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Executives

Alfred Mann - Chairman of the Board, Chief Executive Officer

Hakan Edstrom - President, Chief Operating Officer, Director

Matthew Pfeffer - Chief Financial Officer, Corporate Vice President

Peter Richardson - Corporate Vice President, Chief Scientific Officer

Analyst

Simos Simeonidis - Rodman & Renshaw Llc

Steve Byrne - Bank of America

Tom Russo - Baird

Michael Tong - Wells Fargo Securities, Llc

John Newman - Oppenheimer

Jon Lecroy - Hapoalim

Doug Dieter - Imperial Capital

Presentation

Mannkind Corp. (MKND) Q2 2010 Earnings Call August 2, 2010 9:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Mannkind Corporation’s second quarter 2010 conference call. At this time all participants are in a listen-only mode. Later instructions will be given for the question-and-answer session. (Operator Instructions)

Joining us today from Mannkind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; Chief Financial Officer, Matthew Pfeffer; and Chief Scientific Officer, Dr. Peter Richardson.

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

Matthew Pfeffer

Good morning and thank you for participating in today’s call. I will summarize our financial results for the second quarter of 2010 as reported earlier today. Next, Hakan and Peter will provide an update on key events and finally Al will comment on the current situation and our outlook going forward. We’ll then open up the call to your questions.

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, August 2, 2010. Mannkind’s management undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

Let us start with the financials. For the second quarter of 2010, total operating expenses were $37.4 million compared to $53.4 million for the second quarter of 2009, and $40.6 million for the first quarter of 2010. R&D expenses were at $26.2 million for the second quarter of 2010, compared with $39.8 million for the second quarter of 2009 and $30.5 million for the first quarter of 2010.

The decrease in R&D expenses for the second quarter of 2010 compared to the same quarter in 2009 was primarily due to decreased costs associated with the clinical development of AFREZZA, as we filed our NDA in March of 2009. The decrease in R&D expenses this quarter from last quarter was primarily due to timing of insulin purchases.

General and administrative expenses were $11.2 million for the second quarter of 2010, compared to $13.5 million for the second quarter of 2009, and $10.1 million for the first quarter of 2010. The net loss applicable to common stockholders for the second quarter of 2010 was $42.3 million or $0.37 per share, compared with a net loss applicable to common stockholders of $55.6 million or $0.54 per share for the second quarter of 2009.

Our cash, cash equivalents and marketable securities at the end of the quarter totaled $30.8 million. Our cash in hand and remaining credit facility from Al amounted to $138.8 million as of June 30, 2010. Our cash burn in the quarter, again slightly decreased with $37.8 million spent in Q2 compared to $41 million in Q1. With our cash-on-hand and the amount still available under the credit facility from Al, we believe we’ll be able to fund our operations through the first quarter of 2011.

We continue to asses our operational plan for the balance of 2010, in order to find ways of extending our cash runway further into 2011.

With that I would now like to turn the call over to Hakan Edstrom. Hakan?

Hakan Edstrom

Thank you Matt. Good morning. Well, as you can imagine, the time between the receipt of the complete response letter in March and the end of the second quarter’s been a very busy time for our organization. Not only did we digest the information provided in CRL, but we prepared for and had the meeting with the FDA on June ’09, and then addressed the issues put forward by the FDA in our response. That was submitted to the FDA on June 29, and as you know our submission was accepted by the FDA and given a December 29, 2010 PDUFA date.

Our clinical, regulatory, CMC and manufacturing staff have done an outstanding job on analyzing the issue, addressing the outstanding questions and putting together our responses into an amended NDA.

The June 9th meeting with the FDA was an important milestone for us. It provided us the opportunity to better understand the issues that was raised, seek clarification and provide further insights into our NDA. Leaving the meeting with the FDA, our team was so pleased and motivated and encouraged that we were able to respond to the FDA in a timely manner and fortunate, from our extensive database we had most of the answers either already available or almost complete.

The fact that the amended NDA was classified as a Class 2 resubmission with a six-month review time put us right where we had hoped, that would be at this point, potentially gaining approval of AFREZZA, including the next generation inhaler at the end of 2010.

