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Executives

Alfred Mann - Chairman of the Board, Chief Executive Officer

Hakan Edstrom - President, Chief Operating Officer, Director

Matthew Pfeffer - Corporate Vice President and Chief Financial Officer

Analysts

Cory Kasimov - JPMorgan

Steve Byrne - Bank of America

Keith Markey - Griffin Securities

Jason Butler - JMP Securities

Simos Simeonidis - Cowen and Company

Graig Suvannavejh - MLV & Co

MannKind Corporation (MNKD) Q3 2013 Earnings Conference Call November 4, 2013 5:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation third quarter 2013 conference call. At this time, all participants are in a listen-only mode, and later, instructions will be given for the question-and-answer session. (Operator Instructions).

As a reminder, this call is being recorded today, November 4, 2013. Joining us today from MannKind are Chairman and CEO, Alfred Mann, President and COO, Hakan Edstrom and Chief Financial Advisor, Matthew Pfeffer.

I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead, sir.

Matthew Pfeffer

Good afternoon and thank you for participating in today's call. I will discuss very briefly our financial results for the third quarter of 2013 as reported this morning and then turn the call over to Hakan.

Before we proceed further, please note that comments made during this call will include forward-looking statements within the meaning of Federal Securities laws. It is possible that the actual results could differ from these stated expectations. For factors, which could cause actual results to differ from expectations, please refer to the reports filed by the company with the Securities and Exchange Commission under the Securities and Exchange Act of 1934.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 4, 2013. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

Turning now to the financials. The net loss applicable to common stockholders for the third quarter of 2013 was $50.8 million or $0.17 per share, compared with a net loss applicable to common shareholders of $42.8 million or $0.22 per share for the third quarter of 2012, primary factors from resulting in this change were an increase in research and development expense, due to an increase in non-cash stock compensation expense, partly offset by a decrease in clinical trial related costs resulting from the completion of the Affinity studies.

Also affecting this outcome was an increase in general and administrative expenses due primarily to increased stock compensation expense and professional legal fees in 2013, partially offset by non-recurrence of a litigation accrual made in the prior year.

Cash and cash equivalents were $93.8 million at September 30, 2013. Subsequent to quarter end, we received $45 million of proceeds from warrants exercise prior to their expiration on October 29, which represented substantially all of the remaining outstanding October 1.

Additionally, last week our earlier exercised December warrants resulting in the issuance of 30 million restricted common shares, exchange the cancellation of $78 million outstanding principle under the loan agreement with the Mann Group, leaving our principle balance outstanding of $41.6 million as of October 31.

Further, I will agree to extend the maturity date of the loan agreement with the Mann Group 2019 and increase our previous $350 million borrowing capacity to $370 million. This along with the Deerfield financing facility in May [10], which we are yet to trigger provides us the ability to repair convertible debt obligations on December 15 and fund our operations into 2014 towards FDA approval of partnership.

With that brief summary, I will now turn the call over to Hakan. Hakan?

Hakan Edstrom

Thank you, Matt. Good afternoon. Well, as you all probably already heard. We did this past week get acknowledge letter from the FDA regarding our NDA resubmission, in which the agency have signed a PDUFA date of April 15, 2014.

Based on some questions that we have received, there seems to be some confusion over the FDA procedures regarding the process and their acceptance over resubmission, so let me try to bring some clarity to this matter.

The recent communication from the FDA informed us of the target action date. The next checkpoint in the FDA review process is that internal finding is where will make a determination on the filing of the resubmission and any significant review issues based on their early evaluation of the NDA. We expect additional FDA feedback on our application shortly after the filing or as part of the Day 74 letter later thus everything is on track and proceeding according to the usual regulatory timeline. Should the 74 Day have significantly changed any of the planning assumptions for their efforts of submission, we will of course share such material information with you.

Our partnership process is underway, and we are pleased with the way Greenhill is managing our interactions with potential partners, and at this time, I cannot say anything more specific than that. In preparations for our [purchase] (ph) discussion and eventually the market launch of AFREZZA, we have recently updated our pricing research in the U.S. market meeting with payers representing managed care organizations, pharmacy benefit managers, and distribution companies.

