MannKind Corporation (NASDAQ:MNKD) Cantor 2020 Global Virtual Healthcare Conference September 15, 2020 8:40 AM ET

Company Participants

Michael Castagna - Chief Executive Officer

Conference Call Participants

Brandon Folkes - Cantor Fitzgerald

Brandon Folkes

Welcome everyone to the 2020 Cantor Fitzgerald Virtual Healthcare Conference. Thank you very much for joining us. Next up, we have a fireside chat with MannKind. Joining us from MannKind is CEO, Michael Castagna, Michael, thank you very much for joining us.

And to investors, we may run short of time for Q&A on this fireside chat. So, if you do have any questions, please feel free to email them directly to me and I'll get back to you on them via email.

Question-and-Answer Session

Q - Brandon Folkes

Michael, firstly, MannKind has been around for a while, but could just give a brief overview of the company for those joining us today in case some people are not familiar with a company?

Michael Castagna

Sure. And thank you for having us today. Appreciate it. MannKind is a company has been around almost 30 years. We launched Afrezza, our inhaled insulin here in Q1 of 2017. And we completed a pipeline deal year later in Q3 of 2018 with United Therapeutics for -- pipelines assets which I know will talk about today called TreT.

And when you think about MannKind, it's been around a long time, but we really do have is unique inhalation platform that's really -- we've done some baseline research throughout the world. We can't find anything that really matches our technology in terms of scale, and FDA, and now Brazil approval and looking at other countries.

So, we feel very good about the uniqueness of our platform for inhaled technology and the device combination makes us unique. So, that's really what we've built over the last 30 years and a lot of knowhow in that. So, it comes to scale, commitment, FDA running a pretty clean -- regulatory fund has been a great, great run.

Brandon Folkes

Great. Thank you. And then in terms of where the business is today and you've done very well to grow the business the last year since you've taken over. Could you just give us an update us where you are I guess one with the Afrezza? How's it been performing during COVID?

Michael Castagna

Yeah, I think when the March came and everybody was wondering, which way was the road going to go in the stock market were generally closed, and we were slipping into PPP loan mode which was really timely because it allowed us to keep focus on our business, keep our people employed, not furlough anybody.

And all that came together very nicely as we closed out the quarter, we've performed incredibly well during COVID. It really demonstrated a couple things, how sticky our patients are. We weren't really clear when you're getting new patients and are they dropping off, are they staying on, but really saw some -- the refills really pulled-through in Q2 and helped keep our business pretty stable. We expected much deeper declines in the experience.

And so that, that when you look at the end of Q2, we just had our quarterly earnings about a month ago, when you look at cash on hand, sales trends, our people retention, our people recruitment, employee motivation, I couldn't ask for us to be in a better spot, given how many headwinds we've had to face as the company and industry and society in the last three, four months -- really six months now, I can't believe it's already September. So, it's flying by and now we all got different challenges, as we have our kids at home and employees working virtually. It's really a different world that we're all going to have to get used to, so.

Brandon Folkes

Okay. Any benefits you see coming out of COVID? Just maybe the way you've done business? Obviously, I mean, travel cost is one that sticks out, I think to all companies. But just going forward as we sort of emerged, hopefully, into a more normalized road, is there anything you've learned during this pandemic that you think is actually going to be a positive when we get out of it?

Michael Castagna

I definitely enjoy my family a lot. So, that's been a good one. No, I think COVID been -- it's been tough for society, tough for mental illness, right, a lot of those challenges everybody's facing. But I think from a company perspective, it's really allowed us to reposition ourselves.

When we think about the world and the role of the sales rep, how do we think about Telehealth? How we think about access to care? We're in the process of building out a Telehealth platform that we'll be launching hopefully here in Q4. We're looking at changing our distribution model to make it more efficient and more direct for patient access to get the drugs straight to their house. So, you're going to see quite a few changes in the company as we look out over the next three, four months.

That really, in my mind, COVID helped us leapfrog that timeline by a year or two, maybe three, when you think about telehealth and access to care online and getting a virtual FEV1. So, I personally think COVID made us step up and think about the challenges we face and not wait to think, the world's is going to be back to normal, but how do we evolve with this world, because I think healthcare is so fragmented, so antiquated, that maybe we can start to change how we access care. I mean, we can start to change how people manage their diabetes and insulin virtually.

