Insmed Inc (INSM) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2009 Insmed Incorporated earnings conference call. My name is Carissa, 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 of FD. Please proceed.

Thank you, Operator. Good morning, everyone. This is Brian Ritchie from FD and welcome to Insmed's fourth quarter and full year 2009 conference call. Today, we are joined by Dr Melvin 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 fourth quarter and full year 2009 financial 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, Mel.

Thank you, Brian. Hello everyone and welcome to our conference call today to discuss the Company's fourth quarter and full year 2009 financial results. As evidenced by our financial results, we continue to prudently manage our financial resources preserving our capital base in support of a potential transaction which we believe will drive shareholder value. Although we have not finalized the transaction to date, we continue to work diligently in conjunction with our advisors to review potential opportunities. As we've indicated previously, due to the lack of access to capital for small and private biotech companies we began the strategic review with a lengthy list of assets to review and we're well down the path of narrowing down to a high quality short list. While we remain excited about the opportunities available to us, factors related to each opportunity make it difficult to be precise regarding the timeline related to the potential conclusion of this process. The evaluation process that we have undertaken requires complete, thorough, and time consuming analysis and multiple levels. Specifically science, regulatory, commercial and financial analysis. The strategic review is too important to the future of Insmed not to explore all avenues. However, as we continue to align potential alternatives and our search criteria, we remain confident that our prudence will result in a transaction that not only increases shareholder value, but also positions Insmed to be one of the leading biotech companies in the years to come.

As Chairman of the Board, insuring the successful execution of the potential transaction is my responsibility and I assure you that I, along with the rest of the Board, and Insmed's management team are doing all that we can to make this a reality. With all that said, I would be remiss if I did not again mention that we continue to preserve shareholders capital as we push ahead with our review. Over the past couple of years there have been a number of companies that have executed strategic reviews while moving ahead with expensive drug development programs, thus carrying high burn rates. This has drawn the ire of their investors. We have no intention of going down that path. Our burn rate has dropped substantially and in fact we actually posted a profit in the fourth quarter which Kevin will discuss a bit more in a few moments. Going forward, we continue to anticipate we'll be at least operationally cash neutral for the foreseeable future.

And I'd now like to take a moment to briefly discuss IPLEX. As we've stated previously, Insmed's proactive IPLEX development program remains on hold. We are, however, continuing to provide IPLEX to those ALS patients in Europe and US currently receiving drug and will continue to do this until our limited supply is fully eroded, which based on the current shipment rate, is expected to be around mid 2011.

Before I pass the call off to Kevin I'd like to highlight the fact we recently regained compliance with NASDAQ's minimum bid price rule. This removes a significant overhang from our story and certainly provides us with increased leverage with respect to strategic review. We recognize that given our lack of recent news catalysts we have you, our investors, to thank for this achievement. We sincerely appreciate the confidence you've shown in us and to reiterate, we as a Board and management team are fully committed to bringing forth a proposal to investors that we believe will deliver 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, Mel, and good morning everyone. As Mel mentioned earlier, we were able to finish 2009 strongly, posting a profit for the fourth quarter as a combination of grant receipts, lower expenses and reduced a tax expense more than offset any minimum decline in the cost recovery from our ERP program. In terms of the detail, revenues for the fourth quarter ended December 31, 2009, were $2.5 million as compared to $2.9 million for the corresponding period of 2008. This decrease was a result of a reduction of $0.9 million in cost recovery from our IPLEX Expanded Access Program for ALS in Europe, which is partially offset by $0.5 million of IPLEX grant revenue that was recognized in the fourth quarter of 2009. The reduction in IPLEX cost recovery was solely due to the Company's decision in July 2009 to cease supplying IPLEX to new ALS patients in order to preserve the remaining IPLEX inventory for ALS patients currently receiving the drug. The $0.5 million in grant revenue relates to the timing of a grant received from the Muscular Dystrophy Association in regards to the previously completed Phase II Myotonic muscular dystrophy trial.

In the fourth quarter of 2009 the Company posted a net profit of $2.3 million or $0.02 per share as compared to a net loss of $4 million or $0.03 per share for the fourth quarter of 2008. The $6.3 million improvement was attributable to a combination of a $4.5 million decrease in total expenses, a $2 million reduction in taxes, and a $0.2 million reduction in interest expense, which was partially offset by the $0.4 million reduction in total revenues. The $4.5 million decrease in total expenses was driven largely by lower R&D expenses as a result of the elimination of manufacturing expenses following the sale of our FOB assets to Merck in March 2009. While selling, general and administration expenses were principally in line with the fourth quarter of 2008. The $2 million reduction in taxes resulted from the beneficial impact of the revised tax laws which came into effect in the fourth quarter of 2009 and allowed the Company to utilize more of its net operating losses to reduce the amount of taxes paid on the gain on sale of its FOB business to Merck in 2009.

In short, the new tax laws provided the Company with an opportunity to use NOLs which would otherwise have been lost under the prior tax laws to offset more of the gain on sale. Thus, reducing significantly our overall 2009 tax burden. We expect to file our 2009 tax return this week and we anticipate receiving the tax refund in the second quarter of 2010. As for the lower interest expense, this was due to the reduction of the debt discount amortization associated with our 2005 convertible notes.

For the 12 months ended December 31, 2009, revenues totaled $10.4 million as compared to $11.7 million in the 12 months of 2008. Consistent with fourth quarter results, the decrease was primarily attributable to a year-over-year decrease of $1.3 million in cost recovery from our IPLEX AFP in Europe. Net income for the 12 months ended December 31, 2009, was $118.4 million or $0.93 per share compared to a net loss of $15.7 million or $0.13 per share for the corresponding 12 months of 2008. This $134 million improvement was primarily due to the $127 million after-tax gain on the sale of our FOB assets to Merck, combined with a $7.1 million decrease in total expenses, and $0.3 million improvement in investment returns, a $0.5 million decrease in interest expense, and a $0.5 million reduction in the realized loss on investments. This was partially offset by the $1.3 million reduction in net revenue. The $7.1 million decrease in total expenses was due to an $11.8 million reduction in R&D expenses, which was partially offset by a $4.7 million increase in SG&A expenses. The $11.8 million reduction in R&D expenses was due primarily to a decrease in manufacturing expenses following the sale 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 stock compensation expense for the restricted stock and restricted stock units that vested on March 31, 2009, together with the award of bonuses and with the increased finance, legal and consulting fees related to the ongoing strategic review. The improved return on investments reflected the increased cash position, the lower interest expense was again due to the reduction in debt discounts amortization and the $0.5 million reduction in investment loss was due to the write-off of the NAPO investment which occurred in 2008.

As of December 31, 2009, Insmed had total cash, cash equivalents, short-term investments and certificate of deposits on hand totaling $124.3 million, consisting of a $122.2 million in cash and short-term investments and $2.1 million in the certificate of deposit as compared to $2.4 million of cash on hand as of December 31, 2008. The $121.9 million increase in total cash was due to the $127.5 million in 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 the $0.4 million unrealized gain on the investments which was partially offset by $11 million utilized to fund operations and $1.2 million for the partial repairment of the Company's 2005 convertible notes.

In closing, I believe we have an enviable balance sheet, especially in the light of the current financing climate. Our operation of burn rate remains at least neutral. As of March 1, 2010, we are debt free as we are fully paid off the 2005 convertible notes and with a significant tax refund expected in the second quarter of 2010, our overall cash position continues to solidify. These points underscore the fact that while we thoroughly explore our strategic options, our capital remains protected, so that we may fully utilize it for the benefits of shareholders. 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 the presentation. You may now disconnect. Good day.