SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- 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 ---------------- 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 ------------ 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.
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
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 ------------- ------------- 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 ------------- ------------- 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) ------------- ------------- Total stockholders' equity 42,855 4,462 ------------- ------------- Total liabilities and stockholders' equity $ 50,150 $ 5,296 ============= ============= </TABLE> See accompanying notes. 3
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
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 --------- ---------- Increase (decrease) in cash and cash equivalents 29,057 (9,464) Cash and cash equivalents at beginning of period 317 11,677 --------- ---------- Cash and cash equivalents at end of period 29,374 2,213 ========= ========== </TABLE> See accompanying notes. 5
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
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
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
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
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
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
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
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
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
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
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
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. 17
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) 18
EXHIBIT INDEX Exhibit No. 3.1 Articles of Incorporation of the Company, as amended as of July 28, 2000. 27 Financial Data Schedule.