MannKind Corporation (NASDAQ:MNKD) Q4 2023 Earnings Call Transcript

MannKind Corporation (NASDAQ:MNKD) Q4 2023 Earnings Call Transcript February 27, 2024

MannKind Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon and welcome to MannKind Corporation 2023 Fourth Quarter and Full Year Financial Results Earnings Call. As a reminder, this call is being recorded on February 27, 2024, and will be available for playback on the MannKind Corporation website shortly after the conclusion of the call until March 12, 2024. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainty, which could cause actual results to differ materially for those stated expectations. For further information on the Company’s risk factors, please see the 10-K report filed with the Securities and Exchange Commission this afternoon, the earning release, and the slides prepared for this presentation. Joining us today from MannKind are Chief Executive Officer, Michael Castagna; and Chief Financial Officer, Steven Binder. I will now turn the conference over to Mr. Castagna. Please go ahead, sir.

Michael Castagna: Thank you, Valerie. We have never seen a better time for MannKind than we do today. As we look at our future, it’s extremely exciting and I’m never more motivated to ensure we deliver on all key operational opportunities in front of us. As we think about today, Steve and I will go over the operational pipeline highlights of the financial review, and I’m also here today with Lauren Sabella, our Chief Operating Officer for Q&A. We will drive shareholder value by making a difference in the lives of the patients we serve. We will make over 25 million doses and devices in 2024 and helped roughly 25,000 patients take a MannKind-produced product in 2023, the most in our history. In Q4, we had record revenue for Tyvaso on both royalty and collaboration manufacturing, along with record production on Tyvaso cartridges.

We advanced our pipeline in both the orphan business as well as the endocrine business, and our endocrine business hit its second consecutive profitable quarter. We finished a year in the strongest position we have been in, in terms of financial ability, as well as by selling the Tyvaso — 1% of our Tyvaso royalty for $150 million upfront and $50 million in revenue milestones. Many of you asked, could we have sold more? Why didn’t we sell more? And the reality is, we didn’t need to sell more. We wanted to make sure we were comfortable with carrying the level of debt and cash on the balance sheet to control our future. We’re very excited about Tyvaso DPI and what it’s going to bring to patients and anticipate hopefully positive milestones for Tyvaso in the future and, therefore, want to preserve 90% of that value for our shareholders.

At the same time, we want to deep risk on the debt side of our Company. We’ve also restructured insulin purchase commitment and reduced our near-term cash outlay by $50 million. The EBU will be the foundation for our future launches and currently makes up about 37% of our revenue in 2023. As I presented at JPMorgan in January, our ability to grow double-digits for the foreseeable future looks bright when you see, in 2023, our total revenue approached $200 million, almost 100% growth year-over-year. I’m going to spend a few minutes on Afrezza and the EBU because we are at a pivotal inflection point with our future. Innovation takes time and disruption is even harder. When you think about the weight loss craze today GLPs were 20 years in the making to what you see today.

The pods in Type 1 diabetes 10 years in the making and pens took a huge time to convert from vials back in the early 2000. I believe we can make this business a core pillar of our growth story. When you look at the Endocrine business, it grew 32% year-over-year, or $70 million in ’23, and created $20 million in Q4, the second quarter in a row of profit contribution as well as on a run rate of $80 million. We’ve made a lot of changes in 2023 and delivered despite those changes to set us up for a transformation once we see the new data from INHALE-1 and INHALE-3 this year. As I look at the revenue, Afrezza net revenue grew $12 million, or 27% year-over-year. This is our largest jump in seven years and is the most we’ve seen driven by volume alone as opposed to price balance by historical standards.

Several clinical readouts in 2024 may expand our market potential, and I’ll talk about those in a minute. One of the questions I get is what is different this year than prior years? Our focus this year is incredibly different. We’ve been waiting for this moment, where we have people, money, and data, many times we had two out of three, but not all three. The number one, we got to maintain our persistence in Medicare and Commercial to grow this base business and leverage the $35 insulin copay that currently exists for Medicare and Commercial insured. So coverage we know is the number one objection. Number two, we optimized our sales force footprint here in January to build capabilities for the future growth. And what that means is, we were able to reallocate some headcount to create key account managers, reimbursement specialists, as well as virtual and in-person training across the country.

We also have new insights from market research, which I’ll share with you shortly that suggest by executing effectively we can increase prescriber adoption. And finally, is around data and education. We want to focus on KOL development, education at conferences and publications to elevate the support and awareness, especially among academic centers. Here’s some new market research as we go forward, called the Emotional Engagement Mindset model, which is done by a Company we’ve leveraged for market research. This shows a significant shift in perception by the various groups we tested with our new data. And you can see at baseline, just unaided awareness of a present, what people’s perceptions were in terms of unattracted, apathetic, attracted or passionate.

And by exposing them to our core V-Go aid as well as some expectation of what INHALE-3 data could read out, you can see we shift almost two-thirds of our key target audiences are attracted or passionate about our future. This is really important because it’s the first time we can see this big of a shift from where we started to where we end up with the new data coming. People don’t want slow-acting insulin in a world that moves as fast as we do. When I look at the future here on our studies, INHALE-3 and INHALE-1, I’m going to talk a few minutes about these. We have 60 US sites in KOL sites like the Mayo Clinic, the Johnson Clinic, some of the foundations of diabetes treatment in this country. Irl Hirsch is our top-tier thought leader here on INHALE-3 as the Principal Investigator.

