this article cuts the b/s:
INSM:US
Insmed Inc
Insmed Shares Fall for Second Day After Patent Loss (Update5)
By Susan Decker and Joel Rosenblatt
Dec. 7 (Bloomberg) -- Insmed Inc. shares fell 12 percent, dropping a second day after a federal jury found that the company infringed patents controlled by Tercica Inc., a rival maker of drugs to treat abnormally short children.
The shares were down 16 cents to $1.15 in Nasdaq Stock Market trading as of 4 p.m. New York time, bringing their two- day decline to 28 percent and cutting Richmond, Virginia-based Insmed's market value to $115.3 million.
The jury in Oakland, California, said yesterday Insmed should pay $7.5 million for past sales of its lone product, the growth factor Iplex, plus royalties of between 15 percent and 20 percent. Tercica, which makes the competing drug Increlex, and patent owner Genentech Inc. said they will seek a court ruling that would pull Iplex from the market.
``It's very low risk given that the interest of the public is at stake,'' Matthew Osborne, an analyst at Lazard Capital Markets in New York, said in a phone interview. ``There would likely be a backlash from physicians if this drug were removed.''
U.S. District Judge Claudia Wilkin today scheduled a Feb. 16 hearing on whether she should issue an injunction blocking Insmed's sales or require the company to license the patents. Both Iplex and Increlex are given to children whose growth is stunted by the lack of a protein called insulin-like growth factor, which is created in the liver.
`Losing Sales'
``Every day that goes by, we'll be losing sales,'' Terry McMahon, a lawyer for Tercica and Genentech, told Wilkin. ``We'd like to move this along as soon as possible.''
Insmed will appeal the jury verdict and fight any attempt to block Iplex sales, Chief Executive Officer Geoffrey Allan said today. The royalty rate set by the jury was for past sales, and the judge will have to set a rate for future sales, he said. Two patents expire in 2010 and a third, for a manufacturing process, expires in 2018.
``We'll either prevail through invalidity of the patent or simply change to an alternate source'' in manufacturing, which would take at least two years, Allan said on a conference call. ``We don't feel this is going to be an impediment to moving forward with the business.''
Shares of Brisbane, California-based Tercica rose 34 cents, or 5.8 percent, to $6.24 in Nasdaq trading, bringing the two-day gain to 22 percent. Genentech, based in South San Francisco, California, fell 25 cents to $82.94 in New York Stock Exchange composite trading.
2010 Profit
Insmed, which reported $489,000 in sales for the year's first nine months, is expected to begin making a profit in 2010, said Osborne, who has a ``buy'' rating on Insmed and a ``hold'' rating on Tercica. He doesn't own shares of either company and said he doesn't intend to change his ratings.
A court block of Iplex sales is unlikely, Andrew Fein, an analyst with C.E. Unterberg in New York, said in a note to clients. He rates Insmed ``buy'' and Tercica ``market perform'' and said he may change those assessments after Wilkin issues final rulings in the case.
The jury found that Insmed infringed two patents and upheld the validity of the manufacturing patent that Wilkin already found to be infringed. Tercica licenses the patents from Genentech, the world's second-biggest biotechnology company behind Amgen Inc.
The jury said infringement of one of the patents was willful, allowing Wilkin to as much as triple any damage award.
The case is Genentech Inc. v. Insmed Inc., 04cv5429, U.S. District Court, Northern District of California (Oakland).
To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net Joel Rosenblatt in Oakland federal court at jrosenblatt@blooomberg.net
Last Updated: December 7, 2006 16:24 EST
