MannKind Corporation (MNKD) Earnings Call Transcript & Summary

Hello, all. Welcome. My name is [ Tousy Kuwash ], and I'm an associate at JPMorgan. It's my pleasure to welcome our speaker for today, Michael Castagna, CEO of MannKind. And with that, I'll hand over to Michael to get started.

Thank you for having us today. I appreciate being back at JPMorgan. It's been a great week and a great conference, and thank you for hosting it this year. So MannKind, as you saw, is really about paving the future of orphan lung diseases and how we have pivoted the company from what we were known as 31 years of an inhalation diabetes company that was struggling to now really pivoting to a pipeline that has multiple shots on goal, nebulized and dry powders, along with a nice royalty stream with our partnership with United Therapeutics to a diabetes franchise that is growing and has lots of good readouts in the next year. Our mission is really to give people control of their health and the freedom to live life. As we sit back and looked around the company and said, "Where do you want to be when we grow up? How do you want to transform the company?" And we talk to our patients, our providers, what is it that MannKind technology really does? And when we hear from our patients on diabetes, it's about freedom. It's about I get to live my life. I get to go out to eat with my wife, and really transform how I feel every day. When we talk to patients who are taking treprostinil, they're about, "Hey, I got to leave my house and go to the movies, go to the grocery store, I got freedom." And that really rings true. And then as we recruit our employees, it's about freedom from big pharma, and then how do we actually embrace diversity of thoughts, diversity of talent and how do we break the health care mindset of traditional approaches to running our company and running this industry. And we call that ultimately living life for a humann. So many of you may know MannKind historically. It's had a lot of transformation over the past couple of years. I joined in 2016. I've been CEO since 2017. And it's been a whirlwind of a ride between the equity markets, the cap structure, the failed launch and the turnaround and our partnerships. And we're really proud of where we are today. We've done an amazing job. The team is working really, really hard to get here, and the future of MannKind is very exciting. We have 2 therapeutic areas that we focus on. We focus on orphan lung disease, and we have 4 assets as I'll talk about in a second. And we focus on endocrine with our diabetes business with Afrezza and V-Go. We're not limited to our dry powder inhalation technology. We're agnostic. We look for things that can help make a difference and help complement what we're doing. But we do like our technology. We find a very unique platform and something that does differentiate us in the marketplace. And so don't expect us really to go into COPD or asthma. But if someone comes to us and says, "We'd like to use your platform, it's got 2 products that are FDA approved. It's derisked." We're open to those types of partnerships. But otherwise, we're going to keep moving forward our own programs and really focusing on what we can control. The -- for those who don't know Technosphere, it's an extremely versatile platform. It's -- we've got scale. We've got a large facility in Danbury, Connecticut. We've got a great team, and it's got 2 FDA-approved products on the platform. So as you know, many small to mid companies barely get 1 drug approved, let alone 2. So I think we're unique of the 1,000-plus companies out there that we now have 2 drugs and working on more. What makes us really unique is how well Al Mann, our founder, and the team he built really delivers the powders into the lung. Most dry powders, you lose 20 -- you lose 70% on the way into the lungs, and most of it only gets stuck in the upper airway. It's very dependent on how you inhale. Our technology actually slows the powder as it comes out. You get really deep lung penetration and it gets picked up in the blood and treats whatever you're trying to treat. So if you want more blood circulation, right, you increase the dose, and that's what we do with our insulin. In the case of pulmonary hypertension, you want to really treat the lung and get to the periphery. And so we get that extensive distribution and rapid systemic and lung delivery, which is really unique. And it happens in half a second from the time you inhale to the time it's distributed. So that really gives you consistent dosing to where we can dose down to 16 micrograms in the case of Tyvaso. And most dry powders can never be that accurate, where you're 16 to 32 to 64 and keep going. So when you think about MannKind's evolution from '15 to '20, it was really all about Afrezza. We spent 20-some years at that point working on inhaled insulin, a lot of money invested in the company and the infrastructure and the technology and the talent. We got Afrezza approved in the U.S. and Brazil. At that point, we've had 125,000 scripts written for Afrezza. Now we're probably another 100,000 beyond that. And so we did pipeline