MannKind Corporation Q4 2007 Earnings Call Transcript

Mar.24.08 | About: MannKind Corporation (MNKD)

MannKind Corporation (NASDAQ:MNKD)

Q4 2007 Earnings Call

March 4, 2008 9:00 am ET

Executives

Richard L. Anderson - Chief Financial Officer, Corporate Vice President

Hakan Edstrom – President, Chief Operating Officer, Director

Peter C. Richardson – Chief Scientific Officer

Alfred E. Mann – Chairman, Chief Executive Officer

Analysts

Cory Kasimov – JPMorgan

Annable Saminy – UBS

Thomas Russo – Robert W. Baird

Michael Tong – Wachovia Securities

Analyst for Salveen Kochnover – Jeffries & Co.

Elizabeth [inaudible] – Piper Jaffray

Operator

Welcome to the MannKind Corporation fourth quarter 2007 conference call. (Operator Instructions) Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; the Chief Financial Officer, Dick Anderson; and the Chief Scientific Officer, Peter Richardson. I would now like to turn the call over to Dick Anderson, Chief Financial Officer of the MannKind Corporation.

Richard L. Anderson

I will summarize our financial results for the fourth quarter of 2007 as reported earlier today. Next, Hakan and Peter will provide an update on key accomplishments during the past year. Finally, Al will comment on the current situation and our outlook going forward. We will 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 actual results could differ from these stated expectations. For factors which could cause actual results to different from expectations please refer to the reports filed by the company, with the Securities and Exchange Commission, of the Securities Exchange Act of 1934.

This conference call contains time sensitive information which is accurate only as of the date of this live broadcast, March 4, 2008. MannKind’s management undertakes no obligation to revise or update any statements to reflect events and circumstances after the date of this call.

Let’s start with the financials. For the fourth quarter of 2007, total operating expenses were $79.1 million compared to $79.8 million for the fourth quarter of 2006, and $75.6 million for the third quarter of this year. R&D expenses were $66.8 million for the fourth quarter of 2007 compared to $59.7 million for fourth quarter of 2006 and $64.8 million for the third quarter this year.

The increase in R&D expenses was primarily due to increased manufacturing costs, including clinical supplies for Technosphere Insulin offset in part by lower purchase services in the associated clinical development program.

General and administrative expenses were $12.3 million for the quarter, compared to $12.1 million for the fourth quarter of 2006, and $10.7 million for the previous quarter. G&A expenses increased for the fourth quarter of 2007, primarily due to increased consulting and professional fees. At the end of December, we had 609 employees, which represent a decrease of 5% from the end of the third quarter of 2007.

The net loss applicable to the common shareholders for the fourth quarter of 2007, was $75.0 million, or $0.75 per share, based on a weighted average of 99.6 million shares outstanding compared with a net lost applicable to common shareholders of $71.3 million for a $1.30 per share, based on 54.7 million weighted average shares outstanding for the fourth quarter of 2006.

For the full year ended December 31, 2007, total operating expenses were $307.4 million compared with $233.8 million for 2006. R&D expenses were $256.8 million in 2007 up $65 million from 2006 primarily related to increases in manufacturing costs including technical supplies for Technosphere Insulin and associated clinical development program expenses.

G&A expenses increased by $8.5 million to $50.5 million for 2007 as compared to 2006 primarily related to costs associated with an increased number of employees, and increased professional fees. The total number of employees increased from 545 at the end of 2006, to 609 at the end of 2007.

The net loss applicable to common stock holders for 2007 was $293.2 million or $3.66 cents per share based on 80.0 million weighted average shares outstanding compared with a net loss applicable to common share holders of $230.5 million or $4.52 per share based upon 51.0 million weighted average shares outstanding for 2006.

Our cash, cash equivalents and marketable securities at the end of fourth quarter of 2007 totaled $368.3 million. On October 5 of last year we received gross proceeds of $250 million from our registered direct offering of common stock.

That’s our cash, cash equivalents and marketable securities on that date totaled approximately $454 million which compares to $204.2 million at the end of September 30, 2007 and $436.5 million at December 31, 2006. Our cash burned this past year was by quarter, $70.9 million in Q1, $81.6 million in Q2, $79.8 million in Q3 and $85.7 million in Q4.