In general, AFREZZA's clinical date and drug attributes were viewed very favorably. Payers told us that they believe the elimination of injection would be an important compliance advantage, and due to the chronic nature of the diabetes, they would welcome a product of increased compliance within the diabetic population.

Now the message from the payers if that they see [RRA] (ph) pen as the value and price comparator for AFREZZA based on the current safety and efficacy profile as well as their [perceived] (ph) advantages of convenience and even increased compliance associated with our mode of delivery.

This is important because pens already carry a price premium due to their convenient and compliance benefit compared to needle injections, and based on this research, we have a clear understanding of how we can drive the placement of AFREZZA on Tier 2 formulary status which is important to drive volume and revenue, and of course the most important value of AFREZZA is the far better kinetic profile leading to improved medical care and better outcomes. Since completing studies 171 and 175, we have also updated our market research into physician interest in prescribing AFREZZA, which could be the first ultra rapid acting insulin in the market.

In September, we commissioned a market research company to reach out to large sample of endocrinologists and primary care physicians to better understand the type of patients for whom AFREZZA would likely be prescribed. After showing physicians a full product description reflecting our recent clinical results and safety profile, physicians identified three likely patient populations.

The first one being Type 2 insulin naïve patients who are not adequately controlled on oral agents or GLP-1 analog. The second group was Type 2 patients on the long acting analog who need to intensify their insulin regimen to achieve glycemic control. The third group, Type 1 and Type 2 patients using prandial insulin who have a high risk of hypoglycemic events.

The vast majority of physicians that participated in this research, 86% to be specific, indicated that they were very likely to use AFREZZA in their practice. Physicians reported that there are many reasons why they would prescribe AFREZZA including the ability to achieve glycemic control without the use of injection, and the convenience of using the product, and most importantly, the faster onset of actions compared to other prandial insulins.

The patient types identified by prescribers represent very large segment of the diabetes population and confirms our belief that AFREZZA can meet the needs of so many patients with diabetes.

With that overview, let me hand the call over to Al. Al?

Alfred Mann

Thank you, Hakan and good afternoon, ladies and gentlemen. As we reported, the NDA for AFREZZA was submitted to FDA three weeks ago. The agency's review of this resubmission is now in process with a PDUFA date of April 15. The FDA's two-week action to set the PDUFA date is the agency's regular positive response at this point in today's regulatory process. Moreover, we believe that the NDA submission incorporates all the requirements to make the application complete. That then initiates the agency's six-month review, but does not at this point assess approvability.

The filing of resubmission was an enormous effort, and I am so very proud of our team that 16 months earlier, in June of last year had set the goal for filing in mid-October this year. The NDA package of almost 800,000 pages was actually electronically filed on October 13. That performance was incredible. After all, the Affinity trials were only actually just completed on June 17. In only five months, the evaluation of about 240,000 pages of new data was completed and results were incorporated in the approximately 2,000 pages of the five summary regulatory documents. Although, only the FDA can establish approvability, MannKind and our regulatory advisors are satisfied that the Affinity trials met their targeted primary endpoints and concur that the resubmission addressed all questions raised by the FDA in the two complete response letters.

As in earlier trials involving patients with Type 1 diabetes in Affinity 1, that is MKC 171, AFREZZA showed a substantially reduced incidence of severe hypoglycemia, less weight gain, and much better prandial excursions while also achieving the primary endpoint of non-inferiority and lowered HbA1c as compared to the rapid acting analogs, which provides today's best prandial insulin therapy. There were no related safety signals in any of the AFREZZA patients. We had reported similar findings in the past. Though those prior trials had been conducted with the MedTone device. The findings in this trial were with the Dreamboat inhaler and they also showed pulmonary equivalents of the HbA1c results with both devices, so that this study generated a bridge of the Dreamboat to the enormous amount of all the pulmonary safety data in the earlier trials.

In Affinity 2 or MKC-175, we observed that the addition of AFREZZA to a regimen of oral medication produced an average drop in HbA1c of more than eight-tenths of 1% demonstrating superiority compared to the oral-only group and with a P value that is statistically equivalent of a home run. These results indicated AFREZZA is an effective first insulin for patients with Type 2 diabetes who are insufficiently controlled with oral anti-diabetic agents.

