Insmed Incorporated
INSMED INC (Form: S-3, Received: 07/24/2003 17:06:03)    
 
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As filed with the Securities and Exchange Commission on July 24, 2003

Registration No. 333-                    


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


 

 

INSMED INCORPORATED

(Exact name of registrant as specified in its charter)

 


 

Virginia   54-1972729

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

4851 Lake Brook Drive

Glen Allen, Virginia 23060

(804) 565-3000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 


 

Kevin P. Tully, C.G.A.

Principal Financial Officer,

Treasurer and Controller

Insmed Incorporated

4851 Lake Brook Drive

Glen Allen, Virginia 23060

(804) 565-3000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


 

Copies to:

 

T. Justin Moore, III, Esq.

Hunton & Williams LLP

Riverfront Plaza, East Tower

951 East Byrd Street

Richmond, Virginia 23219

(804) 788-8200

 


 

Approximate date of commencement of the proposed sale to the public:     As soon as practicable after this Registration Statement becomes effective.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment, please check the following box.   ¨

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.   x

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨             

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective statement for the same offering.   ¨             

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.   ¨

 

 

 

CALCULATION OF REGISTRATION FEE


Title of Each Class of

Securities to be Registered

  

Amount

to be

Registered

 

Proposed
Maximum
Offering Price

Per Share(1)

   Proposed
Maximum
Aggregate
Offering Price(1)
   Amount of
Registration Fee(1)

Common Stock, $0.01 par value(2)

   8,416,222 shares(2)(3)   $2.67    $22,471,313    $1,818

(1)   Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) on the basis of $2.67 per share, which was the average of the high and low prices of the common stock as quoted on the Nasdaq National Market on July 23, 2003.
(2)   This Registration Statement also relates to the rights to purchase shares of Series A Junior Participating Preferred Stock of the Registrant which are attached to all shares of Common Stock issued pursuant to terms of the Registrant’s Rights Agreement, dated as of May 16, 2001. Until the occurrence of certain prescribed events, the rights are not exercisable, are evidenced only by the certificates for the Common Stock and will be transferred with and only with the Common Stock. Because no separate consideration is paid for the rights, the registration fee therefor is included in the fee for the Common Stock.
(3)   Includes 3,269,376 shares of common stock issuable upon exercise of warrants to purchase common stock held by the selling shareholders.

 


 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 



Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting any offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JULY 24, 2003

 

P R O S P E C T U S

 

8,416,222 Shares

 

INSMED INCORPORATED

Common Stock

 


 

This prospectus relates to the offer and sale from time to time of (i) up to 5,146,846 shares of our common stock and (ii) up to 3,269,376 shares of our common stock issuable upon exercise of warrants to purchase common stock held by the selling shareholders, both for the benefit of the selling shareholders named in this prospectus.

 

The selling shareholders identified in this prospectus, or their pledgees, donees, transferees or other successors-in-interest, may sell the shares of our common stock at various times and in various types of transactions, including sales in the open market, sales in negotiated transactions and sales by a combination of these methods. Shares may be sold at the market price of the common stock at the time of a sale, at prices relating to the market price over a period of time or at prices negotiated with the buyers of shares. We do not know, however, when the proposed sales of the shares by the selling shareholders will occur. More detailed information concerning the distribution of the shares is contained in the section of this prospectus entitled “Plan of Distribution” which begins on page 21.

 

We are registering the offer and sale of the shares of common stock to satisfy our contractual obligations to provide the selling shareholders with freely tradable shares. We will not receive any of the proceeds from the sale of the shares.

 

Our common stock is listed on the Nasdaq National Market under the trading symbol “INSM.” The reported closing price of our common stock on the Nasdaq National Market on July 23, 2003 was $2.62 per share.

 


 

YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.

 


 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is             , 2003


Table of Contents

TABLE OF CONTENTS

 

     Page

The Company

   3

The Offering

   7

Risk Factors

   8

Forward Looking Information

   18

Use of Proceeds

   19

Selling Shareholders

   19

Plan of Distribution

   21

Legal Matters

   23

Experts

   23

Where You Can Find More Information

   23

Information Incorporated by Reference

   23

 

You should rely on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this prospectus. The selling shareholders, as defined below, are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the shares of common stock.

 

In this prospectus, “selling shareholders” refers to the persons identified in the section titled “Selling Shareholders” beginning on page 19.

 

In this prospectus, “Insmed,” “we,” “us” and “our” refer to Insmed Incorporated.

 

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THE COMPANY

 

Introduction

 

Insmed was incorporated in Virginia on November 29, 1999 to facilitate the May 31, 2000 acquisition of Celtrix Pharmaceuticals, Inc. by Insmed Pharmaceuticals, Inc. Insmed Pharmaceuticals, Inc., our predecessor, was incorporated in Virginia on September 23, 1988 and Celtrix Pharmaceuticals, Inc., was incorporated on July 24, 1990. Our principal executive offices are located at 4851 Lake Brook Drive, Glen Allen, Virginia 23060 and our phone number is (804) 565-3000.

 

We are a biopharmaceutical company focused on the discovery and development of drug candidates for the treatment of metabolic diseases and endocrine disorders. Our approach is to correct metabolic defects in the human body by replacing key regulatory molecules in a physiologically relevant fashion. We believe this approach will translate into an intrinsic safety advantage for our products in the marketplace. We currently have two lead drug candidates, recombinant human insulin-like growth factor one, complexed with recombinant human insulin-like growth factor binding protein three (rhIGF-I/rhIGFBP-3), also known as SomatoKine, and recombinant human insulin-like growth factor binding protein three (rhIGFBP-3). We are actively developing these drugs to treat indications in the metabolic and oncology fields.

 

Medical Background

 

One of the main factors in maintaining normal healthy growth and metabolism is the equilibrium of the triumvirate of insulin, growth hormone and insulin-like growth factor I (IGF-I). Any imbalance in the various levels of these key components will result in multiple endocrine and metabolic conditions such as Growth Hormone Deficiency and Diabetes. It is believed that the administration of IGF-I, bound together with its most common binding protein IGFBP-3, addresses certain deficiencies and instabilities caused by an imbalance in this key axis.

 

Hormones

 

Hormones are chemical messenger molecules that are made by various glands and secreted into the bloodstream to stimulate other parts of the body to perform specific activities. The human body produces a number of individual hormones that fulfill varied purposes. One of the hormones, growth hormone (GH), is made by the pituitary gland in the central brain and its primary function is to stimulate growth. As such, GH secretion is most urgently needed during adolescence when it reaches its peak concentrations in the circulatory system. GH is most frequently produced and secreted in short bursts during sleep. Typically, after the age of 20 the secretion of GH starts to decrease rapidly as the need for growth is much reduced. However, the secretion of GH does not stop completely as its presence is critical for a number of vital biological processes, including tissue repair, muscle growth, healing, brain function, bone strength, energy and metabolism. GH does not last long in the bloodstream and circulating GH is rapidly absorbed by the liver, where it stimulates the production of growth factors, including IGF-I. The term “insulin-like” growth factor was adopted because IGF-I shares significant structural homology with insulin and it is a member of the peptide family which includes insulin. IGF-I is a hormone just like GH, and, although GH is the initiator of a complex biological signaling cascade that promotes growth in different tissues, it is actually IGF-I that is the principal messenger molecule at the cellular level. Similar to replacing insulin in diabetic patients, we believe it should be possible to treat growth related deficiencies caused by either GH deficiencies or insensitivity to GH by making more IGF-I available in the bloodstream. Growth hormone insensitivity syndrome (GHIS) is a syndrome whereby the body does not have, or has lost, its ability to recognize human growth hormone and therefore fails to respond in the normal manner. This results in defective cell and tissue growth. There are two main types of GHIS: primary GHIS where an individual is born with a growth hormone receptor (GHR) defect, and secondary GHIS, where an individual acquires the GHR defect sometime during their life.

 

A subset of primary GHIS is Laron syndrome (LS), a rare genetic condition which presently is reported to affect over 250 patients world-wide. These patients are characterized by severe dwarfism and metabolic dysfunction. LS patients also have normal to high levels of human GH and low levels of IGF-I and IGFBP-3. Most LS patients are diagnosed around the age of two and if untreated often grow to adult heights of less than four feet. As adults, LS patients experience progressive obesity, insulin resistance, and a predisposition towards high total cholesterol and diabetes.

 

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We have initiated a pivotal clinical trial in the pre-pubertal LS population, utilizing rhIGF-I/rhIGFBP-3. We believe this limited population could obtain a great deal of therapeutic benefit from treatment because they have yet to enter their normal key growth phase. If successful in treating GHIS, we further believe that rhIGF-I/rhIGFBP-3 could offer the potential for treating several other medical conditions including diabetes, severe burns and hip fractures.

 

Oncology

 

Cancer is a term applied to a variety of diseases, all of which are characterized by abnormal and unregulated cell growth. The World Health Organization estimates that by 2020, the number of annual worldwide cancer related deaths is expected to reach 10 million. Although there are several drugs available to treat cancer, their use often produces significant side effects and decreases the quality of life of the patient.

 

Clearly there are a number of factors which can contribute to the development and progression of malignancies. Scientific research over the past two decades has brought about the identification of key cellular pathways that regulate tumor growth. As a result, novel agents that target these growth-promoting pathways are emerging as promising new treatments for cancer.

 

Our oncology program focuses on IGFBP-3, a protein that is normally found in the bloodstream and that has been shown to induce cancer cell death in a variety of experimental systems. Several studies have demonstrated that cancer risk increases with decreasing levels of circulating IGFBP-3. In addition, recent independent studies have demonstrated that IGFBP-3 can induce cell cycle arrest and enhance the efficacy of chemotherapeutic agents. Insmed is currently engaged in an active preclinical program with leading clinical oncologists and world experts in the field of IGFBP-3 research to evaluate the efficacy of rhIGFBP-3 as a therapeutic agent and to define the optimal clinical protocol in which to translate these promising observations into human clinical trials.

 

Insmed’s Products

 

rhIGF-I/rhIGFBP-3

 

Our lead product candidate, rhIGF-I/rhIGFBP-3, is the recombinant protein complex of IGF-I and its most abundant binding protein, IGFBP-3. Although IGF-I is also found in its “pure” form in the bloodstream, free circulating IGF-I has a biological half-life of approximately 15 minutes. IGF-I is most frequently found in the circulatory system bound to its natural binding protein IGFBP-3 which, as a complex, has a biological half-life of 12 to 15 hours. We believe this extended half-life may offer an improved safety and efficacy profile compared to the administration of rhIGF-I alone.

 

rhIGF-I/rhIGFBP-3 is a complex made up of IGF-I derived from E. coli containing a gene encoding human IGF-I, bound to IGFBP-3 derived from E. coli containing a gene encoding human IGFBP-3. When injected into animals and humans, rhIGF-I/rhIGFBP-3 mimics the physiological effects of IGF-I and offers certain benefits over the administration of rhIGF-I, including:

 

    providing a convenient once daily dose regimen; and

 

    possibly providing an improved safety profile.

 

Several short and long-term (greater than five years) studies to evaluate the effects of rhIGF-I in children with GHIS, such as LS, have demonstrated the effectiveness of rhIGF-I to significantly increase growth velocity.

 

The Food and Drug Administration (FDA) in the US and the European Medical Evaluation Agency (EMEA) in Europe have granted us Orphan Drug Status for rhIGF-I/rhIGFBP-3 for the treatment of GHIS, which could lead to an extended period of market exclusivity. We have recently initiated a pivotal trial for rhIGF-I/rhIGFBP-3 for the treatment of GHIS and plan to apply for marketing authorization in the US and Europe during the second half of 2004. It is our intention to initially enter the market with the GHIS indication and then pursue additional unmet medical needs in which IGF-1 deficiency has been shown to play a role.

 

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We also have positive results from previously conducted clinical trials with rhIGF-I/rhIGFBP-3 in the treatment of diabetes, recovery from burn injuries and recovery from osteoporotic hip fractures.

 

In April 2000, the Journal of Clinical Endocrinology & Metabolism published the results of our first completed Phase II clinical trial with rhIGF-I/rhIGFBP-3 for type 1 diabetes. This trial demonstrated that rhIGF-I/rhIGFBP-3 significantly improves insulin sensitivity and lowers glucose in patients with type 1 diabetes with no clinically relevant adverse side effects. This data was based on a double-blind, placebo-controlled study involving 12 patients with type 1 diabetes. Specifically, data from this study revealed that when compared to placebo, average daily insulin requirements were significantly reduced (p<0.01), average daily blood glucose levels declined (p<0.02) and cholesterol levels declined (p<0.05). Published results of previous studies by other companies of IGF-I administered alone without rhIGFBP-3 indicate that patients frequently reported jaw pain, muscular pain, headache and tissue swelling. There were no reports of clinically relevant side effects in this Phase II trial of rhIGF-I/rhIGFBP-3.

 

At the 2001 American Diabetes Association meeting, we reported results from our clinical study of rhIGF-I/rhIGFBP-3 in type 2 diabetes patients. Data from this randomized, double-blind study demonstrated that the drug reduced insulin consumption by 51% to 83% and fasting blood glucose levels by 29% to 31%.