We actually may not have reached this point using our initial pathway of approval, first with the MedTone based version, followed by supplemental NDA to seek approval over the next generation device. With the new pathway, we may have achieved this result with more certainty. We will certainly be working closely with the FDA going forward, diligently responding to questions or providing supplemental information as necessary, in order to complete this final stage of review.

While I obviously will be cautious regarding comments on our partnership discussion, I can say that the discussions have already commenced, following the acceptance of the amended NDA and that several new entrants, including both global and regional players have also emerged. While we still favor a global agreement, a number of regional players are demonstrating significant interest.

I believe that the CRL and the acceptance of the amended NDA were helpful in promoting resumption of partnership discussions, since the issues are now well defined. Whether it will be enough to consummate the deal prior to approval with acceptable economics [ph] remains to be seen; however, the interest is certainly there. It’s clear that AFREZZA will be filing a full unmet need in diabetes care by offering comparable HbA1c control to existing insulin therapy, but with significant benefits regarding postprandial glucose excursion, fasting glucose control, hyperglycemia and weight gains.

Well, with that quick overview, I’m going to ask Peter to give you an even greater insight into the June 9 meeting with FDA and the activity in preparation for that meeting. Peter, please.

Peter Richardson

Thank you Hakan and good morning. As Hakan has indicated, the past quarter has indeed bee a very busy time to the scientific and regulatory team at Mannkind, as we successfully filed our response to the questions raised by the FDA in the complete response letter.

To remind you, there were three substantive areas for which the agency raised questions; clinical utility, or where does the project and the product fit into the therapeutic armamentarium with patients with diabetes; the assay methodology used in our study to demonstrate bio equivalency of the inhaler used in our pivotal clinical studies and that to me marketed; and finally, technical aspects of the requirements of the device, such as how often is it changed and how we mark the amount of drug and identify [ph] each cartridge.

As we indicated to you in our previous updates, we are confident that we will be able to address these on the basis of data we already had available, or in the process of generating as part of our previously agreed development of our next generation device, formerly known internally as Dreamboat.

We were able to have a very helpful and productive discussion in the meeting with the agency on June 9, during which we were able to establish that the data would be sufficient for them to resume the review, based upon the additional clinical data from Study 117. We also discussed our study comparing the original inhaler to our new next generation inhaler, demonstrating bioequivalence, using both an ElectroChemiLuminescence assay and Radioimmunoassay.

We’re able to show the agency that since this is a systemic peptide [ph], we can make absolute measurements in venous blood and compare them directly in subjects with a range of doses. This is done my maintaining the delivery of the same amount of powder in the range that it is absorbed, whilst reducing the amount that’s not absorbed, thus reducing the total amount of powder required in each cartage by 33%. This of course is reassuring in terms of safety and tolerability.

Indeed, the data from our studies looking in detail at the airway reactions with powder, show further reduction in the small pulmonary function changes we’ve earlier described with the original inhaler. Studies of the performance of the new inhaler in the clinic showed that it can be safely used by patients with no formal training, and that by supplying replacement inhalers every two weeks, there is no need for washing. In addition, we were able to justify [ph] to the FDA that we color code each cartridge pen and mark it with the name AFREZZA and the dose.

Because we had all of these data in hand, apart from the further assay of the samples collected on bioequivalence study, we were able to expedite the preparations for resubmission following the meeting, and filed a fully electronic submission on June 29. Subsequently the agency confirmed and accepted the resubmission, considering this a complete response, this category II, with a PDUFA date of December 29 this year.

I’m delighted with my team’s performance in responding so rapidly to the questions and feel that we have a strong set of answers. Furthermore, I’m pleased that we are now on course for the next generation device, which offers such significant benefits.

The new device in the studies are able to address the technical aspects with the complete response, it’s clear that this evolution is the optimal approach of bringing our therapy to market in the most effective way and the shortest possible timeframe. In order to do this, we’ve in essence simplified the old device to its very basics and have not changed in any way the powder formulation or the amount of fine particles absorbed.

Because there has been considerable interest in bioequivalence, I will go over in some detail the results of these studies, showing that we have met the FDA established definitions, using two well validated assays as agreed with the agency. Study 142 has demonstrated the inhalation system used in Phase III trials and generation two inhalation systems to be bio-equivalent.

