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Edited Transcript of MNKD earnings conference call or presentation 7-Aug-19 9:00pm GMT

Q2 2019 MannKind Corp Earnings Call

VALENCIA Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of MannKind Corp earnings conference call or presentation Wednesday, August 7, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael E. Castagna

MannKind Corporation - CEO & Director

* Steven B. Binder

MannKind Corporation - CFO

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Conference Call Participants

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* Anita Dushyanth

Zacks Investment Research, Inc. - Medical Technology and Devices Analyst

* Dylan Edward Dupuis

SVB Leerink LLC, Research Division - Associate

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Presentation

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Operator [1]

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Welcome to the MannKind Corporation Second Quarter 2019 Earnings Call. As a reminder, this call is being recorded on August 7, 2019, and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call until August 21, 2019. (Operator Instructions)

This call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty, which could cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see their 10-Q report filed with the Securities and Exchange Commission, the earnings 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 would now like to turn the conference over to Mr. Castagna. Please go ahead, sir.

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Michael E. Castagna, MannKind Corporation - CEO & Director [2]

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Thank you. Hello, everyone, and welcome to our second quarter earnings call today. As you can imagine, we're very excited here at MannKind as today's call is important, given it caps off the recapitalization journey we started 2 years ago when I became CEO. Since then, we've raised over $160 million, paid off our senior secured lender, signed multiple partnerships, including a $105 million deal with royalties from United Therapeutics as well as laid the foundation for our future. This journey has been a bumpy ride for our shareholders, our debt holders and our employees, and I want to say thank you to everyone involved in getting us to this point. I believe we are now in a solid position to deliver on shareholder value going forward.

Over the past 24 months, we transformed MannKind into a growth engine for years to come when you look at these 4 pillars. First, we have announced 5 key partnerships since 2017, UT is progressing very nicely as we just completed the build-out of our high-potency area within our factory and the teams are now in the process of preparing commercial batches. This program should move very quickly through the next stage of development, where we expect to bring in $37.5 million in milestone payments in the next 15 months. Additionally, we received approval for Brazil in Q2, and we expect to ship our first commercial supply in Q3 for an October launch. We are very excited about our partnership there as well as India as we get ready to start the Phase III trial. And finally, AMSL is working on preparing our file for submission in Australia. In addition, our recent announcement with One Drop is our first partnership to move BluHale forward as we think about ways to make it easier for people to manage their disease.

Our second pillar is around our UT partnership as they have exclusivity on our platform for pulmonary hypertension, and we anticipate we'll identify other opportunities to work with them over the coming years in addition to our own internal pipeline progress. We will provide some greater detail on how we view this moving forward based on our recently completed landscape assessment. The good news is our larger scale -- our large-scale dry powder manufacturing and formulation capabilities continue to be unique in the industry and give us a competitive advantage.

The third pillar is our FDA-approved product Afrezza, which is protected by our vast patent portfolio that now exceeds over 975 patents. We have made strategic investments to help close the clinical gaps for Afrezza, such as new time and range data with CGM, dosing and hypoglycemia. For the last 24 months, we have updated our packaging, pricing structure, dosing recommendations, our FDA label as well as removal of REMS program. As we go forward, you can now see ADA standards of care have been updated to include Afrezza's unique attributes, our pediatric cohort 2 is almost complete and 3 opened up last week with top-tier centers. We also expect numerous new publications to continue to help build out the scientific story in addition to our new data showing how well we can improve time and range, which we expect to become the next standard of care. The good news is Afrezza is here to stay and help transform the standard of care for diabetes.

Our fourth and final pillar is our financial position. Let me go to the next slide to talk about this. As many of you have seen by now, we have a summary of over 7 transactions we've been working on over the last month or 2. The first thing is the recapitalization creates a solid financial foundation going forward. We've restructured over $200 million in liabilities to improve cash flow and capital structure. We reduced our legacy debt by approximately $28 million and the majority of our near-term maturities, which were almost $100 million, were due in 2021 are now due in 5 years.