 

In January 2002, we announced positive results from a Phase II dose-ranging trial of rhIGF-I/rhIGFBP-3 in patients with type 2 diabetes. This study was placebo-controlled and double-blinded with eight-day treatment duration to determine the efficacy, safety and pharmacokinetics of rhIGF-I/rhIGFBP-3 in subjects with type 2 diabetes. Thirty-seven subjects were randomized to receive either placebo or rhIGF-I/rhIGFBP-3 at dose levels between 0.125 mg/kg and 2 mg/kg once daily in the evening. All subjects were on insulin therapy prior to enrollment and continued to receive appropriate insulin doses during a four-day run-in period as well as during the treatment period. The data demonstrated that statistically significant improvements in insulin sensitivity and fasting blood glucose occurred with the administration of rhIGF-I/rhIGFBP-3, with the most pronounced changes achieved with a dose of 2 mg/kg. At this dose a significant decrease in average daily insulin requirement from 70.8 units at baseline to 56.5 units (-20.2%) at the end of the treatment period was observed. Other outcome measurements included the change in fasting blood glucose which was decreased from 171.5mg/dL at baseline to 102.2mg/dL on treatment day eight (-40.4%) for the patient group receiving 2mg/kg of rhIGF-I/rhIGFBP-3 versus a decrease from 151.5mg/dL to 134.8mg/dL (-11%) for the patient group receiving placebo. The study further revealed a dose-dependent occurrence of mild hypoglycemia, which suggests that patients on rhIGF-I/rhIGFBP-3 therapy could have further lowered their daily insulin dose to achieve a desirable fasting blood glucose concentration. We believe the results demonstrated that a single daily dose of rhIGF-I/rhIGFBP-3 can be an effective adjunct to insulin in patients with type 2 diabetes whose blood glucose is poorly controlled by standard insulin regimens.

 

In January 2003, we announced positive results from a dose-ranging trial of rhIGF-I/rhIGFBP-3 in adolescent patients with type 1 diabetes. The double-blind placebo controlled dose-range finding study was designed to investigate the effects of the addition of a single daily dose of rhIGF-I/rhIGFBP-3 on insulin sensitivity, growth hormone and IGF-I levels in adolescent subjects with type 1 diabetes. The study was conducted at the University of Cambridge in Cambridge, England. All subjects were on insulin therapy prior to enrollment and continued to receive appropriate insulin doses during the study. The study revealed that following the administration of rhIGF-I/rhIGFBP-3, IGF-I blood levels were restored and increases in insulin sensitivity occurred in a dose-dependent manner. These results were presented at the American Diabetes Association Meeting in July 2003.

 

rhIGFBP-3

 

Our second product candidate, rhIGFBP-3, is a proprietary product currently in preclinical development to evaluate its potential as a novel anti-tumor agent to treat human cancers. In January 2003 we announced the results of studies conducted by our collaborators at McGill University in Montreal, Canada and the Bristol Royal Infirmary in Bristol, England. These studies demonstrated that rhIGFBP-3 caused a significant reduction in cancer cell growth and a marked inhibition of tumor growth in animals with no adverse side effects. Ongoing preclinical work is directed toward defining the optimal clinical protocol in which to translate the promising observations.

 

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This program is very focused and is moving forward at a rapid pace. Toxicology studies in support of the Phase I clinical program have already begun and we plan to initiate clinical studies in the first half of 2004. In addition, we are actively seeking strategic partnerships to expedite the clinical development of this compound.

 

In July 2003 at the 94 th Annual Meeting of the American Association of Cancer Research, we reported data from recent studies of our proprietary anti-cancer compound, rhIGFBP-3. The study conducted at McGill University in Montreal, Canada was designed to examine the anti-tumor effect of rhIGFBP-3 in three solid tumor models: lung, breast and colon, with the objective of determining the potential therapeutic capability of rhIGFBP-3 in human trials. The results of this study, published in the abstract titled, “Insulin-Like Growth Factor-Binding Protein 3: Single Agent and Synergistic Effects with Chemotherapeutic Drugs on Solid Tumor Model,” demonstrated the following:

 

  1.   rhIGFBP-3 inhibited lung tumor growth by 70% as a single agent in mice.

 

  2.   rhIGFBP-3 increased the effect of paclitaxel, a chemotherapy drug, from 33% to 61% in mice bearing human breast tumors.

 

  3.   rhIGFBP-3 inhibited colorectal tumor growth in mice by 25% as a single agent and increased the inhibitory effect of irinotecan, a chemotherapy drug, from 30% to 69%.

 

In summary, rhIGFBP-3 exhibited single agent and/or combinatorial anti-tumor effects in three solid tumor models. No signs of rhIGFBP-3 toxicity were noted in any of the animal studies.

 

A further study conducted at McGill University, was designed to evaluate the effects of rhIGFBP-3 on radiation therapy in a model of human breast cancer. The results are published in the abstract titled, “Radiosensitizing effect of rhIGFBP-3 on MCF-7 Breast Cancer Cells In Vitro”, which demonstrate the following:

 

  1.   rhIGFBP-3 alone produced a dose-dependent inhibition of cell proliferation, with a maximum suppression of approximately 45%.

 

  2.   The data also showed that rhIGFBP-3 enhanced the apoptotic effects (programmed cell death) of radiation therapy.

 

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THE OFFERING

 

Common stock offered by selling shareholders

8,416,222 shares (including up to 3,269,376 shares issuable upon exercise of warrants to purchase common stock held by the selling shareholders).

 

Use of proceeds

We will not receive any proceeds from the sale of our common stock sold by selling shareholders.

 

Nasdaq National Market symbol

INSM

 

 

Risk Factors

See “Risk Factors” for a discussion of the factors you should carefully consider before deciding to invest in shares of our common stock.

 

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RISK FACTORS

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before making an investment decision. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

 

If any of the following risks actually occur, our business, financial condition, or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment.

 

This prospectus contains forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a variety of factors, including those set forth in the following risk factors and elsewhere in, or incorporated by reference into, this prospectus. In evaluating an investment in the shares of common stock you should consider carefully the following risk factors in addition to the other information presented in this prospectus or incorporated by reference into this prospectus.

 

GENERAL RISKS RELATED TO OUR BUSINESS

 

Because our products are in an early stage of development, we have not received regulatory approval for any of our products or released any products for commercial sale; therefore, we can give you no assurances that we will succeed in commercializing our products.

 

Our long-term viability and growth will depend on the successful commercialization of products resulting from our development activities, including rhIGF-I/rhIGFBP-3 and rhIGFBP-3. All of our potential products and production technologies are in the research or development stages, and we have generated no revenues from product sales. We need to conduct significant additional development, laboratory and clinical testing and invest significant additional amounts of capital before we can successfully commercialize our products. We can give you no assurances that we will identify, develop or produce products with commercial potential or that we will secure market acceptance for our products. The failure to commercialize our potential products will adversely affect our business, financial condition and results of operations. In addition, the research, development, testing, clinical trials and acquisition of the necessary regulatory approvals with respect to any given product will take many years and thus delay our receipt of revenues, if any, from any such products. Also, potential products that appear promising at early stages of development may fail for a number of reasons, including the possibility that the products:

 

    may be ineffective;

 

    may cause harmful side effects; or

 

    may be too expensive to manufacture.

 

Our products may also fail to receive regulatory approval and, even after regulatory authorities approve our products, the products may fail to achieve market acceptance or the proprietary rights of third parties may prevent their commercialization.

 

Since we have a limited operating history, a history of operating losses and an expectation that we will generate operating losses for the foreseeable future, we may not achieve profitability for some time, if at all.

 

We are focused on product development and we currently have no sales. We have incurred losses each year of operation and we expect to continue incurring operating losses for the foreseeable future. The process of developing our products requires significant pre-clinical testing and clinical trials as well as regulatory approvals for commercialization and marketing before we can begin to generate any revenue from product sales. In addition, successful commercialization of our drug candidates will require us to establish a sales and marketing organization and contractual relationships to enable product manufacturing and other related activity. We expect that these activities, together with our general and administrative expenses, will result in substantial operating losses for the foreseeable

 

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future. As of March 31, 2003, our accumulated deficit was $178.4 million. For the quarter ended March 31, 2003, our consolidated net loss was $2.2 million.

 

We will need additional funds in the future to continue our operations, but we face uncertainties with respect to our access to capital that could adversely impact our business, financial condition and results of operations.

 

We will require substantial future capital in order to continue to conduct the time-consuming research and development, clinical studies and regulatory activities necessary to bring our therapeutic products to market and to establish production, marketing and sales capabilities. There can be no assurance that our cash reserves together with any subsequent funding will satisfy our capital requirements. The failure to satisfy our capital requirements will adversely affect our business, financial condition and results of operations. Our future capital requirements will depend on many factors, including the progress of pre-clinical testing and clinical trials, the time and costs involved in obtaining regulatory approvals, the costs involved in filing and prosecuting patent applications and enforcing patent claims and the establishment of strategic alliances and activities required for product commercialization. We believe that existing cash reserves with the additional capital will sufficiently fund our activities through 2005.

 

We may seek additional funding through strategic alliances, private or public sales of our securities or licensing all or a portion of our technology. Such funding may significantly dilute existing shareholders or may limit our rights to our currently developing technology. There can be no assurance, however, that we can obtain additional funding on reasonable terms, or at all. If we cannot obtain adequate funds, we may need to significantly curtail our product development programs and/or relinquish rights to our technologies or product candidates.

 

If our products fail in clinical trials or if we cannot enroll enough patients to complete our clinical trials, there may be an adverse effect on our business, financial condition and results of operations.

 

In order to sell our products, we must receive regulatory approval for our products. Before obtaining regulatory approvals for the commercial sale of any of our products under development, we must demonstrate through pre-clinical studies and clinical trials that the product is safe and effective for use in each target indication. Therefore, if our products fail in clinical trials, there will be an adverse effect on our business, financial condition and results of operations. In addition, the results from pre-clinical testing and early clinical trials may not be predictive of results obtained in later clinical trials. There can be no assurance that our clinical trials will demonstrate sufficient safety and effectiveness to obtain regulatory approvals. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in late stage clinical trials even after promising results in early stage development.

 

The completion rate of our clinical trials is dependent on, among other factors, the patient enrollment rate. Patient enrollment is a function of many factors, including:

 

    patient population size;

 

    the nature of the protocol to be used in the trial;

 

    patient proximity to clinical sites;

 

    eligibility criteria for the study; and

 

    competition from other companies’ clinical trials for the same patient population.

 

We believe our planned procedures for enrolling patients are appropriate; however, delays in patient enrollment would increase costs and delay ultimate sales, if any, of our products. Such delays could materially adversely affect our business, financial condition and results of operations.

 

If we fail to obtain regulatory approvals for our products under development, such failure may adversely affect our business, financial condition and results of operations.

 

Because our products are in an early stage of development, none has received regulatory approval or been released for commercial sale. The pre-clinical testing and clinical trials of any compounds we develop and the

 

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manufacturing and marketing of any drugs produced from such compounds must comply with regulation by numerous federal, state and local governmental authorities in the United States, principally the FDA, and by similar agencies in other countries. No product can receive FDA approval unless human clinical trials show its safety and effectiveness. There can be no assurance that clinical testing will provide evidence of safety and effectiveness in humans or that regulatory agencies will grant approvals for any of our products.

 

The regulatory process takes many years and requires the expenditure of substantial resources. Data obtained from pre-clinical and clinical activities are subject to varying interpretations that could delay, limit or prevent regulatory agency approval. We may also encounter delays or rejections based on changes in regulatory agency policies during the period in which we develop a drug and/or the period required for review of any application for regulatory agency approval of a particular compound. Delays in obtaining regulatory agency approvals could adversely affect the marketing of any drugs that our collaborative partners or we develop. Such delays could impose costly procedures on our collaborative partners’ or our activities, diminish any competitive advantages that our collaborative partners or we may attain and adversely affect our ability to receive royalties, any of which could materially adversely affect our business, financial condition and results of operations.

 

If the FDA grants approval for a drug, such approval may limit the indicated uses for which we may market the drug, and this could limit the potential market for such drug. Furthermore, if we obtain approval for any of our products, the marketing and manufacture of such products remain subject to extensive regulatory requirements. Even if the FDA grants approval, such approval would be subject to continual review, and later discovery of unknown problems could restrict the products future use or cause their withdrawal from the market. Failure to comply with regulatory requirements could, among other things, result in fines, suspension of regulatory approvals, operating restrictions and criminal prosecution. In addition, many countries require regulatory agency approval of pricing and may also require approval for the marketing in such countries of any drug that our collaborative partners or we develop.

 

We cannot be certain that we will obtain any regulatory approvals in other countries, and the failure to obtain such approvals may materially adversely affect our business, financial condition and results of operations. In order to market our products outside of the United States, our corporate partners and we must comply with numerous and varying regulatory requirements of other countries. The approval procedures vary among countries and can involve additional product testing and administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries includes all of the risks associated with obtaining FDA approval detailed above. Approval by the FDA does not ensure approval by the regulatory authorities of other countries.

 

If our products fail to achieve market acceptance for any reason, such failure may adversely affect our business, financial condition and results of operations.

 

There can be no assurance that any of our product candidates, if approved for marketing, will achieve market acceptance. If our products do not receive market acceptance for any reason, it will adversely affect our business, financial condition and results of operations. The degree of market acceptance of any products we develop will depend on a number of factors, including:

 

    the establishment and demonstration in the medical community of the clinical efficacy and safety of our products;

 

    their potential advantage over existing treatment methods; and

 

    reimbursement policies of government and third-party payers, including insurance companies.

 

For example, even if we obtain regulatory approval to sell our products, physicians and healthcare payers could conclude that our products are not safe and effective and physicians could choose not to use them to treat patients. Our competitors may also develop new technologies or products which are more effective or less costly, or that seem more cost-effective than our products. We can give no assurance that physicians, patients, third-party payers or the medical community in general will accept and use any products that we may develop.

 

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We currently have no internal manufacturing and limited marketing capability, which may make commercializing our products difficult.

 

We have no internal manufacturing and limited marketing capability. Failure to successfully manufacture and market our products could materially adversely affect our business, financial condition and results of operations. We intend to enter strategic alliances with other parties that have established commercial scale manufacturing capabilities. There can be no assurance that we will enter such strategic alliances on terms favorable to us, or at all. If we are unable to establish and maintain relationships with third parties for manufacturing sufficient quantities of our product candidates and their components that meet our planned time and cost parameters, the development and timing of our clinical trials may be adversely affected. In addition, there can be no assurance that an adverse FDA inspection of a contractor’s manufacturing facilities would not impede our commercial supply capability. As an alternative, we may choose to commercialize such products on our own, which would require substantial additional funds.

