MannKind Corporation (NASDAQ:MNKD)
34th Annual JPMorgan Healthcare Conference Call
January 13, 2016, 06:30 PM ET
Matt Pfeffer - CEO
Ray Urbankski - Chief Medical Officer
Cory Kasimov - JPMorgan
All right. Good afternoon, everyone. My name is Cory Kasimov. I am the Senior Biotech Analyst at JPMorgan. It's my pleasure to introduce our next company here, which is MannKind Corporation.
Presenting for MannKind is the company's newly appointed CEO, Matt Pfeffer and please note that following Matt's presentation, there is a breakout down the hall to the left in the Yorkshire Room. So with that, turn it over to Matt.
Thank you, Cory and thank you everybody. So before we get started as it's typical, I need to warn you that as the SEC requires, we'll be making some forward-looking statements, quite a lot of them in fact and advice you to check our SEC filings for additional information.
So as advised, I am the newly minted CEO of tenure of -- gosh, I guess this is my third day or so and so this presentation has come together quite quickly and we've been hitting the ground running and accomplished quite a lot in just a few days to have some things we can talk about today to how really what we're going to do about the company.
But before I get into that, I want to talk a little bit about how I came to be here and what happened with the [file] [ph] just briefly, but I want to make sure people realize this limbo state we're in while there was some uncertainty about who is going to lead the company is now done. We're not in limbo. Things are happening and they're happening quickly.
I do want to stress however that my almost CEO, Duane DeSisto, well there is a lot of rumors out there about this having to do something with Sanofi and I categorically state that's not true. It is very much that was portrayed in the release we had.
But all that notwithstanding I am very thrilled to be here and I want to talk about what MannKind is going to be doing from this point forward and what I've, with some -- done somewhat [indiscernible] titled MannKind 2.0 stealing from the tech world a bit.
First thing I want to emphasize is Afrezza is definitely here to stay all right. I don't want anybody especially our patients out there to have any questions about that. This is a product that has done tremendous things for an awful lot of people and we will make this work.
So that's my first point I want to make and we've had great user experiences. The trends in sales are rising, albeit much slower than we had hoped, not where expected, but -- and Sanofi did elect as you all know I am sure, to terminate the relationship. They started the notice period at least.
So we are working with them to do that an early transition and ensure there is no interruption in supply to the patient base.
We will -- we have been developing a new marketing and sales strategy at the same time now that we are somewhat unshackled from Sanofi, we can go back and pursue partnership. So we weren’t able to talk to anybody about that while still partnered with Sanofi, but that's now gone away. So we have reinitiated those discussions.
That said at the same time we are looking at our own strategy because that's the working assumption here, regardless we need to keep this moving forward and we'll be talking about some of those initiatives today.
That said they're still in their infancy. I do have two new things I'll be bringing out today to talk about and I'll talk about those in just a few moments.
The other thing I wanted to stress is that Technosphere is the platform and the technology underlying are [leap] [ph] program in Afrezza. We still believe in that technology. We do expect that we'll be partnering that technology.
It's a very active effort. We've occasionally been questioned about that because we've been somewhat vague about what we're doing in that area. That too ends today. I have with me Ray Urbanski, our Chief Medical Officer, who will give just a couple minutes presentation.
We hope we'll elaborate on that later, but I am sure you're going to find some great deal more information on exactly what it is we're working on, what the timelines look like and how we're going to take those programs forward, in addition to outside licensing of the technology as well, which has gotten renewed interest.
Finally I want to make sure you understand that MannKind is here to stay as well. So we do have cash to get us comfortably into the second half of the year. That's based on just our known cash today, not taking into account any cash we have line of sight to and we'll talk about some of those very soon and it also is based on our historic burn rate, which is dropping rapidly.
There is a lot of endeavors we have underway to get that down. So we hope we can extend that a great deal further because that's going to be the key to all this. We'll be perfectly frank. We have a lot of ideas to how to fix the issues. We get this moving forward. The key will be time and make sure they have the runway and the resources to do it.
