Insmed Incorporated (INSM) Q4 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 and Full Year Insmed Incorporated Earnings Conference Call. My name is Lacie, 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 of FIT Consulting (sic) [FTI Consulting]. Please proceed.

Thank you, Lacie. Good morning, everyone. This is Brian Ritchie from FTI Consulting, and welcome to Insmed's Fourth Quarter and Year-End 2011 Conference Call. Insmed issued a press release this morning containing fourth quarter and year-end 2011 financial results, which is posted on the company's website. Today, we are joined by Mr. Tim Whitten, President and CEO; and Mr. Kevin Tully, Executive Vice President and CFO. Tim will provide a business update, followed by Kevin's review of the financials. Following the prepared remarks, Tim and Kevin will be available for a question-and-answer session. [Operator Instructions] 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, Tim.

Thank you, Brian. Hello, everyone, and thank you for joining us on today's fourth quarter and year-end 2011 conference call. The fourth quarter and beginning of 2012 have been very busy for Insmed, as we have made significant progress in moving forward with the development of our ARIKACE program. In January of this year, the U.S. Food and Drug Administration, or FDA, lifted the clinical hold previously placed on ARIKACE in patients with nontuberculous mycobacteria, or NTM lung disease. We also announced that the company was proceeding with 4 important studies. Number one, a Phase II clinical trial of ARIKACE in NTM. Number two, a pivotal Phase III study of ARIKACE in Europe in cystic fibrosis patients who have Pseudomonas lung infections. Number three, a follow-on multicycle, open-label study to measure mainly safety and tolerability for patients who complete the Phase III CF study. And lastly, a 9-month inhalation dog toxicity study. For non-TB mycobacteria, we plan to initiate the Phase II clinical trial for ARIKACE in mid-2012 and anticipate top line data being available in the second half of 2013. This Phase II clinical trial will consist of a randomized, placebo-controlled study of approximately 100 adult patients with recalcitrant NTM lung disease. The trial consists of 2 parts: a randomized portion, which lasts 84 days; and open label portion, which lasts an additional 84 days. In the randomized piece of the study, patients will receive either ARIKACE 560 milligrams once daily or placebo once daily for 84 days with both delivered by an optimized investigational eFlow Nebulizer System. All patients will continue their underlying standard antibiotic regimen that they were on when they entered the trial. The primary efficacy endpoint will be changed in mycobacterial density from baseline to the end of treatment with the timeframe of 84 days.…

Thank you, Tim, and good morning, everyone. Revenues for the fourth quarter of 2011 were $1.4 million as compared to $1.3 million for the corresponding period in 2010. The $0.1 million increase in revenue was primarily attributable to the receipt of $0.8 million from a licensing of patent technology related to Insmed's CISPLATIN Lipid Complex, which is partially offset by year-over-year decrease in $0.7 million in cost recovery from Insmed's IPLEX Expanded Access Program in Europe, which ended in early December 2011. I'd like to note here that given the EAP has now ended, Insmed will no longer receive IPLEX-related cost recovery revenue going forward. Revenues for the year ended December 31, 2011, totaled $4.4 million as compared to $6.9 million for the year ended December 31, 2010. The $2.5 million decrease was also primarily due to a year-over-year decrease of $3.5 million in cost recovery from the IPLEX EAP in Europe, partially offset by $1 million in license fees received in 2011 for the out-licensing of patent technology related to Insmed's CISPLATIN Lipid Complex. Net loss for the quarter was $8.2 million or $0.33 per share as compared to a net loss of $5.8 million or $0.42 per share in the fourth quarter of 2010. The $2.4 million variance arose from a $2.7 million increase in total expenses and includes a $1.2 million noncash charge related to the write-down of the Richmond office lease, following the closure of the office in December 2011 when the IPLEX EAP activity ceased. This was partially offset by the $0.1 million increase in revenues. The higher expenses related primarily to the increased clinical and manufacturing costs associated with our ARIKACE development program, while the $1.2 million noncash charge resulted from the write-down of the lease on the Richmond, Virginia office. Net loss attributable…

[Operator Instructions] And our first question will come from the line of Chris Marai with Wedbush.

Couple of questions. I was wondering if you could elaborate perhaps on your response to the FDA and maybe the patient population of that sort of changed the trial. Is that going to look much different?