And he’s done a great job ensuring this trial is dosing properly and enrolling quickly. We have over 300 patients in both of these trials and both of them are on track to read out this year. On the left side of the slide, Type 1 diabetes, INHALE-3, is the largest switch study away from AID pumps. There’ll be about 120-some patients in this trial. Half of them will be on MDI, half of them will be likely on AID pumps, as we look at the data. The reason this data set is important is it’s utilizing a new dosing conversion upfront to ensure proper efficacy is maintained or improved. We are also doing meal tolerance test at baseline in week 17, so we can see how people’s dosing may have changed over this time frame. Another thing to remember about this trial, the first time we’re enrolling, almost 25% of the patients are at level seven A1C when they entered.

So we’re also showing you, hopefully, that tight control can remain by switching to Tresiba plus Afrezza or degludec as the generic name. So a lot of people asked me, what is the goal of INHALE-3? Our goal is equal efficacy to what perceived to be the standard of care, including an AID system. No mealtime insulin or AID system has ever beaten another system head to head. We think this is an important metric that is successful, and if we see a clinical advantage on highs or lows, that’s upside to our expectation. We also plan to use this data to hopefully update conversion figure one in our Afrezza label. We’ve been in discussions with the FDA since the start of the PEDS program around how do we update that initial dose conversion. We hope that INHALE-3 will be part of that data set.

On the right side of the slide, you can see, sorry, on the bottom of the slide, the different data readouts. First dose will be ATTD in March, the 17-week data we expect to present at ADA in June, and the 30-week data will be complete in third quarter and will be presented at a future conference. On the right side of this slide is INHALE-1. This is a pediatric study and we think this is a watershed moment in order to transform the inflection of Afrezza will be through pediatrics. When we look at diabetes innovation today, whether it’s CGM insulin pumps, has started with children and worked their way into adults because the patients are more on social media, the parents are more progressive, some doctors are more progressive. This will be the largest study done on Afrezza over ten years, and so far we don’t have the data, but I can tell you the conversion dose has appeared to cause less dropouts relative to our original trial on Afrezza.

There’s also a meal tolerance test at baseline using CGM and hope this study will be used to secure pediatric approval in 2025 and beyond. This is how we believe we will accelerate rapid growth of Afrezza and this will ultimately spill over into adults. The one hangover is still the lungs and we think it’s time to move forward beyond this. When we look at the data today, we’ve been on the market 10 years, we’ve helped tens of thousands of patients. We are building up US KOL support and we have this new data coming out. We would not be going to the children if we were worried about the safety of our product. So when I look at the future and the growth opportunity, we look at four segments of our future. Number one, we’re already approved for Type 1 and Type 2 adults.

INHALE-3 will be using a new dosing with CGM in an upfront conversion. We’re super excited about this data set as it will also include the head-to-head data I just mentioned. GLPs will continue to be the bolster of the units there in Type 2 diabetes. However, those patients will still need a mealtime insulin, and will continue to promote Afrezza and V-Go in that segment as there are millions of people, who require mealtime insulin over the coming years. However, in order to be a leader in Type 1, we need the data from INHALE-3 to set us up for INHALE-1, which is the pediatric segment, because when we do finally get that data, we know insulin pumps will be the indirect competition of when it comes to a doctor, a patient or CDA making an educational decision for a patient.

They will want to know what Afrezza looks like against insulin pumps. So we started that study with INHALE-3. We’re excited to hopefully wrap up INHALE-1 in a few months here. Once we see that data, we will have a one-two punch this year as we wrap up 2024. And now as people are starting to see the first dose data, we’re getting questions on gestational diabetes. We think there’s an unmet need there that we want to fulfill over time because there’s only two drugs that can be used today, metformin, which crosses the placenta and slow-acting injectable insulin. And for anyone that knows anyone suffered from gestational diabetes, keeping your time and range really tight is critically important. I’m going to bridge over to the pipeline very quickly, NTM, nontuberculous mycobacteria with our clofazimine suspension.

So some of you may not be aware, but one of the competing products in Phase 3 had a pause last week in enrollment. And people ask me, why am I excited about our program? And why am I confident? Well, the reason we are excited is, one, when we purchased the product, there was preclinical data showing an improvement in bacterial recovery in the lung model that they used. Number two, there’s worldwide data. The product is approved today indirectly through a market access program by the FDA and Novartis. We see worldwide data being generated from patients taking clofazimine here in the US, as well as Japan. Third, there’s KOL support for this, along with guidelines, potentially. And finally, there’s no near-term competition for trials now for patients.

So, as we look forward, we have 100 sites we’re going to target across the world, and we see no other option, really, for these patients to enroll besides the current drug that’s on the market Arikayce. So here is the design of our Phase 3 study called the ICON1 study, which was designed post our FDA feedback along with the quality of life group there at the FDA. We’ve taken their feedback, we’ve incorporated that into this design, and it’s 120 patients on active arm and 60 on the placebo arm. We’ll do an interim analysis at 50% and we’ll continue to watch enrollment as we saw that competing program enrolled relatively quickly over the last six months of the year, last year, into this year, and that gave us even more excitement for the speed of enrollment that could happen with this trial.

We’re excited to get this trial going and we expect to file the R&D here in March and kick off the trial in June as we’ve had a lot of dialogue with the FDA on the trial design and we expect quite quick approval on the Central IRB. It’s exciting to us that this will be over a billion-dollar market with only two players in the next five to 10 years. We have the potential to be the second approved NTM product, and the market research indicate we will be a potentially preferred option for patients whether it’s because of our favorable safety profile relative to oral clofazimine that’s utilized or the toxicities and tolerability challenges that some people face with Arikayce. We also know that we have convenient dosing. What does that mean? 28 days of treatment followed by two months off, followed by 28 days of treatment.

