MannKind Corporation

Good afternoon and welcome to the Mankind Corporation first quarter 2022 earnings call. As a reminder, this call is being recorded on May 5, 2022 and will be available for playback on the Mankind Corporation website shortly after the conclusion of this call until May 19, 2022. 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 the 10-K report filed with the Securities and Exchange Commission this afternoon. The earnings released in the slides prepared for this presentation. Joining us today from Mankind are Chief Executive Officer Michael Castaña and Chief Financial Officer Steven Binder. I would now like to turn the conference over to Mr. Castaña. Please go ahead, sir.

Thank you, and thank you, everyone, for dialing in to our earnings call today. We're in unprecedented times as we look at the volatility in the stock market as well as our biotech sector having lots of, unfortunately, mishaps these days in terms of companies imploding on a daily basis, which, from a mankind perspective, we're expanding and hiring, so we're able to find great talent, but from an industry perspective, we see lots of change ahead. When I think about Q1, we had some great opportunities to continue to advance our transformation in Afrezza, which I'll talk about today, as well as advance our pipeline progress with clofazamine, and we'll give what update we know today on Tyveso, so those will be the three focuses of our conversation. I personally just got back from our ATTD Diabetes Conference in Europe, and I was able to meet about 10, 15 of the top regional thought leaders in those countries that are represented in the European Union. to really talk about AFREZA, the potential of AFREZA, as well as the pediatric trial and the studies that we're doing. And I walk back invigorated on opportunities on how we can continue to advance the science within diabetes. We've also had several FDA interactions on AFREZA and the pipeline as we think about trying to think about the label change, as well as preparing to go to advance clophasamine into phase two. And we also had an advisory board with roughly 10 of the top thought leaders in non-tuberculin and mycobacterium for the first time where we could really assess how we think about NTM, how we're positioned in clofazamine, and to confirm our strategic direction relative to where we're going in our clinical trial before we go to the FDA. So within the UT collaboration here on the slide, our PDUFA date is May of 2022. We eagerly await for the FDA to give us a notification, or actually UT. We are focused on preparing to support the expected commercial launch of UT in June. On the pipeline, our SAD trial is almost complete. I'll describe that in a second. We expect full results from the MAD section in Q3. On MNKD 201 and 501, both of these are progressing nicely. We're in doing animal inhalation studies and really looking at the levels as well as the bleomyosin-induced lung models here in Q2 and Q3. On the Afrezza side, we have $9.8 million in revenue for the quarter. 21% growth year-over-year. Our Afrezza pediatric trial site certifications continue to increase each month, and we're on track for our patient goals for 2022. We also kicked off the Afrezza-Basil combination study, which I'll show you some progress on that very shortly, and finished the quarter with $233 million in cash. On the Teresa DPI update, we are deferring to UNITR on any questions related to indications, FDA approval timelines, Any questions on the label, that will all go through UNITER. They're handling the day-to-day communications with the FDA. We do eagerly await the decision, and we are excited to continue to focus on what we can control, which is manufacturing commercial products for launching Q2, as well as building out the plant expansion to support the additional readouts that UT expects for COPD and IPF. On Mankind 101, which is our clofazamine product, we have completed Part A yesterday, thank God. And so we have done cohorts A1, A2, and A3. We've now dosed patients up to 90 milligrams, which is the highest dose we thought we should go. And so far, I've seen great tolerability with no safety signals. We will now wait for the full data set to be analyzed along with PK and PD and assess the proper doses here for Part B. We'll know on the low end we'll go to 30 milligrams, which we think is more than enough to overcome any MICs. And we are debating whether to go to 90 or 60 based on the data coming out of Part A. We think we can go to 90, and it would probably make sense to go to 90 just to have the max tolerated dose. Top lines are expected here in Q3 from the MAD part. Obviously, in Part A, we know the safety and tolerability of clofazamine looks very strong in the nebulized formulation. I'm now going to bridge a little bit over to Afrezida because we haven't spent a lot of time on Afrezida the last few earnings calls, but I thought we should share with you some of the activities we're doing and what's changed over the