Insmed Inc (INSM) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2010 Insmed Incorporated Earnings Conference Call. My name is Noellia, and I'll 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, with FD. Please proceed, sir.

Thank you, operator. Good morning, everyone. This is Brian Ritchie from FD. Welcome to Insmed's first 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 first quarter 2010 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 to discuss the Company's first quarter 2010 financial results. I'm pleased to report that the recently completed first quarter was the third consecutive quarter in which we were at least break even on a per share basis. In addition, our cash balance is a robust $124.6 million. While Kevin will address the financials more in depth momentarily I wanted to highlight these two metrics, because they so clearly display Insmed's current financial strength. While the strategic review continues to move forward, shareholders' capital continues to be well protected.

In terms of the strategic review, our objective throughout this process has remained consistent -- leverage our balance sheet to grow Insmed's business. With that said, investors are understandably looking to the Company for direction on Insmed's ultimate strategic direction. As I've stated in the past, as we conduct our due diligence and hold transaction-related discussions with multiple parties, our ability to disclose information is limited. However, I would like to reiterate our search criteria on this call and give you a better idea of how the strategic review process is being conducted internally at Insmed.

Our initial focus remains on reviewing late-stage assets with strong intellectual property profiles, preferably in niche markets, although we continue to keep an open mind in terms of therapeutic areas. In regards to transaction type, we are also open to multiple possibilities there, as well. Our discussions are taking place with both public and private companies and could culminate with the purchase of a company or a specific asset, an in-licensing agreement or a reverse merger, just to highlight a few potential transaction possibilities. On all fronts we continue to see high-quality opportunities.

I'd like to spend a few moments walking you through how the strategic review is being conducted, as I think it's important for our investors to understand our approach. While I continue to lead the strategic review, both Insmed's management team and RBC Capital Markets, our financial advisor, are engaged in crucial roles in the process.

To begin with, RBC plays an important part in identifying and providing the management team potential opportunities for their initial review. What occurs next is a methodical evaluation process by the management team that requires thorough and time-consuming analysis on multiple levels, specifically from commercial, clinical, regulatory and financial perspectives.

With that I'd want to take a moment to provide a bit of color on the roles and responsibilities of those management team members involved in this endeavor. As you might imagine, the commercial, clinical and regulatory analysis are conducted simultaneously.

The clinical and regulatory analysis, for all intents and purposes, looks at the science an asset is based on and the potential for that asset to be approved by the Food and Drug Administration. This charge is being led by Nicholas A. LaBella, Jr., who recently joined Insmed as Chief Scientific Officer, a newly created position on the executive team reporting directly to me. Nick had most recently served as a scientific consultant to Insmed at certain points during the strategic review, and his counsel has been instrumental in our scientific evaluations to date. Bringing Nick aboard as a member of the management team has helped us streamline the review process and added greater efficiency to the clinical and regulatory analysis of each asset.

Leading our evaluation of the commercial potential of the assets we're reviewing is Steve Glover, Insmed's Chief Business Officer. Essentially, Steve's role is to review the potential market dynamics of the areas of interest, engage the commercial risk and reward of the assets under review. Once an asset has been deemed to have sufficient potential for a transaction from clinical, regulatory and commercial standpoints, our CFO, Kevin Tully, along with the RBC and the Board, can begin to evaluate possible transaction structures and evaluation metrics.

While we've had several opportunities make it to this late stage of the review process, we've not yet reached an acceptable definitive agreement with any party that we believe would be in the best interest of all shareholders. However, given the pipeline of opportunities available to us, I have every reason to believe that we will identify the right transaction for Insmed and its shareholders in due course.

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

With that, I'll now turn over the call to Kevin for his review of the financials.

Please go ahead, Kevin.

Thank you, Mel, and good morning, everyone.

As Mel noted, Insmed remains in an enviable financial position as we continue to contain costs and preserve shareholders' cash. I should also mention at the outset of my remarks that the $2 million tax refund we discussed on our last quarterly call was actually received in April, which further bolsters our cash position, and this will be reflected on our balance sheet at the end of the second quarter.

Moving on, total revenues for the first quarter ended March 31, 2010 were $1.9 million, as compared to $2.4 million for the corresponding period in 2009. The $441,000 decline in revenue was due to a combination of the receipt of $272,000 in grant revenue for the MMD trial in the first quarter of 2009, $143,000 in lower cost recovery in the most recent quarter from our IPLEX Expanded Access Program for ALS in Italy, and $26,000 in lower income from a longstanding TGF-beta royalty which expired in the current quarter.

Net income for the first quarter of 2010 was $118,000, break-even on a per share basis, compared with a net income of $117.8 million, or $0.96 per share, reported in the first quarter of 2009. The $117.7 million change in net income was primarily due to the $125 million after-tax gain on the sale of our follow-on biologics business to Merck in March 2009, together with the $0.4 million reduction in revenue noted above. These were partially offset by an overall reduction of $7.1 million in operating expenses, a $0.4 million improvement in investment income and a $0.2 million reduction in interest expense.

The $7.1 million reduction in total expenses resulted from a $5.2 million reduction in R&D expenses and a $1.9 million decline in SG&A expenses. The lower R&D expenses reflected the elimination of manufacturing costs following the sale of our FOB assets to Merck in March 2009, while the reduced SG&A expenses were principally due to the recognition of stock compensation expense associated with the restricted stock and restricted stock units which were granted during the first quarter of 2009 in connection with the sale of our FOB assets.

Investment income for the 2010 first quarter was $397,000. This was an increase of $374,000 over the corresponding quarter of 2009, due to a significantly higher invested cash balance. Interest expense of $28,000 was $214,000 lower than the same quarter in 2009 due to a decrease in the debt discount amortization on the 2005 convertible notes, which were fully repaid in March 2010.

As of March 31, 2010, the Company had total cash, cash equivalents and short-term investments on hand of $124.6 million, made up of $103.1 million in short-term investments, $19.4 million in cash and cash equivalents and $2.1 million in a certificate of deposit. This compares to $124.3 million as of December 31, 2009. The $0.3 million increase in cash, cash equivalents and short-term investments was due primarily to a $0.3 million improvement in unrealized gain on investments, as the net cash produced from operating activities of $0.2 million was fully offset by the $0.2 million final payment of our 2005 convertible notes.

In closing, our overall cash position continues to be enhanced, and we are now debt free. We are truly in a unique position for a small cap biotech company, and, as such, there continues to be a multitude of opportunities available to us as we continue to move ahead with the strategic review so that we may leverage our strong balance sheet for the benefit of all 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 your presentation, and you may now disconnect. Have a great day.