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MannKind Corporation (NASDAQ:MNKD)

Q3 2010 Earnings Conference Call

October 29, 2010 9 AM ET

Executives

Matthew Pfeffer – CFO and Corporate VP

Hakan Edstrom – President and COO

Peter Richardson – Corporate VP and Chief Scientific Officer

Alfred Mann – Chairman and CEO

Analysts

Simos Simeonidis – Rodman & Renshaw, LLC

Keith Markey – Griffin Securities

Steve Byrne – Bank of America Merrill Lynch

Jon Lecroy – Hapoalim Securities

Anthony Espiduda – Imperial Capital

Leah Hartman – CRT Capital Group

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation’s Third Quarter 2010 Conference Call. (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 Corp. Please go ahead.

Matthew Pfeffer

Good morning, and thank you for participating in today’s call. I will summarize our financial results for the third quarter of 2010 as reported earlier today. Next, Hakan and Peter will provide an update on key events. 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, October 29, 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’s start with the financials. For the third quarter of 2010, total operating expenses were $42.5 million compared to $42.8 million for the third quarter of 2009 and $37.4 million for the second quarter of 2010.

R&D expenses were $31.4 million for the third quarter of 2010 compared with $30.5 million for the third quarter of 2009 and $26.2 million for the second quarter of 2010. The increase in R&D expenses for the third quarter of 2010 compared to the same quarter in 2009 was primarily due to raw material purchases in the third quarter of 2010 offset by decreased costs associated with the clinical development of AFREZZA, and after the submission of its NDA in March of 2009.

General and administrative expenses were $11.1 million for third quarter of 2010 compared to $12.3 million for the third quarter of 2009 and $11.2 million for second quarter of 2010.

The net loss applicable to common stockholders for the third quarter of 2010 was $45.3 million or $0.40 per share compared with the net loss applicable to common stockholders of $45.6 million or $0.42 per share for the third quarter of 2009.

Our cash, cash equivalents and marketable securities at the end of the quarter totaled $98 million. Our available financial resources including both cash on hand and remaining credit facility from Al amounted to $196 million as of September 30th, 2010.

Our cash burn for the quarter was essentially flat with $38.5 million spent in Q3 compared to $37.8 million in Q2. With our cash on hand and the amount still available under the credit facility from Al, but not including any potential proceeds from future sales of equity Seaside 88, we believe we’ll able to fund our operations into the third quarter of 2011.

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

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

Hakan Edstrom

Thank you, Matt. Good morning. During this third quarter, we have focused our strength of the progression of the NDA, interactions with potential partners, preparation for commercialization and the initiation of the Oncology 1106 Phase 2 Trial.

Recording the NDA resubmission, we understand that the FDA is currently reviewing our submission and as of this moment, we have not received any feedback that would indicate a concern with our resubmission or the PDUFA date. We will certainly continue to work with the FDA in collaborative manner going forward.

Also, we get ask from time to time about the minutes on the end of the review meeting held last June. Around this standing is that the FDA is focused on our resubmission of the NDA, so the minutes may have taken a lower priority.

With the recent CRLs to Amylin, ALKS and Arena that seems to be concerning the industry that FDA actions are becoming less predictable. But the CRL to Amylin regarding Bydureon was specific to a requirement both the FDA’s guidelines for a QT study, apparently Amylin did not perform the specific test and that led to the CRL.

We do not anticipate any such issue for AFREZZA because we did conduct the QT study following an in-depth discussion with the FDA on the study protocol.

Nevertheless, the uneven industry can certainly affect our biggest transaction. We believe that it’s prudent for us to be patient in our partnership discussion because deal negotiations will probably be more productive and deal terms more favorable once AFREZZA is approved or at least when the label is finalized.

We are therefore continuing our interactions with potential strategic marketing partners with the aim of aligning deal negotiations with the PDUFA dates. And as you can appreciate, we are rapidly approaching our PDUFA date, so it would in any case be difficult to finalize the transaction before PDUFA.

We recently received a first of several packaging machines at our manufacturing facility in Danbury. It’s exciting to see the [inaudible] of AFREZZA technology becoming a commercially bio [ph] product opportunity and to see the Danbury facility progressing towards full scale manufacturing. The early scale processing very successful and the readiness activity is continuing.

