MannKind Corp. Q1 2008 Earnings Call Transcript

 |  About: MannKind Corporation (MNKD)
by: SA Transcripts


Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation First Quarter 2008 Conference Call. At this time all participants are in a listen-only mode, later instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder this call is being recorded today May 5, 2008.

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

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

Hakan Edstrom

Sorry this is Hakan Edstrom. Well, good afternoon and thank you for participating in todays call. Before we proceed further, please note that comments made during this call would include forward-looking statements within the meaning of Federal Securities Laws. It is possible that the actual results could differ from these stated expectations. And for factors, that could cause actual results to differ from expectations, please refer to our reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Well let me start by recapping our activities during the past quarter. All of our key programs are on schedule and on/or the low budget. We are nearing the end of our pivotal Phase III trials and have put in place the necessary personnel assistance so that we can lock the databases this fall and conduct the analysis leading to the NDA filing.

We are also approaching the completion of the construction phase of our manufacturing facility in Danbury. Much of the equipment has already been installed and our validation activities are well underway. Our target submission date for the NDA for Technosphere Insulin remains the end of December 2008. Although this stock is still considered an aggressive goal.

Our clinical operations, is busy initiating study 117, a Phase IIIb clinical trial that will examine the effect of TI in patients with tightly controlled fasting glucose levels. As you know out of fear of hypoglycemia, patients today tend to be managed at high fasting levels. So high as to invite the risk of long-term complications and at these high levels fasting glucose, not prandial glucose primarily controls the A1c. Our goal in this study is to use insulin more aggressively by taking advantage of TI superior hypoglycemia profile and observe the affect of this aggressive insulin use on A1c levels.

We also have a number of non-insulin trials under way, having recently initiated second clinical trial of our inhaled GLP-1 product, the MKC253 and a trial of the second cancer immunotherapy product, the MKC1106-MT and these other programs also appear to be outstanding opportunities. We believe that we have done everything that we told you that we would do and even a little bit more.

Nonetheless in the wake of the withdrawals of Novo Nordisk and Eli Lilly from the inhaled insulin market, and more recently the revised labeling of EXUBERA, many investors and analysts have changed their perception of the inhaled insulin opportunity and MannKind's prospects and our stock price has plummeted.

All this has led to a great deal of discussion, analysis and speculations in the last few weeks about the future of MannKind Corporation, and over inhaled insulin generally. The bottom line is this Technosphere Insulin is progressing well. There is nothing that we have heard from Pfizer, Lilly or Novo Nordisk. That has caused us to change our opinion about the safety or efficacy of Technosphere Insulin.

We still believe that we have a very safe, effective and differentiated diabetes therapy. Of course we have not yet completed our Phase III clinical trials and as you know we are still blinded to the data. When the data are available we and you will have substantially more information about the safety and efficacy of Technosphere Insulin, than what is currently available.

Ultimately we believe the exit by these three companies may enhance our opportunity with TI. We first must deal with some of the negative perception that they have created. We are only prepared to make decisions about the future. Our product is based on solid clinical data not on the basis of suggestions and speculation.

All our data to-date and also our extensive underlying science support the safety and efficacy of Technosphere Insulin. That we have every reason to move forward and we are continuing the clinical development Technosphere Insulin as one of the completion of the build out or manufacturing facility.

Indeed assuming that the data from our pivotal trials continues to support the view that Technosphere Insulin is safe, effective and a significant improvement over today's standard of care as such all our data consistently demonstrate until now. We shall proceed towards submission of a new drug application with the FDA and with the preparations for the pre-approval inspection of our manufacturing facility in Danbury.

The cloud of uncertainty that has formed over the inhaled insulin space has nothing to do with Technosphere Insulin and we believe that we can best dissipate these doubts by obtaining approval for our product.

I know that many of you participating in this call have questions what the FDA will do with our inhaled insulin in light of the pneumatic imbalance in lung cancer cases, Cmax EXUBERA.

I certainly cannot predict what precision the agency will ultimately make to take on this issue, but I can tell you that we maintain an open and constructive dialogue with the FDA, and there we expect this dialogue to continue unabated.

Please keep in mind that unlike others exploring inhalation of insulin in addition to extensive toxicology studies that have shown no effects on tissue, we have specifically evaluated the carcinogenicity of our product in studies not just in one but in two species.

We undertook these animal studies not because we felt that insulin is carcinogenic, but because we wanted to thoroughly understand the safety of our formulation. All preclinical carcinogenicity data indicated that neither our product nor the carrier material alone has any carcinogenic potential, although the final histology report from the second study in immune compromised transgenic mice will not be received for another few weeks.

