MannKind Corporation (MNKD) Earnings Call Transcript & Summary

Good afternoon everyone. My name is Balaji Prasad, I am the analyst for the spec pharma space, continuing our spec pharmaceutical track for the day. I'm delighted to have the management team from MannKind with me, Michael Castagna; and Chris Prentiss, CEO and CFO, respectively. Mike and Chris, thank you so much for taking your time today and joining us at the Barclays healthcare conference.

Thank you for having us down here. It's been great.

Maybe to begin with, Mike, could you -- I mean you recently reported your Q4 results, walk us through the key points and the highlights there. And then drill it down further into the 2025 outlook that you see? And what are the key events milestones we should look for?

Yes. I mean Q4 was a record quarter for revenue. We had a great quarter in terms of Afrezza growth, did really well year-over-year. We got our NDA approval of the launch of Afrezza hopefully there later this year. We were able to take out most of our convertible debt. We started kicking off our Phase III trial on clofazimine, we'll talk more about that. And we kind of closed out the year just really getting ready for 2025. So we're really excited about this year and all the momentum happening in the company.

Maybe as the business stands itself, could you provide an overview of the company, too, for those who are new to the story, focus and the strategic goals you have?

For those who followed the company for a while, it was really known for a diabetes endocrine focus for 20-some years. Back in 2018, 2020 time frame, we started pivoting the orphan and lung with the first deal with Tyvaso doing the DPI deal with United Therapeutics back in '18. And then in 2019, we kind of said, where do we best use our technology to drive a difference. And many people may not realize, when you look at dry powder technologies, most of them are lactose blends. There's really nothing unique or special about most, I'll say, third-party CMOs that are making powders. Our technology is the only one really like it. When you look at the landscape of dry powder technologies, a lot of companies have not survived. I think MannKind is one of the few that's still independent, still growing there. And we look at the novel excipient called FDKP, no one else in the world really plays with that. You got to think about it as a delivery vehicle, kind of like the [indiscernible] technology, right, with biologics. This is just a different technology to deliver drugs into the lung and really get deep absorption and consistent absorption. We have a proprietary device platform in addition to how we make the powder. So it's not just the powder, it's the device and you really need both hand in hand. That's what we did. So we pivoted that in the orphan lung and said, where do we best help patients and how do we best create shareholder value. And I think that strategy has really paid off.

Got it. And maybe I think with multiple things happening on the pipeline side. Let's start there. So walk us through the current state of the pipeline, what is it that you find the most exciting within your pipeline?

Yes. It's an exciting time at MannKind, we have really, Chris and I were talking earlier, the first Phase III asset outside of diabetes the company has ever done in 34 years is clofazimine, so that's in Phase III and it's obviously very important to get that trial moving in the right direction, really help patients get to market as soon as we can. And so that trial, in particular, has got 75% of the sites activated. And we will be about 30% enrolled by the end of the quarter in terms of the number of patients needed for the interim analysis. So that's the most exciting thing we have right now that's near term that really is big enough opportunity to be meaningful for patients and shareholders. And then the second thing that we have that's moving forward is in inhaled nintedanib and that's -- that can be so amazing for patients, and we'll talk more about that today, I'm sure. But that one's going into Phase II, hopefully, we'll meet with the FDA very shortly and being able to see hopefully 2 assets in Phase II/III. We started these projects 5, 6 years ago. So it's nice to finally see them getting into humans and scaling up.

Understood. And I would imagine, as you go through the enrollments, you would, at certain points, you'll be updating the market and your investors about it. And so maybe starting with clofazimine, how should we think about this drug versus the existing drugs in the market? Where are the points of differentiation for the product?