deal with United Therapeutics with RLS on the cannabinoid space and Fosun for oncology assets. And those are going to be opportunistic and continue to hopefully have positive impact. And then we said, "How do we expand?" And that's really been the last -- the next 5-year plan. And within that, it was really getting our second platform approved with United Therapeutics as the lead. And in that one, we'll get royalties and manufacturing revenue. And we laid out that plan 4 years ago. It was about getting Tyvaso approved so that, that could fund our innovation as we pivoted the company. And so while the market's been paying attention to diabetes, we've been pivoting to orphan lung. And now when you look, all that basic research we were doing, all the formulation, all the talks, all that hard work is done, and now it's still going to be hard work, but now it's about execution. And that's really what's coming in the purview is like we're well capitalized. And as those assets now move into Phase I, II and III, we're able to fund that growth ourselves as opposed to depending on partners or public markets. As you guys may have listened to United Therapeutics on Monday, Martine and the team have done an amazing job there on the launch of Tyvaso DPI. And they've given some clarity on the IPF enrollment times, and that's a big upside to the company. So we're really happy with just where we are today with ILD and PH with that launch. And there was a big upside to us and ultimately to see United therapeutics and patients in IPF, who are really suffering with a lack of choice. And that our technology really excited can really help the IPF landscape. Then it was about scaling Afrezza growth. And so every year, we've grown Afrezza consistently. Despite the pandemic, we still grew year-over-year. We want to get stronger uptick in the U.S. We're looking at indication expansion in pediatrics and international market expansion. So we can go back to Brazil. Now COVID is almost behind us, but not stopping a relaunch. We're waiting on some FDA time lines on expiry and so we can make a bigger lot and lower the cost for Brazil. And then India, we'll have a trial readout roughly in Q2 this year on a new type II trial. And we're excited about those results because all the work we've done in the last couple of years was about fixing the development program of Afrezza. It was really had a lot of flaws and the dosing was misunderstood. And so that's a lot of what we've put our energy and is getting -- making sure we know the dosing because fully dosed inhaled insulin probably is going to lead you to a far better outcome and safety profile than what we've seen with the previous dosing regimens that were used. And so we'll wait for those results. We'll get excited once we see them. But these new trials reading out will help bring some clarity, and I'll show you that in a few minutes. And then on the business development side, we've been very prudent with our capital. We've made strategic bets. So far, they were really working out nicely. So we bought MNKD-101 2 years ago. That's now, as you'll hear me talk about today, going into Phase III. Phase II, III depending on how you want to catalog the study, but it looks like we're going in the right direction with the FDA. As I'll talk about V-Go, we purchased last year, that's going well. And then new collaborations we'll continue to look for. And so our goal really is to set ourselves up for one new indication or one new product launch every year starting in 2025. So here's overall, diabetes is up top, and our orphan lung is down the bottom. I'm going to hit the highlights of the key programs. You can watch this if you want to look back at any one program, happy to talk about. But let me talk a little more about orphan lung direction. So for those of you who didn't know, we announced the collaboration with United Therapeutics in 2018. That was about $105 million deal over time. And then upon launch, we get manufacturing and royalties on sales. So that is now off. We received all the milestones, and now it's just purely manufacturing revenue, some expansion revenue in the manufacturing plant as well as Tyvaso royalties every quarter that go out the door. We have a 10-year supply agreement, and so that will -- we expect to be able to supply Tyvaso for a long time. And we're actually working on the manufacturing expansion. When we built the facility and did the deal in 2018, it was obviously for PAH and ILD. And so we feel very comfortable with the supply around those 2 assets. But as Martine looks at IPF, which is 10x bigger, that is not what we built our production capacity for, and that's why we're investing with UT now. They are funding that growth in this manufacturing plant, and that will be done hopefully this year and ready for -- upon indication. And then they have an option to license a second product if they want on our platform. They have exclusivity for PAH. And so they are looking for other assets to continue to grow in the inhalation space. As you heard, they're very happy. We've been a great partner. They've been a great partner, and we hope to be able