We also know that our carrier is not biologically active and everything that reaches the lung is excreted in urine unmetabolised.

Remember that the target for our product is not really the lung itself but rather the arterial circulation that drains from the lung. Our formulation gets insulin, and is carried into the bloodstream quickly, with neither material spending much time in the lung. We can only speculate how our mechanism of action differs from that of the sugar-based formulation used in EXUBERA.

Suffice it to say, we have not seen any of the adverse effects on the measures of lung function that have been reported to occur with inhaled insulins. Yet the recent publicity raises questions as to whether EXUBERA causes or accelerates cancer. Even if a cancer relationship is eventually established, it does not mean that there is a class issue. In fact, Lilly and Novo Nordisk, as well as MannKind, have seen no signal of cancer. All these products are different. Indeed, a minor difference in the formulation of an active ingredient can have a profound effect of the safety and efficacy and commercial viability of a pharmaceutical product.

Those of you who have been following diabetes for sometime will recall the problems encountered by users of troglitazone or Rezulin after it was launched in 1997. There were a number of cases with severe liver damage and quite a few fatalities. Although Rezulin was withdrawn in 2000 for safety reasons, its sale did not mean that (inaudible) class were doomed not at all. Pioglitazone or Actos was launched in 1999, and has gone on to generate many billions of dollars in revenues. This is just one example that illustrates how the failure of one drug does not define the performance of an entire class.

This brings me to the other major concern that has been raised regarding Technosphere Insulin, that even if approved, the product will be difficult to market in the wake of EXUBERA's problems and the exits by Novo Nordisk and Lilly.

We fully understand the marketing challenge that faced us today with Technosphere Insulin. Even before the recent events, we were well aware that marketing a novel therapy to primary care physicians would require substantial sales and marketing efforts. For this reason, we were pursuing a partnership arrangement with the collaborator with substantial marketing and sales capabilities. That is still our strategy. But because of the recent publicity and the associated perceptions, we have temporarily reset discussions with potential partners. We will resume, or proceed with our partnership after our pivotal data is available.

Although we are still committed to the commercialization strategy, we are as well exploring other models we are introducing as safe, effective and differentiated pharmaceutical product to the marketplace.

We believe that Technosphere Insulin is a unique product, with significantly improved safety and efficacy and with the potential to change the way diabetes is treated. Ultimately, it is the clinical data that will drive our decision about how to best market our product.

As recently as last week, we met with U.S. payors to discuss reimbursement and based on our data to-date, they have been very encouraging. They recognized the significance of Technosphere Insulin therapy and its clinical benefit that clearly differentiated from EXUBERA.

Now as you are aware, Dick Anderson has to retire as CFO and for the next year, he has moved to a reduce work schedule in the office of the Chairman and we are pleased to now introduce to you Dick's successor, our new Chief Financial Officer, Matt Pfeffer.

Many of you may know Matt from his tenure at VaxGen and earlier at Cell Genesys.

Matt will present our financial report and then Peter Richardson will give you an update on our Research and Development programs. Finally, Al will then present some observations and comments before you open up the call to questions. Matt, Please.

Matthew Pfeffer

Thank you, Hakan and good afternoon. Before I get into the financials, let me remind all of you this conference call contains time-sensitive information, which is accurate only as of the date of this live broadcast, May 5th, 2008. MannKind’s management undertakes no obligation to revise or update any statements to reflect events and circumstances occurring after the date of this call.

In the first quarter of 2008 total operating expenses were $74.1 million compared to $77.3 million for the first quarter of 2007 and $79.1 million for the fourth quarter of 2007.

R&D expenses were $58.4 million for the first quarter of 2008 compared to $63.8 million for the first quarter of 2007 and $66.8 million for the fourth quarter of 2007. The decrease in R&D expenses from the first quarter of 2007 was primarily due to lower clinical trial costs and associated costs of packaging for the clinical materials, and was partially offset by higher stock compensation expense.

General and administrative expenses were $15.6 million for the first quarter of 2008 compared to $13.6 million for the first quarter of 2007 and $12.3 million for the fourth quarter of 2007. G&A expenses increased from the first quarter of 2007, primarily due to a one-time patent expense.

The net loss applicable to common shareholders for the first quarter of 2008 was $71.4 million or $0.70 per share based on a weighted average 101.4 million shares outstanding, compared with a net loss applicable to common stockholders of $73.1 million or $1 per share, based on 73.4 million weighted average shares outstanding for the first quarter of 2007.

