Insmed Inc (INSM) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2008 Insmed Incorporated earnings conference call. My name is Chanelle, and I will be your coordinator for today.

(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's call, Mr. Brian Ritchie, from FD. Please proceed, sir.

Thank you, Chanelle. Good morning, everyone. This is Brian Ritchie from FD, and welcome to Insmed third quarter conference call.

Today we are joined by Geoff Allan, President and CEO, and Kevin Tully, Executive Vice President and CFO. Geoff will provide a business update, followed by Kevin's review of the financials.

Insmed issued a press release this morning containing third quarter results, which is posted on the Company's website. As has been Insmed's historical policy, the Company will not be taking questions from retail shareholders following the call. However, if you have any questions or would like additional information about Insmed, please contact me at 212-850-5683 after today's call.

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 this conference call and webcast.

Please go ahead, Geoff.

Thank you, Brian.

Good morning, everyone, and welcome to our third quarter conference call. Once again I am pleased to report that we are continuing to execute on our business plan and efficiently advance both areas of our business -- our follow-on biologics platform and our IPLEX program.

Let's begin with our FOB program. Our second FOB candidate, INS-20, has entered the clinic and demonstrates further that we have the potential to be an initial US marketplace entrant following the establishment of an FOB regulatory pathway. Insmed recently received approval from the United Kingdom's medicines and healthcare products regulatory agency to initiate a Phase I clinical study for INS-20, which is a pegylated recombinant form of human G-CSF, and an FOB of the FDA-approved product Neulasta, which had U.S. sales of approximately $2.4 billion in 2007.

Our preclinical studies have demonstrated that INS-20 and FDA-approved Neulasta are comparable in both their pharmacological and toxicological profile. Detailed analytical characterization has also demonstrated that the products have a high degree of similarity. Data from these initial valuations have been used in part to support the Phase I study, which will be initiated immediately. The Phase I study will be conducted in the United Kingdom and will compare the safety and establish the bioequivalence of INS-20 to Neulasta. Results from the trial are anticipated in 2009 and are expected to be used as part of the submission to the FDA to establish a protocol with the agency for a Phase III clinical trial.

As I have previously mentioned, we continue to be pleased by the progress we are making in the development of our FOB portfolio utilizing our unique protein drug development capabilities and technical expertise. Each development milestone we achieve with INS-19 and INS-20 is further evidence of our strong position as a leader in this evolving industry. As you know, we have been working with RBC Capital Markets for just over three months, and I am pleased to say that in this short period of time they have been a significant asset to us in examining a number of strategic alternatives. As a result of RBC's work, we have received a number of term sheets, which we are presently evaluating.

Turning to the other side of our business, the fourth quarter will be an important one for our IPLEX programs. In myotonic muscular dystrophy we will be nearing completion of the ongoing Phase III enabling trial, and, as such, I would like to take a moment to review the key details surrounding our opt-in agreement with either Ipsen or Genentech. If either company exercises their opt-in rights, they will assume half of the incurred and future development costs and share half the profits. Ipsen has the first right to opt in for this indication and will have 60 days to make a decision following the completion of the ongoing clinical trial. If they waive their right to opt in, Genentech will have an additional 30 days to exercise their opt-in right. If both companies waive their opt-in rights and Insmed continues developing IPLEX in this indication, we have the freedom to operate in the end market with a 4% royalty.

Turning to ALS, we have received $3 million in cost recovery revenue in the third quarter related to the expanded access program in partnership with the Italian Ministry of Health for the treatment of ALS. This compares to $1.4 million received for the corresponding period in 2007. The program currently includes 23 physicians, and over 100 subjects have enrolled. We will begin analyzing the data generated from this program beginning in the fourth quarter of 2008 in hopes of determining potential next steps for the use of IPLEX in ALS.

Before I move on from IPLEX, I wanted to briefly mention the results we recently announced with Premacure that demonstrates how IPLEX increased serum IGF-I levels into the normal range in significantly premature infants. Premacure is developing IPLEX as a potential treatment for retinopathy of prematurity via a material transfer agreement with Insmed. Based in part on the results of this study, Premacure intends to initiate a Phase II multicenter trial in this indication during the fourth quarter.

I think it's important that I address the status of our NASDAQ listing. As you know, we recently announced that as a result of the temporary suspension of NASDAQ's minimum bid closing price rule NASDAQ has informed Insmed that the Company now has until March 20, 2009 to comply with the minimum bid requirements. We are pleased that NASDAQ has recognized that the current economic environment has contributed greatly to the artificial deflation of so many companies' value, including Insmed.

