Insmed Incorporated Reports Financial Results for the Fourth Quarter and Twelve-Months of 2005

Insmed Incorporated (NASDAQ:INSM), a biopharmaceuticalcompany focused on the development and commercialization of drugs forthe treatment of metabolic and endocrine diseases in niche marketswith unmet medical needs, today announced its financial results forthe three- and twelve-month periods ended December 31, 2005.

Twelve- Twelve-
Months Months
Ended Ended
Dec. 31, Dec. 31,
$000's (except EPS) Q4 2005 Q4 2004 2005 2004
---------------------------------------------
Revenues 24 23 131 137
Net loss (12,885) (5,837) (40,929) (27,203)
Net cash used in
operations 6,209 6,452 27,765 24,901
Earnings per share (0.27) (0.14) (0.84) (0.69)
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Discussion of Revenue and Expense Items

Revenues for the three months ended December 31, 2005 were $24,000as compared to $23,000 for the same period in 2004, and $131,000 forthe twelve months of 2005 as compared to $137,000 for the same periodin 2004.

The net loss for the fourth quarter ended December 31, 2005 was$12.9 million or $0.27 per share, as compared to a net loss of $5.8million or $0.14 per share for the corresponding quarter of 2004. Thenet loss for the twelve months ended December 31, 2005 was $40.9million or $0.84 per share as compared to $27.2 million or $0.69 pershare for the full year of 2004.

The $7.0 million increase in the net loss for the fourth quarterof 2005, as compared to the same quarter of 2004, was due to thecombination of a $6.0 million increase in interest expense, a $0.6million rise in research and development expenses and a $0.6 millionincrease in general and administrative expenses, offset by a rise ininvestment income of $0.2 million,. The $6.0 million rise in interestexpense resulted from the March 2005 convertible debt financing andconsisted of two components: $5.8 million of non cash expense arisingfrom the accounting treatment of the March 2005 convertible debtfinancing, which requires that the amortization of the debt discountand deferred offering costs of the financing be accelerated asinvestors convert the debt into shares, and $0.2 million arising fromactual interest paid on the notes. The higher research and developmentexpense was due to increased litigation costs in support of our patentposition, while the $0.6 million rise in general and administrativeexpenses was due mainly to increased external service costs in supportof our business. The increased investment income results from theCompany having a higher cash balance than the corresponding period of2004.

The net loss for the twelve months ended December 31, 2005 was$13.7 million higher than the corresponding period for 2004 due toincreases of $14.2 million in interest expense and $1.5 million ingeneral and administration expenses, which were partially offset by areduction of $1.5 million in research and development expenses and arise in investment income of $0.5 million. The increase in interestexpense was due to the March 2005 financing and consisted of $13.1million of non cash expense relating to the accelerated amortizationof the deferred discount and offering costs, and $1.1 of actualinterest paid on the notes. The reduction in research and developmentexpenses was principally due to lower development and manufacturingcosts for IPLEX(TM), which were partially offset by increasedlitigation costs in support of our patent position, while the highergeneral and administrative expenses were due to increased costsassociated with financing activities and additional external servicecosts in support of our business. The rise in interest income was dueto the higher cash balance on hand.

As of December 31, 2005, the Company had total cash and cashequivalents of $18.8 million which represents an increase of $9.6million from December 31, 2004. This increase was mainly due to thegeneration of $37.4 million from financing activities, offset by theuse of $27.8 million in support of our business operations. The $37.4million of cash from financing activities was generated from acombination of $32.6 million in net proceeds from the March 2005convertible debt offering, $4.6 million from the exercise of warrantsand $0.2 million from a reduction in a restricted letter of credit.

Between January 1, 2006 and February 28, 2006, the Companyreceived additional cash of $8.2 million from the exercise ofwarrants. As a result of these conversions in the first two months of2006, the following shares, warrants and convertible debt wereoutstanding as of February 28, 2006:

-- 76.8 million total shares

-- $6.0 million in convertible debt from the March 2005 financing, convertible at $1.295

-- 6.2 million warrants from the March 2005 financing convertible at $1.36

-- 2.3 million warrants from the November 2004 financing convertible at $1.71, and

-- 1.5 million warrants from the July 2003 financing convertible at $4.10

Conference Call

The Company will host a conference call on Thursday, March 2; at4:30 p.m. Eastern Time to discuss operating results for fiscal year2005 and provide a business update.

Interested investors can listen to the call over the internet fromInsmed's investor relations website at www.insmed.com or by dialing(800) 289-0529 (domestic) or 913-981-5523 (international).

A telephonic replay of the call will be available for one week at888-203-1112 (domestic) or 719-457-0820 (international), passcode:4436753. A web replay of the call will be available through ourcorporate website, in the investor relations segment, beginning at6:00 p.m.

About Insmed Incorporated

Insmed Incorporated is a biopharmaceutical company focused on thediscovery, development and commercialization of drug products for thetreatment of metabolic diseases and endocrine disorders with unmetmedical needs. For further information about Insmed and IPLEX(TM)(mecasermin rinfabate(rDNA origin) injection), our FDA-approved drugfor the treatment of growth failure in children with severe primaryIGF-1 deficiency or with growth hormone deletion who have developedneutralizing antibodies to growth hormone, please visit the company'scorporate website at www.insmed.com.