Just to put the size of that segment of the diabetes market in perspective, there are currently more than 15 million insulin naive Type 2 diabetes patients just in the United States. About another half million of such patients each year convert from alternative drugs to insulin. So we think such patients under doctors would surely be very interested in the results of Study 175 probably leading to use even much earlier in Type 2 diabetes therapy.

In deed, far sooner disease progression, many earlier stage Type 2s ought to be better off with insulin than with alternative anti-glycemic drugs. After all, those other drugs are primarily utilized today because of the problems and disadvantages of current insulin products.

I would like to take a little time to talk about some fascinating new clinical results involving AFREZZA that reinforces significance of AFREZZA's greatly improved PK/PD. This study, not previously mentioned, is in the program permitted by the Juvenile Diabetes Research Foundation. The Sansum Clinic in collaboration with the University of California Santa Barbara is conducting a study of a closed-loop "Artificial Pancreas" in which the patients inhale a dose of AFREZZA at the start of each meal. A sensor-controlled, closed-loop insulin pump then adjusts the residual glucose level 24x7 largely eliminating excessive excursions.

The initial result of this study had been exceptional, glucose control was far better for those patients taking the meal-time AFREZZA dose. The resulting glucose pattern was actually very close to that for a healthy physiology. This study is continuing and the expected very positive results will be published in a few months.

Indeed the obstacle with earlier efforts at close-loop glucose-controlled has been the deficient PK/PD of current prandial insulin. AFREZZA offers a potential solution to that problem for bolus control and the pump clearly offers the best solutions basal control. These efforts in UCF beats the JDRF study should therefore demonstrate that in the foreseeable future, the best glucose control in Type 1 will surely be the combination of AFREZZA plus closed loop control of the overall residual glucose level. However, complexity and especially the high cost of pumps and sensors will likely continue to be deterrent to their widespread use other than a portion of especially committed Type 1 patients.

However, the combination of AFREZZA even with a simple low cost fix rate system basal delivery system would offer a valuable compromise that should provide quite excellent glucose control for most Type 1 and late Type 2 patients. We are considering such basal advice for use with the present or the substantial portion of diabetic that should really be on basal bolus insulin therapy. Of course, many early stage Type 2s could do very well with just having AFREZZA much earlier in disease progression.

As we await completion of the FDA review of our NDA resubmission, we are planning a few marketing trials designed to better illustrate very important additional advantages of AFREZZA for prandial glucose control with even less hyperglycemic and throughout the entire spectrum of diabetes. All of the delay of over three years due to the January 2011 CRL has been very costly. We are now seeing the light at the end of the tunnel.

The company will now be concentrating mostly on supporting the FDA's review of the AFREZZA NDA, preparing for pre-approval inspection and planning for commercial launch. As Hakan noted, the process for selecting a sales and marketing partner is well underway and is being coordinated by Greenhill, our partnership advisor. But we are not yet prepared to suggest a date for completion.

The clinical trial program has been extremely extensive and has already shown important and better benefits with AFREZZA. Let me then take a few moments now to summarize some interesting characteristics and advantages about AFREZZA that have been demonstrated so far.

One, the delivery device is tiny, easy use and discreet.

Two, the powder is inhaled and there is no need for any prandial injections.

Three, dosing is linear and not as critical as in current practice.

Four, delivery is far more efficient than with any other effort in inhalation of insulin.

Five, the reduction in HbA1c levels have already been proven, along with a reduced risk of hyperglycemia and less weight gain than with rapid-acting analog prandial insulin.

Six, the clinical results in insulin naive Type 2s create a potentially huge market opportunity for AFREZZA. Study 175 shows that the addition of AFREZZA offers superior HbA1c control in early Type 2 patients failing an oral anti-glycemic.

Seven, the only real side effect seen with AFREZZA inhalation in some patients is just a single non-productive cough in reaction to the tickling sensation when first inhaling some powder. For those affected patients, this minor problem is really just a single cough, does not often continue for more than few doses. In the trials, only about 2% to 3% patients discontinued AFREZZA due to cough.