Bioequivalence is key to linking the pivotal clinical data from the MedTone inhalation system to the to be marketed generation two inhalation system. The study followed the same vision principles that were used to the previous bioequivalent study between the clinical Phase III MedTone inhaler Model C and the previously to be marketed MedTone inhaler Model D, as submitted in the original NDA.

The gen 2 inhalation system delivers the same fine particle doses in the MedTone C inhalation system but with a lower cartridge fill, due to better degeneration [ph] of the powder and better cartridge emptying. The bioequivalence study, MKC TI 142, used the ElectroChemiLuminescence assay and a fully validated radioimmunoassay , thereby meeting all of the requirements of the bioanalytical assays used in bioequivalent studies.

AFREZZA comprises regular human insulin, absorbed on to carrier particles composed of fumaryl diketopiperazine, FDKP. By equivalence, the two inhalation systems measuring insulin levels ensures that the efficacy will be the same, while equivalent exposure measuring the excipient FDKP, ensures that the fine particle exposure to the lung is the same, therefore showing the same systemic exposure in insulin to the two inhalation systems is key to linking the efficacy data. And furthermore, demonstrating bioequivalence in insulin and the equivalent to FDKP exposure combined, is key to linking permanent safety data from the extensive MedTone C Phase III program to data collected from the studies using the two marketed generation two inhalation systems.

In summary, as this inhalation system is designed for the delivery of the systematically active drug, our development approach for the generation two inhalation system has been to match all performance characteristic that could affect the systemic exposure. As we can likely asses the systemically active levels of insulin and the excipient FDKP in the circulation, we’ve been able to develop a product that is bioequivalent to the one used in all of our Phase III clinical studies.

The primary objective of this trial is to show that the calculated confidence interval for the ratio of the average log transformed insulin area under the curve zero to 120 and Cmax for the 20 unit cartridge using the generation 2C [ph] inhaler, and the 30 unit cartridge using the MedTone inhaler, fell between the FDA standard limits of 0.8 and 1.25. Insulin exposure was evaluated throughout the study by comparing AUC 0-120 and Cmax determined from the C-peptide corrected insulin concentration.

The secondary object of this study, was to show that the calculated confidence for the ratio of the average log transformed insulin AUC 0-120 and Cmax for the 20 unit cartridge using the generation 2C inhaler and two 10 unit cartridges using the gen 2 inhaler, fell between the 0.8 and 1.25 range. In addition, confirmatory pharmacokinetic and bioequivalent analysis were conducted using uncorrected or lower insulin levels, and baseline corrected insulin concentrates to all comparisons.

The 90% confidence intervals for the standard bioequivalent parameters, maximum observed serum concentration Cmax, and the area under the serum concentration time curve from 0-120 minutes post those or AUC 0-120 ratios, fell entirely within the required 80 –to 125% interval.

The ratio of the area under the curve is actually 1.06, with confidence limits of 0.981 to1.145, and for Cmax was 1.082 with confidence margins of 0.992 to 1.180. Similar results were also seen with the required variability and with the RIA and in each of the secondary analysis. Further details of these studies will be available on our website shortly following this call.

It’s very gratifying that the data clearly indicates that in our in vitro studies and our initial design confirmation studies are conformed in this very carefully conducted bioequivalent study.

In addition to these important data, we’ve been able to present the results from our recently completed Study 117, which was conducted in patients with Type 1 diabetes, where we aim to show non-inferiority in HbA1c, whilst reducing hyperglycemia using the dosing regimen.

We announced these results a couple of months ago. Although not a long [ph] study, this is a definitive study which was carefully conducted in several expert centers in the United States. The power is appropriate for the question we asked, it’s over 90%, and the duration is sufficient to meaningfully [ph] add changes in HbA1c.

We met the primary end point and non-inferiority HbA1c is demonstrated. High precaution patients reached A1c levels of less than 6.5%, and significantly lower levels of fasting glucose were reached in the AFREZZA treatment patients, even the doses of background insulin was similar in both groups.

Postprandial hyperglycemia excursions were significantly reduced at one hour, two hour and was measured overall in the meal challenges, and importantly significantly lower rates of hyperglycemia were recorded in AFREZZA treated patients, independent of their trial A1c level at end point.

Although a matter for review by the agency, we believe this data will be helpful in further establishing the utility of AFREZZA, as an option for physicians looking to better manage their patients with diabetes and can provide important benefits, not only in terms of glycolic targets, but doing so more safely in insulin regimens used widely today.

