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Edited Transcript of MNKD.OQ earnings conference call or presentation 4-Nov-20 10:00pm GMT

·34 min read

Q3 2020 MannKind Corp Earnings Call VALENCIA Nov 5, 2020 (Thomson StreetEvents) -- Edited Transcript of MannKind Corp earnings conference call or presentation Wednesday, November 4, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Michael E. Castagna MannKind Corporation - CEO & Director * Steven B. Binder MannKind Corporation - CFO ================================================================================ Conference Call Participants ================================================================================ * Brandon Richard Folkes Cantor Fitzgerald & Co., Research Division - Analyst * Robert Cummins Hazlett BTIG, LLC, Research Division - MD & Biotechnology Equity Research Analyst * Steven Michael Lichtman Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst * Thomas Jonathan Smith SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, everyone, and welcome to the MannKind Corporation Third Quarter 2020 Earnings Call. As a reminder, this call is being recorded on November 4, 2020, and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call until November 18, 2020. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, 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 this afternoon, 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. -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [2] -------------------------------------------------------------------------------- Great and thank you. And thank you, everyone for dialing in on what appears to be a hectic election -- post-election day here. So as we get into the agenda, we're going to go through Q3 highlights, a financial review with Steve and Q4 expectations and then a Q&A. I just want to remind people about our mission, which is really to give people control of their health and the freedom to live life, and we call that life more human. Our technology really helps provide quick relief of patient symptoms such as high sugar, pulmonary hypertension and migraine, almost at the onset of action and being able to correct that with a quick inhalation using our platform. We're very excited to continue to expand our technology into other assets as we continue to move R&D forward. I'd also like to announce a recent new addition to our team, Dr. Kevin Kaiserman, who now will be our Head of Medical Affairs and Safety. And next week, we expect to also announce a new Head of Regulatory. Kevin has 25 years of pediatric endocrinology experience, which we felt was very valuable given our direction to move Afrezza into pediatrics in 2021. He's well respected as a thought leader. He had a (inaudible) private practice here in California and was trained at Children's Hospital of L.A. He'll be leading our Medical Affairs, expanded Field Medical team, our Safety and our Pediatrics Program. Let me talk about a few of the Q3 highlights. Afrezza third quarter net revenue of $7.3 million was 27% ahead of Q3 of 2019. In the U.S., our total prescriptions grew 8% and sequentially 3% from quarter 2. The market was down 3% year-over-year for rapid-acting analogs and 2% quarter-on-quarter, respectively. So we are outpacing the market shrinkage and we're continuing to grow year-over-year despite the headwinds that COVID-19 presents. Access is continuing to open up for our field reps, reaching customers in the field. Obviously, certain areas have come through more difficult than others, but our team has done a very decent job given the difficult circumstances they face. Our U.S. September year-to-date net revenue is $22.1 million or 31% versus 2019. And our trends have started to pick up nicely in Q4 as we hope to see in time when we see scripts come out this Friday. Our United Therapeutics collaboration with TreT remains on track to complete the critical NDA components here in Q4 and we recently received a $1.2 million purchase order for clinical supplies as we get to Q4 and 2021 and beyond. Our cash at the end of the quarter was $52.7 million, and we used $13.5 million in operating activities. We also reduced our debt by $2.6 million in October by prepaying our December promissory note ahead of schedule. When we look at our Afrezza, the green line here is NRx and our magenta line here is TRx. As you can see, we are stable throughout Q3, slightly growing. But there would be -- might have been some small data issues here at the end of September. But net-net, you can see our Afrezza lines are starting to trend back in the right direction at 344 as of last week and 799. We expect to continue to see that trend as we go through Q4. However, I will highlight the differences we'll see over the next few weeks and months as we end our free bridge program at the end of the call. Our clinical programs are tracking to a fourth quarter completion. And I tried to outline here for you the 4 key pivotal things that we need to complete by the end of this year. Number 1 is the BREEZE trial, which has almost completed enrollment, and we expect that to wrap up here in Q4. That's being led by UniTher. The second is the pivotal PK trial, which is now complete, and the study report is currently being written up. The human factors study that MannKind is wrapping up as we speak, and we expect that will be done by next week, with a study report due here in Q4. And our stability program, which MannKind is also responsible for, will wrap up in the next 3 to 4 weeks. So as you can see, the 4 critical things that lead to a TreT filing in early 2021 will be completed here in the fourth quarter. We're also excited to -- the increased potential that