Insmed Incorporated Reports Financial Results for the First Half and Second Quarter Ended June 30, 2006.RICHMOND Richmond, cities, United States Richmond. 1 City (1990 pop. 87,425), Contra Costa co., W Calif., on San Pablo Bay, an inlet of San Francisco Bay; inc. 1905. , Va. -- Insmed Incorporated (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :INSM INSM Initiative Neue Soziale Marktwirtschaft (German) INSM Integrated Network and Systems Management ), a biopharmaceutical company focused on the development and commercialization of drug candidates for the treatment of metabolic diseases metabolic disease, n a disorder that causes dysfunction of the metabolic action of the body, resulting in loss of control of homeostasis. paraneoplastic syndrome and endocrine endocrine /en·do·crine/ (en´do-krin, en´do-krin) 1. secreting internally. 2. pertaining to internal secretions; hormonal. See also under system. en·do·crine adj. disorders with unmet un·met adj. Not satisfied or fulfilled: unmet demands. medical needs, today announced results for the three and six month periods ended June June: see month. 30, 2006. 1st Half 1st Half $000's (except EPS) Q2 2006 Q2 2005 2006 2005 --------------------------------------------------------------------- Total Revenues 210 28 263 85 Net loss (8,911)(8,524) (22,339) (14,288) Earnings per share (0.09) (0.19) (0.25) (0.32) --------------------------------------------------------------------- Discussion of Revenue and Expense Items Revenues for the three months ended June 30, 2006 were $210,000 as compared with $28,000 in the corresponding period of 2005. The $210,000 revenue figure for the second quarter of 2006 was made up of $172,000 in sales to patients in our named patient program, $8,000 in sales to commercial patients and $30,000 in royalties. Commercial sales of our FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approved drug In the United States, the FDA approves drugs. Before a drug can be prescribed, it must undergo an extensive FDA approval process. This process involves first testing the drug on animals or in medical labs. IPLEX IPLEX (mecasermin rinfabate [rDNA origin] injection) is a drug developed by INSMED corporation for the treatment of growth failure in children with severe primary IGF-I deficiency (Primary IGFD) or with growth hormone (GH) gene deletion who have developed neutralizing antibodies to (TM), commenced on May 25, 2006 with the first month's supply being provided free to many of the children in order for them to begin treatment immediately rather than wait for IPLEX(TM) to be approved by the individuals' payer plan. The $28,000 of revenue for the second quarter of 2005 reflects only royalties as receipts from our named patient program for the second quarter of 2005, totalling $27,000, were classed as a reduction in expense, as we were reporting results on a research and development basis at the time. Cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold for the second quarter of 2006 was $23,000. The cost of goods sold for the current quarter was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by the consumption of intermediates and raw materials which were manufactured and expensed in prior quarters when all costs were classed as research and development expense. The net loss for the second quarter ended June 30, 2006 was $8.9 million or $0.09 per share, as compared to a net loss of $8.5 million or $0.19 per share for the corresponding quarter of 2005. The $0.4 million increase in the net loss for the second quarter of 2006 as compared to the second quarter of 2005 was due mainly to a $3.5 million increase in selling, general and administration (SG&A) expense, which was partially offset by a combination of a $1.7 million decrease in interest expense, a $1.0 million reduction in research and development expense and a $0.3 million increase in interest income. The rise in SG&A expenses for the three months ended June 30, 2006 is mainly due to the hiring and ramping up of our commercial team and associated marketing expenses for our commercial launch of IPLEX(TM), and the recording of patent litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. expenses in the SG&A category as we commenced commercial operations in the second quarter of 2006. Prior to the second quarter of 2006 the patent litigation expenses were recorded in research and development. The decrease in interest expense is due to a $1.8 million reduction in non-cash amortization associated with the convertible debt discount on the 2005 notes, which was partially offset by a $0.1 million reduction in actual cash interest payments on the 2005 notes. The decrease in research and development expenses for the three months ended June 30, 2006, as compared to the corresponding period of 2005, was mainly due to the capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of inventory and construction in progress at the our production facility in Boulder, Colorado The City of Boulder (, Mountain Time Zone) is a home rule municipality located in Boulder County, Colorado, United States. Boulder is the 11th most populous city in the State of Colorado, as well as the most populous city and the county and the recording of the patent litigation expenses in SG&A. The increase in interest income for the quarter resulted from the higher level of cash on hand for investment as a result of the completion of our public offering in March of 2006. Revenues reported for the six months ended June 