MannKind Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2024

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to MannKind Corporation 2023 4th Quarter and Full Year Financial Results Earnings Call. As a reminder, this call is being recorded on February 27, 2024, and will be available for playback on the MannKind Corporation website shortly after the conclusion of the call until March 12, 2024. This call will contain forward looking statements. Such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those stated expectations. For further information on the company's risk factors, please see the 10 ks report filed with the Securities and Exchange Commission this afternoon, the earnings release and the slides prepared for this presentation.

Operator

Joining us today from MannKind are Chief Executive Officer, Michael Consania and Chief Financial Officer, Steve Binder. I will now turn the conference over to Mr. Consania. Please go ahead, sir.

Speaker 1

Thank you, Valerie. We have never seen a better time for mankind than we do today. As we look at our future, it's extremely exciting and I'm never more motivated to ensure we deliver on all key operational opportunities in front of us. As we think about today, Steve and I will go over the operational pipeline highlights, the financial review, and I'm also here today with Lauren Sabella, our Chief Operating Officer, for Q and A. We will drive shareholder value by making a difference in the lives of the patients we serve.

Speaker 1

We will make over 25,000,000 doses and devices in 2024 and helped roughly 25,000 patients take a MannKind produced product in 2023, the most in our history. In Q4, we had record revenue for Tyvaso on both royalty and collaboration manufacturing, along with record production on Tyvaso cartridges. We advanced our pipeline in both the orphan business as well as the endocrine business, and our endocrine business had its 2nd consecutive profitable quarter. We finished the year in the strongest position we've been in, in terms of financial ability as well as by selling the Tyvaso 1% of our Tyvaso royalty for $150,000,000 upfront and $50,000,000 in revenue milestones. Many of you asked could we have sold more, why didn't we sell more.

Speaker 1

And the reality is we didn't need to sell more. We wanted to make sure we were comfortable with carrying the level of debt and cash on the balance sheet to control our future. We're very excited about Tyvaso DPI and what it's going to bring to patients and anticipate hopefully positive milestones for Tyvaso in the future and therefore want to preserve 90% of that value for our shareholders. At the same time, we want to de risk on the debt side of our company. We've also restructured our insulin purchase commitment and reduced our near term cash outlays by $50,000,000 The EBU will be the foundation for our future launches and currently makes up about 37% of our revenue in 2023.

Speaker 1

As I presented at JPMorgan in January, our ability to grow double digits for the foreseeable future looks bright. When you see in 2023, our total revenue approached $200,000,000 almost 100% growth year over year. I'm going to spend a few minutes on Afrezza and the EBU because we are at a pivotal inflection point with our future. Innovation takes time and disruption is even harder. When you think about the weight loss craze today, GLPs were 20 years in the making to what you see today.

Speaker 1

The pods in Type 1 diabetes, 10 years in the making. And Penns took a huge time to convert from Vios back in the early 2000s. I believe we can make this business a core pillar of our growth story. When you look at the endocrine business, it grew 32% year over year or $70,000,000 $23 and greater than $20,000,000 in Q4, the 2nd quarter in a row of profit contribution as well as on a run rate of $80,000,000 We've made a lot of changes in 2023 and delivered despite those changes to set us up for a transformation once we see the new data from INHAL 1 and INHAL 3 this year. As I look at the revenue, Afrezza net revenue grew $12,000,000 or 27% year over year.

Speaker 1

This is our largest jump in 7 years and is the most we've seen driven by volume alone as opposed to price balanced by historical standards. Several clinical readouts in 2024 may expand our market potential and I'll talk about those in a minute. One of the questions I get is what is different this year than prior years? Our focus this year is incredibly different. We've been waiting for this moment where we have people, money and data.

Speaker 1

Many times we had 2 out of 3, but not all 3. So number 1, we got to maintain our persistence in Medicare and commercial to grow our base business and leverage the $35 insulin co pay that currently exists for Medicare and commercial insured. So coverage we know is the number one objection. Number 2, we optimized our sales force footprint here in January to build capabilities for the future growth. And what that means is we were able to reallocate some headcount to create key account managers, reimbursement specialists as well as virtual and in person training across the country.

Speaker 1

We also have new insights from market research, which I'll share with you shortly, that suggests by executing effectively, we can increase prescriber adoption. And finally, is around data and education. We want to focus on KOL development, education at conferences and publications to elevate the support and awareness, especially among academic centers. Here's some new market research as we go forward called the emotional engagement mindset model, which is done by a company we've leveraged for market research. This shows a significant shift in perception by the various groups we tested with our new data.

Speaker 1

And you can see a baseline just unaided awareness of Afrezza and what people's perceptions were in terms of unattractive, apathetic, attracted or passionate. And by exposing them to our core visual aid as well as some expectations of what inhaled through data could read out, you can see we shift almost 2 thirds of our key target audiences are attracted or passionate about our future. This is really important because it's the first time we can see this big of a shift from where we started to where we end up with the new data coming. People don't want slow acting insulin in a world that moves as fast as we do. When I look at the future here on our studies, INHAL3 and INHAL1, I'm going to talk a few minutes about these.

Speaker 1

We have 60 U. S. Sites in KOLs, sites like the Mayo Clinic, the Jazmin Clinic, some of the foundations of diabetes treatment in this country. Raul Hersh is our top tier thought leader here on inhale3 as a principal investigator, and he's done a great job ensuring this trial is dosing properly and enrolling quickly. We have over 300 patients in both of these trials and both of them are on track to read out this year.

Speaker 1

On the left side of the slide, Type 1 diabetes inhale 3 is the largest switch study away from AID pumps. There'll be about 120 some patients in this trial, half of them will be on MDI, half of them will be likely on AID pumps as we look at the data. The reason this data set is important is it's utilizing a new dosing conversion upfront to ensure proper efficacy is maintained or approved. We are also doing meal tolerance test at baseline in week 17, so we can see how people's dosing may have changed over this timeframe. And another thing to remember about this trial is the first time we're enrolling almost 25% of the patients are at level 7a1c when they enter.

Speaker 1

So we're also showing you hopefully that tight control can remain by switching to Tresiba plus Afrezza or degludec is the generic name. A lot of people ask me what is the goal of inhale-three. Our goal is equal efficacy to proceed to be a standard of care, including an AIV system. No mealtime insulin or AID system has ever beat another system head to head. We think this is an important metric that is successful.

Speaker 1

And if we see a clinical advantage on highs or lows, that's upside to our expectations. We also plan to use this data to hopefully update conversion figure 1 in our Afrezza label. We've been in discussions with the FDA since the start of the PEETS program around how do we update that initial dose conversion. We hope that inhale-three will be part of that data set. On the right side of the slide, you can see, sorry, on the bottom of the slide, the different data readouts.

Speaker 1

First dose will be ATTD in March, the 17 week data we expect to present at ADA in June, and the 30 week data will be complete in Q3 and will be presented at a future conference. On the right side of the slide is INHIL-one. This is a pediatric study and we think this is a watershed moment in order to transform the inflection of Afrezza will be through pediatrics. When we look at diabetes innovation today, whether it's CGM, insulin pumps, this started with children and worked their way into adults because the patients are more on social media, the parents are more progressive and the doctors are more progressive. This will be the largest study done on Afrezza in over 10 years.

