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spk07: 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.
spk05: 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.
spk01: 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.
spk05: Thank you, Steve. Great summary, great future. So looking over the next 18 months, I'm just going to share a couple things. We have a good purview on the endocrine business unit and where we are with the Fresno. First, we launched a quick start program to get patients started quickly here in Q4. to pilot that as we get ready for next year to how to scale our business. In 2023, we fully expect that AFREZA will be covered in Medicare as $35 under the Inflation Protection Act bill that was passed. That changes the game as one of the major objections for AFREZA is around access. We really want to continue to see that patients can only have to pay $35 for AFREZA, and it's not assured we'll have a low-cost cash program available. We expect to finally launch Blue Health Viz, which is our patient edition integrated with CGM, in Q1 as a pilot with a full-scale launch in Q2 next year, assuming that goes well. SIPL is fully enrolled in a Type 2 study and we expect that readout to happen by Q3 next year. And then Inhale 1 readout for PEEPs could happen late Q4 or early Q1 at the latest. I'm going to bridge over to our Mankind Pipeline. This is a position that we started three years ago when we looked at the orphan lung business. In 2019, we decided to pivot and focus on orphan lung as we felt that was the best opportunity to help patients. Hearing the patient's stories on non-tuberculomycobacterium, as well as tabasodipi, are heartbreaking. But we are fundamentally going to extend and enhance people's lives as it comes to using our product and our technology to give them the freedom to live their life. With clofazamine, we are fully engaged in getting this ready for FDA submission in terms of a phase two, hopefully three, study. That's one study. On the tetanin, we're progressing that rapidly into a phase one. 301, the team is working hard on the formulation. We're almost ready to go to the next stage there. And the TGF beta will be getting a final study report very shortly in the next couple weeks. On the cannabinoid program, RLS just released recent data, and they're going forward with their second trial. And on the FOSIM, we continue to watch that progress in the oncology space. One of the things I was talking to some investors yesterday was how do we start to help people understand our pipeline and the opportunity that we're going after? I think this slide is a good summary. When you look at NTM, pretty much a big unmet need. Most of the drugs are generic and have severe toxicities. Competition is narrow, and our market value for this is in the $3 to $4 billion range. We look at this as about 58,000 patients, ultra-orphan here in the U.S. with 15,000 in treatment, as well as Japan as another large market for this opportunity. In the IPF space, the market is littered with failures and very tough disease. It's called idiopathic pulmonary fibrosis because it's very hard to treat. very hard to diagnose, very hard to get a consistent patient population. However, we believe the only two products approved are the tetanib and profentadone, give us an opportunity to reformulate the tetanib in an orphaned lung delivered product, where we know one of the great limiting side effects of the tetanib is the dose-related adverse events. They cannot dose much higher. We're excited about this as there's 100,000 patients in IPF who need more options. On the cystic fibrosis side, I was actually privileged to be at the CF conference this past weekend, hearing all the great progress and life expectancy that's been extended in this patient population. Despite the life expectancy extension, there's a subset of patients who continue to be sick, and there's a subset of patients who continue to have exacerbations and infections. In fact, one of the conversations there was the fact that people's lungs are getting better are masking the infections because these patients are no longer producing sputum, and how do you continue to treat an infection if you can't culture the sputum? These are great opportunities and challenges to develop drugs in this space, but I think they point to the unmet need in the CF community and the interest that the CF Foundation has in our product pipeline as we go forward. As every year we lay out all of our milestones, we feel pretty good that we're on track to hit all of them. Nothing here is surprised. And in Q2, we released the 101. Pretty soon, hopefully, we'll have ABC results, and the Mankind 501 results will be in short. Q4, we're lined up to have a great quarter, close out the year strong, and get ready for 2023. I'll stop there and get ready for questions.
spk07: To ask a question, you will need to press star 1-1 on your telephone. Again, to ask a question, you will need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster. And our first question comes from Brandon Foulkes with Cantor Fitzgerald. Your line is now open.
spk03: Hi, thanks for taking my questions and congratulations on another very good quarter. Maybe just two from the, you talked about the manufacturing on Taipei, so running 24-7. Can you just give us an update in terms of how you, or how it's been with staffing? Obviously, we've had staffing challenges across the board in 2022, but do you have the staff there? Do you have sort of the ability to kind of ramp up should this strong ramp on target DPI continue. And then maybe just a point of clarification. I think you mentioned 60 additional sales reps that are going to target, they're going to detail Vigo. Are these current reps that you have detailing Fraser or are these new hires to the company?