Now, let me turn the call over to Al Mann, who will provide better color on some of these filings. Al.

Alfred Mann

Thank you Peter and good morning ladies and gentlemen. This past quarter was momentous for Mannkind. We just received a complete response letter in March raising several questions to be resolved before approval.

The CRL invited us to request a meeting with the agency, that was ultimately scheduled for June 9. Our objective in that meeting was to gain clarity on the path to approval of AFREZZA. The meeting with the FDA was very positive and we believe we have addressed all the questions raised in the CRL and that we’re now on a path to approval of AFREZZA.

We told you we would file our amended NDA before the end of July. We actually completed preparation and submitted our response early on June 29. This document incorporated additional data from Studies 117 and 159, the data package from the studies related to the protocol for our next generation inhaler and responses to the several other questions raised in the CRL.

More importantly, the FDA accepted that filing as a Class II complete response submission and set a PDUFA date of December 29. The agency has not required any further studies. There are just a few subjects to review in the file of only about 19,000 pages, compared to 521,000 in the original NDA. We believe that our resubmission addresses the CRL in its entirety and we look forward to working with the FDA for timely approval.

That said, we cannot predict what action the agency will take or whether the action will come before or after the PDUFA date. Given the enormity of issues before the FDA, we are very encouraged that the agency has moved forward so expeditiously and constructively with the AFREZZA resubmission.

The PDUFA schedule is more or less inline with our earlier expected approval for the commercial product using the next generation inhaler, one that we have been proceeding along path and involved approval of AFREZZA using the MedTone device, followed by a supplemental NDA just seeking approval of the next generation device. Thus we have seen no direct impact on our overall regulatory timeline or commercial launch.

We appreciate our relationship and the collaboration with the FDA, and now we are looking forward to launching AFREZZA, what today is a fully met need in diabetes therapy. Our extensive clinical program has demonstrated that AFREZZA significantly improves postprandial excursion, lower type of ischemic incidents, lower fasting glucose, lower weight gain -- probably it’s weight neutral and mimics normal curtailment of gluconeogenesis.

Moreover, we have carefully evaluated all adverse events and have presented to the agency an extensive safety package updating the safety experience, and showing no pulmonary damage or clinically significant pulmonary effect, no cardiovascular impact and no indication of any cancer risk. The only adverse effect likely associated with AFREZZA, is mild to moderate coughing in early use with some patients, because people are not accustomed to the feel of inhaling any powder, not just AFREZZA. This effect moderates with use and less than 3% of patients find it objectionable enough to discontinue.

Our study 117, clearly demonstrated the benefits of AFREZZA. Actually, the data is very persuasive and emphasizes the need and the opportunity for better prandial insulin. The FDA has accepted study 117 for a detailed review, and it appears that this study resolves any concern raised by the statistical analysis of study 009.

We have shown at present the non-inferior in reducing HbA1C, compared to the very best prandial insulins available today, and also that it provides many other very important advantages over all current insulins.

We believe these other advantages, even with only comparable effects on HbA1c, will likely propel AFREZZA to become a major antiglycemic drug, but AFREZZA is really much more than non-inferior in HbA1c and we see a great opportunity to get back some trials corrected to demonstrate even greater benefits that are possible with AFREZZA. We will therefore be turning our attention to clinical studies that will show the unique and important advantage of this therapy.

We want to conduct several new trials to confirm in additional patient populations, that without complex dose titration, AFREZZA can provide potentially excellent HbA1Cs as well as superior postprandial glucose control, and lowering fats and glucose levels with weight neutrality, and almost no risk of hypoglycemia from this drug. I believe we’ll be able to demonstrate that with AFREZZA, a much larger percentage of patients can reach HbA1c below6.5%. Of course, that is just my projection and new trials that we’ve directed to support these predictions.

I am confident we will be able to provide a vision into the future, in which therapy for Type 1 diabetes will be simpler and more convenient using AFREZZA, than with rapid analyze and will enable most patients to safely achieve much lower HbA1cs. I also look forward to trials of AFREZZA along with a basal pump or with better basal insulins are expected to become available in three to four years, so that we can further demonstrate the superior advocacy and effectiveness of AFREZZA.

