MannKind Corporation

good afternoon and welcome to the mankind corporation second quarter 2022 earnings call as a reminder this call is being recorded in august 9 2022 and will be available for playback on the mankind corporation website shortly after the conclusion of this call until august 23rd 2022 this call will contain forward-looking statements such forward-looking statements are subject to risk and certainty which should cause actual results to differ materially from the stated expectations. For further information on the company's risk factors, you see their 10Q report filed with Securities and Exchange Commission this afternoon. The earnings released and the slides prepared for this presentation. Joining us today from Mankind, our 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.

Good afternoon, everyone, and thank you for listening in. Today, I'll give a quick update on our performance for the quarter. Steve will go through the financials, and then I'll close on the pipeline and company updates. As you can see, this is the quarter we've all been waiting for. We're super excited about Mankind and the growth story that it's becoming. Overall, we have 58% quarter-over-quarter growth, and we have several new sources of revenue. As you all know, we closed Vigo in May. We booked sales starting in June. That product is off to a great start. I'll give a little bit more details on that. We also were able to book a portion of the DPI commercial manufacturing revenue, which Steve will go into more at $4.7 million, and royalties, which will not be broken out as a percentage, but more as a dollar value as we go forward, about $300,000. And then you can see collaboration services other by $1.2 million. You may recall previous years and quarters, A lot of that was the amortization of the payments that we received from UT over the time period of that contract. So I think it's good to look quarter to quarter now as we look at the way the revenue is looking given that contract ended last October. Total revenues for the quarter were up 58% from Q1. And we think that as you continue to look out, we'll see more royalties, more manufacturing, more present, more ego. And so we really feel this is the foundation of the growth story that we've been working towards over the past several years. So a couple highlights here on the orphan lung side. As you all know by now, the FDA approved our Tyvesa DPI for PAH and ILD, and then we began manufacturing and commercial product sales with UP in June with royalties recognized. You will notice as Steve talks that some of that inventory that was built in June is hung up in the balance sheet and will carry over to the front next quarter. On the pipeline, clothazamine completed the SAD and MAD trials, single sending dose and multiple sending dose. I will have those top line results here shortly, and we'll release those publicly at the appropriate time. The other two pipeline assets are starting to move forward is the tentative Mankind 201, as well as Mankind 501, THF beta outside. And that development's progressing. I'll give a few updates on these at the end of this call today. On the endocrine side, we saw 7% growth in Afrezis from 2021. We saw TRX grow 12% from Q1 to Q2. Unfortunately, we did do a primary care pilot for the last six to nine months, And that did not produce the results we expected relative to the expense. And so we terminated that at the end of June. And so that expense will not be going forward much further than July. So that's some of what we'll see as we go forward in terms of expense reduction on the PCP pilot. On the inhaled lung pediatric trial, that's going as expected. We added a few new sites in the last quarter, as well as about 80 patients now. And we're on track to hit our goals between now and the end of the year. And we also have the Afrezza-Basal Combination Study, ABC. And that's the one looking at maintaining a pump, adding a Fresa to a pump, or switching off a pump to a Treceva Fresa. And that's on track to give us results in early Q4. It's a small study, but I think will be very important results to give us opportunities for 2023 and beyond. And on Vigo, we'll give a little more details there, but we had booked net revenue of $2.1 million just for the month. Zealand will book the revenue for April and May. And from a liquidity perspective, as we look at it in the future, you can see four sources of revenue. Additionally, man-to-man group converted $10 million in debt in Q2, so now we have $10 million less in debt, and we'll capitalize as we go forward. That does include some accrued interest that will be taken off the principal. As we head to DPI, you can see here the final packaging, the FedEx truck leaving our Denver facility. We are at 24-7 manufacturing. We continue to look for ways to drive more efficiency in the manufacturing process to get more cartridges per hour as we can. And we are also broke ground on the expansion, as you all may or may not know. UT is pursuing two studies called the TETON and the PERFECT study, which are much larger patient populations than PH and ILD. And so we had built the original plan a couple years ago. That was to handle the first two indications at launch. We always knew we'd have to expand. So that broke ground here in the last quarter in Danbury. One of the big shifts we made for Mankind and Afrezza in the first quarter, specifically February, was really starting to look at market share, and in particular, new prescription market share relative to the ultra-acting class. And the reason is that class consists of Lumgev, C-Ops, and Afrezza. It's been growing, and more and more doctors continue to adopt ultra-acting insulins. While I don't necessarily believe Lungesic will be able to qualify, the reason doctors are writing those is because they believe they're faster, and I think their clinical data would say otherwise. The fact is that Fresa is competing indirectly or directly against those two launches, and