MannKind Corporation (NASDAQ:MNKD) H.C. Wainwright Bioconnect 2021 Conference January 11, 2021 6:00 AM ET

Company Participants

Michael Castagna - CEO

Conference Call Participants

Oren Livnat - H.C. Wainwright

Oren Livnat

Welcome to the H.C. Wainwright 2021 Bioconnect Conference. My name is Oren Livnat, I am spec pharma analyst here at H.C. Wainwright. It's my pleasure to welcome our presenter MannKind Corporation. With us today is CEO, Michael Castagna. Welcome, Mike.

Michael Castagna

Thank you for having me.

Oren Livnat

Great. So, you know, I've covered MannKind for several years now. And the story is really been evolving in new ways recently, especially and I think the stock reflects that. You're at multi-year highs right now. And, you know, I'm getting a lot more inbound interest in the name and I think it's probably not for the very well-known, you know, story of inhalable insulin, which is still quite an exciting product, but I think more near term, some exciting developments in the pipeline front.

So today, I do want to talk about Afrezza for a minute, but then I think we'll spend most of our, you know, relatively short time talking about TreT, the inhalable treprostinil partner with UTHR [ph] and then some of the other, you know, more recent developments with the company, if that's all right with you.

Michael Castagna

Absolutely. Thank you.

Oren Livnat

Okay, great. So, I mean, just to touch on Afrezza. I mean, obviously, you've had this slow and steady growth trend for a while. And I'm just curious if you could give us just the latest on you know, what the field force is experiencing out there in terms of access, market receptivity, maybe COVID impacts? And, you know, what are the primary initiatives right now you're focused on to keep that steady growth trend going or even to accelerate uptake?

Michael Castagna

Yeah, no, thank you. Great question. As you know, 2021 is here, I'm sure none of us want to look back and relive again and 2021 is not starting off much better, unfortunately in California when we look at the COVID rates there and what's happening and turning people away.

I think when you take a step back and say, where we a year ago in March, when COVID first was really happening in the US and what we thought would happen in Q2, you know, MannKind really buckled down, we took salary cuts, we took bonus cuts in the salesforce, we reduced our expense base dramatically.

And when you think about capital and burn rate, we were able to reduce that, continued year-over-year for the last three years. Last year, we burned about $13 million a quarter, which was a record low in the last 12 quarters. So Q4 is just wrapping up. I don't know the final numbers yet.

But when you think about where Afrezza did finish there in Q3, in the scripts, you can see publicly Q4, we rebounded very nicely from Q2 to Q3 to Q4 with growth quarter-over-quarter during one of the most difficult times in accessing health care providers.

So I think that's, you know, what I give a testament to the team and everyone trying to get together to execute on virtual speaker programs, virtual lunches. We changed our sampling, we added some new targets. So everything we could do to help keep our salesforce active and busy we did.

And then one of the big changes that's coming that, you know, we'll probably see some bumps here in Q1, but nothing material, is we ended the Free Goods program. And so about 10% to 15% of our scripts, in any given quarter are the Free Goods program. And we’ve disclosed that publicly, we deduct that from our revenue.

And so we ended that program, mainly because we just saw people were not doing prior authorizations. And those Free Goods kept building up over the last 2 years. And it got to a point where it's millions of dollars a quarter and we just said, look, let's you know, these patients will be covered by insurance. We just need the doctor and a patient to go through the prior off process.

And so we worked on that for new patients in Q4. I think that's the nice thing. As you saw we shut that off in November. We didn't see a huge drop off there in Q4 in terms of shutting off new patients. And now the existing patients we're working on converting here in Q1 and Q4.

So, I think that will be the big momentum here in Q1, will be some nice upside. If all goes well, in terms of converting free scripts to paid which should give you quarter-over-quarter, trajectory where we're going. Obviously, COVID is a headwind, so you got to kind of take that in the context of everything.

The other part of that is we launched a new reimbursement hub. So, we really transformed how [indiscernible] routing and how easy they are for the doctor to do. And it's nice that doctors and customers are giving us feedback to say, I don't know if you know, CoverMyMeds, which is one of the leading platforms out there with McKesson. That's who we've used historically. And this new one we built that the customers are telling us it's as good or better than cover my meds. So we're seeing quick turnarounds with PA is going to improved in the same day.

