which we refer to as MMD.

Before taking up these topics, I will turn this call over to Kevin, who will go over the financial results for the first quarter ended March 31, 2007.

Good morning, Kevin.

Good morning, Geoff. Thank you, and good morning to everyone on the call.

For the three months ended March 31, 2007, Insmed reported total revenues of $1.7 million, which is made up of $0.7 million in cost recovery from our Expanded Access Program, $0.5 million in license income from the initiation of our license agreement with NAPO Pharmaceuticals, $0.4 million in commercial sales of IPLEX and $35,000 from royalty. By contrast, revenues during the first quarter of 2006 were all royalties, totaling $54,000.

The net loss for the three months ended March 31, 2007 was $10.3 million, or $0.10 per share, compared to a net loss of $13.4 million, or $0.17 per share, for the corresponding period of 2006.

Total expenses for the first quarter of 2007 were $12.1 million, as compared to $11 million reported for the same period in 2006. The increase in expenses is due primarily to severance costs associated with our recent business restructuring, which were partially offset by reduced litigation expenses.

Interest expense for the first quarter of 2007 was $0.2 million, as compared to the $2.8 million during the first quarter of 2006. This decrease is due entirely to the acceleration of the debt discount in the first quarter of 2006, as certain note holders involved in the March 2005 financing converted their notes into our common shares. During the first quarter of 2007, there were no conversions, and therefore no acceleration of the debt discount took place.

In terms of cash, we ended the first quarter of 2007 with $12 million of cash on hand, as compared to $24.1 million as of December 31, 2006.

The end of this first quarter 2007 for Insmed signals a new era for our Company. With the agreement between Tercica, Genentech and ourselves in place, we have a clear legal role to the niche indications we have always wanted to pursue, with the potential of a readymade partner to share our risks as we move forward. We can now focus our resources and efforts into moving IPLEX into indications which show great promise, with the knowledge that we have the freedom to offer it, the manufacturing to support our requirements and the clinical and regulatory experience to navigate efficiently through drug development.

We also have the potential to leverage our manufacturing know-how and production capability to take advantage of a budding biogenerics opportunity, which Geoff will expand on.

It's now down to execution, and this week I'm pleased to report we further enhanced our position, as we were successful in garnering close to $17 million in net proceeds from a registered sale of our stock. Approximately 20 million shares of Insmed common stock were issued at the price of $0.90 per share, along with five-year warrants to purchase approximately 2 million additional shares of Insmed common stock at an exercise price of $1.10 per share.

In March we took an aggressive approach to right-size the Company for the exciting opportunities we have ahead of us. Since then, I'm pleased to report that we have more than halved our monthly burn rate, and with the current financing in place we expect to end 2007 with a cash balance of between $15 million and $18 million, which is a $2 million improvement from the range guidance I gave at our 2006 year-end conference call in March.

That concludes my financial overview, and now I'll turn the call back over to Geoff.

Thank you, Kevin.

I would like to start more or less where I left off at our last conference call when we were reporting 2006 end-year results. At that time, we were discussing Insmed's future following the settlement of the patent litigation, and at that time, as you may recall, I explained that the settlement had not required us to change our strategy, which was and remains to pursue several avenues of development for IPLEX that could eventually far exceed the short-stature market which the drug was initially approved for.

These indications include, but are not limited to, the application of IPLEX for the treatment of myotonic muscular dystrophy, HIV adipose redistribution syndrome and retinopathy of prematurity. Some 40,000 people in the U.S. suffer from MMD and about 80,000 are affected by HARS. The patient population for retinopathy of prematurity is between 14 and 16,000.

I also noted at the time that Insmed is now generating revenue expected to reach $3 million in 2007 by supplying IPLEX to physicians in Italy who are treating patients with ALS. I further noted that we are continuing an oncology development program centered on two molecules, recombinant IGFBP-3 and a small molecule that we refer to as INSM-18. Both products are in early clinical studies.

