Insmed fourth quarter revenues increase to $1.4 million

Insmed Incorporated (Nasdaq CM: INSM), a biopharmaceutical company, today reported results for the fourth quarter and fiscal year ended December 31, 2011.

Key Recent Highlights:

• Clinical hold lifted by U.S. Food and Drug Administration (FDA) for ARIKACE® (liposomal amikacin for inhalation) in patients with non-tuberculous mycobacterial (NTM) lung disease
• Insmed proceeding with four key ARIKACE studies:
  • Phase 2 clinical trial in NTM patients
  • Pivotal phase 3 clinical study in Europe in Cystic Fibrosis (CF) patients with Pseudomonas lung infections
  • Follow-on multi-cycle open-label study primarily to measure safety and tolerability for patients who complete the European pivotal phase 3 CF study
  • 9-month dog inhalation toxicity study
• Company submits complete response to FDA requests regarding CF clinical hold

"We have recently made significant progress with our ARIKACE program," said Timothy Whitten, President and CEO of Insmed.  "In January of this year, FDA lifted the clinical hold on ARIKACE in patients with NTM lung infections and we plan to initiate enrolment in the phase 2 clinical trial for ARIKACE in NTM patients in mid-2012.  In addition, we expect to begin enrolment in the European pivotal phase 3 clinical study of ARIKACE in CF patients in the second quarter of this year.  Insmed is also on track to initiate the nine-month dog inhalation toxicity study during the second quarter of this year."  

"Additionally, we have submitted our complete response to FDA's requests with regard to the CF clinical hold," noted Mr. Whitten.  "We continue to believe that ARIKACE has the potential to be an important treatment option for patients who have NTM lung infections and CF patients who have Pseudomonas lung infections, as well as an opportunity to create significant long-term value for our shareholders."

Financial Results:

For the fourth quarter of 2011, Insmed posted a net loss attributable to common stockholders of $8.2 million, or $0.33 per share – basic and diluted, compared to a net loss of $5.8 million, or $0.42 per share – basic and diluted, for the three months ended December 31, 2010.  The fourth quarter of 2011 net loss includes a $1.2 million non-cash charge related to the lease write-down following the closure of the Richmond, Virginia office due to the cessation of IPLEX® activities in December 2011.

Net loss attributable to common stockholders for the year ended December 31, 2011 was $68.8 million, which includes the $1.2 million non-cash charge from the Richmond office closure and a $26.0 million non-cash charge resulting from an impairment adjustment in the third quarter, or $2.95 per common share – basic and diluted, compared to a net loss of $6.4 million, or $0.49 per common share – basic and diluted, for the year ended December 31, 2010.  The impairment charge in the third quarter of 2011 was due to the material impact of the FDA clinical hold on our ARIKACE development program. The net loss attributable to common stockholders in 2011 also includes the conversion of the Series B 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 earnings of Insmed per common share on a basic and diluted basis by $0.40.  The charge represents the $1.00 difference between the conversion price of the Series B Preferred Stock of $7.10 per share and its carrying value of $6.10 per share.  The carrying value of the Series B 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 December 31, 2011 were $1.4 million, as compared to $1.3 million for the quarter ended December 31, 2010.  The $0.1 million increase in revenue was primarily attributable to the receipt of $0.8 million from the licensing of patent technology related to Insmed's CISPLATIN Lipid Complex, which was partially offset by a year-over-year decrease of $0.7 million in cost recovery from Insmed's IPLEX Expanded Access Program (EAP) in Europe, which ended in early December 2011.

Revenues for the year ended December 31, 2011 totalled $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 $1.0 million in license fees received in 2011 for the licensing of patent technology related to Insmed's CISPLATIN Lipid Complex.

Research and development (R&D) expenses were $6.5 million for the fourth quarter of 2011, compared to $2.5 million in the fourth quarter of 2010.  The increase of $4.0 million is attributable to the clinical and manufacturing R&D activities for ARIKACE in the CF and NTM indications.  General and administrative (G&A) expenses were $3.8 million for the fourth quarter of 2011, compared to $5.2 million for the same period in 2010.  The $1.4 million decrease was primarily attributable to the non-recurring external finance, legal and consulting expenses related to the business combination in the fourth quarter of 2010, which were partially offset by the Richmond office closure costs and increased headcount expenses in the current quarter.

R&D expenses increased to $27.9 million in the year ended December 31, 2011 from $4.8 million for the year ended December 31, 2010.  The increase of $23.1 million in 2011 is also attributable to clinical research and development of the ARIKACE program and the manufacturing of supply to support the studies in 2011.  Of note within the R&D expenses, clinical development and regulatory expenses increased $15.4 million in 2011 compared to 2010 as a result of the planning efforts for the ARIKACE studies.  There was also a $4.5 million increase in clinical manufacturing expenses from 2011 to 2010 attributable to the manufacturing of ARIKACE for use in these studies while compensation expenses rose $3.2 million due to an increased headcount of 17 year on year to 28.  G&A expenses increased to $12.2 million in the year ended December 31, 2011 from $10.3 million for the year ended December 31, 2010.  The $1.9 million increase was due largely to the Richmond office closure costs and headcount increases associated with the administrative support for the development of ARIKACE, which were partially offset by the non-recurring business combination costs which were incurred in 2010.

As of December 31, 2011, Insmed had total cash, cash equivalents, short-term investments, and certificate of deposits on hand totaling $78.4 million, consisting of $76.3 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 $31.8 million decrease in total cash was primarily due to the net cash used in operating activities of $30.2 million during the 2011 fiscal year.