And basically, you know, we always hear this access question for Afrezza. And the reality is, you know, 8 out of 10 patients who get prescribed to Afrezza actually get it and then the 20% we either got to move to our cash program, or we appeal them or we work through the difficult PA process with them. But reality is 8 out of 10 people that want Afrezza get it the same week usually. And that's really one thing we're trying to work with our salesforce, on our customers to make sure we continue to push that simplicity message.

You know, I think that net, we ended 2020 in a good spot with Afrezza. We all wanted to grow faster, but COVID was a pretty tough year and despite that, you know, we should see year-over-year growth and quarter-over-quarter growth like we have been the last couple of quarters.

So that's the long and short of it. And you know, at this point, we got only a few salesforce openings, so we kind of got some stability out there in the salesforce. BluHale is working on the second edition in terms of what that's going to launch later this year, hopefully with dose detection. What else, the team is really refocusing the marketing strategy and the pull-through here in Q1. So that's a lot of focus, its nuts and bolts on Afrezza.

Oren Livnat

All right. And if I can transition to TreT, because that's what I know, a lot of people are really interested right now. You know, we were - I was writing about this three years ago when there was a twinkle in your eye. And since then, it's a - you've partnered with the £800 guerilla in the space in the United Therapeutics, as opposed to competing with the £10,000 guerilla and insulin, it's probably nice to be on the other side of the equation, right?

And so, you know, for those who don't know, this is a treprostinil inhalable dry powder formulation based on your Technosphere platform, right, same as Afrezza. And Tyvaso is United's $500 million inhalable treprostinil franchise for PAH currently, right. So it's a really high value concentrated market.

And so now, you guys have been in development with them for a while. And I just want to talk about, what's coming up, it sounds like in first half of 2021, they've talked about a potential NDA filing. So I think there's a bunch of talk out there. So first, what's left if anything to do on the development front, between you or United, whether it's clinically, CMC, or anything else to enable the NDA filing?

Michael Castagna

I mean, the good news is Oren, and I think that we saw some of the movement in Q4 is, you know, as we announced in our earnings call, everything was going to wrap up in Q4. So the pivotal Phase III trial is done. The human factor study is done. The stability program is done, and the PK study was done.

So everything is done. Just writing clinical study reports and filing the NDA is that all that's left. So that - when people ask me, like, was the data going to become public? I said, I don't - that's up to UT on data disclosure, it doesn't really impact us. The Phase III clinical study was a safety study, it wasn't even truly an efficacy study, efficacy was a secondary endpoint.

And I think when you think about Afrezza, it took 100 years to innovate an injectable insulin to an inhaled. It took us 20 years to make a powder, an injectable, subcutaneous treprostinil into a nebulizer, right, and then another to make it into a dry powder, you know, really took 20 years from the time Tyvaso and Treprostinil was out there in the marketplace.

And so it's not easy to do what we do. And I think that's what you see here is, you know, we are getting it done. The data, the patients we've seen them in the extension phase, they titrate up. So we've had a good number of the patients go on drug for over a year now. They're doing great, they love it. And I think that's - it's really exciting to see, you know, how we can innovate not just diabetes, but now this pulmonary lung disease, where these patients spend their days attached to a pump or attached to a nebulizer, you know, four times a day doing 20 minute nebulizer sessions where they got to carry a backpack, if they leave their house, they need electricity to plug it in, they need sterile water.

It's a big arduous process. And so - and plus we got COVID out there, so people aren't even leaving even more. So we're going to transform these patients’ lives into being a two second inhalation, which we're very excited about. We're leveraging our technology, we're leveraging the infrastructure we've invested in and built. And UT has been a great partner.

And to your point, you know, we laid that strategy out 3 years ago, when I became CEO, we did the Phase I study there. We got it to the FDA and then part of that, you know, less than a year. And that's the reality is we've been laying down these railroad tracks for last 2, 3 years. And now you're finally seeing them all start to come to fruition, right, in terms of the pipeline, and this asset itself. And this is meaningful to the future of the company. And so it's not a small revenue target for the future. And we'll talk more about that.

Oren Livnat

Right. So I mean, obviously, a lot of investors who, you know, looked at your company for years have, you know, understand well, the fixed infrastructure you've put in place and how you've had to really work through to start generating margins on Afrezza, and this is potentially a very different beast, right. Can you just remind us sort of what the basic terms are in this deal?

