Final Event Transcript of INSM conference call, 31-Jul-03 11:00a
2003-08-01 11:55 (New York)
Q2 2003 Insmed Incorporated Earnings Conference Call
Boston, Aug 1, 2003 (CCBN StreetEvents) -- Event Transcript of Insmed
Incorporated conference call, 31-Jul-03 11:00am ET.
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Corporate Participants
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* Baxter Phillips
Insmed Incorporated - Investor Relations
* Geoff Allan
Insmed Incorporated - President and Chief Executive Officer
* Kevin Tully
Insmed Incorporated - Principal Financial Officer, Treasurer, Controller
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Conference Call Participants
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* Steve Previge
[Inaudible] Financial - Analyst
* Kevin McKenna
RBC Dain Rauscher Wessels - Analyst
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Presentation
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Operator [1]
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Good morning, and welcome ladies and gentlemen to the Insmed Inc. second
quarter earnings release conference call. At this time, I would like to inform
you that this conference has been recorded and that all participants are in a
listen-only mode. At the request of the company, we will open the conference up
for questions and answers after the presentation. I will now turn the conference
over to Baxter Phillips, please go ahead sir.
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Baxter Phillips, Insmed Incorporated - Investor Relations [2]
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Thank you. Again, good morning ladies and gentlemen, and welcome to today's
investor earnings conference call. We will shortly be presenting Insmed
Incorporated's results for the second quarter of 2003, along with the current
outlook for the company. Before that, I would like to start out by reading the
Safe Harbor Statement, which is as follows. This call may contain
forward-looking statements with uncertainties that may cause our actual results,
performance, achievements or industry results to be materially different from
any projection of future results or achievements, expressed or implied by these
forward-looking statements, including those outlined in the Securities and
Exchange Commission filings. In an effort to provide useful information to
investors, our comments today may also include certain non-GAAP financial
measures. For details on these measures, including why we employ them and a
reconciliation to comparable GAAP measures, please refer to our filings for our
earnings release and the Form 8-
K that has been furnished to the SEC, both of which are available on our website
at www.insmed.com. It is now my pleasure to turn the call over to Insmed
Incorporated's Chairman and Chief Executive Officer, Dr. Geoff Allan. Geoff?
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Geoff Allan, Insmed Incorporated - President and Chief Executive Officer [3]
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Thank you Baxter. Good morning everyone, and welcome to our end of quarter
conference call. As Baxter told to you, the purpose of this call is two-fold.
First, to present our financial results for the second quarter of 2003, and
second, to give you a report on our company's progress towards meeting it's
long-term strategic goals. First, we will begin with our Principal Financial
Officer, Kevin Tully, who will take you through the financials. Kevin?
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Kevin Tully, Insmed Incorporated - Principal Financial Officer, Treasurer,
Controller [4]
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Thank you Geoff, and good morning everyone. I am pleased to join you again for
this, the second in our series of quarterly conference calls for 2003. As usual,
I'll be leading up with the financials. I will first give you an overview of our
results for the three and six month periods ending June 30, 2003 and then
compare them with the corresponding periods of 2002. I will then provide some
details on the results, and finally I will close with some brief guidance for
the balance of 2003.
First, the overview. In the second quarter ended June 30, 2003, revenues were
$34,000 as compared to the $70,000 reported for the second quarter of 2002. The
net loss for the latest quarter at $3.2m or $0.10 per diluted share was $3.9m or
$0.11 per diluted share, lower than the equivalent period in 2002. For the first
six months of 2003, reported revenues were $96,000, a drop of $76,000 in the
first half of 2002. The net loss for the first half of 2003 was $5.4m or $0.16
per diluted share. This was a 59% improvement from the $13.2m or $0.40 per
diluted shares for the same period in 2002. As for the details behind these
results, for the three months ended June 30, 2003, the $36,000 drop in revenue,
compared to the same period in 2002 was due to the elimination of international
license fees for INS-1, our drug candidate that we discontinued in September
last year. The $4m improvement in our operating expenses for the latest quarter
was due to lower R&D spending of $4.4m, which was partially offset by $357,000
increase in our general and administrative costs. The drop in R&D spendings is
a result of a shift in our clinical trial activity to support the start of the
Pivotal Phase III trials of our current lead candidates, the IGF-1, IGFBP3
complex, in the treatment of growth hormone insensitivity syndrome. In contrast,
during 2Q02, Insmed was involved in four clinical trials for INS-1, which were
completed in September last year. The higher costs in the G&A area was due to an
increase in the investor relations and marketing activities. Finally, for the
most recent quarter, interest income declined by $99,000 due to falling interest
rates and less cash invested. In looking at the analysis of the six months ended
June 30, 2003 as compared with the same period in 2002, many of the same
factors, which impacted the quarterly variances were again evidenced in the
half-year comparison. The $76,000 decline in revenues was due to the elimination
of the INS-1 license fees. The $8.1m drop in operating expenses was driven by
an $8.5m reduction in clinical spending partially offset by $439,000 increase in
G&A. With the former again arising from less clinical trial activity and the
latter due to increased investor relations and marketing efforts. The $209,000
reduction in interest income are also in the same factors, which impacted second
quarter namely, lower interest rates and less cash invested.