Speaker 1

And so far, we don't have the data, but I can tell you the conversion dose has appeared to cause less dropouts relative to our original trials on Afrezza. There's also a meal tolerance test at baseline using CGM, and hopefully this study will be used to secure pediatric approval in 2025 and beyond. This is how we believe we will accelerate rapid growth of Afrezza and this will ultimately spill over into adults. The one hangover is still the lungs and we think it's time to move forward beyond this. When we look at the data today, we've been on the market 10 years, we've helped tens of thousands of patients, We are building up U.

Speaker 1

S. KOL support and we have this new data coming out. We would not be going to the children if we're worried about the safety of our product. So when I look at the future and the growth opportunity, we look at 4 segments of our future. Number 1, we're already approved for type 1 and type 2 adults.

Speaker 1

Inhale 3, we'll be using a new dosing with CGM and an upfront conversion. We're super excited about this data set as it will also include the head to head data I just mentioned. GLPs will continue to be the bolster of the units there in type 2 diabetes. However, those patients will still need real time insulin will continue to promote Afrezza and V Go in that segment as there are millions of people who require mealtime insulin over the coming years. However, in order to be a leader in type 1, we need the data from inhale 3 to set us up for inhale 1, which is the pediatric segment, because when we do finally get that data, we know insulin pumps will be the indirect competition of when it comes to a doctor, a patient or a CDE making an educational decision for a patient, they will want to know what Afrezza looks like against insulin pumps.

Speaker 1

So we started that study with INHAL3. We're excited to hopefully wrap up INHAL1 in a few months here. And once we see that data, we will have a 1, 2 punch this year as we wrap up 2024. And now as people are starting to see the first dose data, we're getting questions on gestational diabetes. We think there's an unmet need there that we want to fulfill over time because there's only 2 drugs that can be used today, metformin, which crosses the placenta and slow acting injectable insulin.

Speaker 1

For anyone that knows anyone suffered from gestational diabetes, keeping your time and range really tight is critically important. I'm going to bridge over to the pipeline very quickly. NTM non tuberculomycobacterium with our clofazamine suspension. So some of you may or may not be aware, but one of the competing products in Phase 3 had a pause last week enrollment. And people ask me why am I excited about our program and why am I confident?

Speaker 1

Well, the reason we are excited is 1, when we purchased the product, there was preclinical data showing an improvement in bacterial recovery in the lung model that they used. Number 2, there's real world data. The product is approved today indirectly through a market access program by the FDA and Novartis. So we see world world data being generated from patients taking clofazmin here in the U. S.

Speaker 1

As well as Japan. 3rd, there's KOL support for this, along with guidelines potentially. And finally, there's no near term competition for trials now for patients. So as we look forward, we have 100 sites we're going to target across the and we see no other option really for these patients to enroll besides the current drug that's on the market, ARIKAYCE. So here is the design of our Phase 3 study called the ICON-one study, which was designed post our FDA feedback along with the quality of life group there at the FDA.

Speaker 1

We've taken their feedback, we've incorporated that into this design and it's 120 patients on active arm and 60 on the placebo arm. We'll do an interim analysis at 50% and we'll continue to watch enrollment as we saw that competing program enrolled relatively quickly over the last 6 months of the year last year into this year, and that gave us even more excitement for the speed of enrollment that could happen with this trial. We're excited to get this trial going and we expect to file IND here in March and kick off the trial in June as we've had a lot of dialogue with the FDA on a trial design and we expect quite quick approval on the central IRB. What's exciting to us is this will be over $1,000,000,000 market with only 2 players in the next 5 to 10 years. We have the potential to be the 2nd approved NTM product and the market research indicates we will be a potentially preferred option for patients, whether it's because of our favorable safety profile relative to oral prophasim units that's utilized or the toxicities and tolerability challenges that some people face with ARIKAYCE.

Speaker 1

We also know that we'll have convenient dosing. What does that mean? 28 days of treatment followed by 2 months off followed by 28 days of treatment. So if you're doing well, you'll potentially be treated 4 cycles a year. That gives patients a large burden back from what they did every single day to where they are.

Speaker 1

We also know the current treatments are not highly efficacious and that patients need more options in order to keep this disease in control. It may be a disease that goes away and comes back over time, but it's one that they'll probably live with chronically for a long time. We have an opportunity to expand a brand within the brand as we think about clafasmin in the future. The next quick pipeline highlight I want to talk about is idiopathic pulmonary fibrosis 201. This is going to be known as natinib DPI as we go forward.

Speaker 1

The reason I'm excited about this program is our 28 day tox data was very clean. We know 80% of these patients die in 5 years. There's a huge unmet need in this disease state. And OFEV is the market leader marketed by Brendel Einhain. And we have decreased risk relative to the landscape that has failed in IPF development because we already know this molecule works in IPF.

Speaker 1

What we do also know is that there's severe GI toxicities, which limits patients' acceptance and uptake and prescriber adoption. There's roughly 15,000 active patients in treatment in this country, and we believe bringing a more tolerable product that could potentially be dosed higher will be maximizing value for this population relative to what's out there today. Additionally, our rat leomycin study on 201 appeared to mitigate the inflammation of fibrosis comparable to oral latentanib at substantially lower doses. As we go forward in our INDOB file, we'll be studying this in 201 in our next slide. We'll be studying this in our Part 1, a single ascending dose, as well as our multiple ascending dose to show can we tolerate higher doses over 7 days.

Speaker 1

This will be an important study that gets done here in Q2 with data expected to read out in Q3. Our goal is to show lower GI side effects in safety and healthy volunteers. I want to acknowledge as we go forward the hard work that Steve has done in landing our royalty financing deal as we worked on this for over 6 months. We're in a great position because of Steve's vision and leadership over the last 7 years. Before I turn it over to Raj, I want to acknowledge all the hard work Steve has done for us and our shareholders and our employees.

Speaker 1

With that said, I'll turn it over to Steve to go over the financials for the quarter.

Speaker 2

Thank you, Mike, and good afternoon. I'm pleased to review Select's Q4 and full year 2023 financial results. Please supplement this call by reading the consolidated financial statements and MD and A contained in our 10 ks. 2023 was a year of substantial revenue growth for the company in terms of both percentage and dollar growth. Total revenues doubled versus 2022 and reached nearly $200,000,000 Let's break this down by starting with the 4th quarter total revenues at the bottom of the table.

Speaker 2

Our total revenues grew a robust 62% versus Q4 2022 99% for the 2023 full year period, primarily due to the growth in our Tyvaso DPI related revenues. Going back to the top of the table, you will see that Tyvaso DPI royalty revenue for the Q4 was $21,000,000 which is 132% increase versus 2022, and the result of continued growth in use of Tyvaso DPI for patients suffering from PAH and PH ILD. Please note that $2,100,000 of the 4th quarter royalty revenue was sold to a 3rd party, and I will review the accounting for the royalty sale in a few slides. Collaboration and Services 4th quarter revenue was $17,000,000 which was an 81% increase over 2022, which primarily representative of strong Tyvaso DPI production volumes in the 4th quarter. For the full year 2023, Tyvaso DPI royalty revenue was $72,000,000 an increase of 3 61% versus 2022, which is primarily due to the increase in patient demand for the product and the start of commercial sales by United Therapeutics late in Q2 of 2022.