So with that, let's get into a few details. Most of this I've talked about already. Al Mann will remain the Chairman of the Board. I'll take over the CEO position. I want to know, well my people to know for people are worked since I am retained the CFO title as well. How that's going to be possible?
We have now appointed a Principle Accounting Officer who will take care of most of the day-to-day responsibilities of a CFO, leaving me with just the kind of more externally focused things raising money and that sort of thing and having raised hundreds of millions of dollars I think kind of how to do that pretty well and I will take care of the existing vacancy down the Board of Directors.
So, how we’re going to make this work and how we’re going to turn this around? Obviously the key thing is we need to increase the market demand for the product and get the production volumes up. I mean those who read our P&L, it's obvious we've been struggling a bit because the volumes were never what we anticipated and what we built out at Silicon and Danbury. We need to get volumes up.
We think we know how to do that. One of those is frankly we think we need to readdress the pricing strategy that Sanofi implemented. Most of you know about that.
Those who go way back with we remember I used to talk about this as always being priced at parity. Ultimately Sanofi decided to price it at a significant premium. Clearly we can readdress that. I think that we'll have a great deal of impact on the sales volumes and maybe perhaps more importantly the -- our ability at reimbursement from insurance companies and so forth.
How do we market this? We have learned an awful lot about this product through frankly Sanofi’s trails with that. We know that one of the keys to have success is not just the more traditional 2,000-based sales approach with just a bunch of sales reps.
You need to get the information out there and get the doctors educated. This is a fundamentally different product with some significant advantages if used in the right way and we have a lot of reports and you've probably seen many of them in the social media and others from people who had just remarkable benefits from this product.
And the good news is we’ve pretty much largely learned what is the key things that have caused that. We need to get that information out there. Get the patients and as importantly the doctors and the caregivers trained in what the differences with the product are, how to use it correctly and how to get these advantages.
One of the ways we can get maximum benefit from this with minimal dollars outlaid, which is an important thing is in the social media. Some of you may be aware we now have a MannKind Twitter account and we have some of these through the course of today, we just activated this morning, a huge number of followers.
You can expect us to be much more open with things that are going out with the company and forthcoming and transparent in the days to come and I have a couple of things I’ll talk about in that regard that I think will help.
We also need to start doing a little more hands-on support. So just using this as a regular insulin without more training to the patients hasn’t always worked well. Patient retention has not been what we thought it would be. That’s a relatively new phenomenon that has been talked about by Sanofi. So I’ll certain address it.
We think we now had to turn that around and I'll give you one example of how we’re going to do that. Remember it’s only been a few days and pulling some of these things together have been difficult, but I think I've got a couple of things already underway.
We clearly need to work on our fulfillment change that strategy and we have a lot of ideas to talk about there, but not today. It’s underway. In the meantime, Sanofi can handle that for us and if we need to having do it longer, I am sure it's something we could negotiate.
And finally and this is important both from a sales volume, a cash asset perspective and many other ways. Many will remember we used to talk about our international strategies way before we partnered globally with Sanofi and had a lot of interest in many foreign jurisdictions.
Those discussions have been reopened. It would be very nice to get some of those distribution arrangements underway. I think that’s going to be very important to us because as it has a kind of a double whammy effect.
Clearly any upfront dollars we could get from into those transactions would be hugely helpful for us at this time, but equally important or maybe more so is getting the sales volumes up.
So some of these jurisdictions let’s be frank that will be a low margin, high volume regions, but that’s fine. We have our huge facility in Danbury equipped to make massive economies of this product. It’s kind of a burden for us right now with the sales volume we have.
But this product is very volume sensitive and getting those volumes up will have a very nice impact on our margins anywhere in the world including the United States.
So that’s a capital summary of some of those things. I want to talk about a couple of them in more detail. The first one is a simple one. It’s something that Sanofi toyed with for an idea for a while, which is a little more user to user and doctor to user and thought leader user interactions.
