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MannKind Corporation (NASDAQ:MNKD)

Q1 2014 Earnings Conference Call

May 12, 2014 05:00 p.m. ET

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

Graig Suvannavejh – MLV & Company

Christopher James – Brinson Patrick Securities

Brittany O'Neil – JPMorgan

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation First Quarter 2014 conference call. (Operator instructions). As a reminder this call is being recorded today May 12, 2014. Joining us today from MannKind our Chairman and CEO Alfred Mann, President and COO Hakan Edstrom and Chief Financial Officer Matthew Pfeffer.

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

Matthew Pfeffer

Good afternoon and thank you for participating in today's call. I will be discussing very briefly our financial results for the first quarter of 2014 as reported this morning. We will then turn the call over to Hakan.

But 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 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 and is accurate only as of the date of this live broadcast, May 12, 2014. We will take 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 first quarter of 2014 was 52.1 million or $0.14 per share compared with the net loss applicable to common stockholders of 41 million or $0.15 per share for the first quarter of 2013 and 53.6 million or $0.16 per share for the fourth quarter of 2013.

Research and development expenses were $26.2 million for the first quarter of 2014 compared to $29 million for the fourth quarter of $2013 and $26.4 million for the first quarter of 2013. R&D expenses decreased by $0.2 million for the first quarter of 2014 compared to the same quarter in 2013 primarily due to decreased in clinical trial related expenses resulting from the completion of the Affinity studies offset by increases in non-cash stock compensation expense in commercializing this cost.

R&D expenses decreased by $2.8 million from the prior quarter primarily due to decreases in clinical trial related activities and non-cash stock compensation expenses.

General and administrative expenses were $15.2 million for the first quarter of 2014 compared to $17.6 million for the fourth quarter of 2013 and $10 million for the first quarter of previous year.

General and administrative expenses decreased from prior quarter due to non-cash stock compensation expenses associated with the achievement of performance grants in the fourth quarter of 2013 which is non-occurring in the first quarter of 2014. Decrease in the same quarter of the prior year is primarily due to non-cash stock compensation expense and financial transactions cost.

Cash in equivalence were $35.8 million at March 31st, 2014 which compares to $70.8 million in the fourth quarter of 2013. Currently there is $30.1 million of available borrowings under the amended loan agreement with the Mann group.

On May 6, 2014, Deerfield purchased $20 million in notes under the provision of the Amended Facility Agreement.

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

Hakan Edstrom

Thank you, Mat and good afternoon. Having completed a very successful AdCom committee meeting on April 01. We are now eagerly awaiting the finalization of the NDA by the agency.

Well that decision may not materialize until July 15th PDUFA date, we are currently actively working with the agency to ensure a timely review. In the meantime, we are preparing our Danbury site for commercial production by executing qualifications and validations rounds using operational infrastructure.

And we are also working closer with our supplier to ensure that they will be ready to meet commercial forecast requirements. The [proxy] process supported by Greenhill (inaudible) is proceeding well and we are quite pleased with the progress.

While with those few remarks our business is proceeding as usual and with that I will now give the meeting over to Alfred to add some remarks. Al?

Alfred Mann

Thank you Hakan and good afternoon all of you who are tuned into this call. As my colleagues have noted this is an awkward time to speak publicly of certain important matters which are of interest to you. My comments today will thus be rather limited.

A very significant event during this past three months was as Hakan mentioned the FDA Advisory Panel meeting on April 1. During that meeting there was an extensive open discussion after which the panel overwhelmingly voted to recommend approval of the AFREZZA 13-1 for type 1 diabetes and 14-0 for type 2.

Of course we were really very pleased with the proceedings of the AdCom and with the overwhelming positive vote. There was so much that was satisfying. Our Mannkind team delivered effective presentations on the safety, efficacy and many valuable attributes to the AFREZZA.

17 public speakers gave strong, very strong endorsements and arguments for approval.

Those public citizens and could be patients who participated in the trial events of trials, several physicians, prescribing or even themselves using insulin and senior people and several major diabetes organizations including the American Diabetes Association, The American Association of Clinical Endocrinologists, Juvenile Diabetes Research Foundation, Closed Concerns, Diatribe, and Take Control of Your Diabetes. Patients indicated very significant attribute, never available with other insulin. The outcome of the meeting concluded a very open and detailed review and the panel provided some recommendation for the agency to consider.

As we reported the FDA then reset the PDUFA date by the standard three months extension to July 15 to allow more time for them to review those injections and also some additional information that we have submitted in response to some of the requests shortly before the AdCom meeting. They may not need the full three months but we cannot predict when they may announce the decision.

Another major activity during this past period is included rather intensive discussions and negotiations with a number of potential partners, interested in commercializing AFREZZA. We have said that we will only make an announcement on these matters upon finalizing of an agreement. So today's call we cannot discuss any such progress.

We apologize that we cannot talk about the various subjects which are of such significant interest of many of you on this call. Yet we do say that we are making progress and that we expect much to report on those important matters within the matter of weeks. We look forward to making announcement as soon as we have something substantive to report. So please be patient.