Speaker 2

Royalty revenue has now become our largest single source of revenue, which allows us to fund and progress our clinical development and product pipeline. Collaboration and services revenue for the 2023 full year period was $53,000,000 an increase of 90% versus 2022, which is primarily due to the start of commercial manufacturing in the Q2 of 2022 and the increase in production and sales of Tyvaso DPI Semi Finish product to United Therapeutics in 2023. Moving down the table to our endocrine business. Total endocrine revenues were $20,000,000 for the 4th quarter $74,000,000 for the full year. For the Q4, Afrezza net revenue of $15,000,000 compared to $12,000,000 in 2022, a growth rate of 29%, which was mainly driven by higher patient demand with underlying paid TRx growth of 29% year over year, a lower gross to net deduction as a percentage of gross revenue and price.

Speaker 2

Compared to the Q3 of 2023, there was a $2,000,000 increase, which represents half patient demand and half increased channel inventory due to wholesalers purchasing an extra week of product in late December. This additional wholesaler purchase in late December will likely impact our net revenues for the Q1 of 2024. For the full year 2023 period, the 27% increase in Afrezza net revenue was mainly related to increased volume from higher patient demand with underlying paid TRx growth of 25%, price and a more favorable growth to net adjustment as a percentage of gross revenues. Net revenue for V Go was $5,000,000 for the Q4 of 2023. Revenues were 13% lower versus 2022, primarily due to lower demand and higher growth to nets as a percentage of gross revenues, partially offset by price.

Speaker 2

V Go net revenue improved versus the Q3 of 2023 by $200,000 mainly due to improved gross to nets. For the full year period, the 48% increase is primarily related to the purchase of V Go on May 31, 2022, reflecting a 7 month versus 12 month comparative. The next slide shows our revenue growth by source and basic earnings per share on a quarter by quarter basis in the Q1 of 2022 through the Q4 of 2023. I'd like to show this graph because it highlights how dramatically our business has changed in 2 years and how we are executing against expectations. For the Q4 of 2023, total revenues increased 14% sequentially versus the Q3 of 2023 and are up 62% versus the Q4 of 2022.

Speaker 2

Q4 2023 total revenue of $58,000,000 was almost 5x the total revenues recorded in the Q1 of 2022. Below the graph were our quarterly basic earnings and loss per share. The 4th quarter was the 2nd straight quarter with net income and positive earnings per share. As I stated during the Q3 earnings call, we are in a period we expect to bounce back and forth between earnings and loss per share as our revenues increase, but we will also be increasing our spending on our pipeline as we move MNKD101 into a Phase 3 global clinical trial and MNKD201 into a Phase 1 clinical trial. In addition, we will wait to see the results from the INHALE 3 and INHALE 1 clinical trials for Afrezza before deciding whether to increase promotional spend behind that product.

Speaker 2

For now, we will continue to focus on growing the profitability of the endocrine business unit, which has had a positive contribution for 2 straight quarters. Moving on to our GAAP to non GAAP reconciliation. I'll first focus on the Q4, which is on the left hand side of the table. We had GAAP net income of $1,000,000 which when adjusted for select non cash items for stock compensation, gain or loss on foreign currency transactions, which is related to our insulin purchase commitment, loss unavailable for sale securities, a sold portion of the royalty revenue and the interest expense on the liability for sale of future revenues, which I'll discuss in more details in a minute, provide for a non GAAP net income of $7,000,000 versus the 2022 4th quarter non GAAP net loss of $11,000,000 For the full year 2023 period, we ended with a net loss of $12,000,000 When adjusted for the select non cash items, becomes non GAAP net income of $6,000,000 which is compared to a non GAAP net loss of $78,000,000 in 2022, an $84,000,000 year on year positive change. Now I'd like to take some time to explain the accounting that resulted from the sale of our 1% of our Tyvaso DPI royalty.

Speaker 2

To set the stage, we sold 1% of our 10% royalty for $150,000,000 plus up to $50,000,000 more if certain net revenue numbers are attained within a period of time ending in September 2027. This puts a 3rd party valuation on a 10% royalty of approximately $1,500,000,000 to $2,000,000,000 After we announced the royalty sale in early January, heard back from investors that we could have done a better job explaining how we recognize these transactions in our financial statements and how we got to our accounting conclusions. So let me try again. First, we looked at all of the GAAP guidance, reviewed all similar relevant transactions we could find in the last 5 years and then consulted with our auditors. The conclusion we arrived at, amongst other things, is that MannKind has a continuing involvement in the generation of Tyvaso DPI revenue through activities to protect the intellectual property of Tyvaso DPI, such as defending the patent estate protecting the product and the continuing involvement in the manufacturing of the product for United Therapeutics.

Speaker 2

Thus, the upfront proceeds recorded as a liability for future sales of royalties, not as revenue. The table on this slide reflects how the accounting works. We record the cash consideration received, net of issuance costs and a related liability for the sale of future royalties on our balance sheet. To recognize interest expense related to the liabilities, we forecast the future royalties to be received through 2,040 2 and calculate the return that would be needed when receiving a $150,000,000 upfront payment for 1% of the royalty over this time period. This rate came to just over 11%.

Speaker 2

In future periods, we will continue to estimate the future royalty stream based on royalty trends, commercial success of Tyvaso DPI, competition for the brand and other meaningful inputs. The outcome of these future estimates may adjust the prospective interest rate used in determining interest expense and amortization of the liability. Each quarter, we will charge our P and L for non cash interest expense based on the interest rate and credit to liability. We also recognize 1% royalty as non cash revenue and reduced the liability by this amount. In addition to the non cash attributes of this transaction, we also earned cash interest income of approximately $7,500,000 annually.

Speaker 2

The slide shows how the accounting should work for 2024 if nothing changes in our forecast of expected royalties. The balance sheet would end 2024 with $153,000,000 in cash and $153,000,000 of a liability for the sale of future royalties. The liability balance will increase as long as the non cash interest expense is greater than the non cash royalty revenue, which is likely to occur over the next few years. Once the non cash royalty revenue becomes greater than the non cash interest expense, assuming that sales of Tyvaso DPI continue to grow, then the liability balance will begin to decrease. Focusing on the 2024 income statement on the right side of the table, we will record non cash revenue of $10,000,000 and cash interest income of $7,000,000 offset by non cash interest expense of $17,000,000 As discussed on a previous slide, we expect to isolate the non cash aspects of this transaction in our quarterly GAAP to non GAAP reconciliation of net income and loss.

Speaker 2

With over $300,000,000 in cash and investments on our balance sheet as of December 31, 2023, want to share our near term priorities for using the cash to increase shareholder value. 1st, focusing on our development pipeline, we expect to fund much of MNKD101 and MNKD201 clinical trial expense over the next few years through operating cash flow. As these assets advance through clinical trials, we will prioritize their funding. In addition to MNKD101201, we have 2 clinical trials for Afrezza nearing data readouts. We will wait to see the results of these trials before deciding whether to invest more behind this asset to grow revenues.

