Insmed Inc (INSM) 2008 Q1 法說會逐字稿

Good day ladies and gentleman and welcome to the first quarter 2008 Insmed Incorporated earnings conference call. My name is Stacie and I will be your moderator for today. At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of the conference. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today, Mr. Brian Richie, with FD. Please proceed.

Thank you Stacie, good morning, everyone . This is Brian Richie from FD and welcome to Insmed's first quarter conference call . Today we are joined by Geof Allan, President and CEO; Steve Glover, President Insmed therapeutic Proteins; Kevin Tully, Executive Vice President and CFO. Jeff will provide a business update, followed by Kevin's review of the financials, we'll then open up the call for questions. Insmed issued a press release this morning containing first quarter results whish is posted on the company's website. If you have questions after call or would like additional information about Insmed, please contact me at 212-850-5683. Before we proceed with the call I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to the conference call and webcast. Please go

Okay, thank you, Brian. Good morning, everyone. And welcome to our first quarter conference call. I'm please today report that significant progress continues to be achieved within both areas of our business. The follow on Biologics activity and IPLEX. Although we recently provided the market with an update on our most recent key accomplishments, I would like to begin today's call by providing some further context for these positive developments. In addition, I will address a number of issues we are well aware that are on top of your mind. This relates to a potential follow on Biologics partnership, the June 12 NASDAQ minimum bid price requirement date, concern over a possible reverse split, and the company's potential near term capital requirements. With that said, let me review the current starters of our follow on Biologics program.

To reiterate, I'm pleased to say that Insmed has built one of the most robust and mature FOB platforms in this evolving industry. We have FOB candidates in various stages of development and with more than an estimated 250,000 patients in the US being treated for neutropenia with G-CSF and Peg-G-CSF, our two leading programs, INS-19, which is a FOB-4 neupogen and INS-20, which is a follow on Biologic of neulasta. If approved, will target a market that realized sales of over $4 billion in 2007. I am pleased to report that Insmed recently received regulatory approval from the United kingdom's medicine and healthcare products regulatory agency to initiate a clinical trial for INS 19. Pre-clinical pharmacological, pharmacokinetic and toxicological studies have demonstrated that INS-19 and FDA approved neupogen are comparable and detailed analytical characterization has also demonstrated that the products of a high degree of similarity. Screening for participants for the phase I study has begun, with dosing of the first patient expected very shortly . Dated a support human similarity is expected in July of this year. INS-20 has also completed pre-clinical pharmacological and pharmacokinetic studies they have too have demonstrated that INS-20 FDA approved neulasta, are comparable. Detailed analytical characterization has also demonstrated that the products have a high degree of similarity, the company intends to initiate clinical study to INS-20 in the fourth quarter of this year.

As our internal FOB pipeline has continued to move forward, so, too, have the discussions in Washington regarding establishment of regulatory pathway for FOB's in the US. Insmed has become an integral part of these discussions . We are now routinely sought after when FOB key opinion leaders are needed to sit on panels or participate in public discussions on the subject. Just recently, for example Insmed's participated in FOB programs sponsored by the center for business intelligence and the American enterprise institute, two highly respected organizations. Moreover, Insmed recently received and completed a questionnaire from the chairman and ranking member of the US house of -- representative subcommittee on health on the possible development of legislation to establish an FOB regulatory pathway. Additionally, Steve and I have been routinely asked to provide our FOB insight to members of the media who are covering this issue extensively. All of this underscores the substantial progress we are making in establishing Insmed as a recognized and key player in the FOB industry . We are committed to helping ensure the establishment of the US regulatory pathway as soon as possible.

