Insmed Inc (INSM) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the third quarter 2009 Insmed Incorporated earnings conference call. My name is Veronica and I will be your operator for today. At this time, all participants are in a listen-only mode and will remain muted for the duration of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today Mr Brian Ritchie of FD. Please proceed.

Thank you operator. Good morning, everyone. This is Brian Ritchie from FD. Welcome to Insmed's third 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 overview 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 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 on 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, Mel.

Thank you, Brian. Hello everyone and welcome to our conference call to discuss the Company's third quarter 2009 financial results. As you are all are well aware since our last earnings call we have said very little publicly. We fully understand that this has created a certain level of uncertainty in the market place and the purpose of this call is to address as many of the issues as possible that are of major concern to our investors. However, it is important that I tell you at the outset of this call that there are are just certain questions which we simply are not able to answer at this time due to their sensitive nature and ongoing transaction-related discussions which are presently taking place. As I will discuss further in a moment we are in transaction related discussions with multiple parties and are engaged in extensive due diligence on a number of potential alternatives. The outcome of all of this remains to be determined, thus it's necessary for us to keep the details of this work confidential.

With that said let me clear about two things. First, we are aggressively moving this process ahead and are certainly making progress. When we began this strategic review, there was quite the long list of potential alternatives to consider. While we consider this a significant positive it also meant it would take time to coal the list of possibilities down. We have done this and are focused on a short list of potential opportunities. This brings me to the second point I wanted to make. We are confident that the potential alternatives we're now close to reviewing are high quality in nature with potential to add shareholder value. Myself, the rest of the board and Insmed's management truly believe this is the best course of action for the Company. While I cannot put a time line on this process nor have we set a deadline for its conclusion, I can say once again, that we're moving forward as swiftly as possible. Also, as we said in the past, as we push ahead with our review, our cash position will be substantially preserved. We will continue to be operationally cash neutral, for the foreseeable future. Now, of course, should we not, for whatever reason reach an agreement we feel is in the best interest of our share holders, we will not execute a transaction just for the sake of executing a transaction.

I know there are some investors that have asked about the possibility of Insmed being sold. While I would not eliminate this scenario, let me be clear our primary objective is to leverage our balance sheet to grow our business. Of course this could occur in a variety of ways, merger, reverse merger, licensing or something else. We have said and will continue to approach this process with an open mind. With that said, the ultimate goal is to identify near-term commercial product opportunity for our business. I am sure some of you may also be wondering how the state of capital markets is impacting this process. While the capital markets have shown some improvement recently, it has primarily been in smaller capital raisings. For the size of transaction we're considering that volume of cash is still largely unavailable to most companies.

Additionally, I'm aware that there are some investors that have asked about our current infrastructure. Insmed currently has 15 full time employees including executive management. From a clinical regulatory and financial perspective, most of these employees are focused on executing due diligence on the potential transactions we're considering as well as running a public company. Also on the clinical side we had a number of employees dedicated to completing the final report related to the recently completed MMD trial that I will talk more about later. From a senior management perspective as previously stated, we're not currently seeking a new CEO. Given our on going strategic review process which will determine the long-term course for Insmed, we continue to believe now is not the right time to bring a new CEO on board. I continue to oversee this process with significant input from the rest of the board as well as Insmed management and RBC Capital Markets, our strategic financial advisor.

Let me now move on to IPLEX. As we previously announced Insmed will neither continue the supply of IPLEX to any new patients nor initiate further clinical trials with IPLEX at this time. As we explained last quarter these actions are being taken because we have determined that our limited inventory on hand must be conserved for the treatment 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 through 2010. This does not mean the IPLEX program is being abandoned. We're using this time to analyze the data being collected for various indications, including MMD, or myotonic muscular dystrophy, ALS, Amyotrophic Lateral Sclerosis, and ROP, Retinopathy of Prematurity and assessing the overall IPLEX development program, including possible IPLEX manufacturing options with third parties and possible future collaborations for further clinical trials. Finally, as I alluded to earlier, we have very recently completed and submitted the final clinical study report on the MMD trial to the Muscular Dystrophy Association. The submission of this final report meets the final milestones our clinical development grant with the MDA and the last $500,000 installment associated with this milestone is expected to be received in the coming weeks following approval and acceptance of the final report by MDA.

Some share holders have asked about the status of the opt-in agreement with Ipson and Genentech as part of the March 2007 settlement agreement and how the results of our recently report MMD trial impact the opt-in provisions. As a reminder the opt-in provisions apply to a Phase three enabling trial which was a term defined in our agreement as a Phase two trial whose design and results would permit further development of IPLEX into Phase three trials. Although Ipson and Genentech agreed prior to launching, the trial that it met design requirements for a Phase three enabling trial, the study, the MDA study, ultimately did not meets it primary end points. Because IPLEX failed in this trial to demonstrate the efficacy in the myotonic dystrophy, the results do not permit further development of IPLEX in Phase three, and therefore, no no opt-in provision applies to this trial for either Ipson or Genentech. In regards to ROP indication, again Retinopathy of Prematurity, we understand that Premacure AD is in the process of initiating a Phase two trial with IPLEX in Europe, which should take approximately 18 months to complete. Given the indication involves premature babies, only a minimum quantity of IPLEX is required to complete the trial and we already supplied the amount required to complete this Phase two trial to Premacure prior to the sale of our boulder assets in Merck. We are presently in preliminary discussions with Premacure regarding the future potential opportunities for IPLEX in the ROP indication.