Speaker 2

In addition, we plan to do the following with our debt. Our mid cap senior secured debt has a balance $33,000,000 as of December 31, 2023 and currently carries an interest rate of 8.25%. We expect to pay off this debt in the first half of twenty twenty four to take advantage of the interest rate arbitrage between debt interest expense cash investment returns and release our assets from mid caps security interest. Man convertible debt with a balance of approximately $9,000,000 as of December 31, 2023, is expected to be paid off early in cash or to mix with cash and stock. By doing this, we would be reducing future shareholder dilution.

Speaker 2

Our senior convertible debt with a balance of $230,000,000 as of December 31, 2023, carries a low fixed interest rate of 2.5%, and we do not expect to buy back bonds prior to maturity in March 2026. When maturity arrives, we expect to reduce future dilution by paying off the debt with cash of our stock prices below the conversion price of $5.21 Additionally, we do not expect to access the ATM. To summarize a very successful 2023, we doubled our total revenues to almost $200,000,000 versus the prior year. 4th quarter was the 2nd success quarter for positive contribution from our endocrine business unit. 4th quarter was the 2nd successive quarter of net income for the company.

Speaker 2

We sold a 1% interest in our 10% Tyvaso DPI royalty, which values the royalty stream alone at between $1,500,000,000 $2,000,000,000 and we ended 2023 with $302,000,000 in cash and investments. 2024 should be another stellar year for MannKind as we are financially primed to drive our commercial and clinical priorities and deliver increased shareholder value. Thank you. And now I'll turn it back over to Mike.

Speaker 1

Thank you, Steve. I appreciate the explanation of all the accounting. I never wanted to know. I know I appreciate you. So next slide.

Speaker 1

So MannKind has been around 33 years and I want to give a special thank you to our founder who passed away 8 years ago on February 25. The reason that's important is the day I decided to join MannKind and I'll forever be grateful for Al Man. He was a special human being who cared about society, our patients and making a difference. We have the foundation he left us within 2016, and we built this into a major self sustaining growth company against all odds. When you look at the history from 2016 forward, we announced our United Therapeutics collaboration.

Speaker 1

We acquired Quorum, which is now our Phase III asset with chlorfazimyr, MANCHYM101. We purchased V Go, which made our endocrine division more sustainable and brought us a couple of 1,000 new prescribers. And Tabesa DPI has been ahead of all expectations since its approval. As I look forward, we are just getting started. The expected 2024 milestones alone between Afrezza and the study readouts, MANKIND-one hundred and one, MANKIND-two zero one, not to mention the TAVESSA DPI, which has 2 major trials going on in TAVRSA and TAVRSA 2, which I heard this last week, were 70% enrolled.

Speaker 1

Once they finish up enrollment, they'll have 12 months there. We should expect to see data from United Therapeutics. Additionally, our team just this day completed the high speed fill finish line in terms of qualification and will now be going to PPQ, hopefully producing much higher volumes at TAVESO out of that line as we exit Q1 going into Q2. As I look at our future, we have several key value drivers. As you can see, our insiders picked up some stock in the last few weeks, post our Board meeting, because we believe we're undervalued and we're very confident in our future.

Speaker 1

Analysts have expenses in for our pipeline, but no revenue in the next 5 years. We think this is an unfair evaluation of our company given that we do expect to launch clofazmy in the next 5 years and move NTM I'm sorry, and move the IPF asset in terms of MANKIND-two zero one into patients and then hopefully into Phase 3 by then. We go back and look at another successful company in time, Intermune, was similarly valued at $800,000,000 at 1 point and 18 months later with $8,000,000,000 once they got a positive data readout. Our job is to not react or overreact day to day to swings in the stock market, but to lay out a firm foundation for future growth. And as we look out there, whether it's the pipeline with MANKIND-one hundred and one, every 1,000 patients is approximately $100,000,000 in revenue.

Speaker 1

201, we're going to start patients dosing there. And if you think about IPS, every 1,000 patients is roughly $150,000,000 in annual revenue. And then we get into Tyvaso DPI, which as you can see this past year was when you add up the collaboration services revenue in addition to the royalties, we knew there's roughly 5,000 patients on Tyvaso DPI, and that's about half of the $250,000,000 in revenue that we experienced this past year. On the endocrine side, we have several major upcoming opportunities with inhale 1 and inhale 3 as well as Afrezza International. V Go is being managed for improved profitability as we continue to focus on improving our margins by reducing COGS as well as improving gross to nets.

Speaker 1

As we take a step back, we have multiple shots on goal to create significant shareholder value across 3 commercial products when you think about Afrezza, Aveso DPI and V Go that are already FDA approved, as well as 2 assets coming up quickly in the pipeline between MANKIND 101. We have multiple shots on goal within these assets and we are completely focused on delivering shareholder value sustainably for years to come. We have several upcoming presentations and engagements at conferences. I'll be doing non GAAP roadshows with Steve over the coming months to get the word out as we feel like mankind is at the best inflection point with the best team in the industry, cash on the balance sheet and multiple shots on goal in terms of data reouts to drive future growth. We're super excited about future and I will stop there Valerie to take questions.

Speaker 1

Thank you again.

Operator

Thank you. Our first question comes from the line of Andreas Arjuez of Wedbush. Your line is open.

Speaker 3

Great. Thanks for taking our question. Congrats on all the progress. Just maybe 2 for us here quickly. Despite an evolving competitive landscape in PAH and ILD, the cigar royalty puts a $15,000,000,000 valuation on Tyvaso DPI.

Speaker 3

A key component to DPI's advantage is the ease and convenience of the low resistance device compared with other high resistance devices. So the question here is, could you elaborate on the differences with the DPI device compared with the competitors and how that plays into DPI safety and efficacy profile? And also how do you see the DPI device playing a key role in the delivery of natinib and IPF? Thanks.

Speaker 1

Andre, let me check with that second question. Can you repeat that one?

Speaker 3

Yes, yes, sure. So back to the advantages of the DPI device, how do you see it playing a key role in the delivery of natinib and IPF? Sure. Mostly from a delivery to safety perspective. Yes.

Speaker 1

No, I think that's what gets us excited, right? I'll start with that question first is, when you think about our platform, it's the same device being used in the same audience that we're currently moving forward in orphan lung disease that United Therapeutics is also using, right? So the familiarity of the training, all that and the comfort of bringing inhalation into this patient population with our current technology gives us that much more confidence because most of the powder is our novel excipient FTKP. So if they can tolerate that in the pH market, we know some of those patients overlap with ILD as well as IPF. Then being able to show that our powder at 90%, 99% FDKP should be able to tolerate it in the netenib as we go forward.

Speaker 1

And so far the animals, the dissolution and all that looks positive. We're doing a chronic toxin. We'll have that done by the end of this year at the same time we get Phase 1. So I think this year vatinib should feel like it's even more dearest than it already is given it's a known asset and a known technology. That will be a positive contribution for there.

Speaker 1

On the other side of the equation, you're asking me how do we differentiate our platform. I think our powders are built to fly with our devices. They're going hand in hand. We're not taking a novel powder and throwing into an off shelf device. I think that it's about that deep lung penetration.

