<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-30739
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INSMED INCORPORATED
(Exact name of registrant as specified in its charter)
Virginia 54-1972729
(State or other Jurisdiction of (I.R.S. employer
Incorporation or Organization) identification no.)
800 East Leigh Street
Richmond, Virginia 23219
(804) 828-6893
(Address of principal executive offices
including zip code and telephone number including area code)
Indicate by check X mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes: X No __
-
As of November 9, 2000, there were 32,655,522 shares of Insmed
Incorporated's common stock outstanding.
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INSMED INCORPORATED
INDEX
REPORT: FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 - Financial Statements and Notes......................................... 3
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 10
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk............. 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 17
Item 2. Changes in Securities and Use of Proceeds.............................. 17
Item 3. Defaults Upon Senior Securities........................................ 18
Item 4. Submission of Matters to Vote of Security Holders...................... 18
Item 5. Other Information...................................................... 19
Item 6. Exhibits and Reports on Form 8-K....................................... 19
SIGNATURE....................................................................... 20
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS AND NOTES
<TABLE>
<CAPTION>
INSMED INCORPORATED
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2000 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 29,374 $ 317
Marketable securities 499 4,318
Due from Taisho Pharmaceutical Co., Ltd. 1,123 -
Other current assets 409 43
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Total current assets 31,405 4,678
Property and equipment, net 1,702 242
Goodwill, net 16,429 -
Deferred offering costs 363 -
Other assets 251 376
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Total assets $ 50,150 $ 5,296
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,632 $ 723
Payroll liabilities 687 111
Deferred revenue 143 -
------------- -------------
Total current liabilities 5,462 834
Deferred revenue 1,833 -
Stockholders' equity:
Series A Convertible Participating - 61
Preferred Stock
Series B Convertible Preferred Stock - 36
Common stock 271 39
Additional capital 137,332 27,181
Notes receivable from stock sales - (64)
Accumulated deficit (94,742) (22,780)
Accumulated other comprehensive loss (6) (11)
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Total stockholders' equity 42,855 4,462
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Total liabilities and stockholders' equity $ 50,150 $ 5,296
============= =============
</TABLE>
See accompanying notes.
3
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INSMED INCORPORATED
Condensed Consolidated Statements of Operations
(in thousands, except per share data - unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ --------------------------------
2000 1999 2000 1999
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 53 $ 172 $ 143 $ 576
Operating expenses:
Research and development 7,919 1,961 14,608 4,603
General and administrative 1,678 439 4,103 1,457
Purchased research and
development (3,999) - 50,434 -
Non-cash stock compensation - - 3,564 -
-------------- -------------- -------------- --------------
Total operating expenses 5,598 2,400 72,709 6,060
-------------- -------------- -------------- --------------
Operating loss (5,545) (2,228) (72,566) (5,484)
Interest income 598 53 804 262
-------------- -------------- -------------- --------------
Loss before income taxes (4,947) (2,175) (71,762) (5,222)
Income tax expense 200 - 200 -
-------------- -------------- -------------- --------------
Net loss $(5,147) $(2,175) $(71,962) $(5,222)
============== ============== ============== ==============
Basic and diluted net loss per $ (0.19) $ (0.69) $ (5.10) $ (1.66)
share
============== ============== ============== ==============
Shares used in computing basic
and diluted net loss per share 27,089 3,151 14,110 3,144
============== ============== ============== ==============
</TABLE>
See accompanying notes.
4
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INSMED INCORPORATED
Condensed Consolidated Statements of Cash Flows
(in thousands - unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
2000 1999
-------- -------
<S> <C> <C>
Operating activities
Net loss (71,962) (5,222)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 434 55
Issuance of stock for services 541 -
Interest accrued on note receivable from stock sales (2) (2)
Non-cash stock compensation 3,564 -
Purchased research and development 50,434 -
Changes in operating assets and liabilities:
Due from Taisho Pharmaceutical Co., Ltd. (1,123) -
Prepaid expenses and other current assets (333) (34)
Other assets (614) (97)
Accounts payable and other liabilities 2,624 215
Payroll liabilities 576 -
Deferred revenue 1,976 -
--------- ----------
Cash used in operating activities (13,885) (5,085)
--------- ----------
Investing activities
Purchases of marketable securities (496) (4,321)
Proceeds from marketable securities matured and sold 4,320 -
Purchases of property and equipment (1,222) (72)
Acquisition of Celtrix Pharmaceuticals, Inc. 3,613
--------- ----------
Cash provided by (used) in investing activities 6,215 (4,393)
--------- ----------
Financing activities
Proceeds from issuance of common stock 36,661 14
Repayment of notes receivable from stock sale 66 -
--------- ----------
Cash provided by financing activities 36,727 14
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Increase (decrease) in cash and cash equivalents 29,057 (9,464)
Cash and cash equivalents at beginning of period 317 11,677
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Cash and cash equivalents at end of period 29,374 2,213
========= ==========
</TABLE>
See accompanying notes.