TreT has for the interstitial lung disease indication as UT expects approval for Tyvaso in April of 2021. And we'll be hearing back in terms of does that get filed and able proactively or do we have to do additional work. We'll know that very shortly. I'd like to turn it over to Steve to talk about our financials. -------------------------------------------------------------------------------- Steven B. Binder, MannKind Corporation - CFO [3] -------------------------------------------------------------------------------- Thanks, Mike, and good afternoon. Very pleased to review our third quarter and September year-to-date 2020 financial results which show continued U.S. Afrezza net revenue growth, Afrezza gross margin expansion rising above the 50% mark for the first time and our continued focus on efficiently managing our cash resources. I'll be discussing select financial highlights and ask that you supplement this call by reading the condensed consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC this afternoon. Let's start out with looking at revenues for the third quarter and September year-to-date. Starting with the table on the left, which is our third quarter results. U.S. Afrezza net revenue was $7.3 million versus $5.7 million in 2019, a growth rate of 27%. The increase was driven by volume growth from underlying Afrezza prescription demand, which was up 8% year-over-year; price, including a more favorable gross-to-net percentage; and a continuation of a favorable mix of higher insulin unit cartridges. Please note that a reduction of $0.3 million in wholesale inventories occurred between June 30 and September 30, 2020, adversely impacting our volume growth. The COVID-19 pandemic continues to impact our sales and marketing efforts in the third quarter. Physician access, including both face-to-face and digital interactions, was constrained in varying degrees between different geographies, which impacted the effectiveness of our sales and marketing efforts. We continue to see an impact on our new Afrezza starts as some patients were reluctant to visit their physician to minimize their exposure to COVID as well as physicians increasing the use of telehealth. Please note that we do not have an international Afrezza revenue in the third quarter of 2020, but did have revenues of $0.7 million in the third quarter of 2019, which is our first sale of Afrezza to Biomm, our Brazilian commercial partner. Looking at the September year-to-date comparison for Afrezza in the table to the right. U.S. Afrezza net revenue grew 31% versus 2019, driven by volume, mix and price. Gross to nets were 41% for the third quarter, which was slightly favorable to our expected range of 42% to 44% and favorable to 2019 by 2% and demonstrates the impact of our efforts to lower gross to nets. The September year-to-date gross to net came in at the lower end of the expected range at 42%. Revenue from collaboration and services was $8.1 million for the third quarter of 2020 versus $8.2 million for 2019, while September year-to-date revenue was $24.4 million versus $29.5 million for 2019. The reduction in the September year-to-date revenue year-over-year was expected and was mainly due to the recognition of the $10 million United Therapeutics research agreement over a period of the fourth quarter 2018 through to second quarter of 2019 when our performance obligations were substantially completed. This shot -- sorry, this slide shows an example of one of our commercial initiatives to lower our gross to net. Using full line wholesalers is very expensive for small biopharmaceutical companies like MannKind. So we have been shifting prescription fulfillment from retail to specialty pharmacies. Specialty pharmacies purchase Afrezza directly from MannKind and not through a wholesaler. They have lower fees, and generally, they have minimal product returns, which improves our gross to nets. As you can see from the graph, we have increased specialty pharmacy shipments each quarter in 2020. We came into the year with 6% of shipments going through specialty pharmacies, increasing to 8% in the first quarter, 15% in the second quarter, 17% in the third quarter and in October, we saw 20% of shipments go through specialty pharmacies. We have shown the next slide at almost every quarterly earnings call over the last 2 years. It's that important a factor on our Afrezza net revenue growth story. This graph shows how our product mix continues to favorably impact our Afrezza revenue growth in the September year-to-date period. Our successful messaging for physicians enhanced patient understanding of a product have resulted in more appropriate starting doses for patients as well as subsequent titration to higher doses. This has driven the 12-unit and 8-unit cartridge growth rate faster than the 4-unit. As a reminder, our 12-unit cartridge is priced 3x the 4-unit cartridge and the 8-unit cartridge is priced at 2x the 4-unit cartridge. Faster growth of the higher unit cartridges results in a higher growth rate of Afrezza revenue compared to prescription growth. As Afrezza revenues have been increasing, so have gross margins. This table shows gross margins in the first quarter of 2019 through to third quarter of 2020, where our gross margin is up 50% for the first time. We have had and continue to have excess manufacturing capacity, which results in our cost of goods remaining relatively flat quarter-to-quarter due to production volumes remaining significantly lower than our production capacity. This results in the majority of manufacturing expenses being recognized as cost of goods in the quarter incurred. As TreT clinical product reduction is ramped up in 2020, we are