Our cash and cash equivalents as of March 31, 2008 totaled $269.1 million as compared to $368.3 million as of December 31st 2007. Our cash burn during the past four quarters has been $81.6 million in Q2 '07, $79.8 million in the third quarter of '07, $85.7 million in the fourth quarter of '07 and $99.2 million in the first quarter of '08. We anticipate our cash burn may increase further over the next one to two quarters and should then decline.

Fluctuations in the quarter with 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 Danbury plant. With our current cash and availability of the $350 million credit facility from Al, we continue to believe we will be able to fund our operations through the end of 2009.

I'd now like to turn the call over to Peter Richardson, who will discuss our R&D activities. Peter.

Peter Richardson

Thanks Matt. On April 9th, 2008 the following information was added to the EXUBERA package insert and warnings in clinical trials at EXUBERA there have been six newly diagnosed cases of primary lung malignancies among EXUBERA treated patients. And one newly diagnosed case among comparative treated patients. There has also been one post-marketing report that primary lung malignancies in an EXUBERA treated patient.

In controlled clinical trials of EXUBERA instance and new primary lung cancer for 100 per 100 patient-years of study drug exposure was 0.13 or 5 cases over 3,900 patient-years for EXUBERA-treated patients and 0.02 or one case over 4,100 patient-years for comparator-treated patients. There were too few cases to determine whether the emergence of these events is related to EXUBERA. All patients who were diagnosed with lung cancer had a prior history of cigarette smoking.

We have limited information available on the both records, but note that in both letters to doctors and patients and as shown on the FDA website identifies that EXUBERA is considered a safe and efficacious treatment for diabetes.

To-date our Technosphere Insulin clinical program has enrolled 4,849 subjects in 25 completed and seven ongoing trials, of which 2,684 subjects have been treated with Technosphere Insulin and 2,165 subjects received controlled medication. This correspondence to 2,182 patient-years as the Technosphere Insulin treatment and 1,708-patient years of controlled treatment. MannKind received a report of one case of primary lung cancer and the second case of lung involvement in a patient with metastatic colorectal cancer.

In both cases, the patients had a prior history of smoking. Conservatively assuming that both reported cases in the Technosphere Insulin treated group are primary lung treatments using to this date the Technosphere Insulin is 0.091 to 100 patient years with no statistical difference to the control groups. Based on epidemiological data, the rate does not exceed what would be expected and are similar to untreated population.

Give you an update on toxicology information. To preliminary data from two carcinogenicity studies in rodents are available. In a 104 week study in Sprague-Dawley rats, inhalation of either Technosphere Insulin or Technosphere only particle comprised this fumaryl diketopiperazine was well tolerated and there was no indication that either Technosphere Insulin or FDKP had carcinogenic potential in the lung or other tissues. There was no difference observed in cell proliferation activity in the lung tissue of controlled and treated groups. Similarly, microscopic evaluations in transgenic rasH 2 mice administered Technosphere Insulin or Technosphere placebo cutaneously over 26 weeks indicate no carcinogenic potential in lung or other tissues.

On the 9th of April 2008, the Independent Data Safety Monitoring Board reviewed the public information related to EXUBERA together with updated information on the Technosphere Insulin program. On this basis, the Data Safety Monitoring Board recommended that the studies could continue unchanged. We immediately thereafter informed all investigator sites the information and today there have been no signs which have chosen since dropped from our studies that very few patients have discontinued therapy as a result of this information.

In the evaluation of any potential safety issue, which remained part of product, we are first and foremost committed to the safety and well being of the patients taking part in our studies. We have seen no reason to alter our studies in any way in light of the reports around EXUBERA. We believe our main priority is to proceed to the completion of our ongoing studies and the start of the important 3B program we are undertaking to establish the benefits of Technosphere Insulin over existing therapies, the patient's with diabetes as well as thorough understanding of any potential risks that need to be managed in partnership with regulatory authorities, our patients and prescribers.

The data with our product indicates that there are important differences in the basic pharmacology of Technosphere Insulin in comparison to all other insulins including the inhaled preparations that have been in development by others. Our job is to demonstrate how these differences can be used to allow patients to achieve better control of their diabetes with less disruption to their lives and is presently possible with existing therapies. We remain on track to do that.

And in the meantime, we are continuing our studies and analysis of data with our specialist advisors from the fields of endocrinology, pulmonology, and epidemiology.

Our program is not just aimed to demonstrate the safety of Technosphere Insulin, but also to establish the Technosphere particle as the new way to deliver peptide systemically by the lung.