Thank you all for joining us today and we will now open the call for your questions. But keep in mind that we cannot provide substantive information about certain key subjects. Operator?

Question-And-Answer Session

Operator

Yes, thank you. We will now begin the Question-and-Answer session. (Operator Instruction) And our first call comes from Mr. Graig Suvannavejh from MLV & Company. Please go ahead.

Graig Suvannavejh – MLV & Company

Great. Good afternoon everyone and thanks for taking my questions. First, let me congratulate you on the very positive outcome that you had down the DC area. So that was great turn up for you guys.

Alfred Mann

Thank you.

Graig Suvannavejh – MLV & Company

Sure. No problem. My first question just has to do with the post that event given the positive vote, can you give us a sense at all of what the nature of your interactions with FDA has been like and in particular I am curious to know if you guys have made any progress on what seems to have been the desired by the AdCom to see kind of long term follow-up in terms of particular items like diabetic ketoacidosis and potential lung cancer just given uncertainties and how you would monitor for things like that?

Alfred Mann

Well, please understand that the primary task of the agency at this point in addition to making their final decision is the preparation of the license. I’m sorry, the label, the [Paramus] project which is what you are sort of referring to and also probably the phase IV study for children. And there has been interaction in between our people and the agency on events program. So it is progressing, it's still under certainly the consideration by the FDA.

Graig Suvannavejh - MLV & Company

Okay. My second question as to pick up on a comment, Al that you’ve made in your prepared remarks, you’ve mentioned something that while you can't really talk about whether it's partnership discussions or perhaps other aspects of your discussions with FDA but you had mentioned I believe that we could expect to see news in a few weeks and I don't know if you can maybe expand on that in terms of what specifically you might have been referring to.

Alfred Mann

Well there are discussions going forward across the FDA has approximately what maybe eight or nine weeks to make their decision. They don't need to take eight or nine weeks. Could do it much sooner than that. Obviously it would be nice to do sooner so that we could have a more open session at the American Diabetes Association meeting in another month but the other, whether it takes four weeks or eight or nine weeks, I can answer as the partnership discussions, there are conversation going on now and those that necessarily have to wait for the NDA to be finalized. I believe that there is enough expectation of approval now which is really a question of the detail of the label and the [Paramus] program that are the only issues really outstanding at this point but one never knows what’s going to happen with the regulatory process.

Hakan Edstrom

Graig. This is Hakan, just to make sure we are all on the same page, Alan say within a few weeks, I said coming weeks or in the weeks ahead. So that’s a little less – a little vaguer then I think you applied by your questions. I want to make sure you didn’t misunderstand.

Graig Suvannavejh – MLV & Company

Okay, that’s the exactly where I was trying to drive to see if there was something that you are trying to manage expectations appropriately in terms of news coming out on either end. And then maybe Matt, I will ask a question about current cash and I will jump back in the queue to – how are you thinking about cash right now? I think in the last call you said you felt you had enough cash through third quarter of this year and certainly we are where we are right now. So what are your latest thoughts or how should we be thinking about how you are thinking about cash right now?

Matthew Pfeffer

Yes, maybe I should have elaborated on my one simple sentence into the discussion I gave. But in addition to the cash we already had on hand which could have gotten us pretty close to the revised PDUFA date but again pretty scarily close to the edge of that point, we did draw $20 million from Deerfield and it was additional straight debt to give us little more breathing room and so between that and the -- if we need to I guess we can go back to the [corpus] through our credit facility with the Mann group where we have another $30 million there. So we feel pretty comfortable. We can get us to a decision point and then see what happens.

Graig Suvannavejh – MLV & Company

Okay. Great. I have got a ton more about but I will let others ask questions. I will jump back in the queue. Thank you very much for taking my questions.

Alfred Mann

Thank you.

Operator

(Operator Instruction) And we also have Mr. Christopher James from Brinson Patrick Securities. Please go ahead.

Christopher James – Brinson Patrick Securities

Hi. Good afternoon and thanks for taking my questions and let me also add my congratulations on the tremendous progress you have made. I understand the sensitivity around not discussing – the discussions with partnerships but could you perhaps, let us know if you are able to share some of the back and forth with the FDA regarding label and Paramus discussions with potential partners during the process or is there something that will be discussed after?

Alfred Mann

Actually, we do have sharing sessions in between our regulatory people and the regulatory people of those people as we believe to be say, top potential for partnerships. So yes we are trying to address that inappropriate say collaborative manner.

Christopher James – Brinson Patrick Securities

Okay, great that’s helpful and in the past I think you said, you would be able to, from a manufacturing standpoint support commercial launch within six months of approval on partnerships. Have any of those timelines changed since the PUDFA was pushed back?

Alfred Mann

No. we still are operating with, certainly the factor we will be have relative support commercial launch within six months of approval and quite honestly if approval is around July 15, we may even be a little bit faster than the six months because we cannot wait to do our validation rounds and may make the manufacturing ready for commercial operation type of upscale.