Speaker 1

It's about the velocity of those powders are coming out and how consistent and deep lung penetration you're getting across the lung bed.

Speaker 3

And so

Speaker 1

I think that's number 1. Number 2, we know that the powder we need is very low because we probably build records of filling the smallest volume for the 60 microgram, all the way up to 64 microgram or higher. So as people want more, they don't need to inhale that much more powder to get additional effect size, which should help on cough, which should help on absorption as well as just safety. When you think about, a lot of FDA had questions on hormones and devices and asthma, how to use steroid use. These are questions that come up with the FDA.

Speaker 1

It's really important, right, that there's not excess powder coming around, especially when you get to these narrow therapeutic drugs. You want the proper dose delivered with minimal powder containment happening or powder extraction happening outside of the cartridge itself. These are all important things that come up. And I also think patient satisfaction was very high in the trial that UT ran in the pivotal and as we also know from thousands of patients we've studied Afrezza in, The device is relatively easy to use from 4 years old to roughly 80 years old. So those are just the well known comfort, the dosing and the consistency of dose will be important factors as we go forward.

Speaker 3

All right. Appreciate that. I'll jump back in the queue. Congrats also on all the progress.

Operator

Thank you. One moment please. Our next question comes from the line of Olivia Breyer of Cantor Fitzgerald. Your line is open.

Speaker 1

Hey, good afternoon guys. Thank you for the question. Can you talk about how NTM fits into your strategic priorities just as you grow into a more mature company? And there is some competition in the space, although maybe less so these days as you pointed out. So how should we be thinking about where MNKD101 could fit into treatment paradigm?

Speaker 1

And last question is just can you remind us on what the timelines are for expected enrollment and data readouts there? Thank you. Sure. So I think there's a couple of things to help fit in the company. The first will be a decision on licensing outside the U.

Speaker 1

S. So we'll run the trial in the key countries where NTM exists, but we may choose to partner out Japan, for example, where we saw, in the Medway Independent. We haven't made those decisions. We don't have to make those decisions. We are looking for partners and talking to partners, But it's up to us and we're a little bit in control of that process there.

Speaker 1

In terms of how it fits into MannKind, I think there's core capabilities that we have today around reimbursement support, patient training and how do you treat specialty product from distribution, things like that, that we have that will be applicable to the NTM space. And then when you think about where it fits into the treatment regimen, there's 2 points there. Number 1, we're going after the refractory patients first. And in that population, right, the only drug approved is ARIKAYCE. And we think there we have a significant clinical advantage as well as a convenience advantage that we should be able to displace or grow that market opportunity very quickly as we enter it.

Speaker 1

The other part is we are actively working on a dry powder version of clofozamine and we expect that that will be used for naive population so that it can be used earlier in lines of treatment. So we do intend to cover early and late stage and that's one of the benefits of being where we are as a company is when that opportunity presents itself and we choose to want to fund maybe a second trial at that point, we can decide and part of that will be how fast is the Phase 3 enrolling on the refractory population. If we look at AN2 as the lead example, right, they got about 180 patients in 15 months. And so that's about what we need. So if you really think about where we are today, 15 months from now, we could be fully enrolled, but we only need half of that population to do our interim analysis.

Speaker 1

So we hope to have that interim analysis sometime in the second half of next year, and then we would just be waiting for the full patient population to get there in order to hopefully file on 6 month data. So that's our goal. It's a primary endpoint of 6 months. And when you think about the grand scheme of life, we're not that far away from hopefully kicking this trial here in Q2. And more importantly, we're sitting here next year at this time, we should be quickly enrolling halfway if everything goes as planned.

Operator

Thank you. One moment please. Our next question comes from the line of Steve Lichtman of Oppenheimer and Company. Your line is open.

Speaker 4

Thank you. Good evening, guys, and congrats on the progress. Just level setting into ATTD, what is the data exactly that we're going to see there? I know we'll see the 17 week at this is on inhale 3, excuse me. I know we'll see the 17 week at ADA, but what's the anticipation at ATTD?

Speaker 1

Yes. So we have a presentation there by Earl Hirsch, which will be the first dose on the meal tolerance data. And Steve, what I think that will allow us is the opportunity to obviously have Afrezza on the podium there in front of everybody. But I'm sure Earl will be presenting some of the data and rationale why Afrezza deserves a more fair chance in treatment. And he'll show that first dose data and that'll be the primary focus there.

Speaker 1

As you know, it's a technology conference with lots of innovation and that's really a Type 1 community that comes from there. I think the other part of this is starting to talk about, do you go to Europe, for example, is there another opportunity once we see the full data set to expand to other markets in a meaningful way? So we're there for that reason as much as anything in terms of showing the data and meeting global thought leaders.

Speaker 4

Got it. Okay. And then just on the endocrine business in general, I know you've been balancing growth and profitability and you noted in your prepared remarks optimizing the sales force footprint. So I guess are you been reducing the footprint, being more strategic there? Can you talk a little bit about what you've been doing?

Speaker 4

And then what are the range of commercial investments you would consider assuming positive outcomes in inhale 3 and 1? Would you add more to the sales force or be something else? Thanks.

Speaker 1

Yes. I think on the sales force footprint, you have to rewind back 18 months. When we bought V Go in May of 'twenty two, we dedicated roughly 20, 25 FT feet feet feet

Operator

feet feet feet feet feet

Speaker 1

feet feet feet feet feet feet feet feet feet Es to that brand alone. And 1, it was on a 2 year decline not being promoted, we wanted to stabilize it. And 2, we didn't want to disrupt the Afrezza field team. So we held overlapping expenses for quite a while in both of those businesses. And really our focus going into July January this year was a 2 step process around integrating V Go into our commercial footprint on Afrezza.

Speaker 1

And then the second step was integrating the sales force into one voice, one team. And that took place in January of this year. There were some headcounts that were freed up as a result of that process, and we reinvested some of those headcounts into the field reimbursement support, the training and the key account managers. We think the key account manager is critical as we go into pediatrics and academic centers. That's not where Afrezza has been widely adopted.

Speaker 1

So the first step is getting the key account managers to make sure we stabilize those big accounts. And then the second step will be hopefully filtering in some reps underneath them where they can maintain accounts or grow accounts day to day, while those key account managers take on the next group of accounts and get us ready for PEATs. So we have a multi step process here. It's not going to happen overnight. But the first step was getting to 1 field footprint, one voice with 1 team and 1 new marketing campaign, which we're actually going out this week.

Speaker 1

So I think the team will see that. We've invested a lot in training. We have a couple of field trainers now. And that's going to be the number one focus this year is can we grow faster than we have been with the current footprint and the current infrastructure we put around that footprint. And if that model is working, I think we'll have conviction to go ahead and expand that model further.

Speaker 1

We could easily add 50 to 100 more people. I wouldn't really do that until we saw groundbreaking data and that some of our current model was working with KOL support. I think the number one thing with the data will be the KOL support around that data because we have to be able to penetrate the academic centers, which are very pump based. And I think that the pump data within INHIL 3 is going to have to hold up in every objective way in terms of reducing highs or reducing lows or improving A1C or time and range. So, yes, what does the data need to look like?