In our continued efforts to further differentiate AFREZZA from other diabetes therapy, we have planned a few new trials. But I will hand the call over to Dr. Peter Richardson to address some of this initiative and the start over with our Phase 2 Oncology Trial. Peter?

Peter Richardson

Thank you, Hakan, and good morning. In today’s call, I’d like to update you on the progress in three areas over the past quarter. The ongoing FDA review of our Class 2 resubmission for AFREZZA, the next steps for our 3B4 Program and start of our Phase 2 Program with MKC1106.

Our interactions to the agency have been routine up to this point and indications that the review is progressing normally. We’re still a couple of months away from the PDUFA dates and at this stage would not anticipate significant discussion of the potential label.

As in the consistent feedback in the reviewing division, we’ve not had any indication that there would be any plans from an advisory committee for AFREZZA. The focus seems to be getting on with the review of the data set that we had presented to address the points for the Complete Response Letter as indicated by the exceptions of our resubmission we review early in July.

We do not anticipate giving further updates or commentary on the progress of the review of commenting on the FDA interaction until we receive either a definitive action from FDA or a change in the timing of their response.

In the meanwhile, we started preparation of our plan Phase 3B4 Program and aim to support the launch of AFREZZA with additional data from studies conducted within the anticipated label. These studies are intended to further demonstrate the significant benefits of AFREZZA. We intend to prepare these studies and conduct them in two phases.

The first phase will be a small pilot study followed by a large expansion later. The first trial to start will be Affinity 2, study comparing meal time AFREZZA head to head with meal time Humalog in patients with Type 2 Diabetes requiring insulin intensification. We know this is an area of great interest for patients and physicians, who wish to put and apply a more physiological insulin regimen in their patients, but are limited at present by the complexity and poor acceptance of regimens used in injected insulin analogs.

This trial incorporates intensive treat-to-target requirements that should result in getting more patients to their therapeutic goal of an HbA1c of less than 7% without dose limiting hypoglycemia. The results in Type 2 patients that we’ve presented comparing AFREZZA against premix analogs as reported in the Lantus earlier this year along with results in Type 1 patients from trial MKC117 comparing AFREZZA to insulin as part allow us to design a study that should show some of the real benefits of AFREZZA in aggressive diabetes management.

Sites and patients are presently being initiated for the pilot phase of this study in anticipation of our pending action date.

Two Type 1 studies, Affinity 1 and Affinity P will be started with more aggressive treat-to-target algorithms in patients using basal injections and in patients using insulin pumps, respectively. Based on our analysis of Study 117, we believe that there is a major opportunity for further improving on the numbers of patients able to reach near normal HbA1c levels. We expect in this new study that significantly fewer patients will experience hypoglycemia with AFREZZA than with insulin analogs even when trying to achieve a goal of near normal HbA1c of 6.5% or even less.

These two Type 1 studies where pilot using the unique kinetics of AFREZZA to allow does optimization based upon measured glucose values with albumin [ph], carbohydrate counting. Such a therapy would be a paradigm changing approach in the field. We’re working through the final details of the protocols and again plan to start this in selected specialist IB2 centers over the next several months.

It’s a key part of our strategy to work closely with opinion leaders as we move towards product launch and get hands on experience using AFREZZA and a variety of situations where our benefits will be the most important.

Meanwhile, as we progress our launch plans, further Phase 4 activities are being planned to establish the use of AFREZZA earlier in the treatment options, but we would anticipate initiating these trials only with our partner.

With our successful financing, we’ve been able to progress our novel cancer immunotherapy program, MKC1106. We’ve moved forward with our Phase 2 study based on the data from Phase 1, in which both trials met their pre-sanctified end points, have demonstrated the same immune response with excellent tolerability and evidence of sustained clinical response in the subsets of patients.

For this Phase 2 study, we selected a target approach in advanced melanoma patients with minimal visceral disease, where we’ve seen the best results to date. Indeed, we observe several patients showing sustained efficacy for over a year with significant reductions in tumor size as judge by recent criteria. We’re using an efficient two-stage design that allows to evaluate the outcome after treating up to 19 patients and then, if successful, adding a stage with up to another 25 patients.

This study should provide definitive proof of concept for our intra-nodal approach in immunotherapy in the disease with a significant unmet need. This plan will also allow us to optimize our partnering strategy based on the size and scope of the regulatory requirements, which will depend on the robustness of the clinical response seen in this next study.