spk05: Great, Brandon. Thank you for dialing in this morning. Just answer that one easily. It's our existing infrastructure. We bought Vigo not to add a ton of more infrastructure to the diabetes business, but to leverage the existing infrastructure we have. So we have 60 current friends and salespeople across the country, and we'll be dropping Vigo in that bag around late January. So that hopefully clarifies that one. On the Teveso 24-7 manufacturing, fortunately, we've had a really good year of staffing, very low turnover relatively to the market. And on the ramp, the real issue on the ramp is continued production. I think that's the biggest thing is when equipment starts and stops, that's when we have headaches. When equipment's running 24-7, it actually gets more efficient over time. And so I think that's really where the team is focused on is making sure, you know, as you ramp up production, that the equipment continues to manufacture and fill cartridges at the rate we need. And then ultimately get better on the supply chain in terms of packaging and shipping to the pharmacies. So we don't anticipate having to hire more people in the near term for production outside of the scale-up facility. Remember, we're building a major expansion in Danbury, and that facility will require some extra employees next year, which will be reimbursed by UT. So currently, we've already worked with UT to anticipate upside demand, and we will make sure we're able to supply that demand in 2023.
spk03: Thank you for both of those. Do you mind if I just sneak one more in? Just given your strong cash balance, I know you talked about, you mentioned sort of getting investors to understand your pipeline, but how do you think about capital allocation going forward, just given sort of the strong position you've built in the company on your balance sheet now? And then that's it for me. Thank you.
spk05: Yeah, and I think that's a question we just had with our board last week around the future of the company, the five-year plan, priorities for investment. I think the way we look at the company is continue to run the diabetes business on a tight, in terms of budgets and returns for our money that we're spending there. We think the pipeline has a huge amount of opportunity, and we also will look for external innovation. We haven't really decided on which of those focuses will be priority for 2023, but we do believe Afrezza and Vigo are off to a great start. We do believe there's some milestones in that business unit that will give us some information that should we invest more in 2024, should we invest harder in pediatrics, Let's get the data, let's let the data drive some of the uptake of Afrez as we go forward into 2024. We also believe you'll start to see Vigo as a platform. I think that's something I don't want to talk about now, but as we get ready for next year, that's probably where some of that capital can go, which is how do you repurpose Vigo outside of diabetes? And we think it's a platform device that can be leveraged for other products. So that's an area that we're looking at. And then I think in the future, is there investments in automation? How do we bring down our cost structure across the company given the inflation, the impact on employees? And the growth we have, we've got to get more efficiencies out of the company. So is there ways to invest to bring more efficiencies in the future? For example, one of the decisions we'll make today is around lab automation and manufacturing automation of data and how to transfer us from a manual process to a digital process. So things like that bring efficiencies as we continue to scale the company as we go forward. Steve, I don't know if you have additional comments on that. That's good, Mike. Okay. That answers the question, Brent. Thank you.
spk03: Thank you to you both, and congratulations on all the progress
spk07: Thank you. And our next question comes from Gregory Renza with RBC Capital Markets. Your line is now open.
spk06: Great. Good morning, Mike and Steve. Congrats on the progress in the quarter, and thanks for taking my question. Mike, just to perhaps piggyback on the previous question when it comes to capacity, I'm just curious if you could maybe provide just some additional color or highlights just on that process through which you intend to meet the advancing demand. Any color on the runway through which you can lock down product currently, how that engagement works, and maybe to be direct, you've mentioned the collaboration with Uther is healthy and engaging and strong. I'm just curious, do those engagement points change? Are there ongoing touch points that provide that closeness for anticipating the demand and meeting the supply now that the product is launched and underway, say, versus the previous development process. Thank you very much.
spk05: Yeah, there's really two things when it comes to production. Number one is how much product can you spray dry and what does that yield? And the second one is how quickly can you fill that cartridge per minute? And currently there's two different rate limiting steps in that process. And as we continue to build efficiencies on the cartridges per minute, one of the production lines next year that will be coming in online, hopefully will be the fill finish part of the cartridges. And that will, then the rate limiting effect will be how much powder can we produce to fill those cartridges. The other part that's shifted a little bit is the dosing. So, you know, probably more naive patients than UTA expected. But on the flip side, higher dose patients also, they titrate up in ILD. So we kind of got both ends of those spectrums, and a 64-unit cartridge, for example, requires four times as much powder as a 16-unit. So those are some of the things that drive production volume and time and capacity that we continue to balance as we're in this initial launch phase. The good news is every week we can adjust that production volume. We can adjust that with the packager. There's no limitations in the short term that we can see as we continue to watch the launch phase every week. We talk to UT weekly. We feel good about where we are, great communication, collaboration, and continue to prioritize the most needed packaging, for example, to get this to patients to make sure there's no stock out. So far, everything is really tight and going very well. On the capacity side, we ordered equipment. The manufacturing and build-out is happening, as you saw, and we continue to see that the rate-limiting effect there is really the construction as opposed to equipment, which is what you hear from many other companies buying stuff these days. So we feel pretty good about getting the expansion done next year, getting it ready for 2024. And when we built the factory, we anticipated high end of demand from where we are, and we anticipated ILD and pH. So we have enough production capacity to supply the market from where we are today that we can see. I think that answers the questions there.