Speaker 1

It's got to be very compelling for us to be willing to spend money and that compelling investment will be commensurate with the data. We're not going to we've been through Afrezza a long time. We're very excited about the data. We love the product, but we have to be objective around our investments and our ability to drive success. And I think the data is going to help support that.

Speaker 4

Understood. Thanks, Mike.

Operator

Thank you. One moment, please. Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is open.

Speaker 5

Hi, Mike and team. It's Anish on for Greg. Congrats on the quarter and thanks for taking my questions. I just wanted to parlay some questions on inhale-three there. How should we be thinking about clinical bars for HbA1c over the 17 week period in June?

Speaker 5

And then just considering real world translatability of the trial design, maybe if you can just remind us on the foreseen pushes and pulls for getting patients to switch between injectable insulin or pumps to Afrezza? Thanks again.

Speaker 1

I think the first question I had was kind of the non inferiority margin maybe an inhaled rate between the two arms. And I think that's a 0.4%, which was consistent with our pivotal trials with Type 1. And so that was those trials were done with a different conversion. And so we're hoping one of the things we saw in those trials was we got to the right dose, it just took 12 weeks. We're hoping by starting at a better dose upfront, we have 12 more weeks of benefit.

Speaker 1

And we saw the other part this year, if you may or may not recall this, we did a small study called ABC, which was a pilot trial on 25 patients to show, could you switch off an insulin pump? How do you adjust the basal? What happens over the 12 weeks of that study? That study gave us a lot of insights on things we had to correct for this larger trial before we spent the money. For example, one site titrated basal very well, the other site, we learned that they could you could be a little more aggressive in their basal titration.

Speaker 1

And so those are the types of things we try to get more guardrails around in this trial to ensure proper titration, proper conversion. And obviously, doctors know how to use the insulin pumps. And so that was the only thing we saw in the original trial was they know how to manipulate a pump very well because these doctors use pumps all day long, where Afrezza was new to them. They didn't know how to use it to its advantage in terms of dosing and follow-up dosing if necessary. So we kind of feel pretty good about the trial design, the controls within the trial.

Speaker 1

So now we have to wait for the data. So that gives you some perspective there. So we didn't design it for superiority. There will be secondary endpoints that we'll watch out for. And then your second question around how do you think about this in the real world existing with pods and pumps and physicians.

Speaker 1

And I think this comes down to patient motivation. At the end of the day, I think we will have KOL support. I think we will continue to see guidelines support. We saw some updates this year in the standards of care for Afrezza. People are starting to understand the lower rates of hypoglycemia, the better timing range.

Speaker 1

And they're seeing they want a real time acting insulin as they've kind of adjusted every AID system and pumped together, what's next. And what's next is really tightening control even further, and we're the best tool to help that. So that's a lot of what we're talking about is how do we look at data on Afrezza on top of pumps potentially, even though that's an FDA challenge. We're also thinking about GLPs and if you still have meal time popping on GLPs, do you add Afrezza to those populations? So we're starting to look and say, if we were to get positive data on inhale-three as an early readout and we anticipate inhale-one to look good, then what's the next leg up that we should really start exploring for more continued opportunities for Afrezza?

Speaker 1

If we think about it, it's the pump market, it's the pediatric market, it's the gestational diabetes market, GLP market. There's a lot of niche areas that are quite large that we think this brand can grow pretty rapidly over the coming years relative to where it's been in the last 5 years.

Speaker 5

Great. Thank you so much.

Operator

Thank you. One moment please. Our next question comes from the line of Orin Lambda of H. C. Wainwright.

Operator

Your line is open.

Speaker 6

Thanks. I got a couple of 101 questions. Can you just help us better understand how you arrived at the pivotal study sample size and powering? What's that based on? And with regards to the PRO endpoint, I guess since that's a new subjective endpoint in the space, What is the bar there?

Speaker 6

What does that need to look like to be an effective competitor review? And I've got a follow-up. Thanks.

Speaker 1

Yes. Doreen, these are two great questions and I think it's the biggest challenge to developing products for NTM. And it's why I think you're going to see continued lack of investment because you have to be either have enough capital to go through with it, in the case of INDiMed, which spent many years building out this space and working with the FDA, as well as the patient communities. And we know that the physician KOL population really wants chlofasmine. We know the patient population really wants chlofasmine.

Speaker 1

And even FDA, I will say, has been nothing but collaborative along this whole journey for 5 years and going back with Quorum. So I think the market forces are aligned to help support us with the wins in our backs to push us forward. And then you get into risks of running these trials. And I think the reality is there are risks in this population. But given the efficacy on clofazamine, we estimated about a 20%, 30% effect size delta between us and placebo.

Speaker 1

And that's going to be the interim analysis to see are we on track for that. If not, we might have to increase the sample a little bit. That's number 1. The second part is the PRO. We went back and forth with the FDA for years, not just months, on the PRO endpoint, the PRO division and the feedback from the PRO division for two reasons.

Speaker 1

One, we weren't comfortable running a placebo controlled trial, given that you can pretty much know what the active arm is. And we think that makes the PRO a difficult tool. And therefore we try to make it a secondary endpoint. The FDA was insistent it should be a primary or co primary endpoint. And so around and around, the long story short, we landed where we did, which is a co primary endpoint with the understanding that this is a little bit of a risky endpoint, but that they agree we've done the best we can to create the baseline measurements and the improvements in those key measurements that we've aligned to with the FDA.

Speaker 1

And that the efficacy is going to have to matter in terms of sputum conversion as much as the PRO tool by itself. And so just like I know, I listened to Intermed's call, I mean, what they're going through with the FDA, we've had a lot of those questions. We've worked with them. We've gotten a lot of their feedback already incorporated into our trial design. So now it's about the data and then what happens with the data and how you analyze that data once it comes in, all be really important.

Speaker 1

But again, we'll work very closely with the FDA. I think they understand where we are, they understand the pros and cons and rather than keep debating it, we thought it was more important to get the data and help take this drug across the finish line.

Speaker 6

Okay. And just so I'm clear, you're going based on some clofazamine experience efficacy wise and are you assuming an improvement on that with your powering assumptions or are you being conservative on that?

Speaker 1

No. I think when you look if we're going after naive patients, we think we'd see a much higher efficacy rate, but because we're focused on refractory, we think it'll be a little less obviously naive patients. And I think you saw that in the INDOMED ARIKAYCE data out there. There's only one study to really judge NTM endpoints on and that's our case. And so I think when you go back in their development program, they had a 20%, 30% delta between the control and there is I'm not sure they had a placebo.

Speaker 1

I have to go back and double check the data. And so that's some of the work that we were going back and forth on is incorporating the placebo could have a placebo effect and how much more you have to be and how do you power your trial with that potential risk. And that's a lot of back and forth with the FDA. So we've done the best we can. We'll have a interim analysis.

Speaker 1

We think that's the most important aspect that we will get to in this trial. But assuming that's on track, then we feel very good about the wrapping up this trial to bring this to patients very quickly.