This is not a matter of convenience, but the way to mimic the pulsatile release of several hormones which were of physiologic importance in the endocrine metabolic diseases. We have seen with Technosphere Insulin how this can open up new possibilities for the use of the product that has been with us for over 80 years. We are now applying this to the deliver of other peptides where we believe this approach may yield similar benefits in terms of improved safety and efficacy.

Our goal is to establish the Technosphere platform as the preferred method of delivering peptide hormones physiologically, and the unique characteristics of our propriety particle allow us to approach this in a truly innovative way.

The first of our projects in this area is MKC253 where we can deliver glucagon-like peptide observed on to Technosphere particles using the MedTone inhaler.

We will be reporting in more detail the exciting data from the first of our studies in normal volunteers at the American Diabetes Association Meeting where we have been accepted in all of our presentations.

Furthermore, I am pleased to report that we are making excellent progress in our second study in patients for type 2 diabetics, where we evaluate the effects of glucose levels calling in new challenge. In addition, we have obtained very encouraging results from preclinical studies exploring the use of our technology to deliver appetite suppressing peptides in well tolerated rodent model. We started the necessary preclinical testing of the first of this needed to allow us to start clinical testing early next year.

Our cancer programs have certainly made excellent progress. The first of our active immunotherapy treatment, MKC1106-PP, currently in Phase I clinical trial, has now recruited all of the low dose cohort with encouraging results to-date.

Our internodal administration of biomolecules aim to lesser community against cancer cells seems to be very well tolerated. It observes sustained immune responses against those targets to suit in this trial, a multiple subjects with genotypes. A number of patients are now proceeding on to multiple repeat cycles. We will now stop the high-dose cohort as well as the study of our second regimen, a Phase I 2 trial with an expanded list of objectives specifically design to target patients with malignant melanoma which is known as MKC1106-MT.

At an earlier stage, I am very pleased to be able to give you some information on two of our innovative small molecule programs. We have recently received support from two notable non-profit organizations with whom we are partnering in order to expedite bringing novel drugs to the clinic, initially targeted at devastating forms of blood cancer.

On the (inaudible) program targeting the IRV one pathway, which appears to be a fundamental in how cancer cells deal with treatments in the bodies defense mechanisms, has received of up to $1 million from the Multiple Myeloma Foundation, which (inaudible) molecular design efforts in this area. And in addition, we received a grant of $1 million from the American Leukemia & Lymphoma Society to expedite the further development of a lead class of compounds we have discovered, targeting the cellular kinase ITK, which we believe is of importance in various types of T-cell leukemia's and lymphomas.

ITK is a member of an important class of molecules, Tec kinases. That would offer us a unique opportunity to tackle additional types of leukemia and lymphoma through developing compounds based on similarly inhibited chemistry.

We truly have an exciting program of promising products. Nova Technosphere Insulin are still in early development. Yet, from my experience in drug development, I suggest you that these new products have a better than usual likelihood of successfully moving through development to commercialization.

Now, let me turn the microphone over to Al.

Alfred Mann

Thank you, Peter. Matt provided an update on first quarter financials and has reported that we are on plan, even somewhat better than plan. Hakan and Peter have spoken about our clinical program, our progress with the manufacturing facility, some of our product pipeline opportunities, and recent events about EXUBERA and Inhaled Insulin.

I would like to take a few moments to make some additional comments about that EXUBERA report, and about the market's reactions to the announcement by Pfizer of a numerical imbalance in their clinical trials in the number of primary lung cancer cases among EXUBERA treated patients versus controlled patients.

It is an understatement to say that we were dismayed that from a Pfizer report, so many of the analysts were quick to write off Technosphere Insulin MannKind and that investors have greatly devalued our stock in the wake of that announcement. It was almost as if we had announced a numerical imbalance of lung cancer patients for our own product or that we even acknowledge a genuine safety signal for EXUBERA.

The reaction was that strong, but that is not the case. First of all, as Peter noted while there was an imbalance in the Pfizer experience and in the two cohorts. The number of cases of lung cancer in the primary patients did not of itself signal a safety risk for EXUBERA. The actual incidence of lung cancer was consistent with statistics within the general population and that incidence was actually low because every one of those patients was a smoker. According to Pfizer and the FDA, EXUBERA remains a safe and effective medicine.

As to Technosphere Insulin, we have seen no lung cancer signaled in our clinical data. Our independent data safety monitoring board has consistently recommended that our trials continue without change. Even after Pfizer’s announcement, the DSMB found no basis to discontinue or otherwise modify our trial.

Let me also remind you that both Lilly and Nova Nordisk announced that there were no safety issues with their products. Both Abbott and Aradigm have announced that they have not seen any cancer signals in the data related to their inhaled insulin programs.