As I said on our last call in November, we anticipate our cash burn could increase significantly over the next two to three quarters and would then decline. The fluctuations in the quarterly burn rate, over the next few periods, will be due in large part to the timing of our expenditures, for our clinical trials and for capital costs for the new Danbury plant.

With the cash from our October financing and the availability of the $350 million credit facility from Al, we now believe we will be able to fund our operations to the end of 2009. I would now like to turn the call over to Hakan Estrom, our President and Chief Operating Officer, who will provide an overview, of our accomplishments in 2007.

Hakan Edstrom

We previously said that 2007 was going to be a quiet year in terms of outward signs of progress but not in terms of actual accomplishments. From my vantage point, I believe that MannKind’s performance this past year was extraordinary. I am very proud of the many significant accomplishments achieved by employees during 2007 and let me share some of these highlights.

We executed a large and challenging Phase 3 clinical program for TI involving over 300 sites in dozens of countries, with many hundreds of physicians. Our pivotal trials remain on schedule for completion later this year and I will ask Peter to provide more information about this program in a moment.

We initiated our first clinical trial program for Technosphere GLP-1, our second program candidate for the treatment of diabetes. In this study we observed a format of kinetic profile for GLP-1 that suggests our platform also may have broad applicability to a variety of signaling hormones.

We completed two carcinogenicity studies Technosphere Insulin and RFTK carrier that delivered clean results. And these studies will also support fully our own Technosphere platform products. We funded a second R& D for cancer and immunotherapy product and trials should get underway this summer.

We moved forward with ambitious construction project in Danbury, Connecticut. The expansion of the manufacturing facility is scheduled for completion this summer. The project is on time and below budget. And we put in place a long-term agreement with a supplier of insulin. Our Danbury call to management systems have been certified as compliant ISO9001 and ISO13485.

We raised $250 million through an equity financing, we also put in place a $350 million credit facility that would fund us through the end of 2009, and we secured external funding to help support our drug discovery programs that are pursuing small molecules for cancer indications.

Looking ahead to this year, we know that this will be a very important and exciting year for MannKind as our lead product candidate Technosphere Insulin advances to the final stages prior to our filing of the NDA. And I am sure that many of you would like to know when we expect to announce results for each pivotal trial.

Starting with study of OSI1009 is 12 months pivotal efficacy in patients with type 1 diabetes. We expect to complete the last patient left with insulin in July and we expect top line results for this trial in the third quarter of this year.

Study 102 which is our pivotal efficacy study of type 2 diabetes comparing TI to premix insulin over one year, we expect to complete the last patients last visit in early September and we expect to announce top line results for this trial before year end.

Study 030 is a two-year partner safety study of TI. The last patients left for this trial is also scheduled to take place in the beginning of September and we expect to announced top line results either prior to our NDA filing or in our filing package.

And lastly, Trial 103 is a non-pivotal labeled special study and it is not critical to the filing of our NDA. We expect to announce top line results for this trial later this summer, after we have completed the key elements of the NDA filing activities with our pivotal trials.

With respect to the NDA itself our goal continues to be to submit by the end of December this year. Even though the last patients’ last visit for study also will be in early September, our team remains committed to this very aggressive role. Moreover, the clinical modules are only one of five modules that comprise the NDA.

The scale up of manufacturing operations in Danbury is proceeding well but there are many activities that must be completed before the CNC module of the NDA is in a form suitable for submission.

Joining me now to provide more detail about our clinical program is Dr. Peter Richardson, our Chief Scientific Officer.

Peter C. Richardson

As we have highlighted, we expect to announce later this year the results from our three critical TI trials as well as the Study 103.

I will now provide an overview of the several trial designs starting with the pivotal efficacy trial consisting of the 009 and 102 trials. Our [inaudible] program is well designed to support the use of TI in a broad patient population comprising type 1 and type 2 diabetics. In comparison to the use of TI in cranular insulin and top base background insulin, such as rapid acting analogs in type 1 and fixed mixtures in patients with type 2.

Turning endpoint in the pivotal efficacy studies of 109 and 102 is non-inferiority in changes in HbA1c baseline. The second endpoint looking at postprandial glycemic excursion [7.03] profile is well within the assessments of hypoglycemia. In addition, we’ve incorporated studies to evaluate the number of quality of life measures into this program.