So if you’re doing well, you’ll potentially be treated four cycles a year. That gives patients a large burden back from what they did every single day to where they are. We also know the current treatments are not highly efficacious and that patients need more options in order to keep this disease in control. It may be a disease that goes away and comes back over time, but it’s one that they’ll probably live with chronically for a long time. We have an opportunity to expand a brand within the brand as we think about clofazimine in the future. The next quick pipeline highlight I want to talk about is idiopathic pulmonary fibrosis-201. This is going to be known as nintedanib DPI as we go forward. The reason I’m excited about this program is our 28-day Tox data was very clean.

We know 80% of these patients die in five years. There’s a huge unmet need in this disease state. And Ofev is the market leader marketed by Boehringer Ingelheim. And we have a decreased risk relative to the landscape that has failed in IPS development because we already know this molecule works in IPS. What we do also know is that there’s severe GI toxicities, which limits patients acceptance and uptake and prescriber adoption. There’s roughly 15,000 active patients in treatment in this country, and we believe bringing a more tolerable product that could potentially be dosed higher will be maximized in value for this population relative to what’s out there today. Additionally, our rat neomycin study on 201 appeared to mitigate the inflammation of fibrosis comparable to oral nintedanib at substantially lower doses.

As we go forward and our IND will be filed, we’ll be studying this in 201 in our next slide. We’ll be studying this in our part one, a single ascending dose as well as our multiple ascending dose to show, can we tolerate higher doses over seven days? This will be an important study that gets done here in Q2 with data expected to read out in Q3. Our goal is to show lower GI side effects and safety in healthy volunteers. I want to acknowledge as we go forward the hard work that Steve has done in landing our royalty financing deal as we worked on this for over six months. We’re in a great position because of Steve’s vision and leadership over the last seven years. And before I turn it over, I just want to acknowledge all the hard work Steve has done for us and our shareholders and our employees.

With that said, I’ll turn over to Steve to go over the financials for the quarter.

Steven Binder: Thank you, Mike, and good afternoon. I’m pleased to review select fourth quarter and full year 2023 financial results. Please supplement this call by reading the consolidated financial statements and MD&A contained in our 10-K. 2023 was a year of substantial revenue growth for the Company in terms of both percentage and dollar growth. Total revenues doubled versus 2022 and reached nearly $200 million. Let’s break this down by starting with the fourth quarter total revenues at the bottom of the table. Our total revenues grew a robust 62% versus fourth quarter 2022, and 99% for the 2023 full-year period, primarily due to the growth in our Tyvaso DPI-related revenues. Going back to the top of the table, you will see that Tyvaso DPI royalty revenue for the fourth quarter was $21 million, which is 132% increase versus 2022, the result of continued growth in use of Tyvaso DPI for patients suffering from PAH and PH-ILD.

Please note that $2.1 million of the fourth quarter royalty revenue was sold to a third party and I will review the accounting for the royalty sale in a few slides. Collaborations and services fourth quarter revenue was $17 million, which was an 81% increase over 2022, was primarily representative of strong Tyvaso DPI production volumes in the fourth quarter. For the full year 2023, Tyvaso DPI royalty revenue was $72 million, an increase of 361% versus 2022, which was primarily due to the increase in patient demand for the product and the start of commercial sales by United Therapeutics late in the second quarter of 2022. Royalty revenue has now become our largest single source of revenue, which allows us to fund and progress our clinical development and product pipeline.

Collaborations and services revenue for the 2023 full-year period was $53 million, an increase of 90% versus 2022, which was primarily due to the start of commercial manufacturing in the second quarter of 2022, and the increase in production and sales of Tyvaso DPI semi-finished product to United Therapeutics in 2023. Moving down the table to our endocrine business. Total endocrine revenues were $20 million for the fourth quarter and $74 million for the full year. For the fourth quarter, Afrezza’s net revenue of $15 million compared to $12 million in 2022. A growth rate of 29% which was mainly driven by higher patient demand with underlying paid TRx growth of 29% year-over-year, a lower gross-to-net deduction as a percentage of gross revenue and price.

Compared to the third quarter of 2023, there was a $2 million increase, which represents half patient demand and half increased channel inventory due to wholesalers purchasing an extra week of product in late December. This additional wholesaler purchase in late December would likely impact our net revenues for the first quarter of 2024. For the full year 2023 period, the 27% increase in Afrezza’s net revenue was mainly related to increased volume from higher patient demand with underlying paid TRx growth of 25% price and a more favorable growth to net adjustment as a percentage of gross revenues. Net revenue for V-Go was $5 million for the fourth quarter of 2023. Revenues were 13% lower versus 2022, primarily due to lower patient demand and higher growth to nets as a percentage of gross revenues, partially offset by price.

V-Go net revenue improved versus the third quarter of 2023 by $0.2 million, mainly due to improved gross to nets. For the full year period, the 48% increase is primarily related to the purchase of V-Go on May 31st of 2022, reflecting a seven-month versus twelve-month comparative. The next slide shows our revenue growth by source and basic earnings per share on a quarter-by-quarter basis from the first quarter of 2022 through the fourth quarter of 2023. I’d like to show this graph because it highlights how dramatically our business has changed in two years, and how we’re executing against expectations. For the fourth quarter 2023, total revenues increased 14% sequentially versus the third quarter of ’23, and are up 62% versus the fourth quarter of 2022.

