MannKind Corporation

Good morning and welcome to the Mankind Corporation first quarter 2022 earnings call. As a reminder, this call is being recorded on November 8th, 2022 and will be available for playback on the Mankind Corporation website shortly after the conclusion of this call until November 22nd, 2022. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainty which could cause actual results to differ materially from the stated expectations. For further information on the company's risk factors, please see their 10-key report filed with the Securities and Exchange Commission this morning, the earnings release, and the slides prepared for this presentation. Joining us today from Mankind, our Chief Executive Officer, Michael Castagna, and Chief Financial Officer, Stephen Beiner. I would now like to turn the conference over to Mr. Castagna. Go ahead.

Good morning, and thank you for joining us for our earnings call today. Today marks the beginning of the new mankind. You can start to see our execution from a single product to a sustainable growth company. We've never been more excited about our future than now. When you look down, you see four sources of revenue growth and 74% growth quarter over quarter. Oregon Long Business is really starting to shape up as you look at the collaboration and service revenue with Teveso, as I'll talk about with Bethesda moving forward. The endocrine business is also doing well at double-digit growth, 28% quarter-over-quarter, with Afrezza and Vigo revenue. When you look at the orphan lung, we're well-positioned with Tyveso, DPI, growing significantly as we go forward, and colostomy is starting to enter patients, hopefully in 2023. Our EBU is growing year-over-year, but in Q3, we made some changes and integrated Vigo, and as you'll see in a minute, we started to make... As those changes took place, we started to grow our market share month-over-month and quarter-over-quarter. And it's on the ASO side, you'll see our first quarter of commercial manufacturing. One of the first questions I get is, is this full manufacturing? The answer is no. This is just the beginning. The first full quarter commercialized by UT, our royalties earned were about $6 million, which is significantly higher than Wall Street expected. Our capacity expansion is ongoing and quickly progressing here in Danbury. On our pipeline, we have reported out in September our phase one results that were generally well-tolerated up to 90 milligrams, no significant adverse events or QT prolongation, and we're planning to meet with the FDA here in late Q4. We're very excited about this program and excited to get this product to patients. On Afrezza, really focused on paid TRX, which grew 10% year-over-year and 4% Q3 to Q2. On inhale one, we're currently on track to hit our goals for enrollment this year, with an expectation of completing enrollment by mid-next year and results six months later. We also will be presenting our ABC results very shortly, which is the Afrezza-Basel combination trial, where we switched some patients off a pump, we added Afrezza to a pump, where we maintained the people on the pump. On the VECO side, we feel good that we've stabilized the revenue and we're ready for growth. Overall, we have $178 million in cash to fund our growth and our five-year plan. Here's a quick picture just to see the team in Danbury working through making our devices 24-7, not just devices, but also product and dry powder cartridges. It's a very exciting time for people, mankind, and our future. With the purchase of Bego, we really do become the mealtime solutions company. Let me start off by talking about our present and what we're doing to kind of continue to grow market share there. We pivoted this year to focus on a subset of doctors as well as ultra-acting doctors. Analog insulin, URAA. And so that market share, if you look amongst our key targets, has continued to grow after years of decline and watching our competition continue to take ultra-active market share away from us. And we believe they're reaching for a faster insulin, and our friends should be the fastest insulin of choice. And with that refocus this year, we've continued to grow market share quarter over quarter, month over month. You look year-over-year, very excited that the new RXs are a leading indicator of our TRXs, and you can really see the NRX growth from Q1 to Q2 to Q3, where we had 18% NRX growth year-over-year, and how that translates to TRX growth year-over-quarter, year-over-year. On the Vigo, we gave guidance of $18 to $22 million when we purchased this asset. We're on the higher end of that expectation, with revenue of $5.4 million here at Q3, and we continue to see positive momentum with Vigo here in Q4, and we're planning to implement this in the 60 additional sales reps in January of 2023. We stabilized the TRX decline that's been happening for over 18 months and exited Q3 around 1,200 TRXs a week. There's additional business here that's not showing up in Symphony, in distributors, as well as some of the TRICARE accounts. Vigo will be in a P2 position in their federal sales force as we exit this year going into next year. So people ask me, what does that mean for product segmentation? We just got the ABC results and market research telling us where we need to fix on Afrezza to continue to accelerate the growth. We expect to focus on 2023 on a narrow focus on a set group of providers that write both Vigo and Afrezza, which is around 3,000 providers. Additionally, we want to make this business cash flow break even and really choose to win where we choose to play. On the Afrezza side, you'll continue to see us focus more on type 1, younger population, commercially insured, endocrinology focus. On the Vigo side, continue to focus on type 2 for patients looking for a simple way to deliver their insulin and basal control. Older population, typically Medicare and endo, MPPA, PCP. The bottom right corner shows you Afrezza will be a P1 target for our core sales force, and type 2 will be a P3 target, and Vigo will be a position 2 target in that sales force. As we go forward, we're very excited about the Endocrine Business Unit, our pipeline I'll talk about at the end of today, as well as the impact Tyvese is going to have on the future of mankind. I'm going to turn it over to Steve. Thank you.