 

If the FDA or any other regulatory agency permits us to commence commercial sales of products, we will face competition with respect to commercial sales, marketing and distribution. These are areas in which we have no experience. To market any of our products directly, we must develop a marketing and sales force with technical expertise and with supporting distribution capability. Alternatively, we may engage a pharmaceutical company with a large distribution system and a large direct sales force to assist us. There can be no assurance that we will successfully establish sales and distribution capabilities or gain market acceptance for our proprietary products. To the extent we enter co-promotion or other licensing arrangements, any revenues we receive will depend on the efforts of third parties and there can be no assurance that our efforts will succeed.

 

Manufacturing capacity necessary to supply rhIGF-I/rhIGFBP-3 and rhIGFBP-3 may not be available, which may adversely affect our business, financial condition and results of operations.

 

The available capacity for the manufacture of recombinant proteins that comprise rhIGF-I/rhIGFBP-3 is limited. A shutdown or disruption in any of these facilities due to technical, regulatory or other problems, resulting in an interruption in supply of these materials, could delay our development activities and adversely impact our business, financial condition and results of operations.

 

Process improvements in the manufacture of rhIGF-I/rhIGFBP-3 and rhIGFBP-3 will be necessary to conduct Phase III clinical trials and produce commercial scale quantities.

 

We have signed an agreement with Avecia Limited to manufacture rhIGF-I/rhIGFBP-3 and rhIGFBP-3 at Avecia’s site at Billingham, England. At present, rhIGF-I/rhIGFBP-3 and rhIGFBP-3 have never been manufactured by Avecia; we cannot guarantee that they will be able to produce rhIGF-I/rhIGFBP-3 and rhIGFBP-3 at scales necessary for Phase III and commercialization. If process improvements are not successful, our costs will increase and the manufacture of rhIGF-I/rhIGFBP-3 and rhIGFBP-3 for research and development will be delayed. Such delay could materially adversely affect our business, financial condition and results of operations.

 

We need collaborative relationships for success.

 

We currently rely and may in the future rely on a number of significant collaborative relationships for research funding, clinical development and/or sales and marketing. Reliance on collaborative relationships poses a number of risks, including the following:

 

    we cannot effectively control whether our corporate partners will devote sufficient resources to our programs or products;

 

    disputes may arise in the future with respect to the ownership of rights to technology developed with corporate partners;

 

    disagreements with corporate partners could delay or terminate the research, development or commercialization of product candidates or result in litigation or arbitration;

 

    contracts with our corporate partners may fail to provide sufficient protection of our intellectual property;

 

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    we may have difficulty enforcing the contracts if one of these partners fails to perform;

 

    corporate partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue technologies or products either on their own or in collaboration with our competitors; and

 

    corporate partners with marketing rights may choose to devote fewer resources to the marketing of our products than they do to products of their own development.

 

Given these risks, a great deal of uncertainty exists regarding the success of our current and future collaborative efforts. Failure of these efforts could delay our product development or impair commercialization of our products.

 

Uncertainty regarding third-party reimbursement and healthcare cost containment initiatives may negatively affect our business, financial condition and results of operations.

 

If we succeed in bringing any of our proposed products to the market, we cannot assure you that third parties will consider the products cost-effective or provide reimbursement in whole or in part for their use. Our commercial success will depend in part on third-party payers agreeing to reimburse patients for the costs of products. Government health administration authorities, private health insurers and other organizations generally provide reimbursement. Third-party payers frequently challenge the pricing of new drugs. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Therefore, third-party payers may not approve our products for reimbursement.

 

If third-party payers do not approve our products for reimbursement, sales will suffer, as some patients will opt for a competing product that is approved for reimbursement. Even if third-party payers make reimbursement available, these payer’s reimbursement policies may adversely affect our corporate partners and our ability to sell such products on a profitable basis.

 

Moreover, the trend toward managed healthcare in the United States, the growth of organizations such as health maintenance organizations and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for our products which could adversely affect our business, financial condition and results of operations.

 

In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after the FDA or other regulatory agencies approve any of our proposed products for marketing. While we cannot predict the likelihood of any such legislative or regulatory proposals, if the government or an agency adopts such proposals, they could materially adversely affect our business, financial condition and results of operations.

 

Our growth strategy includes acquiring complementary businesses or technologies that may not be available or, if available and purchased or licensed, might not improve our business, financial condition or results of operations.

 

As part of our business strategy, we expect to pursue acquisitions and in-license new products and technologies. Nonetheless, we cannot assure you that we will identify suitable acquisitions or products or that we can make such acquisitions or enter into such license agreements on acceptable terms. If we acquire businesses, those businesses may require substantial capital, and we cannot assure you that such capital will be available in sufficient amounts or that financing will be available in amounts and on terms that we deem acceptable. Furthermore, the integration of acquired businesses may result in unforeseen difficulties that require a disproportionate amount of management’s attention and our other resources. Finally, we cannot assure you that we will achieve productive synergies and efficiencies from these acquisitions.

 

We intend to conduct proprietary development programs with collaborators, and any conflicts with them could harm our business, financial condition and results of operations.

 

We intend to enter into collaborative relationships which will involve our collaborator conducting proprietary development programs. Any conflict with our collaborators could reduce our ability to obtain future

 

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collaboration agreements and negatively influence our relationship with existing collaborators, which could reduce our revenues and have an adverse effect on our business, financial condition and results of operations. Moreover, disagreements with our collaborators could develop over rights to our intellectual property.

 

Certain of our collaborators could also be or become competitors. Our collaborators could harm our product development efforts by:

 

    developing competing products;

 

    precluding us from entering into collaborations with their competitors;

 

    failing to obtain timely regulatory approvals;

 

    terminating their agreements with us prematurely; or

 

    failing to devote sufficient resources to the development and commercialization of products.

 

We face uncertainties related to patents and proprietary technology that may adversely affect our business, financial condition and results of operations.

 

Our success will depend in part on our ability to:

 

    obtain patent protection for our products;

 

    prevent third parties from infringing on our patents; and

 

    refrain from infringing on the patents of others, both domestically and internationally.

 

Our patent positions are highly uncertain, and any future patents we receive for our potential products will be subject to this uncertainty, which may adversely affect our business, financial condition and results of operations. We intend to actively pursue patent protection for products arising from our research and development activities that have significant potential commercial value. Nevertheless, it is possible that, in the patent application process, certain claims may be rejected or achieve such limited allowance that the value of the patents would be diminished. Further, there can be no assurance that any patents obtained will afford us adequate protection. In addition, any patents we procure may require cooperation with companies holding related patents. We may have difficulty forming a successful relationship with these other companies.

 

We can give no assurance that a third party will not claim (with or without merit) that we have infringed or misappropriated their proprietary rights. A variety of third parties have obtained, and are attempting to obtain, patent protection relating to the production and use of rhIGF-I and/or rhIGFBP-3. We can give no assurances as to whether any issued patents, or patents that may later issue to third parties, would affect our contemplated commercialization of rhIGF-I/rhIGFBP-3 or rhIGFBP-3. We can give no assurances that such patent(s) can be avoided, invalidated or licensed. If any third party were to assert a claim for infringement, we can give no assurances that we would be successful in the litigation or that such litigation would not have a material adverse effect on our business, financial condition and results of operation. Furthermore, we may not be able to afford the expense of defending against such a claim.

 

Third parties, including Genentech, Chiron, Amgen, Novartis AG, Fujisawa, Beth Israel Hospital and Robert Rieveley hold United States and/or foreign patents possibly directed to the composition, production and/or use of rhIGF-I, rhIGFBP-3, rhIGF-I/rhIGFBP-3 and/or recombinant proteins in general. After examining these patents, we do not believe they present an obstacle to our plans to commercialize rhIGF-I/rhIGFBP-3 and rhIGFBP-3. However, we can provide no assurance that any one of these third parties will not assert in the future a contrary position, for instance in the context of an infringement action. Moreover, while we cannot predict with certainty the outcome of such a proceeding, an adverse ruling could impact our ability to make, use or sell our products.

 

We may have to undertake costly litigation to enforce any patents issued or licensed to us or to determine the scope and validity of another party’s proprietary rights. We cannot assure that a court of competent jurisdiction

 

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would validate our issued or licensed patents. An adverse outcome in litigation or an interference or other proceeding in a court or patent office could subject us to significant liabilities to other parties, require us to license disputed rights from other parties or require us to cease using such technology, any of which could materially adversely affect our business, financial condition and results of operations.

 

In 1998 Genentech requested a hearing with the European Patent Office to oppose the validity of one of our European patents with claims to rhIGFBP-3, uses of rhIGFBP-3 and uses of rhIGF-I/rhIGFBP-3. As of yet, no hearing date has been set by the European Patent Office. Should the opposition hearing be held and should Genentech prevail, some or all of the claims of this patent may be revoked. This result could lessen our ability to exclude others, but would not affect our own ability, to practice these claims.

 

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

 

In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

 

Third-party claims that our products infringe on their proprietary rights may adversely affect our business, financial condition and results of operations.

 

We have entered into license agreements, and may enter into future license agreements, with various licensees to develop and market our products, and we cannot assure that third parties will not claim that we and/or our licensees, by practicing our technology, are infringing on their proprietary rights. If other companies successfully bring legal actions against us or our licensees claiming patent or other intellectual property infringements, in addition to any potential liability for damages, a court could require us and/or our licensees to obtain a license in order to continue to use the affected processes or to manufacture or use the affected products, or alternatively, require us and/or our licensees to cease using such products or processes. Such a result may have an adverse effect on our business, financial condition and results of operations. Any such claim, with or without merit, could result in costly litigation or might require us and/or our licensees to enter into royalty or licensing agreements, all of which could delay or otherwise adversely impact the development of our potential products for commercial use. If a court requires us to obtain licenses, there can be no assurance that we and/or our licensees will be able to obtain them on commercially favorable terms, if at all. Without such licenses, we and/or our licensees may be unable to develop certain products. Our breach of an existing license or our failure to obtain, or our delay in obtaining, a license to any technology that we require to commercialize our products may materially adversely impact our business, financial condition and results of operations.

 

An inability to compete successfully would harm our business, financial condition and results of operations.

 

We engage in a business characterized by extensive research efforts, rapid developments and intense competition. We cannot assure that our products will compete successfully or that research and development by others will not render our products obsolete or uneconomical. Our failure to compete effectively would materially adversely affect our business, financial condition and results of operations. We expect that successful competition will depend, among other things, on product efficacy, safety, reliability, availability, timing and scope of regulatory approval and price. Specifically, we expect crucial factors will include the relative speed with which we can develop products, complete the clinical testing and regulatory approval processes and supply commercial quantities of the product to the market. We expect competition to increase as technological advances are made and commercial applications broaden. In each of our potential product areas, we face substantial competition from large pharmaceutical, biotechnology and other companies, as well as universities and research institutions. Relative to us, most of these entities have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. Many of our competitors may achieve product commercialization or patent protection earlier than we will. Furthermore, we believe that our competitors have used, and may continue to use,

 

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litigation to gain a competitive advantage. Finally, our competitors may use different technologies or approaches to the development of products similar to the products we are seeking to develop.

 

Rapid technological change could make our products obsolete, which could materially adversely affect our business, financial condition and results of operations.

 

Biotechnology and related pharmaceutical technology have undergone and should continue to experience rapid and significant change. We expect that the technologies associated with biotechnology research and development will continue to develop rapidly. Our future will depend in large part on our ability to maintain a competitive position with respect to these technologies. Any compounds, products or processes that we develop may become obsolete before we recover any expenses incurred in connection with their development. Rapid technological change could make our products obsolete, which could materially adversely affect our business, financial condition and results of operations.

 

We are dependent upon retaining and attracting key personnel and others, the loss of which could materially adversely affect our business, financial condition and results of operations.

 

We highly depend on the principal members of our scientific and management staff, the loss of whose services might significantly delay or prevent the achievement of research, development or business objectives and would materially adversely affect our business, financial condition and results of operations. Our success depends, in large part, on our ability to attract and retain qualified management, scientific and medical personnel, and on our ability to develop and maintain important relationships with commercial partners, leading research institutions and key distributors. We face intense competition for such personnel and relationships. We cannot assure that we will attract and retain such persons or maintain such relationships.

 

We expect that our potential expansion into areas and activities requiring additional expertise, such as further clinical trials, regulatory compliance, governmental approvals, contract manufacturing and marketing, will place additional requirements on our management, operational and financial resources. We expect these demands will require an increase in management and scientific personnel and the development of additional expertise by existing management personnel. The failure to attract and retain such personnel or to develop such expertise could materially adversely affect prospects for our success.

 

Our research and development activities involve the use of hazardous materials, which could expose us to damages that could materially adversely affect our business, financial condition and results of operations.

 

Our research and development activities involve the controlled use of hazardous materials, including hazardous chemicals and radioactive materials. We believe that our procedures for handling hazardous materials comply with federal and state regulations; however, there can be no assurance that accidental injury or contamination from these materials will not occur. In the event of an accident, we could be held liable for any damages, which could exceed our available financial resources, including our insurance coverage. This liability could materially adversely affect our business, financial condition and results of operations.

 

We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. These laws and regulations may require us to incur significant costs to comply with environmental laws and regulations in the future that could materially adversely affect our business, financial condition and results of operations.

 

We may be subject to product liability claims if our products harm people, and we have only limited product liability insurance.

 

The manufacture and sale of human therapeutic products involve an inherent risk of product liability claims and associated adverse publicity. We currently have only limited product liability insurance for clinical trials and no commercial product liability insurance. We do not know if we will be able to maintain existing or obtain additional product liability insurance on acceptable terms or with adequate coverage against potential liabilities. This type of insurance is expensive and may not be available on acceptable terms. If we are unable to obtain or maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to commercialize our products. A successful product liability claim brought against us in excess

 

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of our insurance coverage, if any, may require us to pay substantial amounts. This could have a material adverse effect our business, financial condition and results of operations.

 

RISKS RELATED TO OUR COMMON STOCK

 

The market price of our stock may continue to be highly volatile.