we felt it was good to start measuring our market share and incentivizing our corporate executive management team, all of our employees, as well as the frontline sales reps. And you can see that that had a direct impact on our market share growth over the last four or five months here, as we've closed out the quarter. So we did hit a low of 12, and we continued to grow through March all the way to June. And additionally, on the right side here, you can also see these are prescriptions that don't show up in Symphony, but we have a free goods program, a cash pay program, and it tries to assist with your referrals coming in, which ultimately become the funnel for new patients. And you can see on an average quarterly basis and weekly basis that those have gone up from 122 to 223 over the last couple quarters here. So that's also exciting. That kind of gives us the bonus of what as we go forward. When you look at new prescriptions, we delivered 14% sequential NRX growth, which will lead you to the 12% TRX growth. So we need our NRXs to grow faster than TRXs in order to feel good about the next quarter as we look out. We also amplified our clinical message with healthcare providers. We had a major presence at ADA, ACE, and ENDO. I was pretty impressive when I attended ADA. Typically, you'd walk in and AstraZeneca and Novo Nordisk and Lilly had the biggest booths you couldn't get in without walking through them. And this year, Mankind was right up front and one of the bigger booths. And the large people who've generally been committed to diabetes are some of the smaller or no booths. And it was really a technology conference. And that's what ADA was focused on. So I think the team really tried to showcase Mankind here because it's the first conference that people can come back to live. back in June with ADA. So we'll continue to see, focus on the remaining impact from the conferences and the investments that the marketing team made there. I want to talk a little bit about Vigo because we haven't had the chance since we closed that deal to have a deep dialogue on it. We really want to strengthen our commitment to mealtime solutions when it comes to running our endocrine business. We have about 60 sales reps, and when they go in, if the doctor doesn't want to write a Fresa, of which we see a large majority of our customers after six years still not writing in a Fresa prescription, it's not efficient. And so Vigo is a device we've watched many years, and they were doing at one time almost 2,500 prescriptions a week. And, you know, that was a lot more prescriptions than Afreza at that time. And when we look at it now, it's been on a decline, but they had a lot of utilization and a lot of prescribers that loved the product. Those aren't necessarily prescribers who prescribed Afreza or tried Afreza. And so we thought, you know, being able to build more efficiency in our sales force, being able to make mankind more committed to real-time solutions is really something that can differentiate us as a company. There really is no diabetes company today focused on mealtime solutions. They're all focused on cranial control or devices and trying to get insulin on the go. So we felt this was a very nice synergy with our portfolio. And when you look at the purchase price below, $15 million, that included all the IP, $11 million of inventory, and $3 million of equipment. So if you add up those two lines, we basically got Vivo for a net $1 million. So this was a good investment of shareholder money. we will return we will get our return on that investment and hopefully grow and provide more solutions to the diabetes space than we ever had and we expect first year revenue to be 18 to 22 million and accretive in 2023 and that's 12 months a year not necessarily the rest of this year uh commercial infrastructure we've hired an additional 15 sales force as well as a leader to lead the vivo business and a medical person uh in addition to the manufacturing people so this did increase our headcount but all that is in our expectations And overall, we have the former Zeeland employees who joined us up in Boston. We're outside Boston Marvell, who are continuing to run the supply chain and manufacturing network. So we're very excited about Vigo. I think you can see in the first quarter it looks very good. When you look at the next slide here, the big thing was about stabilization. This has been on a 15-month decline, mainly because they stopped promoting it back in March of 21. We were very happy to be able to get the people on board and start to stabilize that decline in Q2. Hopefully, as we look in Q3, we can start to turn that from negative to a positive growth. I would say the leading indicator of NRXs and the NRX ratio over TRXs is indicating that we are starting to make impact. We know the prescribers are excited to have Beagle in Mankind and really can't wait to get it in the hands of the rest of our sales force. Right now, we're only promoting it through those 15 reps. Those are the top reps in the top centers that probably cover 50% of the units. And to my earlier comment on prescriptions and coverage, you can see now in a given month we have almost 9,000 patients filling a prescription for a Mankind product. And that gives us about 2% market share of all rapid-acting scripts. And so that's not just ultra-acting, that's all rapid-acting, including Novolog, Humalog. And that gives us a reason to show up to the doctor's offices and be expected to continue to grow that share over the coming years and also reach nurse practitioners and PAs who are heavy users of BeGo and also heavy prescribers of insulin. So we feel like this is a really good opportunity to increase our share of voice, increase our commitment to diabetes and the endocrinogenesis, and give our sales force another tool to help provide solutions to patients who aren't in control for the most part. I'm going to stop there and turn it over to Steve. Thank you for listening.