For Type 2 patients, the path is even simpler. What we saw on study 119 and other supporting studies, that there is really no need for titration for meals with carbohydrate content from zero all the way to 150 grams. For more grandiose meal or for meals that digest very slowly, a second dose of AFREZZA maybe taken at the end of the meal and that’s probably all that’s needed to yield post-prandial excursion within the ADA’s target range and also it will enable better HbA1C.

The important question for Type 2 is at what point in disease progressions should AFREZZA be started. This query is all the more relevant given the recent concerns about Avandia and possibly entire class of TZDs, as well as side effects and safety concerns with the other antiglycemic drug. After all, insulin is nature’s primary antiglycemic drug, but which class of influence should be the first influence.

Loss of prandial control begins many years before the loss of basal control. Lantus has become so successful as the first insulin used in Type 2 diabetes is really because of the problems with the today’s prandial insulin, and this advantage has been effectively marketed by sanofi-aventis, but AFREZZA does not have the deficiency of excessive persistence and hyper insulin anemia seen with today’s prandial insulin; then there are other advantages as well. I predict that with little of any titration in early Type 2, AFREZZA will prove to be very effective producing low HbA1Cs, as well as better postprandial level and with a very low risk of hypo.

We must not construct studies that I believe should go far in demonstrating these benefits and distinguishing AFREZZA as a major tool in glycemic therapy, but those studies are for the future and now we need to concentrate on what we have established, and our priority must be to gain approval with the data now available.

We will continue working closely with the FDA to bring AFREZZA to the market, using an enormous body of data that’s already been compiled. Based on this data, I believe AFREZZA will fill, what today is the poorly met need and the later trial would be directed towards expanding the label with new data.

Now that we have much more clarity regarding the regulatory path, we are moving forward in signing the commercial launch. Toward this end, a partnership is surely the paramount concern for most of you on this call. All I can say now is that we have just begun to resume launch discussion, with a number of leading partner contenders to commercialize AFREZZA.

In addition, as Hakan said, some new contenders have vested interest in exploring the AFREZZA opportunity. We are considering creating a formal process in order to manage the discussion with multiple parties. We cannot say more about partnership talks at this time, but we will certainly announce any significant development when appropriate.

I am enthused that the data I am seeing and the positive progress with the FDA and at the interest from our potential partners. I must say that I personally am more confident than ever of the success of AFREZZA. I look forward to the excitement of the launch and seeing how AFREZZA will improve diabetes therapy.

Thank you all for joining us today. We now like to open up the call for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Simos Simeonidis from Rodman & Renshaw. Go-ahead, your line is open.

Simos Simeonidis - Rodman & Renshaw Llc

Could you tell us if you received the minutes from your meeting with the FDA, and if so if you’ve been able to share them with your potential partners?

Alfred Mann

We have not received the minutes yet from the FDA.

Simos Simeonidis - Rodman & Renshaw Llc

Okay. In terms of your discussions on the REMS program with the agency, what is the latest update or status of these discussions?

Peter Richard

Yes, Simos, I think that we are going to get it before in terms of the REMS discussion. We’ve had some feedback and discussion in the original review and complete the small slider [ph]; there were no significant changes to that. We submitted again our proposal for the REMS program, which has not significantly changed from that which we had previously and we anticipate that there will be further discussion towards the end of this cycle, all of that is (inaudible).

Simos Simeonidis - Rodman & Renshaw Llc

Okay, final question for Matt. It seems like you have, you spent another close to $40 million this quarter and it seems that you have about three more quarters to go and obviously a lot of people are concerned about dilution. Obviously if you have a partnership before that that can possibly alleviate those worries, but is there a possibility where Al could extend his line of credit, instead of having to raise capital in the market?

Matt Pfeffer

Well I’m not sure if that’s a question for me, but it’s certainly always a possibility. We’ve been pretty open that our first choice would always be a partnership, but the timing of that is obviously uncertain and we don’t want to leave ourselves in a position where we might be viewed as over barrel so to speak with the partner. So we are evaluating a lot of different options and that’s certainly the one of the ones we are evaluating.

Simos Simeonidis - Rodman & Renshaw Llc

Okay, thank you very much.

Operator

And our next question is from Steve Byrne with Bank of America. Go ahead your line is open.

