MannKind Corporation

Good afternoon and welcome to the Mankind Corporation 2024 First Quarter Financial Results Earnings Call. As a reminder, this call is being recorded on May 8, 2024 and will be available for playback on the Mankind Corporation website shortly after the conclusion of this call until May 22, 2024. This call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty, which can cause actual risks to differ materially from these stated expectations. For further information on the company's risk factors, please see their 10Q report filled with the Securities and Exchange Commission this afternoon. The earnings released in the slides prepared for this presentation. Joining us today for Mankind are Chief Executive Officer Michael Castana, EVP and former Chief Financial Officer Steven Binder, and Chief Financial Officer Chris Prentice. I'd like to turn the conference over to Mr. Castana. Please go ahead, sir.

Good evening, everyone, and welcome to my 28th earnings call. I'm thrilled to report another exceptional quarter of growth for mankind. Over the past eight quarters, our revenue has surged by over 250%, a testament to the dedication and innovation of our team. This puts us on a run rate of over $250 million in revenue for 2024. We have made tremendous progress in the field of inhaled insulin that we believe will continue to be a growth driver for years to come. I'm also excited to share with you our progress in addressing rare orphan lung diseases today. Thank you for joining us in this journey of growth and societal impact around the world. Just to remind everyone, our mission at Mankind is to get people to control their health and the freedom to live life. When we think about that, it translates into how our products make a meaningful impact on patients every single day. As I look at Q1, we had record Tabeza DPI revenue of almost $48 million due to strong sales by United Therapeutics and record production Q1 as we continue to scale up the expansion facility we've been building over the last several years. Number two, Mankind 101 made several strategic advancements with the IND being cleared, fast track designation, as well as a setup to meet with the Japanese authorities. to get a clearance on how we expect to pursue Japanese registration approval down the road, but also activate clinical trial sites in the second half. 201 also received the green light to proceed to phase one. We expect that to start momentarily. In our diabetes business, things are going nicely, given the upset that we all had with changed healthcare. As we look at April, we're growing 7% on volume year over year, And we believe the challenges that happened in Q1 will be behind us as we look at Q2 going forward. And I'll provide more comments as we get into the discussion today. And on the financials, Steve will go into great detail, but I want to say thank you for all the work that the team has done as we end the Q1 with $304 million in cash, which was $2 million above the previous quarter, and gap that income of $11 million and continue to reduce leverage as we came into Q2. On Mankind 101, we are moving into a promising area. As we think about our nebulizer version, we are next on deck for this product to be developed and be a key part of NTM treatment worldwide. When we look at the NTM prevalence, this is continuing to grow and the unmet need exists around the world. And we believe this will be over a billion dollar opportunity with two players over the coming years. Patients are suffering greatly, and we're gearing up to hopefully bring them a new solution. As you can see in this chart, the unmet need really focuses on the U.S. and Japan, which is where 80% of our clinical trial sites roughly will be. As I share with you here, our ICON1 phase three study design, we'll be having our investigator launch meeting here next month to really talk about the study design and the expectations for this trial And the interest is growing as we already have about 80% of the sites identified who are currently gearing up through the contracting process with our hopes to enroll our first patient by the end of Q2. We've aligned with the FDA on our co-primary endpoints. Our phase three is progressing. And I want to remind everybody that we have 12 years of exclusivity between orphan and QIDP designations. As we look forward to the next up in our pipeline is IPF, or call it fibrotic diseases, because we could also be looking at PPF and other pulmonary-related conditions for 201. When you look at this, it's continued to become an unmet need with only two products approved and littered with failure. This is a very, very difficult disease to treat and harmonize the types of patients you're studying. But when you do look, OFEV has done