So sure, Chris. So we filed, as I said, in February what we believe our complete response to the FDA. And included in there, we've had several discussions with FDA. It included there a patient population that we have been in discussions with the FDA about. And right now, I don't want to speculate on that until we hear back something definitive from the FDA. And when we hear something back definitive from the FDA, we will provide that information to you, to the Street straightaway.

Okay, great. And if I could just follow up something on the NTM Phase II trial. You noted that the patients will be on antibiotics. So we were just wondering -- beyond ARIKACE, and so we were wondering what will the underlying antibiotics be used on by this patient population. Will it be relatively heterogeneous, and will you stratify patients by the underlying antibiotic use?

Good question, Chris. So the way the trial works is that patients are on a pretty much standard multidrug antibiotic regimen. So they're going to be on 2 of -- likely 2 of 3 drugs that they normally use to treat non-TB mycobacteria and they're not getting a good response. In other words, their counts for NTM are just stable or they're increasing. So those drugs will be clarithromycin, ethambutol or rifampin. So they're like -- they're going to be on either 2 or 3 of those drugs. It's got to be multidrug before they can enter the trial. So I think that the drugs will be fairly homogenous since there's only those 2 or 3 drugs that they can be on, and then ARIKACE or placebo will be added on top of that standard antibiotic regimen. And those drugs are right out of the ATS/IDSA guidelines.

And our next question will come from the line of Stuart Harrison [ph], private investor.

I guess my first question is around the recently submitted changes to the bylaws, the amendment. I guess my question specifically is, what drove that change or changes to the bylaws?

Yes. I'll take that one, Tim, if that's okay.

Okay.

Stuart [ph], bylaws have been in place since the company was formed in 2000. We regularly review them, and we take legal guidance as to whether they need to be updated to make sure they're always current. And as we have not changed them for quite a while, they were getting a bit dated. And we just basically took legal advice to update them to bring them up to -- up to spec in terms of what bylaws as they should relate to public companies today. So it really was just an update based on legal guidance, nothing really specific.

Okay. So you're saying it's fairly standard across for public companies then?

Correct.

Okay. And I may have missed this. Regarding the cash burn and in 2012, Kevin, did you say the range would be about $44 million to $48 million in 2012?

Yes. $40 million, 4-0, to $44 million is our current projection.

$40 million to $44 million. And one last question quickly, regarding the Phase II NTM trial. This was originally agreed to by the FDA as a Phase III. And I guess, what specifically drove the change to the Phase II? Was it the findings of the rat study?

Stuart [ph], this is Tim. This is -- to the best of our knowledge, that was -- that's what drove the change, because that's the first time that they asked us to make a change from Phase III to a Phase II. So it was the findings from the rat study. Everything else about that trial is identical though in terms of the number of patients, the trial design. The only difference is -- the primary endpoints are saying, the only difference is that now we're treating patients 18 and above instead of patients 12 and above. So patients 12 to 17 are no longer eligible. But that accounts for a very, very small percent of the total patient population, probably less than 5%.

Right, right. Okay. Can I ask one more quick question, or am I out of questions?

One more, Stuart [ph].

One more. Regarding the -- you stated the -- it's written that you've submitted the complete response to the FDA in February. And then the FDA has 30 days to respond to the state if in fact they are, I guess, satisfied with the response. Is that correct?

That's right. Technically, they have 30 days. But they're pretty busy people at the FDA, so sometimes they take longer than 30 days.

Sure. So the anticipated response cannot be anticipated till probably, what, sometime in April?

Stu, I don't know. I can't speculate on that because we filed our complete response as I said in February, and normally, they would usually respond within 30 days. So you think it will be March, but they could take longer. I just don't know the answer to that. It's up to them.

[Operator Instructions] And at this time, we have no further questions in queue. I would like to turn the call back over to President and CEO of Insmed, Timothy Whitten, for closing remarks.

Thank you, operator, and thanks to everyone for joining us today. We appreciate your interest. We appreciate your support of Insmed and look forward to providing you with future updates. Enjoy the rest of your day. Thank you.

Thank you for your participation in today's conference. This concludes your presentation. You may all disconnect. Good day, everyone.