01—Abstract
Summary
Summary of the 10-K filed March 16, 2010. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated, a Virginia corporation headquartered in Richmond, Virginia, reported in its 10-K for fiscal 2009 that it sold its follow-on biologics (FOB) platform to Merck & Co., Inc. on March 31, 2009 for an aggregate purchase price of $130 milliona, with net proceeds of approximately $127 million.
The sale produced a gain of $127,474 thousandb and net income of $118,350 thousand for 2009, the company's only profitable year, compared with a net loss of $15,667 thousand in 2008. Following the sale, the company's focus is its proprietary protein product IPLEX™, which it no longer has the capability to manufacture. The company has ceased supplying IPLEX™ to new patients, has decided not to pursue further clinical trials pending its Strategic Review Process, and has about 51 patients receiving the drug, most under an Expanded Access Program for ALS in Italy that generates cost recovery revenue.
The company's financial position at December 31, 2009 included cash, cash equivalents and short-term investments of $122.2 millionc, plus a $2.1 million certificate of deposit, for total cash and investments of $124.3 million. Total revenues were $10.4 million in 2009, down from $11.7 million in 2008, and the company reported an accumulated deficit of approximately $230 million. The filing states that the company's sufficient IPLEX™ inventory supports existing patients into approximately mid-2011, when its primary source of operating revenue will cease.
Thereafter, interest on the sale proceeds is expected to be the primary income source unless the Strategic Review Process produces an income-generating transaction. Leadership and listing matters are also significant. Geoffrey Allan, Ph.D., resigned as President, CEO and Chairman in June 2009, and the company has decided not to hire a new CEO pending the Strategic Review Process.
The company had 15 employees at December 31, 2009. Its common stock traded on the Nasdaq Capital Market, and the company regained compliance with the $1.00d minimum bid price requirement, as NASDAQ notified it on March 3, 2010. The filing notes that the company is reviewing options for the use of the sale proceeds, which may include a special dividend.
02—Key points
Key Highlights
- Sold the follow-on biologics platform to Merck & Co., Inc. on March 31, 2009 for $130 million aggregate purchase price, with approximately $127 million in net proceeds.
- Reported 2009 net income of $118.4 million, or $0.93 per share, driven by a $127.5 million gain on the asset sale; 2008 net loss was $15.7 million.
- Total revenues were $10.4 million in 2009, versus $11.7 million in 2008; the company had an accumulated deficit of approximately $230 million at December 31, 2009.
- Cash, cash equivalents and investments totaled $124.3 million at December 31, 2009, up from $2.4 million a year earlier.
- IPLEX™ inventory is expected to support existing patients into approximately mid-2011, when the primary operating revenue from the Italian Expanded Access Program will cease.
- The company can no longer manufacture IPLEX™; a third-party manufacturing arrangement would take 12 to 18 months to produce additional quantities, and no such arrangement is being pursued.
- Chief Executive Officer Geoffrey Allan resigned in June 2009, and the company does not plan to hire a new CEO pending its Strategic Review Process with RBC Capital Markets.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 16, 2010Financial Statements
| Revenue | $10.37M |
| R&D Expenses | $9.21M |
| Operating Expenses | $19.05M |
| Operating Income | -$8.67M |
| Interest Expense | $781K |
| Net Income | $118.35M |
| EPS (Basic) | $9.31 |
| EPS (Diluted) | $9.30 |
| Shares Outstanding (Basic) | 13K |
| Shares Outstanding (Diluted) | 13K |
05—Questions
Frequently Asked Questions
What is Insmed's main source of revenue going forward?
The filing states that the company's major source of income is cost recovery charges from its Expanded Access Program in Italy for ALS. Those revenues are expected to end around mid-2011, when IPLEX™ inventory is depleted. After that, the primary income source will be interest on the FOB sale proceeds, unless the Strategic Review Process produces an income-generating transaction.
Why did Insmed report a profit in 2009?
The 2009 net income of $118.4 million was primarily due to the $127.5 million gain on sale of the follow-on biologics assets to Merck. Operating losses continued, with an operating loss of $8.7 million for the year.
What is the Strategic Review Process?
Engaged in April 2009 with RBC Capital Markets, the Strategic Review Process evaluates options for use of the FOB sale proceeds. These options could include acquisitions, product licensing or mergers, share repurchases, or distribution of proceeds to shareholders. The filing notes that a special dividend may be one option.
Can Insmed still produce its lead product, IPLEX™?
No. The transfer of the Boulder, Colorado manufacturing facility to Merck eliminated the company's internal IPLEX™ production capability. The company is not actively exploring third-party manufacturing, which would require 12 to 18 months to produce additional quantities once a manufacturer is identified.
What are the risks regarding Nasdaq listing?
The company's stock had closed below the $1.00 minimum bid price for 30 consecutive business days, and NASDAQ granted a 180-day period through March 15, 2010. NASDAQ notified the company on March 3, 2010 that it was in compliance and that the panel would continue listing the stock. If the price falls below $1.00 again, delisting could occur, and the company may need a reverse stock split.
06—Continue