30, 2006 were $263,000 as compared to $85,000 reported for the same period in 2005. The $263,000 of revenues reported for the half year were made up of $172,000 in sales to patients in our named patient program, $8,000 in sales to commercial patients reported and $83,000 from royalties. The $85,000 of revenue for the first half of 2005 reflects only royalties, as receipts from our named patient program for the first half of 2005, totalling $134,000, were classified at the time as a reduction in expense. Cost of goods sold for the six months ended June 30, 2006 were $23,000, the same as reported for the second quarter of 2006. The net loss for the six months ended June 30, 2006 was $22.3 million, or $0.25 per share, compared to the net loss of $14.3 million, or $0.32 per share, reported for the corresponding period in 2005. The $8.1 million increase in the net loss for the first half of 2006 as compared to the first half of 2005 was due primarily to a $6.0 million increase in SG&A expense, a $1.9 million increase in research and development expense and a $0.9 million rise in interest expense, partially offset by a $0.6 million increase in interest income. The rise in SG&A expenses is primarily due to the build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. of our commercial team and associated marketing expenses in connection with the launch of IPLEX(TM), together with the recording in SG&A of patent litigation expenses, which were higher than corresponding quarters. The higher research and development expenses were mainly due to higher product and process development expenses at our manufacturing facility in Boulder, Colorado, as we added personnel and continued scale up and process improvements in support of current and future IPLEX(TM) production. These increases were partially offset by the recording of patent litigation expenses in SGA SGA abbr. small for gestational age Small-for-gestational-age (SGA) A term used to describe newborns who are below the 10th percentile in height or weight for their estimated gestational age. and the capitalization of inventory and construction in progress. The higher interest expense results from a $1.1 million increase in non-cash amortization of the March 2005 convertible debt discount, offset by a $0.2 million reduction in actual cash interest payments, as the conversion of the March 2005 notes and warrants, which were exercised during the first quarter of 2006, resulted in an acceleration of the debt discount and a reduction in interest paid. The increase in interest income for the quarter resulted from the higher level of cash on hand for investment. As of June 30, 2006, we had total cash and cash equivalents of $48.4 million which represents an increase of $29.6 million from December December: see month. 31, 2005. This net increase is due to the $52.1 million in net cash provided by financing activities during the first half of the year, which was partially offset by the $19.5 million in net cash used during the half in support of our business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and $3.0 million of construction in progress at our manufacturing facility. The $52.1 million of cash from financing activities was generated from a combination of $42.8 million in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the sale of common stock in March 2006, $8.8 million from the exercise of certain outstanding warrants and $0.4 million from a reduction in a restricted letter of credit and employee option exercises. Conference Call We will host a conference call on Tuesday Tuesday: see week. , August 8; at 4:30 p.m. Eastern Time to discuss the financial results for the first quarter of 2006 and provide a business update. Interested investors can listen to the call over the internet from Insmed's investor relations Investor relations The process by which the corporation communicates with its investors. website at www.insmed.com or by dialling (800) 361-0912 (domestic) or (913) 981-5559 (international). A telephonic replay of the call will be available for one week at 888-203-1112 (domestic) or (719) 457-0820 (international), passcode: 1703416. A web replay of the call will be available through our corporate website, in the investor relations segment, beginning at 6:00 p.m. About IPLEX(TM) IPLEX(TM) is approved in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. as the only once daily treatment for children with short stature Short stature refers to a height of a human being which is below expected. Shortness is a vague term without a precise definition and with significant relativity to context. associated with severe primary IGF-I IGF-I see somatomedin C. IGF-I Insulin-like growth factor I, somatomedin-C A polypeptide hormone structurally similar to proinsulin, synthesized in the liver and fibroblasts, giving fibroblasts a paracrine function; serum levels correlate with deficiency A shortage or insufficiency. The amount by which federal Income Tax due exceeds the amount reported by the taxpayer on his or her return; also, the amount owed by a taxpayer who has not filed a return. (Primary IGFD). IPLEX(TM), a complex of recombinant recombinant /re·com·bi·nant/ (re-kom´bi-nant) 1. the new entity (e.g., gene, protein, cell, individual) that results from genetic recombination. 2. pertaining or relating to such an entity. See also under DNA. human IGF-I and its binding protein IGFBP-3 (rhIGF-I/rhIGFBP-3), is the only FDA-approved IGF-I replacement therapy that also replaces deficient de·fi·cient adj. 1. Lacking an essential quality or element. 