MannKind Corporation

Good afternoon and welcome to Mankind Corporation 2023 Second Quarter Financial Results Earnings Call. As a reminder, this call is being recorded on August 7, 2023 and will be available for playback on Mankind Corporation website shortly after the conclusion of this call until August 21, 2023. 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 their 10Q report filed with the Security and Exchange Commission this afternoon, the earnings release, and the slides prepared for this presentation. Joining us today from Mankind are Chief Executive Officer Michael Castagna and Chief Financial Officer Steve Binder. I will now turn the call over to Mr. Castagna. Please go ahead, sir.

Thank you and thank everyone. Happy afternoon. It was a year ago in Q2 when we were notified that United Therapeutics got FDA approval for Tybaso DPI. At that time, we said that would put us on the path of profitability. And as we kick off a year later, we are proud to say that we've achieved our first operating income, making us a long-term sustainable company, which helps us live our mission to ultimately give people control of their health and the freedom to live life. Today, we probably have between 15,000 to 20,000 people taking one of our diabetes products. There are thousands of people benefiting from Tabasco DPI. We're really proud of all the hard work and really excited to share this quarter's earnings with you. Let me first start off by a couple highlights here in Q2. Orphan Lung Disease business is off and running. United Therapeutics is doing an amazing job, strong patient demand. We received royalty revenue of $19 million or 63% growth just over the first quarter. We also took a step to improve manufacturing capacity through efficiencies and yield. increasing that by about 250%. Additionally, our orphan lung pipeline is starting to come into the purview. We expect to have two INDs filed and going into phase one and phase three in the next 12 months. In HAL 101, as we just notified you previously, there was a fire, unfortunately. We are now moving GMP manufacturing to Danbury, Connecticut. And fortunately, we have facilities there where we can move the equipment into. Our chronic tox study is now complete, and we'll have a full study readout on that here in Q3. On Mankind 201, we did receive FDA feedback on our health attendant program. For those of you following the IPS market, that is the generic for OFAB, which is marketed by a company named Bravo Engelheim. We are planning to progress that to IMD filing shortly and kick off a phase one study next year. We're super excited to get that in the humans. On the endocrine area, we have now a President Vigo, both synergizing our success. Starting in July, we have now moved everything to one sales force, one management team, one focus to help people with mealtime control and type one and type two diabetes. As you look at Q2, friends with TRX grew 16% versus last year, mainly driven by the Medicare access that was created under law in January of 2023. And I'll share more with you that shortly. Additionally, inhale one is continuing to roll nicely. We had our best enrollment in the month of June ever. And inhale three just kicked off and that's already enrolled patients. And that's the first study we're doing to show you where, how, and the conversion factor for pump switching. We have no data on that in our package insert, and it's a question we get, which is, can you switch from a present to a non-pump? And that is the study that will drive that, which is built upon the pilot study we did last year. And now it's been over a year that we've closed the Vigo deal, and that is achieving our first year forecasted net revenue. We gave a guidance of 18 to 22 million, And we are coming in exactly on the high end of that forecast from a year ago. Overall, what does this mean for shareholders? Our operating GAAP income was $2 million driven by the strong growth in DPI year over year. And our non-GAAP operating income is $8 million when adjusted for certain non-cash items that will be described later. I've said DPI saw strong demand and we were able to supply that demand with our increased manufacturing. There was an IP update from United Therapeutics in their recent quarterly earnings where we heard the patent for ILD should be issued and give allowance through 2042. We have revenue expectations and continue strong patient demand. I wanted to give clarity for our shareholders that for every 10,000 paying patients, we expect annual revenue to mankind between $250 million to $300 million. Additionally, we are on track to complete our high volume capacity expansion between now and the end of next year. We have bulk spray drying scales happening with two new spray dryers being installed as we speak. And we have a fill finish line coming in here in August that hopefully will be online between now and early next year. As we look at the Tyveso quarterly revenue from Q2 of last year all the way through Q2 of this year, you can see growth consistently quarter over quarter. and this has continued to put us on the path of profitability. We're very proud of the launch. We think it's doing amazing. We hear great patient stories, and we see nothing really slowing us down as we keep going. And I just want to say thank you to our partner, United Therapeutics, for helping so many patients on our technology. Now I want to bridge over to our diabetes business. This is one of the things that we control every week and every year. We're trying to do a better job