The other pivotal trial is the 030 trial which is two-year pulmonary safety trial. The primary endpoint to this is change in FCD1. The second endpoint is changes in SBC total lung capacity and DLC0 change in L1C from baseline as well as hypertensive hypoglycemia and other useful safety metrics.

The 09 Interferon Trial have been conducted under special protocols assessments with the FDA and the Y2 objectives is virtually identical to 09 so we don’t anticipate further requirements from the agency.

Moreover, all of our pivotal trial designs are in line with [inaudible] FDA guidelines, which are at issue recently. Studies 1 and 3 and 09 will be completed by midyear in some patients in both of these will be answering our follow-up observational study after treatment study 126. Pulmonary function will be evaluated in patients in both these studies and will releasing results later this year after we have all patients in these three studies completing this follow up.

With [inaudible] TI we are trying to reaffirm the absence of an effect of TI on pulmonary function. In contrast to that report on other inhaled endpoints in the extent and quality of this program will be key in providing the data needed to convince physicians and regulators that we are different.

The quality of our program was recently acknowledged at the American Society of [inaudible] Academy in which MannKind pulmonary testing specialist [inaudible] Harris was named Diagnostic Section Practitioner of the year by this association to reflect the contributions that we have made in areas of pulmonary clinical trial methodology. All our studies incorporate extensive pulmonary function assessments which are an innovated program which we standardized testing in central labs.

Now I would like to move on to our TI platform expansion program starting with MKC253. As we quoted in our call in December, we completed our first inline safety tolerability trial of MKC253 and a technical formulation of GLP-1 that is inhaled using our [med-term] device As you will recall we observed very rapid bioavailability GLP-1 with a T-match of less than three minutes.

In patients that received one of the two higher doses, 1.05, 1.5 mg, their concentrations of GLP-1 exceeded 100 [inaudible] 5per liter. Yet, even in these patients there were no reports of the side affects normally associated with such levels of GLP-1 which is profuse sweating, nausea and vomiting.

This lack of side effects may be another benefit of administering MKC253 in a [inaudible] manner, through the lungs without administering long acting formulations of GLP-1 analogs that will then linger in the bloodstream for hours or days. We are encouraged by these exciting results and felt the MKC253 warranted additional evaluation.

Therefore we moved forward with a second Phase 2 type trial with subjects with type 2 diabetes. The clinical trial application of MK253002 was submitted in September of 2007 and cleared by the European [inaudible] Authority. This trial is designed to patients’ own ability [inaudible] and safeness with subjects with type 2 diabetes and to measure drug levels and post [inaudible] glucose and insulin. Enrollment began in January 2008 and the trial is currently ongoing, and we expect the results from this trial in mid-2008.

Now in our clinical oncology program we also gained approval to commence the second of our cancer immunotherapy studies using our novel approach in the plasmic [inaudible] stimulus followed by peptide boosts to let us [inaudible] category. This second machine, known as 1106MC, is targeted against melanoma and is reviewed and under RND by the FDA.

We will be commencing recruitment for the study shortly. Our 1106PP measurement is progressing satisfactorily with several patients now advancing onto repeated therapeutic cycles.

And now I would like to hand the call back to Hakan.

Hakan Edstrom

I now want to provide some additional details regarding our manufacturing expansion product and our commercial readiness activities. We are approaching an inflection point in 2008, when our corporate efforts will transition from supporting the development of TI to supporting the commercialization of TI. And in order to make this transition we must implement a number of new business processes, systems and supplier relationships.

The $250,000 expansion of our TI commercial manufacturing facility is progressing according to plan and our experienced team in Danbury is expecting a physical completion in the third quarter of 2008. Currently the project is transitioning from construction to commissioning and scale up which will take place in the second quarter of 2008.

Preparations for the FDA pre-approval inspections are ongoing. One example of our progress in this area was our ISO9001 and ISO13485 certifications in October of last year. Additionally our compliance order group is working closely with key suppliers to ensure their readiness with commercialization and pre-approval inspection.