Our first patient was those to mid-October and we anticipate recruitment completing the first part of the study during the first half of 2011.

And with that, let me turn the call over to Al Mann. Al?

Alfred Mann

Thank you, Peter. As Hakan and Peter have said, the FDA review of the amended present NDA is proceeding towards the December 29 PDUFA. Let me repeat that although we cannot predict actions by the agency, we have received nothing that so far would suggest any issue that might derail or delay accrual of AFREZZA beyond the scheduled action date.

We are continuing to work collaboratively with the agency to support their review of our resubmission. Even before approval and our partnership, it’s important that we begin planning for commercialization of the AFREZZA system. MannKind must therefore increase that focus and begin to plan for the launch. Our goal is to secure global partnership with a major company and such discussions with a number of potential partners are moving forward.

However, as Hakan noted, we do not expect to reach closure until after the label is finalized. That said, we cannot comment further on the partnership until it’s appropriate to announce the definitive agreement.

In the meantime, we are preparing for commercial readiness. The first of the new commercial filling and packaging machines that will be used with the AFREZZA installation system was delivered to our Danbury, Connecticut factory in August. We are in the process of qualifying that equipment, which has been in development for over a year.

This new system is something to behold. It is fully automated and truly amazing. This is huge, about 85 feet long. The input is Technosphere insulin powder, dose cups, cartridge covers and the packaging materials. The output is finished boxes of 90 cartridges that should be suitable for one month of therapy for most patients. The automation includes inspection and weighing of each cartridge and any cartridges bailing inspection are replaced by the robot.

This system produces cartridges at the rate of 400 per minute. Fifteen completed cartridges are sealed individually in a blister package, two of these are sealed in the foiled bag and three bags plus two inhalers and the package insert are placed in the box. Three of the commercial systems that launch will be sufficient to serve about 400,000 patients.

When the Danbury plant is fully equipped, the capacity is expected to be sufficient to serve about 2 million people. At the price of current rapid acting insulin analogs of equivalent dose, this capacity would potentially generate overall revenues of close to $4 billion.

You may wonder why we are already thinking about production capacity. What do we expect for early market penetration in rate of increasing penetration that would justify this? We are confident of rapid and substantial penetration because of the many significant and unique benefits of therapy with AFREZZA for most people with diabetes. So, what are the important boundaries of AFREZZA that generate this confidence?

I believe it will be able to assert one simple convenient discreetness delivery. No need for a complex titration for meal, A1C comparable today’s best standard of care, less hypoglycemic risk, lower post-prandial highs, lower fasting glucose levels, less weight gain and little need for meal time glucose measurements. AFREZZA is well-tolerated and we’ve not identified any safety signals, though we will not recommend it for patients with compromised lung function.

Thus I say that AFREZZA will fill what today is a poorly met need in a burgeoning market. This advance therapy could not be more timely. The U.S. Center for Disease Control has just released a frightening prediction. By mid-century, the prevalence just in adults is projected to be between 21 and 33% of the U.S. population.

As we prepare for commercialization, we want now to highlight the unique benefits of AFREZZA. The FDA has not asked us for any new trials, but additional data could accelerate penetration after launch. PD [ph] has described several phase 3B and 4 studies that are intended to enable later label expansion and to enhance the market opportunity. Those trials are being initiated as small pilot studies before partnership, but our intention is for expansion of these studies to be funded by our partner.

The objectives are to further import the benefits I just outlined and to demonstrate better A1Cs until other advantages with AFREZZA compared to the standard of care in both Type 1 and Type 2 basal bolus therapy as well as monotherapy in early stage Type 2 patients. And the part in reason for starting these studies now before approval is to enable us to generate echo cardiac evaluations for a subgroup of patients in order to support a market authorization application with the EMA for Europe.

All this leads me to comment on the market opportunity for AFREZZA. Based on my long experience in this field, I believe that AFREZZA has the potential to change diabetes therapy. In patients with Type 1 diabetes, AFREZZA insulin for prandial control in conjunction with an optimized long-acting insulin may prove to be the best therapy until we can find a cure for this devastating disease.