this year in improving patient access and keeping patients on therapy, on Afrezza, as we also turn around Vigo into a growth driver for the company. As we think about Afrezza, a couple highlights. For those of you who don't know, Medicare passed a law that all insulin will be $35 starting in January of this year. And you can see Afrezza was under-penetrated in this market because it was always on a non-preferred formulary, which forced patients to have a huge cost differential. We could not do anything to close that gap. When it was covered by $35, you can see we quickly got back to what you see as a standard of care rapid-acting insulin, about 28% of all prescriptions are for Medicare Part D recipients. And Afrezza now in Q2 has now gotten that back up to where the market is for rapid-acting. Really proud of the teamwork here, and hopefully continue to grow and help more people living with diabetes in the Part D space. Additionally, in order to make our access message simple, we adjusted our commercial copay to be $35 to be consistent with Medicare. And you can see our TRX and our NRX growth on the next slide here has grown consistently, and we really have had an inflection if you look from last year to this year, Q1 and Q2. Hopefully we continue this as we go into the second half, and we continue to see really good momentum, you know, year over year, quarter over quarter, and we'll kind of keep watching this on a weekly basis. I wanted to share also, I think it's important, I get a lot of questions, why can't we grow at Fresno faster? I think we had a lot of things to fix over a long period of time. Most of that is behind us, and a lot of the fruition of that work will come out next year. In the meantime, we continue to push forward while we don't have any new data to share, and you can see how patients feel about our product. When you look at the right side of this picture, innovative, adventurous, smart, complex, exciting, bold, we are pushing the envelope in mealtime control. This is a completely different drug. It takes a completely different approach on how you manage your sugars day to day. And when you look at patient satisfaction, we rank the highest of all mealtime insulin sprayed out there by patients. This is an independent analysis by DQ&A, and it's something we'll continue to watch as we go forward. Now I want to bridge over to Vigo. We achieved the high end of our forecast, as I just mentioned. What's nice to see here is when you look at our TRX trajectory, we started telling you last quarter it was flattening out on NRXs and TRXs that should follow. I'm really proud to show you now in Q1 going into Q2, we have slowed the decline, and now we're back on a growth trajectory, which we expect to continue for the foreseeable future. So we have 4% growth in TRXs in Q2 over Q1, and this should continue that we feel like we've hit bottom, that the white space has continued to decline while the rep targeting efforts on call-on doctors continues to go up. So we feel like we've hit that inflection and hopefully continue to see Vigo do well and help more patients as we go forward. This is another slide just showing you NRX and TRX year-over-year. Obviously, NRX is our leading indicator of what's going to happen in the future, and you can see from Q2 of last year, negative 8% on NRXs up to a plus 4% of the 12% difference year-over-year, and that's contributing to that positive TRX growth that we're seeing. On the scientific front, our medical team is working really hard to start to articulate the benefits of this product with the new dosing arrangements that we've been studying. As we look here, we want to expand the eligible population for AFREZ as we go forward. In particular, when you think about diabetes and the transformation of the insulin pump market or the CGM market, it always started with kids. Doctors and parents are very progressive. This is a life-threatening disease. Hypoglycemia is a life-threatening condition. And we believe we'll be able to demonstrate in this trial, hopefully, positive benefits when it comes to the safety of hypoglycemia as well as the efficacy. This is a non-inferiority trial, but we do know from a lot of our analysis that hypoglycemia is lower with the presence. Now we'll have to see how the data pans out. This is more than halfway enrolled at this point, and we will have some insight here in Q4 of this year with a primary endpoint wrapping up mid-next year. CIPLA phase two, I got a lot of questions on when the data was coming out. We did receive the data. The data analysis is being finalized. We don't expect the data to become public until sometime in 2024, once CIPLA is done finalizing their plans here for India. On inhale three, we call this our type one, aka pump sparing study, because this is the first study we're doing head-to-head, showing you how to rotate off an insulin pump or how to rotate off injectable insulin to really just a freza, traciba, dexcom. And that's where the three comes from. We only think of these three things that manage your diabetes. It's really these three secret ingredients, hopefully give you really tight control and give you the ability to live your life. There'll be quality measures run in this trial, as well as improved dosing regimens from our previous trials. And this is a four-month primary endpoint with additional three months of follow-up. So everyone in this trial will switch to Afreza by the end of the seven months. Now I'm going to turn it over to Steve to talk about our financials. Thank you, Steve.