 

Our common stock is listed on the Nasdaq National Market under the ticker symbol “INSM.” The market price of our stock has been and may continue to be highly volatile, and announcements by us or by third parties may have a significant impact on our stock price. These announcements may include:

 

    Our listing status on the Nasdaq National Market;

 

    Results of our clinical trials and preclinical studies, or those of our corporate partners or our competitors;

 

    Our operating results;

 

    Developments in our relationships with corporate partners;

 

    Developments affecting our corporate partners;

 

    Negative regulatory action or regulatory approval with respect to our announcement or our competitors’ announcement of new products;

 

    Government regulations, reimbursement changes and governmental investigations or audits related to us or to our products;

 

    Developments related to our patents or other proprietary rights or those of our competitors;

 

    Changes in the position of securities analysts with respect to our stock; and/or

 

    Operating results below the expectations of public market analysts and investors.

 

In addition, the stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging biotechnology and biopharmaceutical companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock.

 

Future sales by existing shareholders may lower the price of our common stock, which could result in losses to our shareholders.

 

Future sales of substantial amounts of common stock in the public market, or the possibility of such sales occurring, could adversely affect prevailing market prices for our common stock or our future ability to raise capital through an offering of equity securities. Substantially all of our common stock is freely tradable in the public market without restriction under the Securities Act of 1933, as amended (the “Securities Act”), unless these shares are held by “affiliates” of our company, as that term is defined in Rule 144 under the Securities Act.

 

We have never paid dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

 

We have not thus far paid cash dividends on our common stock. We currently intend to retain our future earnings, if any, to fund the development and growth of our businesses and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.

 

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Certain provisions of Virginia law, our articles of incorporation and our amended and restated bylaws, and our Stockholder Rights Plan make a hostile takeover by a third party difficult.

 

Certain provisions of Virginia law and our articles of incorporation and amended and restated bylaws could hamper a third party’s acquisition of, or discourage a third party from attempting to acquire control of us. The conditions could also limit the price that certain investors might be willing to pay in the future for shares of our common stock. These provisions include:

 

    a provision allowing us to issue preferred stock with rights senior to those of the common stock without any further vote or action by the holders of the common stock. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of the common stock. In certain circumstances, such issuance could have the effect of decreasing the market price of the common stock;

 

    the existence of a staggered board of directors in which there are three classes of directors serving staggered three-year terms, thus expanding the time required to change the composition of a majority of directors and perhaps discouraging someone from making an acquisition proposal for us;

 

    the amended and restated bylaws’ requirement that shareholders provide advance notice when nominating our directors;

 

    the inability of shareholders to convene a shareholders’ meeting without the Chairman of the Board, the President or a majority of the board of directors first calling the meeting; and

 

    the application of Virginia law prohibiting us from entering into a business combination with the beneficial owner of 10% or more of our outstanding voting stock for a period of three years after the 10% or greater owner first reached that level of stock ownership, unless we meet certain criteria.

 

In addition, in May 2001 our board of directors approved the adoption of a Shareholder Rights Plan under which shareholders received rights to purchase new shares of preferred stock if a person or group acquires 15% or more of our common stock. These provisions are intended to discourage acquisitions of 15% or more of our common stock without negotiations with the board. The rights trade with our common stock, unless and until they are separated upon the occurrence of certain future events. Our board of directors may redeem the rights at a price of $0.01 per right prior to the time a person acquires 15% or more of our common stock.

 

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FORWARD-LOOKING INFORMATION

 

The matters discussed throughout this prospectus that are not historical facts are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. This prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Our actual results may differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below. In particular, please review the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our current reports on Form 10-Q for the quarter ended March 31, 2003, and in our annual report on Form 10-K for the fiscal year ended December 31, 2002, which reports are incorporated herein by reference, and such section of any subsequently filed Exchange Act reports.

 

These forward-looking statements may include, but are not limited to, future capital expenditures, acquisitions (including the amount and nature of acquisitions), future revenues, earnings, margins, costs, demand for new pharmaceutical products, market trends in the pharmaceutical business, inflation and various economic and business trends. You can identify forward- looking statements by the use of words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “plan” and similar expressions. Forward- looking statements include all statements regarding commencement of clinical trials, 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 our proposed products, plans and objectives of management, proposed relationships with third-party research organizations, manufacturers and suppliers and markets for our stock.

 

These forward-looking statements are found at various places throughout this prospectus. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to publicly release any revisions to these forward- looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors.” In connection with forward-looking statements which appear in these disclosures, prospective purchasers of the shares offered hereby should carefully consider the factors set forth in this prospectus under “Risk Factors.” Also these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus.

 

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USE OF PROCEEDS

 

We will not receive any proceeds from the sale of the shares of our common stock by the selling shareholders. All proceeds from the sale of the shares of common stock by the selling shareholders will be received directly by the selling shareholders. See “Selling Shareholders.” If the selling shareholders exercise the warrants to purchase our common stock, then we will receive the exercise price from the exercise of the warrants. The proceeds from the exercise of the warrants, if any, will be used for development of our pharmaceutical product candidates, working capital and general corporate purposes.

 

SELLING SHAREHOLDERS

 

On July 11, 2003 we issued 5,146,846 shares of our common stock and warrants to purchase up to 1,544,046 shares of our common stock to accredited institutional investors in a private placement transaction. In May 2000 we issued warrants to purchase up to 1,725,330 shares of our common stock to accredited institutional investors. We are registering the 8,416,222 shares covered by this prospectus on behalf of the selling shareholders named in the table below. We have registered the shares to permit the selling shareholders and their pledgees, donees, transferees or other successors-in-interest that receive their shares from the selling shareholders as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares.

 

The following table sets forth the name of each selling shareholder, the number of shares owned by it, the number of shares that may be offered under this prospectus and the number of shares of our common stock owned by the selling shareholder after this offering is completed. Except as otherwise disclosed below, none of the selling shareholders has, or within the past three years has had, any position, office or other material relationship with us. The number of shares in the column “Number of Shares Being Offered” represents all of the shares that a selling shareholder may offer under this prospectus and assumes the exercise of all the common stock warrants. The selling shareholders may sell some, all or none of their shares. We do not know how long the selling shareholders will hold the shares before selling them, and we currently have no agreements, arrangements or understandings with the selling shareholders regarding the sale of any of the shares. The shares offered by this prospectus may be offered from time to time by the selling shareholders.

 

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). The warrants issued to the investors in the July 2003 private placement are not exercisable until January 11, 2004. In accordance with Rule 13d-3(d), the 1,544,046 shares of common stock issuable upon exercise of these warrants will not be deemed to be beneficially owned by the investors until November 12, 2003. The number of shares in the column “Number of Shares of Common Stock Beneficially Owned Before This Offering” excludes the 1,544,046 shares of common stock underlying these warrants, and the number of shares in the column “Number of Shares Being Offered” includes the 1,544,046 shares of common stock underlying these warrants.

 

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Selling Shareholder


    

Number of Shares of
Common Stock

Beneficially Owned

Before This Offering


  

Number of Shares

Being Offered


  

Number of Shares of
Common Stock

Beneficially Owned

After This Offering


 

Portside Growth and Opportunity Fund LLC

   833,333    1,083,332    0  

Deephaven Small Cap Growth Fund LLC

   648,148    842,592    0  

Capital Ventures International

   555,555    722,221    0  

Omicron Master Trust

   518,518    674,073    0  

Elliott International, L.P.

   420,000    546,000    0  

Gryphon Master Fund, L.P.

   370,370    481,481    0  

Elliott Associates, L.P.

   280,000    364,000    0  

Langley Partners, L.P.

   260,000    338,000    0  

Quantum Partners, LDC

   494,995    250,048    244,947 (1)

Pequot International Fund, Inc.

   250,048    250,048    0  

Pequot Partners Fund, L.P.

   250,048    250,048    0  

Veron International Ltd.

   1,291,560    250,048    1,041,512 (2)

Otape Investments LLC

   185,185    240,740    0  

Castle Creek Healthcare Partners LLC

   185,185    240,740    0  

AIG DKR Soundshore Private Investors Holding Fund Lt.

   150,000    195,000    0  

Vector Later-Stage Equity Fund II (QP), L.P.

   723,253    187,536    535,717 (3)

CLSP, L.P.

   170,108    170,108    0  

Redwood Partners, LLC

   92,592    120,369    0  

Spectra Capital Management

   92,592    120,369    0  

Stonestreet LP

   92,592    120,369    0  

WEC Partners LLC

   92,592    120,369    0  

Highbridge International LLC

   100,018    100,018    0  

Truk Opportunity Fund, LLC

   75,000    97,500    0  

Crown Investment Partners, LP

   60,000    78,000    0  

Everspring Master Fund Ltd.

   50,000    65,000    0  

T. Rowe Price Health Services

   62,512    62,512    0  

Greenline Health Sciences Fund

   62,512    62,512    0  

Vector Later-Stage Equity Fund II, L.P.

   241,083    62,512    178,571 (1)

JAS Securities, LLC

   46,296    60,184    0  

TCMP3 Partners L.P.

   46,296    60,184    0  

CLSP-SBS I, L.P.

   58,511    58,511    0  

Greenwich Growth Fund Ltd.

   37,037    48,148    0  

Wolverine Trading LLC

   37,037    48,148    0  

Maybach Capital Inc.

   18,518    24,073    0  

CLSP-SBS II, L.P.

   21,429    21,429    0  
    
  
  

Total

   8,872,923    8,416,222    2,000,747  
    
  
  


(1)   Represents less than 1% of our outstanding shares of common stock upon completion of this offering.
(2)   Represents 2.5% of our outstanding shares of common stock upon completion of this offering.
(3)   Represents 1.3% of our outstanding shares of common stock upon completion of this offering.

 

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PLAN OF DISTRIBUTION

 

The selling shareholders and any of their donees, transferees, pledgees, assignees and successors-in-interest may sell, from time to time, any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling shareholder may use any one or more of the following methods when selling shares:

 

    ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

    block trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

    purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

    over-the-counter distribution in accordance with the rules of the Nasdaq National Market;

 

    privately negotiated transactions;

 

    short sales;

 

    broker-dealers may agree with the selling shareholder to sell a specified number of such shares at a stipulated price per share;

 

    a combination of any such methods of sale; and

 

    any other method permitted pursuant to applicable law.

 

Under applicable rules and regulations under the Securities Exchange Act, any person engaged in a distribution of the shares of common stock covered by this prospectus may be limited in its ability to engage in market activities with respect to such shares. A selling shareholder, for example, will be subject to applicable provisions of the Securities Exchange Act and the rules and regulations under it, including, without limitation, Regulation M, which provisions may restrict certain activities of the selling shareholder and limit the timing of purchases and sales of any shares of common stock by the selling shareholder. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. The foregoing may affect the marketability of the shares offered by this prospectus.

 

To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the shares or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of our common stock in the course of hedging the positions they assume with selling shareholders. The selling shareholders may also sell our securities short and redeliver the shares to close out such short positions. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions that require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares the broker-dealer or other financial institution may resell pursuant to this prospectus, as supplemented or amended to reflect such transaction.

 

The selling shareholder may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades. The selling shareholder may pledge its shares to their brokers under the margin provisions of customer agreements. If a selling shareholder defaults on a margin loan, the broker may offer and sell, from time to time, the pledged shares.

 

The selling shareholder may sell shares directly to market makers acting as principals and/or broker-dealers acting as agents for itself or its customers. Broker-dealers engaged by the selling shareholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions, concessions or discounts from the selling shareholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholder does not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Market makers and block purchasers that purchase the shares will

 

21


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do so for their own account and at their own risk. It is possible that a selling shareholder will attempt to sell shares in block transactions to market makers or other purchasers at a price per share that may be below the then-current market price. We cannot make assurances that all or any of the shares of common stock will be issued to, or sold by, the selling shareholder.

 

In addition, any shares that qualify for sale pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.

 

The selling shareholder and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

In certain states, the applicable state securities laws will require a holder of shares desiring to sell its shares to sell its shares only through registered or licensed brokers or dealers. In addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling shareholders. We have agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

In addition, we will make copies of this prospectus available to the selling shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

 

At the time a particular offer of shares is made, if required, a prospectus supplement will be distributed that will set forth the number of shares being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling price to the public.

 

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LEGAL MATTERS

 

The validity of the common stock offered hereby will be passed upon for us by Hunton & Williams LLP, Richmond, Virginia.

 

EXPERTS

 

Ernst & Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual report on Form 10-K for the year ended December 31, 2002, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and special reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy any documents we file at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public on our web site at http://www.insmed.com at the SEC’s web site at http://www.sec.gov.

 

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

 

The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, until all the shares registered by this prospectus are sold. This prospectus is part of a Registration Statement we filed with the SEC (Registration No. 333-              ). The documents we incorporate by reference are:

 

  1.   Our Annual Report on Form 10-K for the fiscal year ended December 31, 2002;

 

  2.   Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003;

 

  3.   Our Current Reports on Form 8-K, filed with the SEC on May 13, 2003, July 11, 2003 and July 16, 2003;

 

  4.   The description of our Common Stock contained in our Registration Statement on Form 8-A, as filed with the SEC on June 1, 2000; and

 

  5.   The description of our Preferred Stock Purchase Rights contained in our Registration Statement on Form 8-A, as filed with the SEC on May 17, 2001.

 

You may request a copy of these filings, at no cost, by writing or telephoning us at the following address: Mr. Kevin P. Tully, Insmed Incorporated, 4851 Lake Brook Drive, Glen Allen, Virginia 23060; telephone number (804) 565-3000.

 

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We have not authorized any dealer, salesperson or other person to give any information or to make any representations not contained in this prospectus or any Prospectus Supplement. You must not rely on any unauthorized information. This prospectus is not an offer of these securities in any state where an offer is not permitted. The information in this prospectus is current as of             , 2003. You should not assume that this prospectus is accurate as of any other date.

