MannKind Corporation (NASDAQ:MNKD) H.C. Wainwright 23rd Annual Global Investment Conference September 13, 2021 7:00 AM ET

Company Participants

Michael Castagna - Chief Executive Officer

Conference Call Participants

Oren Livnat - H.C. Wainwright

Oren Livnat

Hello and welcome to the H.C. Wainwright 23rd Annual Global Investment Conference. My name is Oren Livnat, I'm a specialty pharmaceuticals analyst here at H.C. Wainwright and it's my pleasure to welcome for a brief chat today, Michael Castagna, Chief Executive Officer of MannKind, Corporation Leader and inhalable drug delivery technology. I do cover MannKind with a buy rating. And anyone watching this is welcome to reach out to me afterwards if you have any additional questions.

So, Mike, welcome.

Michael Castagna

Hey, Oren, thanks for having me today.

Oren Livnat

Yeah, no problem. Thanks for coming. So look, there's more investor interest in MannKind now than probably any time in the nearly four years, I think I've covered it. And, you know, you're quickly approaching a big milestone for the company. October PDUFA date for Tyvaso DPI. Most people know MannKind as the inhalable insulin company, but in my opinion the story has really taken on an exciting new, you know, twist with Tyvaso DPI. And for those who don't know, that's a next-gen version of United Therapeutics Tyvaso. And you're partnered with United Therapeutics, right? So you got the right partner. So I want to spend most of our time on that, if that's cool.

Michael Castagna

Absolutely.

Oren Livnat

All right, great. So Tyvaso is running, it was $600 million or more and United tip you guys to be the first major innovation for that franchise, you know, I guess since it launched years ago. And so for those not familiar, can you just remind us what Tyvaso DPI is, in terms of the technology and you know, what makes it a game changer versus the legacy Tyvaso product?

Michael Castagna

Sure. And Oren, thanks for all your coverage over the years, you were well ahead of the marketplace and covering MannKind and been with us the whole journey watching the evolution of the company. And so I am glad you're at the forefront of the next phase of growth, because you've [ph] always very closely and so thank you for all that history and, and being with us in the dark days.

So for those not familiar with Tyvaso DPI. Tyvaso is nebulized formulation today. It does roughly $500 million a year for an orphan indication called pulmonary arterial hypertension. And you know, these patients have to set up a nebulizer and kind of basically be hooked there multiple times a day, in order to basically stay alive. They have a very - about a five year life expectancy by independent [ph] and it's a very tough life.

And so we're going to be able to take our inhaled technology and make it into a dry powder inhaler, using the same exact type of device we see in an insulin. And we made these – these powders are slightly different than the technology we have behind Afrezza, but the concept is same, which is we use FDKP. We make these powders fly in a way to get deep consistent lung penetration.

And I think that's one of things we see that differentiates a making - making Tyvaso from a nebulizer to dry powder was hard, and to making it fly the way - we make our particles flies even harder. So that's what makes us unique, and you know, called a game changer.

It's really - you know, one of the things we set out on this probably about almost four years ago now, we wanted to show that we could dose higher doses than Tyvaso nebulizer could. We felt that the rate limiting effect of getting effective treatment in the space was being able to dose higher than 50 micrograms.

And so we did a single ascending dose study back in 2017, where we showed you can go you know, literally three, four times higher than the FDA approved dose today with no more safety signals. And so that was the question that we set out in the development program that showed could you dose effectively, could you dose higher? And what does that look like? What does the safety look like? And I think the whole program, you probably saw the data. I'm going – we're going to talk more about that.

But I think being able to get good decent lung penetration across the entire surface area of the lungs, is what our technology does, and this is the lung disease. So being able to get really nice and consistent absorption, I think is playing out very well in our clinical development here with you [ph]

Oren Livnat

Okay. Yeah, we'll definitely get back to that. You always anticipate my questions. So, you know, I think one area that you know, maybe - you know, maybe less exciting in terms of an efficacy side of the equation, but it's also - just I think there's maybe an investor lack of appreciation for how onerous therapy with existing Tyvaso is, you know, even at $600 million, where they are now, I mean, this is a four times a day therapy right?