We just put a new current financing vehicle in place that provides almost $100 million in non-dilutive capital when you add up the $75 million loan with MidCap plus the United Therapeutics milestones. This MidCap loan is broken into 3 segments: $40 million upfront that we've just taken; with an option for $10 million, but no later than April 15, 2020; and an additional option for $25 million, no later than 2021, assuming we meet the covenants in the agreement.

Additionally, we've reduced our cash burn. When you look at our insulin purchase commitment that existed historically, these were out of line within our current demand. We've now been able to work with Amphastar to get a more reasonable forecast and purchase commitment over the next 4 years, reducing our expense by $45 million. We've also driven efficiencies and reduced spending throughout our business as you look year-over-year continued expense reductions and as we look into 2020.

All these choices that we've made are expected to fund the company to cash flow breakeven. My goal has always been to put this company on the path to cash flow breakeven. Now that we've completed this transaction, when combined with the continued reduction in our expense base as well as TreT moving forward, I believe we now have the flexibility and opportunity to makes this happen, unless, of course, we find investment opportunities that create greater value for shareholders.

The team at MidCap have done extensive due diligence on the management team, Afrezza and the prospects for the company as we go forward. MidCap manages a large debt portfolio with extensive health care experience backed by the Apollo group, and we are excited to be partnering with them.

As you can see on this slide, they have a vast experience in biopharmaceuticals, health care, and they really understand our business and our strategy and have followed the company for a long time. They have brought accesses to funding through the partnership with Apollo group and currently are managing over $20 billion in commitments.

Now let me turn our focus to Q2. First is international partnerships, we just discussed. And the second is Australia, which I also mentioned. United Therapeutics is going very nicely. We expect to start the Phase III trial very shortly. The high-potency manufacturing area is complete and built out. We anticipate achieving our second milestone of $12.5 million in the second half of 2019. The research agreement for the undisclosed PAH compound is substantially complete. We expect a decision with United Therapeutics in Q3.

On insulin and MannKind awareness, many of you have seen our Indianapolis 500 sponsorship with Conor Daly as well as our Friends for Life as we go into the pediatric space. We also are trying to change the conversation with print ads that you'll see in a second, in one aspect as well as inhalemyinsulin website, social media, billboards that we just launched this past week. And finally, we've increased our analyst coverage to 4 with BTIG initiating in May.

The first thing I want to share with you is the excitement that's going on in Brazil. Since the day of announcement of approval, it's been very exciting down there. We've appeared on the front page of the 2 big newspapers and there's been lots of write-ups up by the physician community down there. Over 60 appearances have happened and there's just a lot of buildup there. And so we're looking forward to working with Biomm and make this a very, very successful launch, where we can take the learnings from the U.S. and launch successfully in Brazil the first time.

The second big thing many of you may have seen in the past week is 2 targeting messages that we're working on in Texas around "Spread the Word." Say goodbye to mealtime insulin -- say goodbye to needles for your mealtime insulin, visit inahlemyinsulin.com. And everybody knows somebody with diabetes, tell them about inhalemyinsulin.com. This is targeted in a couple of cities right now, including an airport in the Midwest. So we're excited to see how this works. And so far, the early days of website traffic and video shares, et cetera, have been going above expected.

The next agreement that we signed was One Drop, which was announced on Monday. The important part of this aspect is it really starts to connect Afrezza into the connected care community, when we think about providing seamless integration of patients managing their disease on third-party platforms. We expect One Drop to be the first of other -- many platforms we go forward with in the coming years. This will make it a seamless experience for when a patient takes their Afrezza, the dosing will show up in the One Drop app. And when you look at your glucose data, they are able to integrate Dexcom as well as their own BGM data. Patients will be able to see an overlay of the glucose response curves. And with that data, ultimately, we'll be able to start to do predictive analytics.