to find more assets to help more patients in this disease. In terms of why Tyvaso and what do we think and what's UT think? They presented the same slide on Monday, but I thought I really talked about our technology and why is it unique? What makes it different? And it's really the ease of use, right? It fits in your pocket. It's small. It's nimble. The product's stored at room temperature. You think about the patient satisfaction. We know in diabetes, people love it. We know in Tyvaso, they love it. It's a half a second inhalation and you're done, and then you move on to your day. And the efficacy, obviously, the technology works great. And so I think it really gives you that trust, that safety and that comfort and it's already approved. So this is paving the way for us as we go more into orphan lung. A lot of docs will now be familiar with our platform and our technology as we continue to launch new products. What else is unique about our technologies? When we did our first data for Tyvaso, we were really excited. I remember we had no money back then. And every week, the trial kept going as another $200,000, $300,000. And all of a sudden, a dose, we thought would stop around 100 micrograms, and then it was higher and higher. We got all the way up to 180 micrograms before we had to stop. So our max tolerated dose on our platform before you saw any safety signals was around 180. And so we know we can safely dose Tyvaso DPI up to 150. And what you can see on that with a nebulizer, when you plot the green and the black, the green is what you see in Tyvaso. And one of the things we always knew is they couldn't really go higher than 54 some derivative of that micrograms. And you can see on our DPI, we can go almost 3x higher in a linear fashion. As you look at other competitor treprostinil, they really drop off. Their platforms aren't consistent. They need a lot more powder to get the same effect. And so we don't need 100 micrograms to get 54, we need 54 micrograms. And so we're really parallel to Tyvaso nebulizer, and you can see that as linear all the way up to really 150, 180 where we dosed out. So that's really different about our technology I'm showing you. So next question I get is we don't give guidance, but like what are the analysts saying, how does this impact our company? And you can see this dark blue area from OpCo really shows you that they project Tyvaso to do over $1 billion this year. I think if you look at Q3, UT announced it should be $1 billion run rate from that point forward. And then the question is, okay, that's great for Tyvaso, what does that mean for MannKind and your DPI formulation? And so RBC has done a nice job breaking that out, showing you the light blue being Tyvaso conversion. So I think every quarter from here on out, that's going to be the big question is how fast is it converting? How's it going? Are people happy? If you're on track with this curve, are you ahead of this curve or behind? But I think ultimately, that every quarter from here on out, we will start to see patients are happy, and this is going to do very, very well and help a lot of people. So I'm going to pivot to our pipeline real quickly. This is what's emerging very rapidly. So we pivoted the company into 3 areas: NTM, nontuberculous mycobacteria, which has a huge unmet need. It's about a $3.7 billion market opportunity. It's about 58,000 patients in the U.S., which is our main focus. We think there's opportunities in Asia Pacific. And most of the drugs are off-label, all generics and the only drug really there is ARIKAYCE. And you can see they projected about $300 million this year and growing. And then in the IPF space, it's littered with failures over the last 20 years. A lot of unknown. That's why it's called idiopathic. And we think that, that's a real opportunity for our technology to really treat the lung and fibrosis. And we think you're just touching the surface, whether it's United Therapeutics with treprostinil or what we're going to talk about today is our 201 nintedanib oral inhalation. We think that there's ability that the oral nintedanib just has a dose-limiting side effects, can't go much higher, but putting it directly into the lung allows you to dose much higher. And we're very excited about the ability to move that into clinical development now in Phase I, hopefully, in the next 12 months. And then you have cystic fibrosis, which we're working with Pulmozyme for years, and that one is finally looking like it's going to get out the gate. And that's an area where, fortunately, we kept debating, do we go, do we not go? Pulmozyme is still doing $700 million, $800 million a year worldwide. I talked to CF convention [indiscernible] in December, and I met a guy. He's got 4 kids, and 2 of them have CF. And he goes, "My son's in college. He doesn't take half his doses. If you had a dry powder, this would be amazing. Like he'd be more compliant and get him function better." And so I do think there's still an unmet need here that Vertex has done an amazing job extending the life expectancy of patients, but they still have -- not everyone works on the Vertex drug, and they