And so, we feel very good about that future. And the role of the sales rep will be important as well. So we don't think the selling model changes, but can the rep provide more of a local customer service, whether that patient is coming from online, the patients coming from the doctor's office, but how do we become more ubiquitous around the channels that the patients come into the company through online or physical and local offices?

So, I think COVID called us to take a step back and manage our expenses tightly, just to make sure, we were fine on a financial front and that's fine. So, overall, I think we -- this company has survived multiple challenges in the past, and this is nothing new. So, I think the good news is, we're pretty quick at adjusting and moving forward and that's really demonstrated our success here in Q2 and coming into Q3, we're finally starting to get back and grow a little bit faster. So we're excited.

Brandon Folkes

Great. And then, I think one thing that has been a challenge for most companies in the industry, especially those in the chronic conditions as new patient starts. How has that affected MannKind? And then following on from that, you did talk about some initiatives, would those also help with bringing on new patients.

Michael Castagna

Yes. So, one of the things we did was virtual FEV1. We felt -- what I mean by virtual is a doctor may not see the patient in person. So, we actually created a process where we will ship an FEV1 directly to a patient's home upon the doctor request. And that's something to make sure we're complying with our label. People feel good about prescribing the product. They are doing the right thing. And during COVID, not everyone's going to want to do -0 a lot of the pulmonology labs or even closed. So, we've had to reinvent that part of the business model in terms of gaining new patient starts.

But we were impacted like anyone on starts in Q2, but we've started to bounced back here in Q3 when you look at our access list three, four weeks, we’re starting to go in the right direction. I like what I'm seeing in our new expansion territories. We went up about 11 new territories this past six months where people just got out there starting in July and we're already seeing some nice growth from those sales reps.

I personally went on the field last week, it was in two different parts of the country, just talking to customers. And honestly, I was pleasantly surprised how many offices were open? How many were willing to talk to you? Yes, you're wearing your protective gear, but it's nice to start to feel like there's a more new normal coming back. And honestly, our competition is not out there right now. So, we're trying to be cautious with our employees. But really use this time to be in front of our customers and get our data filing.

Brandon Folkes

Okay. And then, just maybe following on from something you raised there. How large is your commercial footprint right now in terms of sales force and customer facing reps? And then, where would you like to get it to over time?

Michael Castagna

Yes, we're right around 80, 85 people right now, depending on the vacancies each week, but I feel that that's a sufficient enough number to get this company where we need to be without clearly seeing dramatically faster growth. If we start to see that these 85 team members on the frontlines can grow a little bit faster, especially in those new territories and I think we would be more -- we'd have an appetite for faster growth by filling more reps on the front lines.

We just want to be cautious with COVID. We want to manage our expense base to hit a – put a bunch of new employees out there and then not be able to fully leverage them and they can't make -- do their job. So I think, we got to see the next 90 to 120 days dealing with COVID and does this thing come back with a resurgence as we get closer to November and December, which I think we could see. And then very much shut down, again you don't want to have a bunch of people that are just not able to make impact.

So I personally believe, we can get to a higher number, especially as we go more into the Type 2 diabetes space, but right now focus on Type 1, I find our numbers are efficient enough when you look at pump companies and CGM companies, where they started from 50 to 80 or 100. We can get through a large Type 2, you're going to get to 2 to 400 reps one day. We stick to where we are in Type 1, we'll get 9 to 130 at some point. So we see room for growth, but it's really about the impact we're making and can we self-fund that growth as opposed to -- raise more money to do that, that’s our goal.

Brandon Folkes

Okay. Thanks very much. And I think one thing again, so with Afrezza launched, you took it back over and the company's done very well. And part of that has been getting data out there. And I think one is -- I don't want to say stumbling blocks, but I think one is maybe the initial stumbling blocks that the prior company who promoted it, didn't do as well, I think was this equivalent dosing you've talked about, right?

And I think that's it for me -- from my perspective that sounds like a very important part of the story. And I think you've done very well there. So can you just maybe talk about what you have done in that equivalent dosing? And where are we in terms of presenting that to the – sort of the whole prescribing universe? And any tailwinds you think for now, we've captured versus that we still could capture from that initiative that you put in?