Steve Byrne - Bank of America

Hi. I was wondering if in your meeting with the FDA whether there was any discussion about an outcome [ph]. Do you think that it’s any more or less likely than your views previously?

Alfred Mann

There was no specific discussion about an outcome in the meeting at all. As I’d indicated to you previously, the agency had been cleared in the previous review cycle and quite early on, but in line with the requirements in the answer committee, and we’ve seen nothing to indicate that has changed, but at this point the agency will of course reevaluate and look at that. From our point of view, we’re going to be well prepared should there be (inaudible) committee and actually see this as a very positive opportunity for advancing the data, but at this point there is no reason to believe that there will be one.

Steve Byrne - Bank of America

And Peter, the bioequivalence data that you discussed earlier, will those be available in any form to us?

Peter Richardson

As I said, we will probably today have (inaudible) verbally update, I realize it’s always difficult for you to transcribe those numbers. The message around the bioequivalence looks like a very robust package and I think when you see the curves, you will see the remarkable overlay between the MedTone device and the single and the two cartridges of the new device. That’s the best set of data that we can bring up.

Steve Byrne - Bank of America

And just one last one from me, is the manufacturer of the Dreamboat device required to be inspected and has that been scheduled?

Peter Richardson

We’ve certainly not heard any indication of that and I wouldn’t expect at this point to have an indication on a requirement inspection on – any supplier. The agency does not inspect any supplier.

Steve Byrne - Bank of America

Thank you.

Operator

Our next question is from Tom Russo with Baird. Go ahead, your line is open.

Tom Russo – Baird

Good morning. Thanks for taking the question. Could you comment, maybe provide a little bit of additional detail on how firmly and definitively FDA on its side indicated concurrence with switching the device and seemingly the dose now and not after approval of their device that was used in pivotal trials, and then maybe what divisions the FDA did or did not concur with that approach?

Peter Richardson

I think if the agency hadn’t concurred, we wouldn’t have sent in the submission. Clearly, what we are trying to talk about here is that we have an unusual situation of an inhaled drug (inaudible) and that was the discussion at the agency in terms of the ability to clearly demonstrate the speculation of the active drug and also the carrier.

The clear bioequivalence that we are able to show, I think also in terms of that is one of the things that’s a very important part of doing that. This will be subject to full review by the agency and normally inhale products are more of a challenge initially to get any success or favorability [ph] at all, it’s one of the things you try to avoid or it is minimal. And it’s also novel as you are looking at what the action of the drug is in the lung, the site of action of the systemic prevail of the peptide which is very good. So we had a very productive discussion with the agency around that.

I think the major thing from their point of view, is that we have not changed the formulation in any way. It’s exactly the same powder, and what we’ve done, as I stated was, just make the device more efficient in reducing the amount of new powder that doesn’t contribute to the efficacy, and not which is not inhaled, but is actually left in the cartridge or deposited in the mouth. That actually is the reason that we can take this approach and we made absolutely no change to the formulation.

Tom Russo – Baird

Okay, and then regarding the comments about considering regional partnership or that there is interest from regional players, should we assume that that would be U.S. only or is there in some way -- is the current status with FDA in some way relevant to regional players outside the US?

Alfred Mann

Actually, we have been approached by both regional players from within the U.S and from certainly, a number of other parts of the world, so it’s not restricted just to the US. The US approval usually is a critical component of those partnership discussions as well, but the interest is coming in from several parts of the world.

Tom Russo – Baird

Okay. And then lastly, you made a comment in the press release about initiating installation and validation of equipment for the new device. Can you give some additional color on that and what work is left to be done and what regulatory steps are left to be done with regard to the equipment for the new device?

Alfred Mann

Well, when we moved to the so called Dreamboat inhaler, the filling systems for that is of course quite different, and of course all of the packaging is different, so that we have spent this past year designing, working with our supplier, developing the system and the first machine is to be delivered, it was supposed to be delivered about a week or two ago, but it’s now scheduled I think for either this week or next week to be delivered and installed.

Our team is over – it’s being built in Germany, they are over in Germany now doing testing on it and that will be installed momentarily. And when it’s installed, then it has to be validated. It’s not clear whether the agency will feel that they need to do another inspection, but that’s always a possibility.