So I think first, the market is really divided between 2 phases in my mind. You got the early treatment population, mostly taking off-label generic drugs that are very cheap, not that effective, but it's all they have. And then you got ARIKAYCE approved in the later lines of treatment of refractory. So the refractory population has been growing. There's more and more patients getting diagnosed and treated. And so we think that's where we're going to start. We're following the same model that ARIKAYCE did start with the refractory go earlier. So mainly because if you had to enroll a trial in the early patients, it's a mixed population. And it's quite hard to recruit that population. It takes a long time. So ironically, it's just faster to enroll to get to market through refractory population, which is what we're doing. We've differentiated the product profile in a couple of different ways. Number one, we've added M. abscessus into our trial. So there's patients who be co-infected with MAC and M. abscessus NTM. And what that does is a lot of these patients have co-infections. And because we know clofazimine works on both, we want to enroll as many people as we could as quickly as we can, and that will help us hopefully hit some enrollment timelines. The second part is the dosing. So today, the only other drug approved is nebulized every single day. And if you treat for 6 months and you do well, congratulations, you have a whole another year in treatment. And so we tried to make that dosing burden once a quarter. And so when you think about clofazimine, it's got about a 90-day -- 70-, 90-day half life depending on what study you look at, but it's got a very long half-life. We saw that in our animal models and the lung concentration and lung tissue. So what that means is you can load the lung up over 28 days and then take a break for 2 months and then load the lung again. And so we kind of have a 1-month cycle off for 2 months, 1 month cycle. What that's going to do is really help patient copay burden, administration burden and cleaning the nebulizer, new parts of the nebulizer to really reduce a lot of that friction. So I think that's important for these patients. These are patients who will be on treatment probably for at least 6 months. And then if they do really well, they got another year. So it's really -- and unfortunately, a lot of these patients relapse. So if they have a response, for example, it is in the water system, it's in the soil, they often will get reinfected at another time point. So hopefully, we'll be able to show durability of effect in our trial as well and that will be something here. But I would just say dosing administration, hopefully, tolerability and efficacy, we're benchmarking comparable to ARIKAYCE. We don't think there's a wide enough data set to say you can get better than they're getting, so let's see what happens.

Sure. And as regards to market itself, help us contextualize the total addressable market as you see for the product and maybe the market and then translate that to potential revenue sides?

Yes. So I think there's a huge unmet in this area, unfortunately, last year at this time, there were 2 other companies working on assets that haven't made it. And so patients just -- they don't have a choice for trial. They don't have a choice for treatment, and they really do need options. And when you think about ARIKAYCE is a great drug, Insmed is doing a great job building the market up, really raising awareness, raising treatment diagnosis rates. And so we think that, that's going to continue, whether it's Japan or U.S., those are the 2 biggest markets. And the current brand is on track to do over $400 million this year.

Sorry?

$400 million is what ARIKAYCE is on track to do. And so we watch that closely because we think this is a multibillion-dollar market opportunity, and there's enough room for 2 players to do well. And so we really look and see. Do we think clofazimine will be used in addition to ARIKAYCE, could be some patients. Would it be used instead of? I'm sure, in certain situations or do we expand the market and treat more people, right? And I think that's the real opportunity for everybody. We see this as a $500 million to $1 billion opportunity when we look out there.

All right. So as we look at the progress of the trial, one of the key events or catalyst we should be looking forward to?

Yes. I mean the first catalyst is just fortunately, site activations are going pretty well. So we're almost done with that in Q2. Then it's going to be the speed of enrollment. And so that started off -- I'll be honest, this year starting very strong. So as we look at Japan, South Korea, Australia coming on board, they're really active by using clofazimine in that part of the world. And so we expect to see faster adoption in the trial because there's already a belief that the drug works. They know the side effect profile, and they really do hope that this has a better side effect profile. So we've seen about -- we'll see about 20 some patients come in the trial just in Q1 by the time we close out the quarter. So the interim analysis, which is based on the first 100 patients will be very important because that's going to determine the size of the trial. And so we've said publicly, we expect to get the interim analysis by the -- we expect to finish enrollment by the end of this year and then it's a 6-month endpoint. So call it, mid-next year, you'll hit that endpoint and then the data people will review it at that point and tell us is the trial size appropriately? Do you have to go bigger and one of the things is we'll probably keep enrollment going just in case they tell us you need to go bigger, at least we already have the patients in.

Got it. And remind us again, what is the data that you would see that would give you decision, at least create a confidence in continuing on with the trial? And what would you like to see it as also help it commercially?

Yes. So in the interim analysis, we're just going to know, is it powered appropriately for the 2 endpoints, one is the PRO, one is the sputum. That's for the U.S. and Japan, you only need sputum. So we don't have to necessarily power it for Japan. It's 180 patients is our goal for the trial. So 2:1 randomization. And what the interim analysis is going to tell us is, do we need more patients to make sure we hit the statistical validity of the trial. We won't necessarily know is the response rate, 40% and 20% until we get the final results. But at least they'll tell us if the trial is futile then I think it'll just tell us to stick at 180, not to go any higher. So that will be kind of just the answer we wait for on that one.

Understood. Shifting from clofazimine to nintedanib. So remind us of where this asset stands currently, and I know you have had some interactions with the regulatory agencies for an end of Phase I meeting. What's the update there?