last few months. Starting in February, we had a refocused effort, and that effort is starting to show early signs of impact on driving NRX Ultra Acting Share. So on the left side, you can see here, this is our patient funnel when we look at all patients coming into Afrezza Assist, which is our reimbursement hub, as well as our cash program, as well as our free goods program, which takes out a lot of the cost that used to exist in our old program. And you can see, on average, we're at about 187 patients a week now involved in one of these three programs, up from 122. So these are patients that don't necessarily show up in the symphony if they're free goods or cash pay, but this is activity that's showing continued growth and momentum of the diabetes franchise. When we look on the right side, we started refocusing our efforts on ultra-acting share, which is defined as FEOS, LUNGEV, and AFREZA. We've had a multi-year decline in share, and this year we changed our field incentive comp as well as our target list to really focus on moving market share back in the right direction. We had our first sales meeting in person in the last three years due to COVID, and that meeting happened, and you can see early signs here on NRX, which is where you'll see that progress. We've gained almost 1% market share through April since January with this new focus. We'll continue to watch this closely. This is one of our key metrics for 2022. And we're excited about what that can bring. On inhale one, this is our pediatric trial. We now have 18 sites confirmed. These are high quality US investigators from leading academic centers as well as some of the top private practice doctors. We met with our colleagues in Europe and there was some interest in a couple countries such as Germany, Israel, and Italy to add a pediatric site. in those countries to get experience for those investigators who have a strong desire to learn more about inhaled insulin as we think about filing in Europe sometime down the road. What you can see here on the U.S. only focus so far is we are meeting and exceeding our target enrollment and we are, the randomization is a delay of a couple weeks between the time we get enrolled and the time they actually randomize. So it's not that we've lost 16 or 17 patients in these numbers, it's just a delay from the time they actually enter the trial to the time to actually randomize. I think only one randomization failure has happened so far. But otherwise, this track is on, this trial is on track to continue to hit our goals for this year. The next trial I want to talk about, which again, we haven't given much focus on, we referred to this previously as the PUMP switch trial. If you look up on clinicaltrials.gov, it's called the AFREZA with basal combination study. And one of the things we've realized about Afrezza is a lot of people enjoy their insulin pumps that have type 1 diabetes. And a lot of them, when we get questions about our script refill trends, it turns out a good proportion of type 1s use Afrezza for special occasions or their mealtime on top of their pump. And so we have no clinical data in showing what Afrezza plus an AID pump looks like in greater than one dose, which some of the trials were done years ago. We also have zero data on switching a patient off an insulin pump So we can show people safely how to switch from their insulin pump to Afrezza Traceeba and show that they can have hopefully equal or better glucose control and quality of life. This is the first time in history that we can see that there's a pump switch from a pump over to Afrezza. Then we also decided to maintain a control group so we can see what happens if we take people on a pump and continue them on the pump for the duration of the 12 weeks. So we'll be able to compare in this pilot study, staying on your pump, Adding Afrezza to your pump only for your meal time, using the pump just for your basal, and or switching off, you know, calling it a detached lifestyle, over to Afrezza plus Traceeva. And the reason this is important is we do see an opportunity in the future where we see once-weekly basals coming. That's a very compelling proposition for patients, as well as oral basal, potentially watching what Oramed will do later this year with their readout and type 2s. So we want to understand how best to use Afrezza in different combinations. This trial's primary output is no difference in A1C between the three treatment options. The good news is, pretty much by the end of this month, this trial will be fully enrolled, and we should have the results here in late Q3, early Q4. I think when you look at clinical trials, the excitement around enrollment tells you the excitement around the trial. And the fact is, this trial enrolled literally in 60 days these 25 patients. So we're very excited about it. It's two sites, very focused effort here, and we'll await these results very shortly in the next quarter or two. Now I'm going to turn it over to our CFO, Steve Binder.