The next slide here talks about the scientific communication. These are decisions that were made over 1 to 2 years ago, when David Kendall joined 18 months ago, where we started a couple of these trials. We submitted the data from '17 into '18, and now you can see, it just takes a while to get the scientific data moving. But as we go forward, we see numerous publications coming to support Afrezza at the various conferences already in 2019, but as we go forward in the publications in the second half and new data generated in 2020.

For those of you who may have missed, one of the important data sets at ADA I wanted to share with you here is around our new fixed-dose titration schedule in type 2 patients. This very easy to follow a protocol resulted in a 1.6% reduction in A1C in the first 12 weeks. Additionally, we measured time-in-range, where we saw an improvement by 76% from baseline. Almost 93% of people achieved an A1C less than 8 and the time spent greater than 180 is reduced almost by 50%. These types of results are unheard of and very excited about continuing to make Afrezza part of the standard of care.

Now I'm going to bridge to the pipeline. We completed an external third-party landscape assessment to give us some feedback on how our platform stacks up against other inhaled products, including nasal technologies. When we completed this assessment, we were convinced that amongst our peers out there, we have a platform that does differentiate itself and that these compounds are the right ones to continue to focus on.

When we look at the real way to create value, it's really licensing these products when they get to Phase I. A lot of questions I get are around when will these products get to Phase I and how long does it take? And so the next slide really gives you some descriptions of what this typically looks like for a typical program.

So this is a sample development plan to show you year 1 and year 2. And our various compounds are in the various phases between year 1 and year 2 as we get to pre-IND. But you can see, the decisions that we made back in December to move the pipeline forward take 6 to 12 months before you start to get to pre-IND filing. For example, EpiHale is already done in year 1 of this project, and we have to go back to the FDA to find a feasible population that we feel this product can work in. But we are very excited to now fund the pipeline, and this is in our cash flow plan, to get each of these molecules to at least Phase I, where we think we can create significant shareholder value.

Now I'm going to turn it over to Steve to walk us through our financials.

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Steven B. Binder, MannKind Corporation - CFO [3]

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Thanks, Mike, and good afternoon. I'm also very excited by the announcement of both our recapitalization as well as our second quarter results. I'll be breaking my discussion to 2 sections. The first will be addressing our recap. The second will be a review of second quarter and June year-to-date results, where I'll be discussing select financial highlights and urge you to read the condensed consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC this afternoon. In addition to Mike's high-level review, we issued an 8-K after the market closed today, which provides details of our recapitalization.

Now it's time to dig into some of those details. Starting with the graph on the left, we entered the third quarter of 2019 with $108 million in debt. Since then, we executed 4 debt transactions over the last 30 days to reduce our debt by approximately $28 million, while pushing out our $100 million 2021 debt maturity overhang, and we brought in MidCap Financial with an initial $40 million funding, which puts our total debt outstanding post these transactions at approximately $120 million.

As Mike said earlier, MidCap Financial is a firm with deep roots and experience in lending in the life sciences industry who've done extensive research on our company before lending money to us. We feel really good about our partnership with MidCap and the support we have received so far.

So looking at the big picture, we have increased cash by $30 million, while increasing debt by only $12 million and have pushed out debt maturities to better align with future increased operational cash flows. There are a lot of moving parts, which are more fully described in our 8-Ks, and we will answer questions in Q&A at the end of our presentation, to help understand the numerous transactions we have entered into.

Now a little bit more in the MidCap funding. The total funding commitment of $75 million, with 2 more tranches that will be funded based on MannKind attaining milestones related to our commercial strategy. The funding is at our option and we expect the second tranche to be $10 million after attaining our milestone by the end of the first quarter 2020 and $25 million by June 30, 2021.

The transactions associated with our legacy borrowings saw a $28.4 million reduction in debt, which consisted of, first, $9 million repaid to Deerfield between 2 transactions, a previously announced repayment in July of $4 million and yesterday, we repaid the remaining $5 million. So Deerfield is now paid off and so released their liens on our assets and has released the $5 million held in escrow.

Second, an $8.4 million reduction in the senior convertible note consisting of repayment of $6 million and a principal reduction in the form of a discount for early payment of $2.4 million, leaving $5.3 million now due in 2020 and a $5 million convertible note due in 2024.