Eight, the powder quickly passes the arterial blood between 12 to 15 minutes with very little remaining in the lungs after two and half to three hours, and no accumulation has been seen. This PK/PD of AFREZZA much more closely mimics normal pancreas physiology than does any insulin in the market today or to our knowledge in development and that, by the way, is the most significant of all features.

Nine, in extensive studies, for as long as two years and for some patients for as long as five years, we have seen no increased cardiovascular or cancer risk and only a tiny insignificant reduction of lung function. That tiny difference in PFT is reversible on sensation and is probably just a reaction of the powder before the test rather than due to any real tissue impact.

In the extensive clinical program, there has been nothing to raise any subjective question whatsoever about safety. Based on that, AFREZZA should be viewed as a safe and superior anti-glycemic for use in early phase Type 2 and as a critical, best and safest prandial influence in Type 1 and later Type 2.

Moreover, our patient have been so very enthusiastic about AFREZZA. In Study 171, we asked patients to respond to a quality of life survey. AFREZZA patients reported a substantial improvement in their self reported health status to a significantly greater extent than that reported by the insulin aspart group. Interestingly, I expect patients will widely help to promote enthusiastic and rapid widespread commercial acceptance of our AFREZZA.

Of course, only time will prove this to be so, but I have and I am continuing to put my money in favor of the science and the excitement that we see with our patients and their commission. As Mann reported, I have just exercised my warrants to purchase three million shares of MannKind common stock and have also extended my loan to the company.

With all of that then, let us open the call for your questions. Operator?

Question-and-Answer Session

Operator

Yes. Thank you very much. We will now begin the question-and-answer session. (Operator Instructions). We have several questions here. The first one is from Cory Kasimov. Please go ahead, Cory.

Cory Kasimov - JPMorgan

Thanks for taking questions. First of all, has the FDA given you any indications at this point whether or not they may want to host a panel?

Alfred Mann

No. There has been no indication at this point in time. The earliest time we would expect to see that if again against our belief right now would have to look probably be conjunction with this 74 Day letter.

Cory Kasimov - JPMorgan

Okay. Then I understand you don't want to get into specifics about a partnership, but are you at this point able to say whether you would expect this happen before or after approval?

Alfred Mann

No. I would not make a commentary on that one, because -- and then I am speculating.

Cory Kasimov - JPMorgan

All right, I can appreciate that. Then maybe let me ask it a different way. If you don't have a partner preapproval, would you launch yourself without a partner?

Alfred Mann

Most likely not. We have alternative for that situation, so we would look to which would not necessarily involve a self launch, which certainly would require significant funding availability.

Cory Kasimov - JPMorgan

Okay. Then lastly a quick modeling question for Matt. Can you just give us your current fully diluted share count?

Matthew Pfeffer

As of today?

Cory Kasimov - JPMorgan

Yes. Just with the different warrants and things like that that have been exercised with all the financials that you have talked about, if you can give us the fully diluted share count as of today would be helpful.

Matthew Pfeffer

Okay. Yes, because it's changing pretty rapidly, so I understand your confusion. We did finish the quarter with roughly 310 million shares, but we did have some17 million warrants exercised post that and then 30 million shares to Al, so if you add all those up, it comes to about $357 million technically, I think the shares to Al, while he exercises, warrants haven't actually been issued to him, but it will be any moment now, so I would count those.

Cory Kasimov - JPMorgan

Alright, so 357. Great. Thank you very much.

Operator

Our next question here is from Steve Byrne. Please go ahead, sir.

Steve Byrne - Bank of America

Yes. Just continuing with those financial questions, what are the remaining warrants that are still outstanding?

Matthew Pfeffer

Well, just the warrants from the February issue that we did last year, so I don't know the exact number.

Steve Byrne - Bank of America

[40 some] (ph) million. Alright.

Matthew Pfeffer

Yes, we had -- It's in that range. We have said some of those exercises, well, although not a dramatic number of them, and essentially all the warrants obviously for October were exercised. There were maybe a couple of thousands. I think the people just lost track of them somehow, but no material amounts went unexercised.