The basal insulin [ph] include one of the new longer acting insulins in development or even a basal pump. We are actually working actively with the Juvenile Diabetes Research Foundation, who have funded the study to further explore the AFREZZA basal pump combination.

For Type 2s, based on my understanding of the mechanism of the disease, AFREZZA may play an important role early in management of the disease. After all, the underlying deficit begins with the loss of prandial glucose control. As Peter noted, we intend to study this in finical trial not being planned. Early use of prandial insulins in Type 2 has not been pursued in the past, largely because of the deficiencies of current products. Yet many KOLs believe that there will an important role for earlier use of ultra-fast acting insulins that may even contribute to preventing progression of the disease.

There was a time until recently when a few people question even the approvability of the AFREZZA system. Most of those doubters seem now to be shifting their question to the size of the market opportunity for AFREZZA. This negativity seems to be based on the incredible failure of Exubera. But it is foolish to compare these two widely different products. That comparison makes no sense at all.

Interestingly, the skepticism at this time seems almost entirely to be founded in the financial community. We see very little skepticism by patients or by healthcare professionals not by specialist, not by primary care physicians, not by nurses and not by diabetes educators.

On the contrary, we see substantially increasing interest in AFREZZA. This has been reflected in various surveys including those done by close concerns at the last three ADA conventions.

In June 2008, even before completion of our Phase 3 trials and just a few weeks after the Exubera meltdown, only 28% of healthcare professionals in a closed-concerned survey said they would use AFREZZA in their practice. A year later, when the professional began to realize the features and benefits of AFREZZA, the number AGBs that would consider such use had risen to 48%. By June of this year, with people increasingly realizing the significance of AFREZZA, the percentage of positive AGBs have risen to 95%.

While a closed-concerned survey is not a rigorous market evaluation it does indicate that there are currently seem to be minimal concern and rapidly growing interest in AFREZZA among diabetes professionals. More to the point as we reported earlier, MannKind has contracted for a number of rigorous professional market studies. We earlier describe the significant study in the U.S. and the five major markets in Europe conducted in the spring of 2009.

In that study, 611 positions almost evenly divided between specialist and PCPs reviewed actual patient files and concluded, they would likely consider prescribing AFREZZA insulin for about 25% or more above their Type 1 and their Type 2 patients, even higher in France, Spain and Italy, though somewhat lower in Germany. While the results of that study and others before would have to be heavily discounted creating a credible business model, they do validate that there was significant interest in AFREZZA even last year. And I say that interest is growing.

With just a small fraction of those projected indications, it would seem that a prediction of a multibillion dollar opportunity for AFREZZA by us and also, by several of our potential partners could prove to be quite conservative.

With that, I thank you for joining us today and would like to open up the call for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Simos Simeonidis. Your line is open, and please state your company name, sir.

Simos Simeonidis – Rodman & Renshaw, LLC

It’s Simos from Rodman & Renshaw. Thanks for taking the question. Hakan, you preface some of your remarks when you reference the Amylin Bydureon situation. And you said, basically, this doesn’t concern us really because they hadn’t done the QTC study and we have. But I was going to ask you, I think the bigger issue is not whether you’ve done the specific study, which you obviously have and you have the data.

But would you be concern that the agency could respond to your response to the first CRL with another CRL that brings up new issues that were not discuss in the first one, which was basically what happened to Amylin.

Hakan Edstrom

Well, as I said, also in my comment, there seems to be a concern of – the some of the unpredictability or [inaudible] actions right now in the industry. So, I mean certainly cannot seem absolutely confident that that will not happen. They only thing I can say as of this point in time, we certainly have no indications in our interactions with FDA that any new issues based on the additional requirements, additional information or compliment the information have been requested of us.

So, certainly, I will feel a lot more comfortable after the PDUFA date, after nothing has come forward. But at this point in time, Simos, I have no indication of any further requirements on the FDA.

Simos Simeonidis – Rodman & Renshaw, LLC

Okay. And then, if you can comment on where the label discussions and the REMS program discussions are right now.

Hakan Edstrom

Peter?

Peter Richardson

Yes. As I indicated, we’ve not stage and review of anticipated label discussion. The REMS discussion and the things that happened before the initial CRL are standing and our REMS plan has been submitted and I anticipate the discussion of that at the end of the cycle.