Fourth quarter 2023 total revenue of $58 million was almost 5x the total revenues recorded in the first quarter of 2022. Below the graph, where were our quarterly basic earnings and loss per share. The fourth quarter was the second straight quarter with net income and positive earnings per share. As I stated, during the third quarter earnings call, we are in a period where we expect to bounce back and forth between earnings and loss per share as our revenues increase, but we will also be increasing our spending on our pipeline as we move MNKD-101 into a Phase 3 Global Clinical Trial and MNKD-201 into a Phase 1 clinical trial. In addition, we will wait to see the results from the INHALE-3 and INHALE-1 clinical trials for Afrezza before deciding whether to increase promotional spend behind that product.

For now, we will continue to focus on growing the profitability of the endocrine business unit, which has had a positive contribution for two straight quarters. Moving on to our GAAP to non-GAAP reconciliation, I will first focus on the fourth quarter, which is on the left-hand side of the table. We had GAAP net income of $1 million, which when adjusted for select non-cash items for stock compensation, gain or loss on foreign currency transactions, which is related to our insulin purchase commitment, loss unavailable for sale securities, a sole portion of the royalty revenue, and the interest expense on the liability for sale of future revenues, which I’ll discuss in more details in a minute, provide for a non-GAAP net income of $7 million versus a 2022 fourth quarter non-GAAP net loss of $11 million.

For the full year 2023 period, we ended with a net loss of $12 million, but when adjusted for the select non-cash items becomes a non-GAAP net income of $6 million, which is compared to a non-GAAP net loss of $78 million in 2022, an $84 million year-on-year positive change. Now I’d like to take some time to explain the accounting that resulted from the sale of our 1% of our Tyvaso DPI royalty. To set the stage, we sold 1% of our 10% royalty for $150 million plus up to $50 million more if certain net revenue numbers are attained within a period of time ending at September 2027. This puts a third-party valuation on the 10% royalty of approximately $1.5 billion to $2 billion. After we announced the royalty sale in early January, heard back from investors that we could have done a better job explaining how we recognized these transactions in our financial statements and how we got to our accounting conclusions.

So let me try again. First, we looked at all of the GAAP guidance, reviewed all similar relevant transactions we could find in the last five years, and then consulted with our auditors. The conclusion we arrived at, amongst other things, is that MannKind has a continuing involvement in the generation of Tyvaso DPI revenue through activities to protect the intellectual property of Tyvaso DPI, such as defending the patent estate, protecting the product, and the continuing involvement in the manufacturing of the product for United Therapeutics. Thus, the upfront proceeds recorded as a liability for future sales of royalties, not as revenue. The table on the slide reflects how the accounting works. We record the cash consideration received net of issuance costs and a related liability for the sale of future royalties on our balance sheet.

To recognize interest expense related to the liabilities, we forecast the future royalties to be received through 2042 and calculate the return that would be needed when receiving a $150 million upfront payment, 1% of the royalty over this time period. This rate came to just over 11%. In future period, we’ll continue to estimate the future royalty stream based on royalty trends, commercial success of Tyvaso DPI, competition for the brand and other meaningful inputs. The outcome of these future estimates may adjust the prospective interest rate using determining interest expense and amortization of the liability. Each quarter, we will charge our P&L for non-cash interest expense based on the interest rate and credit the liability. We’ve also recognized 1% royalty as non-cash revenue and reduced the liability by this amount.

In addition to the non-cash attribute of this transaction, we also earn cash interest income of approximately $7.5 million annually. The slide shows how the accounting should work for 2024 if nothing changes in our forecast of expected royalty. The balance sheet would end 2024 with $153 million in cash and $153 million of a liability for the sale of future royalties. The liability balance will increase as long as the non-cash interest expense is greater than the non-cash royalty revenue, which is likely to occur over the next few years. Once the non-cash royalty revenue becomes greater than the non-cash interest expense assuming that sales of Tyvaso DPI continue to grow, then the liability balance will begin to decrease. Focusing on the 2024 income statement on the right side of the table, we will record non-cash revenue of $10 million and cash interest income of $7 million, offset by non-cash interest expense of $17 million.

As discussed on our previous slide, we expect to isolate the non-cash aspect of this transaction and our quarterly GAAP to non-GAAP reconciliation of net income and loss. With over $300 million in cash and investments on our balance sheet as of December 31st, 2023, we want to share our near-term priorities for using the cash to increase shareholder value. First, focusing on our development pipeline, we expect to fund much of MNKD-101 and MNKD-201 clinical trial expenses over the next few years through operating cash flow. As these assets advance through clinical trials, we will prioritize their funding. In addition to MNKD-101 and 201, we have two clinical trials for a present nearing data readouts. We will wait to see the results of these trials before deciding whether to invest more behind this asset to grow revenues.

In addition, we plan to do the following with our debt. Our midcap senior secured debt has a balance of approximately $33 million as of December 31st, 2023, and currently carries an interest rate of 8.25%. We expect to pay off this debt in the first half of 2024 to take advantage of the interest rate arbitrage between debt interest expense and cash investment return and release our assets from Midcap’s security interest. MannKind convertible debt with a balance of approximately $9 million as of December 31st, 2023, is expected to be paid off early in cash or in a mix of cash and stock. By doing this, we would be reducing future shareholder dilution. Our senior convertible debt with a balance of $230 million as of December 31st, 2023, carries a low fixed interest rate of 2.5% and we do not expect to buy back bonds prior to maturity in March 2026.

When maturity arrives, we expect to reduce future dilution by paying off the debt with cash if our stock price is below the conversion price of $5.21. Additionally, we do not expect to access the ATM. To summarize, a very successful 2023, we doubled our total revenues to almost $200 million versus the prior year. Fourth quarter was the second successive quarter of positive contribution from our endocrine business unit. The fourth quarter was the second successive quarter of net income for the Company. We sold a 1% interest in our 10% Tyvaso DPI royalty, which value for the royalty stream alone at between $1.5 billion and $2 billion, and we ended 2023 with $302 million in cash and investments. 2024 should be another stellar year for MannKind, as we are financially prime to drive our commercial and clinical priorities and deliver increased shareholder value.