So what does this all mean for the future of inhaled insulin? After all three major companies have withdrawn from this market. But none of those products delivered any clinical advantages over existing standard of care rapid acting insulin analogs. Without a valid value proposition reimbursement was a serious obstacle for all those products.

One might even ask why Lilly and Novo Nordisk ever pursued those products and what really led to the termination of Ara and AERx. Consider the business rational for Lilly and Novo, for both company's injectable rapid acting insulin or analogs are major blockbuster products.

Why cannibalize those substantial profit drivers with a product directed to the same market but with lower margins. For example Lilly's air system had an effective bioavailability of only 7% to 8%, thus requiring 13 times more insulin, as well as all the processing costs and device costs and also the payments to Alkermes. As a consequence the economics made no sense for them. Lilly also decided the regulatory environment as part of the rational for termination. But in reality surely the economic issue dictated termination.

In the case of Novo Nordisk the reason was similar and even clearer. While pulmonary delivery of rapid acting insulin made no sense, Novo Nordisk is continuing to pursue an inhalable lung acting insulin. Why? I say because Novo Levemir twice daily injectable basal insulin is not competing well against Lantus from sanofi-aventis's.

So, what can we incur from all this after the market failure of EXUBERA both Lilly and Novo re-examined their inhaled insulin programs. It seems evident that both those companies were pursing this route of delivery only for defensive reasons. I say that after the demise of EXUBERA, the termination of both Ara and AERx were best cases where Lilly and Novo Nordisk simply found those products not to be economically justified within their product portfolio and found no reason, no defensive reason to continue them.

On the other hand, our product has much better viability than the others and clear clinical advantages over today's standard of care. With our data to-date we have never had any difficulties explaining our value proposition to physicians and why Technosphere Insulin become a valuable addition to the diabetes treatment option and why it should be prescribed for broad array of patients.

We're also finding encouragement from peers for re-imbursement, after all ours is not just another inhaled insulin, instead we have tried to define our product as the first in a new class of also ultra rapid insulin and the insulin that most closely mimics normal physiologic release by a healthy pancreas.

This is not just my view, this was firstly tested by Jay Skyler a world leader in diabetology and his description has since been embraced by other key opinion leaders. No other product has ever come close to TI's kinetics and those kinetics are absolutely needed to avoid the complication of diabetes.

Let me explain. Glucose of course is a fuel to the body, but must be controlled or serious consequences can ensue. A person is faced with two independent sources of glucose, that which is ingested in meals and that which is provided by the liver to fuel the body between meals. Basic control science dictates that to control the system with two independent variants require use of two separate and independent controls. Even nature realizes this. When a person eats a meal, the pancreas reacts with the meal by releasing a surge of insulin within minutes and that turns off delivered during meal digestion.

The normal body does feel the mealtime glucose load separately from fasting glucose loads. In contrast to the insulin released by the normal pancreas of a healthy person which reaches peak plasma concentrations in less than 10 minutes, subcutaneous prandial insulin peak in two to three hours, for regular insulin about 50 to 80 minutes or so for rapid analogs and the other inhaled insulins.

Moreover, the activity of those insulins continues for many hours long after the meal has already been digested. Compares this to Technosphere Insulin peaks in 12 to 14 minutes, almost as fast as in normal pancreas and with the insulin activity closely synchronized to meal digestion.

TI is gone before there is any excess insulin problem. These kinetics result in tremendous advantages. TI therapy can produce exception control of both post-prandial glycemic excursion, with very little if any risk of hypoglycemia. No need for complete meal titration and no weight gain, even weight loss for prior insulin users.

I believe that Technosphere Insulin is a truly disruptive technology that can change the way diabetes is treated. Independent key opinion leaders have postulated that TI even has the potential to stop or at least to slow the progression of type 2 diabetes. I believe this product has a tremendous future and I refused for it to be defined by the failure of others that do not have viable value propositions.

I do understand that we now have to overcome new marketing obstacles, but I say that these obstacles are based on perceptions, not on facts. Those of you who know me and my history will know that I understand what it takes to pioneer disruptive technology and I tell you I am up to this challenge.

To illustrate this point, let me remind you of remarkably similar crisis exploded in the early days of insulin pump therapy when I was at MiniMed. Eli Lilly, Novo Nordisk and Baxter were early competitors in the insulin pump along with MiniMed.

Another major European company was conducting a trial of instant insulin pump and in that trial several people died from severe hypoglycemia. There was uproar about the dangers of insulin pump therapy and the experts offered that the insulin pump market was dead. One by one Novo, Lilly and Baxter terminated their insulin pump programs. Lilly even paid MiniMed to supply replacement pumps for its patients, but MiniMed did not follow the herd.