Tom Russo – Baird

And aside from the inspection of the physical site, can you comment on what type of a regulatory change it is; just simply as a process change?

Alfred Mann

The process change is part of the CMC package.

Peter Richardson

And I hope it’s not a process change, this is purely selling and packaging. Actually the filling principal and the machine design is not exactly the same. It’s not much [ph] reduced in the eight clinical matches and the productions that we used for the Dreamboat device, and that’s important in terms of the processing of the actual insulin formulation remains exactly the same. This is dose [ph] technology.

Tom Russo – Baird

Okay. Thanks.

Alfred Mann

The powder itself is unchanged. It’s just how you fill it.

Operator

Our next question is from Michael Tong with Wells Fargo. Go ahead, your line is open.

Michael Tong - Wells Fargo Securities, Llc

Hi. Just a quick follow up on the installation of the new equipment. Is there any validation data that you need to supply to the FDA and how quickly can you do that, given the timing of the scheduled PDUFA date.

Peter Richardson

In terms of specifics there, it’s really that equipment as we scale up and produce the commercial batches of that, and that would be a requirement and the timing at which we do that with the agency is subject to discussion. You know that we can get performance in terms of the cartridges and the device that’s there, and that’s really scale up type, all the activity in terms of bringing that equipment in, rather than putting in a new process when we change it.

Michael Tong - Wells Fargo Securities, Llc

Great. Thank you.

Operator

Your next question is from John Newman with Oppenheimer. Go ahead, your line is open.

John Newman – Oppenheimer

Hi guys. Just had a couple of questions. The first one is, it seems like a month or so ago, you had raised the point that there was some sort of a Hemoglobin A1c issue that was raised by the FDA regarding the 009 trial. Just wonder if you could expand upon that and give us a little color there.

Also for the 117 study, it also seemed like the enrollment target that you originally had was reduced, and I am also just wondering, given the fact that the efficacy from the control arm, they are seeing maybe a little different than what we would expect. I am just wondering how you’re positioning the results with the FDA? Thanks.

Alfred Mann

Okay. John, to take the 009, I think this is one that we discussed at length. You know that the margin of the upper bound of the confidence interval is actually a (inaudible) which is right at the edge on non-inferiority and I think that the discussion that we had around 009 has been although the meaningful analysis and there’s (inaudible) non-inferiority with that.

We wanted in terms of 117 to look and we could (inaudible). If you look at the results of 117, that’s true. The numbers in that study alone which we had originally projected, that was done with the original device and we stopped that study, when we stopped producing the new device and decided to make that change over on to the new device.

We looked at the power of that study in order to being able to address these questions and looked at that in light of whether we have sufficient power, and as I said we had 90% power to address that, which is really what our best physicians say and more than adequate in terms of questions that we had.

Your question around the control arm, I actually would find it difficult because it’s actually in keeping with what we see and a lot of other registration types that is. (inaudible) HbA1cs that we recently well controlled patients that were going into the study. So we wouldn’t expect to see a really marked improvements in the HbA1cs in either group. They both follow the same pattern in the end and we are clearly showing non-inferiority there. So I think it’s entirely consistent with what you would expect in this study, increasing the time [ph].

John Newman – Oppenheimer

Okay.

Alfred Mann

I think the important things are we are seeing first hand [ph] and I think it’s very, very important that we are getting more patients down to last 6.5 [ph], and we are doing that without new improvements in hyperglycemia. That’s an important piece, I think I’m really sure what we’ve been talking about in terms of what you can do with an improved prandial insulin.

John Newman – Oppenheimer

Correct. And then just a quick question for Matt. I know you’ve already had one question on financing, but just curious if you can give us any sort of guidance or sense as to how we might want to think about just the way that Mannkind would address cash needs this year? Would you maybe think about a raise or are you happy with the cash that you currently have on the balance sheet? I know you had a question already about possibly extending the line of credit. Just kind of curious as to how we should think about it?

Matthew Pfeffer

Yeah, I think it’s a little pre-mature to answer that question in any definitive way, John, so I don’t mean to be evasive. I am happy not just with the cash on the balance sheet, but of course that’s backed up by a line of credit that we access on a regular basis and tend to keep our cash on the balance sheet typically around $30 million at the end of every quarter. So it’s been a fairly consistent, plus or minus a million here or there.