Steve Byrne - Bank of America

Okay. The $80 million of Deerfield loan, where is that on your balance sheet?

Matthew Pfeffer

You will see it more obvious in the Q, but in the summary balance sheet it's a little hard to spot, because it is broken up into pieces. The accounting for the Deerfield transaction is quite complex, so it's in various pieces. You will see a little bit of it in the other liabilities number because of the way it's being treated and our need to bifurcate the loan into a couple of pieces relating to the milestones and the body of the loan. The rest of it is all sitting in current liabilities at this point. We don't really think of it as current, but technically that's the way it's being treated.

Steve Byrne - Bank of America

Okay. That helps. Do you expect to have any of the 171, 175 data presented at a medical conference prior to your PDUFA date?

Alfred Mann

I don't know whether the ACE maybe meeting prior to a PDUFA date because the ADA, ASD of course is following the PDUFA date, so there maybe a couple of medical meetings, but I don't have the timing of those meetings in my head at this point in time.

Steve Byrne - Bank of America

Then just lastly the status of your idled manufacturing lines in Danbury?

Alfred Mann

We don't have any idle lines. We do have two packaging lines that basically have been delivered or are about to be installed as we move forward here, get ready for commercial readiness, but the line that we have in right now is certainly operating as certainly supportive of all of the clinical trials. So we don't have any idle capacity as such.

Steve Byrne - Bank of America

Okay. What I am referring to the other two, so you could have all three online by what, end of 2014?

Hakan Edstrom

Absolutely. I would say by mid-2014. Our plan is to certainly be commercially ready, say, within six months of approval.

Steve Byrne - Bank of America

Okay. Thank you.

Operator

We have a question here from Keith Markey. Please go ahead, sir.

Keith Markey - Griffin Securities

Yes, thank you for taking my question. Just wondering if you could add a little bit of information from the new clinical trial that you are running that compares or adds AFREZZA on to the closed-loop insulin pump. For instance, how many patients are involved? What the length of that trial is? And whether those pumps or closed-loop systems are already commercial in the market?

Hakan Edstrom

We are not really that familiar with that trial, Keith. It's being done by Sansum Clinic under control of the JDRF, but we do have some of the early data. All we know is that we are supplying AFREZZA for meal-time boluses and it is making a huge difference in the results of the patients.

Keith Markey - Griffin Securities

Alright. That's to be expected, I guess.

Hakan Edstrom

(inaudible) details of the trial are.

Keith Markey - Griffin Securities

Okay. Can you tell us approximately when the data from that study will be available?

Hakan Edstrom

I thought it would be available in just a few months, but one of the key managers at Sansum is changing his position and leaving the clinic. So I don't know what the impact of it is going to be.

Keith Markey - Griffin Securities

Okay, thanks, and then could you just tell us whether or not the risk management plan that you had in place and at least some of the negotiations that you have done already with the FDA previously regarding the labeling of your drug aren't going to be able to be carried forward into the discussion presently?

Alfred Mann

That is our expectation. We certainly went into the clinical trial program with what we believe a clear understanding what the FDA were looking for and that has certainly been accommodated in the execution of the trial and in the submission document. So at this point, I have no indication that that would kind of point in any different direction.

Keith Markey - Griffin Securities

Okay, great, and then one last question. In your discussions with the insurers, pharmacy benefit managers and such, I gather that they are, at least, receptive to a premium price relative to many of the other insulin pens on the market. I was wondering how do you envision the price of AFREZZA comparing with say NovoLog?

Hakan Edstrom

As indicated, if you look at the RRA pens that are out there today, they I would say on average have about a 20% price premium over, say, injectable insulins and based again on the safety profile and the efficacy profile and the convenience that's perceived in conjunction with AFREZZA plus the fact that you avoid the cost on needles, that's for planning purposes our assumption right now that we will be in the same range as RRA pen which is at a significant premium to say injectable insulins.

Keith Markey - Griffin Securities

Very good. Thank you.

Operator

And next we have Jason Butler online with a question. Please go ahead.

Jason Butler - JMP Securities

Thanks. My questions have been asked.

Operator

Thank you very much. Here we have right now, Simos Simeonidis. Please go ahead.