There is something I coined as the Afrezza Advocate Counsel. This is still in its embryonic stage. I've got only a couple of people signed up. I have a list of targets to be frank, but I think this is going to come together nicely. It makes a nice avenue for people to get information, potentially well known people in the space to contribute it in a meaningful way at minimal cost.
Likewise another idea and this kind of plays into the how do you get the patients to use the drug properly. An opportunistic thing that kind of came along, I've been talking with the group that’s put together something I think is very innovative and will make a big difference in the field of diabetes, which is specialized diabetes care centers.
Now this is something that requires no money at all for MannKind. Our participation is really just helping them with some ideas. We’ve allowed them to use the name Afrezza and kind of -- this is in its infancy, put it that way, but they’ve actually coined this term Real Time Diabetes Management powered by Afrezza.
It’s a very interesting concept. It’s used in another disease indication quite a lot, but their concept here and they approach us for how we like because frankly they love this product. They think it’s very nicely and what they‘re talking about, which is really real time control of diabetes with the product that has the kinetics of Afrezza that plays into it very nicely.
And if you give people an easy avenue where they can go one stop shop, dropping facility and the contracts they have right now are typically with origin care facilities and in fact a few of those now it will still be pilot facilities opening up as quickly as in the next month or two.
You can go in on a patients -- if the doctors have enough time to deal with their diabetic patients and unfortunately it's all too common in the world we live in today where doctors are called upon to see a number of patients in any 15-minute block.
It’s an easy referral into something that staff pioneers and practitioners and other educators they can just walk in and get their [indiscernible] test if they need it. Walk out with the prescription for Afrezza and be managed by closely at relatively low cost.
So it’s over the -- it’s the provision of an endocrinologist, but they're not seeing an endocrinologist all the time, but they’re getting a lot of help and management and importantly its people who understand Afrezza. So it’s a nice win-win scenario for us. Again it’s an early stage program, but we think it’s going to pay big dividends.
So its couple of ideas we’ve already gotten off the ground, remembering it's only been a few days, but I think we’re making some pretty rounded progress at this point.
So clearly the Technosphere pipeline is something that's important to us. It’s going to be important from a licensing standpoint. This is probably not huge upfront dollars, but I think and in fact I think, if that were very close to when I or I think my predecessor promised me we have in this quarter. I actually thought we have one today. That didn’t happen, but I think it will happen soon.
To have the first one to announce, but there will be more of these and these are things that could actually yield some short term cash and not huge upfront dollars, but some of the milestones are quite near term and could make a big difference for us to show that the technology is sustainable. There is interest in it and there is lot of places we can use it.
That’s something relatively new for us because what we've been focusing on heretofore has been our own products based on this technology because that’s really what are most profitable in the long run, but we can also be opportunistic with these licensing opportunities and I think you’ll see more emphasis on that in the future.
That said, as I said before I was going to take that opportunity of having right here to talk about just briefly, just I think I'll give you three or four minutes Ray to briefly talk about some things that are going on in the pipeline because we can be a lot more specific on what we’re doing and I think there are some really interesting things in it.
So bear with me. I am going to turn over to Ray for just a few minutes.
Thank you, Matt. So what you'll see here is our initial list of potential drug candidates that we've put together.
What’s important to note is we firmly believe that utilizing our innovative oral inhalation technologies that these candidates you see here can either address unmet medical needs or supply superior efficacy and safety data for already existing programs or products I should say.
If you look at the top, while we see these oral drugs that will be used to treat local lung diseases, [indiscernible] for example, we’re looking at several indications as you can see there.
Some of the other products are going to be orally inhalation, but for systemic delivery. You can see a few there and I'll mention just a few parathyroid hormone for example. The PK profile of PTH delivery using our innovative device gives a pulsatile or burst-like activity.
This is very similar to what happens physiologically. We believe that this would lead to an increased efficacy and decreased safety issues compared to the current product that’s on the market.
The physiometric profile of drugs that we give via this route shouldn’t be surprising to you. It’s identical to what we see with Afrezza as we laid it to insulin.