As Hakan was indicating, what we’re dealing with at the moment is the usual technical questions and interest of the agency and the aspects of that and we’re clearly going to have been normal post-asset review, which I think is the way that the agents will be looking at this as they set foot at the appropriate way of managing it from the agency’s point of view.

Simos Simeonidis – Rodman & Renshaw, LLC

Okay. And as final question, you mentioned 60 days left until PDUFA. It’s probably likely that we’re not going to see a partnership before then, if you were to get approve at the end of December, would you have to – would you wait for a partnership to be completed or would you try to take advantage of the two or three months until the partnership happens and launch on your own? What are your thoughts on that?

Alfred Mann

Well, let me say that we are not filing the launch at the beginning of the year. Our plans – we’ve always said that we couldn’t launch before the second half of next year. We want to have three machines fully installed, validated and ready to go before we actually launch, that’s our plan. So, it really is insignificant whether we complete the partnership in December or early in the year.

Simos Simeonidis – Rodman & Renshaw, LLC

Okay, thank you.

Operator

Our next question today comes from Keith Markey. Your line is open, and please state your company name, sir.

Keith Markey – Griffin Securities

Good morning. This is Keith Markey with Griffin Securities. Thank you for taking my call. I had a couple of questions about the reference to an echocardiogram that would be required or you thought might be useful for filing with the European Union and I was wondering if you could tell us a little bit about that and whether that data would be useful for submitting to the FDA at some point.

Peter Richardson

Yes, Keith. The echo data has been something that the agency had request, the EMA had requested in one of the discussions that we had with them and we believe it would be very useful to have those data at the time that we make the filing in Europe, which we’ve not them. I think as we are – as the timing here has progressed, we’re looking at being able to put a substantial data set with the new device into a submission in Europe and so generating some echo data is the subset of patients in these studies is a very appropriate thing to do.

Obviously, longer term echo data from the European point of view can be submitted later in the review cycle. So, now that’s our plan at the moment and I think it makes absolute sense to take that opportunity of doing that in these 3B4 studies.

Keith Markey – Griffin Securities

So, we should expect the echo data to be completed after you’ve actually already partnered?

Peter Richardson

Yes, in the longer term. I think we’re doing this really just to enable us to thought about filing first as in Europe and how long going echo data is available.

Keith Markey – Griffin Securities

Okay, great. Thanks. And then one other question, when might you provide interim data from the open label melanoma study?

Peter Richardson

Clearly, if we – at completion of 19 patients, we’ll be having a formal, like this is an adoptive two-stage design. So, we will be announcing whether we move forward with the study and at the additional 25 patients if it looks appropriate thing to do that time.

So, clearly, in this patient population, we’re looking at recruiting fairly slowly and so we’re anticipating that we should have complete that first half of next year.

Keith Markey – Griffin Securities

Great, thank you very much.

Operator

Our next question comes from Steve Byrne. Your line is open, and please state your company name.

Steve Byrne – Bank of America Merrill Lynch

Hi, Bank of America Merrill. Peter, can you talk a little bit more about that QTC study. Can you talk about the level of renal impairment that existed in subsets of the patients that you treated in that study, what were the dosing compared to the AFREZZA dose in the new dreamboat device.

Peter Richardson

Yes, yes. Good questions in terms of QTC studies. It seems that everyone is trying to become an expert on this rapidly.

We had the benefit of quite an explicit interaction with the agency around this in terms of, obviously is a well recognition [ph] to the absolute ingredient in our product. Insulin is well-known and characterize and QTC would not normally be a requirement there. So, we were conducting a QTC study specifically to look at the novel incipience [ph] in our product, which is biologically inert FDKPs, so you’d have no a priory anticipation of any impact on QT changes on something that has absolute no effect in any preclinical system or any potential design with any receptor that’s known.

So, we had originally approach this from discussion with the agency that the QTC study would not be required. But the agency was very clear in terms of this is now a standard in new drug application and we interacted over the design of this study at length and there was a review of the protocol. The protocol has been conducted absolutely according to the guidance, which has been in the industry now for a while looking at that with a positive control of a drug that does affect QT interval.

And we studied decent doses of FDKP, the exposure there would be up to eight Foley [ph] single cartridge below dose cartridge or four filled high dose cartridge that would be used with patients. And that margin again is something that was discuss with the agency and how we should approach that.

