MannKind Corporation. (NASDAQ:MNKD) H.C. Wainwright 21st Annual Global Investment Conference Call September 9, 2019 12:05 PM ET
Michael Castagna - Chief Executive Officer
Conference Call Participants
All right. Well next presenter is Michael Castagna, CEO of MannKind Corporation.
Good morning everybody and thank you. Can you hear me okay? Just out of curiosity, how many of you are new to the MannKind Story? Just sorry to kind of know what to focus on. Okay, handful. So, to give you a little bit of update as we finished up the recapitalization in August and a lot has changed over the last six months here in the company. Our cautionary statements. So when you think about MannKind, it's a company that's been through a lot of trials and tribulations over the last 20 years. Everything from a product that launched, got FDA approval, which was in itself difficult to getting the product back here to MannKind about three years ago.
Over the last 24 months, we've really focused on a transformative activity to make the company successful and get it further back on track and move the pipeline forward. So, when you think about where we are today, it's really about enhancing shareholder value from here forward. Our first step 24 months ago was really about making sure the company was here. There was a lot of debt that was due in 24 months, and a lot of sales as well as cash on hand.
So, that's really what we've been doing over the last two years of getting everything back in the right format, so that we can actually invest to grow the company faster. So today, when you think about us, think about partnerships, we have multiple partnerships with international deals. We have one large one with United Therapeutics in the pipeline for Treprostinil, and we continue to look for other opportunities as we go forward. So India is moving forward. There's milestones attached to that, and Brazil is launching as we speak. So partnerships will continue to be a key component of our -- expansion of our revenue, especially as these products launch.
We expect to get double digit royalties for example from Treprostinil. The next one is Technosphere platform. So, this is something when I joined the company, I didn't have much appreciation for how great our technology was or how differentiated it was relative to other inhaled platforms.
And so we did -- we just finished up some research, I'll share with you a little bit more about the pipeline and how we're looking at it, but the platform itself is something that's very unique when it comes to inhaled products and very scalable, and we're one of the few that have a large 300,000 square foot manufacturing facility where we can actually manufacture powders as we continue to grow the pipeline.
And there's renewed interest in that now that we've announced [Indiscernible] continue to move that forward, recap the company it was hard to get partners on board when the company wasn't recapitalized, but now we get phone calls asking to think about formulations as we go forward.
And then at our Phase 3 asset, Afrezza, Afrezza has been approved now on the market for over four years. We got it back and launched it ourselves two years ago in January, and since then I'll show you we've had continued growth year-over-year, quarter-over-quarter. [Indiscernible] since we got it back has been one of our main focuses. We had a lot to fix on this product. It was -- it was a company that was built on a device company, and not a drug development company. So, when you think about drug development, you publish your data, you publish your economic stories, you get your dosing right. These are all the things that we've been fixing, and I'll talk about over the last 24 months.
So we created four new data sets since I got here. These datasets are really about matching Afrezza use with CGM. CGM, as you may have heard is Dexcom, where I believe, right, they are now over a billion dollar market and growing rapidly around the world. What's important is that there were probably a million patients roughly on CGM, who can now see what's happening in their sugars real time, and we think this is one of our big competitive advantages as we go forward is being able to show you how Afrezza works with CGM.
International expansion, so if you listen to our Q2 earnings call, we announced Brazil was approved, and Brazil just shipped last week, so we're excited about getting our first international shipment out the door and off the Continental United States. And finally, our Recapitalization with our financial position is done. And so, now we have a strong financial position as we go forward. I'll talk about that shortly.
So those of you new to MannKind, it's basically a inhaled platform technology company; we can reformulate 505(b) products. It's got 300,000 square feet R&D manufacturing in Danbury, Connecticut. And then in Westlake Village, there’s corporate headquarters along with many of the back office functions.
Afrezza was approved in the U.S. and Brazil as I just mentioned. And it really is indicated for Type 1 and Type 2 which is over 400 million people worldwide and growing unfortunately.
Our Technosphere pipeline is focused on United Therapeutics, which are Palonosetron as well as another on unnamed compound, and they have license exclusivity to our platform for pulmonary hypertension.