Based on rigorous manufacturability assessments we have finalized the commercial version of our inhaler which offers functional ease and benefits to our patients. It is suitable for automated assembly and effectively manages supply costs. And most recently we initiated a technology review as part of our lifecycle management effort to identify cost reduction opportunities to be implemented after product approval.

And finally, with regard to our partnership activities, we are already in discussions with potential partners with the goal of reaching a collaboration agreement for TI with a partner who shares all commitment and vision for improving the lives of patients with diabetes. We remain focused on selecting the right partner who can provide the key elements that will set TI apart from other forms of diabetes therapy on the market today.

With that review I now would like to turn the floor to Al Mann, our Chairman and Chief Executive Officer.

Alfred E. Mann

I am certainly pleased with our continuing progress with TI and with our readiness plan for commercial operations. As Hakan discussed 2008 is becoming a very important and exciting year for MannKind as we begin to see the results of our Phase 3 trials and prepare to submit our NDA. Dick reported that our October financing package will now provide funding through the end of 2009 which is one quarter longer than previously indicated.

Our commercialization operations are moving forward and remain on schedule. We continue to execute according to plan. Now I would like to comment on our strategy going forward.

We are committed to establishing Technosphere Insulin as the preferred real time therapy within the broad population of people with diabetes. Let me say once again that I believe that Technosphere Insulin is the most effective means ever created to control cranial glucose excursions and to do it safely.

We believe these vantages that I have repeatedly described in terms of safety, efficacy and convenience of the Technosphere Insulin system as compared to other therapies will enable us to significantly penetrate the broad diabetes population not just the insulin using market.

Importantly, Technosphere Insulin has the potential to prove really valuable in treating type 1 and the entire spectrum of type 2 diabetes, even pre-diabetes. Our target markets include type 2 patients who are currently using conventional therapies other than insulin, even including those currently using diet and exercise therapies but who are having difficulty achieving proper blood glucose control.

Indeed, key opinion leaders have hypothesized that Technosphere Insulin’s unique kinetics that used in pre-diabetes metabolic syndrome could even prevent or at least significantly delay disease progression. It is thus our intention eventually to target people even before they would have started oral medications as well as patients currently using insulin and other diabetes therapies.

We realize that we will need to perform additional trials that will clearly show the benefits of such aggressive therapy and in the interim there are plenty of [inaudible] patients that physicians will recognize to be suitable for Technosphere Insulin therapy than more conventional standards.

What Technosphere Insulin does is to control cranial glucose excursion better than any other product, insulin or otherwise. But what Technosphere Insulin does not do is to control fasting glucose levels. Because of the overriding fear of hypoglycemia in the real world of diabetes therapy, most physicians manage their patients at shockingly high fasting glucose levels that can surely lead to serious complications.

With a fasting level of 180 milligrams per deciliter, a common clinical practice today is the fasting level that primarily determines the HbA1c. With a fasting level of about 100 milligrams per deciliter a near normal levels cranial excursions effectively determine HbA1c. To achieve a nominal HbA1c a patients must control both cranial and fasting levels.

People essential face two independent sources of glucose, that from meals and that supplied by the liver to fuel the body between meals. What we have here is truly exists a classic case of two various controls. Basic control theory teaches that for good control, both of these glucose sources must be independently addressed.

The only insulin formulation that does address cranial level separately from fasting modes is Technosphere Insulin. No other insulin even comes close. Good control cannot be achieved through cranial kinetics that is at least those achieved as good as Technosphere Insulin is. So please don’t compare Technosphere Insulin to Exubera.

Exubera was simply a relatively inconvenient means to deliver insulin with no clinical advantage, and at higher costs and with questions about safety. And don’t even compare Technosphere Insulin to any other inhalable insulin. The Lilly Alkermes product has a tail long after a cranial glucose challenge. They assert that the long tail helps to address basal requirements. As I have said earlier good control requires independence so their approach is unlikely to offer any clinical advantage.

Novartis discontinued it’s [Arix] program for the second time stating that in today’s world a popular set of differentiated value propositions to be successful. That is certainly true and that is precisely why we are confident that Technosphere Insulin will be very successful.

Technosphere Insulin does have the potential to demonstrate a very significant differentiated value proposition with clinical benefits not otherwise achievable with any other therapy. Our challenge at MannKind is therefore to further demonstrate these benefits in carefully executed Phase 3B and Phase 4 programs.