And third, an $11 million reduction in the Mann Group convertible note and accrued interest, with the restructuring of the remaining $70 million debt into a $30 million convertible note due 2024, and a $35 million term loan due 2024.

The debt reductions included the use of cash, MannKind stock and a discount on debt. So when you roll all of the recap transactions together, including the repurchase of warrants announced in July, the restructuring of our legacy debt and the establishment of our new debt facility, we increased shares outstanding plus shares reserved for issuance by only 5.2 million shares or less than 2% of outstanding and reserved shares.

In addition to the new funding, we are committed to reducing spending from historical levels to enable us to achieve cash flow breakeven. We have been reducing operating expenses year-over-year as we highlight in our press release and 10-Q and which are shown in the top table on this slide, and we plan to reduce spending further as we move into 2020.

Moving to the table on the bottom of the slide. As highlighted in our 8-K filed today, we've restructured our insulin purchase agreement to reduce our insulin purchase commitments by $46 million from 2019 through 2023, exclusive of a $2.75 million fee that will be paid partly in the third and partly in the fourth quarters of 2019. We also extended the agreement by 2 years, which should better align our short-term and long-term insulin purchase commitment with patient demand for Afrezza.

In addition to the spending reductions just discussed, we have a number of different sources and potential sources of cash inflows. Looking out over the next 18 months, we expect to see over $110 million coming in from United Therapeutics and MidCap, assuming we exercise our option on MidCap tranches 2 and 3. We also have additional and potential sources of cash inflows that come from: increasing U.S. Afrezza sales; international Afrezza sales, including possible new territories, warrants exercised before expiration in December 2019; royalties from United Therapeutics from sales of TreT; the monetization of TreT royalties; and new business development deals for both Afrezza and our development pipeline.

Taking into account the full recapitalization of paying off and restructuring debt -- our legacy debt, providing -- I'm sorry, bringing in new funding, reducing our near-term spending, including our insulin purchase commitment and understanding our sources or potential sources of cash, you can hopefully see how our business is expected to be funded to cash flow breakeven.

Now moving to operational results. Starting with the table on the left. Total revenues for the second quarter were $15 million versus $3.9 million for the corresponding second quarter of 2018. The 285% increase comes from both the recognition of revenue related to the United Therapeutics license and research agreements of $8.8 million as well as growth of 62% in Afrezza net revenue to $6.1 million for the second quarter of 2019. Inception to date we have recognized $21.8 million from United Therapeutics license agreement and $9.5 million from United Therapeutics research agreement where our performance obligations are substantially complete. The Afrezza net revenue increase is favorably impacted by volume, cartridge mix and price, and this is a similar story to prior quarters. Please note that we did not experience a significant wholesaler inventory change in the second quarter like we saw in the first quarter, which negatively impacted our Q1 Afrezza revenues.

Moving to the June year-to-date revenues in the right table, total revenues were $32.5 million versus $7.4 million for the corresponding 6 months of 2018. The 341% increase comes from both the recognition of revenue related to United Therapeutics license and research agreements of $21.1 million as well as growth of 56% in Afrezza net revenue to $11.1 million for the June year-to-date period. The Afrezza net revenue increase is favorably impacted by volume, cartridge mix and price, and Afrezza gross to nets of 40% were similar to 2018.

As just mentioned, our second quarter Afrezza revenue growth was favorably impacted by cartridge mix. We grew our 8-u and 12-u cartridges more quickly than the 4-u cartridge, which is a profound impact on revenue growth as our 8-u is priced at 2x the 4-u and our 12-u is priced at 3x the 4-u. You can also see that total cartridges grew more quickly at 39% than TRx, which grew at 28%, which reflects the impact of increasing 180-count box versus 90-count box prescriptions being filled.