While we are quite pleased with each of these developments, Insmed understands that a potential near term growth catalyst for us is establishing an FOB partnership. Please be assured that this remains Insmed's top priority, and we are aggressively working to ensure the right deal is in place as quickly as possible. We have received extremely positive feedback from each of our potential partners. But beyond this, we think it is important that our investors understand the partnering discussions landscape . When we first began discussing the possibility of a partnership with the market in the beginning of 2007, there was a significant amount of movement in Washington concerning the potential creation of a regulatory pathway for FOB's. Quickly this led to significant interest from possible partners and we held discussions with multiple companies over a several month period. Accordingly we advised the market of our thoughts on timing, surrounding a partnership. However, when the FOB discussion in Washington was unbuckled from (inaudible) which occurred on September 20, 2007, we noted that the urgency which companies had originally adopted began to subside. Regardless, we maintained our sense of urgency throughout this period, and continued to position Insmed as a pioneer company in the FOB debate. In 2008 the FOB issue has not only been picked up again by many in government and been the focal point of numerous political regulatory scientific and economic discussions in Washington. But additional clarity regarding what a pathway might look like, has emerged. While certainly no one can predict if a regulatory pathway will be established this year, the significant head wind the issue has (inaudible) has attracted substantial interest from potential partners. All of this brings us to where we are today. Simply we're in high level detailed discussions with multiple possible partners. These companies have done extensive diligence on Insmed and all of the feedback we have received to date has been positive . For the most part these companies are now evaluating what a regulatory pathway might look like and when it will come to fruition in determining when partnering makes sense for them to make ensure they do not miss the market window. It is important for our investors to understand that Insmed continues to be focused on finalizing a partnership agreement that is in the best interests of our FOB program and shareholders.

I would now like to move the discussion to IPLEX. Our phase I I I enabling trial of IPLEX in myotonic muscular dystrophy is ongoing and as we have previously noted a substantial portion of the external costs associated with this study are expected to be covered by an approximately $2.1 million grant, which was awarded to the company by the muscular dystrophy association in late 2007. All sites involved in this study have been initiated, received investigational review board approval and are actively recruiting possible trial participants . The trial is currently 50% enrolled, 30 patients are now receiving drug in a randomized fashion. The target number of total subjects and the trial is on target to complete enrollment by mid year 2008. Of particular importance, several patients will soon be reaching the halfway mark in treatment and an interim analysis is scheduled for the fourth quarter of 2008. IPLEX, as you know, is also in use as part of an expanded access program in partnership with the Italian ministry of health for the treatment of ALS. Since early 2007 this program has grown to include 20 physicians and approximately 90 subjects have been enrolled into the program to date with additional subjects being enrolled as the program progresses. IPLEX continues to be safe in this population and well tolerated. During the first quarter of 2008, this program generated $2.3 million in cost recovery for Insmed, compared to 0.7 million during the same period last year . And compared to $2 million in the fourth quarter of 2007. Before I turn the call over to Kevin, I would like to address a couple of important financial related matters. One issue concerns the time line for Insmed to comply with NASDAQ's $1 minimum bid price requirement. As you know, we are currently under a grace period for the bid price requirement, which expires on June 12. If we do not regain compliance by June 12, we will have the opportunity to take advantage of a hearing before a NASDAQ listing panel. We would continue to be listed throughout the hearing process and would expect that our hearing would be held sometime in late July. Under the NASDAQ rules, the listing panel has the authority to grant us additional time to regain compliance. Given that we significantly exceed all other applicable criteria for continued listing and that we have a strong business platform, we believe we can make a strong case for an additional period of time to regain compliance. Like our investors, Insmed is disappointed with how our business is being valued by the street. As such we are aggressively marketing our story to the institutional investment community. As Washington, the main stream media, and a number of large health care companies have made the FOB issue a popular topic of conversation, investors are now beginning to look at this industry as a possible substantial near term opportunity and this has allowed us to begin increasing our institutional investors visibility.

