01—Abstract
Summary
Summary of the 10-K filed March 13, 2012. Cited figures are marked; the original filing is the authoritative source.
Insmed Incorporated, a development-stage biopharmaceutical company focused on proprietary liposomal technology for inhalation lung delivery, reported a 2011 net loss of $59.7 milliona, or $68.8 million attributable to common stockholders ($2.95 per share) after a $9.2 million non-cash beneficial conversion charge.
Revenues fell to $4.4 millionb from $6.9 million, reflecting the end of IPLEX expanded access program cost recovery revenue after IPLEX supplies were exhausted in late 2011. The company's lead product candidate, ARIKACE (liposomal amikacin for inhalation), drove a sharp increase in research and development expense to $27.9 million from $4.8 million, and a $26.0 million non-cash impairment charge was recorded in the third quarter of 2011 after the FDA placed clinical holds on Phase 3 trials for cystic fibrosis and non-tuberculous mycobacteria (NTM) lung infections. As of December 31, 2011, Insmed had $78.3 million in cash and investments and an accumulated deficit of $294.2 million.
The company stated it believed it had sufficient funds for 2012 but would likely need additional capital later, and it noted it had no committed sources of capital. In January 2012 the FDA lifted the clinical hold for the NTM indication, and the company planned a Phase 2 NTM trial starting in mid-2012 and a European Phase 3 CF trial starting in the second quarter of 2012. The U.S. CF clinical hold remained in place, and the filing states that the timing of its removal is unknown.
The company has no material source of operating revenue, expects operating losses for the foreseeable future, and has deprioritized IPLEX, which it intends to out-license. Investors face significant regulatory uncertainty around ARIKACE, dependence on a sole third-party manufacturer and a single nebulizer supplier, and pending appraisal and breach-of-contract litigation related to the 2010 Transave merger and a former IPLEX trial participant.
02—Key points
Key Highlights
- Net loss of $59.7 million for 2011 versus $6.4 million in 2010; net loss attributable to common stockholders of $68.8 million, or $2.95 per share
- Total revenues of $4.4 million in 2011, down from $6.9 million in 2010, as IPLEX expanded access program revenue ended when inventory was depleted in December 2011
- Research and development expenses rose to $27.9 million from $4.8 million, attributed to the ARIKACE program and manufacturing supply for planned studies
- $26.0 million non-cash impairment loss recorded in Q3 2011 following the FDA clinical hold on ARIKACE Phase 3 trials
- Cash, cash equivalents, short-term investments and certificate of deposit totaled $78.4 million at December 31, 2011, with an accumulated deficit of $294.2 million
- FDA lifted the NTM clinical hold in January 2012; the CF clinical hold in the U.S. remains in place, and a European Phase 3 CF trial is expected to begin enrolling in Q2 2012
- Company has no committed sources of capital and states that additional funding will likely be needed, with the company believing it has sufficient funds for 2012
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 13, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.42M$6.92M | −36.2% |
| R&D Expenses | $28.62M$4.70M | +508.7% |
| Operating Expenses | $66.14M$15.01M | +340.5% |
| Operating Income | -$61.72M-$8.09M | −662.7% |
| Interest Expense | $10K$109K | −90.8% |
| Net Income | -$59.66M-$6.43M | −827.3% |
| EPS (Basic) | $-2.95$-0.49 | −502.0% |
| EPS (Diluted) | $-2.95$-0.49 | −502.0% |
| Shares Outstanding (Basic) | 23.35M13.25M | +76.2% |
| Shares Outstanding (Diluted) | 23.35M13.25M | +76.2% |
05—Questions
Frequently Asked Questions
Why did Insmed record a $26.0 million impairment loss in 2011?
The company determined that the FDA's August 2011 clinical hold on ARIKACE Phase 3 trials for cystic fibrosis and NTM lung infections was an indicator of impairment. Interim testing as of September 30, 2011 resulted in non-cash charges of $19.7 million for in-process research and development and $6.3 million for goodwill. The company later concluded no additional impairment existed as of December 31, 2011, citing the January 2012 lifting of the NTM hold and market data suggesting the NTM market may be larger than originally anticipated.
What is the status of the FDA clinical hold on ARIKACE?
The FDA lifted the clinical hold for NTM lung infections in January 2012, and the company plans a Phase 2 NTM trial with enrollment expected to begin in mid-2012. The clinical hold for the U.S. cystic fibrosis program remains in place; the company filed a complete response in February 2012 and continues discussions with the FDA. The FDA has requested a nine-month dog inhalation toxicity study, which the company expects to begin in the second quarter of 2012. The filing states the company does not know whether or when the CF hold will be lifted.
Does Insmed have revenue from its products?
No material product revenue exists. Revenue in 2011 of $4.4 million came from IPLEX expanded access program income and a $1.0 million license fee related to CISPLATIN Lipid Complex. IPLEX cost-recovery revenue ended in December 2011 when supplies were exhausted, and the company stated it has no material source of operating revenue unless it completes income-generating transactions. ARIKACE is not expected to generate product revenue for at least the next several years, if ever.
How much cash does Insmed have and will it need more funding?
At December 31, 2011, total cash, cash equivalents, short-term investments and certificate of deposit were $78.4 million, down from $110.2 million a year earlier, and the company used $30.2 million in operating activities during 2011. The company stated it believes it currently has sufficient funds for 2012, but it expects to need additional capital, which may come from licensing, debt or equity sales. The filing notes there is no assurance that funds will be available on favorable terms and that equity financing may significantly dilute existing shareholders.
What litigation is Insmed facing?
Insmed faces three matters: Cacchillo v. Insmed, a suit by a former IPLEX trial participant seeking monetary damages and access to IPLEX, with trial scheduled for October 2012; and two Delaware appraisal-related matters arising from the 2010 Transave merger, Mackinson et al. (settled and approved by the court in October 2011) and Pilkiewicz v. Transave LLC, an appraisal action challenging the merger consideration for approximately 7.77 million Transave shares. The company believes the allegations are without merit and intends to defend vigorously, and it cannot estimate possible loss.
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