Insmed second quarter revenues decrease to $1.0 million

Insmed IncorporatedAug 8 2011

Insmed Incorporated (Nasdaq CM: INSM), a biopharmaceutical company, today reported results for the second quarter and six-months ended June 30, 2011.

Key Recent Highlights:

• Announced positive results through six cycles of data from the open-label phase 2 study of Arikace™ (liposomal amikacin for inhalation) in the treatment of cystic fibrosis (CF) patients with Pseudomonas lung infections
• Added to Russell 3000, Russell 2000, Russell Global, and Russell Microcap Indexes
• Clinical hold placed on Arikace™ phase 3 program by FDA; Insmed to supply currently requested information and data to the Agency by end of August;  FDA's response expected within 30 days of receipt of the Company's complete response to the Agency's requests

"We continue to believe Arikace™ has the potential to be an important treatment option for CF patients and those suffering from non-tuberculous mycobacterial (NTM) lung disease based on the efficacy and safety data generated from our phase 2 clinical trial program," said Timothy Whitten, Insmed's President and CEO.  "We believe that we are taking the appropriate steps with FDA to address the findings from the interim results of our long-term rat inhalation carcinogenicity study that led to the clinical hold.  Moreover, after reviewing the data, we believe we have a sound scientific rationale for those findings and look forward to working closely with our experts and with FDA to provide the Agency with all relevant information and data required to expedite their review and evaluation.  Depending upon the timing and results of FDA's review, we are hopeful that we can resume our phase 3 clinical trial program for Arikace™ during the fourth quarter of 2011."  

Financial Results:

For the second quarter of 2011, Insmed posted a net loss attributable to common stockholders of $10.0 million, or $0.40 per share – basic and diluted, compared to a net loss of 0.4 million, or $0.03 per share – basic and diluted, for the three months ended June 30, 2010.  

Net loss attributable to common stockholders for the six-months ended June 30, 2011 was $26.1 million, or $1.19 per common share – basic and diluted, compared to a net loss of $0.3 million, or $0.02 per common share – basic and diluted, for the six-months ended June 30, 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, which increased the net loss 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 for the three-months ended June 30, 2011 were $1.0 million, as compared to $1.9 million for the quarter ended June 30, 2010.  The $0.9 million reduction in revenue was primarily attributable to a year-over-year decrease in cost recovery from Insmed's IPLEX™ Expanded Access Program (EAP) in Europe, due to the smaller number of patients being supplied IPLEX™.

Revenues for the six-months ended June 30, 2011 totalled $2.6 million, as compared to $3.8 million for the six-months ended June 30, 2010.  The $1.2 million decrease was also primarily due to a year-over-year decrease of $1.5 million in cost recovery from the IPLEX™ EAP in Europe, partially offset by $0.3 million in license fees received in 2011 for the out-licensing of patent technology related to Insmed's CISPLATIN Lipid Complex.

Research and development (R&D) expenses were $8.7 million for the second quarter of 2011, compared to $0.9 million in the second quarter of 2010.  The increase of $7.8 million is attributable to the full scale R&D activities for Arikace™, including the preparation for the initiation of the phase 3 clinical studies planned for the second half of 2011, and the manufacturing of supply to support the studies.  General and administrative (G&A) expenses were $2.7 million for the second quarter of 2011, compared to $1.9 million for the same period in 2010.  The $0.8 million increase was primarily attributable to the increased headcount associated with the administrative support for the full-scale development of Arikace™.

Research and development expenses increased to $14.5 million in the six-months ended June 30, 2011 from $1.5 million for the six-months ended June 30, 2010.  The increase of $13.0 million in 2011 is also attributable to full scale R&D of Arikace™, including the preparation of the phase 3 studies planned for the second half of 2011 and the manufacturing of supply to support the studies.  Of note within the R&D expenses, clinical development and regulatory expenses increased $6.6 million for the first six-months of 2011 compared to 2010 as a result of the planning efforts for the two phase 3 CF studies and one phase 3 NTM study.  There was also a $3.0 million increase in clinical manufacturing expenses from 2011 to 2010 attributable to the manufacturing of Arikace™ for use in the phase 3 studies while compensation expenses rose $2.4 million due to an increased headcount of 12 year on year, and additionally we incurred the final $1.0 million payment for the recently completed rat carcinogenicity study.  G&A expenses increased to $6.0 million in the six-months ended June 30, 2011 from $3.4 million for the six-months ended June 30, 2010.  The $2.6 million increase was due largely to the increased finance, legal and consulting fees related to the business combination with Transave on December 1, 2010, as well as the reverse stock split transaction on March 2, 2011, and the increased administrative support for the Arikace™ development program.

As of June 30, 2011, Insmed had total cash, cash equivalents, short-term investments, and certificate of deposits on hand totaling $94.0 million, consisting of $91.9 million in cash and short-term investments and $2.1 million in a certificate of deposit, as compared to $110.2 million of cash on hand as of December 31, 2010.  The $16.2 million decrease in total cash was primarily due to the net cash used in operating activities of $16.9 million in the first half of 2011, which was partially offset by a $0.5 million increase in payables and a $0.2 million reduction in receivables.