Addressing Afrezza gross profit for the quarter, the table on the left-hand side of this slide shows that the second quarter of 2019 was the third consecutive quarter that we have had a gross profit for Afrezza. Our net revenue increased and our cost of goods sold decreased in the second quarter of 2018, producing our gross profit of $1.7 million for the second quarter 2019 and a gross margin of 28.7%. We continue to have excess capacity costs being recorded in cost of goods sold which are not capitalized in inventory due to the underutilization of our factory and manufacturing-related personnel.

The table to the right shows our June year-to-date Afrezza gross profit of $2.8 million and a favorable change of $4.7 million from the first half of 2018 when we had a gross loss for the same reasons as just discussed.

Our Afrezza gross margin for the last 3 quarters, which are the quarters when we had a gross profit, are shown at the bottom of the slide. Gross margin has increased from 12.9% in the fourth quarter of 2018 to 28.7% in the second quarter of 2019. We expect sales increases to outpace cost of good increases in the near-term as excess capacity costs are absorbed into inventory, which should produce increasing gross profit as revenues increase. Thank you.

And now we'll turn it back over to Mike for additional comments.

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Michael E. Castagna, MannKind Corporation - CEO & Director [4]

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Thank you, Steve. Nice work. So when we look at Afrezza, we really strive to simplify diabetes treatment. So when you look at the top of this pyramid, our first goal, obviously, is to continue to grow and accelerate Afrezza's growth.

Additionally, we've tried many different things over the past couple of years. And as you look forward, we're going to do less and place targeted bets. It's really about executing with what we have and continue to balance the cash in the company with the expectations of revenue.

We're going to pair Afrezza with CGM as you saw our first deal today with One Drop, as we think that's exciting given where they are with integrating Dexcom into their platform. We're going to remove and reduce payer hurdles as we go forward and expect to have continued positive news in this segment as we go forward.

When you look at these 4 underlying pillars, it's about driving consumer demand, which we're currently doing in the billboard and online campaign, removing friction along the journey, which is really around the access co-pay card program we launched this year as well as a reduction of prior authorizations or minimization of prioritizations in payers. We're going to build partnerships with third parties around the CGM, JDRF, ADA, AADE as well as ACE, and we're going to continue to focus on enhancing the sales force capabilities. We've recently taken about half of our sales force through Tier 2 training, which has really helped close the gap and bring them from the middle to the top of performance.

Now when I look at Afrezza growth over the last 3 years between -- in each quarter, you can see we've had a 4x revenue, whether you're looking at gross revenue, net revenue, by the quarter or by the half, and we continue to expect Afrezza to grow for years to come. It's really nice to see the choices we've made, the investments we've made continue to pay off quarter-over-quarter, year-over-year.

And finally, I wanted to show you a good historical perspective based on the Symphony PHAST data from when we launched our sales force in Q1 of '17, looking at refills continuing to build, NRx is continuing to grow and revenue, as a result of our strategy, continues to grow quarter-over-quarter with a consistent decline in Q1 versus Q4 and continued growth the following quarters. There's nothing in this trend that we don't expect to continue and we're very excited as we continue to move the company forward in the coming year.

And then finally, just want to talk about some key milestones as we close out the quarter. We've hit many of the ones we've laid out and expect to hit the remaining 5 or 6 on this slide. Cohort 2 is literally a couple of patients away from completion. Formulation work is substantially done; we'll meet with United and decide next steps there. Our Brazil launch, I will be there in the coming months, and am excited to meet with the teams down there and the doctors. We're initiating our clinical study in India and currently building the supplies. And there's a study many people aren't watching yet called Kipnes, which is in type 2 using Dexcom CGM with a fixed-dose titration. And again, this will be a bigger study than the one we did with Phil, recently presented Phil Levin data, that we expect to see really good outcomes as the study completes enrollment and gets presented next year.

And finally, as this slide that we all know, is recapitalization is now complete, and I'm excited to lead the company forward without focusing on raising money and getting us -- and right now, I'm going to focus on getting us new investors to continue to build our investor base as we go forward and executing our plans that we've laid out over the next 5 years.