Thank you. And now I’ll turn it back over to Mike.

Michael Castagna: Thank you, Steve. And I appreciate the explanation of all the accounting. I never wanted to know. Now they know why I appreciate you. Next slide. So MannKind has been around 33 years, and I want to give a special thank you to our Founder, who passed away eight years ago on February 25th. The reason that’s important the day I decided to join MannKind, and I’ll forever be grateful for Al Mann. He was a special human being, who cared about society, our patients, and making a difference. We have the foundation left us within 2016, and we built this into a major self-sustaining growth Company against all odds. When you look at the history from ’16 forward, we announced our United Therapeutics collaboration. We acquired Qrum, which is now our Phase 3 asset with clofazimine or MNKD-101.

We purchased V-Go, which made our endocrine division more sustainable and brought us a couple thousand new prescribers, and Tyvaso DPI has been ahead of all the expectations since its approval. As I look forward, we are just getting started, expected 2024 milestones alone between Afrezza and the steady read-outs MNKD-101 — MNKD-201. Not to mention that Tyvaso-DPI, which has two major trials going on in TETON 1 and TETON 2, which I heard this last week, were 70% enrolled. Once they finish up enrollment, they’ll have 12 months there. We should expect to see data from United Therapeutics. Additionally, our team just this day completed the high-speed fill finish line in terms of qualification. I will now begin on the PPQ, hopefully producing much higher volumes of Tyvaso have that line as we exit Q1 going into Q2.

As I look at our future, we have several key value drivers. As you can see, our insiders picked up some stock in the next few weeks and hosted our Board Meeting because we believe we’re undervalued and we’re very confident in our future. Analysts have expenses in — for our pipeline, but no revenue in the next five years. We think this is an unfair valuation of our Company given that we do expect to launch clofazimine in the next five years and move NTM — I’m sorry, and move the IPF asset in terms of MNKD-201 into patients and then hopefully the Phase 3 by then. We go back and look at another successful company in time InterMune was similarly valued at $800 million at one point and 18 months later was $8 billion once they got a positive data readout.

Our job is to not react or overreact day to day to swings in the stock market but to lay out a firm foundation for future growth. And as we look out there whether it’s the pipeline with MNKD-101, every 1,000 patients approximately $100 million in revenue. MNKD-201, we’re going to start patients dosing there, as you think about IPF, every 1,000 patients is roughly $150 million in annual revenue. And then we get into Tyvaso DPI, which as you can see this past year, when you add up the collaboration services revenue and additions that have royalties, we know there’s roughly 5,000 patients on Tyvaso DPI, and that’s about half of the $250 million revenue that we experienced this past year. On the endocrine side, we have several major upcoming opportunities with INHALE-1 and INHALE-3, as well as Afrezza International.

V-Go is being managed for improved profitability as we continue to focus on improving our margins by producing COGS as well as improving gross to nets. As we take a step back, we have multiple shots on goal to create significant shareholder value across three commercial products when you think about Afrezza, Tyvaso DPI and V-Go, they’re already FDA-approved, as well as two assets coming up quickly in the pipeline between MNKD-101 and MNKD-201. We have multiple shops on goal within these assets. We are completely focused on delivering shareholder value sustainably for years to come. We have several upcoming presentations and engagements at conferences. I’ll be doing non-deal road shows with Steve over the coming months to get the word out as we feel like MannKind is at the best inflection point with the best team in the industry, cash on the balance sheet and multiple shots on goal in terms of data read-outs to drive future growth.

We’re super excited about the future. And I will stop there, Valerie, to take questions. Thank you again.

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Q&A Session

Operator: Thank you. [Operator Instructions] One moment for our first question. Our first question comes from the line of Andreas Argyrides of Wedbush. Your line is open.

Andreas Argyrides: Great. Thanks for taking our question. Congrats on all the progress. Just maybe two for us here, quickly. Despite an evolving competitive landscape in PH-ILD, the Sagard royalty puts a $15 billion valuation on Tyvaso DPI. A key component to DPI’s advantage is the ease and convenience of the low-resistance device compared with other high-resistance devices. So the question here is, could you elaborate on the differences with the DPI device compared with the competitors? And how that plays into DPI safety and efficacy profile? And also, how do you see the DPI device playing a key role in the delivery of nintedanib IPF? Thanks.

Michael Castagna: Andreas, let me take that second question. Can you repeat that one?

Andreas Argyrides: Yeah, yeah, sure. So back to the advantages of the DPI device, how do you see it playing a key role in the delivery of nintedanib and IPF, mostly from, you know, delivery to safety perspective?

Michael Castagna: Yeah. No, I think that’s what gets us excited, right. I’ll start with that question first is, you know, when you think about our platform, it’s the same device being used in the same audience that, you know, we’re currently moving forward in orphan lung disease that United Therapeutics is also using, right? So the familiarity, the training, all that, and the comfort of, you know, bringing inhalation into this patient population with our current technology gives us that much more confidence because most of the powder is our novel excipient FDKP. So if they can tolerate that in the PH market, we know some of those patients overlap with ILD as well as IPF. Then being able to show that our powder at 99%, FDKP should be able to tolerate it in the nintedanib as we go forward.