over $3 billion in 2022 and $3.8 billion, I believe, in 2023. So this is an exciting opportunity. And the reason we're excited is when you look at this slide, we believe strongly this product can compete in an evolving landscape. And we're excited that by moving this into an inhaled version, we could potentially reduce the side effects that we see with oral Ofev and maybe dose higher into the lungs than we can currently get with the products available. We believe our raphalomycin study is the first indicator that the doses we're identifying can meet the needs of these patients. We have not published this data yet, but we do have internal data, and we'll continue to look at other ways to triangulate the best chances for success with an inhaled version. 28-day tox has now been completed, and chronic tox will be done at the same time we're roughly getting the phase one data. We're looking forward to moving this forward into humans here in the next month. Now I'm going to focus on the endocrine business unit. Our endocrine business grew 7% year-on-year on the strength of Afrezza. As we look down, you can see the growth of Afrezza was offset by the decline in Vigo. When you look at Vigo, we reduced our Salesforce support dedicated to Vigo in July of last year, and in January this year, we transformed our Salesforce footprint and added more resources towards Afrezza. This has directly impacted Vigo as we doubled down our efforts to get ready to grow Afrezza faster. Some of the key things that we did this year that we should start to see the fruits of that labor here in Q2 on the field restructuring is we added field reimbursement teams, additional training support, and key account managers, and now we'll be gearing up to support medical as we get ready for the release of Inhale 3 followed by Inhale 1. We believe Q2 is already starting to show the benefits of this focus as we're up 7% in the month of April year over year, and we'll continue to watch this trend closely as we close out Q2. We're really excited about the new data on the FREZA and how this could impact our growth trajectory. In healthy to remind you is our type one study where we went head to head against the standards of care, whether that be MDI or AID pumps. We are utilizing a new conversion dose up front, which we just presented this data at ATTD. And we'll also have another test at baseline, followed by baseline, followed by week 17, which has not been presented yet. But our goal here is equal efficacy to the standard of care, which includes the AID. And the reason that's important is doctors perceive this to be the best thing for their patients. And we think it's going to be critical to really understand that data as we get ready for the kids' launch. We do want to update conversion figure one, and we'll make a decision whether we do this separately or together with the pH data based on the FDA feedback we get later this year. I'll also remind you that there'll be a second data readout later this year for 30-week data which will provide some interesting insights as we look at patients who got to week 17 and continued for an additional 13 weeks, as well as the remaining cohort of patients who didn't switch, who switched for the first time. Because now doctors will have more data and more experience around titration and dosing, and hopefully we continue to see that progress as people switch the second round versus the first round. INHALE-1 is a pediatric study focused here in the US, and that one is almost 40 centers And we expect to secure pediatric approval in 2025 and beyond. And that will depend if we file on six months or 12 months of data. Let me remind you of the growth opportunity for Afrezza that we look at over the coming decade. First, we know type 2 will continue to be dominated by GLPs. So we are now double down our efforts on type 1 diabetes with inhale 3, which we started last year. With that data coming out, we believe that will set us up for continued success in type 1 diabetes to go head to head against the competition. As we look into the future, children with inhale 1, that will be a critical milestone and pivot point. As I've always said, most diabetes innovations have started with children, whether that be CGM or the original insulin pumps that Al Mann developed. And finally, gestational diabetes is getting a lot of attention these days for lots of good reasons. And we believe that the support around AFRESA will continue to grow as interest and guidelines get updated and as more data gets generated. These will be long-term strategic initiatives for AFRESA, some of which we will control and some of which outside of our control. With that said, I'm now going to turn it over to Steve Binder to walk us through the financials.