now able to absorb costs over 2 products being manufactured at our Danbury facility, resulting in a favorable impact on Afrezza cost of goods sold as you can see from the reduction in the first and third quarters of 2020. Please note that the first quarter of 2020 included an inventory write-off of $0.5 million. So on a non-GAAP basis, first quarter 2020 cost of goods without inventory write-off would have been $3.7 million. Moving on to operating cash efficiency. On the next slide, we are comparing September year-to-date 2020 versus 2019 versus 2018. The top of each vertical bar is Afrezza net revenue, which has doubled in 2 years to $22.3 million. And the bottom is non-GAAP net cash used in operating activities, which has decreased by 45% in 2 years. The increase in Afrezza net revenue helps drive down the cash burn. But to a larger extent, we have been laser-focused on managing our operating spend and it shows in the reduction to $40.9 million for the 9 months ended September 30, 2020. Looking at this information slightly differently. At the bottom of the slide, we show our average quarterly non-GAAP net cash used in operating activities. We have been running fairly steady in 2020 on a quarter-by-quarter basis, with the average quarterly amount of $13.6 million, while the actual third quarter 2020 amount was $13.5 million. Before handing the presentation back to Mike, let me summarize our third quarter financial progress. First, we had excellent U.S. Afrezza net revenue growth even when continuing to experience headwinds from the COVID-19 pandemic. Second, manufacturing TreT to support United Therapeutics' clinical trials has allowed our manufacturing site to absorb fixed overhead costs, which has favorably impacted the Afrezza gross margin. And lastly, we remain extremely diligent in managing our cash while supporting commercial efforts to grow Afrezza, supply TreT clinical products to United Therapeutics and move our pipeline forward. Thank you. And now I'll turn it back over to Mike for some additional comments. -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [4] -------------------------------------------------------------------------------- Thank you, Steve. Let's talk about growing our future together and where we're heading as we close out here in Q4 and start to move in 2021. First, we completed our commercial and our medical team expansion by hiring 26 new employees in Q3 and early Q4 alone, with several committed employees we expect to start over the next few weeks. We are expanding our integrated care model to improve the patient experience for Afrezza as well as the margins on the product. AfrezzaAssist, you've heard us talk about recently, which will streamline the reimbursement support program, which was launched here in Q3 and has been fine-tuned in Q4 with a really automated process when it comes to prior authorizations and adjudication of free goods. Additionally, we're putting final touches on our telehealth collaboration with Health-Scripts which is weeks from launching. We've had the opportunity to also talk to another telehealth provider called Steady Health, who's already doing Afrezza prescriptions via telehealth here in California and Washington state, and we're very excited by what they're seeing in their early results. Third, we are transitioning our bridge program, which is also on our free goods, and shows up in our repeat prescriptions to AfrezzaAssist, which will ultimately push these prescriptions into a channel that you no longer see in Symphony and will now show up directly to us, but it will not be counted in terms of weekly prescriptions. New patients ended yesterday, and all patients we expect in the free goods program to end by 12/31/2020. There will be some impact in NRx and TRx over the next 12 weeks, but we don't expect any negative impact on revenue because these will either be converted from free goods to paid prescriptions as we expect people to do to [prior alts] and we see a good 50% to 80% of these prior alts get approved in the free goods program. And then second, these patients will go into [pay on drug], but they're already free, so they were not impacting our revenue as we deduct these prescriptions before we report revenue into Wall Street. We also plan to enhance our product distribution model to lower our cost and improve patient access. As Steve talked about, $0.22 of every dollar is right now dedicated to the wholesale channel and returns. And we think that can be dramatically improved by looking at ways such as consignment inventory model, which will minimize returns and the fees will be at our COGS as opposed to a prescription that goes through the wholesaler. There are very expensive prescriptions that go through the free goods program and we hope to minimize that cost and the fees associated with those prescriptions in the coming quarters. Next, we have changed our sample program, and our sample volume will be reduced by half, which we expect will result in better patient initiation as we get a new 27 count titration sample pack launched, which should, A, streamline prescribing; and B, put less samples into the marketplace. We really expect the sample pack to get the patients started for the first 7 days. And then from there, our new AfrezzaAssist program will ship product directly to the patient while the [prior alt] is being completed in that 7-day time period. We also are ready to launch our BluHale Pro. Obviously, with COVID, we slowed that down. But we've already started work on 2.0, which will be dose detection and integration, hopefully with the Dexcom API for continuous CGM monitoring along with overlay of dosing data with Afrezza. We have 6 new