spk06: Absolutely. Thanks so much. A helpful caller, and congratulations again.
spk05: Thank you. Thank you. Thank you, Greg, for coming to visit us.
spk07: Thank you. And our next question comes from Steven Lichtman with Oppenheimer. Your line is now open.
spk04: Hi, this is Ron for Steve Lichtman. I just wanted to ask if you guys can give a bit more of an update on the BlueHair launch. Are you seeing any easing on the chip shortages that you spoke about in the past? You gave a new timing for TQ23. And if you can please remind us about the opportunity you see for Blue Hill. Thanks. And congrats.
spk05: Thank you, Ron. I want to make sure I heard your question properly. Sorry. I think you asked for any shortages on Tyveso launch and update on Blue Hill.
spk04: Sorry. An update on Blue Hill. And you talked in the past that some of the issues with the launch were because of chip shortages. And are you seeing any easing with that? Because we heard from other companies that shortages have been easing up a little bit. So I wondered if that affects you as well. And if you can remind us about the opportunity you see for BlueHell.
spk05: Sure. Yeah, so on the chip, yeah, so BlueHell was, in terms of large-scale production, was limited by chips in the short term. The main chip that we were using became obsolete. And so we had to reprogram the motherboard and redo all the Bluetooth technology around that. We're on our next iteration that's almost done or should be wrapping up shortly. So we have enough units we'll be able to make for Q1 launch. By the time we get before Q2 launch, we believe that shift shortage and part shortage should be behind us, at least in the short term. That should not be our rate limiting factor. Much more worried about the reliability and consistency of the device, the patient feedback, and the patient experience. So we feel like that's the most critical part of BlueHail. The prototype looks great. The app looks great. The team did an amazing job. And I think it's going to be really nice for patients. We're just working through the last-minute device finalization and technical aspects there. But otherwise, it looks like it should be ready to go in 2022. Thanks.
spk04: Just a follow-up. Can you please remind us about the opportunity you guys see for Blue Hill?
spk05: Opportunity? I think the real opportunity is as we continue to go deeper in Type 1s. We know technology and dosing and feedback loops are important. And so that's really where we're really repositioning Afrezza. We tried for a long time to help Type IIs. The Type II market got really crowded, especially with the Modgera launch. We just feel the best place for Afrezza to win is really in that Type I market. Yes, we'll be up against insulin pumps and Omnipod, but when you think about Omnipod's success with the Pay-as-you-go model, Afrezza fits right into that mindset. And I think with the data sets that we're seeing, you know, people do want faster insulin. They do want faster control. They see it on their CGM. We think it's really well positioned. And with the PEAT study readout, we think that's going to reinforce a new data set in type 1s. And we also know from the market research that the more doctors get used to type 1, they will, by default, use it in type 2. And now with Vigo, we think that's a natural segue for them. They've already used insulin. They really like the device. And being able to have a nice, simple device for type 2s is a nice growth opportunity. So we feel... really good about the co-positioning of those assets and really providing a solution for customers which is not something we always had can you hear us thank you guys thank you so much and uh congrats again on that progress thank you thank you and our next question comes from robert hazel with btig your line is now
spk02: Thanks. Thank you for taking the question, and congrats on all the progress. It's terrific to see. So one or two for me. First, on gross margins for Vigo, I think 40% to 45% was where you said that came in, and that was in line with expectations. Is there an opportunity for expansion of gross margin with that product? Love to hear what the potential is there.
spk05: Yeah, I think there is. I just met with Jeffrey, the head of manufacturing, yesterday. You know, it's going to require some automation investment, but that's when I think the earlier gentleman asked me on capital allocation. These are the types of things we can now do when we have a two- to five-year view on capital allocation. You know, short-term, it was always hard to make any investments in the company because we were just focused on survival. When you think now, you know, we are focused on gross margin. We are focused on profitability. We are focused on advancing a pipeline. So we've got to make these plans now as they come to fruition. I think when you look back in the last five years, where we made the risk-based decision to bring plant-based DPI forward, we made the decision to, you know, continue to invest in pediatrics and Afrezza. Those decisions are paying off, you know, now. And I think the same thing is true over the next three to four years, is how do we, you know, Vigo will be here. We expect to invest in that product. And you're right, the gross margin can be improved through automation and manufacturing. We're also going to look at gross to net as we go into 2023 and understand You know, are we getting the value from the payers that we expect in terms of formulary access and restrictions, or are they making it easy for patients to get access? I think these are all really important attributes to continue to help those two products get more profitable.