Now, turning to our cash situation, I am again pleased to report that we
continue to deliver on the promise of supporting our key strategic initiatives
with a cumulative average monthly burn rate of under $1m per month.
Cumulatively, our average cash burn rate is is down to $888,000 per month. This
is a 64% decline in $2.4m per month we were incurring during the first half of
2002. We have said all along that we have a controlled burn rate that is geared
to underpin our key objectives of getting our lead drug candidates approved by
the FDA for marketing in the US by the end of 2004. We are right on track to do
this as we execute on our programs and our cash cover continues to improve. Our
cash balance at the end of the quarter is still a $22m up-to date to net $13m we
recently raised and the cash balance has risen to $35m. At current operating
rates, this gives us close to 3 years cash balance. Finally, in looking ahead to
the full year forecast of 2003, current projections indicate a cash spend of
close to
$12m for the year, which is right in line with our previous estimates. This
concludes my review of the results. I will be available at the end of the call
to answer any questions and now I will hand back to Geoff to continue the
business review.
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Geoff Allan, Insmed Incorporated - President and Chief Executive Officer [5]
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Thank you Kevin. Since the beginning of this year, we have cleanly adhered to a
highly focused business plan with specific initiatives that we believe were
necessary to beat the many demands of our various stakeholders. These
initiatives included improvement in our price per share, so that ultimately we
could avoid the delisting, which is as you may remember was a grave concern
earlier this year. Second, to ensure that we moved forward with the principal
initiative of this company which is to get our lead product recombinant IGF-1
complexed to recombinantIGF-1 BP-3 into the marketplace and ultimately generate
revenue. While concentrating on these initiatives it has been necessary for the
company to continue to operate very prudently and in every way maximize our
resources to the fullest in order to maintain our strong financial base. As
Kevin has reported to you, our financials clearly reflect that we have adhered
to this approach. When we last spoke to you on our May 2nd conference call, our
share price ha
d just risen above the dollar mark. However, we were still in jeopardy that the
potential delisting from NASDAQ. With a clear and concise plan in place to
continue to create investor awareness, we have continued to actively market our
company to investors in both the US and in Europe. Our investor relation
activities coupled with the fact that we have been highly visible at major
scientific meetings and then we have met several scientific and clinical
milestones this quarter, has resulted in what we believe to be a significant
share price appreciation.
On May 9th we received our notice from NASDAQ that our company had regained
full compliance in regard to their listing standards. Not only have we regained
compliance but also at the second quarter of this year our stock has continued
to perform exceptionally well and we've appreciated approximately 100%. I might
add that we are out performing the NASDAQ Biotechnology Index approximately
four-fold. As you will all may know, the financial market's [funding] in the
biotechnology sector has been close to three years now. They have finally
reopened, who knows for how long, but this allows companies that can raise money
to do so if they choose. And as we know from the history of biotech, those
companies that can raise money do so in order to ensure long term success, and
we took no exception to that. We were aware that there was a demand for Insmed
stock on a significant scale and over a short period of time, we completed a
financing raising $13.9m on terms that were very reasonable to the company. This
provides
us with at least another one-year's worth of cash and may allow us to
accelerate the development of additional indications for our lead product, which
I will highlight later in the call. As stated previously, our principal
initiative is to get our lead product recombinant IGF-1 complexed to recombinant
IGF-1 BP3 into the market place. We are now one step further towards success as
we have succeeded in reaching another major milestone this quarter with the
initiation of our pivotal Phase III trial and growth hormone insensitivity
syndrome. We are working with the world's most experienced investigators in this
field. The data from this Phase III trial will be used to support the
improvement of the product and we remain confident that we can not only compile
the data by the end of first half of 2004, but we are hopeful to submit for
review and gain approval shortly thereafter. As I have stated before, we have
several reasons for being confident that we can meet this timetable.