Michael Castagna

Yeah…

Oren Livnat

Three or four times a day where essentially patients are strapped to home, right to track load, to sterile injectable, a sterile liquid…

Michael Castagna

You need electricity, sterile water, you got to be close to your house, you won't be too far, you know, you can pass out if you don't get treatment effectively. And we're going to take that to a two second inhalation that you can carry around anywhere you go.

Oren Livnat

Okay…

Michael Castagna

It's game changing, it's life changing for these…

Oren Livnat

So it's about go about their life and their day while getting their consistent therapy. And we'll get to you know, whether it's superior therapy a little bit later. But I think, you know, a lot of people know United has their fingers in a lot of pies. They're, you know - they're very innovative. They like technology, they're not afraid of technology. And so they've collaborate with a lot of companies.

But I don't think maybe I want appreciate the sort of scale of commitment they've made to you guys, right? So not only in the upfront partnership, but also ongoing investment, you know, manufacturing - investment in the manufacturing of this product, and even acquiring, I think, for over $100 million a priority review voucher that they've used for this particular application. So can you just give us overview on the investment they have made to date on the collaboration and the terms of that deal going forward?

Michael Castagna

Yeah. I think at a high level, right, the original deal three years ago was $105 million upfront and milestone payments. And then they bought the voucher for $100 million. And then there's millions of dollars invested in the manufacturing current scale, plus the scaled up version. So this has been well over $200 million commitment all in.

And it's game changing, right? It's game changing for them, it's game changing for us. This product you know, hopefully help a lot of patients. But when you think about what was required, it's not just the current Tyvaso sales, it's the future indications that Martine has been betting on. And UT clinically, not just for ILD, but you got COPD and IPF.

So this is a multi indication over the next five year that you got to be prepared for years in advance in terms of scale up with manufacturing before we even know the readouts of the next couple indications. We feel pretty good about where we are today and the current indication of the label, based on things we've done.

But this has been a significant investment. I think UT has been one of the best partnerships I've been part of in my career. And I think they would say the same thing. The team has worked really, really well together. And they're aligned at the hip on all the - every single thing that we got to deal with, whether it's manufacturing, CMC, clinical development, clinical supplies, I mean, a lot of great collaboration. And now we're in the middle of lunch preparation.

So it's just a really good team. UT is a smart group of people. And I think that there's a history here about Mann and United Therapeutics, I don't [ph] think people also appreciate it. The original technology that got Martine's first couple patients was our Mann's insulin pump. And so that's kind of how United Therapeutics got started in 1998, was through actually one of our original innovations from Ellman [ph] not MannKind's, but his generation [ph]

Oren Livnat

Yeah, I think I think I forgot that myself. So, you know, I think it's like you're reading my questions. But you talked about CMC and other things. But you know, I've covered a lot of drug device companies, still do. And I know as well as anybody how hard it is, and how rare it is to get first pass approval on these products with a priority review or not, right? If these are complicated procedures involve both the device division and the drug division.

So just from where you stand now, you know, this close to the finish line. What makes you confident that you guys will get an approval next month? And, you know, from both clinical packages submitted to CMC, what's unique about your situation, maybe here that, you know, other drug device companies have, you know, not been in opposition [ph]

Michael Castagna

Yeah. I would just say there's forward-looking statements given today. We didn't give our disclosure there. But that - what we say today could change over the next six to 10 weeks, obviously. But I think what gives us the - you know, we can never guarantee anything with FDA, right? That's number one. But I think you can do everything you can to mitigate risk and to ensure success with everything that's in your control.

And so I think from a clinical package, this study was done well, it over enrolled. We had 51 patients in the final data set. We have patients going on probably two years by now, and the efficacy and safety of this product. So you know, being able to launch a drug that's going to have - you know, COVID slows everything down in the world. So we have, you know, substantial number of people that have – I mean, been on this drug over two years.

