Insmed Inc (INSM) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2009 Insmed, Inc. earnings conference call. My name is Noellia and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. (Operator Instructions).

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

Thank you, operator. Good morning, everyone. This is Brian Ritchie from FD. And welcome to Insmed second quarter conference call. Today we are joined by Dr. Mel Sharoky, Chairman of the Board, and Kevin Tully, Executive Vice President and CFO. Mel will provide a business update followed by Kevin's review of the financials. Insmed issued a press release this morning containing second 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 would like to remind everyone that the Safe Harbor language contained in today's press release, as well as the July 27 press release on IPLEX also pertains to this conference call and webcast. Please go ahead, Mel.

Thank you, Brian. Hello, everyone, and welcome to our conference call to discuss the company's second quarter 2009 financial results. As this is my first opportunity to address Insmed's investors, I would like to begin by providing with you some brief background information on myself. Following this, I'll discuss the current status of IPLEX and close by updating you briefly on where we are in our strategic review process. As you all know, I became Chairman of the Board near the end of the second quarter concurrent with the resignation of Dr. Geoffrey Allan, Chief Executive Officer and Chairman of the Board due to a health condition. I would like to take this opportunity on behalf of everyone associated with Insmed to express our best wishes to Geoff as he manages his medical condition. While it is under unfortunate circumstances that I assume the role of Chairman, it is also with great excitement as Insmed's financial strength is a unique asset in these times of market instability.

I also want to make sure that the investors understand that my background and experience are well suited to lead the ongoing strategic review, which we believe will enhance shareholder value. First, as I've been a Director since 2001, I have an intimate knowledge of Insmed. As a Board member I've played an integral role in our pursuit of Follow-On Biologics and the execution of the transaction with Merck, which has placed Insmed in a strong financial position to pursue opportunities with a more defined regulatory pathway and which are potentially closer to commercialization. Second, I have a significant track record of senior level experience in the life sciences industry. Of note, from January 2002 until March 2007, I served as President and CEO of Somerset Pharmaceuticals, Inc., a specialty pharmaceutical company, which jointly owned by Mylan and Watson before 2008 when Mylan acquired Watson's share. Prior to this, I was President and Chief Executive Officer of Circa Pharmaceuticals, Inc., which develops, manufactures and markets solid dosage generic pharmaceutical products to wholesale distributors, and led the merger between Circa and Watson. Along with this senior level management experience, I've been involved with the development and commercialization of a number of significant drugs, including Eldepryl for the treatment of patients with late stage Parkinson's disease, and ENSAM for major depressive disorder. Last, but not least, I'm a physician with experience across multiple therapeutic areas.

Before I move on, it's important to let you know at this time we are not seeking a new CEO. Given our strategic review process that will determine the long-term course for Insmed, we do not believe that now is the right time to bring a new CEO on board. Let me assure you, though, that with the current board and management team, I am highly confident that we have the right team in place to determine the most appropriate long-term direction for Insmed.

Let me now move on to IPLEX. As we recently announced, Insmed will cease the supply of IPLEX to any new patients. In addition, the company will not initiate further clinical trials with IPLEX at this time. These actions are being taken because we have determined that our limited inventory on hand must be a conserved for the treatment of existing patients in order to maintain their drug supply as long as possible. The company believes that it has sufficient IPLEX inventory to supply these patients for no more than 24 months. During this time, the company intends to analyze the ongoing data collected for various indications, including myotonic muscular dystrophy and ALS, and assess the overall IPLEX development program, including possible IPLEX manufacturing options with third parties and possible future clinical trials.

I would like to spend the remainder of my time discussing the ongoing strategic review with RBC. First, let me be clear that the Board's primary objective in any undertaking we pursue is the enhancement of shareholder value. Second, I want to be sure everyone knows that I and the Board are fully engaged and committed to this process and are dedicating a significant amount of time to insuring a successful outcome. In addition, I think it's important to everyone to step back and understand what a truly unique and remarkable opportunity Insmed's cash position has provided us. Current market conditions have left companies that possess outstanding late stage drug candidates with very few funding opportunities. We have met with a number of these companies to date. Please understand these are opportunities that would not be present if not for the instability of markets and our strong balance sheet, and we are extremely excited to be in this position.

Finally, and most importantly, we are focusing on product candidates with the potential to be commercially viable in the near term. This is a critical point, because despite the various potential uses of IPLEX, this is not a position that would otherwise be possible without our current strong cash position. Now let me get into a bit more detail in terms of what direction we might be headed in. As I just alluded to, we are focused on evaluating near-term commercial opportunities to have a strong IP and patent position with late stage drug candidates. We are not limiting ourselves to certain therapeutic categories, as our Board has experience across multiple areas. It should be noted that while our past experience is in protein drug development, this will not necessarily influence the therapeutic direction we pursue.