Speaker 6

All right. And then just with regards to the Tevaisa DPI situation, we're seeing a lot of headlines with regards to potential competition and lawsuits. And I'm sure you couldn't or wouldn't comment directly on anyone else's litigation. But if you are willing, I'm curious if you're able to comment on whether your orders coming into this year and your efforts at inventory or manufacturing capacity expansion reflect, I guess, any possible assumptions or risks around competition? Are you like potentially waiting to do anything or is it pedal to the metal so to speak on that front?

Speaker 1

Yes. On the Temaseo DPI, I mean, we are making as much as we can around the clock. Nothing slowed down there. We know we want to build up inventory as well. So between the demand and the current, we can manufacture, there's no slowing down where we are with Tymasa DPI.

Speaker 1

In terms of competitor coming, I mean, we've been hearing about this for years. And whether it was the higher dose, it was the indication, everyone's been doubting us about, is this going to get approved? When we did get approved, then you're going to have ILD, we got ILD. We've been very honest with the market ever since this drug was under review. And everything we've said has come true, right?

Speaker 1

We said we would expect ILD, we ILD. We said we manufacture, we've manufactured. We said it would have a nice conversion. It's had a better conversion than anyone expected. So from my perspective, TAVESO DPI has delivered on all parameters above and beyond expectations, despite an under forecasted launch, which put a lot of pressure on mankind and we did not miss 1 beat to make sure every patient had everyday supply.

Speaker 1

And that we did a lot. Our team worked incredibly hard last year to make that happen. We had record production in Q4 and we'll hopefully equal record production in Q1 and even more production in Q2. So, if you look at their story, they were after ILD as their differentiator for some reason. And I'll be honest, if a patient can't tolerate a dry powder for ILD, I don't see how they're going to tolerate theirs, which has 3 or 4 times more powder if I recall.

Speaker 1

So it's really about the patient tolerability. It's about the titration. It's about the powder load. And it's about how you coach a patient, train a patient. All these are really equally important things.

Speaker 1

And anytime you launch a new drug, you find things out as you go along and you modify and you go forward. That's pretty much what I think I hear UT doing is, Fabius DPI is strong. It's doing great in ILD as much as PH from what I heard from their call. Our conversation with UT continue to be very positive. I do want to mention another thing, Oren, is Japan so far is okay with the sputum conversion.

Speaker 1

So we'll do one trial on MANCHYM101 for clofazamine in terms of U. S. And Japan will be one global study, but we'll cut the data 2 different ways, one for Japan for sputum and dual primary for the U. S. Or co primary.

Speaker 1

So that will be an important aspect. We did struggle with the FDA saying, why are you the only country in the world that wants this sputum plus PRO where we don't have the same demand yet in other countries around the world. So that's why I think sputum, you still got to kill the bug at the end of the day and I think that becomes king in this disease. And can we do that really well is the question. The PROs will work out, but when you look at the labels of PROs, they're not really strong claims at the end of the day.

Speaker 1

So I still think efficacy is going to matter in terms of dispute and conversion.

Speaker 6

Okay. And I look forward to talking to Steve some more about this accounting.

Speaker 1

I'll stay out of that conversation.

Operator

Thank you. One moment please.

Speaker 1

Thank you, Rick.

Operator

Our next question comes from the line of Thomas Smith of Leerink Partners. Your line is open.

Speaker 7

Hey guys, good afternoon. Thanks for taking the questions and let me add my congrats on all the progress. Just a couple on our end. I guess first on MNKD-two zero one, the inhaled intenad program. Just walk us through your expectations for the Phase 1 data in Q3 and how quickly you think you could turn this around and advance it into a Phase 2 trial in IPF patients?

Speaker 7

And then just remind us how you're planning for clinical supply and scale on 201?

Speaker 1

Sure. On the Phase 1 study, because it's a pretty quick study, we were actually going to do IPF patients. It was the FDA who pushed us to consider healthy volunteers. So we actually switched from, I'll say, IPF patients to healthies, which saved us a lot of time and money. So that's number 1.

Speaker 1

So that turnaround time should be pretty quick in terms of wrapping up Phase 1 and filing an end of Phase 1 meeting with FDA, hopefully by the end of the year. And then we're having good discussions internally. We just hired a new gentleman, Doctor. Waseem, who will be pivotal in leading our development program beyond Phase 1, 4201. And we're having good discussions internally, for example, that we do a 1b study to get data sooner, in parallel, while we continue to wait to kick off the trial for the next phase, Is it a 2 study going into a Phase 3?

Speaker 1

So that work is happening as we speak and I don't want to prematurely guess where we land. But just like clofazamine where we push to not do a Phase II trial, one could argue that that's a little risky. At the same time, we know these drugs work, we know the approximate dose we're trying to go after, and we know that that dose has produced a signaling effect that we expect. So, in the case of 201, we actually wanted those higher, and that's where we need the chronic tox data in Q4 to help support that higher dosing. And assuming a patient can tolerate that higher dose, and we think that's going to be one of our clinical differentiators for 201.

Speaker 1

So that will be the things we look for in the trials. Can we dose higher? Is it tolerable? And do you have any of the GI side effects that we see with the oral formulation?

Speaker 7

Got it. That's helpful. And then just on the pipeline strategy and the priorities here. You obviously had a lot on your plate across the inhale studies for Afrezza and the clifazamine and the 201 programs, but now you have the financial flexibility. I'm just wondering if you could talk about how you're thinking about balancing external business development opportunities versus advancing sort of the internally derived candidates on your platform?

Speaker 1

Yes, that's a great question. I think the team is bursting at the seams on everything we're doing today. And the good news is we have a great team who's working extremely hard to make sure we get these INDs in to get the INHIL-one and three study wrapped up. And so from a financial flexibility, people don't realize we probably spent, don't quote me exact numbers, but over $30,000,000 between INHAL-one and INHAL-three between people and trial costs. So those trials are wrapping up this year going into next year.

Speaker 1

As you think about clofazamine, there'll be a little bit of overlap with the 101, but these other trials wrap up and so you kind of see that phased in. People also miss that we have been funding tox trials and other data sets in R and D over the last couple of years on 101 and 201 as well as 501. So there's been other investments in R and D that aren't as transparent, we're going to talk about them as much. But again, some of those are wrapping up and those extra funds will be used to fund the Phase III trial. So I think we have the financial flexibility to ensure if we can't fund it out of cash flow generation that we are today that we have the cash on the balance sheet if we needed to.

Speaker 1

But our goal is to continue to run the company lean like we have been and not get too far ahead of our skis until we continue to show consistent delivery as we go forward. Steve, I don't know if there's anything you want to add there.

Speaker 2

No, Mike. I think the other original question was also around BD versus internal. I think you're exactly right. We're going to focus in on the internal priorities that we have. And if opportunities come along, we'll certainly assess them, but the focus will be internally first.

Speaker 1

Yes. And on the BD side, we get lots of inbound these days. We're just busy. And so if we see something compelling, we'll look at it, but we're not actively trying to pursue anything. We want to work with what we have and maximize the value of what we have on our plates right now.

Speaker 7

Got it. That makes sense. All right, guys. Thanks for taking the questions.

Speaker 1

Thank you.