spk02: That's terrific. And then just one on the pipeline with regard to clofazamine. If you could just touch on what the goals are for that program. Is it to reduce the AEs, maybe the skin AEs you see with the product in different routes of administration? And what are next steps? And are we going to see any data anytime in the near future in terms of publications of the results you have? Thanks.
spk05: Yeah. Well, first, I just reviewed a publication last night that's getting accepted to one of the journals. That's exciting. It's our first animal data, and the reviewer comments were really positive around the unmet need that clofazamine nebulization is going to bring to patients. And so I thought that was really positive. The phase one data is just wrapping up and coming in with a complete study report. We'll publish that data as well, showing the dose range effects and what we see in terms of dosing. And then I think the FDA feedback will be critical here in Q4. We have a meeting set up for late December. That should give us the green light to go forward in the Phase 2-3 design that we've laid out. That doesn't mean the FDA is going to agree with it. It doesn't mean all the endpoints are going to be aligned. But we hope to be able to find some commonality with the FDA because there's a big difference with clofazamine or any of the NTM assets between how Japan thinks regulatory-wise from a student conversion and the FDA on field form and function. And so we think clofazamine can improve both. But as you know, this disease is very hard to treat, and it takes a while to get those types of results. It doesn't happen in two to three weeks. And so that we feel good. In terms of what we want to improve on clofazamine, I think clofazamine is an incredible drug that's underappreciated. And the number one thing, as you think about it, is the accumulation of toxicities. Because of the long half-life, we really will be reducing that through our dosing regimen and our dosing to the lung. I think the skin discoloration, you nailed it. That's a big one for patients. But we don't foresee that issue so far in our dosing. We haven't seen any complaints. We don't expect that to be an issue. And then really just getting deep into the lungs and getting a very high concentration above MIC. We feel like that's going to give patients the effectiveness that they want without the systemic side effects. And lastly, the QT prolongation. That's a known side effect of clophasamine. We have not seen that on our highest dosing patients yet after seven days. And we feel really good about that safety profile given our dose. So I think clopidogine overall should be a better, safer product for patients that really treat that lung infection at the site. It's very hard to penetrate from the oral route administration. So we'll see. That's a big on that need, and we think this drug will help a lot of these patients.
spk02: Terrific. Look forward to more progress there. Thanks. Thank you, Rick.
spk07: Thank you. And our next question comes from Thomas Smith with SBB Securities. Your line is now open.
spk00: Hi, everyone. This is Mike on for Tom. Thanks for taking our questions and congrats on a really strong quarter. On Tavasa DPI, can you provide any color on the preliminary commercial and manufacturing trends that you're seeing? And if you'd expect some seasonality in the first quarter of 2023, are there other dynamics that you kind of flag for investors trying to get a sense of the potential ramp here?
spk05: Yeah, I think one thing I'll say, Mike, is these smart investors I've talked with a little bit, people are watching Symphony data, and I think that's okay to get some direction. But I don't think, you know, UT has a very closed distribution network, so not all those scripts probably show up in the framework out there. So we can only say so much, right? This is UT's launch. This is their product, their revenue. We are just the manufacturer and trying to make sure we keep up with their demand and their successful launch. And so we don't anticipate any problems there. We're doing a decent job. The team really looks at the inventory, the demand, the product shipments every week, a lot of constant communication. So I think we're on top of it. Things can always happen beyond our control that we can't see. But as of now, I think every week we get the orders, we look at the demand, we can adjust our supply chain pretty quickly. And it takes about 30 days to get through a batch in terms of We make it, and by the time it's released and packaged, it's about that time. So we can adjust pretty quickly on that demand forecast. I think what you heard from UT, which I thought was very encouraging, is of the patient referrals coming in, 50% were for nebulizer, 50% were for DPI. And I thought that was a really good statistic because we know that this is going to continue to grow. It's going to be a billion-dollar-plus product. And how much of that becomes DPI is the billion-dollar question. And obviously, we feel pretty good about that. And if you heard the patient's stories and freedom that they're getting, I think it's going to be a no-brainer that more and more people want this. I think the other question I get around this topic is, you know, where do you see the market? And I think the good news is the Medicare Part D, I know that's one of the reasons UT feels there's some limitation on conversion, but that hole closes in 2025. And so those patient out-of-pocket costs will be capped about $125 a month, roughly, and And, you know, that will create the next leg up. So anyone that doesn't convert that's on Medicare, for example, you know, will have that opportunity in the next 24 months to get there. So, you know, this is a tough disease. People are going to die, and they don't want to die. And so they really want to extend their life, enhance their life for the remaining years they have. And Tybasis DPI is doing an amazing job changing those lives. I mean, I just wish our shareholders and our investors, you know, and our analysts could hear the stories of the patients and the doctors have been extremely motivating and positive, and our team is so encouraged by the feedback that's happening. It just gives us that much more motivation for our pipeline, because we really are changing lives and extending lives. So it's just super exciting times here.