still have relapses every so often. So we think this population will live a lot longer, they'll have less exacerbations, but they still could benefit from mucolytics. And so we're excited about that product. A little deeper dive on the NTM space. About 180,000 patients, 86,000, somewhere in that range in the U.S. About 58,000 truly diagnosed. This is growing 8% a year. And I think because there's not a lot of treatments, it's a lot of misdiagnosis, underdiagnosis. And as more and more treatments come out, as the awareness gets higher, I think this disease expansion in terms of treatment, diagnosis and patient growth will actually accelerate. I saw this when I worked in hepatitis B. And as we got better and better treatments, more and more people came in and the market compounded. EU, not as much population opportunity. Maybe some people say it's underdiagnosed, but just generally, the pricing is not good in Europe, and so it makes it very hard. But Japan is a large market. South Korea is a large market. And so we look at this as really a by map perspective, which is Asia Pacific and U.S. is really the pillars of what we'll focus on. And for us, it's mainly pulmonary and ID doctors treating it with these 3 generics, which have a ton of side effects along with ARIKAYCE. And we're just getting in research. And I think when you -- as you think about clofazimine, which is the drug we're working on MNKD-101, clofazimine was approved in the '80s for leprosy. And it worked really well, but there's no more leprosy. So Novartis makes it available on a patient basis. And so it's not widely used, but it is used quite a bit. There's quite a bit of publications on the efficacy of clofazimine in NTM. All of our micro studies, our animal models look really good. And so this is not a high-risk bet. It's hard to get formulated. It's hard to work through some of the challenges of making clofazimine. But ultimately, we're going to be able to lower that dose dramatically. And what that's going to do, we expect, is minimize QT prolongation, minimize skin discoloration, minimize organ toxicity and all the problems that clofazimine had. But we know it really does work. And so we're super excited about getting this in, and we met with the FDA in December. And it looks like they're directionally aligning that we're going to be able to do a Phase II/III program, and it will be one study and will be in patients this year. And the way it's going to work is 28 days of dosing, followed by 2 months off, followed by 28 days. So it's really a 6-month endpoint, 2 treatment courses. And we're really excited about this. And we're just getting research from the doctors and the patients who were equally excited. And more importantly, like where is the source of business going to come from? Who's the right patient type? A lot of upside in that market for us as we go forward. So all the tox is done. We're now doing chronic tox, but that will be done before we start our study. And this is really a nice pivot for the company and something I think people are quite paying attention to, but the pipeline is emerging very quickly and this is going to go very fast as we go forward. I'm going to bridge to endocrine, which is the basis of where we got started. And it's been a nice slow growth. We all wanted to be faster. We want to help more patients. We get very frustrated at the lack of concern for patient care and how do we do a better job in driving change. And I don't know when the endocrinology community will wake up that the problem is not the pump, the problem is the insulin. And if you're not going to change the insulin, you're not going to get a better output. And you want a faster insulin. You want to control your mealtime sugar right away. And this is something we've been generating our data, publishing our data, showing how to properly dose the drug. We didn't have a lot of money to fix the fundamental problems until the last 2 years. And so now we finally started our peds study. We're doing -- we did a pump switch trial, share in a second, and we got the trial readout for India approval. So I think when you look at Afrezza, we haven't invested as much as we could because we wanted to fund the orphan business. And those were the strategic bets we took is to move the pipeline, be a diversified company. While diabetes is a transformative event, we think it's a breakthrough product opportunity. But you're changing 100 years of habit, and that just does not happen overnight as we've tried -- as we've learned. But we bought V-Go last year, and now you can start to see we have a very nice, sustainable business growing year-over-year, quarter-over-quarter. And if you took Q3 revenue and you analyzed it -- and you annualized it, you can see -- you're looking at $65 million growing every year from this point forward. And there's nothing we see slowing down Afrezza's growth. It's really an unmet need. There's nothing new coming up for type 1 diabetes that's meaningful. And so people going through the 670G Medtronic, they've gone through the Tandem pump. Now they're on the Omnipod. And eventually, they're going to say, "Okay, now