The results, actually we have summarized on our website, so you can go there. But just to say that there is no indication of a QT issue with the product.

Steve Byrne – Bank of America Merrill Lynch

And Peter, does the FDKP accumulate …

Peter Richardson

I think.

Steve Byrne – Bank of America Merrill Lynch

In patients that are renally impaired?

Peter Richardson

Yes. Well, we’ve actually well characterized this in terms of mild and moderate there’s no risk of accumulation. The attributes of accumulation of renal impairment is to insulin. Insulin is something where you – all careful interns as the handling of insulin patients with severe renal impairments, that’s well done.

But in terms of potential for FDKP, no. there’s no potential for accumulation in mild to moderate. And severe renal impairment, when patients have renal failure – yes, there would be, but that wouldn’t be sensing that you’ve put into a QT study.

Steve Byrne – Bank of America Merrill Lynch

And I thought you – one of the other studies that you were planning Peter was a repeat of 117 using the dreamboat device, is that also in plans?

Peter Richardson

Not a repeat in 117. I think what we’re doing is building all the learning from 117s that we’ve talked about the two studies the Affinity 1 and Affinity P. The one that’s most comparable to 117 is Affinity 1, which is in a similar group of patients, but perhaps are taking those that are really trying to get closer to a more aggressive target of less than 6.5.

Remember in 117, what we saw that we got twice as many patients at those low levels able to get to 6.5 and below without hypoglycemia. And we really want to focus in on that group of patients in Affinity 1, using a modified algorithm as well in patients to adjust dosing in compared to the actual blood glucose measured level.

One of the things that the kinetics allowed us to do is be able to reach very rapidly to a change and we’re piloting that and looking at how that works in this Type 1 patients based on our learning from 117 that’s how we can get even further improvement from that.

Steve Byrne – Bank of America Merrill Lynch

And just lastly, you’re with a new filling machine, are you guys starting to build inventory?

Alfred Mann

Not really just yet. First of all, the machines are just going through qualification now and they have to be validated, so then we’ll be of course doing preproduction lots in the validation program. But we’re not yet embarked on inventory build. But we will be making powder in the not too distant future.

Steve Byrne – Bank of America Merrill Lynch

Okay, thank you.

Operator

Our next question comes from Jon Lecroy. Your line is open, and please state your company name, sir.

Jon Lecroy – Hapoalim Securities

It’s Hapoalim. Thanks for taking my call. I just had a question on Affinity 2. How does that differ from – I think it was the 014 study, which was in Type 2 diabetics other than the echo’s?

Peter Richardson

I will probably quote a small end of Phase 2, beginning Phase 3 study. So there we’re looking – if I were looking here in terms of combination with Lantus and we’ve got a depth and algorithm in terms of that. So, I think it’s got differences in terms of the 014 study and that which we have.

Jon Lecroy – Hapoalim Securities

Okay. And then I think in the past, you guys have said how many partners were still in the running. Do you have any comment on what you’ve narrowed it down to?

Alfred Mann

No comment at this point, until we have definitive to announce.

Jon Lecroy – Hapoalim Securities

Okay. And then have all the pre-approval inspections for the plans in the U.S., international is all that finished at this point with the FDA?

Alfred Mann

Well, all of that was completed. Except that, of course, now we have this new machine, which they may or may not want to evaluate.

Jon Lecroy – Hapoalim Securities

Okay. And then would the tracker go to the FDA, let’s say the approval process extends beyond the third quarter and the Seaside deal may not be in effect at that point. What are you financing plans beyond the third quarter?

Matthew Pfeffer

We haven’t announced financing plans and it’s probably imprudent to do so that far out. Obviously, we anticipate that are [inaudible] you’re stating here.

Jon Lecroy – Hapoalim Securities

Okay. Thanks.

Operator

Our next question comes from Doug Dieter. Your line is open, and please state your company name. Mr. Dieter, please check your mute feature. We’re unable to hear you. Sorry, we are not –

Anthony Espiduda – Imperial Capital

Hello?

Operator

Yes, sir. You may go ahead.

Anthony Espiduda – Imperial Capital

Hi, this is actually Anthony Espiduda [ph] at Imperial Capital. In terms of the AFREZZA [ph] you can expect, is there any guidance that you can give us or some indication of what kind of historical licensing agreements you’re looking at to arrive at your own expectations?