So if we look at anything else outside of PH such as Idiopathic Pulmonary Fibrosis, COPD, asthma, cystic fibrosis, those areas we still own exclusivity to. Receptor Life Sciences, for those of you who don't know, is in the Cannabinoid space, especially as we hear about all the vaping and toxicities that are happening. We have an FDA approved platform that we've been working on for over three years in that space and very excited as it moves forward to be partnered with Receptor Life Sciences.
And there's additional pipeline of candidates and progress that I'll talk about in a few minutes. The Board of Directors has been here for a while. They've been great, steady hand as we've gone through the transition over the last two years, and we recently updated the Board with a new member named Christine Mundkur who joined us from [other] retirement, but really serves on board of Lupin as well as really deep respiratory experience and 505(b) experience, and she joined us in December 2018. So, feel good about the board, and the last part is the management team, so most of the management team is new in the last 24 months.
Steve, who was my CFO, joined us in July 2017, and many others are new in the company. So, we've been continuing to upgrade our company, get us ready for commercialization of Afrezza and start to really work through the kinks that it takes when you launch a new company from scratch.
Let me talk about the recapitalization very quickly. So, we have restructured over $200 million in liabilities. So when you look at the company, we had, most of our debt was due in about 24 months, and we had a large insulin purchase commitment. So when you look out now, we took out $28 million of legacy debt and moved any remaining debt out five years.
At the same time, we brought in a new tranche of the senior secured lender when we paid off Deerfield and brought in midcap for those of you who don't know midcap there, and partner with Apollo Group, and we have a $75 million note which gave us $40 million at close. We know that about $30 million have to be paid down, some of the debt, and then we have another $10 million that we can take by April 2020. That's based on the $30 million trailing 12-month milestone.
And then we have another $25 million tied to Treprostinil because we haven't publicly disclosed when Treprostinil is going to be filed and how that's progressing. That's in United Therapeutics hands. We have a little bit of a window between now and July 2021 when that other $25 million will come in. But when you think about where we are with Treprostinil in and of itself, we have about $37.5 million coming in the next 18 months as well as the $25 million, so almost over $50 million in cash into the company coming in from our pipeline assets.
And then once that's approved, we will get double digit royalties as we go forward and we're very excited to continue to partner with United and then believe this product will be truly differentiated in the [Indiscernible] space. The last part is cash burn. This is a company who's been through a lot of cash and fortunately, and it's one that we feel that you know between what we've done and where we are, we can now go to cash flow breakeven. That's something when I talk to investors they've asked, when does that happen and when are you done with dilution?
Well, we've taken on a lot of the debt, it was over $200 million three years ago, now we’re down to about $120 million and none of the major debt is due in the next five years. So we feel there's things kicking in as we go forward. But, overall we feel very good about our cash position, reducing our expense base and continue to run this company towards a cash flow breakeven. And we're going continue to drive efficiencies throughout the organization. As we've done that, we've spent TV [ph] for example, with $9 million in the first half. We don't expect to have that type of costs recurring as we go into 2020.
So on Brazil. So a lot of people ask me about Brazil, why we're so excited? We're excited, a, because it's gotten a lot of press down there. Our partner BM has done a great job in the premarket to get ready. If you look at the two national newspapers here with the red circles, we were on the front page of the equivalent of the New York Times down there in Brazil. And people ask why is there so much excitement there and not here in the U.S. for Afrezza?
Well, part of it is they just don't have alternatives. So when you think about insulin pumps, you think about CGM, this is really the first new innovation down there in diabetes, in a long time. And so, when it comes to mealtime insulin, this is really the first true innovation that we've seen. And so, a lot of excitement where you got patients lining up and doctors advertising they'll prescribe Afrezza. So we're very excited, we'll be down there in October to kick off the launch at the Medical Society meeting, but otherwise all the feedback we've had at EDA and ESEA’s team meetings next week with Brazilian thought leaders are all going very very positive.
So to talk about the platform real quick. So when you think about in health therapeutics, in general, if you take Advair for example, you're probably only getting about 25% to 30% of the drug into the lungs, so 75% is lost through a mechanical device loss as well as what's sitting in the back of your throat and your cheeks.
In our case with MannKind, we consistently see 60% to 75% of the powder get into the lungs. The way the device works really gets the powder to be a mist almost down into -- deep into the ventricles. Think about a car turning an angle of 90 miles an hour, you couldn't really make the turn and the device was engineered to actually slow the powders down. So when you're inhaling, it shreds the powder in the pipe -- sorry finest particles and it really gets them deep into the ventricle.