Thank you, everyone. I think we'll take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Pasha Sarraf of SVB Leerink.

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Dylan Edward Dupuis, SVB Leerink LLC, Research Division - Associate [2]

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This is Dylan Dupuis sitting in for Pasha. Two questions for you. Number one, just to kind of look further down the road with the pediatric study, what steps are going to be next -- required next after the current cohort 3 finishes enrollment and in order to get label expansion?

And then a second question, just on other initiatives, such as with Kaiser health. How should we be thinking about your interactions with these groups, the growth opportunity there? And how they compare to other key targets such as these -- the centers of excellence that you're also making a priority?

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Michael E. Castagna, MannKind Corporation - CEO & Director [3]

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Sure. Thanks, Dylan. First, on the pediatric, so cohort 3 is really the cohort for 4-to-7-year olds. We just recently opened up another site. So this cohort 3 hopefully will go as planned, and we can wrap up the study. In the meantime, we're planning to go to the FDA to wrap up the data we have so far and get an alignment on the Phase III protocol, and then depending on how things are, and post the FDA meeting, we'll decide how to progress this into the Phase III segment. But that's the first step.

The second step here is continuing to meet with pediatricians and understand how big of an opportunity the pediatric segment can be and then from there, we'll accordingly work through the funding plans that we have for it.

The second one is around Kaiser. So Kaiser is really starting from ground negative I'll say, meaning, it's a closed system and they have no exposure to Afrezza other than a handful of patients who were there. And we have a dedicated person working up and down the channel of Kaiser, really starting to make inroads. In fact, some of our employees, because Kaiser is one of our own health insurers, are going to Kaiser for their own health benefits. And their first meeting there was they didn't even know what Afrezza was. And so I think when you think about impacting all their endocrinologists, it's going to take a little bit of time. But when you look at what Kaiser is publishing, it's around $100 million in expense around hypoglycemia, and they really are focused on how do they continue to reduce hypoglycemia rates in their system and get better outcomes. And so remember, they use Humulin still as their primary insulin of choice. So we really think we have a good value proposition for Kaiser as it goes forward, but it's not going to happen tomorrow, but we do have a 5-year contract, and are excited to continue to work with them to change, hopefully, the whole standard of care there.

The following one is just around other access contracts. So we continue to show, for example, the top 25 docs who adopted Afrezza, went from 100 scripts 2 years ago to over 500 scripts in the last quarter. We continue to see as we get people on board and they adopt the drug, they continue to grow. And the question is, how do we keep getting into the next group of physicians and the next group of physicians and increase depth of prescribing? And so that's one of our core focuses.

And the Med D contracts coming -- are just now coming in, in terms of what the results are for contracting for 2020. And at this point, we're cautiously optimistic and excited that we'll see some good changes in our Med D access as we come into Q3 and get ready for 2020. So I hope that answers those 3 questions.

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Operator [4]

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(Operator Instructions) We will now take our next question from Anita Dushyanth of Zacks Small-Cap Research.

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Michael E. Castagna, MannKind Corporation - CEO & Director [5]

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Anita? Are you on mute?

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Anita Dushyanth, Zacks Investment Research, Inc. - Medical Technology and Devices Analyst [6]

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Can you hear me okay?

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Michael E. Castagna, MannKind Corporation - CEO & Director [7]

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Now we can hear you. Yes.

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Anita Dushyanth, Zacks Investment Research, Inc. - Medical Technology and Devices Analyst [8]

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Congrats on the quarter. I wanted to know what sort of percentage growth do you expect in the prescriber growth for Afrezza going forward.

And also, do you plan to turn on the DTCs for Afrezza during the rest of the year?

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Michael E. Castagna, MannKind Corporation - CEO & Director [9]

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Yes. I don't think we've given guidance on prescriber growth. We continue to see prescribers grow quarter-over-quarter. We look at our new co-pay card data, we see that growing month-over-month. So overall, there's nothing changed. We expect to continue to gain new prescribers, given our sales force footprint.