I mean, it's a $500 million franchise now, we'll talk more about growth opportunities, that UTHR is presumably trying to switch over to your, you know, clearly – and we talk more of the differentiation, but yeah, obviously, we’ve mentioned that it’s about night and day the product. So it shouldn’t hard to convince people to switch. So just what sort of piece of this business are you looking at getting yourself with it?

Michael Castagna

Yeah. So, I think trending through some of the sequence of noise that's come out on this product, but I think one of the things was saying it's going to be an NDA versus a 505b is important. That's a differentiator. Number two is we expect to get the ILD indication with our technology, so that will be an important market expansion.

And then the Tyvaso itself in terms of switch you know, I've worked in many markets over the years where in HIV we were switching from a dry powder thing to, let’s say a capsule that disintegrate in water, to a once a day capsule and three capsules into one capsule.

So conversions are not easy, but they can go as fast as you want or slow as you want. And I think given the headwinds that UT looks at and the benefit, this provides the patience. You know, one of my early conversations with Martine over there was, are you going - are you willing to convert all of your Tyvaso patients to our technology, because I got to be convinced to that, otherwise we're better off doing something else, right, and then that deal that we did. We already suffered one major partnership with Sanofi that I was not willing to put this company back through again. And I'm fully convinced that we have a better product than what they're dealing with today. I think they believe in the product, they see the data.

So I don't think conversion is going to go slow. I think it will go right rather quickly. You know, especially when you look at all the patients that converted over in the trial, they're doing fine. They're doing great. They're titrating up their doses. They're getting good results, they're happy. So why would you want to go through the old technology, if you get something that's new and exciting.

And then you think about the product, is it going to just convert to Tyvaso or could it expand in other markets or earlier in the treatment and combination treatments. So that's something I know UT will be talking about, as we'll talk about in a few minutes probably is…

Oren Livnat

Right. So as you touched on a few things there, right. So I mean, you mentioned some maybe less sexy [ph] line-extension strategies that people seen in the past, this is clearly not just that, I mean, this is taking a very onerous, clunky, maybe not even safe all the time, you know, approach to a nebulizer filling with sterile liquids and versus a pre-packaged dry powder inhaler, right, which everybody knows how to deal with, convenience aside, right.

But, I think what's, you know, maybe worth just mentioning is that, I'm not a UTHR analyst, but I can look at UTHR consensus, right, and I look at Tyvaso estimates, and I see them all over the place. But generally, I think people are maybe sleeping on this, it's kind of like an eroding franchise that looks sort of a possibility of generic competition out there, theoretically. But UTHR’s given you over $100 million, and they just bought a Priority Review Voucher for this product for another $100 plus million. So they've already put $200 plus million, just into the acquisition sort of phase of this, plus, I assume plenty of manufacturing clinical spend. So, in my mind, they're going to push pretty aggressively on this. It certainly looks like it's high priority, a similar degree?

Michael Castagna

Yeah, I don’t think there's some bigger priority between either of our companies, right, the facility behind me, we spent over a couple hundred million dollars building out. That facility is where we're going to make TreT. That's going to be an important product. And you're right, we're using our existing technology, we built – we have other finish lines that are - for this product dedicated.

And, I think the economics you’re asking me about, we’ll get double digit royalties, low double digits on this product. We’ll also be manufacturing COGS plus x . We haven't disclosed all those parameters. But it just becomes meaningful when you think about how much fixed cost there is behind me in the quality systems and everything it takes just to run a drug company. Obviously, two products is better than one and three products is better than two and more you put in your salesforce, the more efficient we get.

So I think you're finally seeing MannKind get to a spot over the next year, where while the second product [indiscernible] I'm sure we'll talk about, and then a second product in manufacturing. So just being able to leverage all this fixed infrastructure and cost becomes a lot more efficient as we go forward.

And that's a nice part of the story, that, you know, India has started the trial that's going forward, you got Brazil moving forward. So everything just keeps building from here on out in the company. So we're very excited about what that means from margin expansion on Afrezza, all the way through, you know, utilizing our people and our resources, everyone is motivated to make this thing successful.