So it slows them down, so they can really turn those ventricles and get deep lung penetration. It's why we get very excited when we think about IPS and cystic fibrosis and some of these areas, because we really can carry the drug and deliver it deep into the lungs where a lot of these diseases are stuck. And you can see this with insulin, how really widespread it is. There's a lot of concerns on the safety of Afrezza. I think, we've kind of addressed that in our development program, and Pfizer just recently published you know 25,000-patient data on Exubera showing you there's no increased risk to be concerned about lung cancer. In fact mortality was lower on people in Exubera than standard of care.
So we feel good about the safety profile and that question continues to diminish as we go forward over time. So, when you think about our inhaled platform, why it's so unique, well this is an example where today, Tyvaso was given in a nebulizer formulation. We were able to formulate and dose in micrograms, added at doses all the way up to 150 micrograms. And so, we were doing this trial last year, we kept going every 30 units. We saw up to 150 micrograms. And here, we saw a parallel curve to Tyvaso which is important as we think about drug development by equivalency studies and FDA approval, number one; and number two being able to show that you can achieve higher peak concentrations, may have some correlations and some benefits. And so, that's really our goal there was to show that you can get beyond 54 micrograms in addition to achieving the bio equivalency with United.
So, that study resulted in the deal that you saw last August or September, I guess, was announced, and United is progressing nicely. They said publicly, they investigated, I mean it just happened two weeks ago, and that trial is now off and running to get this to market.
For those of you who are not familiar with the United deal, there’s $45 million [indiscernible] last September or October after the HSR period closed. And there's $50 million of milestones of which $12.5 million has already been received, and we expect basically $12.5 million every six months, so we consider it second half this year, first half next year, second half next year.
Low double digit royalties, all the way through patent expiration, which today we believe is up 2037. And we achieved, we can do additional development milestones in PH. They want exclusively to the platform for PH. And we've entered a research agreement that can bring other compounds, so now they have exclusivity for PH, if they decide they want to bring molecule two, it's a $10 million upfront fee plus $30 million of milestones, so that's how this is structured just to within PH, if there is deals outside the PH it’s all new structure.
And so we do have a second molecule, united management and often they can choose to wait. They don't have to opt in right away, but that's something that we've now done the formulation powder for it, and now we're in discussions with what next steps are. But we can formulate the product that they were asking us to formulate and that's what's important.
Think about the pipeline. So one of the things people ask us is why do we not have more partnerships or why we're not licensing it out. Well, it doesn't cost a lot of money. The big investment was what investors already paid for which is the manufacturing plant, and all the facility and all the equipment. Putting molecules through the pipeline all the way to phase 1 does not cost us a lot of money, so we're able to self-fund our pipeline all the way through phase 1 based on what we know today with these five six compounds going. So if you look at the top, you've got a further in adults and pediatrics, and so we're finishing up cohort two of the kids and we'll be at the FDA later this year, to move the pediatric program forward in Phase 3.
Then you have the undisclosed compound as well as TrepT with United, and then the cannabinoid space with receptor. And then we get down to our own molecules that we still have rights to. So one is Palonosetron in five -- within chemotherapy induced nausea and vomiting, we believe having a faster onset during the chemotherapy is an important attribute as people don't feel like eating that, they are getting chemo is really something we can alleviate some of those symptoms.
TrepT, we look at migraines the chronic space is growing rapidly with the new CGRP and we believe there's opportunities for renewed interest in acute treatment, and so our migraine will be progressing in the Tox studies very shortly, and we feel very strong about moving that forward as soon as possible.
And then we have Tobramycin and whether it's Tobramycin and other antibiotic, we're looking at a couple of them to see which one is the best pharmacokinetics that we think will be best formulated. But looking at bringing a CCF product, even though the patients are doing much better today, they still have exacerbations they still get sick half the time. So we still need something even though the events have been reduced, the unfortunate infections still occur.
In the DNA there's one that's a complex product to bring to market is a product called Pulmozyme with Roche, that still in $700, $800 million a year list on my check and that product is difficult because you have to get the API which needs to be biosimilar to original compound plus you got to make it inhaled. So, it's one of more complex ones that we don't see a lot of competitive interest in that we feel very unique just like our Tyvaso platform that we can make this one happen as well.
