Insmed Inc (INSM) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the first quarter 2009 Insmed Incorporated earnings conference call. I'll be your coordinator for today. At this time all participants are in listen only mode. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I'd now like to turn the presentation over to your host for today's conference, Mr. Brian Ritchie, with FD. Please proceed.

Thank you. Good morning, everyone. This is Brian Ritchie, from FD, and welcome to Insmed's first 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 containing first quarter 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'd like to remind everyone that the Safe Harbor language contained in today's press release also pertain to this conference call and webcast. Please go ahead, Geoff.

Okay, thank you, Brian. Hello everyone and welcome to our conference call to discuss the Company's first quarter 2009 financial results. In addition to our results this morning which will be discussed by Kevin, we will also provide you with a brief update on our evaluation process with potential uses that the proceeds received from Merck's purchase of our FOB assets, as well as provide an update on our IPLEX program and other corporate developments.

As we previously discussed with you we completed the sale of our FOB assets to Merck on March 31, 2009, and as a result of that closing, Insmed received $130 million, the aggregate purchase price for the assets. So let's begin with a discussion on the potential use of these proceeds. This non-dilutive cash infusion provides us with significant financial flexibility in terms of how we may go about continuing to grow our business and clearly, that is our mission. We will evaluate a number of potential business development-type initiatives and on this front, we are working with RBC Capital Partners who we've established a long relationship with to leverage their significant industry knowledge. We are still in the early stages of this process. We do not intend to rush to complete any transaction, and we are committed to conducting a thorough analysis with significant input from both RBC and our own Board of Directors.

I think it's important to provide you with the criteria that RBC is working within selecting potential assets for us to review. We are currently looking for late stage drugs, those that we consider that have at least robust Phase II clinical data with well defined clinical end points and a well understood regulatory pathway for approval. We believe by having the opportunity to build a pipeline that is complementary to our existing product will provide long term growth and a less risky approach. We've always believed the dependency on a single product is a risky strategy and it always has been. Clearly, the potential products that we review have to have attractive market opportunities, but more importantly, we need to be able to commercialize the product with our available cash and therefore, not be dependent upon accessing uncertain equity markets. So while there is still much work to be done, we are all very confident that the appropriate steps are being taken to ensure a successful review process and I look forward to providing you updates when there is further information to share.

When the deal with Merck was first announced, we mentioned that we would be considering a number of potential uses of the cash, including the possible distribution of a portion of the cash generated from this agreement to shareholders in the form of a dividend; however, as we've begun this initial due diligence and product evaluation, it has become clear that this is an option that should only be considered in the event that we cannot find a suitable asset or assets to add to our existing portfolio. Based on numerous discussions with our bankers and our Board, we think that the opportunities presented by the instability in the markets at present are likely to offer us the better use of cash for our long term prospects.

In addition, as previously disclosed, we are also considering the initiation of a share repurchase program; however, I want to inform you that we also consider this option as a lower priority than our strategic review of assets. While we are well aware that share repurchase programs can signal to the market a companies confidence that its prospects, putting the shareholder repurchase plan in place can be an intensive and lengthy process. While we are certainly confident in the future of the Company and we do believe that the current share price would make a repurchase program a valid option, we do not think that using our cash reserves to repurchase Insmed shares on the open market is appropriate at this time when we have an opportunity to potentially greatly enhance our pipeline.

As we move forward with our analysis, we will certainly consider the merits of such a program. So I want to be clear that our overall objective is to leverage our capital to further enhance the long term value of the Company and we believe that the most effective way to do that is to utilize our internal expertise and our external advisors to evaluate the current business development landscape. With respect to uses of capital, that is our focus going forward and will remain our focus for the foreseeable future.

Now let me turn to IPLEX. As previously announced, the Myotonic Muscular Dystrophy Phase II clinical trial has been completed and we are in the final stages of quality assurance that the data and preparing for final analysis. The database is currently in the process of being locked and we continue to expect the summary Phase II results to be available before the end of this quarter. Once these data are available, we'll have a better sense of what the next steps for the MMD program are.

In regards to ALS, the expanded access program we have ongoing in Italy continues and as we mentioned on our last call, we do intend to expand this program throughout Europe during the second quarter of this year. To that end, we announced on March 30, that we have partnered with IDAS, a private UK-based Company which specializes in the management of named patient programs, and we've contracted to manage this program IPLEX worldwide excluding the U.S. and Italy. Under the agreement, Insmed will continue to be responsible for the IPLEX program in Italy as well as all IPLEX related activities in the U.S. While IDAS will assume responsibility for the managing program throughout the world. Initial inventory of IPLEX has been shipped to IDAS, and they are now in the process of helping patients understand the formal steps which are necessary to participate in the program. We believe that by the end of the second quarter, we will have a better idea of what the demand for IPLEX is throughout Europe and of course, we'll update you then as to this situation.

