01—Abstract
Summary
Summary of the 10-K filed March 31, 2009. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated (INSM) is a development stage company with expertise in recombinant protein drug development, headquartered in Richmond, Virginia.
On March 31, 2009, the company completed the sale of its follow-on biologics assets to Merck & Co., Inc. for an aggregate purchase price of $130 milliona, with expected net proceeds of approximately $123 million after fees, taxes and other costs. The sale included Merck assuming the lease of the Boulder, Colorado manufacturing facility and acquiring its equipment. Insmed now focuses on its proprietary protein platform, led by IPLEX™, with primary focus on Myotonic Muscular Dystrophy (MMD) and Amyotrophic Lateral Sclerosis (ALS).
The company is also evaluating options for use of the proceeds, including acquisitions, licensing, mergers, share repurchases and a possible distribution to shareholders. Financially, the company reported 2008 total revenues of $11.7 millionb and a net loss of $15.7 million, or $0.13 per share, compared with a net loss of $20.0 million in 2007. Cash, cash equivalents and short-term investments were $2.4 million at December 31, 2008, down from $16.5 million a year earlier, and the accumulated deficit was $346 million.
Stockholders' equity was a deficit of $2.8 millionc. The company stated that it expects to operate on a cash-neutral basis for the balance of 2009 and that the net sale proceeds will provide sufficient liquidity to continue as a going concern, while it expects significant losses for at least several more years.
The filing also highlights material risks, including a Nasdaq Capital Market minimum bid price deficiency with a compliance deadline of July 17, 2009, the Italian Health Authority's payment for IPLEX™ used in the Expanded Access Program, dependence on contract manufacturers after the Boulder facility transfer, and a Consent Judgment and Permanent Injunction arising from the 2007 settlement with Tercica and Genentech. Employees were reduced to 18 as of March 31, 2009 after the asset sale.
02—Key points
Key Highlights
- Sold follow-on biologics assets and Boulder, Colorado manufacturing facility to Merck & Co., Inc. on March 31, 2009 for an aggregate purchase price of $130 million, with expected net proceeds of approximately $123 million.
- 2008 total revenues of $11.7 million, up from $7.6 million in 2007, primarily due to a $5.1 million improvement in Expanded Access Program cost recovery.
- 2008 net loss of $15.7 million, or $0.13 per share, versus a net loss of $20.0 million in 2007.
- Cash, cash equivalents and short-term investments of $2.4 million at December 31, 2008, down from $16.5 million, with an accumulated deficit of $346 million.
- Company now focuses on the proprietary protein platform, led by FDA-approved IPLEX™, with primary focus on Myotonic Muscular Dystrophy and ALS; Phase II MMD trial results were expected in Q2 2009.
- Common stock faces potential Nasdaq Capital Market delisting if the $1.00 minimum bid price is not regained by July 17, 2009; a reverse stock split may be required.
- Workforce reduced to 18 employees as of March 31, 2009, from 97 at December 31, 2008, after giving effect to the asset sale.
03—Questions
Frequently Asked Questions
What did Insmed do with its follow-on biologics business in 2009?
On March 31, 2009, Insmed completed the sale of its follow-on biologics assets to Merck & Co., Inc. for an aggregate purchase price of $130 million, with expected net proceeds of approximately $123 million. Merck also assumed the lease of the Boulder, Colorado facility and acquired its equipment, and offered positions to Boulder employees.
What is Insmed's main product and near-term focus?
The company's lead product is IPLEX™, an FDA-approved complex of recombinant IGF-1 and IGFBP-3. Following the sale, Insmed's primary focus is on Myotonic Muscular Dystrophy, followed by ALS. Its Phase II MMD trial results were expected in the second quarter of 2009.
How much cash did Insmed have and what does management say about its liquidity?
Cash, cash equivalents and short-term investments were $2.4 million at December 31, 2008. Management believes the expected net proceeds of approximately $123 million from the asset sale will provide sufficient liquidity to continue as a going concern, and it expects to operate on a cash-neutral basis for the balance of 2009, while still expecting significant losses for at least the next several years.
What are the main risks to Insmed's stock listing and operations?
The stock may be delisted from the Nasdaq Capital Market if it does not regain the $1.00 minimum bid price by July 17, 2009, and a reverse stock split may be required. The company also faces risks from the Italian Health Authority's payment decisions for IPLEX™ used in the Expanded Access Program, reliance on contract manufacturers after the Boulder facility transfer, and the Consent Judgment and Permanent Injunction from the 2007 settlement with Tercica and Genentech.
What might Insmed do with the sale proceeds?
The company has engaged RBC as financial advisor to evaluate options for the proceeds, which could include acquisitions of complementary businesses or technologies, product licensing, mergers, share repurchases, and distribution of a portion of the proceeds to shareholders. The company states that one option may include a special dividend.
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