Prior to this extension, we announced that we would seek shareholder approval at a special meeting of stockholders to implement a reverse stock split, if necessary, in an effort to meet the minimum bid price rule for continued listing on the NASDAQ. As you know, given the extension we have postponed this meeting until further notice. I want to reiterate that we understand our investors' concerns regarding the reverse split and we will only seek to execute one if we feel that it is absolutely necessary to maintain our NASDAQ listing.

It is important that our investors understand how critical it is for us to remain a NASDAQ-listed company. Should we be forced to move to the Pink Sheets, we believe our access to capital and leverage with potential partners would be severely compromised due to the negative connotations often associated with Pink Sheets-listed companies.

With that being said, I would now like to pass the call off to Kevin for his review of the financials.

Please go ahead, Kevin.

Thank you, Geoff, and good morning, everyone.

To begin, revenues for the third quarter ended September 30, 2008 were $4.1 million, as compared to $1.4 million for the corresponding period in 2007. This $2.7 million increase was primarily attributable to a $1.6 million increase in cost recovery revenue from our EAP to treat patients with ALS in Italy and the grant receipt of $1 million from the Muscular Dystrophy Association in support of our IPLEX MMD Phase II clinical trial. This represents approximately 50% of the total $2.1 million MDA grant for the trial which we announced in 2007.

The net loss for the third quarter of 2008 was $2.2 million, or $0.02 per share, compared with a net loss of $3.9 million, or $0.03 per share, in the third quarter of 2007. This $1.7 million reduction was primarily attributable to the $2.7 million increase in revenues, which was offset by a $438,000 increase in total expenses, a $434,000 increase in net interest expense and the realization of a $54,000 non-cash loss on investments.

The $438,000 increase in total expenses was due to a $395,000 increase in research and development expense and a $43,000 increase -- decrease, sorry, in selling, general and administrative expenses.

The higher R&D expenses were due largely to increased clinical trial activity in the current quarter as compared to last year, as our Phase II IPLEX MMD trial continues to progress. SG&A expenses were consistent quarter over quarter.

Interest income for the current quarter of $78,000 was $292,000 lower than the corresponding quarter of 2007 due to a combination of the lower interest rate environment and a lower average cash balance. Interest expense of $301,000 was $142,000 higher than the same quarter in 2007 due to an increase in the debt discount amortization resulting from the quarterly payment of our 2005 convertible notes, which began in March 2008. The loss on investments arises from the write-down of our investment in Napo. This investment, which was funded by a milestone payment from Napo, was recorded as part of our agreement with Napo in 2007.

For the nine months ended September 30, 2008, revenues totaled $8.8 million, up from $5.3 million in the first nine months of 2007. Consistent with the third quarter results, the increase was primarily attributable to a $4.5 million improvement in cost recovery from the EAP to treat patients with ALS in Italy and the grant receipt of $1 million from the Muscular Dystrophy Association supporting the IPLEX MMD trial. This was partially offset by the absence of license income from Napo and the revenues lost from our withdrawal of IPLEX in the short stature market pursuant to the terms of our settlement agreement with Genentech and Tercica entered into in 2007.

The net loss for the nine months ended September 30, 2008 was $11.7 million, or $0.10 per share, compared to $16.7 million, or $0.15 per share, for the first nine months of 2007. Year over year, R&D expenses increased to $15.8 million for the first nine months of 2008, from $14.4 million during the same period last year, reflecting an overall increase in clinical trial activity for our FOB and IPLEX programs. SG&A expenses fell to $3.7 million for the first nine months of 2008 from $7.4 million a year earlier due to the elimination of litigation expenses following the March 2007 settlement and the removal of commercial expenses associated with our business restructuring plan.

In terms of interest for the first nine months of 2008 as compared to the same period of 2007, interest income declined $442,000 and interest expense increased $518,000, as the same factors affecting the third quarter impacted this year-to-date figures. As for the $500,000 loss on investments during the first nine months of 2008, this represents the full write-down of the investment in Napo, which, as indicated earlier, was originally funded by a milestone receipt from Napo and reported in 2007.

As of September 30, 2008, we have total cash, cash equivalents and short-term investments on hand of $5.8 million, compared to $16.5 million on hand as of December 31, 2007. The $10.7 million decrease in cash, cash equivalents and short-term investments primarily reflects the use of $9.1 million for operating activities and a $1.7 million principal payment to our 2005 convertible notes, which began on March 1, 2008.

That concludes my financial review. I will now turn the call back to Geoff.

Thanks, Kevin, and thank you, everyone, for participating in this quarter's conference call. I look forward to continuing to update you on our business as we progress and execute on our programs. Good morning, and thank you.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.