And so far, the animals, you know, the dissolution and all that looks positive. We’re doing a chronic tox, and we’ll have that done by the end of this year, at the same time, we get Phase 1. So I think this year, the nintedanib should feel like it’s even more diverse than it already is, given it’s a known asset and a known technology, that’ll be a positive contribution for there. On the other side of the equation, you were asking me, you know, how do we differentiate our platform? I think our powders are built to fly with our devices. They’re going hand in hand. We’re not taking a novel powder and throwing into an off-the-shelf device. I think that it’s about that deep lung penetration, it’s about the velocity of those powders are coming out, and how consistent and deep lung penetration you’re getting across lung, the bed.

And so I think that’s number one. Number two, we know that the powder we need is very low because we probably go back of filling the smallest volume for the 16 microgram — all the way up to 64 microgram or higher. So, you know, as people want more, they don’t need to inhale that much more powder to get additional effect size, which should help on cough, which should help on absorption, as well as just safety. When you think about, you know, a lot of FDA had questions on hormones and devices in Asthma, how to use steroid use. You know, these are questions that come up with the FDA. It’s really important, right, that there’s not excess powder coming around, especially when you get to these narrow therapeutic drugs. You want the proper dose delivered with minimal powder containment happening or powder extraction happening outside of the cartridge itself.

So these are all important things that come up. And I also think patient satisfaction was very high in the trial that UT ran and pivotal. And we also know from thousands of patients we’ve studied Afrezza. The device is relatively easy to use from four years old to roughly 80 years old. So those are just the well-known comfort the dosing and the consistency of dose will be important factors as we go forward.

Andreas Argyrides: All right. I appreciate that. I’ll jump back into queue. Congrats also on all the progress.

Operator: Thank you. One moment, please. Our next question comes from the line of Olivia Brayer of Cantor Fitzgerald. Your line is open.

Olivia Brayer: Hey, good afternoon, guys. Thank you for the question. Can you talk about how NTM fits into your strategic priorities just as you grow into a more mature Company? And there is some competition in the space, although maybe less so these days, as you pointed out. So how should we be thinking about where MNKD-101 could fit into the treatment paradigm? And the last question is, just can you remind us on what the timelines are for expected enrollment and data read-outs there? Thank you.

Michael Castagna: Sure. I think there’s a couple of things of how it fits in the Company. You know, the first will be a decision on licensing outside the US. So we’ll run the trial in the key countries where NTM exists, but we may choose to partner out, Japan, for example, where we saw Indomed went independent. We haven’t made those decisions. We don’t have to make those decisions. We are looking for partners and talking to partners, but, you know, it’s up to us. And we’re a little bit in control of that process there. In terms of how it fits into MannKind, I think there’s core capabilities that we have today around reimbursement support, patient training, and how do you treat a specialty product from distribution, things like that we have that will be applicable to the NTM space.

And then when you think about where it fits into the treatment regimen, there’s two points there. Number one, we’re going after the refractory patients first. And in that population, the only drug approved is Arikayce. And we think there we have a significant clinical advantage, as well as a convenience advantage that, you know, we should be able to displace or grow that market opportunity very quickly as we enter it. The other part is we are actively working on a dry powder version of clofazimine, and we expect that that will be used for a naive population so that it can be used earlier in lines of treatment. So we do intend to cover early and late stage. And that’s one of the benefits of being where we are as a Company, is when that opportunity presents itself and we choose to want to fund maybe a second trial at that point.

We can decide and part of that will be how fast is the Phase 3 enrolling on the refractory population. If we look at into the lead example, right, they got about 180 patients in 15 months. And so that’s about what we need. So if you really think about where we are today, 15 months from now, we could be fully enrolled, but we only need half of that population to do our interim analysis. So we hope to have that interim analysis sometime in the second half of next year. And then we would just be waiting for the full patient population to get there in order to hopefully file on six-month data. So that’s our goal. It’s a primary endpoint of six months. And when you think about the grand scheme of life, we’re not that far away from hopefully kicking this trial off here in the second quarter.

And more importantly, you know, we’re sitting here, next year at this time, we should be quickly enrolling halfway if everything goes as planned.

Operator: Thank you. One moment, please. Our next question comes from the line of Steve Lichtman of Oppenheimer and Company. Your line is open.

Steven Lichtman: Thank you. Evening, guys, and congrats on the progress. Just level setting into ATTD, what is the data exactly that we’re going to see there? I know we’ll see the 17-week this is on INHALE-3. Excuse me, what — I know we’ll see the 17-week at ADA, but what’s the anticipation at ATTD?

Michael Castagna: Yeah, so we have a presentation there by Irl Hirsch, which will be the first dose on the meal tolerance data. And Steve, what I think that will allow us is the opportunity to obviously have Afrezza on the podium there in front of everybody. But I’m sure Irl will be presenting some of the data and rationale why Afrezza deserves a more fair chance in treatment. And he’ll show that first dose data and that’ll be the primary focus there. As you know, it’s a technology conference with lots of innovation and that’s really a Type 1 community that comes from there. I think the other part of this is starting to talk about, do you go to Europe, for example? Is there another opportunity, once we see the full data set, to expand to other markets in a meaningful way? So we’re there for that reason as much as anything in terms of showing the data and meeting global thought leaders.

Steven Lichtman: Got it. Okay. And then just on the endocrom business, in general, I know you’ve been balancing growth and profitability. And you noted in your prepared remarks, you know, optimizing the sales force footprint. So I guess, are you reducing the footprint, being more strategic there? Talk a little bit about what you’ve been doing. And then what are the range of commercial investments you would consider assuming positive outcomes in INHALE-3 and INHALE-1? Would you add more to the salesforce? Would be something else? Thanks.

