Insmed Inc (INSM) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Insmed Incorporated fourth quarter 2008 earnings conference call. My name is Mary, 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 of FD. Please proceed, sir.

Thank you, Operator. Good morning, everyone. This is Brian Ritchie from FD, and welcome to Insmed's fourth quarter and year end 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 fourth quarter and year end results which is posted on the Company's website. As has been Insmed's historical policy around earnings conference calls, the Company will not be taking questions 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 conference call to discuss the Company's fourth quarter and full year financial results. It has been less than one month now since we announced that we had reached an agreement to sell our Follow-on Biologics assets to Merck, and we remain pleased with the strong position this substantial cash infusion will put us in. I will take a few moments today to discuss our analysis, the possible use of proceeds related to the Merck transaction, and provide you with an update on the status of our IPLEX programs. To begin with, I want to let everyone know that we remain on track to close the Merck transaction by March 31st. As I said on our conference call last month, we have begun the process of determining how best to serve shareholders' interest with the proceeds of this deal. And to that end, we intend as management to pursue a comprehensive and thoughtful analysis to allow the Board, as your representatives, to be equally thoughtful and deliberative in determining the best use of the proceeds we will receive from Merck.

However, it is important to point out that based on current expectations, for the expanded access program in Italy, and the minimal cash burn rate for our current operations, we expect to be cash neutral for the balance of 2009. Very few biotech companies of our size, especially in this distressed market, can boast this type of outlook. In fact, as a recent New York Times article pointed out, investors, with capital markets continuing to tighten, are becoming more and more intolerable of biotech companies rapidly burning through cash with little to show for it. Thus, we are confident that the approach we have taken with continued assistance from RBC Capital Markets, in order to determine the most appropriate strategy going forward, will not only serve business well but should be looked upon positively by Wall Street. Now let me move on to our developments with IPLEX. With respect to our clinical studies with Myotonic Muscular Dystrophy, we continue to expect that the Phase II results will be available in the second quarter of this year. Once these data are available, we will lay out fully our plans for the further development of IPLEX in this indication.

With regard to ALS, the expanded access program in Italy continues to progress. During the fourth quarter, we reported $2.9 million in cost recovery from this program and $10.5 million for the full year. The expanded access program in Italy now includes 23 physicians, and 110 patients have been enrolled to date. Our intent remains to expand the program in ALS throughout Europe before the end of the second quarter. And of course, as I'm sure you are all well aware by now, the FDA has decided to allow ALS patients in the United States access to IPLEX under and IND. The FDA and Insmed have agreed that access to IPLEX will occur in two ways. First, single patient INDs requesting the use of IPLEX for treatment of named patients with ALS received and date stamped by FDA's document rule by close of business on March 6th, 2009, will be allowed to proceed, and Insmed will supplied IPLEX to those patients. The remaining limited supply of IPLEX will be used by Insmed to conduct a clinical trial under an IND in which other patients with ALS who are interested in receiving the drug will be randomly assigned to receive IPLEX through a lottery system. FDA has agreed to allow Insmed to submit a request for cost recovery under existing IND regulations to offset the cost associated with conducting this planned clinical trial.

I would also like to point out that a top line summary of the IPLEX ALS data from the Italian expanded access program has been posted on the FDA's website as well as our own. As a reminder, an expanded access program lacks the rigor associated with a controlled clinical trial, and one has to be very careful in drawing conclusions based on a relatively small number of patients treated in an uncontrolled setting. Thus, as the FDA notes in its statement, the Italian data were not interpretable with regard to determining any benefit of IPLEX in the treatment of ALS, but were useful in that no serious immediate drug-related toxicities were apparent.

The last point I'd like to make about ALS is how pleased Insmed is to have the opportunity to execute a controlled clinical trial in order to determine if IPLEX is effective in treating patients with ALS. We fully understand the severity of this disease and are committed to doing everything we can for these patients. That concludes my prepared remarks, other than to say that I look forward to updating you further as to the Company's future direction over the coming weeks and months; and I would now like to pass it over to Kevin for his review of the financials. Kevin?