I think what's important is we started the year with about 55 sales reps in the field. We've hired about 20. I think right now, we've got 2 or 3 openings, so we're roughly fully staffed at almost 75 people. And a lot of those people just came out of training the last quarter. So they get their lunches and points with their doctors, we know that takes 3 to 6 months for them to start to make impact. So we're optimistic in the second half that we'll see more and more prescribers adopting the product and trying the product as we -- those territories are now filled since January.

The second question was DTC. So on that one, I think given the lack of response that we saw and the investment that it took, at this point, I would say we see more impact from the billboards we launched in the first week, and if anything, we will scale that one up before we scale up TV. It's a very expensive proposition. And I think the second part of that would be, we probably would make a new commercial at this point before funding that commercial. But at this -- as we look forward, DTC is not in our current cash flow or spend and is not something we expect to bring forward in the near term.

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Anita Dushyanth, Zacks Investment Research, Inc. - Medical Technology and Devices Analyst [10]

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Great. And you said the Afrezza distribution in Brazil, the launch will be in Q3. When do we sort of expect -- should we expect the shipment for Australia? It will be sometime next year?

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Michael E. Castagna, MannKind Corporation - CEO & Director [11]

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Well, for Brazil, you should expect the shipment in Q3. For Australia, we expect -- we're working on the filing now, so that's going to take a little bit of time down there. So I don't want give guidance yet as we haven't yet filed the application for Australia.

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Anita Dushyanth, Zacks Investment Research, Inc. - Medical Technology and Devices Analyst [12]

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Okay. And just a last -- one more question. Could you provide some clarity on the pipeline related to RLS, the agreement with them? Do you have any update on that?

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Michael E. Castagna, MannKind Corporation - CEO & Director [13]

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I don't want to speak for RLS. I know they're working on quite a few things, and they continue to be a great partner and move that product category forward. There's obviously, a lot of state and federal laws and country laws they have to get through. But I think that market continues to evolve and our technology is differentiated within that market. So I don't want to speak for RLS, but I think they'll continue to have news coming out in the second half.

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Operator [14]

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We'll now take our next question from Robert Hazlett of BTIG.

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Unidentified Analyst, [15]

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This is [Jake] on for Bert. I was just wondering if you guys could comment on your progress with type 1 patients.

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Michael E. Castagna, MannKind Corporation - CEO & Director [16]

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Yes. I think in the type 1 segment, in particular, that's an area that we're going to continue to focus more and more on. They make up about 40% to 45% of all insulin use in the country on meal time. But when you think about our product and CGM adoption, it's an ideal platform for type 1s.

One of the challenges I know we've seen in the historical uptake in the type 1s is they've used it more as an add-on, either to make their pump work more effectively or to tap out a stubborn high that they were experiencing. So I think the real question is how do we continue to drive fundamental adoption as a real true mealtime insulin full-time as opposed to this add-on concept that we've seen. And some of that's how it was adopted in California that's driven that. I know we have a lot of pump use in California. But we really do believe type 1s, and we see them every day working for us, that they have a phenomenal experience with Afrezza and they got phenomenal time-in-ranges. And I think it's just how do we continue to get that out there. And that's really the goal is starting to utilize the unique aspects of Afrezza's PK/PD showing you that almost-real-time feedback that you see on CGM with Afrezza. And that's part of the inhalemyinsulin campaign where you kind of see the real-world perspective of someone having to wait to inject their insulin. And I think that's our main focus is how do we continue to bring this into the lifestyles of people that they can live in a spontaneous moment. And so that's one area.

We continue to look at other ways to penetrate the type 1 market by working with the top thought leaders as well and looking at some investigator-initiated trials that we think will help differentiate the product in that segment. So it's a big focus for us is the short answer.

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Unidentified Analyst, [17]

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Got it. That makes sense. And then you guys also mentioned expectations for numerous new publications. I was just wondering if you could provide additional color on what you expect to convey in these publications.