Operator

Thank you. One moment, please. Our next question comes from the line of Anthony Petrone of Mizuho Group. Your line is open.

Speaker 1

Thanks for squeezing me in here

Speaker 8

and congrats on strong results. Also condolences on, Alfred Mann passing to the team. Maybe Steve, a couple on Tyvaso, just the royalty agreement, just high level, why was 1% sort of the right number? Orin's point, there's potential competition. So what was the calculus on settling on 1%?

Speaker 8

And can you is there an option to further monetize Tyvaso royalty under a scenario maybe where you want to fast track 101 and 201 or even add to the portfolio for future growth investments, would

Speaker 1

you consider

Speaker 8

monetizing the royalty further as a source of funds? And then I'll have a couple of follow ups on diabetes for Mike.

Speaker 2

So, Anthony, it's Steve. So what we did is we looked at what the value was for the Tyvaso royalty in a very competitive environment. We had originally over 25 different purchasers come to the table, and we wanted to keep a vast majority of the royalty to MannKind. So we thought 1% was right to get to about $300,000,000 on our balance sheet, which would fund not only our pipeline, but put us in a good position to fund the convertible debt when it matures in 2026. So yes, we can further monetize the royalty if there was a need for it, but we don't expect there to be a need for it at this point in time.

Speaker 1

Steve, I'll just add 2 things, Anthony, to your question. The thing that drives royalty valuation is interest rates and the calculation you're using for expected interest rates. And so over time, if interest rates come back down, the overall value of this royalty may go up even further even if the sales came off a little bit of trend for some reason. But we think that when we started this process, the royalty rate was not transparent to the public when you look back in June, July of 2023. And we wanted to bring value to our company around what is 10% of the royalty worth because we thought it was valued and that 10% felt the right way to demonstrate that clearly to investors.

Speaker 1

In the meantime, and we're midway through that process, UT disclosed the royalty, so we didn't have to kind of work around that issue, number 1. And then number 2, the interest rates are high and that does create a bigger discount factor into that future cash flow. So those are things going in our favor hopefully over the coming years. And the thing about a competitor coming, we know there's about X percent converted from nebulizer to DPI. However, there was another competing product out there that may help drive more adoption and earlier adoption of DPI, which indirectly may help us, right, as you think about the future.

Speaker 1

So we're pretty bullish on DPI and whether there's 1 or 2 players out there. It only helps more patients that can hopefully use the product more in earlier lines of treatment as well. So that's kind of how we looked at it and we think MannKind indirectly benefits as more competition does come. Appreciate that. And just on ENHALE 3

Speaker 8

and ENHALE 1, just from a combined outlook there for Afrezza when you think about using Afrezza with automated insulin pumps and then the pediatric indication, just kind of level set again from the MannKind standpoint, how it's looking at those two opportunities from a market expansion standpoint for the product? And actually, which of the two indications are you most excited about? Do you think you get faster traction in pediatrics or would it be in the combination use? Thanks again and congratulations.

Speaker 1

Yes. No, thank you. I think the challenge with adding your Afrezza on top of pumps besides the FDA, I'll just put that out there, is really the need that a patient see and are they always going to carry all this extra supplies with them and do they use it on special occasions, do they use it when they get home? It's not a full time patient when you think about that value. And that's one of the things I think I've seen when people used to criticize our refill rates.

Speaker 1

We knew roughly 20%, 30% of our Type 1s use Afrezza intermittently, which kind of hurts your refill rates, right? And then we know Type 2s are not as compliant as we want to be. So that's why it's so important to make sure that we are a front and center choice for patients who have real time control or want to improve their A1C as we look out there. Can we improve A1C? Can we improve timing range?

Speaker 1

That's what we're hoping to see with these new trials versus when we got approval, it was just to show that the drug is as good as the standard of care. And we think that's good enough for peds approval, but to cause an inflection, right, we want to show that hopefully we're improving something on the product. If you ask me which is going to be more critical, I think INHEL-one will be the study that causes Afrezza to become the next standard of care. And what I mean by that is, look, can we grow faster by putting more people out there, more marketing, more advertising? Absolutely, I think we can.

Speaker 1

Is it going to be an inflection point that looks like a rocket? I think it's going to take another launch into a new market. And the good news about kids is there's only about 500 doctors in the country that are meaningful pedendos and they're mostly academic centers and they're mostly about 40, 50 centers in the country. And when you think about the study, it's only 40 centers in the U. S.

Speaker 1

So we are covering a majority of the key academic centers in this trial, so they will have firsthand experience once the results are unveiled, or finalized at least. And so we kind of really made sure COVID has gone faster by making it into global trial, absolutely. But we thought in order to have a major reflection, you better have the right experience with clinicians in the U. S. And that's really what we're doing.

Speaker 1

Unfortunately, we cannot go against pumps in that trial. We wanted to, at the time, switch off in foam pumps and include them. The FDA would not allow us. And that's one of the reasons we kicked off in HLA-three as we felt once we did the ABC trial, it was safe to switch people off insulin pumps. And even the FDA agreed at that point that we could add that to the trial, but we thought by the time we change in HALE-one and get all that through the IRBs, it wasn't worth the distraction.

Speaker 1

So we feel very good about where we are in a 1, 2 punch with HALE-one and inhale 3. Appreciate that.

Operator

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Michael Constania, CEO for any closing remarks.

Speaker 1

Thank you, Valerie. Thank you all for the analysts coming in. Look forward to seeing hopefully a couple of you at TDD. Also we'll be on the non deal roadshow, hopefully in some key cities meeting with our investors. And just want to say thank you to everyone.

Speaker 1

It's been a great year so far. We're super excited. Everything is off to a great start and we're looking forward to making 2024 another record setting year. So thank you again for everything. Steve and Dave and everything else, thank you for all the work everyone is doing.

Speaker 1

Have a great day.

Operator

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

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Key Takeaways

  • MannKind delivered record 2023 revenues of nearly $200 million (up 99% YoY), with Q4 marked by its second consecutive profitable quarter in the endocrine business and strong Tyvaso DPI royalty and manufacturing revenue.
  • The company sold 1% of its 10% Tyvaso DPI royalty for $150 million upfront (plus $50 million in milestones), retaining 90% of future royalties to de-risk debt and fund pipeline programs.
  • Afrezza inhaled insulin saw net revenues grow 27% YoY—the largest jump in seven years—and is being supported by an optimized sales force, new market research, and two upcoming pivotal trials (INHALE-3 in adults with data at ADA June 2024 and INHALE-1 in pediatrics later in 2024).
  • The orphan and pulmonary pipeline advanced with MNKD101 (inhaled clofazamine for NTM) entering a Phase 3 ICON-1 trial in mid-2024 (120 active/60 placebo, interim at 50% enrollment) and MNKD201 (inhaled nintedanib for IPF) kicking off a Phase 1 healthy volunteer study in Q2 with data expected in Q3.
  • With over $300 million in cash and investments at year-end, MannKind plans to pay down high-cost debt in H1 2024 and remain focused on advancing its internally built “shots on goal” rather than pursuing external partnerships.
AI Generated. May Contain Errors.
Earnings Conference Call
MannKind Q4 2023
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