The science already supports its superiority but we must now undertake studies and education efforts to help the medical community to transition from conventional therapies to scientifically sound glucose control. One of the key trials designed to evaluate the glucose differentiation and superiority is our study MKC117 which is about to begin.

This six-month trial will compare Technosphere Insulin to Humalog, a rapid acting analog in type 1 diabetes patients in whom fasting glucose will be forced using basal insulin to achieve near normal levels, below 110 milligrams per deciliter. We hypothesize that this trial will show more frequent and more severe hypoglycemic incidents with Humalog than with Technosphere Insulin.

Indeed, the difficulty of using Humalog will be so serious that all those patients will be on continuous glucose sensors to warn of low blood sugar. Furthermore, the presence of any serious type of hypoglycemic incidence, the clinicians will then allowed to increase fasting levels to minimize that risk. What we therefore expect to see from this trial, is superiority in HbA1c for Technosphere Insulin probably to near normal levels in low risk of hypoglycemia.

Whereas for Humalog there will be a higher HbA1c and more frequent and more severe hypoglycemic episodes. We believe that this trial and others planned for both type 1 and type 2 diabetes will demonstrate Technosphere Insulin’s unique benefits that result from its ability to more closely match a more normal body pattern of insulin secretion following a meal.

This will differentiate our product from currently available insulins including rapid acting analogs and long acting analogs as well all other prandial therapies. In all of our completed studies we consistently see superior prandial control. Virtually no cases of TI induce severe hypoglycemia, no weight gain, even weight loss, no need for complex meals saturations and no impact on lung function.

As a result of these differences and benefits, we believe physicians will be attracted to Technosphere Insulin especially because of its ease of use and lack of any need for complex training as compared to some other therapies. After all, most type 2 diabetes patients are managed by primary care physicians and these physicians are in need of simpler insulin therapy that requires less patient training and results in lower incidences of side effects such as hypoglycemia.

The question and doubts about the market remind me of the skepticism and lack of understanding when I was rolling out insulin pumps at [Minimed]. That market has become a $1.5 billion business, quite large for medical devices.

Being a pioneer is never easy and this is especially so when one needs to convert an existing and well established market because it is natural for people to resist change, but change is necessary if we are going to bring people into the normal range of HbA1c. And we must succeed if we are to avoid the ravages of the diabetes epidemic.

In order to facilitate the launch of Technosphere Insulin we plan to create a decision infrastructure support group to educate the broad medical community and make the transition easier and smoother. We are already developing our science supporting launch program. We are also implementing a program of scientific publications and we are launching medical education and opinion leader outreach programs.

We are encouraged by potential partners who share the same vision and understand that the launch of TI is not just another pill pushing exercise. As Hakan mentioned we want a partner that recognizes the potential of Technosphere Insulin and that is willing to work with us to realize this opportunity.

And we are looking past the approval and launch of Technosphere Insulin to other aspects of our technology. Many people are not focused on the potential for the Technosphere Insulin platform. This platform continues to demonstrate a very favorable safety profile. In fact, we have done extensive work in this area and neither TI or FTKP show any science whatsoever of toxicity or carcinogenicity.

We previously announced the clean results of a two-year lab study and now a six-month [inaudible] study with no evidence of microscopic tumors. These and other extensive laboratory and animal studies have demonstrated that FTKP and Technosphere Insulin do not and I repeat do not affect lung tissue. We have seen none of the effects, even any that are minor, that have been seen with some pulmonary insulin.

We have been very thorough in evaluating toxicology and carcinogenicity with Technosphere Insulin and our FTKP carrier. And we have seen absolutely no indication of any risks.

And MannKind is much more than Technosphere Insulin in our pipeline. We believe that MKC250B represents the next operating of series of Technosphere formulations of peptide proteins that have the potential to demonstrate significant clinical advantages over existing therapeutic options in diabetes, [inaudible] disorders and obesity. Although it is still early it appears that delivering these drugs into the arterial system circumvents significant side effects seen with other delivery modalities.