Michael Castagna

Yeah. So I think that there's two questions here, right. One is, what have we done differently over the last couple of years with data? And then how does that correlate to dosing? So I think one thing, I was – even we have a new publication come out in a few weeks. And that's going to be really important on the safety side of the drug. There's a lot of questions that we get that, the basic toxicology studies that we had done 20 years ago are just getting published in a few weeks, just got accepted. And so anyone that has a question on lung safety and carcinogenicity, you have that data now getting published.

On the dosing has been an important one because what we know is there is no pivotal pulmonary, when you change route of administration, whether it's Subco to IV, you need 40% more insulin. When you go to pulmonary, you need 1.5 to 2x amount of insulin. There is no equivalent because our drug profiles are completely different. The PK/PD is completely different. So that's been one of the major flaws and when I look back at the development program that, you probably know at the time, it's only when you look back at all the data, you see these things and how long it took doctors to titrate up to get to an effective dose.

So now we have data coming out from one of the largest neo tolerance tests in the world with 525 patients head-to-head against NovoLog. And what you saw in that study was, you can dose on those 2x or 1 to 2x of Afrezza cause no more hypoglycemia or decreased less than your baseline pre-prandial sugars. So that's really given those safety margin that people are looking for is, you can clearly see, as you get to 8, 10 and 12 units of injectable insulin, you're really dropping people and leaving hypoglycemia in causing more hypoglycemia.

With Afrezza because of the short tail, you're just not pushing the sugars that are at three or four hours later. So you as you get lower doses, not as big of a deal, but on most patients around eight to 12 units of least of injectable insulin. You can double that with Afreeza still not cause more hypoglycemia. So I'm excited to get that data out there. We think the number one reason people with diabetes don’t get the goal is ineffective mealtime control. And the reason they don’t have mealtime control is because hypoglycemia. And so we feel like we're a solution to the problem. And that data is coming out very, very shortly. It's got to be -- published during the fall. Data just presented -- and will be presenting again next week at EASD live. So looking forward to get note out there on the dosing.

And then the second part of that – that I would articulate is packaging. So one thing, I saw, you know, when we first got here was the doctors were writing two prescriptions to cover different strengths and the patients were using, you know, four to seven cartridges a day. So we changed all of our packaging.

So now a patient has one copay, one package, all of those strengths they need that really getting through the month and that’s made a tremendous difference in terms of retention and believability and simplicity. So that's where the whole dosing thing works, but I feel like we got a good grasp of it.

Even now, I'm training a whole new medical team and their heads are spinning as they go through the listings saying, why do they do certain things? I said, look, we weren’t here. I can only talk about what we fixed and where we are. And here's how easy it is now. And people all agree, it's so much easier today than it was three, four years ago. And a lot of stuff just came out in last 24 months. So you know, these things take years to get done, not months, unfortunately. But we're excited to where it's going. It's almost wrapped up this year. So…

Brandon Folkes

Okay. And then obviously, those are some of the growth drivers for further. Any growth drivers we are seeing that we haven't talked about, maybe over the past year. And, you know, obviously, within the U.S., now just focusing on that. And now again, on the prescriber side, you know, are you seeing an increase in breadth of subscribers, is it an increase in depth, and where's the growth being driven by in terms of who's writing the descriptions?

Michael Castagna

Yeah, that was a great question. I actually went to my team yesterday and so they shared some details around this exact question, because, you know, we look at the data, but it's not something we study weekly basis, but it's nice to look at the trends now. What we're seeing is all the way through pre-COVID, we were growing breadth of prescribers every month, we’re adding another hundred docs or so. And that was looking great.

And then as we look as COVID lockdown and offices lockdown, we're building depth of prescribing right now. So that's a big shift from where we've been the last three years, is because you can't get into as many new doctors as you'd like, or we didn't have the new reps were out there. So they couldn't get into the new offices. So I think what we're seeing now is deeper depth of prescribing. That's what's driving our growth here in Q3. And I think the good news is we get back out in Q4, you should see depth of prescribing plus breadth start to take shape again, as the new reps are getting back into their offices and as COVID seems to be, you know, I think people are still being cautious, but I feel like offices are trying to get back to the new normal and that's nice to see, and it's going to vary by country – part of the country you're in, but at least the reps can start to do the job again, I think that that's important.