And to your point, there is still a couple years away before Tyvaso goes generic, but I'm pretty confident with Martine and the team there, they're very excited about this, the patients are excited, they're going to convert very quickly. And then you get into the expansion opportunity, right. So today, Tyvaso you know, there's about 45,000 patients in PH, WHO Group 1. And when you look at, you know, through Group 3, you get into another 130,000 patients when you think about ILD and COPD.

And so that's really where - you know, when you look at UT's future layout, right, they've shown that they want to go from 7500 Treprostinil treated patients to 25,000 over the next five years, and we believe a lot of that growth is going to be on our platform, it's not going to be more people want to go on a subcutaneous pump or more people take an [indiscernible] because you know, the tablet has absorption issues, as you know, and the SubQ pump is limited to less resort here. So we believe a lot of the growth in those 15 to 20,000 patients is going to come from TreT and now its going to be from Tyvaso DPI they announced that. So…

Oren Livnat

Okay.

Michael Castagna

So the next indication is PH ILD, that's about 30,000 patients. You know, today, I don't know if UT discloses how many patients are on Tyvaso, but it's in the thousands and so when you think about going from thousands to 30,000 on a $500 million brand, this easily becomes a pretty big growth driver for UT over the next 15-plus years. And then they're going after COPD, which is 100,000 patients on the PH COPD.

Oren Livnat

I guess, I can discuss pricing at that point, that's - across that bridge.

Michael Castagna

Yeah, and these are very specialized patients. This isn't your mom - your grandma who has COPD, and my mom from smoking, these are real patients who are real sick and have very limited resources left to them. And so these will be, you know, orphan designated indications, and they're going to be meaningful growth opportunities for the company and - their company and our company.

Oren Livnat

Right. So let's say you're getting, you know, double digit, low double digit royalties on what is now a $500 million product, I think what some people are really thinking about is that it's not just about converting this market, which I'm sure they know the name and address of every one of those 2000 or 3000 patients on Tyvaso now. So it's not your typical switch, right, but also, this PHL - this PH ILD, which is even bigger, you know, 10x, potential population of the current Tyvaso, they're not trying to expand injectable as an oral products into that population. This is really a Tyvaso, that's the base study in that population, right? So can you just confirm that, when you file - when UTHR files this NDA for DPI, for Tyvaso DPI, the plan is to in fact go after that - those new indications right on label from the start, correct?

Michael Castagna

Absolutely. We've been with FDA independently of UT prior, and we kind of knew what we would be doing, and UT, so many discussions with FDA. So we feel pretty good about the label expansion indications, the studies UT is doing. And that's part of the reason when you think about the voucher is you're going to go through a large COPD, you want to study that with your latest technology, right? You want to study that with the MannKind device, not the nebulize device. So I think that's a lot of the incentive to get this filed and get this moving ASAP. So the later this year, we'll be launching this product, right? I think that's…

[Audit Ends]

Oren Livnat

That anyone hadn't really thought of it, it's not just usual PRV is, I'm in a race to get to market, I had to somebody else. When this case, what sounds like you're telling me is it could also be trying to get this thing approved ASAP. So they can actually get it into the clinic in these other indications, is that right?

Michael Castagna

Yeah, of course. So it's not just the timing, it's just - there's a lot going on there. And there's a lot of expansion. And you know, people think about the next - you got 15, 20 more years now on technology, IP from our company, you're going to want to drive as much upside revenue as you can and have that protected for a long time. While you're providing a huge patient benefit, I can't think of a better…

Oren Livnat

And then just lastly, I know you don't like speaking you know about anyone's product besides your own. But you know, if it were a race, can you speak to you know, how you think your product might be differentiated, not just from obviously being partnered with UTHR, having inside track commercially, but just from a PKPD, what we know publicly about your product versus this other - there is another dry powder product in development?

Michael Castagna

Yeah, I mean, I don't have much to say about them, obviously, they're probably held up until late October 2022. So we'll be out there for probably a year ahead of them. And then, you know, I think the technology is a very different. So I think when you think about, you know, the magic in our technology is our device. And you know, when you - you want to be able to reuse the device, you want to make sure that the device isn't clogging, throwing out a bunch of powder, especially in these high potency drugs, if you were to absorb, you know, too much drug, you could have a pretty downside side effect there, right of Treprostinil.

