Insmed first quarter revenues decrease to $1.6 million

Insmed IncorporatedMay 10 2011

Insmed Incorporated (Nasdaq CM: INSM), a biopharmaceutical company, today reported results for the first quarter ended March 31, 2011.

Key Recent Highlights:

• Received Food and Drug Administration (FDA) clearance of Investigational New Drug (IND) Application to conduct a primary efficacy study for ARIKACE® (liposomal amikacin for inhalation) in non-tuberculous mycobacterial (NTM) lung disease
• Filed for orphan drug status with FDA for ARIKACE® to treat NTM lung infections
• Received acceptance of abstract for oral presentation of six cycles of data from the open-label study of ARIKACE® in the treatment of cystic fibrosis (CF) patients with Pseudomonas lung infections, at the European Cystic Fibrosis Conference in Hamburg, Germany in June
• Executed a one-for-10 reverse stock split and regained compliance with Nasdaq's minimum bid price rule
• Relocated corporate headquarters from Richmond, VA to Monmouth Junction, NJ

"The first several months of the year have produced multiple successes for Insmed," said Timothy Whitten, Insmed's President and CEO.  "In particular, we have reached several key milestones related to our development plan for ARIKACE®, including, most recently, the clearance of ARIKACE® to proceed to a primary efficacy study based on our NTM IND filing, and the submission in the U.S. of the ARIKACE® NTM orphan drug designation.  We continue to ramp up our ARIKACE® clinical trial and drug manufacturing activity and remain on schedule to begin enrollment of our Phase 3 clinical trials for ARIKACE® in patients who have NTM lung infections and in CF patients who have Pseudomonas lung infections, in the second half of this year.  In addition, we have regained compliance with Nasdaq's minimum bid price rule and we remain on solid financial ground, with a strong overall cash balance of $104.9 million, which will continue to drive our development of ARIKACE®."

Financial Results:

For the first quarter of 2011, Insmed posted a net loss attributable to common stockholders of $16.1 million, or $0.85 per share – basic and diluted, compared to net income of 0.1 million, or $0.01 per share – basic and diluted, for the three months ended March 31, 2010.  The net loss attributable to common stockholders in 2011 includes the conversion of the Series B Conditional Convertible Preferred Stock, and a non-cash charge for the beneficial conversion feature of the Series B Preferred Stock in the amount of $9.2 million.  When issuing debt or equity securities that are convertible into common stock at a discount from the fair value of the common stock at the date the debt or equity financing is committed, a company is required to record a beneficial conversion feature ("BCF") charge in accordance with Accounting Standards Codification 470-20.  This BCF of $9.2 million reduced net income available to holders of our common shares and, in turn, reduced our earnings per common share on a basic and diluted basis, by $0.48.  The charge represents the $1.00 difference between the conversion price of the preferred stock of $7.10 per share and its carrying value of $6.10 per share.  The carrying value of the preferred stock was based on its fair value at issuance, which was estimated using the common stock price reduced for a lack of marketability between the issuance date and the anticipated date of conversion.

Revenues were $1.6 million, as compared to $1.9 million for the quarter ended March 31, 2010.  The reduction in revenue was primarily attributable to $0.6 million in lower cost recovery from our IPLEX™ Expanded Access Program in Europe, which was partially offset by $0.3 million in licensing fees received during the most recent quarter.  The reduced IPLEX™ cost recovery was due to the smaller number of patients being supplied IPLEX™, while the license fee related to the initial payment for the licensing of patent technology to Eleison for our CISPLATIN Lipid Complex.

Research and development (R&D) expenses were $5.8 million for the first quarter, compared to $0.6 million in the first quarter of 2010.  The $5.1 million increase resulted from the addition of ARIKACE® related R&D expenses associated with the preparation of our Phase 3 clinical trials in CF and NTM.  Selling, general and administrative expenses were $3.2 million for the first quarter of 2011, compared to $1.5 million for the same period in 2010.  This increase was primarily due to the increased finance, legal and consulting fees related to the business combination with Transave, Inc. on December 1, 2010, as well as the associated proxy preparation costs for conversion of the preferred stock into common stock and reverse stock split consummated on March 2, 2011.

As of March 31, 2011, Insmed had total cash, cash equivalents, short-term investments, and certificate of deposits on hand totaling $104.9 million, consisting of $102.7 million in cash and short-term investments and $2.2 million in a certificate of deposit, as compared to $110.2 million of cash on hand as of December 31, 2010.  The $5.3 million decrease in total cash was primarily due to the reported net loss of $6.9 million and a partial offset of $1.6 million due to an increase in payables.