Matthew Pfeffer

I think it would be unwise to speculate as to what those agreements might look like. I mean we can all go find examples. We don’t really think necessarily they apply. This is a very unique product with a very unique opportunity. So, let’s wait and see when we have something to [inaudible], obviously we will.

Anthony Espiduda – Imperial Capital

Okay, good. Thank you.

Operator

Our final question today comes from Leah Hartman. Your line is open, and please state your company name.

Leah Hartman – CRT Capital Group

Good morning, gentlemen. It’s Leah Hartman with CRT Capital Group. I did have questions on QT study, but they had been answered. So, thank you very much, Peter, for the detail on the escalated dosing relative to what we expect to be the prescription for patients.

I was wondering if someone could speak to the timing of running the planned validation on when you expect that might get concluded with approval by the FDA on the plans, please.

Alfred Mann

Peter, do you want to answer that?

Peter Richardson

Yes. Knowing that we’ve not gotten an indication that the agency will do a further approval inspection, the one they conducted was very comprehensive and we were very pleased with that result. They may comeback, but there’s no indication of that and I think that it would really be as we move into the qualification.

As Al said, the normal process here is to look at that when you produce commercial batches to ensure that you have met that and that will be done in discussion with the agency as would be normal.

Leah Hartman – CRT Capital Group

Okay, great. So, it looks at the moment that there’s not been, nothing arise with respect to the actual manufacturing in the package here.

Peter Richardson

Absolutely …

Leah Hartman – CRT Capital Group

Yes.

Peter Richardson

One of our jobs is to make sure we’re ready for the agency and they, of course, can come without announcement anytime and being prepared for that is something that we ensure we are.

Leah Hartman – CRT Capital Group

And do you have an update for us with respect to the EMA filing. I mean I think a long time ago you suggested would probably be six months post-approval in the U.S. But it sounds like you have a package coming together.

Peter Richardson

Yes, there’s certainly a package coming together. The original NDA forms the great basis of that. I think we’ve taken the opportunity in terms of in Europe as an additional stability requirement with new product, with the device and to be able to submit with additional data on that device will be helpful. And of course, we’re really looking for making a submission with a partner, if they’re appropriately able to do that.

So, the two are somewhat about tied, although we could make a submission and we want to do that with the best possible approach that we can take.

Leah Hartman – CRT Capital Group

And my final question is on the financial side. So, Matt, for you. It appears to me that you have not yet tapped into that equity line of credit.

Matthew Pfeffer

No, actually we have.

Leah Hartman – CRT Capital Group

Okay.

Matthew Pfeffer

We’ve done one sale so far. We don’t …

Leah Hartman – CRT Capital Group

Could you could start that on September 22, is that the first date?

Matthew Pfeffer

That was the first potential date, it did not occur on that date.

Leah Hartman – CRT Capital Group

Okay.

Matthew Pfeffer

If you remember, we establish the $6.50 floor?

Leah Hartman – CRT Capital Group

Yes.

Matthew Pfeffer

And we weren’t above it at that time. It’s slowly based on the volume weighted average price. We weren’t – so, we’ve only had one sale up to this point. That will be in our Q that I think was getting filed sometime today with something else [ph] …

Leah Hartman – CRT Capital Group

Okay.

Matthew Pfeffer

We don’t typically announce each sale at it occurs, it’s not required because all the parameters are out there in public. So, people can readily determine whether they occur or not. You just see them in the Q, although I’ll give you a clue. Since Al’s conversion of his note is closely linked to that deal and he does have to file that very quickly every time it happens, that will be a good clue that it has probably occurred.

Leah Hartman – CRT Capital Group

Okay, all right.

Matthew Pfeffer

Sure.

Leah Hartman – CRT Capital Group

And I did catch that hint in the press release that his parallel transaction was being executed, I just didn’t have the details of the timing. So, thank you very much.

Matthew Pfeffer

Pleasure, thank you.

Operator

That does conclude the Q&A portion of today’s call.

Alfred Mann

Thank you very much for joining us and we look forward to seeing you certainly in the next quarterly call and perhaps sooner. So, have a good day.

Operator

That does conclude today’s presentation. Thank you all for joining. You may disconnect at this time.

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