Brandon Folkes

Okay. And you talked about patient retention, right as something – is that something you'd have seen and marked increase in over maybe the last year or two? That may be – you know, that could be quite a tailwind? I guess when those reps are back out there, and we start adding new patients again?

Michael Castagna

Yes, I think, we see the higher dose cartridges growing faster than low dose cartridges, right. So that talks about effective titration in dosing. So that gives us some confidence that when somebody starts, they're going to have a great experience, and they're going to see the results in the first three, four weeks of using the drug. That immediate feedback, especially with CGM adoption, now is so much better. So I think, you know, that's one big thing.

The second big part of this is Type 1 versus Type 2. We shifted our focus this year to more Type 1s. And we see that growing as a percentage of our business. Type 2s, still almost half our business, if not a little bit over that. But there's just a little less compliant. But I think as you see Type 1 patients taking the drug, using the drug, and during COVID you can see those refills helped stabilize our business way more than any of us had expected.

So, I think the patient retention is there and as we start to grow new patients, I think you'll see that compound effects start to take shape over the next year or two as we go out.

Brandon Folkes

Okay. And along with some of the initiatives you mentioned earlier, I think, as well, will probably be quite helpful. All right. And you talked about some of the publications we're going to see in the coming weeks and then again, since you've taken over, I think, one of the things you had done differently is put an emphasis on really getting the data that you -- the company had generated in the past, really published an outfit.

As we look out probably to the next 12 to 18 months, what are some of the key publications you think, we should be looking out for? And as we look out probably to the next 12 to 18 months, what are some of the key publications you think, we should be looking out for? And then as well -- and then as well on that side of that as you think that prescribers really want to see?

Michael Castagna

Yes. So, back to my field ride this week, usually I'm out there; I'll get the hard questions. That's why I go out to talk to the customers and hear what's going on. I find that about 20 some doctors this week, and usually the questions were much harder. These questions were much easier around optimism around they want to start prescribing.

But at the same time, you realize that two or three docs who were probably 65 to 75 years old, talking how they're going to practice till they are 85. And you sit there and say insulins been around 100 years, and these guys been practicing for 40, 50 years. And you think about what we're doing with the Afrezza, we're disrupting 100 years of habit.

And unfortunately, half the century, these doctors are still practicing today and so a lot of that data that is not out there that they're asking, right? They're like; well, talk it about the 2x dose, show me the data. I'm worried about the safety, show me the safety data.

So, we felt that data was out there four years ago, and I joined the company and you realize, like, wow, we have all the data, but we're getting -- literally l09 is a 14-year old study that will be published and presented as an oral presentation this year, right? Like a 14-year old study, like -- that that's how important the data is still. And I think that's the good news is, data is meaningful, it's differentiating, and it really helps articulate the profile of the product.

And so now we have data coming out on hypoglycemia, we had a publication in December. We have another analysis of all hypo from all of our trials coming out. So, really showing you hands down we have 30% to 70% reductions in overall hypo and severe hypo.

Weight -- we have loss-weight challenges versus injectable insulin. How to effectively dose and titrate the product. We have some efficacy studies coming out showing, if you just switch from injectable insulin to inhaled insulin, you get a better A1c.

So, that wasn't some of the initial data that came out. And I think that's what we're starting to be able to show is that not only equivalent, it's probably better on certain parameters. But again, our next large studies that we do, one of them will be pediatrics, right? And that will be a very exciting kick off, A, because it's very focused on kids. We know -- effectively how to dose the drug. We're going to design the trial to effectively dose that product.

And so we're very excited because that will be the next large head-to-head well-controlled trial where we know what we're doing and we feel very confident in that -- in fact, we have two advisory boards on that this week just to talk about the peak segment, where we're going there. So, that's exciting for us. We just finished up some market research with patients and providers and now we're just reviewing the protocols to get that down with FDA this year. So, that's exciting.

And then the safety, right? Nothing is more paramount and just to want lifetime drug and safety and to see that our toxicology and rodent and dog and animal models are just getting published. Really I read the articles, its 51 pages getting published next month. I thought that data would have been published 20 years ago. But that's kind of the history here is, it takes years to get the data organize, submitted, reviewed, written up. They’ll give you feedback and then there is another submission and other feedback, right? So, it takes years to get all this data out there.