Thanks, Mike, and good afternoon. Please review select second quarter 2023 financial results. Please supplement this call by reading the condensed consolidated financial statements in MD&A contained under 10Q, which was filed with the SEC this afternoon. Our total revenues grew 157% versus second quarter 2022, and 189% with Tyvesa DPI, and to a lesser extent, our endocrine business, which included the results of the Vigo product acquisition from May 31, 2022. Revenues from our collaboration with United Therapeutics totaled $30 million in the second quarter of 2023, which is made up of royalties of $19 million and collaboration and services revenue of $11 million. Royalties earned on the net sales of Tyvesa DPI of $19 million with the result of strong patient demand for innovative product and our low double-digit royalty rate. We recorded $11 million of collaboration and services revenue in the second quarter, which was almost double the prior year. This amount is primarily related to revenue associated with manufacturing Total revenues from our collaboration with UT were $53 million for the first half of 2023, again representing strong patient demand for Tyvesa DPI as compared to $8 million for the first six months of 2022. The 2022 six-month period includes the start of commercial manufacturing of Tyvesa DPI by Mankind midway through the second quarter and the commercial launch of the Moving down the table to our endocrine business, total endocrine revenues were $18 million, which is made up of a Fresa net revenue of $14 million and Vigo net revenue of $5 million. Fresa net revenue of $14 million compares to $11 million in 2022, a growth rate of 27%, which is very consistent with our first quarter growth rate. The growth was mainly driven by higher patient demand with underlying increased channel inventory to support higher demand and price. For the June year-to-date period, total endocrine revenues were $36 million. That revenue from Vigo was $5 million for the second quarter of 2023. We purchased Vigo on May 31st of 2022, so the increase over 2022 is mainly from a one-month versus three-month comparative. For the 12-month period post-acquisition, Vigo had net revenue of $22 million, which was at the top end of our forecasted range. The next slide shows our revenue growth by source on a quarter-by-quarter basis from the first quarter of 2022 to the second quarter of 2023. We like to show this graph because it really highlights how dramatically our business has changed in the last two years. We started 2022 recognizing revenues primarily from Afrezza, and now we have two revenue streams from Tyveso DPI plus two endocrine products delivering commercial revenue. In the second quarter of 2023, we grew total revenue by 20% from the first quarter fueled by the growth of Tyveso DPI royalties. Below the graph, I plotted the loss per share for each quarter, and you can see the impact from the increasing revenues, in particular from Tyveso DPI royalties, which don't have any associated expenses. We recorded a loss per share of only two cents in the second quarter, representing an 82% decrease from the second quarter of 2022. The second quarter of 2023, we had our first quarter of GAAP income from operations since I joined the company six years ago in the amount of $2 million. There's been a long time coming, but the growth in revenues associated with UT Collaboration has had a significant impact on turning this positive. Starting with this quarter, we will communicate a gap to non-gap reconciliation so that investors can clearly see the impact of certain non-cash items on our P&L. Looking at the table, we had positive gap income from operations of $2 million in the second quarter of 23, as compared to a gap loss from operations of $21 million in the prior year. When adjusting for the non-cash items, we had positive non-GAAP income from operations of $8 million for the second quarter of 2023. When looking at EPS, we recorded a GAAP net loss of $0.02 per share, which when adjusted for non-cash items of stock compensation, loss on foreign currency, and a gain on available-for-sale securities, we had non-GAAP EPS of zero for each share. The primary difference between our income from operations and net income included in EPS interest income and interest expense. We plan to continue to show a reconciliation like this each quarter to enable more transparency into the impact of our operations on cash. We continue to tentatively manage our cash outflows while benefiting from the increasing revenues associated with Tyvesa DPI and our endocrine business as we move the company towards profitability and being cash flow positive. We continue to believe that our current level of cash cash equivalents and investments, plus anticipated operating cash inflows and outflows, will allow us to adequately invest in and grow our business without a need for any follow-on stock offers. Thank you, and now we'll turn it back over to Mike.