With this in mind, we are conducting pre-clinical work to bring a certain hormone to deploy quickly. As we near the end of the development phase for Technosphere Insulin, we are more confident than ever of the great potential of this product to make a real advance in diabetes therapy. This advance is fortunate because if not reversed the diabetes epidemic worldwide will devastate humanity and could bankrupt the world.

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

Question-and-Answer Session

Operator

(Operator Instructions) You have a question from [inaudible] - Bank of America.

[inaudible] – Bank of America

On the guidance that was released a few days ago, how long is your wash out period for key trials and second are you accepting or open to relative rates of common morbidity? And then they outlined a number of lung functions that and then on that side they also mentioned about the need potentially for high-resolution temography and I was just wondering if you are utilizing that technology?

Peter C. Richardson

Yes, to answer your last question, we have used high resolution CT in the studies and I believe that we are in keeping with the guidelines on all of these aspects.

In terms of the wash out, my reading of that, I think you are reading in the specifics wash outs of the Phase 2 programs where we did do wash out, we have a short wash out period followed for [inaudible]. But if you look at that guidance the difficulty of washing out patients are requiring insulin is I don’t think the guidance is there. Carefully in terms of that which is applicable to insulin and that which would be more appropriate for oral hypoglycemics and those where you wash outs.

So at least be careful interpreting that.

[inaudible] – Bank of America

Are you assessing relative risks?

Peter C. Richardson

Yes, again, that aspect we have in the program comprising over 3,000 patients, we will be looking at the [inaudible] safety readout not pre–specified co-morbidity and again if you are looking at that section of the guidance I believe that would give you indications where you are looking at claims around convention of the morbidity.

[inaudible] – Bank of America

You also mentioned about special population and do you think that it is now going to be required those trials that you are running as part of the NDA?

Peter C. Richardson

We have already indicated that we have a comprehensive program of Phase 1 and of Phase 3 studies in special population by treating asthma and objective airway disease as well as in terms of capacity [inaudible]. Those are all underway. We will have them ongoing and if you actually read the guidance again on those I think that the wording has been a little looser in terms of we will have patients on those treatments with those indications in RNDA at the time that we make.

Operator

The next question comes from [inaudible] – Rodman & Renshaw.

[inaudible] – Rodman & Renshaw

Why the slightly unusual data release for the 030 data why wouldn’t press release that. What’s the thought process between holding that until you or really never making it public until approval?

Peter C. Richardson

Are you talking about the 030 or the 103?

[inaudible] – Rodman & Renshaw

I think the big long; I think you said the two-year trial would release data on submission of the NDA.

Peter C. Richardson

I think there is basically timing of that will be our last is a critical [inaudible] study with 3,000 patients where we will be doing a complex database lot that first week of September through to filing the NDA in December. I’d like to concentrate in making sure the data in the NDA and the effect of the release of that information will be at the time that we are putting the entire package. I think that is why you are looking at it in those terms.

[inaudible] – Rodman & Renshaw

It’s just a rate-limiting step. You are not treating that data any differently is what you are telling me?

Alfred E. Mann

No, no, no, it’s purely timing, Tom. You know what we have been saying all along, Tom.

[inaudible] – Rodman & Renshaw

I’ve very glad to see the 117 study Al and thank you for your impassioned account of it. Do you think you need those data to launch, what is really the difference between what everyone else has failed on and where you can succeed? Is that now part of the NDA? How does the timing of that come relative to a launch?

Peter C. Richardson

We’ve always planned on to be available after launch. Clearly it’s not the study that will complete the timing to make the NDA submission. But now we are moving into really what I think is the very exciting part of the program which is executing some really challenging 3B and some 4 studies, this is the first of them.

It’s a very aggressive design; its one which I think is really important in the position of TI and our plan is to absolutely have this available at the time of launch to support our message around that. but we have done this during time that we have had terms of executing the Phase 3 program, really so we can focus on making the NDA at the time that we said and then having this data to support launch and I think that is the optimal way of managing it.

[inaudible] – Rodman & Renshaw

The lay of the land right now, although its very different is that pushing diabetics to normal HbA1c levels is dangerous but I understand it was attempted in a very different way, but does that color your ability to get this trial started and when I think it leaves Al’s explicit goal is to get them to normal levels. Am I clear on what I am asking?