 


 

TABLE OF CONTENTS

 

     Page

The Company

   3

The Offering

   7

Risk Factors

   8

Forward Looking Information

   18

Use of Proceeds

   19

Selling Shareholders

   19

Plan of Distribution

   21

Legal Matters

   23

Experts

   23

Where You Can Find More Information

   23

Information Incorporated by Reference

   23

 


 

 


 

 

 

INSMED INCORPORATED

 

8,416,222 Shares

Common Stock

 


PROSPECTUS


 

 

 

            , 2003

 



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PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 14.   Other Expenses of Issuance and Distribution.

 

The following table sets forth the expenses to be borne by the Registrant in connection with the issuance and distribution of the securities being registered hereby other than underwriting discounts and commissions. All of such expenses are to be borne by the Selling Shareholders. All expenses other than the SEC registration fee are estimated.

 

 

SEC registration fee

   $ 1,818

Accounting fees and expenses

     20,000

Legal fees and expenses

     50,000

Miscellaneous

     20,182
    

Total

   $ 92,000
    

 

Item 15.   Indemnification of Directors and Officers.

 

The Virginia Stock Corporation Act (the “VSCA”) permits, and the Registrant’s Articles of Incorporation require, indemnification of the Registrant’s directors and officers in a variety of circumstances, which may include indemnification for liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Under Sections 13.1-697 and 13.1-702 of the VSCA, a Virginia corporation generally is authorized to indemnify its directors and officers in civil or criminal actions if they acted in good faith and believed their conduct to be in the best interests of the corporation and, in the case of criminal actions, had no reasonable cause to believe that the conduct was unlawful. The Registrant’s Articles of Incorporation require indemnification of directors and officers with respect to certain liabilities, expenses and other amounts imposed upon them because of having been a director or officer, except in the case of willful misconduct or a knowing violation of criminal law.

 

In addition, the Registrant carries insurance on behalf of directors, officers, employees or agents that may cover liabilities under the Securities Act. The Registrant’s Articles of Incorporation also provide that, to the full extent the VSCA (as it presently exists or may hereafter be amended) permits the limitation or elimination of the liability of directors and officers, no director or officer of the Registrant shall be liable to the Registrant or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct. Section 13.1-692.1 of the VSCA presently permits the elimination of liability of directors and officers in any proceeding brought by or in the right of a company or brought by or on behalf of shareholders of a company, except for liability resulting from such person’s having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law, including, without limitation, any unlawful insider trading or manipulation of the market for any security. Sections 13.1-692.1 and 13.1-696 to -704 of the VSCA are hereby incorporated by reference herein.


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Item 16.   Exhibits.

 

EXHIBIT INDEX

 

Exhibit

Number


  

Description


4.1

   Description of Capital Stock (contained in the Registrant’s Articles of Incorporation previously filed as Annex H to the Joint Proxy Statement/Prospectus contained in Part I of the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).

4.2

   Specimen stock certificate representing common stock, $.01 par value per share, of the Registrant (previously filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).

4.3

   Article VI of the Articles of Incorporation of the Registrant (previously filed as Exhibit 4.1A to the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).

4.4

   Rights Agreement, dated as of May 16, 2001, between the Registrant and First Union National Bank, as Rights Agent (which includes as (i) Exhibit A the form of Articles of Amendment to the Registrant’s Articles of Incorporation, as amended, (ii) Exhibit B the form of Rights Certificate, and (iii) Exhibit C the Summary of the Rights to Purchase Preferred Stock) (previously filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 17, 2001 and incorporated herein by reference).

4.5

   Form of Rights Certificate (previously filed as Exhibit B to the Rights Agreement, dated as of May 16, 2001, between the Registrant and First Union National Bank, as Rights Agent, filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 17, 2001 and incorporated herein by reference).

4.6

   Form of Stock and Warrant Purchase Agreement by and between the Registrant and each of the investors in the July 2003 private placement of common stock and warrants to purchase common stock.

4.7

   Form of Warrant issued by the Registrant to each of the investors in July 2003 private placement of common stock and warrants to purchase common stock.

4.8

   Form of Warrant issued by the Registrant pursuant to the Purchase Agreement among the Registrant, Insmed Pharmaceuticals, Inc. and certain investors dated January 13, 2000 (previously filed as Exhibit 10.13 to the Registrant’s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on February 11, 2000 and incorporated herein by reference).

5.1

   Opinion of Hunton & Williams LLP.

23.1  

   Consent of Ernst & Young LLP.

23.2  

   Consent of Hunton & Williams LLP (included in Exhibit 5.1).

24.1  

   Power of Attorney (included on the signature page of this Registration Statement).


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Item 17.   Undertakings.

 

(a) The undersigned Registrant hereby undertakes:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement;

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

 

provided, however , that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act that are incorporated by reference in the Registration Statement.

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.


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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Reston, Virginia, on July 24, 2003.

 

I NSMED I NCORPORATED

By:

 

/s/    K EVIN P. T ULLY , C.G.A.


   

Kevin P. Tully, C.G.A.

Treasurer and Controller

(Principal Accounting and Financial Officer)


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POWER OF ATTORNEY

 

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby constitutes and appoints Geoffrey Allan and Kevin P. Tully, or any of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments and any related Rule 462(b) Registration Statement and any other documents filed with the Securities and Exchange Commission) to this Registration Statement, and to cause the same to be filed, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby granting to said attorney-in-fact and agent, or any of them, full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things that said attorney-in-fact and agent, or any of them, or his or their substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on the 24th day of July, 2003.

 

Signature


  

Title


 

Date


/s/    G EOFFREY A LLAN , P H .D.


Geoffrey Allan, Ph.D.

  

Chairman of the Board, President and Chief

Executive Officer (Principal Executive

Officer)

  July 24, 2003

/s/    K EVIN P. T ULLY , C.G.A.


Kevin P. Tully, C.G.A.

  

Treasurer and Controller (Principal Financial

and Accounting Officer)

  July 24, 2003

/s/    K ENNETH G. C ONDON


Kenneth G. Condon

   Director   July 24, 2003

/s/    G RAHAM K, C ROOKE , MB.BS


Graham K, Crooke, MB.BS

   Director   July 24, 2003

/s/    S TEINAR J. E NGELSEN , M.D.


Steinar J. Engelsen, M.D.

   Director   July 24, 2003

/s/    M ELVIN S HAROKY , M.D.


Melvin Sharoky, M.D.

   Director   July 24, 2003

/s/    R ANDALL W. W HITCOMB , M.D.


Randall W. Whitcomb, M.D.

   Director   July 24, 2003


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EXHIBIT INDEX

 

Exhibit

Number


  

Description


  4.1    Description of Capital Stock (contained in the Registrant’s Articles of Incorporation previously filed as Annex H to the Joint Proxy Statement/Prospectus contained in Part I of the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).
  4.2    Specimen stock certificate representing common stock, $.01 par value per share, of the Registrant (previously filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).
  4.3    Article VI of the Articles of Incorporation of the Registrant (previously filed as Exhibit 4.1A to the Registrant’s Registration Statement on Form S-4 (Registration No. 333-30098) on February 11, 2000 and incorporated herein by reference).
  4.4    Rights Agreement, dated as of May 16, 2001, between the Registrant and First Union National Bank, as Rights Agent (which includes as (i) Exhibit A the form of Articles of Amendment to the Registrant’s Articles of Incorporation, as amended, (ii) Exhibit B the form of Rights Certificate, and (iii) Exhibit C the Summary of the Rights to Purchase Preferred Stock) (previously filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 17, 2001 and incorporated herein by reference).
  4.5    Form of Rights Certificate (previously filed as Exhibit B to the Rights Agreement, dated as of May 16, 2001, between the Registrant and First Union National Bank, as Rights Agent, filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 17, 2001 and incorporated herein by reference).
  4.6    Form of Stock and Warrant Purchase Agreement by and between the Registrant and each of the investors in the July 2003 private placement of common stock and warrants to purchase common stock.
  4.7    Form of Warrant issued by the Registrant to each of the investors in July 2003 private placement of common stock and warrants to purchase common stock.
  4.8    Form of Warrant issued by the Registrant pursuant to the Purchase Agreement among the Registrant, Insmed Pharmaceuticals, Inc. and certain investors dated January 13, 2000 (previously filed as Exhibit 10.13 to the Registrant’s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on February 11, 2000 and incorporated herein by reference).
  5.1    Opinion of Hunton & Williams LLP.
23.1    Consent of Ernst & Young LLP.
23.2    Consent of Hunton & Williams LLP (included in Exhibit 5.1).
24.1    Power of Attorney (included on the signature page of this Registration Statement).

   
Exhibit 4.6

STOCK AND WARRANT PURCHASE AGREEMENT

Insmed Incorporated

Ladies & Gentlemen:

The undersigned, _________________________________(the "Investor"), hereby confirms its agreement with you as follows:

1. This Stock and Warrant Purchase Agreement is made as of July 11, 2003 between Insmed Incorporated, a Virginia corporation (the "Company"), and the Investor.

2. The Company has authorized the sale and issuance of up to 6,600,000 shares (the "Shares") of common stock of the Company, $0.01 par value per share (the "Common Stock"), and warrants to purchase up to 1,980,000 shares (the "Warrant Shares") of Common Stock at an exercise price per share of $4.10 (the "Warrants") to certain investors in a private placement (the "Offering").

3. The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor __________ Shares and a Warrant to purchase [30% of the Shares] Warrant Shares, for a purchase price of $2.70 per share, or an aggregate purchase price of $________, pursuant to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and incorporated herein by reference as if fully set forth herein (the "Terms and Conditions"). This Stock and Warrant Purchase Agreement, together with the Terms and Conditions which are incorporated herein by reference as if fully set forth herein, may hereinafter be referred to as the "Agreement". Unless otherwise requested by the Investor, the Warrant and certificates representing the Shares purchased by the Investor will be registered in the Investor's name and address as set forth below. The Warrant shall have the rights, preferences, privileges and restrictions as set forth in the form of Warrant attached hereto as Exhibit B.

4. The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) neither it, nor any group of which it is a member or to which it is related, beneficially owns (including the right to acquire or vote) any securities of the Company and (c) it has no direct or indirect affiliation or association with any NASD member as of the date hereof. Exceptions:


_______________________________________________________________________________.
(If no exceptions, write "none." If left blank, response will be deemed to be "none.")

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose. By executing this Agreement, the Investor acknowledges that the Company may use the information in paragraph 4 above and the name and address information below in preparation of the Registration Statement (as defined in Annex 1).

 
AGREED AND ACCEPTED:

Insmed Incorporated               Investor:_____________________________________

                                  By:___________________________________________
____________________________
By:                               Print Name:___________________________________
Title:
                                  Title:________________________________________

                                  Address:______________________________________
                                  ______________________________________________

                                  Tax ID No.:___________________________________
                                  Contact name:_________________________________
                                  Telephone:____________________________________
                                  Name in which shares should be registered (if
                                  different):
                                  ______________________________________________


ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES AND WARRANTS

1. Authorization and Sale of the Shares. Subject to these Terms and Conditions, the Company has authorized the sale of up to 6,600,000 Shares and Warrants to purchase up to 1,980,000 Warrant Shares. The Company reserves the right to increase or decrease this number.

2. Agreement to Sell and Purchase the Shares; Subscription Date.

2.1 At the Closing (as defined in Section 3), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and conditions hereinafter set forth, the number of Shares and a Warrant to purchase the number of Warrant Shares each as set forth in Section 3 of the Stock and Warrant Purchase Agreement to which these Terms and Conditions are attached at the purchase price set forth thereon.

2.2 The Company may enter into the same form of Stock and Warrant Purchase Agreement, including these Terms and Conditions, with certain other investors (the "Other Investors") and expects to complete sales of Shares and Warrants to them. (The Investor and the Other Investors are hereinafter sometimes collectively referred to as the "Investors," and the Stock and Warrant Purchase Agreement to which these Terms and Conditions are attached and the Stock and Warrant Purchase Agreements (including attached Terms and Conditions) executed by the Other Investors are hereinafter sometimes collectively referred to as the "Agreements.") The Company may accept executed Agreements from Investors for the purchase of Shares and Warrants commencing upon the date on which the Company provides the Investors with the proposed purchase price per Share plus Warrant exercise price and concluding upon the date (the "Subscription Date") on which the Company has (i) executed Agreements with Investors for the purchase of at least 4,444,445 Shares and Warrants to purchase at least 1,333,334 Warrant Shares, and (ii) notified Wells Fargo Securities, LLC, in its capacity as placement agent for this transaction, in writing that it is no longer accepting additional Agreements from Investors for the purchase of Shares and Warrants. The Company may not enter into any Agreements after the Subscription Date.

2.3 The obligations of each Investor under any Agreement are several and not joint with the obligations of any Other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Agreement. Nothing contained herein, and no action taken by any Investor hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby, provided that such obligations or the transactions contemplated hereby may be modified, amended or waived in accordance with Section 9 below. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement (provided, that such rights may be modified, amended or waived in accordance with Section 9 below) and the Warrant, and it shall not be necessary for any Other Investor to be joined as an additional party in any proceeding for such purpose.

3. Delivery of the Shares and Warrants at Closing. The completion of the purchase and sale of the Shares and Warrants (the "Closing") shall occur (the "Closing Date") on July 11, 2003, at the offices of the Company's counsel. At the Closing, the Company shall deliver to the Investor a Warrant representing the number of Warrant Shares and one or more stock certificates representing the number of Shares, in each case as is set forth in Section 3 of the Stock and Warrant Purchase Agreement, each such certificate to be registered in the name of the Investor or, if so indicated on the signature page of the Stock and Warrant Purchase Agreement, in the name of a nominee designated by the Investor.

The Company's obligation to issue the Shares and the Warrant to the Investor shall be subject to the following conditions, any one or more of which may be waived by the Company: (a) receipt by the Company of a certified or official bank check or wire transfer of funds in the full amount of the purchase price for the Shares and the Warrant being purchased hereunder as set forth in
Section 3 of the Stock and Warrant Purchase Agreement; (b) completion of the purchases and sales under the Agreements with the Other Investors; and (c) the accuracy of the representations and warranties made by the Investors and the fulfillment of those undertakings of the Investors to be fulfilled prior to the Closing.