Michael Castagna: Yeah. I think on the sales force footprint, yes, you have rewind back 18 months. When we bought V-Go in May of ’22, we dedicated roughly 2025 FTEs to that brand alone. And one, it was on a two-year decline, not being promoted, we want to stabilize it. And two, we didn’t want to disrupt the Afrezza field team. So we held overlapping expenses for quite a while in both of those businesses. And really our focus going into July and January this year was a two-step process around integrating V-Go into our commercial footprint on Afrezza. And then the second step was integrating the sales force into one voice, one team. And that took place in January of this year. There were some headcounts that were freed up as a result of that process.

And we reinvested some of those headcount into the field reimbursement support, the training and the key account managers. We think the key account manager is critical as we go into pediatrics and academic centers. That’s not where Afrezza has been widely adopted. So, you know, the first step is getting the key account managers to make sure we stabilize those big accounts. And then second step will be hopefully filtering in some reps underneath them where they can maintain accounts or grow accounts day-to-day while those key account managers take on the next group of accounts and get us ready for PEDS. So we have a multi-step process here. It’s not going to happen overnight. But the first step was getting the one field footprint, one voice with one team, and one new marketing campaign, which we’re actually rolling out this week.

So I think the team will see that. We’ve invested a lot in training. We have a couple of field trainers now. And that’s going to be the number one focus this year is can we grow faster than we have been with the current footprint and the current infrastructure we put around that footprint? And if that model is working, I think we’ll have the conviction to go ahead and expand that model further. We can easily add 50 to 100 more people. I wouldn’t really do that until we saw ground-breaking data and that some of our current model was working with KOL support. I think the number one thing with the data will be the KOL support around that data because we have to be able to penetrate the academic centers, which are very pump-based. And I think that the pump data within INHALE-3 is going to have to hold up in every objective way in terms of reducing high or reducing lows or improving A1C or timing range.

So if you ask me, what does the data need to look like? It’s got to be very compelling for us to be willing to spend money. And that compelling investment will be conservative with the data. We’re not going to — we’ve been through Afrezza a long time, we’re very excited about the data. We love the product, but we have to be objective around our investments and our ability to drive success, and I think the data is going to help support that.

Steven Lichtman: Understood. Thanks, Mike.

Operator: Thank you. One moment, please. Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is open.

Unidentified Analyst: Hi, Mike, and team, it’s Nishant for Greg. Congrats on the quarter and thanks for taking my questions. I just wanted to parlay some questions on INHALE-3 there. How should we be thinking about clinical bars for HbA1c over the 17-week period in June? And then just considering real-world translatability of the trial design, maybe if you can just remind us on the foreseen pushes and pulls for getting patients to switch between injectable insulin or pumps to Afrezza. Thanks again.

Michael Castagna: I think the first question I was kind of the non-inferiority margin, maybe an inhale rate between the two arms, and I think that’s a 0.4%, which was consistent with our pivotal trials on Type 1. And so that was — you know, those trials were done with a different conversion. And so we’re hoping one of the things we saw in those trials was we got to the right dose. It just took twelve weeks. We’re hoping by starting at a better dose up front, we have twelve more weeks of benefit. And we saw the other last year, if you may or may not recall, we did a small study called ABC, which was a pilot trial on 25 patients to show, could you switch off an insulin pump. How do you adjust the basal? What happens over the twelve weeks of that study?

And that study gave us a lot of insights on things we had to correct for this larger trial before we spent the money. For example, one site titrated basal very well. The other site we learned that you could be a little more aggressive in their basal titration. And so those are the types of things we tried to get more guardrails around in this trial to ensure proper titration, proper conversion. And obviously, doctors know how to use the insulin pumps. And so that was the other thing we saw. In the original trial, was they knew how to manipulate a pump very well, because these doctors use pumps all day long, where Afrezza was new to them. They didn’t know how to use it to its advantage in terms of dosing and — follow-up dosing if necessary.

So we kind of feel pretty good about the trial design, the controls within the trial. So now we just to wait for the data. So that gives you some perspective there. So we didn’t design it for superiority. Those will be secondary endpoints that we’ll watch out for. And then your second question around, how do you think about this in the real world of existing with pods and pumps and physicians? And I think this comes down to patient motivation. At the end of the day, I think we will have KOL support. I think we will continue to see guideline support. We saw some updates this year in the standards of care for Afrezza. People are starting to understand the lower rates of hypoglycemia, the better timing range. And you’re seeing they want real-time acting insulin as they’ve kind of adjusted every AID system and pump together.

What’s next? And what’s next is really tightening control even further. And we’re the best tool to help that. So that’s a lot of what we’re talking about is how do we look at data on Afrezza on top of pumps potentially. We know that’s an FDA challenge. We’re also thinking about GLPs. And if you know, you still have mealtime popping on GLPs. Do you add Afrezza to those populations? So we’re starting to look and say, if we were to get positive data on INHALE-3 as an early read-out, and we anticipate INHALE-1 will look good, then what’s the next leg up that we should really start exploring for more continued opportunities for Afrezza? If you think about it, it’s the pump market, it’s the pediatric market, it’s the stational diabetes market, GLP market.

There’s a lot of niche areas that are quite large that we think this brand can grow pretty rapidly over the coming years relative to where it’s been the last five years.

Unidentified Analyst: Great. Thank you so much.

Operator: Thank you. One moment, please. Our next question comes from the line of Oren Livnat of H.C. Wainwright. Your line is open.

Oren Livnat: Thanks. I got a couple 101 questions. Can you just help us better understand how you arrived at the pivotal study sample size and powering, you know, what’s that based on? And with regards to the PRO endpoint, I guess, since that’s a new subjective endpoint in the space, you know, what is the bar there? What does that need to look like to be an effective competitor? And I’ve got a follow-up. Thanks.