spk00: Got it. Yeah, I really appreciate the helpful commentary there. And then just a separate one from me. You know, with respect to Afreza, you really did a nice job kind of laying out the important kind of milestones that you have coming up there. Is there a certain one in particular, either clinical or regulatory, that you think could be important for seeing that next leg of growth for product sales?
spk05: I think next year is really an execution year. You know, every year we try to do something different to try to spike growth on Afreza, and we just seem to trot along. And then COVID hits for a couple of years, and, you know, I don't think it's fair to investors to keep guessing where Afreza is going to go. And so what we really have done for the business is, you know, purchasing Vigo, integrating those two next year, and really just focus on execution and alignment. If we have an asset in a franchise that's going to do $80 to $100 million and grow 10%, 20% a year for the foreseeable future, that's a good business for mankind. And so we will continue to hope that the data we have demonstrate upside opportunities, but I think being real about where we are for this much time of getting this to be a profitable division for the company, helping as many patients as we can, and really placing some strategic bets, and pediatrics is one of them. You know, we believe kids is where you're going to change type 1 care. We think being able to show you're as good as an AID system will be important. Those are the attributes that we're focused on. Those aren't going to happen in the next six months, but those are really the key milestones we're looking at, saying, how does the Fresno doing kids, is that really going to be the game-changing opportunity to transform growth in 2024? And the data readout in India will be important, but a little less so important, meaning, I think important for India, but we're really focused on type 1s. And so the India studies for type 2s, that'll be nice to have an additional data set to support what we think is a great drug for type 2s. But recognizing, you know, there's 1.5 million people live with type 1 diabetes. They're half the insulin market. We've got to, you know, the kids' opportunity first to get that really foundation built, work with JDRF a lot more in the patient walks, and raising our awareness out there in the society. There's still too many patients not aware of It's like one, especially that inhaled insulin is not an option. And so we think we just, you know, when we look at next year, it's really about making sure FREZA is a choice amongst the doctors that we're targeting. And I just think we're not in the choice set. We're like number eight out of the eight things they could do. And we've got to move up that ladder a little bit. And year by year, we'll get better from here on out. But we have a map. We have a plan. And we've got the team to do it. And I feel very good about 2023 with the team we have.
spk00: Great. Thanks very much again for the color, and congrats on the strong quarter. Thank you.
spk07: Thank you. I would now like to turn the conference back over to Michael Castagna, CEO, for closing remarks.
spk05: Thank you, Daniel. Overall, monumental quarter for the company. Super excited about where we are with Tyveso. The company is in the best shape it's ever been. We got the best talent we could possibly have. We feel really, really good about our future. We continue to make change and pivot us for the next five years. Afrezza and Vigo will be great in 2023 in terms of pivoting to an endocrine focus, making sure that business is a cash flow positive unit by the end of the year. I think on the pipeline, you're going to see really nice progress over the next 12 months of moving assets from preclinical formulation stage into phase one, phase two, phase three. And we think that's going to be a monumental opportunity for investors to start to really understand that value. Just like Tyveso for years, we had signed a deal with UT in 2018. No one really appreciated it until probably 2021. And I think when you look at the pipeline, we started this progress in 2019. I don't think we have a lot of value or attributes on the pipeline. I think you're going to start to see that come out over the next couple of quarters. And we think that's a nice upside for investors from where we are and ultimately position the future of the company. And anti-vaso is just going to continue to rock the world. It's just a great product. It's helping a lot of patients. UT is doing an amazing job. And we will do everything we can to make sure we stay ahead of the demand curve and build that inventory to make sure we can supply to patients. And so overall, great year. Company's well-positioned for 2023 to be a great year. It's a tough economy, tough biotech investors. But we feel mankind's well-positioned for investors, that double-digit growth for the foreseeable future. And we're very excited about where we are. Thank you.
spk07: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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