5
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Insmed Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
and applicable Securities and Exchange Commission (the "Commission")
regulations for interim financial information. These financial statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. It is
presumed that users of this interim financial information have read or have
access to the audited financial statements for the preceding fiscal year
contained in the joint proxy statement/prospectus of Insmed
Pharmaceuticals, Inc. ("Insmed Pharmaceuticals") and Celtrix
Pharmaceuticals, Inc. ("Celtrix"), dated as of May 4, 2000, included in the
Registration Statement on Form S-4, dated as of February 10, 2000, as
amended (Commission File No. 333-30098), of Insmed Incorporated (herinafter
referred to as "Insmed," the "Company" or the "Registrant"). In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included. Operating
results for the interim periods presented are not necessarily indicative of
the results that may be expected for the full year.
From it's inception in 1988 until 1999, the Company was a development stage
enterprise devoted primarily to raising capital, recruiting personnel,
identifying and acquiring drugs for further research and development, and
conducting preclinical and clinical development of its product candidate.
During 2000, the Company recruited key management positions, completed its
acquisition of Celtrix Pharmaceuticals, Inc., completed a $34.5 million
equity financing, closed a license agreement with Taisho Pharmaceutical,
Co., Ltd and, accordingly, is no longer considered a development stage
enterprise for accounting purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Certain December 31, 1999 amounts have been reclassified to
conform to the September 30, 2000 presentation.
6
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2. Acquisition of Celtrix
In November 1999, Insmed Pharmaceuticals entered into an agreement to
acquire Celtrix. The transaction closed on May 31, 2000. At closing, the
following events occurred (without giving effect to the reverse split
discussed in note 5):
. Celtrix and Insmed Pharmaceuticals became wholly-owned subsidiaries
of the Company.
. Each preferred and common share of Insmed Pharmaceuticals was
exchanged for three and one-half shares of the Company's common
stock.
. Each common share of Celtrix was exchanged for one share of the
Company's common stock.
. The liquidation preference per share ($1,000 per share) plus
accrued but unpaid dividends of Celtrix Series A Preferred Stock
was convertible into Celtrix common stock at a price per share of
$2.006. The holders of Celtrix Series A Preferred Stock received
shares of the Company's common stock on an as-converted basis.
. All options and warrants exercisable or convertible into shares of
common stock of Insmed Pharmaceuticals or Celtrix and outstanding
at the time of the transaction were converted into options and
warrants of the Company.
The purchase method of accounting was used to account for the transaction.
Aggregate consideration of $71.7 million, which includes $2.1 million in
transaction costs incurred by the Company, was allocated to cash ($5.4
million), equipment and other assets ($427,000), accounts payable ($1.2
million), in process research and development ($50.4 million), and goodwill
($16.7 million). Goodwill is being amortized on a straight-line basis over
twenty years.
When the June 30, 2000 financial statements were prepared, purchased
research and development in connection with the acquisition of Celtrix was
estimated to be $54.4 million. On September 15, 2000, an independent third-
party appraisal company completed the valuation of acquired in-process
research and development, and the value assigned to purchased research and
development was approximately $50.4 million. Accordingly, we reduced the
related purchased research and development expense by approximately $4.0
million in our third quarter financial statements and correspondingly
increased goodwill by the same amount.
7
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Pro forma condensed consolidated statements of operations for the nine
months ended September 30, 2000 and 1999 are included below. These
statements give effect to the acquisition of Celtrix by Insmed
Pharmaceuticals and related transactions as if such transactions had
occurred on January 1, 1999. These statements include the results of
operations for Insmed Incorporated and Celtrix for the periods presented.