We believe that our device was superior and different from the other offerings and so we continued. Ultimately, we prospered. MiniMed went public in 1995 and was later acquired. MiniMed's value escalated from the early price of $1.75 per share to its split adjusted $192 at the time when Medtronic acquisition in 2001. That was the return to the early investments over $100 for every dollar invested.

I want to state that MiniMed's past performance is no guarantee of MannKind's future results. Yet the parallel with MannKind situation today to that of MiniMed is quite interesting. Even two of the three players are the same, but please understand I am not being critical of Lilly or Novo for having abandoned their pump program back then or their inhaled insulins now. Those companies have always had multiple products under diabetes franchises.

So, for them it has simply been a matter of managing their product portfolio. The situation for both companies back them is not so different for that and believe is driving their decision about inhaled insulin today. On the other hand, innovators like MiniMed and MannKind focus on unique, singular qualities of their superior technology without worrying about balancing the profitability of the mixed product, some of which are potentially competitive with each other.

So, the situation we find ourselves in today is that all the other major players have removed their inhaled insulin products from their portfolio and have left the field open to MannKind. While we might deal with the perceptions of the current doubters, in the end this should be an important positive for MannKind. I want to reiterate my own conviction about Technosphere Insulin as well as that of the company and the entire team. We are all fully committed and remain so fully committed to take this for insulin. At all levels of our step, there is wide spread confidence in our future.

We believe Technosphere Insulin be the most effective means, indeed the only current means for safely and effectively controlling prandial glucose excursions and it does this without the historically problems of insulin therapy. I assert that Technosphere Insulin has the capacity to increase both the safety and efficacy of diabetes therapy in very significant ways that today are poorly met with available treatments. MannKind is much more that just a company with Technosphere Insulin.

Until now we have not spoken much about our pipeline even though early it is very strong, because we are so focused on TI all the other products are still in early stages and years before commercialization. But exciting are these other products, our focused over this next period will continue to be on Technosphere Insulin. Our intention has been defined a partner that shares our vision and is fully committed as we are to the value of Technosphere Insulin.

But given the reaction to the latest EXUBERA issue, we decided to reassess our partnership talks at least until our pivotal data is available. We view the increase in our challenge for commercialization to be caused not by anything real but by the perceptions raised by the exits of the other players and by the latest EXUBERA scare.

In summarizing, let me say that Mannkind is continuing its development of Technosphere Insulin that we are in course to file our NDA that we have not to-date seen any reason to be concerned about safety or efficacy of these products that the issues with EXUBERA may have led to certain hasty and I believe in accurate perceptions that personally none of EXURBERA problems have been seen with Technosphere Insulin, that we believe Technosphere Insulin is the most effective means to control prandial glucose excursions, that prandial excursions must be controlled if we hope to safely bring most diabetes patients to a normal A1c's. That our factory is nearing completion, and that I and the entire management team at MannKind continue to be committed to this project and to its success.

I think now is the time we can take your questions. Operator?

Question-and-Answer Session


(Operator Instructions). Our first question is from Sa'ar Yaniv, JPMorgan.

Sa'ar Yaniv - JPMorgan

Thank you so much for taking my call. Can you discuss the carcinogenicity study such as the design and the study length?

Alfred Mann


Peter Richardson

Yes. The first the carcinogenicity studies is the standard 104 week or two year rat carcinogenicity study in Sprague-Dawley rats, which we do with inhalation, as they are (inaudible) exposed to inhale Technosphere Insulin or Technosphere powder for that period on a daily basis. Second study is a six month, using in that a carcinogenic mouse, where we actually treat the rodents with cutaneous Technosphere Insulin. This is one way we're trying to amplify a tumor response by looking at mice that were particularly susceptible to this and that's the one where we have so far, the macroscopic lack of findings, and are awaiting final histology report.

Sa'ar Yaniv - JPMorgan

Would you announce the results of that final carcinogenicity data?

Peter Richardson

I would imagine, at earnings calls that they can do, but I do not anticipate there will be any special announcements around it.

Sa'ar Yaniv - JPMorgan

Okay, that is good. We are encouraged by the fact that there has been no cancer signal to-date with TI, but we are concerned that many physicians may hold off using inhaled insulin until they see outcome studies. Is there any other way to tease out the potential for lung cancer for TI aside from outcome studies?