Thanks, Mike, and good afternoon. I am pleased to review select first quarter 2024 financial results. Please supplement this call by reading the condensed consolidated financial statements and MV&A contained in our 10-Q, which is filed with the SEC this afternoon. The first quarter extended our streak of exceptional quarterly revenue growth, with total revenues growing 63% versus the first quarter of 2023. This was our eighth consecutive period of quarter-on-quarter revenue growth. Let's start at the top of the table with Tyveso DPI Royalties, which generated $23 million in first quarter revenue, a growth of 94% over 1Q 2023. If you listened to UT's earnings call last week, strong patient demand for this innovative product is driving growth in our royalty, which is based on UT's Tyveso DPI net revenues. Collaboration services revenue of $25 million increased 118% versus first quarter 2023, which mainly resulted from a higher level of production activity, a higher volume of semi-finished Tyveso DPI units sold to UT with a higher average selling price per unit, and a new source of revenue, kitting certain SKUs of Tyveso DPI instead of using a third party or sending to UT for kitting. A present net revenue of $14 million includes 16% versus first quarter 2023, which was primarily driven by a lower growth-to-net percentage of 31% versus 38% in the prior year and a price increase. The lower growth-to-net percentage was mainly the result of a change in estimate for AFESA product returns. Including our first quarter AFESA results is an unfavorable impact to net revenues due to the interruption of our copay card services when Change Healthcare had a cyber intrusion in February, which completely interrupted copay support as well as severely impacted the ability of pharmacies to fulfill prescriptions. Our copay program was down for approximately two weeks. Vigo dropped 16% to $4 million in the first quarter of 2024, which is mainly driven by lower demand, resulting from transitioning our focus on volume growth to a focus on profitability for Vigo. The next slide shows our revenue growth by source and basic earnings per share on a quarter-by-quarter basis over a rolling eight-quarter period in the second quarter of 2022 to the first quarter of 2024. For the first quarter of 2024, the far right-hand bar, total revenues of $66 million increased 13% sequentially versus the fourth quarter of 2023 and are up 251% versus the second quarter of 2022. which is the first quarter of TIDASO DPI commercial sales by UT. Our exceptional revenue growth is dropping to the bottom line, as you can see below the graph, where we show our quarterly basic earnings and loss per share. The first quarter of 2024 was the third straight quarter with net income and positive earnings per share. $11 million of net income and 4 cents a share, which was a significant increase over the third and fourth quarters of 2023. Moving on to our GAAP to non-GAAP reconciliation, we had GAAP net income of $11 million, which when adjusted for select non-cash items for the sole portion of royalty revenue, interest expense on liability for sale of future royalties, stock compensation, and gain or loss on foreign currency transactions, which is related to our insulin purchase commitment, produced a non-GAAP net income of $15 million versus a 2023 first quarter non-GAAP net loss of $5 million. This is a $20 million quarterly year-on-year improvement. On the fourth quarter earnings call, I laid out our plans for deploying the $300 million in cash and investments on our balance sheet at the end of 2023 against our highest priorities. This slide is an update of what we discussed at year end. The priorities have not changed since that call. but we have begun to execute the plan, as you can see from the comments highlighted in green. Now that we have fast-track designation and FDA clearance to move forward with the Phase III clinical trial for MNKD101, and FDA clearance to move forward with the Phase I clinical trial for MNKD201, we will invest behind these trials to see them executed as quickly and efficiently as possible. As we look for opportunities to grow Afrezza faster from our new commercial model and upcoming data readouts. We intend to wait to see the results from Inhale 3 and Inhale 1 before making a decision on whether to increase investment behind the present. Moving on to changes in our debt structure that were executed in early April. First, we paid off the mid-cap senior secured debt, which freed us of the encumbrances on our assets and discharged the associated debt covenants, while eliminating our higher cost debt, which had an interest rate of 8.25%. We then extinguished the convertible debt without man's trust by converting part of the debt into 1.5 million shares at the contractual conversion rate and paid cash for the remaining outstanding debt. By paying cash, we reduced expected dilution by over 2 million shares that were backing the convertible debt. We also believe that the per share price paid in cash of $4.31 was a bargain for the company, as we see a price on our stock in this range is severely undervalued. We continue to evaluate the senior convertible debt as we get closer to the March 2026 maturity and intend to do what is in the best interest of shareholders. To summarize, we grew total revenues 63% year over year, another exceptional quarter for revenue growth, and we achieved our eighth consecutive quarter of revenue growth, which has us on a run rate of over $250 million in annual revenues. We recorded $11 million in net income, our third consecutive quarter of net income. Our growing revenue is being used to fund our capital allocation priorities and has favorably impacted our ability to grow net income and earnings per share. We ended the quarter with $2 million more in cash and investments on our balance sheet than when we started the quarter, without needing to sell stock, raise debt, or enter into a BD deal, a first in my seven-year tenure at Mankind. As this is my last earnings call, I would like to thank Mike, the extended Mankind team, the Mankind board, and those shareholders who supported us through the dark days when our continued existence was in question. As this support allowed the executive team to execute our strategy and build Mankind into a company that has a bright future and one that we can all be proud of. Thank you, and now I'll turn it back over to Mike.