publications that we believe will be accepted and published here in Q4, in addition to the 14 new scientific releases we've had in 2020. As we talked about on previous calls, one of the biggest factors we need to do with Afrezza is educate the market in all the safety and efficacy aspects of the product. And just the last 2 weeks, I've had many calls in the VA system and Yale and Kaiser and many other key thought leaders around the country. We're really trying to do a much better job of getting our information in front of the right people. We expect our pediatric Phase III study protocol to be submitted to the FDA here in Q4, and we're in the late stages of picking the name for the study as well as the CRO. And once we get the FDA feedback, we will decide when to start that trial, pending the COVID issues that exist in doing clinical trials these days. What to expect in terms of trepostinil here in Q4? One, we expect the fourth milestone to come in at $12.5 million. We anticipate shipping an additional $800,000 in clinical inventory in Q4. And we anticipate additional purchases in 2021 as UT explores ILD and continuation of the existing patients in the BREEZE extension as well as preparation for the approval and building launch inventory. We expect to complete all clinical and CMC work here to support the NDA submission, as I said, stated here in Q4. As you may have heard this week, UniTher expects to file TreT by April 2021 with an FDA approval in late '21 or early '22. The Tyvaso label expansion for ILD is expected in April 2021. The reason that's important, there are no currently approved treatments for this WHO Group 3, which is 30,000 patients. Today, Tyvaso builds their sales on 3,000 patients. This is 10x larger than where they are today. And this is really an important opportunity for TreT. And they have a planned study -- UT has a planned study for BREEZE-2, if it's needed, pending FDA feedback on our filing strategy here very shortly. United Therapeutics expects additional readouts for PH-COPD as well as CFILD, which are all upside on our current TreT key assumptions. I want to bridge over to the pipeline on Technosphere. We just completed formulation work on 2 new opportunities, which we'll talk about in early Q1. And we're progressing sumatriptan forward. It just completed large animal testing, and preliminary results look very positive to keep going forward. We will give a further update here in early 2021 on the pipeline as we go through a prioritization exercise to bring more clarity to the marketplace around which compounds are moving where and unveil some of these new assets we're starting to develop. The next question we always get is around capital expectations. As Steve showed you, we continue to be very prudent in reducing our cash burn, managing it very tightly and we have not had any major fundraises in the last 2 years. We ended Q3 with $52.7 million. We expect a Q4 milestone of $12.5 million. Mid-cap has a third tranche available to us at $25 million between now and the first half of 2021, subject to milestone conditions. We are exploring a sale-leaseback of the Danbury facility. We will retain the facility but (inaudible) sell it to an investor and then lease it back. The early stages -- this is in early stages, but feedback has been very positive. We continue to look for operating efficiency opportunities to drive both top and bottom line growth by decreasing our gross to nets, to manage our cash spend tightly and finding ways to accelerate revenue growth as evidenced by our recent hires in the field, who we know take time to get up to speed, but that expansion to 11 new states should start to pay off here in Q4 and Q1 and beyond. So we've [prudently] showed our transformation and our revenue growth drivers are now finally starting to deliver shareholder value as we look at our performance this year and all the readouts that we have coming in terms of the Technosphere platform continues to move other assets forward. Our U.S. Afrezza for adults has grown year-over-year despite the COVID challenges the industry faces. Our pipeline is moving nicely forward here with TreT. We are looking at additional collaborations with other companies. Afrezza international expansion obviously has been impacted, but the trial in India is definitely underway here in November, if all goes well. And our Afrezza pediatric program is moving forward as planned here to file with the FDA at the end of Q4 and start a Phase III trial in the near future. Overall, we feel very good about where we are. I want to thank all of our employees, our shareholders and our patients for enabling us to continue to be successful and grow despite the challenges we're all facing. I think we'll open up to Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We'll take our first question from Brandon Folkes with Cantor Fitzgerald. -------------------------------------------------------------------------------- Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [2] -------------------------------------------------------------------------------- Congratulations on a very good quarter. Maybe first, can you just talk a little bit about how you think about your sales force now in terms of the size you'd like it to be? And maybe just any color on (inaudible) if you were to add reps, is it adding new territories? Or is it adding additional reps in really covered territories? Are you just increasing maybe core points there? And then following on from that, as we look out into 2021, can you start to just talk about some of the areas you may invest behind next year? -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [3] -------------------------------------------------------------------------------- Right. So