I would now like to follow up on that discussion by telling you about some important events that have taken place since the end of the first quarter. First, there was the news released on May 3 that we have seen positive results from a Phase II investigator-sponsored study of IPLEX in patients with MMD. Preliminary results of the clinical study, which is still ongoing at the University of Rochester School of Medicine and Dentistry, showed that six months treatment with doses of IPLEX up to 1 mg per kg per day in six patients met the primary study endpoint of being safe and well tolerated.

The IPLEX treatment was also associated with improvements in muscle mass, reductions of both cholesterol and triglycerides. Five out of the 6 patients experienced an improvement in lean muscle mass, and patients also reported improvement in gastrointestinal function, endurance and cognitive function. Albeit early stage, this is a very exciting set of data. Myotonic muscular dystrophy is a very debilitating condition, affects a sizable population and there is currently no treatment. If we can corroborate these initial findings in future carefully controlled clinical studies, it will be an enormous opportunity for the Company.

Previous to that news, we reported encouraging results from the Phase II study of IPLEX in the treatment of HARS, which was being conducted and still is being conducted at the University of California-San Francisco. The preliminary data that we published demonstrated that three months treatment of IPLEX at a dose of 0.5 mg per kg per day in seven patients increased IGF levels threefold. The treatment was also associated with significant improvements in fasting glucose levels, the amount of insulin secreted during an oral glucose tolerance test and overall insulin sensitivity.

Moreover, there was a significant reduction in trunk fat and a positive downward trend in waist circumference when compared to baseline. Lipid profiles also tended to improve. Notably in this study, normal glucose tolerance was restored in half of the six patients diagnosed with impaired glucose tolerance at the start of the study. These patients with IGT also experienced a significant decrease in their visceral adipose tissue.

The next phase of the study is underway and will explore a higher dose of IPLEX, a dose of 1 mg per kg provided per day over a six month period. We believe this, too, is an exciting dataset. It is being reported that 250,000 patients in the U.S. and Europe suffer from this condition. More importantly, it has been estimated that approximately 40% of these subjects are pre-diabetic and have impaired glucose tolerance, which over time will worsen and they will develop type 2 diabetes.

IPLEX is the only drug that is currently being studied for the treatment of HARS that has a positive impact on the diabetic condition by improving glucose control. As we saw in our study, half of the patients suffering from this pre-diabetic condition returned to a normal glucose control after only three months of treatment. This is a key finding with IPLEX and, as I said, clearly differentiates the product from its competitors.

This is an ongoing study, and we look forward to reporting more data to you in the next several months. We are also currently working with opinion leaders in this field and actively pursuing the development of a broader based Phase II clinical program.

As we have recently pointed out to you, and as illustrated on our Web site, we continue to pursue early clinical studies for IPLEX in the treatment of retinopathy of prematurity, a disease of premature infants that impedes the development of the small blood vessels in the back of the eye, which leads to blindness in the majority of cases. A Phase I clinical study in 10 patients is underway at the University of Gothenburg in Sweden in collaboration with scientists at the Harvard Medical School here in the United States. Results are currently expected by the end of 2007.

Work continues on our two Insmed oncology compounds, recombinant IGFBP-3 and INSM-18. Both hold promising potential treatment for a variety of cancers. Preclinical models demonstrate that both of these treatments interact with the IGF system to reduce tumor growth in models of breast, prostate, lung, colorectal and head and neck cancers.

Finally, I want to draw your attention to an exciting opportunity that has emerged for Insmed quite recently. There is development of legislation in Congress to promote a regulatory pathway for generic drugs in the field of biologics. Congress has shown considerable interest in this topic and has held several meetings on it in the past two months. I have personally testified at two of those meetings.

Up to this point, the federal government has barred generic production of off-patent biologics. Biologics comprise one of the fastest-growing and most [extensive] categories of drugs. By 2009, it is estimated that sales of biologics will reach or approach $90 billion. If a pathway is developed that allows companies skilled in protein manufacture to pursue the development of these drugs when they become off patent, there will be a huge business opportunity.

Insmed is one such company that is skilled in protein manufacture and has the clinical and regulatory infrastructure to get these products approved. We believe in the U.S. we could be one of the leading biotechnology firms in this business. This is a new business model for Insmed, and we would like to pursue this avenue in partnership with a company that has a strong track record in sales and distribution of generic drugs.