Thanks, Mike, and good afternoon. I'm pleased to review select second quarter and June year-to-date financial results. Please supplement this call by reading the condensed consolidated financial statements in MD&A contained in our 10Q, which was filed with the SEC this afternoon. As Mike pointed out, this is the first quarter for three new sources of revenue for mankind. With the approval of Tyveso DPI in May and the subsequent launch by United Therapeutics, we have begun to recognize manufacturing revenue and royalties in our second quarter P&L. In addition, with the purchase of Vigo effective May 31st, we've recorded net revenue for the month of June. This slide shows revenue for the second quarter in the left table and June year-to-date revenues in the right table. Looking at revenues for the second quarter of 2022, Afrezza net revenue was $10.6 million versus $10 million in 2021, a growth rate of 7%. The increase was mainly driven by price, including a more favorable gross-to-net percentage. Growth in underlying paid TRX demand of plus 8% was substantially offset by a decrease in channel inventory. Year-to-date of Fresa growth came in at plus 13%, which was mainly due to favorable price, including a more favorable growth to net percentage, higher underlying patient demand, and favorable cartridge mix. Next is our net revenue for Vigo. the newly acquired wearable insulin delivery device, where we had $2.1 million in net revenue for the month of June. We expect Vigo net revenue for the 12 months post-acquisition to be in the range of $18 to $22 million. Moving to collaboration and services, revenue for the second quarter was $5.9 million versus $13.3 million for 2021. The second quarter includes the sale of Tyveso DPI commercial product to UT. The decrease in revenue from the second quarter of 2021 was mainly due to the recognition in the prior year of amortization of United Therapeutics milestone payments. I will dive more deeply into the UT manufacturing revenue and deferred revenue on our next slide. The June year-to-date revenue of $8 million is mainly lower because of the prior year UT milestone amortization as well. Also new for mankind, we recognize $300,000 of royalty is associated with the sale of Tyveso DPI by United Therapeutics in the second quarter based on a low double-digit royalty. We had previously communicated that we would provide the exact royalty rate upon approval of Tyveso DPI, but we have agreed with United Therapeutics to keep the royalty rate confidential for competitive reasons. The next slide breaks down the collaboration services revenue that was discussed on the prior slide, but we also added the associated deferred revenue, which sits on the balance sheet. The UT associated revenue includes manufacturing services and, additionally, next-gen R&D services, which are mostly pass-through costs. For the second quarter, we recorded collaboration services revenue associated with UT of $5.4 million, including manufacturing services revenue of 4.7 million, and we deferred 4.1 million of revenue to the balance sheet in the second quarter, of which approximately half is associated with inventory that sits on our balance sheet and is expected to be sold to UT in the third quarter when we will recognize the associated deferred revenue to income. Beginning in the second quarter, we have started to recognize prior period deferred revenue for manufacturing services and expect to do so throughout the life of the manufacturing contract with UT, which runs through 2031. There was a total of $29.8 million of deferred revenue associated with UT on our balance sheet as of June 30th, 2022. Now let's look at the profitability of Afreza and Vigo. Afreza's gross margin increased from 56% in the second quarter of 2021 to 68% in the second quarter of 2022, and the gross profit associated with AFREZA increased 31% to $7.3 million. The increase in the second quarter gross margin versus 2021 was due to an increase in AFREZA sales, coupled with a decrease in cost of goods sold, mainly due to a $2 million fee incurred from the amendment over insulin supply agreement in the second quarter of 2021. When looking at the profitability for the first half of 2022, AFREZA had a gross margin of 72%, and gross profit of $14.8 million, driven by higher sales and lower cost of goods sold. There will always be some variability in a Fresno gross margin between quarters due to the timing of manufacturing spend and activity, as we are not at maximum production capacity for the product. The far right table shows Vigo gross margin of 40%, which is about where we expected the margin for this medical device to be, based on a review of the seller's financial information. Perspectively, we will focus on improving the margin for this product. Let me conclude with some final comments about liquidity and performance. We continue to transform the balance sheet. In the second quarter, there was a reduction of $10 million of debt that was converted to equity by the man group, resulting in reduced debt and interest expense. We spent $15 million to purchase Vigo, including inventory and equipment valued at approximately $14 million, which infers that we got a bargain purchase price. With rising interest rates, we are well-positioned with very little interest rate risk due to the low fixed rate for most of our debt. For our one floating rate loan with mid-cap, we anticipated rising interest rates and negotiated an interest rate cap with a maximum exposure of less than 1% above the current rate. Also associated with the mid-cap loan, we did not exercise our right to borrow up to $60 million under tranche three which was accessible to us once Tyveso DPI was approved by the FDA and was available until June 30th. Operationally, we are showing continued progress in generating sales growth and gross profit for Afreza, which turned Afreza into a money-making brand. We have added Vigo to the endocrine business unit, which will expand our footprint with insulin-prescribing physicians, as well as help synergize our cost base and infrastructure. Our collaboration with UT is strong and has a ton of potential. We are producing tight base of DPI at a 24 by 7 basis and are seeing increased efficiency in our manufacturing output while recognizing manufacturing revenue and royalties for the first time during the second quarter. We are excited about our future as we now have four growing sources of revenue in addition to an early stage but established product pipeline. Thank you, and I'll turn it back over to Mike for additional comments.