First, we are very confident in the scientific rationale that supports the
efficacy of this drug in this population and the groundwork that has been done
to date to get us to this point. Secondly, our exclusive license from Pharmacia
Corporation's portfolio of regulatory filings for their recombinant IGF-1
provides us with a road map and a foundation to build upon. Pharmacia had used
this material on several European countries to obtain market approvable of its
product for the treatment of growth hormone insensitivity syndrome. With
Pharmacia no longer making or providing the drug, we can use these regulatory
filings to support the approval of our product. And as you know in second
quarter, we met an additional milestone in obtaining the often designation for
this product from the European regulatory authorities. [Ortho] drug status has
now been granted in all of the major markets and will provide toxins, study
design assistance, funding for clinical trials along with several years of
market exclusivity fol
lowing first commercial sale.
Finally, as a reminder, we have introduced our IGF therapy into actual medical
use through a special licensed [named] patient program in Scandinavia. We are in
the process of expanding this program into additional countries throughout
Europe. This program makes the drug available for patients who suffer from this
condition, who have no other adequate therapies available to them. The program
allows the companies or provides the company with additional safety data, which
will be used to further support our regulatory applications, while allowing the
physician to gain experience with the product. As you know, growth hormone
insensitivity syndrome. Growth hormone insensitivity syndrome is not a common
disease. The market for a drug to treat it is rather small, though it is still
an unmet medical need that is worth addressing. However, it is important to
recognize that this commercial opportunity is near term and the approval of the
product is key, because it will allow the company to expand the label of the pro
duct into additional indications. The full market opportunity of this product
encompasses several disease conditions, where there is clear evidence that IGF
deficiencies contribute to the cause of the disease. So we see this initial
approval for GHIS, is opening the door to potentially very large markets. In the
past, I haven't compared this product to Insulin and Growth Hormone, which both
enjoy over $1b in the sales throughout the world. And that's why we continue to
investigate the use of this product in the treatment of indications such as
diabetes, severe burn injury, osteoporotic hip fracture, and various other
medical conditions. One of the largest potential markets for this product is in
the treatment of diabetes. Type 1 childhood onset diabetes, affects over one
million people in the United States alone. Type 2 diabetes, which was once
considered an adult onset disease, is now increasingly common in adolescents and
even children, and it is estimated to affect over twenty million Americans. This
year
, we have generated additional positive results from the trials of our product
in adolescents with Type 1 diabetes.
The study was conducted at the University of Cambridge, in England and
demonstrated that the administration of IGF-1, restored IGF-1 blood levels,
increased insulin sensitivity in a dose-dependent manner, and these results were
presented at the 63rd Scientific Sessions of the American Diabetes Association,
which was held in mid-June. The market potential of the product, will be
especially large if the drug is found to be effective and approved for use in
this diabetic population. The American Diabetes Association reports that much of
our diabetic population is still not achieving the target blood sugar level for
a healthy life. Research such as the Cambridge study, suggest our product could
work alongside Insulin, to give these patients adequate control. If it does, it
will have a market with literally millions of customers around the world. Three
million patients, who suffer from diabetes, currently take insulin therapy in
the United States alone.
Now I would like to talk about two additional exciting indications that we
would like to expand our market with label, in the future. Consequently we are
now considering the design of clinical trials for our recombinant IGF-1BP-3
product for the treatment of severe burn injury and trauma and an indication
known as retinopathy of prematurity. Let me first talk about burns and trauma.
Annually approximately 45,000 people in the United States, suffer from a
traumatic burn, which affects over 20% of their total body surface area. Major
tissue damage causes a profound hyper metabolic stress response, which causes
severe loss of lean body mass, muscle wastings, immunological compromise and
delayed wound healing. The length of time spent in a burn center, and the time
required to conduct the skin grafting, requires to cover the burn are directly
related, and any increase in time spent, significantly adds to the overall cost
of treatment. The successful outcome after a severe burn simply includes the
return to a cu
stomary pre-injury activity. Of economic importance, the time required for
burned patients to resume normal activities is often excessive. Patients with
burns of 20% or less of their total body surface area, require on average 13
weeks with expensive convalescence before they are capable of returning to
normal activity and employment. As the percentage of this burn increases across
the body surface area, so does the amount of time required before the patient
can return to normal activity. Studies indicate that approximately 25% of these
burn patients, are never able to return to normal function or previous levels of
productivity. And one of the primary reasons for this is simply the loss of
physical capacity. For this reason, successful rehabilitation for severe burn
patients, must include muscle strength and function, as well as promote wound
healing. As you know, we had conducted studies in both children and adults
suffering from severe burn injury and trauma with our product. We have
demonstrated that thi
s product enhances overall muscle preservation as well as muscle function
through an improvement in net muscle protein synthesis. We are hopeful that this
would provide patients with an improved overall physical capacity and a quicker
return to normal function. And therefore the significance of this will be the
reduction of overall healthcare cost that is associated with severe burn
treatment, as well as an improved economic outcome for the patient. Clearly, the
lack of proper therapeutic intervention in this condition warrants the studies
we are now considering.