But I think the clinical data package is pretty straightforward, pretty clear, and pretty clean at the end of the day. And that was mainly our safety study, right? That was not an efficacy, primary endpoint as a safety endpoint to make sure patients could tolerate our inhaled powders, and not have any safety signals. And so we saw nothing in –means of that.

And the secondary endpoints were efficacy, right, and so that came out nice as well. So I think those two parameters from a clinical side look great. Then you get into, you know, the manufacturing and the CMC and that part. We move really quick. I mean, this product will go from announcement of a deal three years ago, to almost approval for roughly approval three years to the date on October 16. Now, again, we're waiting on the FDA, that's ultimately their decision making.

But I think we've done everything we can. The biggest risk for me was COVID. And those – the FDA get inspections done and did it come out and we pass everything, you know, the way we expect. And you prepare for these things like a marathon, it's not easy, you do it over time and get ready for it. And I think the team here on the CMC and manufacturing side did a fantastic job. We had the FDA here not just for the pre-approval inspection, but also for regular inspection of Afrezza and the facility.

And so going through two weeks of inspections is never fun, but the FDA does do their job and I think they came in and inspected everything they had to and I think we've ended in a really good spot, as a result of those inspections. So I think we're in a really good spot. On that the highest risk for me was can the FDA come in, in the timeframe we needed and do we get through a successful FDA inspection and I would say those two checkboxes are positive.

And now it's down. You know, we have no indication at this point that there's not - this is an approvable. We feel like it is. I think it's - you know, I don't want to speak for UT. They ultimately own the NDA here. And this - we partner with them, we talk to them, but, you know, it's ultimately, we're getting close to the finish line, you know, probably five or six weeks out, right. So, I mean, it's coming quick.

Oren Livnat

You are through a pre-approval on - through the pre-approval inspection, right. So there's nothing of concern came up there, right?

Michael Castagna

No, nothing came up for Afrezza…

Oren Livnat

And you did mention Afrezza, right, and I think it's important to mention or to specify that products approved, obviously, the inhalable insulin. Can you confirm that the Tyvaso DPI device, the cartridges, you know, some of the inactive ingredients that are in this formulation for Tyvaso, the manufacturing process or equipment that it's on. How much overlap is there between this and what's already been approved in with Afrezza by the FDA?

Michael Castagna

Yeah, I think that's the good news, right? And when you do things the first time it's hard, the second time it gets easier, and the third time will be even easier. But I think, you know, here, we had to build out a high-potency manufacturing area, because it is a high-potency molecule. And so you had to make the equipment self contained, you know, we're worried about cross contamination, God forbid if something happened to Afrezza, we got to protect that product. So I think from a night [ph] you know, we build on it.

You know, the good thing about Danbury is we have 450,000 square feet of space, that we could quickly build the shell to house Tyvaso, and to your point, it's the same device of Afrezza, different color, but same device. The cartridges and the technology behind the fill in the cartridges, the validation of that fill is already been validated with Afrezza, obviously as the readout [ph] data for Tyvaso, but that lines installed.

And then in the FDKP molecule, which is what our ingredient that we work with closely. Obviously, it's an excipient that we got approved with FDA, that's Novel Excipient. We're the only ones in the world that use it today for inhalation products. And that excipient we know very well. We have a ton lots of studies over the last 20, 30 years on that product.

And so I think when you take the excipient, you take the manufacturing process, you take the fact that we're using the same inhalation platform as Afrezza's pre-approved, you know, we mitigate as much risk as possible and all those things. The actual manufacturing of the crystallization, that's certainly different than Afrezza, but I think that's what makes Tyvaso unique in some product.

Oren Livnat

Okay. And you mentioned risk there. And I might be off base here, but do you think in the sort of sliding scale of benefit and risk that if you could get your, you know, previous product and approach approved in a diabetes population, and you're - and even testing it in pediatric population, where you talk about chronic use for 20, 30, 40 years, potentially, if your product, does that give you confidence, then that in this much sicker, you know, much higher mortality population that may be the, you know, the hurdle for risk is not even as high for the FDA?