2. Inadequate in amount or degree; insufficient. deficient a state of being in deficit. IGFBP-3 in these patients. The drug, which was launched in the second quarter of 2006, is also being investigated for various other indications with unmet medical needs, including severe insulin resistance Insulin Resistance Definition Insulin resistance is not a disease as such but rather a state or condition in which a person's body tissues have a lowered level of response to insulin, a hormone secreted by the pancreas that helps to regulate the level , myotonic muscular dystrophy Noun 1. myotonic muscular dystrophy - a severe form of muscular dystrophy marked by generalized weakness and muscular wasting that affects the face and feet and hands and neck; difficult speech and difficulty with the hands that spreads to the arms and shoulders and and HIV HIV (Human Immunodeficiency Virus), either of two closely related retroviruses that invade T-helper lymphocytes and are responsible for AIDS. There are two types of HIV: HIV-1 and HIV-2. HIV-1 is responsible for the vast majority of AIDS in the United States. Associated Adipose adipose /ad·i·pose/ (ad´i-pos) 1. fatty. 2. the fat present in the cells of adipose tissue. ad·i·pose adj. Of, relating to, or composed of animal fat; fatty. Redistribution re·dis·tri·bu·tion n. 1. The act or process of redistributing. 2. An economic theory or policy that advocates reducing inequalities in the distribution of wealth. Syndrome (HARS HARS Historical Aircraft Restoration Society HARS HIV/AIDS Reporting System HARS Historic Area Remediation Site HARS Highway Advisory Radio System (public service announcements) HARS High Altitude Route System ). For more information about IPLEX(TM) please go to www.go-IPLEX.com. About Insmed Incorporated Insmed is a biopharmaceutical company focused on the development and commercialization of drug candidates for the treatment of metabolic diseases and endocrine disorders with unmet medical needs. For more information, please visit www.insmed.com. Our leading product, IPLEX(TM) was approved as an orphan drug orphan drug, drug developed under the U.S. Orphan Drug Act (1983) to treat a disease that affects fewer than 200,000 people in the United States. The orphan drug law offers tax breaks and a seven-year monopoly on drug sales to induce companies to undertake the by the United States Food and Drug Administration United States Food and Drug Administration (FDA), n.pr a unit of the Public Health Service created to protect the health of the nation against impure and unsafe foods, drugs, and cosmetics. in December 2005 for the treatment of growth failure in children with severe primary IGF-I deficiency (Primary IGFD) or with growth hormone growth hormone or somatotropin (sōmăt'ətrō`pən), glycoprotein hormone released by the anterior pituitary gland that is necessary for normal skeletal growth in humans (see protein). (GH) gene deletion deletion /de·le·tion/ (de-le´shun) in genetics, loss of genetic material from a chromosome. de·le·tion n. Loss, as from mutation, of one or more nucleotides from a chromosome. who have developed neutralizing antibodies neu·tral·iz·ing antibody n. An antibody that reacts with an infectious agent, usually a virus, and destroys or inhibits its infectiveness and virulence. to GH. Statements included within this press release, which are not historical in nature, may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. for purposes of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provided by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements in this press release include, but are not limited to, statements regarding financial position, results of operations, cash flows, financing plans, business strategies, capital and other expenditures, competitive positions, commercial acceptance of IPLEX(TM), growth opportunities for approved or proposed products, plans and objectives of management. Such forward-looking statements are subject to numerous risks and uncertainties, including risks that we may not successfully launch IPLEX(TM), our product candidates may fail in clinical trials or may not be successfully marketed, we may lack financial resources to complete development of product candidates, we may be unable to raise additional financing necessary to continue current operations, we may not be able to sufficiently expand the manufacturing capacity of our leased manufacturing facility in Boulder, Colorado, and utilize that facility to manufacture our approved product, IPLEX(TM), and other product candidates, competing products may be more successful, we may have a negative outcome of our current litigation with third parties regarding our patent rights, demand for new pharmaceutical products may decrease and the biopharmaceutical industry may experience negative market trends. As a result of these and other risks and uncertainties, actual results may differ materially from those described in this press release. For further information with respect to factors that could cause actual results to differ from expectations, reference is made to reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . The forward-looking statements made in this release are made only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" and Insmed disclaims any intention or responsibility for updating predictions or financial guidance contained in this release.