I missed the 2021 part. -------------------------------------------------------------------------------- Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [4] -------------------------------------------------------------------------------- Just areas of the business you're going to look to invest behind in '20 -- well, you'd like to go invest behind in 2021. -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [5] -------------------------------------------------------------------------------- Great. Thank you. Sure. So let me get some color on the sales force expansion. So we made a decision in Q2 to expand our sales force. We hired quite a few people in Q2. We trained them in Q3. And they're out there now running. We've also expanded our medical team. So we have more medical liaisons doing medical education to providers here. We still have 1 or 2 of them who will be starting very shortly. And that's another big expansion as we think -- one of the key parts of Afrezza is we're finding physicians just aren't aware of our data. But they want to learn more, they want to understand how to prescribe it and are inviting us out. So yes, I think that's exciting. I talked to a physician today who's giving 4 grand rounds in the next 3 weeks, and Afrezza is a big part of it. So that's just one example where having more people on the bus allows us to get in front of these docs who are giving another round and other talks to ensure Afrezza is now being highlighted as one of the new [ultra acting endpoints] out there. So that's exciting. The other part is the expansion that's done with the commercial team. So we know we get a lot of feedback, what are we doing online. So when you think about 2021, I think we can scale up online presence even more because we know the sales force, as much as we try under COVID, the impacts are going to be bumped a little bit as we sit there in these lockdowns and opening and closing of academic centers. So one of the areas we're really focused on is increasing education amongst the diabetes educators, as well as CME education, as well as online engagement with patients. And so that's really what you're seeing the telehealth launch, how we find people online who are struggling, make sure they're clicking on our ads and flowing through into telehealth, how we just raise awareness amongst patient advocates that are out there and all the third-party websites that we just haven't had a strong presence in. But we now have more and more patients coming into the product every day who say, we got to give this out to patients. We've got to share that news. And so we're trying to enable those people to do that more effectively. So I think that's a little bit what you'll see in 2021. On the medical side, we'll probably look at some new analysis of our data to get some new research publications and presentations next year. And we're also looking at maybe running some small studies to answer a couple of questions we have that we have not answered yet in some of our pipeline opportunities with Afrezza as well as the pipeline. In terms of capital allocation, there's not a lot of expense to move some of the pipeline assets forward. We think that can be offset just managing our cash balance. And I think as you see TreT launch and our pipeline move forward, they'll be coinciding each other. As the pipeline moves from Phase I to Phase II, those Phase II studies should come into play roughly after TreT launch and generating cash in the company. So we're trying to manage everything to make them in sync. So we continue to build that out and create shareholder value. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- We'll move next and take Thomas Smith with SVB Leerink. -------------------------------------------------------------------------------- Thomas Jonathan Smith, SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst [7] -------------------------------------------------------------------------------- Just a couple on my end. First on TreT, can you talk about some of the work you're doing on the manufacturing side to prepare for the potential approval and commercialization? It sounds like it could come in 2021 or early '22. And then you mentioned United's planning the BREEZE-2 trial. Obviously, they're running the clinical development program. But can you talk about how you think about their strategy to expand the TreT label beyond the initial PAH indication? -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [8] -------------------------------------------------------------------------------- Sure. On the manufacturing side, we completed a build-out of the factory by [mid late] last year. So that was a multimillion-dollar investment and about a 6-month project that's completed. So we've made commercial supplies within that batch. We were waiting for one piece of equipment to come in and finalize the NDA package. So that's all here, and we're just wrapping all that up here, which will now be at the end of the year. So the factory should be in a place to start to make scalable commercial supplies here in the roughly January time frame. So we'll be ready to go on that one. On the BREEZE and UT leading the filing. What I would say is we're aligned on their perspective of how they think about the label, how we're approaching the FDA with getting ILD in the label. And remember, we're filing TreT as an NDA, not a 505(b). So that gives us a little more flexibility around reference in terms of UT as the owner of the ILD data, as well as the PAH indication. And there's a small chance that we have to do the BREEZE study to get to ILD. And there's a chance the