Michael Castagna

Yeah. Look, I think the FDA always is there to protect patients, right, and number one, and I think, you know, we feel a lot of - we have a lot of confidence in our technology and safety behind our technology and the case [ph] we've had. We run 3000 patients through the Afrezza programs and FDKP. So we have a ton of data on this product and a ton of data on the excipient. And so we know a lot about it. So I feel pretty good about that part of the application is it high risk, low risk, second time, I mean, we learned a lot, unfortunately through Afrezza that we've now made sure we didn't have any hiccups on the Tyvaso side.

So I think you're always better from when your experiences don't go well. And that makes you a stronger company, I think that was evidenced by our inspection became through that inspection, which you know, it's - so these are tough things to do for any company. And I think our team did a fantastic job, getting through the inspection, making sure thing was buttoned up and ready to go for launch. And now we're in the process of preparing for them.

Oren Livnat

Okay. So when we talk about the size of the opportunity, I know this is, you know, United's product, so there's only so much you can say about their plans. But they very - have been very public about their growth aspirations near term and long term for Tyvaso or the franchise, right. So they just launched into a new indication, the first since the initial PH indication, that's PH-ILD, which you mentioned at the top. That's helped them, you know, put up a pretty huge quarter in Q2 year-over-year growth rate wise. And it sounds like you know, they're already - I think they said one six of the way just months into launch into this new indication towards doubling the total patient population they want on this product from 3000 to let's say, about 6000 by the end of 2022, right.

I'm curious, how do you think and from your conversation with the company, how Tyvaso DPI factor into those growth plans? Are you under the impression that United hopes to or expects to be able to rapidly switch, you know, a large chunk of the existing base business to a much more convenient, you know, maybe more efficacious, maybe we could talk about that, again, product in Tyvaso DPI. And do you think as you know, this launches next year, early next year, assuming it's approved next month that the vast majority of new PH-ILD patients would actually start and go on to Tyvaso DPI?

Michael Castagna

Yeah. I don't want to speak for United and their forecast and their plans. But I do think that's up to them. What I would say is, you know, in the 51 patients, we switched 49 converted over to the long term extension. If I recall to patients dropped out, not specific is that we're worried about.

And so 49 patients have continued on to the long term extension, and I don't know what the exact number is going on almost two years now. But the large majority of those patients are even in the long term extension at this point. We have really good safety in that, because let me tell me like, hey, 95% of the patients stayed on, you know, Tyvaso DPI after switching from Tyvaso, that tells you something about the tolerability going into the long term extension, right?

So can 90% - 80%, 90% of patients switch over, I think, at least on our clinical trial, we saw that and they stayed and they actually might have to stay on the drug and continue on. And then from there, they could titrate up their doses, hopefully to get better outcomes. And so we'll keep looking at that, I think United will have some data presentations on the data in the fall, which will be exciting, because now you can see what happens in the first three weeks when you switch and there's some improvement there. And then what happens in one and two years after you switch into dosing and improvements there.

So I think it's exciting of what this can mean for people living with PH [ph] and ILD and what that can do, and I guess, you know, I would defer United, I mean, they spent $100 million on [indiscernible] because I think this is that important to help patients that much faster, and get through the FDA process, because you know, there's patients waiting, and there in the middle of lunch. And so the more you can get to the new innovation in front of your patients.

So I think, Tyvaso by itself is a great drug. But it's a difficult, you know, process for a patient, a lot of people drop out because of the whole complexity of nebulization. And so I think, you know, can we hopefully help more patients stay on drug and start a drug much easier and have less of a burden, have a better quality life? I think all those are really great things if that happens.

And so I suspect that you'll see a pretty high rate of switch, I think some of this is in their control of what - how they promote it and how they go position to do, but I think they have every incentive to want to help their patients get on our technology as soon as possible.