The Investor's obligation to purchase the Shares and the Warrant shall be subject to the following conditions, any one or more of which may be waived by the Investor: (a) Investors shall have executed Agreements for the purchase of at least 4,444,445 Shares and Warrants for the purchase of at least 1,333,334 Warrant Shares, (b) the representations and warranties of the Company

-2-


set forth herein shall be true and correct as of the Closing Date in all material respects (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date) and (c) the Investor shall have received such documents as such Investor shall reasonably have requested, including, a standard opinion of the Company's counsel as to the matters set forth in Section 4.2 and as to exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), of the sale of the Shares and Warrants.

4. Representations, Warranties and Covenants of the Company. The Company hereby represents and warrants to, and covenants with, the Investor, as follows:

4.1 Organization. The Company is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act) has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and as described in the documents filed by the Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the end of its most recently completed fiscal year through the date hereof, including, without limitation, its most recent report on Form 10-K (the "Exchange Act Documents") and is registered or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the location of the properties owned or leased by it requires such qualification and where the failure to be so qualified would have a material adverse effect upon the condition (financial or otherwise), earnings, business or business prospects, properties or operations of the Company and its Subsidiaries, considered as one enterprise (a "Material Adverse Effect"), and no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

4.2 Due Authorization and Valid Issuance. The Company has all requisite power and authority to execute, deliver and perform its obligations under the Agreements and the Warrants, and the Agreements and the Warrants have been duly authorized and validly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Shares and the Warrant being purchased by the Investor hereunder and the Warrant Shares issuable pursuant to the Warrant will, upon issuance and payment therefor pursuant to the terms hereof and thereof, be duly authorized, validly issued, fully-paid and nonassessable.

4.3 Non-Contravention. The execution and delivery of the Agreements and the Warrants, the issuance and sale of the Shares and the Warrants under the Agreements and the Warrant Shares under the Warrant, the fulfillment of the terms of the Agreements and the Warrants and the consummation of the transactions contemplated thereby will not (A) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any agreement or other instrument filed or incorporated by reference as an exhibit to any of the Exchange Act Documents (the "Exchange Act Exhibits"), (ii) the charter, by-laws or other organizational documents of the Company or any Subsidiary, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary or their respective properties, except in the case of clauses (i) and (iii) for any such conflicts, violations or defaults which are not reasonably likely to have a Material Adverse Effect or (B) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any Subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any Exchange Act Exhibit. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other person is required for the execution and delivery of the Agreements and the Warrants, and the valid issuance and sale of the Shares and Warrants to be sold pursuant to the Agreements, and the valid issuance of the Warrant Shares under the Warrant, other than such as have been made or obtained, and except for any post-closing securities filings or notifications required to be made under federal or state securities laws.

4.4 Capitalization. The capitalization of the Company as of March 31, 2003 is as set forth in the most recent applicable Exchange Act Documents, increased as set forth in the next sentence. The Company has not issued any capital stock since that date other than pursuant to (i) employee benefit plans disclosed in the Exchange Act Documents, (ii) outstanding warrants, options or other securities disclosed in the Exchange Act Documents or (iii) an agreement with a third-party service provider under which 65,000 shares of Common Stock were issued. The Shares and the Warrants to be sold pursuant to the Agreements, and the Warrant Shares to be issued pursuant to the Warrants, have been duly authorized, and when issued and paid for in accordance with the terms of the Agreements and the Warrants, as the case may be, will be duly and validly issued, fully paid and nonassessable. The outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid

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and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth in or contemplated by the Exchange Act Documents, there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any Subsidiary, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party or of which the Company has knowledge and relating to the issuance or sale of any capital stock of the Company or any Subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options (except for an agreement with a third-party service provider to issue up to 60,000 shares of Common Stock subject to certain vesting restrictions). Without limiting the foregoing, no preemptive right, co-sale right, right of first refusal, registration right, or other similar right exists with respect to the Shares, the Warrants or the Warrant Shares or the issuance and sale thereof, other than as provided in the Agreements. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares, the Warrants and the Warrant Shares. The Company owns the entire equity interest in each of its Subsidiaries, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, other than as described in the Exchange Act Documents. Except as disclosed in the Exchange Act Documents, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Common Stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders.

4.5 Legal Proceedings. There is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened to which the Company or any Subsidiary is or may be a party or of which the business or property of the Company or any Subsidiary is subject that is not disclosed in the Exchange Act Documents.

4.6 No Violations. Neither the Company nor any Subsidiary is in violation of its charter, bylaws, or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, or is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in any material respect in the performance of any Exchange Act Exhibit, which would be reasonably likely to have a Material Adverse Effect.

4.7 Governmental Permits, Etc. With the exception of the matters which are dealt with separately in Sections 4.1, 4.12, 4.13, and 4.14, each of the Company and its Subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company and its Subsidiaries as currently conducted and as described in the Exchange Act Documents except where the failure to currently possess could not reasonably be expected to have a Material Adverse Effect.

4.8 Intellectual Property. Except as specifically disclosed in the Exchange Act Documents (i) each of the Company and its Subsidiaries owns or possesses sufficient rights to use all material patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, "Intellectual Property") described or referred to in the Exchange Act Documents as owned or possessed by it or that are necessary for the conduct of its business as now conducted or as proposed to be conducted as described in the Exchange Act Documents except where the failure to currently own or possess would not have a Material Adverse Effect, (ii) to the knowledge of the Company, neither the Company nor any of its Subsidiaries is infringing, or has received any notice of, or has any knowledge of, any asserted infringement by the Company or any of its Subsidiaries of, any rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect and (iii) neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, infringement by a third party with respect to any Intellectual Property rights of the Company or of any Subsidiary that, individually or in the aggregate, would have a Material Adverse Effect.

4.9 Financial Statements. The financial statements of the Company and the related notes contained in the Exchange Act Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its Subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified consistent with the books and records of the Company and its Subsidiaries except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which are not expected to be material in amount. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except as may be disclosed in the notes to such financial statements, or in the case of unaudited statements, as may be permitted by the Securities and Exchange Commission (the "SEC") on Form 10-Q under the Exchange Act and except as disclosed in the Exchange Act Documents. The other financial information contained in the Exchange Act Documents has been prepared on a basis consistent with the financial statements of the Company.

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4.10 No Material Adverse Change. Except as disclosed in the Exchange Act Documents, since March 31, 2003, there has not been (i) any material adverse change in the financial condition or earnings of the Company and its Subsidiaries considered as one enterprise, (ii) any material adverse event affecting the Company or its Subsidiaries, (iii) any obligation, direct or contingent, that is material to the Company and its Subsidiaries considered as one enterprise, incurred by the Company, except obligations incurred in the ordinary course of business, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its Subsidiaries, or (v) any loss or damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been sustained which has a Material Adverse Effect.

4.11 Disclosure. The representations and warranties of the Company contained in this Section 4 as of the date hereof and as of the Closing Date, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Except with respect to the material terms and conditions of the transaction contemplated by the Agreements, which shall be publicly disclosed by the Company pursuant to Section 16 hereof, the Company confirms that neither it nor any person acting on its behalf has provided Investor with any information that the Company believes constitutes material, non-public information. The Company understands and confirms that Investor will rely on the foregoing representations in effecting transactions in securities of the Company.

4.12 NASDAQ Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock Market, Inc. National Market (the "Nasdaq National Market"), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the SEC or the National Association of Securities Dealers, Inc. ("NASD") is currently contemplating terminating such registration or listing.

4.13 Reporting Status. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date of this Agreement. Pursuant to General Instruction I.B.3 of Form S-3, the Company is eligible to use Form S-3 to register the Shares and Warrant Shares to be offered for the account of the Investors. The following documents complied in all material respects with the SEC's requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading:

(a) Annual Report on Form 10-K for the year ended December 31, 2002 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and Proxy Statement on Schedule 14A filed on April 3, 2003; and

(b) all other documents, if any, filed by the Company with the SEC during the one-year period preceding the date of this Agreement pursuant to the reporting requirements of the Exchange Act.

4.14 Listing. The Company shall comply with all requirements of the National Association of Securities Dealers, Inc. with respect to the issuance of the Shares, the Warrant and the Warrant Shares, and the listing of the Shares and Warrant Shares on the Nasdaq National Market.

4.15 No Manipulation of Stock. The Company has not taken and will not, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares or the Warrant Shares.

4.16 Company not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and immediately after receipt of payment for the Shares and the Warrants will not be, an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

4.17 Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any corrupt funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to

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foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

4.18 Accountants. To the Company's knowledge, Ernst & Young LLP, who the Company expects will consent to the incorporation by reference of its report dated January 17, 2003 with respect to the consolidated financial statements of the Company included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 into the Registration Statement (as defined below) and the prospectus which forms a part thereof, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.

4.19 Contracts. The contracts described in the Exchange Act Documents that are material to the Company are in full force and effect on the date hereof, and neither the Company nor, to the Company's knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.

4.20 Taxes. The Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which would have a Material Adverse Effect.

4.21 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares and the Warrants to be sold to the Investor hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with. Upon the issuance of the Warrant Shares pursuant to the Warrant all stock transfer or other taxes (other than income taxes) which are required to be paid in connection therewith will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.

4.22 Private Offering. Assuming the correctness of the representations and warranties of the Investors set forth in Section 5 hereof, the offer and sale of Shares and the Warrants hereunder is and, upon exercise of the Warrants, the issuance of the Warrant Shares will be exempt from registration under the Securities Act. The Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with this Offering and sale of the Shares and the Warrants other than the documents of which this Agreement is a part or the Exchange Act Documents. The Company has not in the past nor will it hereafter take any action independent of the placement agent to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Shares and the Warrants as contemplated by this Agreement, or the issuance of the Warrant Shares pursuant to the Warrant, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 3 or Section 4 of the Securities Act.

4.23 Disclosure Controls and Procedures; Internal Controls. At all times since first required by all applicable Exchange Act rules, the Company's has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Form 10-K or Form 10-Q, as the case may be, is being prepared. The Company's certifying officers have evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within ninety (90) days prior to the filing date of each Form 10-K or Form 10-Q for which such evaluation was required by applicable Exchange Act rules, as the case may be (each such date, the "Evaluation Date"). The Company presented in each such Form 10-K or Form 10-Q, as the case may be, the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the most recent Evaluation Date, there have been no significant changes in the Company's internal controls (as such term is used in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other factors that could significantly affect the Company's internal controls.

4.24 Transactions With Affiliates. Except as disclosed in the Exchange Act Documents, none of the current officers or directors of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer or director or, to the knowledge of the Company, any entity in which any officer or director has a substantial interest or is an officer, director, trustee or partner.

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5. Representations, Warranties and Covenants of the Investor.

5.1 The Investor represents and warrants to, and covenants with, the Company that: (i) the Investor is an "accredited investor" as defined in Regulation D under the Securities Act and the Investor is also knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to investments in shares presenting an investment decision like that involved in the purchase of the Shares and the Warrant, including investments in securities issued by the Company and investments in comparable companies, and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Shares and the Warrant;
(ii) the Investor is acquiring the Warrant to purchase the number of Warrant Shares and the number of Shares, each as set forth in Section 3 of the Stock and Warrant Purchase Agreement, in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares, Warrant or Warrant Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares, Warrant or Warrant Shares; (iii) the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares, Warrant or Warrant Shares except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; (iv) the Investor has answered all questions on the Investor Questionnaire for use in preparation of the Registration Statement and the answers thereto are true, correct and complete as of the date hereof and, unless otherwise disclosed to the Company in writing prior to the Closing Date, will be true, correct and complete as of the Closing Date; (v) the Investor will notify the Company immediately of any change in any of such information which is required to be disclosed in the Registration Statement until such time as the Investor has sold all of its Shares and Warrant Shares or until the Company is no longer required to keep the Registration Statement effective; and (vi) the Investor has, in connection with its decision to purchase the number of Shares and the Warrant to purchase the number of Warrant Shares, each as set forth in
Section 3 of the Stock and Warrant Purchase Agreement, relied only upon the Exchange Act Documents and the representations and warranties of the Company contained herein. The Investor understands that its acquisition of the Shares and the Warrant has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor's investment intent as expressed herein. Subject to compliance with the Securities Act, applicable securities laws and the respective rules and regulations promulgated thereunder, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Shares, Warrant or Warrant Shares for any period of time. The Investor has completed or caused to be completed and delivered to the Company the Investor Questionnaire, which questionnaire is true, correct and complete in all material respects.

5.2 The Investor acknowledges, represents and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, Warrant or Warrant Shares or possession or distribution of offering materials in connection with the issue of the Shares, Warrant or Warrant Shares in any jurisdiction outside the United States where legal action by the Company for that purpose is required. Each Investor outside the United States will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares, the Warrant or Warrant Shares or has in its possession or distributes any offering material, in all cases at its own expense.

5.3 The Investor hereby covenants with the Company not to make any sale of the Shares, Warrant or Warrant Shares without complying with the provisions of this Agreement and without causing the prospectus delivery requirement under the Securities Act to be satisfied (whether by delivery of the Prospectus or pursuant to and in compliance with an exemption from such requirement), and the Investor acknowledges that the certificates evidencing the Shares and Warrant Shares will be imprinted with a legend that prohibits their transfer except in accordance therewith. The Investor acknowledges that there may occasionally be times when the Company determines that it must suspend the use of the Prospectus forming a part of the Registration Statement, as set forth in Section 7.2(c).

5.4 The Investor further represents and warrants to, and covenants with, the Company that (i) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Investors herein may be legally unenforceable.

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5.5 Investor will not use any of the Shares or the Warrant acquired pursuant to this Agreement, or the Warrant Shares acquired pursuant to the Warrant, to cover any short position in the Common Stock of the Company if doing so would be in violation of applicable securities laws.