So I think the dose, the dose consistency and accuracy that our technology provides is critical to the success of the program. And you've seen that in our PK data, you've seen that in our dose escalation study. We were able to go linear all up to 150 micrograms, you know, in single dose studies and multiple dose studies. So we feel pretty good about our technology and what it's going to bring to patients and probably, then you get into cough [ph], you get into user friendliness and all the other things, you know, other technologies out there aren't as sophisticated or robust enough, and they don't get as deep lung penetration. So I think that's the thing [ph] you're looking at with our technology, you're getting a large percent of the powder into the lungs, you're not losing it in the mouth, and the oral cavity and the device, which is true of most other dry powders. I'm not going to pick on any one company, but that's just what differentiates us from everything else we're doing.

And this is going to play a critical role as we start to unveil our pipeline, have been working on a lot of assets last year. And we'll start to talk about those more this year, as things get further along. But you'll see that ability to deliver, you know, certain of amount drug in the lung without causing it, you know, systemic side effects is important.

Oren Livnat

Now, I've dragged you too long. And I'm wondering if you could pull off in two minutes describing your latest two deals where you co-promote on oral lip a levothyroxine solution? And also you made a small acquisition recently and tell us how that fits in your overall strategy?

Michael Castagna

Yeah, so I think in the last two minutes real quick, number one, we're excited that Afrezza is going to be moving into pedes [ph] in Q1 and Q2. So that's exciting expansion indications. As you know, anyone that with Type 1 diabetes is typically diagnosed as a kid and lives with it for 60 years. So when you think about our future and change in the standard of care, that's a big opportunity for us to show an improvement, and an execution of a trial with good clinical data coming out over the coming year. So that's number one. We're excited about kids [ph] as a milestone this year.

The second milestone you saw was to co-promote with Vertice. And so this is a liquid thyroid medication, it's calling in our targets, it's a direct fit with where we're going. And the reason that's important is it leverages our sales infrastructure without expanding it that much, in terms of call target lists. So now we can go into endos and pede endos and call on the thyroid Doc's that are in those clinics we're already going in. And so it's not a big distraction from where we are, number one.

Number two, we can start to get into the pediatric endocrinology space building relationships there, in anticipation of having a pedes approval in a couple years, this allows us to go in and kind of lay that foundation and help those patients. I think when you think about liquid thyroid, the real opportunities going to be in kids, maybe some seniors and the endos who are having difficult titration.

But look within the kids segment, they're just not good at swallowing pills, and it's going to be a huge benefit for liquid as you and I have kids that we see them swallow their antibiotics and a little - little syringe, it's going to be a very similar experience for kids with thyroid disorder. So I'm very excited to help them there.

And then the last one is Qrum. And you know, that one is just not about the acquisition, Thomas, Dr. Hofmann who joined us as a pediatric pulmonologist. So he's just going to be critical to the company in the future, as we think about develop an orphan lung disease. Thomas has a good background in developing inhaled therapeutics and nebulised. And now he's got the luxury of this big factory and R&D facility, but next to it, to take on more opportunities to help more patients around the world. And so I know he's very excited about that.

And we really look at this NTM space as an unmet need, there is nothing to treat these patients, we think this clofazimine can only be nebulized, we think we can make it into a dry powder inhaled version, and get that into the clinic as quick as possible here in 2021 and 2022. And so we expect that to hit Phase I this year. And that's going to be really exciting to move that forward very quickly. There's, like I said, there's nothing there, the FDA assist the Cystic Fibrosis Foundation, everybody's very excited about this. And we're very excited as well.

And then it has other applications, maybe potentially in COVID. It's got applications in TV for the developing world. So NIH is helping fund some of the talks work and they're interested in the TV work. So there's a lot there for this product. And the market is under estimating, I think its potential. But we think it's just a great fit with our technology and the team that's joining us and with it is going to really bring forward not just that product, but the pipeline.

So we're excited when you think about pedes this year, Afrezza growth, TreT growth, Thyquidity you know, co promote, and Qrum moving into Phase I. So MannKind's got a lot there. And I still have a couple other things to do...

Oren Livnat

Enough to more than fill our time. So I appreciate it. And I wish you the best of luck and your upcoming milestones this year.

Michael Castagna

Thank you, Oren. Its a pleasure…

Oren Livnat

All right, take care. Bye-bye.

Question-and-Answer Session