Simos Simeonidis - Cowen and Company

Hi, guys. Thank you for taking the questions. If approved, how quickly do you believe you could launch AFREZZA, and how quickly could manufacturing be ready, and assuming you have a partner, what's the fastest you could be on the market?

Alfred Mann

Well, manufacturing will be ready at a moderate rate, almost by around the time we are approved but it will probably be a few months before we actually undertake a major marketing effort.

Simos Simeonidis - Cowen and Company

That would depend on how quickly you get a partner?

Alfred Mann

Certainly that will have a major impact. The launch will certainly be a partnership with where it is it is going to be our commercial marketer in the United States.

Simos Simeonidis - Cowen and Company

Okay. Al, Hakan mentioned earlier that in the situation where you haven't secured yet a partner, you have a potential fallback scenario. What exactly are you referring to?

Alfred Mann

I think you need to ask him that. I don't know what do referring to?

Simos Simeonidis - Cowen and Company

No. That's what I was trying to ask.

Alfred Mann

We have a number of people very interested in our product, a lot of regional partners that we have been putting off frankly waiting until we establish a plan for the United States.

Hakan Edstrom

Yes. That's basically what I was referring to. I mean compared to one global partner, there are other opportunities that we could utilize if we want to get out into the market without having to commit our own resources and utilize the time to the internal infrastructure to be able to afford and take on the capacity for a MannKind-sponsored launch, so that was the idea between the continued plan that we would have.

Alfred Mann

We have several very, very aggressive potential partners and quite a large number of others that have enquired, but we haven't really followed up with them.

Simos Simeonidis - Cowen and Company

Al and Hakan, you are referring to regional partners' discussions versus the global partnership, which is your first preference.

Alfred Mann

That's correct.

Simos Simeonidis - Cowen and Company

Okay. Finally a question for Matt. Matt, what's the remaining under Al's line of credit? I saw in the 8-K this morning it was increased from $350 million to $370 million, but what's the amount that's remaining under the LOC?

Matthew Pfeffer

I don't have the exact number in front of me, so I think it's little over $30 million which is why we added some extra headroom in there [expanded] the line a bit.

Simos Simeonidis - Cowen and Company

It's $30 million plus the $20 million that was expanded?

Matthew Pfeffer

That would include the $20 million, so we added the $20 to give us a little more room just in case. Not that we expect we will needed, but you never know. At the very minimum, frankly, we would expect to continue to capitalized interest that would otherwise be payable under the loan into the principle, so we have want to leave ourselves some working room in there and I Al - to let us to that.

Simos Simeonidis - Cowen and Company

Okay, great. Final question for you, Matt. How should we think about spending for next year? Now that the trials are done, can you talk about that at all?

Matthew Pfeffer

Yes. I can. I have been fairly very consistent in this. I mean, I thought you have broken a record to someone having seeing $10 million to 12 million a months for as long as in month for as long as I can remember in it. It's sort of remained true. Sure. The clinical spending has decreased and we saw that in this quarter as well, but to a great extent it's being offset by increases in spending in other areas largely in preparing for commercialization and launch of the product, so you will see I have had a lot of people call me about the large number of headcount we have or recruiting in Danbury and they think that as a very bullish thing, which I suppose it is.

We do think we are going to be successful and we need to be prepared when we get there, so our cash burn in this quarter, I mean we had a fair amount of non-cash expenses, but it still remains like squarely in the middle of that range at about $11 million a month. We have burned about $33 million in the third quarter of '13 of actual cash. I think it's going to stay more or less constant at that level for the time being, so we will have some ups and down, we talked about the equipment we are putting into Danbury to rates that's already been paid for, but there is still some bills coming due so we need to get ready to launch this product and make it the success it can be and that requires some cash, so I am going to project it's going to stay more or less flat with a few blips here and there.

Simos Simeonidis - Cowen and Company

What would MannKind's responsibility be? Let's assume you have a global partner, what would your responsibility be in terms of spending on the commercialization part?

Matthew Pfeffer

That remains to be seen on under the terms of the agreement, so I am not taking that into the consideration. By the way my projections, I guess, I should have made that clear, that could obviously change cash burn pretty substantially and frankly we expect it would but I think it would be premature to speculate on the terms of that kind of a partnership.