Another product that's on air that's related or very closely related to our PK profile of being very high Cmax short Tmax partially you see being high, very conducive to efficacy in acute care types of conditions. So we are looking at Epinephrine in the anaphylaxis situation.
So some of the complaints or issues we've heard is that we're using that clear on exactly what we’re doing and where we are. So we are now going to be very open and transparent as to where we are.
These are the three drug candidates that we have in our development pipeline as of today, sorry. One being [true] [ph] for PAH I believe that our previous administration has mentioned this several times.
We have three formulations tested and two of three are advancing. Palonosetron for Chemo and to nausea, we think this is an incredibly good asset from moderately mutagenic chemotherapeutic regimens. We have two formulations that are being tested next week and epinephrine for Anaphylaxis, we actually are testing formulations within the next week or two.
To bring this a little bit -- a little bit clearer here is actually our development timeline. We don’t foresee us presenting this frequently at these types of meetings just giving updates, but we just want to give people a sense that we do have the in-house capabilities and knowledge to drive through development programs.
Of note for those of you who may think that a development program such as [True] [ph] may be costly, which I would agree, but when you look at the IND-enabling phase or the tech assessment phase, this is a relatively inexpensive from a capital standpoint. Most of the expense would come from already existing FCEs, which would be fairly immaterial.
As we move into the clinical phases, Phase I and II well as you know the cost would go up tremendously. It is at that time that we would start looking for potential partners. So we either absorb most of that cost or through cost sharing. That’s the business opportunity that’s showing up on the bottom of the slide.
This is the same sort of concept for Palonosetron and again we would be doing most of the tech assessment phase by ourselves and the preclinical work, looking for partners as we move along the value proposition line in the IND phase or the clinical phase.
The last slide, the last one of our clinical development candidates is Epinephrine for Anaphylaxis. I think the one point I want to raise here is this can be an incredibly short timeline. No real clinical studies would be required.
Obviously you cannot do a clinical study in the Anaphylactic setting. So that would be e-study and some human factor studies would probably suffice. So we're looking at this opportunity as again one of our priority ones.
So with that, I’ll pass it back to Matt.
Thank you, Ray. So we have a lot of exciting things going on there. The key thing in all of them is that are all going to take a little bit of time, some less than others, but we're focusing on here are things that are minimal to no cost to us and we have some incredible capabilities in-house already.
We’re taking advantage of those and not a lot of incremental cost to move these things forward, but we’re getting a lot of interest already in them, some quite discussions we’ve had. So it’s an interesting area to be in.
That said in the short run it's going to be based on Afrezza. So let’s not forget that. What else are we going to do? What are the financial keys to our success here?
We did talk about in a prior call that we -- while the books aren’t closed, we haven’t been not ready yet for the last year. We did expect to finish in the $59 million-$60 million range here in cash. At our historic burn rates that would only take us this past mid-year.
Happily with our current rates, burn rates are going to take us less than that and or excuse me, it’s going to take us further than that because where our burn rate is lower and with some plans we have in motion, we think we can go quite a bit further than that.
Is that enough? I think not, but we have some interesting ways we can get more. Clearly, one of those is I hope going to be our strategy for some of the international markets and many we might raise there.
We do have some other non-critical assets. I think it’s fairly well known that we had a facility we opened in Valencia, California, which was now vacant and on the market for sale, which could raise some money.
The key we need to and frankly I don’t want to go too far down this path, but as we negotiated with Sanofi and determine that orderly wind down of that negotiation, we'll see how that turns out.
It's not uncommon for somebody to change hands in those scenarios, but I can’t obviously promise anything, but the key thing is we need to execute on the Afrezza strategy get some momentum going here.
Some of these licensing programs are international programs that change the momentum pretty dramatically in a relative short period of time and should govern where we need to raise more money at some point, however will be in a much better position to do so than obviously we’re now.
So that’s generally the strategy going forward, get us in a position to do financing if we need to, but in the meantime do everything we can, so we don’t have to.