Now, if we shift focus to the U.S. I'm happy to restate that on March 10, the FDA announced that it would allow Insmed to provide access to IPLEX for investigational use in patients with ALS here in the United States. First, any single patient INDs that requested compassionate use of IPLEX for treatment have named patients with ALS that were received in dates stamped by FDA's document rule by close of business on March 6, were allowed to proceed and Insmed has agreed to supply IPLEX to those patients. At this time, all patients authorized for compassionate use treatment have been supplied with IPLEX. Insmed has received no reports to date of any drug related adverse events in patients within this program.

Second, Insmed plans to conduct a controlled clinical trial under an IND in which other patients with ALS who are interested receiving the drug will be randomly assigned to receive the drug. Preparations for the clinical trial are under way and as you're probably well aware the nature of initiating any clinical trial is complex and in this case there are added complexities due to Insmed's intent to establish a lottery system that can accommodate interested patients throughout the country regardless of location. So therefore, we are focused on working very quickly through all of the regulatory and logistic hurdles so that the trial can start as soon as possible.

In the meantime, we continue to communicate with the ALS community both through our website and through phone and e-mail correspondence. We understand the patient demand for IPLEX. We understand the nature of this devastating disease, and we intend to remain transparent in our actions as we build the program necessary to address the patients needs. As a reminder, the FDA has agreed to allow Insmed to submit a request for cost recovery under existing IND regulations to offset the costs associated with conducting the planned clinical trial. While the FDA is in support of our efforts here, they have a defined process that must be completed before moving forward and we must adhere to that. Once this trial has been initiated, we will certainly inform you.

So in a moment I will hand the call off to Kevin, but lastly I'd like to acknowledge the fact that we've regained compliance with NASDAQ's minimum bid price rule and are no longer under the threat of delisting for the foreseeable future. Given our balance sheet and the potential value of our IPLEX program, we still see ourselves as undervalued but we're very pleased to see the market beginning to take notice of our progress. So now I'd like to toss the call off to Kevin for his review of the financials. Kevin, please go ahead.

Thank you, Geoff, and good morning everyone. As usual I'll provide the customary review of the financials and in addition at the close I plan to provide a bit more color on our current cash position. Total revenues for the first quarter ended March 31, 2009, at $2.4 million, were in line with the revenues reported for the corresponding period in 2008. For the first quarter of 2009, we reported increased net income of $117.8 million or $0.96 per share as compared with a net loss of $4.9 million or $0.04 per share reported in the first quarter of 2008. This $122.7 million improvement from Q1 2008 was primarily due to the gain on sale of our FOB assets to Merck after fees and taxes, which is partly offset by increases in SG&A and R&D expenses due mainly to the recognition of stock compensation expense and the award of bonuses. The $2.2 million increase in total expenses was due to a $0.5 million increase in research and development expenses and a $2.1 million increase in selling, general and admin expenses which is partially offset by the absence of a $0.4 million loss on investments which is recorded in the first quarter of 2008. The higher R&D and SG&A expenses were due largely to the recognition of stock compensation expense for the restricted stock and restricted stock units that vested on March 31, 2009. Together, with the award of bonuses.

Interest income for the most recent first quarter of $23,000 was $256,000 lower than the corresponding quarter of 2008 due to a combination of the lower interest rate environment and a lower average cash balance. Interest expense of $242,000 was $112,000 lower than the same quarter in 2008 due to a decrease in the debt discount amortization resulting from the lower average balance of the 2005 convertible notes, the retirement of which began in March 2008. As of March 31, 2009, we have total cash, cash equivalents and short-term investments on hand of $127.5 million compared to $2.4 million on hand as of December 31, 2008. The $125.1 million increase in cash, cash equivalents and short-term investments was due to the $127.8 million in net proceeds received during the first quarter from the sale of our FOB assets to Merck. This was minimally offset by $2.1 million utilized fund operations and $0.6 million for the partial retirement of our 2005 convertible notes.

Before be close, I would like to give you a bit more detail on our current cash position. As Geoff mentioned, at the end of the first quarter we received $130 million in gross proceeds from Merck. We do have some expense obligations with regards to this which total approximately $5 million to cover fees and taxes, and these will be paid out in the coming months leaving approximately $125 million in net proceeds from the sale. This is some $2 million better than expected. As we were able to utilize more of our NOLs than anticipated which lowered the tax payments and we incurred less legal expenses than projected as we were able to complete the transaction in a relatively short period of time. When all of the payables associated with our operations for the first quarter are paid, including compensation expenses, plus the one off costs such as taxes and transaction fees, we expect to have close to $120 million available in cash to fund our future operations.

Looking forward to the balance of the year, we believe the costs associated with our base business which at present consist mainly of salaries, repayment of the 2005 convertible notes and normal public Company costs will be fully offset by a combination of cost recovery from our expanded access program, grants pending from the Muscular Dystrophy association, and interest on our cash reserves. This unique position allows us to continue our programs through some key value inflection points as well as being able to conduct a thorough review of potential business development opportunities without eroding our $120 million cash base. If we do initiate new trials, take on additional R&D, unmet commitments regarding the external manufacture of IPLEX these will obviously require additional funding which will be taken into account at the appropriate time. Until then, we can operate in an extremely economic and efficient manner to effectively progress our business and protect our capital. That concludes my financial review and I'll now pass the call back over to Brian.

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.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.