I've been through 3 devices, and my sugars are still out of control. And at what point do I actually try something different?" And I think we're the next innovation in that space, and we're preparing for that opportunity. But we are going to run this business to cash flow breakeven. So it's no longer a drain on the company. It will become a profitable business for us, and we'll start to then think about how do we grow other parts faster. So for those of you who don't know Afrezza, it's been around, that's almost 9 years this year. It really can be the next mealtime standard of care, which is a huge market. Pricing pressure on insulin is amazing. It's been down every year since 2013, 2014. And this year, we're very excited because Afrezza got covered under the Inflation Protection Act (sic) [ Inflation Reduction Act ] at $35. And one of the things we hear from customers is access is a barrier. So finally, this year, commercial and Medicare should be $35, and we will see how much of the trajectory change that is as we come out of Q1 and go forward. We're launching a lot of new things with our sales force in a couple of weeks. Indicated for type 1 and type 2, but we are going to be more focused on type 1 in the future as we pivot and proposition V-Go for type 2 diabetes. So that's a little bit of background there. Why do we get excited about Afrezza still? Why do we keep it on doing what we're doing? It's because it is truly differentiated. It's misunderstood, but it truly is differentiated. And we just did a pump switch trial, and most people don't even realize we did the study. So we're going against the green, which is hard to do and it was hard to find investigators to do this trial. But we took 20 patients, 25 patients. We randomized 10 to Afrezza Tresiba, took them off their insulin pump. We put 10 more on a pump plus Afrezza for mealtime. And then we kept 5 on the pump, and then we solve for 12 weeks what happened. And that -- those results will be published in oral presentation at the end of February, and hopefully, again, at ADA. But what we do have available publicly is this, and this is the first dose in the office in the first 2 hours. And so we give the dose in the office. We bring you on your injectable insulin, in your pump bolus and we showed you against AID delivered bolus. Here's what happens over 2 hours, a 55-milligram per deciliter difference in the first 60 minutes, and that sustained itself. And so when you think about time and range, and that being the goal with CGM, these patients barely went above 180. We were able to keep them pretty much flat for 2 hours. And you can see when you're looking at injectable and so you're spiking almost 100 points in that peak thing and then you're still not really coming down for 2 hours. So that's what's misunderstood. When I ask people from the time you inject to the time you bring your sugars down on CGM in type 1, how often -- how long does it take? And people tell me, "Oh, immediately, I inject, it's right there." They don't realize there's 45 minutes to break down the insulin, 45 minutes to start working. It's about 90 minutes before you see any impact, and that's a major difference when you could see impact on CGM here in the first 30 minutes with us. The second big thing we invested in was pediatrics. It was an FDA commitment, but we spent a lot of time trying to make sure we designed the trial right. We got the right thought leaders on board. Because if you ask me the really -- the way you're going to change the standard of care is through kids. Al Mann, when he built the insulin pump, started with kids. Older endocrinologists had to learn how to use it. I think Dexcom did a great job of the CGM in that space. And now you can see that they're worth $40 billion. And I think the same is true with Afrezza. I worked in growth hormone where we couldn't get a kid to take one shot a day, and now we're fighting 3 to 5 shots a day and worried about hypoglycemia and sleepovers in the sports. And these kids are busy. I mean, I did a campus week this year, and they're taking their pump off to play basketball. They're taking their pump off to get a shower. They're taking their pump off to go swimming. When you add it all up, they're not having their pump 25% of the day. If you're not getting 25% of your insulin, you're not getting the goal. And so this is really a different lifestyle for these kids. And so we're doing this trial in ages 4 to 7. It's more than halfway enrolled now. So we're super excited. The team has done an amazing job. And we should have those results some -- we'll finish up the trial this year, 6-month end point. So sometime during early next year, we should expect this readout, and then that will be filed. And just to give you some color here. There's about 200,000 kids in treatment roughly, and every 10% market share is about $150 million in revenue. So it doesn't take a lot of penetration for us to make a meaningful business, and we already have the infrastructure. So we don't need a lot more expense to launch this opportunity. And so we're already getting ready for launch in that space. For those who don't know