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Michael E. Castagna, MannKind Corporation - CEO & Director [18]

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Yes. Just to refer back to the slide real quick. So if you look, the real big focus for us is continuing to build out the scientific story around the ultra-acting aspects of the product. So we think that's important to get this data published because we believe at some point between the ACE and the ADA guidelines, there will be an ultra-acting category and getting our data published to highlight the PK/PD profile of our product is one of those things that will be important for them to be able to reference when they create that category.

I think the other aspects of the product are really around time-in-range and hypoglycemia and showing you the dosing, and so there's a whole host of publications around that.

And then finally, it's really around pulmonary safety and helping people understand the data we do have on pulmonary and what's been studied historically. And fortunately, Pfizer just published a data from 2012 recently, showing you that inhaled insulin is relatively safe and effective. And I think that all the scientific data continues to support the efficacy/safety balance of this product in this category of treatment as we continue to grow.

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Unidentified Analyst, [19]

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Great. And then if I could just ask one more. I'm just wondering if you could kind of talk about the response prescribe -- you've gone from prescribers based on the ADA data that you presented specifically around the more simple titration regimen and the need to get on higher doses.

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Michael E. Castagna, MannKind Corporation - CEO & Director [20]

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Yes. I think -- and I've only been out there a couple of times since that data came out and with customers. But I think the general feedback from customers is this -- the ones who use it, their feedback is that matches their clinical experience and reinforces their confidence. And the ones who haven't used it, it helps them understand what they need to get to. And for example, we just looked back at one of our Pharm D students just presented information from our 2006 trial, and in the type 2 segment there, we actually capped the dose to roughly 8 units of inject -- relatively, 8 units of Afrezza was the average dose. And here in this trial, you can see people got to 16 to 20 units per meal. And so it just shows you how far we've come in understanding the dosing of the product and what's required to truly get a nice response output. And I think that's -- people misunderstand trying to compare an injectable to an inhaled, and they really are different. And I think that's what we're trying to explain to people is, don't look at -- don't compare an apple and an orange, really look at them as 2 different products, 2 different ways they work, fundamentally indicated for mealtime control. And I think that's what you'll start to see, the summary of our data going forward, and that -- don't mix up the units, really look at this as a unique option and a fixed-dose way that helps you get type 2s, especially, under control without a lot of complexities.

So that's our goal there, and we're implementing that protocol in India too. So I think that's partly what that study is very helpful for is all the new trials we have, that should be a protocol pretty consistent that we go forward with.

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Unidentified Analyst, [21]

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Okay. Great. And congratulations on all the progress.

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Michael E. Castagna, MannKind Corporation - CEO & Director [22]

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Thank you.

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Steven B. Binder, MannKind Corporation - CFO [23]

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Thank you.

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Operator [24]

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It appears there are no further questions at this time.

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Michael E. Castagna, MannKind Corporation - CEO & Director [25]

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Thank you everyone and -- yes, wrap us up.

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Operator [26]

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I'd like to turn the conference back to you for any additional closing remarks.

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Michael E. Castagna, MannKind Corporation - CEO & Director [27]

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No, I just want to say thank you, everyone. We're very excited about the second half and 2020 and beyond. It took us a little bit longer than we wanted to, to finish up the recapitalization. But we wanted to make sure as we signed up for covenants and partnerships and people and the partner we worked with on the debt, that it was the right timing. And we really do feel the company's at a place where this was the right time with Deerfield ending and starting in with a new partner and that we can hopefully minimize any dilutions going forward so that we can continue to run the company, let the stock price respond appropriately and continue to grow Afrezza within the U.S. and outside the U.S. in addition to moving treprostinil forward as well as our pipeline.

So thank you, again, for everyone. Thank you for the MannKind team working behind the scenes. There was a lot of effort, a lot of late nights getting here, but that we made it happen. And just thank you to everyone around us and all the support.

That said, look forward to keeping in touch and we'll have a few conference updates in September at some of the health care conferences. So we'll talk then. Thank you.

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Operator [28]

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This concludes today's call. Thank you for your participation. You may now disconnect.