To reiterate, it is still not in our current plans to execute a reverse split. However, as we have said previously, market conditions may dictate that we consider this alternative after we have exhausted all of the discussions with NASDAQ. As you can tell from our balance sheet, Insmed has approximately 9 months of cash. Our most preferred method of obtaining capital is via a strategic partnership. And as I have said, this is the top priority for this company today . However, we may also explore and evaluate a number of other funding raising vehicles which may include debtor equity. I would now like to pass the call off to Kevin for a review

Thank you, Jeff. And good morning, everyone . As Jeff explained the first quarter was positive in a variety of important areas. To begin total revenues for the first quarter ended March 31, 2008 rose (inaudible) $0.6 million to $2.3 million as compared to $1.7 million for the corresponding period in 2007 . The increase was primarily attributable to a $1.67 million improvement in cost recovery from our expanded access program to treat patients with ALS in Italy. This was partially offset by the (inaudible) $0.4 million in revenues lost from our withdrawal of IPLEX in the short statute market, pursuant to the terms of our March 2007 settlement agreement with Genetech Inc and Tercica Inc and the [absencing] of licensing income from our agreement with Napal Pharmaceuticals Inc which recorded a (inaudible) $0.5 million milestone in the first quarter of 2007. The net loss for the first quarter of 2008 was $4.9 million or $0.04 per share compared with the net loss of $10.3 million or $0.10 per share in the first quarter of 2007. This $5.4 million improvement was mainly due to the (inaudible) $0.6 million increase in revenues I mentioned previously and a $4.9 million reduction in total expenses . The $4.9 million total expense reduction was due to a $3.9 million decline in selling general and administrative expenses. And (inaudible) $0.9 million decrease in research and development expense and the elimination of a (inaudible) $0.6 million cost of goods sold charge which occurred in the first quarter of 2007 . These were partially offset by a (inaudible) $0.4 million non-cash loss on investments. The reduction in SG&A expenses was due primarily to the elimination of litigation expenses following the March 2007 and the removal of commercial expenses associated with our business restructuring plan . The elimination of the cost of goods sold resulted from our withdrawal of IPLEX in the short stature market, while the lower R&D expenses reflected the reduced operating costs in our manufacturing facility in Boulder, Colorado. As we streamlined the facility to support our clinical activities following the IPLEX withdrawal from these commercial short stature market. The realized loss on investment arises from a write down of our investments in Napal. This investment, which was originally funded by a milestone payment from Napal, was recorded as part of our agreement with Napal in 2007. Interest income in the first quarter of 2008 at $279,000, was slightly below the $301,000 reported in the same period of 2007. This was primarily due to the lower interest rate environment. Interest expense increased to $354,000 in the most recent period from $151,000 during the corresponding period of 2007. Due to an increase in the debt discount amortization resulting from the quarterly convertible note repayment which began on March 1, 2008. As of March 31, 2008, we have a total cash, cash equivalents and short-term investments on hand of $12 million, compared to $16.5 million on hand as of December 31, 2007. The $4.5 million decrease in cash reflects the use of $3.9 million for operating activities and the (inaudible) $0.6 million repayment of our convertible notes on March 1, 2008. That concludes my financial review. I'll now open up the call for questions and

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Mark Rita with Friedman Schneider. Please proceed.

How are you doing, everybody. Good morning, doc.

Good morning, Mark.

You testified in May in front of the house committee on energy and commerce about innovation in the biotech industry. What exactly did you say?

Well, this meeting was focused towards understanding what would be the requirements to bring forth -- follow on biologics pathway -- a registry pathway and there were a number of participants. Some from the industries that supported the development of this pathway, namely myself. And some participants from the industry that doesn't support the approval of this pathway . Namely, some of the large biopharma companies. So, basically it was a series of testimonies from a number of different participants. And my particular focus was really around the issue that today we have the scientific capabilities to produce these molecules in a safe and effective fashion. And we simply need a regulatory pathway to allow the FDA to start reviewing and approving these

Excellent Thank you very much.

Thank you.

(OPERATOR INSTRUCTIONS) I'd like to turn the call back over to management for closing remarks.

Okay . Well thank you very much for listening to this call this morning. We'll be very pleased to speak with you in the near future as we continue the important developments within the company . And as I think I reiterated during my section of the call, the company is very highly focused on the key issues that you, as investors, understand. And we will continue to work very hard to bring this company to a successful outcome. With that being said, I will once again bid you good day and look forward to talking to you in the future.

Thank you for your participation in today's conference, this does conclude your presentation, you may now disconnect, have a good day.