And then what you find is the data you want to reference wasn't published. You're going to get the old data reference publish, so you can reference it. So, that's the reality is we have a lot of trials with this product and a lot of good safety and efficacy data and insights on the side effects of insulin, head-to-head against as well as ourselves.

So we have a ton of new data that, we don't need to do more studies. That's the best news I can share with our shareholders as we don't need a $50 million or $100 million trial to change our future, we just have to get this data. And now get that data in front of doctors. And so we just hired a brand new medical team, it's a new medical liaison. So we're really excited to get them out there to get this data in front of physicians, because we find when they see the data, they go, okay, you've answered my question.

But I think just to summarize all this you're disrupting 100-year old treatment for you're now counting carbs. You're changing the fixed dosing. You don't have to worry about let high-dose popping up three, four hours later.

That is a whole mental change that requires a lot of education. And in order to educate people, you need to get the data. So now we have all the data coming out. Now, it's really about educating the audiences. And so that's where we're going. We're hiring the medical team. And we can go out and educate our medical team here for the last couple years, did a great job organizing and publishing the data.

And now we trying to be a mega firm out there, as we go out there in 2021 and beyond. But -- so we're excited. There's not any one particular data set. I think it's the totality of the evidence that's important. And how do we just get that in front of physicians is really critical.

Brandon Folkes

Okay. And then maybe lastly on Afrezza, any update on the international opportunity? Obviously, we saw strong initial orders to Brazil. Anything you can talk about international side to Afrezza?

Michael Castagna

Yeah. It’s a tough one right for everybody. Unfortunately, our first two markets outside the U.S. were Brazil and India. And both have been majorly hit by COVID. I mean, India is just in deep trouble right now. And one of things, I'm internally talking with our team saying, how do we go back to the regulatory authorities, there diabetes out of control with COVID is that much more of an urgent need? Can we go and help faster? Who knows what the regulatory authorities want? For me, 81 million people with an average age everyone see is not good for society, can we bring those so everyone see them or choose. That'll be important for India.

Brazil now launched, it's mainly a cash trade market down there right now. And, they've been growing sales each month since they launched. But, obviously, it's tough environment for them to get out. But I think they're building up nicely, the feedback from doctors is positive, the patients are positive. Not everyone that's on the drug -- that’s very developed down there.

So I feel like the experience has been great. We just need to get the volume up. And I think I hope it's just a little bit of a headwind against them. But they're going to be doing some more things down there as they get ready for next year and the rest of this year. So I don't have any big expectations for international in the next few months. But I think that business will continue to build as we go into next year and beyond.

Brandon Folkes

Okay. And, obviously, MannKind have historically had a big emphasis on Afrezza for here a lot more than that as well. And I think we have something coming up. And then, this takes you to new height. Can you update us on the latest there, in terms of what are the deliverables from your side, the milestones, and maybe just remind us some of the economics for MannKind for that opportunity?

Michael Castagna

Yeah. No, I mean, you're right, Brandon, we don't get much value from the analysts or from Wall Street for Treprostinil versus a huge value driver as you look out as this year. So Treprostinil for those who don't know is a pipeline asset partner with United Therapeutics, we will get double-digit royalties from that from United. And there's a product called Tyvaso that we plan to -- that’s nebulised that we're making the dry powder version.

And so that product does almost $500 million this year. And we expect to have a better delivery system that's more tolerable and favorable for patients. So we're really excited, we've expect majority of people to convert to that new formulation when it launches. And so what we said in publicly is we expect most of the critical components that wrap-up this year. And that will set us up for an early filing in 2021.

So I think about the components there, we've gotten three out of the four milestones. The fourth milestone we expect here in Q4. Everything looks to be on track from what we can see. So the BREEZE study is over halfway enrolled, but we have some patients approaching almost one year now. So it's really about collecting the safety data and in dosing and that looks really good.

In terms of how we think about this opportunity for MannKind, it's really about the conversion from Tyvaso, but also an expanded indication of interstitial lung disease. This Tyvaso today has roughly 3,000 patients. And when you think about ILD being 30,000 patients, there's no reason this drug doesn't double in the next couple years, and hopefully that doubling is driven by the Treprostinil and MannKind version, which we’re calling TreT for today, but I don't know at United, what we used to name.