Before I pass the call off to Kevin, let me close by thanking all of our investors for their continued support. We understand and appreciate your desire for information concerning our future strategic direction. And we will inform you as soon as we're able to regarding the outcome of ongoing strategic review. In the interim I would reiterate we had a board and management team that are fully committed to bringing forth a proposal that takes this Company to the next level and rewards investors and delivers significant long term shareholder value. With that, I will now pass the call off to Kevin for his review of the financials. Please go ahead, Kevin.

Thank you, and good morning, everyone. Total revenues for the third quarter ended September 30, 2009, with $2.5 million, as compared to $4.1 million, for the corresponding period in 2008. The decrease was primarily attributable, to 1 point -- $1.0 million of grant revenue, related to the IPLEX myotonic muscular dystrophy trial were recorded in the third quarter of 2008 and a reduction of $1.5 million in cost recovery from our IPLEX expanded access program for ALS in Europe. The reduced grant revenue is simply down to timing, while reduction in cost recover from the [ERP] is largely due to the decision made by Insmed in June this year to conserve its limited IPLEX inventory on hand for the treatment existing ALS patients with no new patients being brought on from mid-year onwards.

The net loss for the third quarter of 2009, was $150,000. Break even on a dollar per share basis. Compared with a net loss of $2.2 million of $0.02 per share in the third quarter of 2008. This $2 million decrease was mainly attributable to a $2.7 million reduction in total expenses, and $0.6 million improvement in investment in net income and a $0.2 million in net interest, which is partially offset by the $1.6 million reduction in total revenues. The $2.7 million decrease in total expenses, was due primarily to a $3.8 million decrease in research and development expenses, which is partially offset by $1.1 million increase in selling general and administrative expenses. The lower R&D expenses reflected the elimination of manufacturing expenses, following the sale of our follow-on biologic assets to Merck in March 2009. Higher SG&A expenses were principally due to external finance, legal and consulting advisory services, associated with the ongoing strategic review. The improved investment returns reflected the increased amount of cash available for investment, following the sale of our FOB assets to Merck. And the lower interest expense was due to the reduction of debt discount amortization associated with our 2005 convertible notes.

For the nine months ended September 30, 2009, revenues total $7.9 million. As compared to $8.8 million in the first nine months of 2008. Consistent with third quarter results, the decrease was primarily attributable to a year-over-year decrease of not $0.5 million in grant revenue related to the IPLEX MMD clinical trial and a reduction of $0.5 million in cost recovery during the most recent IPLEX ERP in Europe. As income for the nine months ended September 30, 2009 was $116 million or $0.92 per share, compared to a net loss $11.7 million, or $0.10 per share for the first nine months of 2008. This $127.7 million improvement was primarily due to the $127.8 million before tax gain on sale of our FOB assets to Merck, combined with a $2.6 million decrease in total expenses, and a $0.4 million improvement in investment returns, a $0.3 million reduction in interest expense and the absence of a $0.5 million loss on investment, which was offset, by $2.8 million of income tax expense on the gain on sale and the $1 million reduction in net revenue. The $2.6 million decrease in total expenses, was due to a $7.3 million reduction in R&D expenses that were partially offset by a $4.7 million increase in SG&A expenses. The $7.3 million reduction in R&D expenses was again due primarily to the decrease in manufacturing expenses following the sell of our FOB assets in March, 2009. The $4.7 million increase in SG&A expenses was due largely to a combination of the recognition of stop compensation expense, for the restricted stock and restricted stock units that vested on March 31, 2009 and the awarded bonuses. Together with increased finance, legal and consulting fees related to the ongoing strategic review as previously mentioned. The $0.5 million reduction in investment loss, was due to the write-off of our investment in Napo which occurred in 2008.

As of September 30, 2009, Insmed had a total cash, cash equivalent short term investments and a certificate of deposit on hand, totaling $124.1 million, consisting of $122 million in cash and short-term investments, and $2.1 million in a certificate of deposit. As compared to $2.4 million of cash on hand, as of December 31, 2008. The $121.7 million increase in total cash, was due to the $127.8 million in the before tax proceeds from the sale of Insmed's FOB assets to Merck, $4.1 million from the conversion of warrants and options into common stock, the release of a $2.1 million previously restricted certificate of deposit, and an $0.5 million from securities. Which was partially offset by $11.8 million utilized to fund operations and $1 million for the partial repayment of the Company's 2005 convertible notes. To reiterate, as Mel noted earlier, from an ongoing operations standpoint, we remain cash neutral and we continue to expect to be operationally cash neutral throughout our ongoing strategic review. That concludes my financial review and I will now pass the call back over to Brian.

Thank you, Kevin. 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.

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