Alfred Mann

Really the data that we have seen in the patient database we have at the moment is one which is reassuring in terms of the numbers that we have. Clearly, in terms of how we anticipate the agency and physicians looking at this is going to be first analysis of the risk benefit. Our plans will be to maximize benefits of the drug as we have already seen in terms of what it brings to patients with diabetes, and to look at ways of minimizing the risk. As we follow those under our alternative methods, doing out some outcome studies which are normal, post marketing, surveillance approaches and we will be exploring with the agency and with our external advisors in terms of the most appropriate approaches for doing that, as we would with any new product that's being developed.

Sa'ar Yaniv - JPMorgan

Okay. Are there any plans for longer term outcome studies, is that the Phase IV type studies?

Alfred Mann

We have not had discussions with the agency as yet as to what type of longer term studies, what size and scope of those will be required of us, or those which we would want to do in terms of launching a product in to its markets successfully.

Sa'ar Yaniv - JPMorgan

Okay. Great thank you very much.


Jon Lecroy, Natixis Company.

Jon Lecroy - Natixis Bleichroeder

Yes, thanks for taking my call. Can you guys talk a little bit about how much exposure you’ve given TI to in smokers, and may be give us an update on, I think it is the O16 Smoker Study. And then at one point, I think you were going to run COPD study as well, so if you could update on that. As far as exposure in smokers, what is the max length of time a smoker has been on the product, maybe an average exposure that you guys have had so far?

Peter Richardson

In terms of the smoker study we have not done long-term study in smokers that's been a point at which we have excluded patients on the basis of being smokers within a six month period before starting the studies and that's been across all our studies, apart from that which has been specifically designed, which I think is a study designed O16. It is the PK study in smokers, but we show no difference between smokers and non-smokers in the pharmacokinetic insulin response, which is in not contrast and that which has been reported for other insulin therapies.

In terms of our other special population studies in asthma COPD, we have had one study running in terms of asthma, but has started now a second study in mix COPD asthma population in terms of looking at that, we anticipate that will be ongoing at the time of filing. This is a difficult area to improve patients. As we look back at the smoking history across our programs, approximately 30% of patients in our ongoing Phase III studies have been previous smokers.

Jon Lecroy - Natixis Bleichroeder

And then length of time, the longest, previous smokers been on?

Peter Richardson

Previous smokers have now -- our longest study is up to four years exposure.

Jon Lecroy - Natixis Bleichroeder

Okay. Thank you.


Elizabeth Naldi, Piper Jaffray.

Elizabeth Naldi - Piper Jaffray

Hi, thanks for taking my call. With today's announcement on the collaboration with Leukemia & Lymphoma Society, could you just comment on any in-house expertise MannKind has for developing a tyrosine kinase inhibitor?

Peter Richardson

Well, I think if I can comment, I think this is a real exciting area to be working in. Certainly from my point of view, the excitement in terms of having lived through Novartis and Gleevec is one of the reasons why this was strictly exciting program. I am very well aware of the need in this area and we're actually doing the preclinical area. How? A small but actually I think talented degree of (inaudible) drug discovery who have been looking at the dosing kinases initially in terms of information, but also now looking specifically where we have made the progress is understanding the fundamental role in terms of lot of the control of the T-cell and it's progression to malignancy, which is really a very new area. And in terms of some of our design we have in-house chemistry and we thought it’s a very external relationships as well since the suite developed the chemistry that's necessary to takes that through development.

Elizabeth Naldi - Piper Jaffray

Great, Thank you.


Tom Russo with Baird.

Tom Russo - Baird

Thanks for taking the question. In terms of the perception issue I was wondering if there is anything that you've able to do or can do may be around the ADA meeting, to kind of take that piece of it head on with the opinion leaders, maybe while the EXUBERA issue is still fresh in folks minds?

Peter Richardson

Sorry its Peter again. At the ADA meeting when we will be -- we do have a first in terms (inaudible) study and we will be presenting those data there. Our dealing so far with the opinion leaders the first of whom is of course our own, the independent CSMB and then the investigator community has all been very reassuring in terms they fluctuate this very much as part of a normal pattern of development that is something external to Technosphere Insulin platform. We have actually worked carefully and closely with this, and we have been open with the data and share that in our dealings with the external advisory board, and we have several of those over the past couple of weeks, the reaction has been very much one way. The defense will be felt on the basis and data and experience and the important thing here is to keep a level head and to be able to deliver the data in our patients in the appropriate studies.

Alfred Mann

Please keep in mind that by the time cancer and the lung is detected by x-rays, the cancer has been there for quite a few years long before the EXUBERA trial is began.