Thank you, Geoff, and good morning everyone. Before I review the full year and fourth quarter financials, I, too, would like to express my excitement as it relates to the agreement with Merck. And not just because my primary concern over the past several months has been the health of our balance sheet; as Geoff noted, this agreement represents the culmination of two years' worth of hard work developing our FOB assets to the point where they could be monetized for a significant valuation. I'm extremely proud of the efforts put forth by everyone associated with this deal. This agreement is truly a transformative event, and will not only provide the stability to the Company, but allow it to take full control in charting its own course in the many months and years to come. In the short-term, as Geoff noted, following the execution of the agreement with Merck, we expect to be cash neutral for the balance of 2009, as we anticipate that the cost of supporting our ongoing IPLEX programs will be fully offset by the combined effect of our EAP cost recovery revenue and interest on our cash reserves.

Now for the financial results, I will start with the fourth quarter. Revenues for the fourth quarter ended December 31, 2008, were $2.9 million, up from $2.1 million from the corresponding period in 2007. This increase was mainly attributable to an $846,000 increase in cost recovery revenue from our expanded access program to treat patients with ALS in Italy. The net loss for the fourth quarter of 2008 was $4 million, or $0.03 per share, compared with a net loss of $3.3 million, or $0.03 per share in the fourth quarter of 2007. R&D expenses increased to $5.4 million from $4.6 million, reflecting an increase in clinical trial activity for our FOB and IPLEX programs. SG&A expenses increased to $1.3 million from $0.9 million, due primarily to higher IPLEX distribution costs and increased legal costs associated with the Merck transaction. Interest income for the fourth quarter of 2008 fell to $47,000 from $264,000 in the same period of 2007. This was due to the combination of the lower average cash balance on hand, and lower interest rates during the most recent quarter.

Interest expense increased slightly to $273,000 in the most recent period from $217,000 during the corresponding period of 2007. Revenues for the full year 2008 totaled $11.7 million, up from $7.6 million in the corresponding period of 2007. This increase was primarily due to a $5.1 million improvement in cost recovery from the EAP to treat patients with ALS in Italy, and a 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 revenue lost from our withdrawal of IPLEX in the short stature market, pursuant to the terms of our settlement agreement Inc. Genentech Inc. and Tercica, Inc. in March 2007. The net loss for the 12 months ended December 31, 2008n was $15.7 million, or $0.13 per share, compared to $20 million or $0.17 per share for the 12 months ended December 31, 2007. R&D expenses increased to $21 million from $19.2 million, reflecting the higher activity as our clinical trials in the FOB and IPLEX areas advanced. SG&A expenses fell to $5.1 million from $8.2 million, due to the elimination of litigation expenses following the March 2007 settlement, and the removal of commercial expenses associated with our business restructuring plan.

Interest income for the full year 2008 was $0.5 million compared to $1.2 million for the full year 2007. This decrease was mainly due to lower interest rates and a lower average cash balance for the full year 2008 as compared to the full year 2007. Interest expense for the 12 months ended December 31, 2008 was $1.3 million compared to $682,000 for the corresponding period of 2007. This higher interest expense was due to an increase in the debt discount amortization resulting from the quarterly payments of our 2005 convertible notes, which began in March 2008. The $500,000 loss on investments represents the full write-down on the prior year Napo investment during 2008. As of December 31, 2008, we had total cash, cash equivalents and short-term investments on hand of $2.4 million compared to $16.5 million on hand as of December 31, 2007. The $14.1million decrease in cash, cash equivalents and short-term investments mainly reflected the use of $12 million for operating activities and $2.2 million principal and interest repayment of our 2000(Sic-see press release) convertible notes, which began in March 2008.

To summarize, our overall losses for the full year 2008 were almost 22% lower than the full year 2007, as we increased cost recovery revenues, and -- most significantly at this stage of our development -- reduced costs. Looking forward, our base business will be underpinned by a focus group of 20 or so people, many with significant clinical and regulatory expertise. Our remaining staff will be dedicated to supporting the requirements of our ongoing IPLEX programs in MMD, ALS and ROP, and also meet the needs of a publicly traded Company. The net result will be a minimal cash burn, which we believe will be fully offset by a combination of cost recovery from our EAP program and interest from net proceeds on the asset sale to Merck. This, as Geoff discussed, puts us in the enviable position of being able to evaluate potential opportunities for the use of our cash and affords us the time to complete this exercise without diminishing the overall net cash proceeds from the asset sale. This concludes my financial review. I'll now hand it back to Brian to close.

Thank you, Kevin; and thank you, everyone, for joining us today. We appreciate your interest and look forward to providing you with future updates. Enjoy the rest of your day. You may now disconnect.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a wonderful day.