For the Nine
Months
Ended September 30,
---------------------------------
2000 1999
----------- ------------
Total revenues $ 271 $ 718
Operating expenses:
Research and development 15,494 13,976
General and administrative 7,038 2,921
Purchased research and development 50,434 -
Non-cash stock compensation 3,564 -
----------- ------------
Total operating expenses 76,530 16,897
----------- ------------
Operating loss (76,259) (16,179)
Interest income 891 326
Proceeds from settlement agreement - 600
----------- ------------
Loss before income tax expense (75,368) (15,253)
Income tax expense 200 -
----------- ------------
Net loss $(75,568) $(15,253)
=========== ============
Net loss per share - basic and diluted $ (2.78) $ (0.63)
=========== ============
Shares used in computing basic and
Diluted net loss per share 27,148 24,265
=========== ============
8
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3. Issuance of Equity
In November 2000, we closed the sale of 7,475,000 shares of our common
stock at $11.875 per share in a public offering, including 1,975,000 shares
that were sold by certain selling shareholders. We estimate net proceedds
from our sale of 5,500,000 shares will be approximately $60.8 million after
deducting underwriting discounts and commissions and estimated ooffering
expenses payable by us.
On May 31, 2000 Insmed Pharmaceuticals sold 4,928,585 shares of its common
stock and warrants to purchase 1,725,330 shares of common stock of Insmed
Incorporated for $34.5 million. The warrants are exercisable for five years
at a price of $9.00.
4. Corporate Collaboration
On July 10, 2000, we signed a definitive agreement with Taisho
Pharmaceutical Co., Ltd. ("Taisho") for the development and
commercialization in Japan and other Asian countries of our lead compound,
INS-1, for the treatment of type 2 diabetes and polycystic ovary syndrome.
The collaboration includes license fees and payment of certain development
and regulatory milestones as well as a completed equity investment of $3
million. Taisho will fund 20% of the development costs of INS-1 in the
United States and the Company will receive royalties on product sales in
Japan and other Asian countries.
5. Reverse Stock Split
On July 28, 2000, our shareholders approved a one-for-four reverse stock
split. The split was effective at the close of business on July 28, 2000,
and shares of our common stock began trading on the post-split basis at the
opening of the Nasdaq on July 31, 2000. Stockholders' equity has been
restated to give retroactive recognition to the reverse stock split. In
addition, all references in the financial statements to number of shares
and per share amounts have been restated.
6. Impact of Recently Issued Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("Statement 133"), as amended by Statement No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133 - an Amendment of FASB Statement
No. 133," which is required to be adopted in years beginning after June 15,
2000. In June 2000, the Financial Accounting Standards Board issued SFAS
No. 138, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective date of SFAS No. 133," which addresses the
application of a limited number of Statement 133 issues. The Company plans
to adopt this pronouncement effective January 1, 2001. Management does not
anticipate that the adoption of Statement 133 will have a material effect
on the Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial
statements. The Securities and Exchange Commission issued SAB 101B in June
2000 that further delays the effective date of SAB 101 until no later than
the fourth fiscal quarter of fiscal years beginning after December 15,
1999. Thus, the Company will adopt SAB 101 in the fourth quarter of 2000.
The Company is currently assessing the impact, if any, that SAB 101 may
have on the Company's consolidated financial statements.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in Part I -
Item 1 of this Quarterly Report and the financial statements and notes
thereto in the joint proxy statement / prospectus dated May 4, 2000.
Overview
We discover and develop pharmaceutical products for the treatment of
metabolic and endocrine diseases associated with insulin resistance. Insmed
has two lead drug candidates -- INS-1 and SomatoKine(R). We are actively
developing these drugs to treat diabetes, polycystic ovary syndrome
(commonly known as PCOS) and recovery from osteroporotic hip fracture.
We have not been profitable and have accumulated a deficit of approximately
$94.7 million through September 30, 2000. We expect to incur significant
additional losses for at least the next several years and until such time
as we generate sufficient revenue to offset expenses. Research and
development costs relating to product candidates will continue to increase.
We expect manufacturing, sales and marketing costs will increase as we
prepare for the commercialization of our products.
10
<PAGE>
Results of Operations
For the three and nine-month periods ended September 30, 2000, we recorded
a net loss of $5.1 million and $72.0 million, respectively. The largest
component of the net loss relates to a one-time, non-cash charge of $50.4
million to write-off purchased research and development resulting from the
acquisition of Celtrix.