Let me conclude my remarks by addressing the timing of the conclusion to our strategic review. Given the substantial importance this process holds to the future of Insmed, we are conducting extensive evaluations and are committed to seeing this process through in a most thorough manner as quickly and as reasonably possible. With that said, given the complexities of these types of dealings, it is not possible to provide you with a firm time line at this point. Please keep in mind, as we move through this process, our ongoing operations remain cash-neutral, so we are not burning through this growth capital. This is the most critical juncture in Insmed's history and we are approaching it as such.

Before I pass the call off to Kevin, let me reiterate how truly excited I am, as both Chairman and shareholder, by the unique and enviable position Insmed is in. Insmed being cash-rich during such a financially challenging time with so many other companies has truly presented a number of outstanding opportunities for consideration, which we believe offers us the potential to create significant long-term shareholder value. With that, I'll now pass the call to Kevin for his review of the financials. Please go ahead, Kevin.

Thank you, Mel, and good morning, everyone. As usual, I'll provide the customary review of the financials, and in addition, at the close, I'll provide a bit more color on our current cash position. Total revenues for the second quarter ended June 30, 2009 remain strong at $3.1 million, up from $2.7 million for the corresponding period in 2008. This increase was primarily attributable to $272,000 of grant revenue related to the IPLEX myotonic muscular dystrophy clinical trial, which was received and recorded in the most recent second quarter. The net loss for the second quarter of 2009 was $1.6 million, or $0.01 per share compared with a net loss of $4.7 million, or $0.04 per share in the second quarter of 2008. This $3.1 million decrease was primarily attributable to a $2.8 million reduction in total expenses and the $9.3 million increase in total revenues, which are mentioned earlier. The $2.8 million reduction in expenses was made up of a $4.1 million decrease in research and development expenses, which was partially offset by a $1.4 million increase in selling, general and admin expenses.

The lower R&D expenses reflected the elimination of manufacturing expenses following the sale of our FOB assets in March 2009. The increase in SG&A expenses was due to a combination of external finance and consulting advisory services associated with the ongoing strategic review, together with increased personnel costs, primarily related to the separation agreement with Dr. Geoffrey Allan and license fees payable to Tercica relating to the March 2007 patent settlement agreement with Genentech and Tercica. One point of note on this quarter is the fact that from an ongoing operations standpoint, our business was pretty much at the breakeven level, and it was the total of these nonrecurring SG&A costs which I've just mentioned which actually resulted in the company reporting a loss for the second quarter of 2009.

For the six months ended June 30, 2009, revenues totaled $5.4 million, up from $5.1 million in the first six months of 2008. Consistent with the second quarter results, the increase was primarily attributable to $544,000 of grant revenue related to the IPLEX MMD clinical trial, which was recorded during the most recent six-month period. This was partially offset by a decrease of $262,000 in cost recovery from the various expanded access and Named Patient Programs to treat patients with ALS in Europe. Net income for these six months ended June 30, 2009 was $116.2 million, or $0.93 per share compared to a net loss of $9.5 million, or $0.08 per share for the first six months of 2008. This $125.7 million improvement was primarily due to the $127.8 million before-tax gain on the sale of our FOB assets to Merck, a $3.6 million decrease in R&D expenses and the $9.3 million rise in revenues, partially offset by a $3.3 million increase in SG&A expenses and $2.8 million income tax expense from the sale of our FOB assets.

Year-over-year, R&D expenses fell to $7.3 million for the first half of 2009, from $10.9 million, which, again, was the result of the decrease in manufacturing expenses following the sale of our FOB assets in March 2009. SG&A expenses increased to $6.3 million for the first half of 2009 from $3 million a year earlier, due to a combination of the recognition of stock compensation expense for restricted stock and restricted stock units that vested on March 31, 2009, the award of bonuses, and the increased consulting, personnel, and license fees which I previously mentioned. The realized loss on investments in 2008 arose from the write-down of our investments in Napo. This investment, which was funded by a milestone payment from Napo, was recorded as part of our agreement with them in 2007. Interest income for the first half of 2009 was $135,000 and was a reduction from the $375,000 earned in the same period of 2008, due primarily to lower interest rates.

As of June 30, 2009, Insmed had total cash, cash equivalents, short-term investments, and certificate of deposits on hand totaling $124.9 million, consisting of $122.8 million in cash and short-term investments, and $2.1 million certificate of deposit. This compares with $2.4 million total cash on hand as of December 31, 2008. The $122.5 million increase in total cash was due to the $127.8 million in before-tax proceeds from the sale of Insmed's FOB assets, $4.1 million from the conversion of warrants and option into common stock, and the release of a $2.1 million previously restricted certificate of deposit, which was partially offset by $10.6 million utilized fund operations and $9.8 million for the partial repayment of the company's 2005 convertible notes.

As Mel noted earlier, from an ongoing operations standpoint, we remain cash neutral and we continue to expect to be operationally cash neutral for the balance of the year. What this means is that after taking into account all nonrecurring expenses, including supporting the business through Q1 and taxes and fees to be paid on the sale of our FOB assets, we expect to have close to $120 million of cash available. Thus, as we continue to evaluate the most appropriate actions in leveraging our balance sheet to grow our business, we are able to do so while protecting our overall cash reserves. 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.

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