Tom Russo - Baird

Okay. And then just in terms of the partnership talks obviously on whole at this point, how far would you be prepared to go alone if the right kind of deal does not materialize after the pivotal data. Just I think you alluded to it earlier. But can you talk a little bit about what you might plan do in that scenario if you do not find an expectable partnership even up to the point of launch?

Hakan Edstrom

Yeah, this is Hakan. What we have said in the past that we are prepared to go at alone. We would probably have to look at a different way of approaching kind of the market there at that point of time from let's say global point of view. But there are certainly different alternatives that we could look at. One would be say to mention one is say the Takeda approach where you have to say went to sales force and start that way and maybe you take over the responsibilities. And we have also looked at alternative to say one global partnership would be that you might have very strong regional partnership arrangements. So without being specific and being revealing in any further detail those at least are some of the options that are certainly under consideration.

Tom Russo - Baird

Okay. Is there a forum or an avenue for you to request a formal discussion with the FDA and to kind of revisit the development program that's been agrees to in the past, but in light of the new data that came out from EXUBERA?

Peter Richardson

I think our next steps with the agents will be the standard pre-NDA meeting and proposal to submit our file with them and that's in terms of the discussion that we had with the agency said how, what they expect from us.

Tom Russo - Baird

And you said in a meeting that you would schedule potentially even before you have the entire pivotal Phase III rebate or will be after that time?

Peter Richardson

Yes, I'm making a schedule according to plan.

Tom Russo - Baird

Okay. Thanks a lot.

Hakan Edstrom

Thank you.


(Operator Instructions). [Thomas Schroeder], your line is open.

Thomas Schroeder

Good afternoon.

Hakan Edstrom

Good afternoon.

Alfred Mann

Good afternoon

Thomas Schroeder

Thank you for providing the numbers about how much exposure you have seen. I guess you gave 2100 person years in your database so far. I am wondering is that a final number, how much will that number change by the time you submit. Would you give us a sense of how big the number could finally be in terms of exposure?

Peter Richardson

Off the top of my head, I can not give you an exact number. We still have patients, as you know, on treatment coming to the end of studies at the certain time. So it will increase in that. The numbers that I gave were those which we presented at the DSMB on the April 9th when we proposed and have a very accurate number there. I can not give you the numbers that will eventually end up until we know exactly what the final dates are.

Thomas Schroeder

Is that, say more than 75% of the total?

Peter Richardson

I would have to think about up (inaudible) recruitment in to the study, so I can not guarantee whether it's 75%. This is substantial part of the total exposure, but I can't give you an exact percentage.

Thomas Schroeder

Okay. Does your population look about like Pfizer, was their inclusion criteria also no smokers within six months. So are the rates, apples-to-apples rates when we finally see them?

Peter Richardson

Pfizer have more details than I do, but I know that after smokers are excluded from all that studies as they have been with all inhaled insulins my knowledge often a specific study has been done in smoking populations which you tended to be PK. So I assume that explanation criteria were similar but it's exactly six months or not I do not know.

Alfred Mann

Keep in mind that the main reason that EXUBERA and EXUBERA excluded its smokers because in that case, the smoking so greatly alter the kinetics of the drug so that they have enormous variation by availability based on how recently the patients smoke even during that day and smoking within the few hours may the big difference not just even a few months.

Thomas Schroeder

Right, okay.

Alfred Mann

You've seen none of that by the way with our drug.

Thomas Schroeder

No, I know. Okay. Thanks a lot.

Alfred Mann

Thank you, Tom.


Our last question comes from Sa'ar Yaniv, JPMorgan.

Sa'ar Yaniv - JPMorgan

Hi, guys. Would you tell us what was the reaction any of the prospective partners that you have discussions with in the past, and although you are the one that have discontinued the discussions, have any of them expressed any continued interest?

Hakan Edstrom

First of all, actually the reaction from couple of them was that they thought that this was a smart move at the time where the market was kind of in turmoil and yes, there certainly is a continued expressed interest.

Sa'ar Yaniv - JPMorgan

What would take for MannKind to continue discussions with these partners?

Hakan Edstrom

Well, as we said in our early script from the availability of the Phase III data, we think that the best way to address say some of the concerns in the marketplace right now, but primarily to clearly differentiate the performance of our product.

Sa'ar Yaniv - JPMorgan

Okay, great. Thanks so much, guys.

Hakan Edstrom

Thank you.

Alfred Mann

That's all of the questions today. So thank you all for joining us this afternoon. We think this year is only get much more interesting as we begin to analyze our pivotal Phase III data. We look forward to sharing in our progress at the next quarterly call. Thank you for joining us today. Operator?


Thank you for participating in today's conference. All participants may disconnect at this time. Thank you.

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