When we prepared our June 30, 2000 financial statements, research and
development purchased in the acquisition of Celtrix was estimated to be
approximately $54.4 million. On September 15, 2000, the valuation of
acquired in-process research and development was completed by an
independent third-party appraisal company, and the value assigned to the
purchased research and development was approximately $50.4 million.
Accordingly, we reduced the related purchased research and development
expense by approximately $4.0 million in our third quarter financial
statements and correspondingly increased goodwill by the same amount.
In the first quarter of 2000, we recognized an $8.4 million non-cash charge
for stock compensation. Approximately $4.8 million of this charge was
reversed in the second quarter of 2000. The major component of this non-
cash charge relates to stock options exercised with a non-recourse note.
Generally accepted accounting principles require that compensation be
recognized in the financial statements based on the difference between the
current market price of the underlying stock and the market price utilized
in the previous reporting period. We used the sale of stock to Taisho on
March 28, 2000, to determine the amount of the charge in the first quarter,
as we had no quotable market price at the time. The quoted market price of
$13.00 per share on June 30, 2000 was utilized to determine the amount of
the credit in the second quarter. The non-recourse note to which the
majority of the charge relates was repaid on June 30, 2000; accordingly,
there was no charge for the third quarter.
Revenues for the current and prior periods relate to grants under the Small
Business Innovation Research Program (SBIR). Beginning in August, we began
to amortize the initial license fee received from Taisho into revenue. The
life of the related license agreement is being utilized as the amortization
period.
Research and development expenses increased $6.0 million from $2.0 million
to $8.0 million for the three months ended September 30, 2000, and
increased $10.0 million from $4.6 million to 14.6 million for the nine
months ended September 30, 2000, in each case, as a result of increased
clinical trial activity. INS-1 expenses
11
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for contract research organizations, site grants, monitoring, and other
trial related costs have increased approximately $3.6 million during the
nine months ended September 30, 2000 over the same nine-month period in the
prior year. Contract manufacturing costs for INS-1 to supply drug to the
trials have increased $1.4 million during the nine months ended September
30, 2000 over the same nine-month period in the prior year. We have also
incurred clinical and contract manufacturing costs of approximately $3.7
million related to the development of SomatoKine, the compound we acquired
from Celtrix.
General and administrative expenses increased $1.2 million from $400,000 to
$1.6 million for the three months ended September 30, 2000 and increased
$2.6 million from $1.5 million to 4.1 million for the nine-month period
ended September 30, 2000. Salaries and benefits account for the majority of
the increase. We increased our general and administrative staff to adapt to
our public status and to manage our growing portfolio of intellectual
property. Legal fees were also incurred to finalize the license agreement
with Taisho, transition the SomatoKine patent estate and other general
corporate matters, and we incurred fees to develop our new web site and
other investor materials.
As of September 30, 2000, cash, cash equivalents and marketable securities
have increased $25.2 million from December 31, 1999. The issuance of equity
securities produced net proceeds of $36.5 million and the acquisition of
Celtrix provided an additional $5.4 million of cash. We have also recorded
net receivables of $1.1 million from Taisho for its portion of certain INS-
1 development activities. As of September 30, 2000, we have recorded
$363,000 in costs related to our public stock offering which closed in
November 2000. In addition, approximately $16.7 million of goodwill was
recorded as a result of the Celtrix acquisition.
Accounts payable increased $3.9 million during the nine-month period ending
September 30, 2000 over the same nine-month period in the prior year as a
result of the increased clinical and manufacturing activity and payroll
liabilities increased as a result of additional personnel and potential
bonus payouts. We have also recorded deferred revenue in the September 30,
2000 balance sheet for the initial license fee by Taisho, which is being
amortized into revenue over the life the agreement. Stockholders' equity
increased $38.4 million as a result of the acquisition of Celtrix, the
issuance of equity securities and option exercises. The largest component
of the increase in the accumulated deficit is the $50.4 million non-cash
charge for the purchased research and development acquired from Celtrix.
Liquidity and Capital Resources
At September 30, 2000, our cash and investments approximated $29.9 million
and were invested in money market instruments and investment grade
corporate debt. During the first six months of the year, we completed two
equity financings. In March 2000 we sold Taisho 93,413
12
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shares of our common stock. In May 2000 we sold to a group of investors
4,928,585 shares of common stock together with warrants to purchase an
additional 1,725,330 shares of common stock. The warrants are exercisable
for five years at a price of $9.00 per share. We received aggregate net
proceeds of $36.5 million from these two offerings.