5.6 The Investor understands that nothing in the Exchange Act Documents, this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Shares and the Warrant constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Shares and the Warrant.

5.7 The Company acknowledges and agrees that Investor does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Sections 5 and 16(a) of this Agreement, or in the Investor Questionnaire.

6. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Investor herein shall survive the execution of this Agreement, the delivery to the Investor of the Shares and the Warrant being purchased and the payment therefor.

7. Registration of the Shares; Compliance with the Securities Act.

7.1 Registration Procedures and Other Matters. The Company shall:

(a) subject to receipt of necessary information from the Investors after prompt request from the Company to the Investors to provide such information, prepare and file with the SEC, within 10 days after the first business day following the Closing Date, a registration statement on Form S-3 (the "Registration Statement") to enable the resale of the Shares and the Warrant Shares by the Investors from time to time through the automated quotation system of the Nasdaq National Market or in privately-negotiated transactions;

(b) subject to receipt of necessary information from the Investors after prompt request from the Company to the Investors to provide such information, use its best efforts to cause the Registration Statement to become effective within 60 days after the Registration Statement is filed by the Company such efforts to include, without limiting the generality of the foregoing, preparing and filing with the SEC in such 60-day period any financial statements that are required to be filed prior to the effectiveness of such Registration Statement;

(c) use its best efforts to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith (the "Prospectus") as may be necessary to keep the Registration Statement current, effective and free from any material misstatement or omission to state a material fact for a period not exceeding, with respect to each Investor's Shares purchased hereunder and Warrant Shares purchased under the Warrant, the earlier of (i) two years after the Closing Date, (ii) the date on which the Investor may sell all Shares and Warrant Shares then held by the Investor without restriction by the volume limitations of Rule
144(e) of the Securities Act, or (iii) such time as all Shares purchased by such Investor in this Offering and Warrant Shares issuable pursuant to the Warrant have been sold pursuant to a registration statement;

(d) furnish to the Investor with respect to the Shares and Warrant Shares registered under the Registration Statement such number of copies of the Registration Statement, Prospectuses and Preliminary Prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares or Warrant Shares by the Investor; provided, however, that the obligation of the Company to deliver copies of Prospectuses or Preliminary Prospectuses to the Investor shall be subject to the receipt by the Company of reasonable assurances from the Investor that the Investor will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such Prospectuses or Preliminary Prospectuses;

(e) file documents required of the Company for normal blue sky clearance in states specified in writing by the Investor and use its best efforts to maintain such blue sky qualifications during the period the Company is required to maintain the effectiveness of the Registration Statement pursuant to Section 7.1(c); provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

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(f) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 7.1 (other than underwriting discounts or commissions, brokers' fees and similar selling expenses, and any other fees or expenses incurred by the Investor, including attorneys' fees) and the registration of the Shares and Warrant Shares pursuant to the Registration Statement; and

(g) advise the Investor, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued.

Notwithstanding anything to the contrary herein, the Registration Statement shall cover only the Shares and the Warrant Shares. In no event at any time before the Registration Statement becomes effective with respect to the Shares and the Warrant Shares shall the Company publicly announce or file any other registration statement, other than registrations on Form S-8, without the prior written consent of a majority in interest of the Investors. The Investor acknowledges and agrees that the Company shall not be regarded to have breached its "best efforts" obligation under Section 7.1(b) if, owing to a review of the Registration Statement by the SEC staff, the Registration Statement does not become effective within 60 days after the Registration Statement is filed with the SEC, provided that following receipt of notice of such review, the Company shall have used its best efforts to cause the Registration Statement to become effective at the earliest practicable date.

The Company understands that the Investor disclaims being an underwriter, but if the SEC deems the Investor to be an underwriter, the Company shall not be relieved of any obligations it has hereunder; provided, however that if the Company receives notification from the SEC that the Investor is deemed an underwriter, then the period by which the Company is obligated to submit an acceleration request to the SEC shall be extended to the earlier of (i) the 90th day after such SEC notification, or (ii) 120 days after the initial filing of the Registration Statement with the SEC.

7.2 Transfer of Shares and Warrant Shares After Registration; Suspension.

(a) The Investor agrees that it will not effect any disposition of the Shares or the Warrant Shares or its right to purchase the Shares or the Warrant Shares that would constitute a sale within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section
7.1 and as described below or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Investor or its plan of distribution.

(b) Except in the event that paragraph (c) below applies, the Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Shares and Warrant Shares being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Investor copies of any documents filed pursuant to Section 7.2(b)(i) as the Investor may reasonably request; and
(iii) inform each Investor that the Company has complied with its obligations in
Section 7.2(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use its best efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to Section 7.2(b)(i) hereof when the amendment has become effective).

(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related Prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares or the Warrant Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) of any event or circumstance which, upon the advice of its counsel, necessitates the making of any changes in the Registration Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a

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material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall deliver a certificate in writing to the Investor (the "Suspension Notice") to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Shares and Warrant Shares pursuant to the Registration Statement (a "Suspension") until the Investor's receipt of copies of a supplemented or amended Prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such Prospectus. In the event of any Suspension, the Company will use its best efforts to cause the use of the Prospectus so suspended to be resumed as soon as reasonably practicable within 20 business days after the delivery of a Suspension Notice to the Investor. In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to the Investor, the Investor shall be entitled to specific performance in the event that the Company fails to comply with the provisions of this Section 7.2(c).

(d) Notwithstanding the foregoing paragraphs of this Section
7.2, the Investor shall not be prohibited from selling Shares or Warrant Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than 30 days each in any twelve month period, unless, in the good faith judgment of the Company's Board of Directors, upon the written opinion of counsel of the Company, the sale of Shares and Warrant Shares under the Registration Statement in reliance on this paragraph 7.2(d) would be reasonably likely to cause a violation of the Securities Act or the Exchange Act and result in liability to the Company.

(e) Provided that a Suspension is not then in effect, the Investor may sell Shares and Warrant Shares under the Registration Statement, provided that it arranges for delivery of a current Prospectus to the transferee of such Shares or Warrant Shares. Upon receipt of a reasonable request therefor, the Company has agreed to provide an adequate number of current Prospectuses to the Investor and to supply copies to any other parties requiring such Prospectuses.

(f) In the event of a sale of Shares or Warrant Shares by the Investor pursuant to the Registration Statement, the Investor must also deliver to the Company's transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit A, so that the Shares and Warrant Shares may be properly transferred.

7.3 Indemnification. For the purpose of this Section 7.3:

(i) the term "Selling Stockholder" means the Investor and any affiliate of such Investor;

(ii) the term "Registration Statement" shall include the Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, and any exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section
7.1; and

(iii) the term "Untrue Statement" means any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(a) The Company agrees to indemnify and hold harmless each Selling Stockholder from and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any breach of the representations or warranties of the Company contained herein or failure to comply with the covenants and agreements of the Company contained herein, (ii) any Untrue Statement, or (iii) any failure by the Company to fulfill any undertaking included in the Registration Statement as amended or supplemented from time to time, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, or preparing to defend any such action, proceeding or claim, provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an Untrue Statement made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Selling Stockholder specifically for use in preparation of the Registration Statement, as amended or supplemented from time to time (including, without limitation, information set forth in the Investor Questionnaire), or the failure of such Selling Stockholder to comply with its covenants and agreements contained in Section 7.2 hereof respecting sale of the Shares or Warrant Shares or any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered

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to the Selling Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The Company shall reimburse each Selling Stockholder for the indemnifiable amounts provided for herein on demand as such expenses are incurred.

(b) The Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any failure to comply with the covenants and agreements contained in Section 7.2 hereof respecting sale of the Shares and Warrant Shares, or (ii) any Untrue Statement if such Untrue Statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement, as amended or supplemented from time to time (including, without limitation, information set forth in the Investor Questionnaire), and the Investor will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim. The Investor shall reimburse the Company or such officer, director or controlling person, as the case may be, for the indemnifiable amounts provided for herein on demand as such expenses are incurred. Notwithstanding the foregoing, the Investor's aggregate obligation to indemnify the Company and such officers, directors and controlling persons shall be limited to the net amount received by the Investor from the sale of the Shares and Warrant Shares.

(c) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 7.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying person will not relieve it from any liability which it may have to any indemnified person under this Section 7.3 (except to the extent that such omission materially and adversely affects the indemnifying person's ability to defend such action) or from any liability otherwise than under this Section 7.3. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified person promptly after receiving the aforesaid notice from such indemnified person, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be unreasonably withheld or delayed. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.

(d) If the indemnification provided for in this Section 7.3 is unavailable to or insufficient to hold harmless an indemnified person under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying person shall contribute to the amount paid or payable by such indemnified person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor, as well as any other Selling Shareholders under such Registration Statement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an Untrue Statement, whether the Untrue Statement relates to information supplied by the Company on the one hand or an Investor or other Selling Shareholder on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Untrue Statement. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Investor and other Selling Shareholders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to

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include any legal or other expenses reasonably incurred by such indemnified person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), the Investor shall not be required to contribute any amount in excess of the amount by which the net amount received by the Investor from the sale of the Shares and Warrant Shares to which such loss relates exceeds the amount of any damages which such Investor has otherwise been required to pay by reason of such Untrue Statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Investor's obligations in this subsection to contribute shall be in proportion to its Investor sale of Shares and Warrant Shares to which such loss relates and shall not be joint with any other Selling Shareholders.

(e) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7.3, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 7.3 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Registration Statement as required by the Securities Act and the Exchange Act. The parties are advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 7.3, and the parties hereto hereby expressly waive and relinquish any right or ability to assert such public policy as a defense to a claim under this Section 7.3 and further agree not to attempt to assert any such defense.

7.4 Termination of Conditions and Obligations. The conditions precedent imposed by Section 5 or this Section 7 upon the transferability of the Shares and Warrant Shares shall cease and terminate as to any particular number of the Shares or Warrant Shares when such shares shall have been effectively registered under the Securities Act and sold or otherwise disposed of in accordance with the intended method of disposition set forth in the Registration Statement covering such shares or at such time as an opinion of counsel reasonably satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act.

7.5 Information Available. So long as the Registration Statement is effective covering the resale of Shares and Warrant Shares owned by the Investor, the Company will furnish to the Investor:

(a) as soon as practicable after it is available, one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants), (ii) its Annual Report on Form 10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing, in each case, excluding exhibits);

(b) upon the request of the Investor, all exhibits excluded by the parenthetical to subparagraph (a) of this Section 7.5 as filed with the SEC and all other information that is made available to shareholders; and

(c) upon the reasonable request of the Investor, an adequate number of copies of the Prospectuses to supply to any other party requiring such Prospectuses; and upon the reasonable request of the Investor, the President or the Principal Financial Officer of the Company (or an appropriate designee thereof) will meet with the Investor or a representative thereof at the Company's headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Shares and Warrant Shares and will otherwise cooperate with any Investor conducting an investigation for the purpose of reducing or eliminating such Investor's exposure to liability under the Securities Act, including the reasonable production of information at the Company's headquarters; provided, that the Company shall not be required to disclose any confidential information to or meet at its headquarters with any Investor until and unless the Investor shall have entered into a confidentiality agreement in form and substance reasonably satisfactory to the Company with the Company with respect thereto.

7.6 Legend; Restrictions on Transfer. The certificate or certificates for the Shares and Warrant Shares (and any securities issued in respect of or exchange for the Shares or Warrant Shares) shall be subject to a legend or legends restricting transfer under the Securities Act and referring to restrictions on transfer herein, such legend to be substantially as follows:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

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7.7 Liquidated Damages. The Company and Investor agree that Investor will suffer damages if the Company fails to fulfill its obligations pursuant to
Section 7.1 and 7.2 hereof and that it would not be possible to ascertain the extent of such damages with precision. Accordingly, the Company hereby agrees to pay liquidated damages ("Liquidated Damages") to Investor under the following circumstances: (a) if the Registration Statement is not filed by the Company on or prior to 10 days following the first business day after the Closing Date in accordance with Section 7.1(a) (such an event, a "Filing Default"); (b) if the Registration Statement is not declared effective by the SEC on or prior to 90 days after the Closing Date (such an event, an "Effectiveness Default"); or (c) if the Registration Statement (after its effectiveness date) ceases to be effective and available to Investor for any continuous period that exceeds 30 days or for one or more period that exceeds in the aggregate 60 days in any 12-month period (such an event, a "Suspension Default" and together with a Filing Default and an Effectiveness Default, a "Registration Default"). In the event of a Registration Default, the Company shall as Liquidated Damages pay to Investor, for each 30-day period of a Registration Default, an amount in cash equal to 1% of the aggregate purchase price paid by Investor pursuant to this Agreement; provided that in no event shall the aggregate amount of cash to be paid as Liquidated Damages pursuant to this Section 7.7 exceed 9% of the aggregate purchase price paid by Investor. The Company shall pay the Liquidated Damages as follows: (i) in connection with a Filing Default, on the 31/st/ day after the Closing Date, and each 30th day thereafter until the Registration Statement is filed with the SEC; (ii) in connection with an Effectiveness Default, on the 91/st/ day after the Closing Date, and each 30th day thereafter until the Registration Statement is declared effective by the SEC; or (iii) in connection with a Suspension Default, on either (x) the 31/st/ consecutive day of any Suspension or (y) the 61/st/ day (in the aggregate) of any Suspensions in any 12-month period, and each 30/th/ day thereafter until the Suspension is terminated in accordance with Section 7.2. Notwithstanding the foregoing, all periods shall be tolled during delays directly caused by the action or inaction of any Investor, and the Company shall have no liability to any Investor in respect of any such delay. The Liquidated Damages payable herein shall apply on a pro rata basis for any portion of a 30-day period of a Registration Default.

8. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (A) if within the United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if delivered from outside the United States, by International Federal Express (or other recognized international express courier) or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express (or other recognized international express courier), two business days after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows:

(a) if to the Company, to:

Insmed Incorporated 4851 Lake Brook Drive Glenn Allen, Virginia 23060 Attn: Kevin P. Tully, CGA Phone: (804) 565-3000 Fax: (804) 565-3500

(b) with a copy to:

Hunton & Williams LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, Virginia 23219-4074 Attn: T. Justin Moore, III, Esq.