Thanks, Mike, and good morning. I'm pleased to review select third quarter and September unit eight financial results. Please supplement this call by reading the condensed consolidated financial statements in MD&A contained in our 10Q, which is filed with the SEC this morning. This is the first full quarter of revenue activity across all four sources of commercial revenue. Fresen Vigo for our endocrine business and Tyvesa DPI manufacturing and Tyvesa DPI sales royalties for our orphan lung business. Looking at how our business is growing year on year, please focus on the bottom of the table, where it shows we had a 48% increase in total revenues, which amounts to $32.8 million for the third quarter of 2022. Breaking down the third quarter by source of revenue, a further net revenue was $10.8 million versus $9.8 million in 2021, a growth rate of 11%. The increase was mainly driven by price, including a more favorable growth net percentage and higher patient demand with paid TRX growth of 10%, partially offset by wholesale inventory ordering patterns, which resulted in lower channel inventory levels for the third quarter of 2022. Lower channel inventory levels have been recurring theme this year, as we have seen channel inventories lowered by approximately 1.1 million in the six-month period ended September 30th, and almost $2 million since a year ago at September 30th of 2021, which has adversely impacted our revenue, our net revenue growth this year. We believe that the AFREZA channel inventory levels have likely hit their minimum maintenance balances and shouldn't lower much more. Year-to-date fresher growth came in at plus 13%, which was mainly due to favorable price, including a more favorable gross net percentage, higher product demand, and a more favorable cartridge mix. Next is our net revenue for Vigo, the recently acquired wearable insulin delivery device, where we had $5.4 million in net revenue for the third quarter and $7.5 million for year-to-date, which represents the four months of June through September. We expect ZO net revenue for the 12 months post acquisition to be in the range of $18 to $22 million, and we are tracking to the mid to high end of that range. Moving to collaboration services, revenue for the third quarter was $10.3 million versus $12.5 million for 2021. The main driver of collaboration revenue has shifted from the amortization of United Therapeutics milestones in 2021 to Tyveso DPI manufacturing revenues in 2022. Included in the third quarter 2022 collaboration and services revenue number of 10.3 million is 9.9 million of Tyveso DPI manufacturing revenue. The September year-to-date revenue of 18.4 million is mainly lower in 2022 versus 21 because of the prior year UT milestone amortization and the first half 2022 deferral of revenue associated with the delay in the start of commercial manufacturing. In addition to UT-related revenue recognized in 2022, we had $32.2 million of deferred revenue on the September 30, 2022 balance sheet associated with United Therapeutics, which will be recognized to income through 2031, which is the remaining term of the commercial supply agreement with United Therapeutics. And lastly, we recorded royalties on sales of Tyvesa DPI by United Therapeutics to their customers. The third quarter was the first full quarter of sales of Tyvesa DPI by UT, and we earned $6.2 million of royalties for those sales based on a low double-digit royalty. United Therapeutics released third quarter earnings last week. and on their earnings call said that the physician engagement and enthusiasm around Tyveso DPI is extremely high and we continue to manufacture on a 24 by seven basis to supply UT. I consider Mankind to be a new commercial growth story. The next slide shows our revenue growth quarter to quarter for 2022. Moving from the left to the right, we grew total revenues from 12 million in the first quarter to $18.9 million in the second quarter, a 58% increase, and then grew total revenues from $18.9 million in the second quarter to $32.8 million in the third quarter, a 74% increase. Our quarterly revenues grew almost 3x from first quarter to third quarter. Driving the revenue growth are our three new sources of revenue, Tyveso DPI manufacturing revenue, royalties associated with the sales of Tyveso DPI, and sales of Vigo. We're pretty pumped about the future revenue growth potential across all four revenue streams. Now let's look at the profitability of our endocrine product, Afreza and Vigo. Afreza gross margin increased from 61% in the third quarter of 2021 to 81% in the third quarter of 2022, and the gross profit associated with Afreza increased to $8.7 million in the quarter. The increase in the third quarter gross margin versus 2021 was due to an increase in Afreza sales, coupled with a decrease in the cost of goods sold, mainly due to a decrease in excess manufacturing capacity costs. When looking at the profitability for September 22 year-to-date, I read that a gross margin of 75% and gross profit of $23.6 million, driven by higher sales and lower cost of goods sold, mainly due to a decrease in excess manufacturing capacity costs, and a $2 million fee incurred for an amendment of our insulin supply agreement in the second quarter of 2021. Please note that there will always be some variability in the present gross margin between quarters due to the timing of manufacturing spend and activity, as we are not at maximum production capacity. The far right table shows Vigo September year-to-date gross margin of 44%, which is about where we expected the margin to be. Let me conclude with some final comments around liquidity and performance. We ended the third quarter with $178 million in cash, cash equivalents, and investments. And with our growth across all four commercial revenue streams, we're able to invest behind our pipeline and strategically behind our Fresa and Vigo. Our collaboration with UT is tight, and the Tyveso DPI launch is off to a strong start. I feel like the company's turned a corner. We are focused on maximizing the potential of our collaboration with UT We are focused on profitably growing our endocrine business, and we are focused on developing and bringing innovative products to patients from our emerging pipeline. Thank you, and now I'll turn it back over to Mike to review key milestones and provide a pipeline update.