In addition, on November 1, 2000, in a public offering we sold 5,500,000
shares of common stock that generated net proceeds of $60.8 million. We
believe that our current cash position together with our net proceeds from
this offering will be sufficient to fund our operations for about two
years.
Our business strategy contemplates selling additional equity and entering
into agreements with corporate partners to fund research and development,
and provide milestone payments, license fees and equity investments to fund
operations. We will need to raise substantial additional funds to continue
development and commercialization of our products. There can be no
assurance that adequate funds will be available when we need them, or on
favorable terms. If at any time we are unable to obtain sufficient
additional funds, we will be required to delay, restrict or eliminate some
or all of our research or development programs, dispose of assets or
technology, or cease operations.
Impact of Year 2000
We replaced and upgraded much of our information technology in the normal
course of business during 1999. Year 2000 failures have not had, and we do
not believe they will have, a material adverse impact on our Company. The
incremental costs of the project were not significant.
Recent Developments
In November 2000, we closed the sale of 7,475,000 shares of our common
stock at $11.875 per share in a public offering, including 1,975,000 shares
that were sold by certain selling shareholders. We estimate net proceeds
from our sale of 5,500,000 shares will be approximately $60.8 million after
deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
Forward Looking Statements
Statements included within this Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are not historical in
nature, may constitute forward-looking statements for purposes of the safe
harbor provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements regarding expected
financial position, results of operations, cash flows, dividends, financing
plans, business strategies, operating efficiencies or synergies, budgets,
capital and other expenditures, competitive positions, growth opportunities
for existing or proposed products or services, plans and objectives of
management, demand for new pharmaceutical products, market trends in the
pharmaceutical business, inflation and various economic and business
trends. Such forward-looking statements are subject to numerous risks and
uncertainties, including risks that product candidates may fail in the
clinic
13
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or may not be successfully marketed, the Company may lack financial
resources to complete development of product candidates, competing products
may be more successful, demand for new pharmaceutical products may
decrease, the biopharmaceutical industry may experience negative market
trends and other risks detailed from time to time in the Registrant's
filings with the Securities and Exchange Commission. As a result of these
and other risks and uncertainties, actual results may differ materially
from those described in the discussion above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Insmed invests its excess cash in investment grade, interest-bearing
securities. At September 30, 2000, Insmed had $499,000 invested in fixed
rate securities. Insmed's investments in fixed rate securities are subject
to interest rate and credit risk. Insmed's policy of investing in highly
rated securities whose maturities at September 30, 2000 are all less than
one year minimizes the risk associated with its investment in fixed rate
securities. While a hypothetical decrease in market interest rates by 10
percent from the September 30, 2000 levels would cause a decrease in
interest income, it would not result in a loss of the principal.
Additionally, the decrease in interest income would not be material.
14
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On July 28, 2000, at a special meeting, our shareholders adopted
an amendment to our Articles of Incorporation, as amended, which effected a
one-for-four reverse stock split of our then issued and outstanding common
stock. The amendment is attached as Exhibit 3.1 to this report and this
description is qualified in its entirety by reference to that amendment.
(b) None.
(c) In September 2000, we sold 30,000 shares of our common stock to
Ms. Wen-Chen Yuan at a purchase price of $2.20 per share, or $66,000 in the
aggregate. This sale was executed in satisfaction of warrants that Ms. Yuan
held for Celtrix common stock which were inadvertently not converted to
Insmed common stock pursuant to the terms of the May 2000 reorganization of
Insmed, Celtrix and Insmed Pharmaceuticals. These securities were offered
and sold in reliance on exemptions from the Securities Act of 1933
registration requirements set forth in Rule 504 under the Securities Act,
and in the alternative, under Section 4(2) of the Securities Act.
(d) Insmed closed the sale of 7,475,000 shares of common stock on
November 1 and 9, 2000, including 1,975,000 shares sold by certain selling
shareholders. The shares were registered on a registration statement on
Form S-1, as amended (Commission File No. 333-46552), and a registration
statement on Form S-1 (Commission File No. 333-48732) filed pursuant to
Rule 462(b) promulgated under the Securities Act. The registration
statement became effective on October 26, 2000. Robertson Stephens, Inc.
acted as lead manager of the underwriting with Banc of America Securities
LLC and Prudential Securities, Inc. serving as co-managers.