Simos Simeonidis - Cowen and Company

Okay, great. Thank you for taking the questions.

Operator

And here online, we have Mr. Graig Suvannavejh. Please go ahead, sir.

Graig Suvannavejh - MLV & Co

Great, thank you very much and thank you for taking my questions. I got four, if I could. First, if you could remind us what are the next triggers to release the balance of the Deerfield financing?

Matthew Pfeffer

Sure. So the next one is not really a trigger, per se, but just the passage of time. It will trigger just prior to the due date for the 2013 convertible instrument. So we did that on purpose to allow us to have a little extra cash to the extent we wanted to pay that off at that time. So that will come due in mid December. The fourth and final tranche under the Deerfield financing does have a specific trigger. That would be approval of the product. So that was a time to handle potential launch expenses and so forth. So they were all done with a specific reason in mind and those are the remaining two.

Graig Suvannavejh - MLV & Co

Okay, great. Thank you so much. My second question just has to do, if you could just remind us of the scope and then maybe the specific cost, if you have them, of the additional marketing studies that you are planning to initiate to support, I guess, the competitive profile or the marketing aspects of AFREZZA ?

Alfred Mann

Those trials are not really designed yet. They are just in process.

Graig Suvannavejh - MLV & Co

Okay, great. And just as it relates to the 74-day letter, is that something you think you would announce in terms of a press release, in terms of the contents of what might be in that letter to the public in terms of our press release?

Hakan Edstrom

Well as I said, normally the expectation would be that after confirmation of what's been forthcoming already from the FDA, if there is certain material event there, if there, for instance would be a request for a advisory board meeting, we would certainly make that information public because that's material information. So I would say, if the content is what we expect to be not necessarily a press release, we might certainly mention in, maybe in an investor conference or anything like that, but again if there is material information, we would certainly would share it with the shareholders.

Graig Suvannavejh - MLV & Co

Okay, great. Thank you, and then my last question just has to do with some of the market research that you had conducted over the past couple of months and it was impressive that you had 86% of physicians that they had indicated that they were likely to prescribe it. I was wondering if you have any details around the 14% that did not have the same answer and what the reasons might have been for that.

Hakan Edstrom

No, I do not. I have to say this was provided to me by my staff on the commercialization side. So I couldn't tell you what the 14%, if that represent a non-use or a maybe, I mean the positive part here was that a great majority and these were several hundreds primary care physicians and in excess of 100 endocrinologists. So it was a good size sample but I do not have the specificity on the 14% for you.

Graig Suvannavejh - MLV & Co

Okay, great. Well, thank you so much for taking my questions. And good luck to you.

Matthew Pfeffer

Thanks, Graig.

Hakan Edstrom

Thank you.

Operator

And we have a final question here from Keith Markey. Please go ahead sir.

Keith Markey - Griffin Securities

Okay, thanks. Just a follow-up question on the responses that you had from the partners that you have being talking with. None about the partnering, per se, but just simply, can you tell us a little bit about the information or feedbacks that you have been getting from them in terms of what they like about the drug or how they may potentially position it in terms of, for instance, whether they like to especially focus on the convince or potential for increased compliance?

Hakan Edstrom

Well, certainly the convenience. We do not emphasize that part of it. We emphasize the PK/PD profile and the better quality of care is coming from that. If anything that convince is really translated into a compliance to benefit with a product, but then because of the type of partner weather they are involved in, say, an insulin product or in diabetes, the question is vary all over the broad. The only thing we can say is that certainly in general they do understand why the product is different, how it's different and how it could benefit diabetes patients going forward.

Operator

At this time, I am showing no further questions. Mr. Edstrom, do you have any final remarks?

Hakan Edstrom

Yes. With that, what I would like to do on behalf of the management and all of the people on the phone, wish Al a happy birthday. He's currently with us from Hawaii, so he is there on a well deserved vacation retreat, so happy birthday Al.

Alfred Mann

Thank you very much.

Hakan Edstrom

Thank you for the call.

Alfred Mann

Thank you all.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation and you may now disconnect.

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