Christopher James – Brinson Patrick Securities

Alright. That’s helpful. And then regarding the supplement on NDA for the 9 and 12 unit cartridge, could you maybe walk us through the necessary steps for this and how much additional preparation is needed for that application?

Hakan Edstrom

Yes, when it comes to the [nine unit] that is worked on very actively right now and again the assumption is that immediately upon approval of the AFREZZA, you would submit the supplemental SNDA and hopefully then get certain response within six months from that one. So that should be almost an approval in conjunction with the launch or very shortly upon launch. When it comes to the 12 units, it's a little bit more involved because the fact that we most likely will need to change a little bit of the concentration of the ingredients into that one so that’s further up in terms of the – of submission and I would say that would probably happen certainly following launch and during maybe late 2015.

Alfred Mann

The difference for the nine unit is simply putting a little more powder in the cartridge whereas the as Hakan said we are adding a little more insulin onto the carrier particles for the 12 unit. How long it will take is hard to say hopefully the agency will not require much for that approval well because we really need both of those until as we can.

Christopher James – Brinson Patrick Securities

Great. That’s helpful. Thank you and good luck.

Alfred Mann

Thank you.

Operator

Thank you. Our next question comes from Mr. Cory Kasimov from JPMorgan. Please go ahead.

Brittany O'Neil – JPMorgan

Hi this is actually Brittany O'Neil for Cory. Thanks for taking my questions. Just curious for your launch plans are, if you don't sign a partnership agreement this year?

Hakan Edstrom

Well, we certainly doing in intends that’s our plan to launch in conjunction with the partner, I mean do we have kind of continue to plan in place where which would be appropriate for company like ours [Ph], yes we do but at this point in time, I would say we feel comfortable with all those partnership opportunities.

Alfred Mann

And we have several different approaches to how we are going to do this but we don't think that we are going to get there so we are not worried. Since I am not.

Brittany O'Neil – JPMorgan

Okay. Thank you.

Operator

Thank you. And our next question comes from Graig Suvannavejh from MLV & Company. Please go ahead. Thank you very much.

Graig Suvannavejh – MLV & Company

Great. Thanks so much for the follow-up. Just two quick questions I mean one, how are you thinking about ADA right now given that less than or about a month away, how do you guys prepared for that meeting given the how important that is and without knowing what’s happening with the PDUFA?

Alfred Mann

Well unfortunately, since we don't really know for certain when we are going to be approved by the FDA or we have no decision yet on the table by the agency, we are questioning whether we should have a formal operation at the ADA, they are going to be a couple of papers about AFREZZA and we have reserved a booth there whether we should spend the money unless we know we have the approval is a question before us now and we are wondering whether we should spend the money to have the booth under the circumstances.

Graig Suvannavejh – MLV & Company

Alright. Okay. Great. So what is if there is a default plan right now, do you have one placed around ADA activities?

Hakan Edstrom

Well, not specifically but I could say that the amount of money that we would spend potentially in vain for those depending on the timing of approval. We could do a lot in terms of other information needed and some other activities in conjunction with the ADA, plus the fact we may even be in a situation where we will have a partnering opportunity there if we have both the partner and the approval in place at the time. So I think we will have to be just a little bit (inaudible) and do the best we can.

Matthew Pfeffer

So, Graig, I think you can safely assume that from what we can hear so I can just kind of recap. We will all be there and there will be some presentations that we will be giving at ADA. So we all will be around. The question is just whether we have a booth on the floor or not but we will still be pretty actively involved at the ADA.

Alfred Mann

We would like to have booth. The problem is that if we cannot open discussions, it's probably is worth spending the money and we can't have open discussions unless we have approval sometime and probably days if not weeks before the ADA meeting and we have no guarantee of that.

Graig Suvannavejh – MLV & Company

Sure. Just one last question if I may. Just to summarize kind of comments that you have made on this particular call. It sounds as if you guys are pretty comfortable not only on just the straight up FDA approval but also in terms of partnering opportunities and if I read in between the lines or read by your language, I think you said you weren’t worried about much. So can I just confirm that?

Alfred Mann

Well, we don't see our bodies so I will go by the body language. But we are so confident of the significance of this product and there are partners out there that recognize that this is going to be a very, very significant product. So we are not really worried. It’s just a question of how we are going to launch it. There are several opportunities that we are considering.

Matthew Pfeffer

Yes, great folks. Obviously nothing is going to withstand and we feel confident before but I could tell you I am sitting with only few people now and doesn’t look at all worry to me.

Graig Suvannavejh – MLV & Company

Okay. That’s great to hear. Thanks very much and good luck with the process going forward.

Alfred Mann

Thank you.

Operator

At this time I am showing no further questions. I will now turn the call over to Mr. Mann for final remarks.

Alfred Mann

Well, thank you all very much for joining us today. And we look forward to further and hopefully much more open communications with you during the coming weeks. Thank you all.

Operator

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

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