Insmed Inc (INSM) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second-Quarter 2010 Insmed Incorporated Earnings Conference Call. My name is Shakwana, and I will be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Mr. Brian Ritchie of FD. Please proceed, sir.

Thank you, Shakwana. Good morning, everyone. This is Brian Ritchie from FD. And welcome to Insmed's 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 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 second-quarter 2010 financial results. As you all know, we have been involved in a strategic review for several quarters now and before Kevin speaks to the financials in greater detail, I'd like to take a moment to briefly provide you with an update as to where we stand to the extent possible.

As you know, the entire Board and the executive team are fully engaged in the strategic review process and collectively bring significant expertise and various strengths that span the life sciences industry. We have no interest in the strategic review taking any longer than it has to. However, we will continue to demand a process that is extremely thorough, while also ensuring shareholders' capital is well protected. The opportunities we have explored most thoroughly to date each bring with them their own unique set of circumstances for Insmed.

Together with our financial advisors at RBC Capital Markets and the life sciences market experts Campbell Alliance, we have methodically wedded them against the criteria we have set in order to enhance shareholder value. Also, it is important to note that the list of targets remains an evolving one, as we are constantly evaluating multiple opportunities, thus maintaining a solid pipeline of high-quality deal candidates.

The process we are currently undertaking is one which emphasizes quality. We will not complete a transaction just to satisfy the market's desire that something get done soon. It has to be the right deal for you, the shareholders. Although from the op side it can appear that little is being accomplished, I can assure you that internally the wedding of the risk and rewards, which accompany each and every opportunity is intense and time consuming.

As we said in the past, being a public company does not allow us to divulge the details as to the types of discussions we are having and at what stage we may be with each of the opportunities as we assess them. However, the numerous investment prospects available to a biotech company with $125 million plus on its balance sheet in a difficult financing environment remains a positive challenge for all of us.

With that said, I'd like to reiterate that we are all focused on achieving a successful outcome to the strategic review in which we deliver an option to the shareholders that Insmed's Board and management think will bring significant shareholder value. And as we said in the past, while the strategic review moves forward, our expenses will remain well under control to preserve shareholders' capital.

I would now like to take a moment to provide you with a brief update on IPLEX, specifically Premacure's work with the drug in retinopathy of prematurity or ROP. Recently, Premacure dosed the first patient in a Phase II clinical trial for IPLEX in ROP. Going forward, as Premacure reaches key milestones in the trial, we will report them to investors as appropriate on our quarterly earnings conference calls. I should also note in regards to IPLEX and ALS that we continue to expect the supply of IPLEX will be fully depleted by mid-2011.

With that, I will now pass the call to Kevin for his review of the financials. Please go ahead, Kevin.

Thank you, Mel, and good morning, everyone.

Insmed's cash position remains sound, as we continue to reduce expenditure and preserve and grow cash on the balance sheet. As for the specific results for the second quarter, total revenues for the second quarter ended June 30, 2010 were $1.9 million, as compared to $3 million for the corresponding period in 2009.

The $1.2 million decline in revenue was due to a combination of $0.9 million in lower cost recovery from our IPLEX Expanded Access Program, the receipt of $0.3 million in grant revenue for the MMD trial in the second quarter of 2009, and $30,000 in lower royalty income. The reduced EAP cost recovery resulted from the Company's decision in 2009 to cease patient enrollment in order to preserve inventory for existing patients, while the lower royalty was due to the expiry of a long-standing TGF-beta royalty.

Net loss for the second quarter of 2010 was $0.4 million; break even on a per-share basis, as compared with a net loss of $1.6 million or $0.01 per share in the second quarter of 2009. The $1.2 million change in net loss was due to an overall reduction of $1.6 million in operating expenses, a $0.4 million improvement in investment income, and a $0.4 million reduction in interest expense, which was offset by the $1.2 million reduction in revenues I noted earlier.

The $1.6 million reduction in total expenses resulted from a $0.6 million reduction in R&D expenses and a $1 million decline in SG&A expenses. The lower R&D expenses resulted largely from reduced licensing fees, patent costs and external consulting costs, while the reduced SG&A expenses were principally due to lower external finance advisory fees, combined with the separation costs incurred in the second quarter of 2009 associated with the departure of our CEO due to health reasons.

Investment income for the 2010 second quarter was $0.5 million. This was an increase of $0.4 million over the corresponding quarter of 2009 due to increased returns from improved market conditions. Interest expense was zero for the second quarter of 2010, as compared to $0.4 million for the same quarter in 2009 due to the elimination of the 2005 convertible notes, which were fully repaid in March 2010.

Turning to the half-year results, revenues for the six months ended June 30, 2010 were $3.8 million, as compared to $5.4 million for the corresponding period in 2009. The $1.6 million decline in revenue was due to the same factors which impacted our second-quarter 2010 revenues; with a $1 million decline in EAP cost recovery, the receipt of $0.5 million in grant revenue from the MMD trial in the first half of 2009, and $56,000 in lower income from the expired TGF-beta royalty.

Net loss for the first half of 2010 was $0.3 million; break even on a per-share basis, compared with net income of $116.2 million or $0.93 per share reported in the first half of 2009. The $116.5 million change was primarily due to the $125 million after-tax gain on the sale of our follow-on biologics assets to Merck in March 2009, together with the $1.6 million reduction in revenues noted earlier. These were partially offset by an overall reduction of $8.7 million in operating expenses, an $0.8 million improvement in investment income, and a $0.6 million reduction in interest expense.

The $8.7 million reduction in total expenses resulted from a $5.8 million reduction in R&D expenses and a $2.9 million decline in SG&A expenses. The lower R&D expenses reflected the elimination of manufacturing expenses following the sale of our FOB assets in March 2009, while the reduced SG&A expenses were principally due to reduced personnel costs associated with the asset sale to Merck and the CEO separation agreement during the first half of 2009.

Investment income for the first half of 2010 was $0.9 million. This was an increase of $0.8 million over the corresponding period of 2009, and was due to improved returns and a significantly higher cash balance invested for the full six months of 2010. The reduction in interest expense for the first half of 2010 as compared to the same period in 2009 was entirely due to the elimination of the 2005 convertible notes, which were fully repaid in March 2010.

As of June 30, 2010, the Company had total cash, cash equivalents and short-term investments on hand of $126.9 million, comprised of $113.5 million in short-term investments, $11.3 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 $2.6 million increase in cash, cash equivalents and short-term investments was due primarily to the receipt of a $2 million income tax refund and a $0.6 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 summary, as Mel indicated, we remain committed to identifying an attractive transaction that leverages our balance sheet, grows our business, and produces an optimal return for our shareholders. In addition, while we move forward with the strategic review, we continue to prudently manage our capital base and we expect to remain at least cash neutral on an operational basis for the duration of the strategic review.

With that, I'd like to thank you for your continued support and investments in Insmed. That concludes my financial review, and I'll now pass the call 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 and have a great day.