Oren Livnat

Okay. So, we've mentioned dosing a couple of times, you mentioned there's a switch study, where we saw that not only patients switched over and stayed from Tyvaso to Tyvaso DPI, that you can also dose higher tolerably. And, you know, I think that begs the question, I'd be remiss if I didn't mention that there is another company developing a dry powder version of treprostinil, which has, I think, a PDUFA date after its complete response letter themselves, maybe a month after you guys in November. And so maybe that's part of the reason there was a priority review voucher.

But also, I'm just curious, I don't want to speak out of school, but when is the earliest we think that that product could potentially come to market? And then more importantly, how do you think other than being partnered, not only this - besides being partner with the incumbent and the market leader, and United, how do you think Tyvaso DPI is better than that product in terms of bioavailability, and dosing, et cetera?

Michael Castagna

Yeah, what I'd say, I think what I've seen publicly is there's some dispute between liquidity and whoever [ph] and they have a 30 month stay. So that takes them to October of 2022, if I recall. So I wouldn't expect to see anything before then, personally, but I don't control the system. But that's, I think, what I read out there publicly.

In terms of our technology, then we have no – that data. So I don't want to say we're better or worse than them, I would just say, you know, I'm happy to be partnered with UT. This is a population that they've built, they've helped. I think our technology is world class in terms of helping people get consistent lung delivery, and deep penetration of the lungs, consistently across the half the size of a tennis court, where a lot of dry powders are just you know, pill piercing technology, that you know, you have to inhale and really not just insulin or capsule base technology, but you're really taking a high velocity powder into the back of the throat in the upper airways.

And then I think that's the question, right is, what's best for the patient at the end of the day, what works for the patient and what makes them feel great, you know, may the best man win. I mean, I think that I feel good about our technology. I think we're going to help a lot of patients. We got some great experience and learnings. We got digital technology connected to it. So I think we're - MannKind set up and UT set up to do a great job and help a lot of people. And that's our focus at the end of the day.

Oren Livnat

And quickly, I think one of the important features of this product is the asset duration. Can you just remind us what kind of IP add approval you think you all have on this product to put in the Orange Book? And even beyond IP, you know, do you think it's even possible to knock this off, given what you know about the technology?

Michael Castagna

Obviously, the IP is going to go into the 2030s. So I'm not worried anytime in the next decade that we can see. I never want to underestimate competition. I think our job is to continue to innovate and be progressive. And we'll continue to do that even beyond where we are today.

But you know, in terms of [indiscernible] knock this off, look, I was at Sandoz, Novartis years ago, where we're trying to make generic Advair. And that took an extra 10 years to get to market. These inhalation products are very difficult, like you said, whether it's getting them approved, or actually making them even copy and then was hard, right.

And so I think, you know, I'm not aware of anyone else in the world that has the precision of other technology and how we do - what we do the fill cartridges to get the admitted dose to deliver consistently that dose - I don't know if anyone has that precision around the world and dry powder technology. So not going to say can't be invented or, you know, adapted over the next decade. But right now, today, I don't think there's anyone that could copy what we do, where we are today.

Oren Livnat

Okay. Really quickly, I hate to, you know, dismiss Afrezza in this conversation. Obviously, it's what the company was built on and what you spent years working on, but just quickly can just remind us for this program, you're going to [indiscernible] but just what are the - your near term expectations, potential catalysts for growth on that product?

Michael Castagna

Yeah. Look, I think we're finally well capitalized, right. And that's always one of our challenges is deployment of capital and we spend more money on Afrezza, more on the pipeline, more on everything else. And so, you know, we've had to be choice over the years and really, you know, be bare bones about what we're doing. Now, I think, look, we're getting ready to go on the kids with Afrezza, which is great. I can't wait to see this population. We just finished two investigator initiated launches, lots of positive feedback, lots of excitement amongst the pediatric [ph] community. So we're excited about that, right? That's number one.

I think the second big thing is, you know, can we expand our primary care setting a little bit more, can we get more early adoption of Afrezza in certain markets where we have good penetration, and start to show what happens when you have a reimbursement support person, what happens when you have a trainer in the local market city [ph] and what happens when you have good rep coverage and primary care doctors being educated by endocrinologist.