Phone: (804) 788-8200
Fax: (804) 788-8218

(c) if to the Investor, at its address on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

9. Changes. This Agreement may be modified, amended or waived only pursuant to a written instrument signed by the Company and (a) Investors holding a majority of the Shares issued and sold in the Offering, provided that such modification,

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amendment or waiver is made with respect to all Agreements and does not adversely affect the Investor without adversely affecting all Investors in a similar manner; or (b) the Investor.

10. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

11. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the Commonwealth of Virginia, without giving effect to the principles of conflicts of law.

13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

14. Entire Agreement. This Agreement and the Warrants constitute the entire agreement between the parties hereto and supersedes any prior understandings or agreements concerning the purchase and sale of the Shares and the Warrants and the resale registration of the Shares and Warrant Shares.

15. Rule 144. The Company covenants that it will timely file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Investor holding Shares purchased hereunder or Warrant Shares purchased under the Warrants made after the first anniversary of the Closing Date, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any such Investor may reasonably request, all to the extent required from time to time to enable such Investor to sell such Shares and Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Investor, the Company will deliver to such holder a written statement as to whether it has complied with such information and requirements.

16. Confidential Information.

(a) The Investor covenants that it will maintain in confidence the existence of the transactions contemplated herein until such information (a) becomes generally publicly available other than through a violation of this provision by the Investor or its agents or (b) is required to be disclosed in legal proceedings (such as by deposition, interrogatory, request for documents, subpoena, civil investigation demand, filing with any governmental authority or similar process), provided, however, that before making any use or disclosure in reliance on this subparagraph (b) the Investor shall give the Company at least fifteen (15) days prior written notice (or such shorter period as required by law) specifying the circumstances giving rise thereto and will furnish only that portion of the non-public information which is legally required and will exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded any non-public information so furnished.

(b) The Company shall on the Closing Date issue a press release disclosing the material terms of the transactions contemplated hereby (including at least the number of Shares and Warrants sold and proceeds therefrom). The Company shall not publicly disclose the name of Investor, or include the name of Investor in any filing with the SEC or any regulatory agency or the Nasdaq (other than the filing of the Agreements with the SEC pursuant to the Exchange Act), without the prior written consent of Investor, except to the extent such disclosure is required by law or Nasdaq regulations.

17. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

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Exhibit A

CERTIFICATE OF SUBSEQUENT SALE

Wachovia Bank, N.A.
1525 West W. T. Harris Blvd.
3C3 Charlotte, NC 28262-1153

RE: Sale of Shares of Common Stock of Insmed Incorporated (the "Company") pursuant to the Company's Prospectus dated _____________, ____ (the "Prospectus")

Dear Sir/Madam:

The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of Selling Shareholders in the Prospectus, that the undersigned has sold the shares pursuant to the Prospectus and in a manner described under the caption "Plan of Distribution" in the Prospectus and that such sale complies with all securities laws applicable to the undersigned, including, without limitation, the Prospectus delivery requirements of the Securities Act of 1933, as amended.

Selling Shareholder (the beneficial owner):_____________________________________

Record Holder (e.g., if held in name of nominee):_______________________________

Restricted Stock Certificate No.(s):____________________________________________

Number of Shares Sold:__________________________________________________________

Date of Sale:___________________________________________________________________

In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a stop transfer on your records with regard to such certificate.

 

                                                   Very truly yours,

Dated:________________________________________     By:__________________________

                                                   Print Name:__________________

                                                   Title:_______________________

cc:      Insmed Incorporated
         4851 Lake Brook Drive
         Glenn Allen, Virginia 23060
         Attn: Principal Financial Officer

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Exhibit 4.7

THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

WARRANT
TO PURCHASE COMMON STOCK
OF
INSMED INCORPORATED

(void after July 10, 2008)

No. W-___

THIS CERTIFIES THAT, for value received, ______________ or registered assigns (the "Holder"), from and after the Commencement Date (as defined below), and subject to the terms and conditions herein set forth, is entitled to purchase from Insmed Incorporated, a Virginia corporation (the "Company"), at any time before 5:00 p.m. New York City time on July 10, 2008 (the "Termination Date"), ___________________ (_____) shares (the "Warrant Shares") of the Company's common stock, $.01 par value per share (the "Common Stock"), at a price per share equal to the Warrant Price (as defined below) upon exercise of this Warrant pursuant to Section 5 hereof. The number of Warrant Shares is subject to adjustment under Section 2.

1. Definitions. As used in this Warrant, the following terms have the definitions ascribed to them below:

(a) "Commencement Date" means January 11, 2004.

(b) "Issuance Date" means July 11, 2003.

(c) "Offering Warrants" shall have the meaning ascribed to the term in
Section 8.

(d) "Person" means any individual, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

(e) "Purchase Agreement" means that certain Stock and Warrant Purchase Agreement dated as of July 11, 2003 between the Company and the initial Holder of this Warrant.

(f) "Warrant Price" means $4.10 per share subject to adjustment under
Section 2.

2. Adjustments and Notices. The Warrant Price and/or the Warrant Shares shall be subject to adjustment from time to time in accordance with this Section
2. The Warrant Price and/or the Warrant Shares shall be adjusted to reflect all of the following events that occur on or after the Issuance Date.


(a) Subdivision, Stock Dividends or Combinations. In case the Company shall at any time subdivide the outstanding shares of the Common Stock or shall issue a stock dividend with respect to the Common Stock, the Warrant Price in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such subdivision or the issuance of such dividend shall be proportionately increased. In case the Company shall at any time combine the outstanding shares of the Common Stock, the Warrant Price in effect immediately prior to such combination shall be proportionately increased, and the number of Warrant Shares for which this Warrant may be exercised immediately prior to such combination shall be proportionately decreased. In each of the foregoing cases, the adjustment shall be effective at the close of business on the date of such subdivision, dividend or combination, as the case may be.

(b) Reclassification, Exchange, Substitution, In-Kind Distribution. Upon any reclassification, exchange, substitution or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant or upon the payment of a dividend in securities or property other than shares of the Common Stock, the Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received if this Warrant had been exercised immediately before the record date for such reclassification, exchange, substitution, or other event or immediately prior to the record date for such dividend. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise or conversion of the new warrant. The provisions of this
Section 2(b) shall similarly apply to successive reclassifications, exchanges, substitutions, or other events and successive dividends.

(c) Reorganization, Merger etc. In case of any merger or consolidation of the Company into or with another corporation where the Company is not the surviving corporation, or sale, transfer or lease (but not including a transfer or lease by pledge or mortgage to a bona fide lender) of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition to closing any such reorganization, merger or sale, duly execute and deliver to the Holder hereof a new warrant so that the Holder shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise or conversion of the unexercised portion of this Warrant, and in lieu of the Warrant Shares theretofore issuable upon exercise or conversion of this Warrant, the kind and amount of shares of stock, other securities, money and property that would have been receivable upon such reorganization, merger or sale by the Holder with respect to the Warrant Shares if this Warrant had been exercised immediately before the consummation of such transaction. Such new warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2. The provisions of this subparagraph
(c) shall similarly apply to successive transactions of the type described in this subparagraph (c).

(d) Certificate of Adjustment. In each case of an adjustment or readjustment of the Warrant Price, the Company, at its own expense, shall cause its Principal Financial Officer to compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. No adjustment of the Warrant Price shall be required to be made unless it would result in an increase

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or decrease of at least one cent, but any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder.

(e) No Impairment. The Company shall not, by amendment of its charter, by-laws or other organizational documents, or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all of the provisions of this Section 2 and in taking all such action as may be necessary or appropriate to protect the Holder's rights under this Section 2 against impairment.

(f) Fractional Shares. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the fair market value of a full share.

3. No Shareholder Rights. This Warrant, by itself, as distinguished from any shares purchased hereunder, shall not entitle the Holder to any of the rights of a shareholder of the Company.

4. Reservation of Stock. The Company will reserve from its authorized and unissued stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares issuable upon the exercise of this Warrant.

5. Exercise of Warrant. This Warrant may be exercised only as a whole by the Holder, at any time from and after the Commencement Time and prior to the termination of this Warrant, by the surrender of this Warrant at the principal office of the Company, together with the Notice of Exercise in the form attached hereto as Attachment 1, duly completed and executed, specifying that all of the Warrant is to be exercised and accompanied by payment in full of the Warrant Price in wire transfer or by certified check with respect to the Warrant Shares being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise.

6. Transfer of Warrant. This Warrant may be transferred or assigned by the Holder hereof as a whole or in part, provided:

(a) that the transferor provides, at the Company's request, an opinion of counsel satisfactory to the Company that such transfer does not require registration under the Securities Act, and

(b) that if after such transfer there will be two or more such Warrants (due to the Warrant having been transferred in part and not in whole), that all persons holding a Warrant covering shares that were covered by the original Warrant must agree in writing with each other that none of them will exercise unless all of them exercise simultaneously.

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7. Legends. Upon issuance, the certificate or certificates evidencing any Warrant Shares shall bear legends as set forth in the Purchase Agreement.

8. Purchase Agreement. This Warrant is one of a number of warrants (the "Offering Warrants") issued pursuant to the Purchase Agreement, and the Warrant Shares shall be entitled to the rights conferred thereon under the Purchase Agreement, including without limitation the registration rights provided in
Section 7 thereof.

9. Termination. This Warrant shall terminate at 5:00 p.m. New York City time on the Termination Date.

10. Miscellaneous. This Warrant shall be governed by the laws of the Commonwealth of Virginia, as such laws are applied to contracts to be entered into and performed entirely in Virginia by Virginia residents. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. Neither this Warrant nor any term hereof may be changed or waived orally, but only by an instrument in writing signed by the Company and (a) holders of Offering Warrants exercisable for a majority of the Warrant Shares issuable upon exercise of the then outstanding Offering Warrants, provided that such change or waiver does not adversely affect the Holder without adversely affecting all holders of Offering Warrants in a similar manner or (b) the Holder. All notices and other communications from the Company to the Holder of this Warrant shall be delivered personally or by facsimile transmission or mailed by first class mail, postage prepaid, to the address or facsimile number furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an address or facsimile number to the Company in writing, and if mailed shall be deemed given three days after deposit in the United States mail. Upon receipt of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock.

ISSUED: July 11, 2003

INSMED INCORPORATED

By:__________________________________

Name:________________________________

Title:_______________________________

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Attachment 1

NOTICE OF EXERCISE

TO: INSMED INCORPORATED

1. The undersigned hereby elects to purchase all Warrant Shares of Insmed Incorporated pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any.

2. Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:



(Name in which certificate(s) are to be issued)


(Address)


(Name of Warrant Holder)

By:_________________________

Title:______________________

Date signed: _______________

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Exhibit 5.1

 

[Letterhead of Hunton & Williams]

 

July 24, 2003

 

Board of Directors

Insmed Incorporated

4851 Lake Brook Drive

Richmond, Virginia 23060

 

Insmed Incorporated

Registration Statement on Form S-3

 

Ladies and Gentlemen:

 

We are acting as counsel for Insmed Incorporated, a Virginia corporation (the “Company”) in connection with the Registration Statement on Form S-3, to be filed with the Securities and Exchange Commission (the “Commission”) on or about July 24, 2003 (the “Registration Statement”), pursuant to the Securities Act of 1933, as amended (the “Act”). The Registration Statement relates to the registration for resale under the Act of (i) up to 5,146,846 shares of its common stock (the “Shares”), $0.01 par value per share, and (ii) up to 3,269,376 shares of its common stock (the “Warrant Shares”) issuable upon exercise of warrants (the “Warrants”) to purchase common stock that are currently held by the selling shareholders named in the Company’s Registration Statement (collectively, the “Selling Shareholders”).

 

This opinion is being furnished in accordance with the requirements of Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.

 

In connection therewith, we have examined and relied upon the original or a copy, certified to our satisfaction, of (i) the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws of the Company, each as amended to date; (ii) actions of the Board of Directors of the Company; (iii) the Registration Statement and exhibits thereto; and (iv) such other documents, instruments or other information as we deemed necessary or appropriate in rendering our opinion. In making the foregoing examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. As to various questions of fact material to this opinion, we have relied, to the extent we deem reasonably appropriate, upon representations or certificates of officers or directors of the Company and Selling Shareholders and upon documents, records and instruments furnished to us by the Company and the Selling Shareholders, without independently checking or verifying the accuracy of such documents, records and instruments.

 

We do not purport to express any opinion on any laws other than the Commonwealth of Virginia and the United States of America.

 

Based upon the foregoing, we are of the opinion that:

 

1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Virginia.


Insmed Incorporated

July 24, 2003

Page 2

 

2. The Shares have been duly authorized and legally issued, fully paid and nonassessable.

 

3. The Warrant Shares issuable upon exercise of the Warrants, when exercised, issued and paid for as contemplated in the Warrants, will be legally issued, fully paid and nonassessable.

 

We consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to this firm under the caption “Legal Matters” in the prospectus which is part of the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act, the rules and regulations of the Securities and Exchange Commission promulgated thereunder, or Item 509 of Regulation S-K.

 

This opinion letter is rendered as of the date first above written and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Selling Shareholders, the Shares or the Warrant Shares.

 

Very truly yours,

 

/s/    H UNTON & W ILLIAMS LLP

 

 
 

Exhibit 23.1

 

CONSENT

 

We consent to the reference to our firm under the caption “Experts” in the Registration Statement (Form S-3 No. 333-              ) and related Prospectus of Insmed Incorporated for the registration of 8,416,222 shares of its common stock and to the incorporation by reference therein of our report dated January 17, 2003, with respect to the consolidated financial statements of Insmed Incorporated included in its Annual Report (Form 10-K) for the year ended December 31, 2002, filed with the Securities and Exchange Commission.

 

/s/    E RNST & Y OUNG LLP

 

July 23, 2003