FDA will allow us to file with the ILD in the label. We're waiting for FDA feedback on that. And logically, it makes sense, you should be able to move forward. But I think that will be in lockstep with the FDA and UT to make that decision. But we'll have that pretty much in early Q1. We'll be able to give more clarity, too, there. But from my perspective, Tyvaso looks good in ILD. TreT looks good relative to Tyvaso. There shouldn't be additional -- or much additional work required in order to get the ILD indication. And just to give you a little more color on that. We're including different types of PH subgroups in our human factor study. So we will have human factors data, which is probably one of the bigger things with the FDA for ILD, right? And that additional indication's beyond just people on Tyvaso. So that's just other ways we're preparing to make sure we're ready to go. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- We'll move on next to Bert Hazlett with BTIG. -------------------------------------------------------------------------------- Robert Cummins Hazlett, BTIG, LLC, Research Division - MD & Biotechnology Equity Research Analyst [10] -------------------------------------------------------------------------------- Yes. Appreciate all the color here. Just to follow-up on that line of discussion. What would the BREEZE 2, the design look like? Do you have any sense of a plan for that at this point? -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [11] -------------------------------------------------------------------------------- I think -- I don't have a black and white answer on this one, Bert. I think it would be a small study like you saw with our BREEZE 1 study. The question is probably more naive patients than a switch is my guess. But I think that's going to be dependent on FDA feedback. But I think a real question right now is, do we need to do BREEZE 2. We're ready to go in the event we need to as we don't want to lose any time in getting this in the TreT label. And so I think that's the first question is, do we need to do BREEZE 2? And if we do, we're ready to go. And if we don't, we plan to file with ILD in label for, hopefully, 2021 launch. -------------------------------------------------------------------------------- Robert Cummins Hazlett, BTIG, LLC, Research Division - MD & Biotechnology Equity Research Analyst [12] -------------------------------------------------------------------------------- Okay. Great. And then the United Therapeutics agreement contemplates other research programs and efforts that you haven't disclosed. Any chance on any visibility of those other efforts in the not-too-distant future? -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [13] -------------------------------------------------------------------------------- Yes. What I would say is, we're all focused to making sure TreT hits its time line and get to the patients as soon as possible. We've met with UT many times with other ideas and other assets. I won't talk much about that. I think, let's get through TreT. I think, hopefully, this is a -- the plan here is not to be a one-and-done partnership with UT. We expect they [exploit] our platform exclusively for PH, and we would expect to find more opportunities to help patients in PH with other products. So I think let's get TreT off the ground, and I think the rest we'll have further discussions and guidance on. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- And we'll move next to Steven Lichtman with Oppenheimer & Company. -------------------------------------------------------------------------------- Steven Michael Lichtman, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [15] -------------------------------------------------------------------------------- Mike, I think you started -- you talked about at the start, excuse me, of AfrezzaAssist here. Can you walk through again sort of the mechanics of that in terms of the P&L? And also the benefits that you see in terms of really opening up access? -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [16] -------------------------------------------------------------------------------- Yes. And Steve, I apologize, we're having some issue with phones. So to our shareholders and analysts on the phone, I apologize if I broke up a little bit. We'll look into this for next time. I think what I heard you ask is the mechanics of AfrezzaAssist and the benefits that I see of the program in terms of the process? -------------------------------------------------------------------------------- Steven Michael Lichtman, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [17] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [18] -------------------------------------------------------------------------------- So the mechanics are, if you've heard of something like CoverMyMeds, it's very similar but streamlined. So a doctor would e-prescribe to a central pharmacy. And that pharmacy then -- it's automatically given -- if -- as it goes through with no PA, just goes through and gets filled. If there's a PA required, a PA gets it immediately e-mailed to the doctor. And then from there, they fill it out, it goes electronically into the payer. And we -- most of the time, these are approved within a day or 2. So we think max 72 hours. If you're not approved within 72 hours after submission, we will provide a free code for a free drug to get the patients started quickly while we await the answer. If the answer is negative, we'll appeal -- the doctor, obviously, will appeal it. We do see maybe 20% of patients have to go through an appeal. But 80% of the people generally either did it right away with no PA or