Now last one is Epinephrine. The reason we're excited about Epi is, we fill out the high potency manufacturing area. We've finished that in July. And now that's done, we have the capability and ability to manufacture Epinephrine. It's really about will the FDA allow us to have injunctive indications. For example, I have an allergic reaction, I inhale Epi and if I don't get a response in five minutes I inject my EpiPen. It's very can we get that injunctive indication, because in that population a lot of people wait, they take benadryl and then they get in trouble. And our goal is to really prevent that first step from happening.
Now quickly, I'm going to talk about Afrezza, but really focused on building the next standard-of-care mealtime insulin. So we are indicative for Type 1 and Type 2. That's a very large market here in the U.S., as well as the rest of the world. You take it at the start of a meal. The reason that's important is the study that came out over the weekend using Bluetooth technology showing you when patients actually give a drug or not. Patients on average Type 1 missed 17 doses in a week. That's pretty bad. We know that there is another two times a day they were given a 20, 30 minutes late. So really shown you that taking your meal and not guessing when you need to take it is really important as you'll see we have Bluetooth technology coming. And we do a very strong dose-to-dose consistency given the inhaled platform versus when you inject you really see much more variability dose-to-dose.
Why is all those important? Well, an article just came out a few weeks ago in JAMA showing you that over the last 15 years and last decade outcomes in diabetes has actually gotten worst, right? This is one disease, cholesterol gotten better, hypertension's gotten better. Cancer's gotten better. Diabetes glycemic control has gotten worst in the last 15 years. T1D Exchange published data in Type 1s back earlier this year. Type 1s on pumps and Dexcom actually are doing worst today than they were five years ago. How is that possible, all the new spend, all the new drugs and we really do believe that the fundamental issue is around mealtime control.
When you look at people on insulin; 70%; on a goal; that has not changed in two decades. So if we're going to keep using and not changing, don't expect a different outcome. And the data is now proven that out after 10 and 20 years of adoption of new insulins, new pumps and CGM. And the reality is the closer you get to a level seven, this little blue bar on the right shows you that 70% of that contribution of mealtime goal is related to your mealtime control. So if you're not properly controlling mealtime, you're not getting the goal which is why on the left side you see the majority people are not a goal and that's not moving.
So this is a chart I showed years ago that got me intrigued to the company. So, here's a patient was on an insulin pump and the standard-of-care was time and range we just started three years ago. And this person on YouTube figured out how to dose Afrezza and go from the top to the bottom in one week. And every doctor said, well that's nice, but that's one patient. So this is our journey and these are the insights we've gotten. That's a sign, we will go ahead and do studies even though we didn't have a lot of money; we've placed a couple bets because we know it takes a long time to get data generated.
And so the first thing we did was to present last year called the STAT study. This was in Type 1s where we showed you can dose insulin as soon as one hour and double the dose of insulin and not increase your risk of hypoglycemia. No doctor believed me that we could do that and they all told me, even to stop the drug and go hypo. Not only did we do it, but we proved you got two hours better time in range. Why does that better? Why is that important? Because two hours better actually I think, it reduces retinopathy by 65%, retinopathy is very expensive to treat and very debilitating to the patient.
It also reduces kidney disease by 30%. So getting better time and range in Type 1 specifically really has shown to be tremendous in terms of outcomes and correlate to the DCCT study. So we showed you here Afrezza in the first hours coming down and your postprandial from zero to four hours stay in consistent. Where in injectable insulin, you're going up for the first hour and then start to come down an hour or two; this is on 28 days of glutamine glucose monitoring.
And then the last thing we looked that was hypoglycemia in this trial amongst many other parameters. I'm just giving you a high level here. And here you can see hypo was cut almost in half, less than 70 and almost 60%, 70% less than 54 minutes a day which is when you start to get in trouble. So if you can reduce the number one side effect of insulin that's a huge benefit and differentiator for the product. And it didn't matter whether you dosed the product and gave twice as much insulin or you give the same dose. She got the same mealtime response either way, but the more you gave the better your outcome was on time and range.