Our strengths at Insmed are in the technical development of these products. We have proven we can manufacture and receive FDA approval for a therapeutic protein, and we simply aim to do it again. Our position is that generic manufacturing of proteins is feasible in highly advanced facilities such as our own FDA-approved plant in Boulder, Colorado. As I noted in testimony last week before the House Energy and Commerce Committee, I believe that many companies have the scientific expertise and capability to manufacture safe and affordable generic biological products. I believe Insmed is possibly the most advanced in this respect. As I told the subcommittee, Insmed intends to be a leader in this emerging field.

I think we have an exciting program, and I would like to end there and take any questions that you may have.

Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]

At this time, our first question comes from Matthew Osborne. Please go ahead.

Good morning, Geoff. Thanks for taking the question here. Just a question on HARS and MMD, do you plan on, or do the investigators plan on presenting any of the data in the second half, maybe for HARS at IBSA or [ICAC]?

I think there's been discussion amongst the investigators in both programs to try to present data at whatever scientific forum is available towards the end of the year. So the answer is yes.

Okay.

But I can't guarantee that that will happen yet, Matt.

And are you still on track to initiate formal Phase II studies beyond these initial patients who are being treated by the year end?

Yes.

Okay. One last question just in the biogeneric route, any commercial opportunity by the end of the year, or are you kind of early in terms of meeting with companies and perhaps establishing some kind of partnership?

Well, we aim to meet with companies, establish a dialog and demonstrate our capabilities to them, and I would certainly like to believe that we would be in a position to have advanced partnering discussions towards the end of the year. As all of that is ongoing, there'll be development work ongoing in our Boulder facility to characterize some of these proteins. We're starting to make a list of proteins that we believe are important. We have some ongoing work right now. And we aim to sort of continue to develop that work to demonstrate our capabilities.

Great. Thanks, Geoff.

Thanks, Matt.

Thank you.

[OPERATOR INSTRUCTIONS]

Thank you. And our next comes from Morgan [Stolls]. Please go ahead.

Good morning, gentlemen.

Good morning.

[Inaudible] a question about IPLEX itself, since, as I read here on the screen this morning, you're saying that you've given up the rights to that in Europe as well as the United States. Is that where Genentech would come in as a partner, to facilitate the distribution of IPLEX? I'm a little confused by that as to whether or not -- just how that would go forward -- with the HARS and the MMD, that is.

With HARS and MMD, we have a settlement agreement with Tercica and Genentech that allows -- sorry, that defines the field of interest of both companies, and the two indications I talked about this morning, myotonic dystrophy and HARS, they're in our field of interest. And the settlement calls for an opt-in provision where basically at a time when we have data that would enable us to conduct a Phase III clinical trial and move down the path towards registration of the product we would share that data with Tercica, initially, and they would make a decision as to whether they would like to share with us the development of the program, i.e., become an equal partner in the development of the program. And that would relate to the worldwide development for those two indications.

So they would not be involved in the generics, then.

No. They've got no involvement with that.

And one last question, how long before you think you'd see any sales, or sales efforts in this particular area? It sounds like it's a year or two away, easily.

Sorry, in the biogeneric area?

Yes.

Oh, yes. I think that's going to be certainly well after two years. Yes.

As well as the IPLEX.

Yes.

One last thing, how do you expect to generate revenues, then, to survive?

We'll be looking at different options with that, whether it's through partnerships or debt or equity, the usual routes that companies like ourselves pursue in the biotech area.

Thank you, gentlemen.

Thank you.

Thank you. And this concludes the question and answer session for today. Go ahead, Mr. Allan.

Okay. Once again, I'd like to thank you for joining us for the end of first quarter call this morning. I think we have an exciting program. And, as Kevin has demonstrated to you, we've carefully ratcheted down our spend. We're very focused with regard to that spend. And we're looking forward to a very exciting 2007 and beyond. Thank you once again.

Thank you.

Thank you, everyone, for joining today's Insmed Incorporated conference call. This call has concluded. You may now disconnect.