And then, that long-term partnership, I think, has long-term legs. I mean, this is not a one product partnership. We signed a research agreement with deals that we can announce on other pipeline assets. And we think there will be more opportunities with United going forward. They've been a great partner. Teams are working really, really well together and we're making the products here in manufacturing.

So when you think out for the company from a shareholder perspective, you're going to get double-digit royalties, will be the contract manufacturer. So that'll offset some of the expense base there in Danbury, which will make Afrezza more efficient from a cost perspective. And getting more people on our platform and more products on the platform ultimately is good for us as a company. So, I think, that's what you'll see going forward is this. It's not just a TreT, we hope you will see other assets that we continue to develop with them.

Brandon Folkes

Okay. And along the lines of getting other products onto the platform, you also do have early stage pipeline, right? And you've talked about bringing some of those forward to a certain stage and then assessing whether it's a partner or not? And can you, one, just update us and your thinking on your early stage pipeline and, sort of, there were a number of indications of targets maybe then after -- including COVID, right? What should we expect to see from you over the next sort of 12 months from an early stage pipeline?

Michael Castagna

Yes, I think, there's a couple of things we're moving forward that we didn't announce yet. But we’re going to make sure the formulations work and the dosing works and so we'll announce those at the right time. But we're excited about them. And then on the stuff that is out there, whether it's COVID related or non-COVID, the Sumatriptan is moving in towards a Phase 1 for next year, so that'll be exciting, as I think will provide a really unique differentiated profile for migraine sufferers. So that to me -- that space is hot, as a lot of companies jumping in. And if we can just move that product forward, I think, we'll find the right partner for that one.

The other ones, really around orphan lung, we tend to keep ourselves and developers as far along. So we know we can be there in the Phase 3 for regulatory purposes. And then we're starting to look at early stage stuff. So what can we bring in that's going to help complement this work-from-home strategy that we established and announced here back in January, we believe, fortunate, unfortunate now that COVID hit society, there are going to be more lung complications five and 10, 20 years down the road that we could have ever imagined.

And so, we think we're well positioned to help patients as they develop. They're going to develop really rare things that we've never seen, or we've seen, but in rare conditions, rare instances, but now they're going to be 10x. So, I think our strategy focused on more humongous spot on.

I think the market dynamics are heading in our favor, unfortunately, because of COVID. And there's some stuff we're looking at -- and early stages that we think will bring more value to the shareholders as we go forward. So, I think you continue to see the pipeline being an important engine, and a revenue generating engine for the company.

And a lot of people don't understand how can MannKind fund that? When you look at the early stage funding to get an asset from preclinical through tox, through Phase 1, that's about two years, and the cost is not that high, because we already have the people, we already have the infrastructure and the studies aren’t that expensive to run. So, you know, us moving pipeline forward now, is not a big cost or overhang on the company. And by the time the pipeline starts hitting with Treprostinil and Afrezza continues to grow, that's going to fund the next phase of the growth of the company.

So, we feel pretty good about the strategy we have, which took a few years to get to where we are. But now, with the pipeline moving, international sales moving, Afrezza growing peds, all those revenue drivers start to become very big and you look it over the next three to five years

And then, when the pipeline starts to get to Phase 2, Phase 3, if you're talking $10 million, $20 million, $30 million studies, we'll have the money to fund those at that time. And worst case scenario, you don't, you can always fund those out to third parties, so we’ll find a partner. But our intention is to really continue to move this forward and make this a private company that's growing rapidly over the next decade.

Brandon Folkes

Fantastic. And we're just about out of time. So, thank you very much for joining us today to discuss MannKind. But, that was it. Congratulation and I completely agree with you on all the success and sort of terms of really just building those blocks where sort of the next three to five years very ready [ph] for the company.

And yeah, just a reminder to anyone, if you do have additional questions, please just reach out to me via email, and myself and Michael will get back to you, and myself and Michael will get back to you and answers those questions via email. That ends the discussion. Thank you, Michael.

Michael Castagna

Thank you so much Brandon. Have a great day.