Michael Castagna: Oren, these are two great questions and I think it’s the biggest challenge to developing products for NTM. And it’s why I think you’re going to see continued lack of investment because you have to be — either have enough capital to go through with it. In the case of Indomed, which spent many years building out this space and working with the FDA as well as the patient communities. And we know that the physician KOL population really wants clofazimine. We know the patient population really wants clofazimine. And even the FDA will say, there’s been nothing but collaborate along this whole journey for five years and going back with Qrum. So I think the market forces are aligned to help support us with the winds in our backs to push us forward.

And then you get into risks of running these trials. And I think the reality is there are risks in this population. But given the efficacy on clofazimine, we estimated about a 20%, 30% effect size delta between us and placebo. And that’s going to be the interim analysis to see, are we on track for that? If not, we might have to increase the sample a little bit. That’s number one. The second part is the pro. We went back and forth with the FDA for years, not just months, on the PRO endpoint, the PRO division and the feedback from the PRO division, for two reasons. One, we weren’t comfortable running a placebo-controlled trial, given that you can pretty much know what the active arm is. And we think that makes the PRO a difficult tool and therefore we tried to make it a secondary endpoint.

The FDA was insistent it should be a primary or co-primary endpoint. And so we rounded around a long story short, we landed where we did, which is a co-primary endpoint, with the understanding that this is a little bit of a risky endpoint, but that they agree we’ve done the best we can to create the baseline measurement and the improvement in those key measurements that we’ve aligned to with the FDA. And that the efficacy is going to have to matter in terms of sputum conversion as much as the PRO tool by itself. And so just like I know, I listen to the Indomed call. I mean, what they’re going through with the FDA, we’ve had a lot of those questions. We’ve worked with them. We’ve gotten a lot of their feedback already incorporated into our trial design.

So you know, now it’s about the data, and then what happens with data and how you analyze that data once it comes in, all be really important. But again, we’ll work very closely with the FDA. I think they understand where we are. They understand the pros and cons and rather than keep debating it, we thought it was more important to get the data and help get this drug cross the finish line.

Oren Livnat: Okay. Just so I’m clear, you’re going based on some clofazimine experience, efficacy-wise, and are you assuming an improvement on that with your powering assumptions, or you’ve been conservative on that?

Michael Castagna: Now, I think when you look — if we were going after naive patients, we’d think we’d see a much higher efficacy rate, but because we’re focused on refractory, we think it’ll be a little less obvious in naive patients. And I think you saw that in the Indomed Arikayce data out there. There’s only one study to really judge NTM endpoints on, and that’s the Arikayce. And so I think when you go back in their development program, they had a 20%, 30% delta between the control and theirs — I’m not sure they had a placebo. I have to go back and double check the data. And so that’s some of the work that we were going back and forth on, is incorporating the placebo could have a placebo effect, and how much more do you have to be, and how do you power a trial with that potential risk?

And that’s a lot of backend forth with FDA. So we’ve done the best we can. We’ll have an interim analysis. We think that’s the most important aspect that we will get to in this trial. But assuming that’s on track, then we feel very good about wrapping up this trial to bring this to patients very quickly.

Oren Livnat: All right. And then just with regards to the Tyvaso DPI situation, you know, we’re seeing a lot of headlines with regards to potential competition and lawsuits and I’m sure you couldn’t or wouldn’t comment directly on anyone else’s litigation. But if you are willing, I’m curious if you’re able to comment on whether your orders coming into this year and your efforts at inventory or manufacturing capacity expansion reflect, I guess, any possible assumptions or risks around competition. Are you potentially waiting to do anything? Or is it pedal to the metal, so to speak, on that front?

Michael Castagna: Yeah. On the Tyvaso DPI, I mean, we are making as much as we can around the clock. Nothing slowed down there. We know we want to build up inventory as well. So between the demand and the current amount we can manufacturer, there’s no slowing down where we are with Tyvaso DPI. In terms of competitor coming, I mean, we’ve been hearing about this for years, and whether it was the higher dose it was the indication everyone’s been doubting us about. Is this going to get approved? When we did get approved, then you’re going to have ILD. We got ILD. We’ve been very honest with the market ever since this drug was under review, and everything we’ve said has come true, right? We said we would expect ILD. We got ILD. We said we manufacture, we’ve manufactured.

We said it would have a nice conversion. It’s had a better conversion than anyone expected. So from my perspective Tyvaso DPI is delivered on all parameters above and beyond expectations, despite an under-forecast launch, which put a lot of pressure on MannKind. And we did not miss one beat to make sure every patient had an everyday supply. You know, we did a lot. Our team worked incredibly hard last year to make that happen. We had record production in Q4. And we’ll have hopefully equal record production in Q1 and even more production in Q2. So if you look at their story, they were after ILD, they are differentiated for some reason. And I’ll be honest if a patient can’t tolerate a dry powder for ILD, I don’t see how they’re going tolerate theirs, which has three or four times more powder, if I recall.

So, you know, it’s really about the patient tolerability, it’s about the titration, it’s about the powder load, and it’s about how you coach your patient, train your patient. All these are really equally important things. And anytime you launch a new drug, you find things out as you go along and you modify and you go forward. And that’s pretty much what I think, I hear UT doing is, you know, Tyvaso DPI is strong. It’s doing great in ILD as much as PH. From what I heard from their call, and our conversation with UT continue to be very positive. I did want to mention another thing, Oren. Is Japan so far is okay with the sputum conversion? So we’ll do one trial on MNKD-101 for clofazimine in terms of US and Japan, it’ll be one global study, but we’ll cut the data two different ways.