Alfred E. Mann

Yes, but I think you have to be very careful. You are referring to families to these [inaudible] studies and that study could never have produced good control. The problem that exists today is there is absolutely no way to get truly normal glucose control to any current diabetes products.

Unless you can address both prandial and basal levels or fasting levels, separately, independently, you just cannot do it. And so the [inaudible] study really has some faulty conclusions. And in the fact all of the people that I have talked to, the KOLs who will look at this say that they don’t really understand or are not paying much attention to that because frankly the implications are just not supportable.

[inaudible] – Rodman & Renshaw

So you have seen no indication that IRVs are missing at this point, they are all aware that it is very different?

Peter C. Richardson

I think that we are discussing with IRV and we are moving soon and that we have a very good set of answers to those questions. You are obviously very aware in terms of the surprise factor of that year round we have a lot of discussion with opinionated in the field and I think that until we see the published results of that we have more questions than we have answers.

You are absolutely right in terms of potentially this is an opportunity for us in terms of looking and saying we are sensing that exclusion in terms of optimizing the rapid, short acting prandial insulin that we will have a tool and we hope we will be able to use that. I think the 4T study as well, in demonstrating the difficulty in getting HbA1c down with conventional with rapid acting analogs again, helps us in terms of where we have to go in terms of picking our product to demonstrate the benefit.

Operator

Your next question comes from Cory Kasimov - JPMorgan.

Cory Kasimov – JPMorgan

I will start with a partnership question and try to get some more clarity there and the status of ongoing discussions with pivotal TI results now just about six months away, at this point, should we be assuming that a partnership is not going to be signed until at least the initial results are available given the potential value inflection data you have provided?

Hakan Edstrom

No, you cannot make that assumption. These discussions have been ongoing for some time and they certainly come with regards to evidence in regards to what they see in terms of the differentiated benefits of our product. So while certainly there are important data they are not kind of driving the pace of the discussions at this point in time.

Cory Kasimov – JPMorgan

So you don’t think that you think you would get more in return if you held out and waited six months or so, until at least the initial pivotal efficacy figures are out.

Hakan Edstrom

I would say that no that we have not had that indication that the results of our clinical trials from that point of view would drive a different outcome.

Cory Kasimov – JPMorgan

With regard to the 103 Metformin study, this is the trial that I remember was originally supposed to have data by the second quarter and given its complexity that’s been pushed back a little bit, can you just review what is so complex about that particular study and more importantly what you hope to learn from it.

Peter C. Richardson

It’s not just the complexity of the study. It’s actually the fact that these patients we have continued into the offset study and we want to look at the data in terms of the entire [inaudible] when we have the offset study complete as well.

Cory Kasimov – JPMorgan

With regard to TI, Al again gave a very impassioned speech about moving this much earlier not just a big plan deal established there with type of insulin but moving this ahead into even pre-diabetic populations and I realize its very early now but in thinking about that designing long-term strategies there what type of long term outcome studies do you think you would need to design and conduct in order to actually get patients at that stage to use a therapy like this?

Peter C. Richardson

Well for the pre-diabetic population I would refer you actually to the recent issued guidance which actually gives some help in terms of this first time that we have seen an approach being recommended in terms of the outcomes that we can measure and look at in there and I think that is encouraging in terms that we do have a path forward which we could start to follow.

Cory Kasimov – JPMorgan

Did you submit the Phase 1 GLP-1 data for presentation of NDA?

Peter C. Richardson

Yes.

Operator

Your next question comes from Annable Saminy – UBS.

Annable Saminy – UBS

On the guidelines again, was there I think that I remember seeing some kind of mention that might require a very long term study of co-morbidity for these patients and can you give a little bit more color on that and if the FDA is going to come back and say we want to see longer studies.

Richard L. Anderson

My reading of the guidance there is that if there is safety signals that emerges then maybe that requirement or if you are going to specific [inaudible]. Clearly as the safety data evolve any signals that would normally be expected about direct with this [inaudible] requirements for studies. I have no indication of that being the case at present time but I think that is what the guidance would show something.

Annable Saminy – UBS

Are you actually measuring the co-morbidities?

Richard L. Anderson

In terms of the safety outcomes as would be known for this.