INSMED INCORPORATED
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
June 30, Dec. 31,
2006 2005
---------- ---------
Assets
Current assets:
Cash and cash equivalents $48,356 $18,835
Restricted cash 285 285
Accounts receivable 105 -
Inventories 1,797 -
Other current assets 190 83
----------- ---------
Total current assets 50,733 19,120
Long-term assets:
Restricted cash - long term 2,830 3,118
Deferred financing costs, net 262 532
Property and equipment, net 3,029 17
------------------------
Total long-term assets 6,121 3,667
------------------------
Total assets $56,854 $22,829
=========== =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,884 $968
Accrued project costs & other 1,353 1,990
Payroll liabilities 1,690 1,574
Interest payable 28 52
Restructuring reserve 121 286
----------- ---------
Total current liabilities 6,076 4,870
Long-term liabilities:
Convertible debt 6,013 11,438
Debt discount (2,466) (5,001)
----------- ---------
Net convertible debt 3,547 6,437
Asset retirement obligation 1,330 1,034
------------------------
Total liabilities 10,953 12,341
----------- ---------
Stockholders' equity:
Common stock; $.01 par value;
authorized shares
500,000,000; issued and
outstanding shares,
100,228,903 in 2006 and
66,525,792 in 2005 1,002 665
Additional paid-in capital 321,895 264,522
Accumulated deficit (276,996) (254,658)
----------- ---------
Net stockholders' equity 45,901 10,529
----------- ---------
Total liabilities and
stockholders' equity $56,854 $22,870
=========== =========
INSMED INCORPORATED
Condensed Consolidated Statements of Operations
(in thousands, except per share data - unaudited)
Three Months Ended Six Months Ended
June 30 June 30
----------------- -------------------
2006 2005 2006 2005
-------- -------- --------- ---------
Sales $ 180 $ - $ 180 $ -
Royalties 30 28 83 85
-------- -------- --------- ---------
Total revenues 210 28 263 85
Operating expenses:
Cost of goods sold 23 - 23 -
Research and development 4,348 5,339 11,522 9,626
Selling, general and
administrative 5,163 1,640 8,963 2,933
-------- -------- --------- ---------
Total costs and expenses 9,534 6,979 20,508 12,559
-------- -------- --------- ---------
Operating loss (9,324) (6,951) (20,245) (12,474)
Interest income 577 252 889 316
Interest expense (164) (1,825) (2,983) (2,130)
-------- -------- --------- ---------
Net loss $(8,911) $(8,524) $(22,339) $(14,288)
======== ======== ========= =========
Basic and diluted net loss per
share $ (0.09) $ (0.19) $ (0.25) $ (0.32)
======== ======== ========= =========
Shares used in computing basic
and diluted net loss per share 100,152 44,998 90,125 44,992
========== ======== ========= =========
INSMED INCORPORATED
Condensed Consolidated Statements of Cash Flows
(in thousands - unaudited)
Six Months Ended
June 30
2006 2005
-------- --------
Operating activities
Net loss $(22,339) $(14,288)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,809 1,573
Non-cash stock acceleration 14
Stock based compensation expense 481 -
Stock options issued for services 40 -
Changes in operating assets and liabilities:
Accounts receivable (105)
Inventory (1,797)
Other assets (107) (16)
Accounts payable 1,916 (690)
Accrued project costs (636) (586)
Payroll liabilities 116 (149)
Restructuring reserve (165) (158)
Asset retirement obligation 296 296
Interest payable (24) 315
-------- --------
Net cash used in operating activities (19,515) (13,689)
-------- --------
Investing activities
Purchase of Property, Plant and Equipment (3,016) -
-------- --------
Net cash used in investing activities (3,016) -
-------- --------
Financing activities
Proceeds from issuance of convertible debt with
detachable stock warrants - 35,000
Proceeds from issuance of common stock 165
Public offering - issuance of 23 million shares 43,240 -
Issuance costs (421) -
Warrants converted into shares 8,810 -
Other 135
-------- ---------
Total proceeds from issuance of common stock 51,764 165
Costs incurred in conjunction with issuance of debt - (2,428)
Cash restricted to restricted letters of credit 288 185
-------- --------
Net cash provided by financing activities 52,052 32,922
-------- --------
Increase in cash and cash equivalents 29,521 19,233
Cash and cash equivalents at
beginning of period 18,835 9,222
-------- --------
Cash and cash equivalents at end of
period $ 48,356 $ 28,455
======== ========
Supplemental information
Cash paid for interest $ 165 $ 411
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