V-Go, it's been around a long time. Big investment behind this patch pump. It's an amazing product. People love it. Doctors love it. And one of the reasons we bought it is we know a large percent of time we call in a doctor, they're not going to want to write Afrezza, but they still have patients that need help. And so this really allowed us to get another couple of thousand prescribers who are comfortable with the product, using the product, want to continue to use pumps or patch pumps. And so we're super excited to be able to purchase this drop in the bag of our Afrezza sales force. And so this is being added to our Afrezza bag here in a couple of weeks. And we also have a dedicated V-Go sales force with key accounts. And so we have about 80 reps now in the country selling both V-Go and about 65 selling Afrezza and V-Go together. We bought this for $15 million. It was a great opportunity. We knew the product well. And this year, we expect we'll be at the high end of the revenue guidance we gave back in June. So V-Go is off to a great start. It looks like it's stabilized and should start to grow once we drop it in the rest of the bags. The other thing to think about is this as a platform, it's not something people thought about V-Go but we look at how do you use it for biosimilars? How do you think about the buy and bill market? How are the drugs that need continuous infusion for side effects? And so there's a lot more opportunities probably with V-Go than people could think about, but we're putting our heads together and really working through what those could be. So in summary, MannKind, it's a new company. We're super excited. I want to thank the entire company and the 400 employees we have. It's been a major transformation, a very good success story, well capitalized. We closed Q3 with about $175 million on the balance sheet. No major debt due in the next 3, 4 years. And we're growing -- accelerating our growth here. When you look at now 4 sources of revenue from 1. So much more diversified, much more balanced growth and super excited there. Now when you look and say, what's the excitement about MannKind? It's really the next 24 months. The clinical profile, the assets we have are all starting to come into fruition. And so when you look at Afrezza, you're going to have the Indian trial readout in Q2. You're going to have the pediatric trial, and we're going to do a larger pump switch trial to really show this is how you can get off a pump, this is how you titrate your basal. The Tyvaso manufacturing facility will be done, and that will set us up for the IPF launch, if UT gets positive results there. And then on an orphan lung, you can see I got a ton of FDA work. And my regulatory development team are doing a great job around getting the APIs ready, the stability programs done, the tox done. But we got a ton of pre-IND, IND and post-IND Phase I, Phase III, Phase II things moving along. So extremely busy and super proud of the company and where we've been and where we're going. And there's really -- the future is very exciting. Four sources of revenue growth. IP, well into the 2030s, great emerging pipeline, indication expansion with approved assets and billions of dollars in opportunity and sustainable growth that is well funded. So hopefully, you see a different company, different perspective and nothing but great opportunity for investors, for employees and stakeholders in what we're doing. And we're looking forward to helping hopefully hundreds of thousands of patients as we go forward. So thank you for everyone who's been an investor and hopefully for those that are here, become new investors and continue to watch our company grow and be with us. Thank you.

Thanks very much, Michael. I guess, we have some quick Q&A if you want to join us.

Steve, do you want to come up? Steve, our CFO, is here and I'll ask him to come up.

So as you mentioned in your presentation, can you just let us know how you're thinking about the longer-term strategy of MannKind?

Yes. I think when you look, we are going to be laser-focused on making sure we're in the U.S. And so anything outside the U.S., we'll look for licensing partners and launch partners. And so when you look at clofazimine, huge opportunity in the U.S., but huge opportunity in Asia Pacific. So how do we start to find good Asia partners to help bring that on? And we think the Japanese authorities will have a pretty clear development pathway for this asset, and it would be pretty exciting to help those patients. I think within the company, as we get bigger and bigger, you start to have a big diabetes business and you start to have a big orphan lung business, how do you really think about that future? And we invested 31 years now of our life in the technology in inhaled insulin. We're 12 months from finding all the answers that we've worked so hard for. So let's get those cards that flip over and really understand what that potential is and what the upside looks like. And our shareholders, if we did the right decisions, will be very, very happy with those choices. But it's been a long ride for inhalant and we understand that, too.