Thanks, Mike, and good afternoon. I'm pleased to review select first quarter financial results. Please supplement this call by reading the condensed consolidated financial statements in MD&A contained in our 10Q, which is being filed with the SEC this afternoon. Let's start by looking at revenues for the first quarter of 22. The present net revenue was $9.8 million versus $8.1 million in 2021, a growth rate of 21%. The increase was driven by wholesaler inventory ordering patterns during the first quarter of 2021, which were adversely impacted as wholesalers decreased inventory levels, plus price, including a more favorable growth to net deduction of 38.7% and underlying TRX growth. Moving to collaboration services, revenue for the first quarter was $2.2 million versus $9.3 million for 2021. The revenue in the first quarter was mainly associated with United Therapeutics, specifically the NextGen R&D efforts, clinical supplies for patients in the BREE study extension, and some pass-through expenses. We did not have and did not expect to have revenue from our commercial supply agreement with United Therapeutics in the first quarter. We expect to start recognizing revenue associated with the UT commercial supply agreement in the second quarter. Revenue associated with the manufacturing activity in the first quarter of 2022 was deferred on the balance sheet in the amount of $7.4 million, which I will discuss in greater detail in a few minutes. From a cash standpoint, we were able to invoice and collect from United Therapeutics for these manufacturing activities. The graph on our next slide shows the quarterly of Fresno's margin trend from the first quarter of 21 through the first quarter of 2022. Our gross margin for the first quarter of 2022 was a record 77%, which reflects increasing AFRESA net revenue and lower cost of goods, mainly related to the absorption of indirect and overhead costs at our factory where we now produce two products. We expect the gross margin for AFRESA to be at least 70% for the full year of 2022, but it can fluctuate quarter to quarter based on manufacturing activity and spend across both products. The next slide is similar to one that I showed last quarter in that we have been deferring the revenue associated with our Tyveso DPI manufacturing activities since the second quarter of 2021 and will not be able to recognize this revenue until we sell product to UT, which we expect in the second quarter of 2022. For the first quarter of 22, we had $7.4 million in manufacturing expenses recognized in our P&L without a corresponding revenue offset. Since the second quarter of 21, the amount of manufacturing expenses recognized in our P&L without a corresponding revenue offset totaled $21 million, which sits on our balance sheet as of March 31st, 2022. Deferred revenue will be recognized over the manufacturing services agreement life, which currently runs to 2031. United Therapeutics is funding this cost as we've been invoicing and collecting from UT. Now that we've looked at AFRESA and collaboration services separately, let's look at the gross profit and gross margin for both side by side. Please note that collaborations and services is mostly associated with our agreements with UT. AFRESA gross margin increased from 47% in the first quarter of 21 to 77% in the first quarter of 22 as discussed earlier. And the gross profit associated with Afrezza increased almost 100% to a record $7.5 million. The collaboration services close loss for the first quarter of 22 was mainly due to the revenue deferral I just spoke about. We expect this to turn positive once revenue is allowed to be recognized when we start selling product to UT. Let me conclude with some final comments. Having done our convertible debt and sale leaseback financings in 2021 before the capital market downturn this year, we're in a strong financial position to fund our growth with a cash and investments balance of $233 million as of March 31st. In addition, with rising interest rates, which are likely to continue for some time, we are well positioned with minimized interest rate risk. The vast majority of our debt, which includes the convertible amend debts, are at a fixed rate of 2.5%. Also, anticipating a rising interest rate environment, we negotiated an interest rate ceiling for our floating rate debt with MidCap about a year ago, with a maximum exposure of only 1% over the current rate. Operationally, we are showing continued progress in turning Afrezza into a money-making brand, and we are preparing to support the expected commercial launch of Tyvesa DPI as the FDA action date approaches. Thank you. Now I'll turn it back over to Mike for some additional comments.