Statements included within this press release, which are nothistorical in nature, may constitute forward-looking statements forpurposes of the safe harbor provided by the Private SecuritiesLitigation Reform Act of 1995. Although Insmed believes that suchstatements are based on reasonable assumptions within the bounds ofits knowledge of its business and operations, the forward-lookingstatements are neither promises nor guarantees and various factors maycause its actual results to differ materially from its expectations.Forward-looking statements all statements regarding expected financialposition, results of operations, cash flows, dividends, financingplans, business strategies, operating efficiencies or synergies,budgets, capital and other expenditures, competitive positions,commercial acceptance of IPLEX(TM), growth opportunities for approvedor proposed products, plans and objectives of management, demand fornew pharmaceutical products, market trends in the pharmaceuticalbusiness, inflation and various economic and business trends. Suchforward-looking statements are subject to numerous risks anduncertainties, including risks that we may not successfully launchIPLEX(TM), our product candidates may fail in clinical trials or maynot be successfully marketed, we may lack financial resources tocomplete development of product candidates, we may be unable to raiseadditional financing necessary to continue current operations, we maynot be able to sufficiently expand the manufacturing capacity of ourleased manufacturing facility in Boulder, Colorado, and utilize thatfacility to manufacture our approved product, IPLEX(TM), and otherproduct candidates, competing products may be more successful, we mayhave a negative outcome of our current litigation with third partiesregarding our patent rights, demand for new pharmaceutical productsmay decrease and the biopharmaceutical industry may experiencenegative market trends. For further information with respect tofactors that could cause actual results to differ from expectations,reference is made to reports filed by Insmed with the Securities andExchange Commission under the Securities Exchange Act of 1934, asamended. The forward-looking statements made in this release are madeonly as of the date hereof and Insmed disclaims any intention orresponsibility for updating predictions or financial guidancecontained in this release.

INSMED INCORPORATED
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

Dec. 31, Dec. 31,
2005 2004
--------- ---------
Assets
Current assets:
Cash and cash equivalents $18,835 $ 9,222
Restricted cash 285 285
Other current assets 83 174
--------- ---------
Total current assets 19,203 9,681

Long-term assets:
Restricted cash - long term 3,118 3,303
Deferred financing costs, net 532 -
Property and equipment, net 17 27
--------- ---------
Total long-term assets 3,667 3,330

Total assets $22,870 $13,011
========= =========

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 968 $ 2,621
Accrued project costs & Other 1,990 884
Payroll liabilities 1,574 1,183
Interest payable 52 -
Restructuring reserve 286 360
--------- ---------
Total current liabilities 4,870 5,048

Long-term liabilities:
Convertible debt 11,438 -
Debt discount (5,001) -
--------- ---------
Net convertible debt 6,437 -

Asset retirement obligation 1,034 443
Restructuring reserve-long-term portion - 285
--------- ---------

Total liabilities 12,341 5,776
--------- ---------

Stockholders' equity:
Common stock; $.01 par value; authorized share
500,000,000; issued and outstanding shares,
66,525,792 in 2005 and 44,893,496 in 2004 665 449
Additional capital 264,522 220,515
Accumulated deficit (254,658) (213,729)
--------- ---------
Net stockholders' equity 10,529 7,235
--------- ---------

Total liabilities and stockholders' equity $22,870 $13,011
========= =========


INSMED INCORPORATED
Condensed Consolidated Statements of Operations
(in thousands, except per share data - unaudited)

Twelve Months Ended
Dec. 31,
--------------------
2005 2004
--------------------

Revenues $ 131 $ 137

Operating expenses:
Research and development 21,835 23,260
General and administrative 5,730 4,242
--------------------
Total operating expenses 27,565 27,502
--------------------

Operating loss (27,434) (27,365)

Interest income 752 222
Interest expense (14,247) (60)
--------------------

Net loss $(40,929) $(27,203)
====================

Basic and diluted net loss per share $ (0.84) $ (0.69)
====================

Shares used in computing basic and diluted net
loss per share 48,742 39,160
====================


INSMED INCORPORATED
Consolidated Statements of Cash Flows
(in thousands - unaudited)

Twelve Months Ended
Dec. 31,
2005 2004
--------- ---------

Operating activities
Net loss $(40,929) $(27,203)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 12,897 34
Non-cash stock acceleration 15 -
Stock options issued for services 33 33
Changes in operating assets and liabilities:
Other assets 91 51
Accounts payable (1,653) 1,961
Accrued project costs 1,106 (863)
Payroll liabilities 391 978
Restructuring reserve (359) (335)
Asset retirement obligation 591 443
Interest payable 52 -
--------- ---------
Net cash used in operating activities (27,765) (24,901)
--------- ---------

Financing activities
Proceeds from issuance of convertible debt with
detachable stock warrants 35,000 -
Proceeds from issuance of common stock 4,621 8,185
Costs incurred in conjunction with
issuance of debt (2,428) -
Cash restricted to restricted letters of
credit 185 (3,588)
--------- ---------
Net cash provided by (used in) financing
activities 37,378 4,597
--------- ---------

Increase (decrease) in cash and cash
equivalents 9,613 (20,304)
Cash and cash equivalents at beginning
of period 9,222 29,526
--------- ---------

Cash and cash equivalents at end of period $18,835 $ 9,222
========= =========

Supplemental information
Cash paid for interest 1,104 -