the PA is approved within a couple of days. So we believe 8 out of 10 patients will go through automatically through this new process, and they'll be streamlined directly to a pharmacy. And the benefit of that, on the other side of this, is the pharmacy is used to seeing Afrezza prescription. If it's written wrong, we'll get it corrected with the doctor immediately. They'll have it in inventory within a day. So there's no long-term wait for the patient. And then we think as we launch the telehealth model, they're going to know -- they're not going to want to go to a Walgreens or CVS, right? They're going to want to go and have it directly mailed to a third party. So that's also streamlining that aspect for the patient with the telehealth model as well as the direct streamlined prescribing. So we're trying to make it easy for patients to get Afrezza, easy to get the refills, along with -- one of the things we'll get here is the ability and the consent to follow-up with the patients to make sure they stay on the drug, we train them in person. And if there's any other challenges we face, that we have the ability to reach out to them. That's another big part of our model in the future. And leveraging our new hub that we built to help with difficult cases to make sure patients want and receive access to the drug. And it's interesting, some of the payers are contacting us, trying to think about ways to move Afrezza up in the category, maybe to preferred from nonpreferred. That will be exciting if that happens. And we recently got notification that CMS is going to remove the injectable restrictions for Afrezza when it comes to getting CGM. Right now, CGM was -- in Medicare was only dedicated if you're on injectable insulin. That will be changed in the coming months with the period where inhaled insulin will also be added to the criteria. Or they'll just remove the word injectables, the reality of how that will flow. So we're having good discussions there, and we're also looking to try to ensure that Medicare patients have access under the new Medicare plan with insulin savings in 2021 or 2022. So lots on the access side. And ultimately, that's really what we're trying to do, is just streamline this perception because that's one of the reasons doctors tell us that holds them back. And we think if we can fix this and make that easier, take the barrier question -- that takes barrier question away, then the rest of it is really about doctors knowing how to prescribe the drug and titrate the drug, and that's getting easier by the day with the new sample pack. So long-winded answer to an important question. But we hired some great people here from other competing companies in terms of the diabetes space. And I feel very good about the team we have in place to run this program. So we're looking forward to getting it off the ground. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- We'll move on to the next. We'll take a follow-up from Bert. -------------------------------------------------------------------------------- Robert Cummins Hazlett, BTIG, LLC, Research Division - MD & Biotechnology Equity Research Analyst [20] -------------------------------------------------------------------------------- So I meant to ask a question about gross margin. Congratulations on the progress with that, first and foremost. That's pretty impressive over the past couple of quarters. Is there more room, more leverage there, especially as you think about additional capabilities coming on board with TreT and other programs? -------------------------------------------------------------------------------- Steven B. Binder, MannKind Corporation - CFO [21] -------------------------------------------------------------------------------- Yes, Bert, it's Steve. Yes, there certainly is. And when I look at our costs and you look at where we're trending for Afrezza, I'll call it, in the $4 million a quarter range, and $2 million for collaboration services, that gets adjusted a little bit if we have to add some additional resources for commercial manufacturing. But generally, that's not going to change in the short term. So you take a model and you model out where our revenues are going, you kind of see where our costs are going to be. -------------------------------------------------------------------------------- Michael E. Castagna, MannKind Corporation - CEO & Director [22] -------------------------------------------------------------------------------- Sorry. So Bert, I think we'll see if we can wait to get this into the 70%, 80% range as we keep going forward. There's no reason that doesn't drop into the bottom line. And so that's -- it's first getting efficiencies in the factory. Second, the TreT. And as Steve said, and we'll continue to move this in the right direction. Thank you. Okay. I don't see any more questions here. So I want to thank -- I know (inaudible) is dealing with something else, but I appreciate the message here. So we will wrap up the call. Available for any questions for analysts for follow-up. And any shareholders, feel free to email us. We'll try to get back to you through Rose and answer any questions you have. But we are looking forward to wrapping up here Q4 and 2020, putting this behind us and getting ready for an exciting 2021 as we anticipate using our TreT program forward, Afrezza and the international market opportunity that exists. So I want to say thank you to everybody. Be safe out there, and I look forward to talking to you, hopefully, early New Year. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Everyone, that concludes our conference call for today. Thank you all for your participation, and you may now disconnect.