Now, let me introduce you to another indication and this indication is known as
retinopathy of prematurity, and this is an indication that we are as equally
excited about the prospects for our recombinant IGF-1, IGF-1BP-3 product.
Approximately 30,000 cases of retinopathy of prematurity occur in the United
States on an annual basis. This is a blinding disease, which is a result of
improper retinal vascularization after a premature birth. While the baby is in
the utero, he or she receives IGF-1 from the maternal circulation. If the child
is born prematurely, he or she loses the IGF-1 supplementation from the mother.
The child's liver is typically not functional enough to produce the levels of
IGF-1 necessary for proper growth and as a result, the child may be considered
IGF-1 deficient. It has been hypothesized that levels of IGF-1 are directly
correlated with the development of retinopathy of prematurity and that the early
restoration of IGF-1 levels in these infants could prevent this disease and
ultimatel
y prevent the blindness that occurs so often in these infants. Furthermore,
premature infants spend a significant period of time in the Neonatal Intensive
Care Unit, this is one of the most expensive forms of healthcare in the world.
Similar to the overall economic benefits of IGF-1 therapy in burns, it may be
hypothesized that not only would IGF-1 therapy in these infants help to restore
proper retinal vascularization and therefore prevent blindness, but also it may
provide a secondary benefit that's helping the infant develop, so that the
infant is able to exit the intensive care unit sooner. Again, not only would our
IGF replacement therapy help the child, but it may also improve the overall
economics that the incredibly high cost of healthcare for this population of
patients. We believe that the rationale for IGF-1 supplementation in this
indication is both scientifically valid and it stands to reason that if proven
to be effective, IGF-1 replacement therapy will result in a wide acceptance by
the practi
tioner and would represent a very substantial market for Insmed.
Now while getting approval in growth hormone insensitivity syndrome and
expanding the label for the use of this product is our principal initiative, we
are also continuing to develop another product candidate which we refer to as
recombinant IGFBP-3. And as I have stated before, we are developing this product
as a potential treatment for cancer. We have been very active this quarter with
regards to this program. We presented our research results to the American
Association for Cancer Research and the American Society of Clinical Oncology.
These results have demonstrated that this product causes a significant
inhibition [of self proliferation] in vitro and a significant inhibition of
tumor growth in animals. As a result of the promised invasion we have seen, we
are continuing these studies and have initiated new studies to help us best
position this product to Phase I critical trial, and I expect that we will be
able to initiate such trials in early 2004.
The key to ensure that we get the right return on our investment for this
product, is to continue to build and understanding of the value of the product
by conducting a high quality research program, while simultaneously gaining an
access to best in class strategic partners. To this end we're creating and
scientific advisory board, which I hope to report out to you in near future upon
its formalization, and at the appropriate time you may expect future
announcements and updates on our cancer program as we close out the year.
I've said on earlier occasions that this product represents an ideal
[inaudible] opportunity for the company, and it will offset the financial burden
of running our own clinical trial. There is tremendous interest in finding new
approaches to modulate tumor growth and our experience at AACR and ASCO was that
this approach with IGFBP-3 was novel, well founded and compelling. Now, as part
of the wrap up I think it made it clear that approval and growth hormone
insensitivity syndrome represents the fast half way to approval, because of the
major unmet medical need that exists. The immediate commercial value is not
huge. We clearly understand the limited size of this patient population, however
we'll go as to obtain approval and expand the indication beyond this limited
indication into other IGF-1 deficient markets and develop a substantially large
market for IGF-1 replacement therapy. More importantly, we have demonstrated the
efficacy of this product in three major indications, namely diabetes, severe
burns a
nd trauma and osteoporotic hip fracture. And as I outlined to you a few moments
ago, we believe that retinopathy of prematurity may be also be an additional
market where there clearly exists an opportunity to generate significant
revenue. |