So I think we're in the process of starting to be able stitch together a scaled up impact of Afrezza from where we've been, and I think our reimbursement hub was a big factor in the last 12 months that we spent, really getting the reimbursement story done, because, you know, if you can't get it covered, then we're not going to help enough people.

But I do feel now we're able to see through 1200 patients that have come into our hub, you know, 70%, rough reimbursement and coverage, the other 20% to 30% may need to go through an appeal or something else, but we're seeing a really good approval rate, we need more doctors generate more demand, and how are we going to do that? More marketing, right, unfortunately, more education and be a big part of it. And probably some new clinical data, right. I think we've done a lot of small studies to show that we think we have a far better product of what people are doing today. But they're not large, robust trials.

And so, you know, is there one more trial we're going to run that's going to take all these insights, put it into one study, to drive a better outcome? And can that study be label changing, right. So some of these things before we run, we got meetings coming up with FDA, we want to see, you know, can we get the FPV 1 [ph] to be optional on the label, can we get the dosing change them label, and there's certain things we can fix them to label work with the FDA, and we got every indicator from them that they're open to working with us to fix some of those things.

So I'm excited about where we're going with Afrezza. But we got some good meetings coming up in the fall with FDA that I think will help drive the next strategy here. So…

Oren Livnat

And you do have money now, you got over $200 million bucks in the bank, you've presumably got royalty revenue coming sooner than later from United, no maturities for four or five years on the debt side. So you do have this pipeline. It's never been part of the story. Can you just quickly tell us and you know, a minute, what's the next thing on your early stage pipeline? Because you know, you could become quickly, you know, broader base, rare, I guess, OE [ph] company, right?

Michael Castagna

I think the story will change pretty much go into next year, right, like Tyvaso hopefully has great approval and great success and launch, Afrezza starts to pick up momentum as we go into 2022 and beyond. And then you got the pipeline, which would be the next story of the company, which we've been investing in for years, building up the capability we purchased.

The thing I'm most excited despite three things in the pipeline that kind of get me excited, right. Number one is clofazimine and the NTM space, that'll be going into Phase 1, late this year, early next year, and being able to get through Phase 1, quickly going into Phase 2 will be our goal. For that one, we think it will work. We don't worry about that part. It's just can we get the right dose, can we get a dry powder version of it. Those are all the key questions there is going to be stuck in a nebulizer. We're okay that way. But getting that into patients as quickly as possible be there.

COVID is here to stay. I hate to say that, meaning we all hope it's going to go away. I don't see that happening. So we're going to have to have treatments for COVID and Candace [ph] NRx partnership we just announced a few weeks ago, you know, can we get that product in a way that stabilize in a dry powder, they start working on more COVID treatments to help more patients in our technology.

We have the ability to make about 300 million doses of a product a year. So you know, anything that's going to be COVID, I'll make up we make an inhaled vaccine, right. I mean, these are - this is going to be a chronic booster shot every year, well then paying a nurse or pharmacist to give a $35 injection every time like, can we do that with inhalation, right? I have no idea. But these are the things that we're focused on is. You know, now COVID is here and it's going to be a chronic treatment as it appears and disappears, how do we start to help those patients.

And then the final one is, I think one of the early for Thirona and the alpha inhibition and IPF, you know, is there any signals here? Can we get a proof of concept model the next 12 months and start to show that this product has real potential treatment of IPF. And there's a couple of things we haven't announced yet that are public that I'll talk about next year. But lots of excitement in the pipeline. I think that's really going to showcase over the next 12 to 18 months.

Oren Livnat

All right, yeah. I mean, I think the story is going to keep evolving. You got big months ahead. And then let's sounds like next year, is there going to be a pipeline story here. So congrats on a lot of progress and look forward to your next big catalyst.

Michael Castagna

Thank you, Oren.

Oren Livnat

All right, thanks. Take care.

Question-and-Answer Session

End of Q&A