Then the next study was Type 2. So we did a study over the last year with Phil Levin in Baltimore. And here, we took anyone uncontrolled that was not on mealtime insulin and we said we don't care if you're on a GLP or basal, orals, we really don't care. We think there's a mealtime problem, let's prove this out. And so these patients came in. We dropped this off on your way because we don't want to increase risk of hypoglycemia. And we said, we're going to fix the dose of mealtime insulin because we realized majority of docs do not initiate insulin consistently. And so we gave them four units a day for three days each meal and then eight and then 12.
So by day seven, everybody was on the same dose. And then we try to treat it up once a week. And what you saw on a very simple fix dose titration protocol is a 1.6% A1c reduction in twelve weeks. You can look at these curves and see how we let the study go for 24 weeks you would have gotten probably a 2% A1c reduction, which I'll just remind you is comparable to what we're seeing in the GLP that everyone is excited about. And here, these are very sick people, 9.1 A1c is not really in range and 93% people got less than eight. The reason that's important is Medicare is half to Type 2 population on insulin and their goal is less than eight for five star ratings. And so we feel that we have a real solution here as we go into Medicare. What's the second two key things that came out of this trial? We did baseline CGM Libre, and we showed you that a baseline, it increased your time in range by seven hours a day and all you did was drop one drug and add another drug and you've got a 1.6% reduction and better time in range by seven hours a day. You didn't increase your hypo risk at all and you knock your highs down by 74%. All of these are real outcomes that people are looking to gain in the healthcare system here, but for whatever reason they've not adopted this drug, but we've put our money where our mouth is and we're showing you that the clinical data continues to go well.
I was very excited recently because we got market research back in August that looks at physician perceptions of our product. Perception is reality. And these are the Top 13 drivers on mealtime insulin choice. And all you have to look at is know that the purple bar is higher than the blue bar and that's a good thing. Because that means that they perceive Afrezza to be better than the standard-of-care of mealtime injections that they're using today on 11 out of 13 parameters. The two that they didn't rank high was really around managed care which we've addressed and will continue to address, it's a perceive versus actual objection.
And the last one is dosing and dosing only gets fixed by having experience. And so as doctors get experience that last one will go away. So you can see now two or three years ago people were not perceiving this drug to be better than the standard-of-care. They've powered it or perceive it to be as good as standard-of-care. But our new data and getting all the existing data out there in the conferences is really starting to pay off and doctors are starting to change their perceptions. And we're very excited as we go forward.
Bluetooth technology is something we see a lot in diabetes or Connected Care I'll call it. And so here you can see, we've done a small pilot study with our BluHale technology, it just snaps on to the back of the inhaler and with this I'll show you is if you properly inhale that little curve shows your proper inhalation. Now we've added those detection so it actually show the color of the cartridge that you read and how we can correlate that into apps with CGM so you can see real time control and real time dosing and start tracking compliance and tracking outcomes if you're dosing properly or not.
So we just tested this and it scored 4.4 out of five on ease-of-use. And you can see over 97% rated at four or five. It's great. And then this was even more important which is using BluHale you were very confident in your inhalation technique. And you can see how confident they got from baseline to post trial. All you can know is that green and yellow really went up and everything else went down, 72% thought BluHale would reduce your teach time, time which is important to officers are busy and 91% including docs who had experience and nurse who had experienced with that drug thought well, I've been doing something wrong. This is going to help me a lot.
So we're excited to launch this early next year and really start to move into Connected Care as we connect into the various third parties out there.
And then the question is how we're doing on revenue? Well we've gone 4x over the last 24 months in terms of what you're look at gross revenue, quarterly revenue, first half revenue, every which way the company is continuing to grow and outpace where it was historically. And we see nothing slowing us down. At this point we don't see any major competitive threats in the mealtime space. And so we feel good about our value proposition.
On top of this, you'll see international growth happen around India. We just got guidance there. The trial that the equivalent with FDA there for review. There'll be a small Phase 3 trial which the reason that's good is we'll get another dataset in Type 2s properly dosing the drug, hopefully mirroring some of the outcomes you just saw in a larger study going forward. And then in Australia, we're ready to file hopefully later this year, early next year with our partner AMSL. That's the milestones for the year. So, I won't go through all these. I'll leave this here. And I'll stop and take questions. Thanks.