Insmed registered a total of 7,475,000 shares in connection with
the offering. The aggregate price of the offering amount registered was
$88,765,625 of which $65,312,500 was for the Company and $23,453,125 was
for the account of the selling shareholders. On November 1, 2000, the
Company sold 5,500,000 shares and the selling shareholders sold 1,000,000
shares of our common stock. The aggregate offering price of the securities
sold on November 1, 2000 by the Company and the selling shareholders before
deducting underwriting discounts and commissions was $65,312,500 for the
Company and $11,875,000 for the account of the selling shareholders. On
November 9, 2000, the selling shareholders sold 975,000 additional shares
of our common stock pursuant to the underwriters' full exercise of their
over-allotment option. The aggreate offering price of these securities sold
for the account of the selling shareholders, before deducting underwriting
discounts and commissions, was $11,578,125.
15
<PAGE>
In connection with this public offering, the Company incurred expenses
in the form of underwriting discounts and commissions of $3,918,750 and
estimates paying an additional $575,000 in costs and expenses. We estimate
that our net proceeds from the sale of 5,500,000 shares of our common stock
will be approximately $60.8 million after deducting underwriting discounts
and commissions and estimated offering expenses payable by us. We will not
receive any of the proceeds from the sales of shares of common stock by the
selling shareholders.
The offering terminated November 9, 2000 upon the underwriters'
exercise of their over-allotment option to purchase up to an additional
975,000 shares of common stock from the selling shareholders. We did not
receive any of the proceeds from these sales, and will make no further
sales in this offering.
We expect to use our net proceeds of this offering to fund our
development of INS-1 and SomatoKine, and for working capital, capital
expenditures and general corporate purposes. Although we may use a portion
of the net proceeds to acquire businesses, products or technologies that
are complementary to our business, we have no specific acquisitions
planned. Pending these uses, we plan to invest the net proceeds in
investment grade, interest-bearing securities.
All of the payments described above were direct or indirect payments
to entities or persons other than directors, officers or greater than 10%
owners of any equity securities of Insmed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
At a special meeting held on July 28, 2000, the shareholders of Insmed
Incorporated approved an amendment to our Articles of Incorporation, as
amended, to effect a one-for-four reverse stock split of the issued and
outstanding shares of our common stock, par value $0.01 per share. The
results of the vote were as follows:
Total Shares Shares Voted
Class of Shares (as of record date) For Against Abstain
--------------------------------------------------------------------------
Common Stock 108,127,568 93,583,881 991,242 88,786
16
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ITEM 5. OTHER INFORMATION
The registrant's stock was registered under the Securities Exchange Act
of 1934 on June 1, 2000. On August 8, 2000 our common stock listing moved
from The Nasdaq SmallCap Market to the Nasdaq National Market. Our symbol
was "INSMD" from August 8 through Friday, August 25, 2000. On Monday,
August 28, 2000, the symbol reverted back to our original symbol--"INSM."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company, as amended as of
July 28, 2000.
10.15 License Agreement, dated as of July 10, 2000, between Insmed
Pharmaceuticals, Inc. and Taisho Pharmaceutical Co., Ltd. (incorporated by
reference to Exhibit 10.15 of the Company's Registration Statement on Form
S-1 (Commission File No. 333-46552)).
27. Financial Data Schedule.
(b) Reports on Form 8-K
Amendment to Current Report on Form 8-K/A, dated May 31, 2000, filed
under Item 2 with the Commission on August 14, 2000, amending our Current
Report on Form 8-K dated May 31, 2000, filed with the Commission on June
15, 2000 and including the required financial statements and pro forma
financial information related to our acquisition of Celtrix. This report
also attached under Item 5 a press release dated July 18, 2000 regarding
the execution of an agreement with Taisho Pharmaceutical Co., Ltd. for
development and commercialization of Insmed's lead compound in Japan and
other Asian countries.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSMED INCORPORATED
(Registrant)
Date: November 14, 2000 By: /s/ Michael D. Baer
_______________________________
Michael D. Baer
Chief Financial Officer
(Principal Accounting and Financial
Officer and Duly Authorized Officer)
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EXHIBIT INDEX
Exhibit No.
3.1 Articles of Incorporation of the Company, as amended as of
July 28, 2000.
27 Financial Data Schedule.