So that’s everything in a nutshell, I want to recap a little bit. I’m extremely gratified and with reactions I’ve seen internally amongst our Management Team, I find them energizing the way I haven’t seen in a very long time.
It feels like in many ways a brand new company. A level of excitement, I was worried that after the Sanofi announcement people will be depressed and things won't move forward. I found exactly the opposite as the case.
Now that we're in control of our own destiny, there is a lot of things we can do. There are steps we can take. In many ways, our hands are somewhat unshackled and things are moving forward very, very rapidly.
I am gratified that I ask the team to delivery some pretty much impossible things in the course of little less than three days and to a great extent they delivered and even at least one that I thought was going to get delivered came this close and I think you'll hear about it soon.
I would like this to be an era of a lot more transparency and communications amongst our stockholders. We have some social media outlets we can use to do that, even Twitter and it has been something of [indiscernible] myself. I am getting myself there and we're going to try to do that.
I would like to consider having a call with our investors sometime between now and the next earnings call where we can go into a little more detail about some of these things. I hope we'll have a little clearer path we can lay out for some of the initiatives we have going on that we can do after a few days effort in a 25-minute presentation.
And maybe I'll even give Ray a few more minutes to talk as well and we'll try to do that sometime between now and our scheduled regular -- we have regularly scheduled earnings call, which is at the end of February.
The key thing is we will be in charge of Afrezza and marketing it in the near term. We think we can move some of the barriers and take advantage of some of the learnings that we have from our experience with Sanofi to change how we go about this. Make the patient experiences better and remove some of the insurance obstacles.
To be sure, some of these are not going to happen overnight. Some of them will take longer than others, but we can start making the -- turning the ship around I believe and I feel very confident that we can do that.
We need to accelerate the growth in Afrezza through really high impact, but equally important or maybe some would say more so low cost initiatives. I showed you a couple of those today, which are essentially no cost. We have some low cost things in the wings too and we're working on them. I hope you'll have a chance to hear about those in due course.
At the same time we're not abandoning the idea that we might quickly get our new Pharma partner or I am trying to think of a way to do this. These are not too confusing. There are other partnering opportunities that are a little more innovative that have been discussed and we're thinking about.
Those efforts are underway. We were obviously not able to do that until we got official notice from Sanofi, but now with that notice it is now a non-exclusive license. So we can have some serious discussions with others. Those are just starting now and I hope I'll have more to tell you about that.
That said, we're not counting on any of those things being successful. We think we can do this ourselves at least in the near term and do it successfully and so more of our efforts are going on that path with more external advisors reaching back out to the second and say third choices amongst the partnering opportunities we once had.
Finally, Technosphere as a platform, as a licensing opportunity is still important to us. It's getting a lot of attention. It's getting a lot of attention internally and externally. We think that there is a big future for that technology and we're continuing to exploit it.
We need to make sure that we can turn Afrezza around sufficiently. So we have a longevity to realize those aspirations, but we're confident we can do it.
We are continuing to explore different ways to conserve cash and raise new cash. Some of them are a little unusual and some are innovative. Obviously we do not want to be out in the marketplace or anything like our current stock price. We could absolutely, but that's not our goal.
We have a lot of things we can do and we're exploring them. With three days in there is a not enough time to have too much to announce there, but you can hope we'll have more in the future.
Certainly we're -- what I can talk about is there is a very active and very energetic effort underway looking at ways to do things very differently. The way we changed our manufacturing process is how we staffed different operations and ways to save money generally.
So we've traditionally had a pretty high burn rate. We have high [personal] [ph] obligations from some suppliers. All those things are in discussion and being negotiated or talked about.
And I hope we can continue to have some success getting that burn rate down because it's going to be critical to us to have that, to have the runway to get the changes we're hoping to get and the things we're working on here and have them come to fruition.
So with that, I want to reassure everybody and especially our patients. Afrezza is not going away. MannKind is not going away. We're here to stay. We're not going quietly into the night. We believe in this product. We believe in our man's vision for this product and we're going to get it to fruition.
Thank you very much.
End of Q&A
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!