Insmed Inc (INSM)

[copernicus]

rfoable - capacity utilization a small part of COGS

COGS is only influenced by capacity utilization if there are large fixed costs that are amortized over the volume of product produced. Those fixed costs usually appear as depreciation expense or lease payments. The former is virtually non-existent for Insmed and the latter is very small.

If you look at Insmed's balance sheet, there are almost no fixed assets to depreciate. The depreciation & amortization that shows up in the cash flow statement is amortization that is the result of the convert and shows up on the income statement below the operating line.

As far as the lease goes, Insmed will pay about $168K this year going to about $216K in 2010. Part of this will go into COGS and part should go into R&D, but if $216K is a significant portion of COGS by 2010, I'm sure you'll agree that we've made a big mistake investing in this company.

So the Dow technology could help COGS immensely, but it'll be because variable costs are reduced.