We have a lot of financing options. I think we are unique in having as many as we do. Al was one of them before, I think that’s certainly unique and we are looking at all of them and it’s premature to commit one way or the other. We obviously want to feel for how some of these things are going to play out before we come to a conclusion. So we have not made a determination at this point and when we do, we’ll tell you about it.

John Newman – Oppenheimer

Okay, thanks.

Operator

Our next question is from Jon Lecroy with Hapoalim. Go ahead, your line is open.

Jon Lecroy – Hapoalim

Yeah, thanks for taking my call. I first want to talk on the 117 trial. It was an open label trial and it looks like the patients in the injected insulin arm had much lower fasting level of glucoses implying -- or I’m sorry the other way around, that Technosphere had lower fasting glucose implying they are on more basal insulin. I am wondering what the open label nature of that had maybe to do with that data point.

Peter Richardson

I am sorry, you are just incorrect. They are actually …

Alfred Mann

We seem to be losing Peter. Hello, Peter? Peter, we lost you there for a while. So you may want to repeat what you said.

Peter Richardson

Hi, sorry. (inaudible) exactly the same levels of (inaudible) which is the long acting insulin used in both arms. So the difference that we see are due to differences in the prandial insulin. We’ve talked about the rationale for that, and the reasons for that which are not entirely clear, but we think there’s probably differences in insulin resistance. That’s been a very consistent finding that we’ve seen across all our studies. The open label nature is standard in insulin studies as you know and I think has no impact whatsoever.

Jon Lecroy – Hapoalim

Okay thanks. And then as far as Europe goes, what are your plans on more trials to do European filing and kind of timing on European filing?

Peter Richardson

At the present stage we are looking in terms – are having -- I think that would be a discussion, but we’ll absolutely have a potential partner onboard and that would be very helpful to us in terms of that filing. There are no specific requirements of any additional studies required in order for us to do a filing in Europe.

Jon Lecroy – Hapoalim

Okay, thanks.

Operator

(Operator Instructions) Our next question is from Doug Dieter with Imperial Capital. Go ahead, your line is open.

Doug Dieter - Imperial Capital

Good morning. Just wanted focus on the discussion with partners and I guess my first question is, what is the primary hiccup right now to get something done with the primary push backs from the best partners?

Alfred Mann

There is really no push backs, Doug. It’s just that we were waiting to finalize or to really start serious talks until we got the minutes from the meeting of June 9, which are obviously late from the agency, but we understand that. But given that it’s been delayed, we have started the discussions, but we won’t get into any real negotiation till after we see the minutes.

Doug Dieter - Imperial Capital

And in terms of your confidence level, I know you’re not giving guidance here, but obviously your intent is to get an approval by December. You want to have a partner probably by September-October timeframe. What’s your confidence around being able to do so and is it clear from the potential partner side that that’s the timeline?

Alfred Mann

No. You know early last year we were told by our partners that they wanted to close the deal in July. So I made a prediction that I’m not going to do that again.

Hakan Edstrom

No. I would also say Doug that as I mentioned in my part of the presentation, that we’ve had new both global and regional contenders coming into the game, and certainly we want to manage all the discussions in a way to hopefully optimize the financial results of the discussion. So from that point of view, I would not kind of hold ourselves to a specific timeline September-October, but looking for what is the best possible deal that we can accomplish, trying to also bring the newcomer is kind of somewhat in line with people that have been with us for a longer period of time.

Doug Dieter - Imperial Capital

And then finally, just from the liquidity perspective as a follow-up to a prior question, Matt is it safe to assume that the reason why you’re not going to comment on additional liquidity is because you’re waiting on what the partnership potentially brings to the table?

Alfred Mann

Certainly, one factor.

Matthew Pfeffer

You’ve taken the words right out of my mouth Al. It’s certainly one of the factors but it’s not the only one and so we want to make sure we do a thorough evaluation of what our options are before we come to a conclusion.

Doug Dieter - Imperial Capital

Fantastic. Thanks.

Alfred Mann

All right. I’d like to thank all of you for joining us today. We look forward to updating you in our next quarterly call or perhaps sooner. Good day folks.

Operator

That does conclude today’s conference. Thank you for participating. You may disconnect at this time.

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Source: Mannkind Corp. Q2 2010 Earnings Call Transcript

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