Annable Saminy – UBS

On the data with the special populations, are we going to be seeing any of the data releases over the course of the year before it is included in the NDA package?

Richard L. Anderson

The Phase 1 data as it becomes available but I haven’t got specific guidance on the timing when that will be available its going to the cost of this year.

Annable Saminy – UBS

On the GLP-1, I think I remember in the last call you had mentioned that the GLP-1 is a native GLP-1 rather than an analog. I just wanted to understand specifically what the importance of that is versus an analog,

Richard L. Anderson

Yes, it is a native GLP-1 and the advantages of that are that is the naturally occurring peptide and which I think from that basis [inaudible] immensely attractive.

What we are exploring is the difference, again, just as we are seeing with the Technosphere Insulin with the characteristics of the peptide action can be changed by that time action giving it a very rapid delivery by the lung enables you to do something different in terms of signaling and the clinical effects that you see because of that change in the pharmacokinetics.

Now the previous thinking with GLP-1 and I believe most other companies and developments in this area extend the action profile just as with insulin the first many years we tried to extend the insulin action. Looking at those effects in terms of having the very rapid, short PK and the looking of what that will do in terms of, glycemic control and I think that you will look forward to seeing the data as related to [inaudible].

Operator

Your next question comes from Thomas Russo – Robert W. Baird.

Thomas Russo – Robert W. Baird

I was wondering if you could elaborate on whether you have had any interactions with payers yet, I know you have [inaudible] program taking off and I was just wondering if you interaction with those up to this point?

Hakan Edstrom

Well, yes, we certainly have a consulting group that has been working with us and looking into all of the aspects of reimbursements both in the United States and in the European arena. I couldn’t tell you specifically whom they have spoken to at this point in time but actually in about two to three weeks from now we will have their first report based on what they learn and what they have seen. So it’s certainly on our agenda to make sure that we are fully aware of requirements that they might have.

Thomas Russo – Robert W. Baird

I think you mentioned earlier interest in moving another module into the Technosphere system and I was wondering if basal insulin is an application that would be of interest to MannKind.

Richard L. Anderson

Yes, but that doesn’t mean that is going to be the next one going through.

Thomas Russo – Robert W. Baird

Just in terms of the Danbury facility when in the process do you expect the FDA inspection to occur?

Hakan Edstrom

Our preparation is such that we expect to be ready within 90 days of the findings. Our expectations is probably somewhere around May of 2009 we would expect the FDA in our facilities.

Operator

Your next question comes from Michael Tong – Wachovia Securities.

Michael Tong – Wachovia Securities

On the Phase 3 and Phase 4 studies [inaudible] Humalog, how big is that study going to be and how long do you think patient enrollment will take?

Richard L. Anderson

Roughly every 100 patients, its 300 in enrollment we are planning to have this study completed in time for supporting the NDA filing. We have a lot to do in terms of enrolling and I think this is a very attractive study.

Michael Tong – Wachovia Securities

You are going to have it completed by the time of filing the NDA.

Richard L. Anderson

By the time we launch.

Operator

Your next question comes from Salveen Kochnover – Jeffries & Co.

Analyst for Salveen Kochnover – Jeffries & Co.

Has there been a common concern in your discussions with potential partners on enrollment issue in terms of a major hurdle for partnership and if so, how do we get over this hurdle? Has there been a common concern from potential partners in terms of signing partnerships?

Hakan Edstrom

No I cannot say that that has been anything in common. There have been unique situations either on their side or our assessment whether they are the right partner to take us forward phase of marketing to [inaudible] partnership.

Operator

Our last question comes from Elizabeth [inaudible] – Piper Jaffray.

Elizabeth [inaudible] – Piper Jaffray

On the preclinical program, first do you feel comfortable your preclinical program will meet the requirements set forth in the [inaudible] documents and then second are you going to release data from the six-month transgenic [inaudible] study?

Richard L. Anderson

Yes to the first and we will have some further work on the histology and details on transgenic and when we have that we will put that into the appropriate earnings call.

Operator

There are no further questions at this time.

Hakan Edstrom

Ladies and gentlemen we are grateful to all of you for your ongoing support and commitment as we pursue our mission and try to reach and exceed our goals. Thank you all for joining us today. We look forward to updating you at our next quarterly call.

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