Yes. So we've submitted all the work for the FDA. So we'll be meeting to talk about the Phase II trial design. It's a 4-arm study, 25 patients in each arm. And so we'll be comparing ourselves to nintedanib. And the way to really think about that is one of our hypothesis is that we can dose higher doses directly into the lung over the oral OFEV. And so there's a big debate out there. Do you need the systemic exposure or is the lung exposure enough and then even within lung exposure, is it a Cmax issue, AUC issue, a frequency issue. And given some of the failures we've had in IPF, it's obviously a very hard target and therefore, we're going to design this trial to have multiple shots of success, right? One is a comparable efficacious dose. One is a higher dose, just in case we miscalculate it or can we get better efficacy. And the third one is going to look at higher frequency. So could you dose the patient more often and see what happens. And we think that's important. And the good news in this disease, we've seen another company prove that an inhaled IPF treatment can actually work as good as the oral delivery to treatment. So we think the proof of concept's there that you really can deliver an appropriate lung dose and get the outcome you need. Hopefully, our big goal here is better safety. The population of IPF, they really just cannot tolerate the existing drugs out there. It's a very tough disease from that respect.

And it's still in a slightly early stage generally for analysts like me to start modeling out the market and giving -- putting a number to the drug and the potential opportunity, but help us understand the market opportunity for this drug.

Yes. So I mean look, you look today, oral OFEV is about $4 billion in sales and 50% of the people drop out pretty quickly and only about 15% of people who have IPF even take a drug. So when you think about the marketplace, 85% of the people who were given a death sentence would say, I'd rather be dead than taking the current drugs. It's a pretty dismal outlook. And that's because the safety and tolerability of these products are so tough on the patient. The quality of life is really rough, and they're not feeling a benefit. So we really think that opportunity is, can you help the 85% who can't tolerate what's out there. can you get them in the treatment. And I think whether it's our treprostinil program that we have partnered with United Therapeutics on IPF or nintedanib. We think there's a real opportunity to bring dramatic change to these patients and help them -- then you got the people on the drug, and that's who we're going to start the study with. There's a population here, it's about 15,000, call it, that you can really help and bring them a more tolerable option, but the real opportunity in my mind is helping all those that can't tolerate what's out there, and that's a 5x bigger market than where everyone [ want ] it.

Understood. And maybe a final question around the pipeline side of things. What do you see as a scope for possible expansion of the pipeline? Is that a priority for both of you? And how are we thinking about it -- related to your other goals that you have?

Yes. I think on the company, when we take a step back, you're looking at innovation over the next 10, 15 years. And so obviously, we have a platform technology that can be applied to more molecules. And we just picked up an external research facility last year through our Pulmatrix collaboration there. And what that brought us was another team and other expansion, more spray drying capacity. Because when you look at what we're doing from where we were even 5 years ago, we have clofazimine moving forward. We have nintedanib moving forward. We have Afrezza work happening. You have Tyvaso work happening. There's a small team working really hard to keep all that moving and we need more capacity for R&D. And so that is now we basically doubled the size of that team and now we can actually put some more work into the pipeline. We're not out of ideas yet. There's still a couple more ideas we have that push forward here. And we'll start formulating those and sharing those later this year, early next year, but we want to make sure we get the right formulation, the right target dose and the right animal studies moving, but we definitely have more ideas coming beyond what we see out there.

Understood. Shifting more a bit towards the commercial side of things. Talk to us about Afrezza and the level of adoption you're seeing currently? And how does the drug fit into the broader treatment paradigm?

The good news on Afrezza, I mean, it's been around 10 years now. And so when you look at the pump -- insulin pump market, which is only type 1s worldwide is about $5 billion. When you think about Afrezza doing $65 million last year, there's nothing but upside for continued growth. The biggest challenge that I think we are at this point is really awareness and marketing, right? And so I think that's something that we've run the brand for profitability over the last couple of years while we waited for the data readouts that just happened last year. We've now filed with the FDA a labeling change that really will change, hopefully, the dosing configuration in our label as well as pediatric expansion. So those are 2 big opportunities in the next 12 months that we'll wait for. But what that allows us to do is promote INHALE-1 and INHALE-3 in the broader populations and hopefully start people off on the right dose the first time instead of waiting for doctors to titrate up and people struggling in that phase, which is what happens in the real world. And so now that the data is out there, you can clearly see Afrezza is a differentiated product. It works faster than injectable insulin. The onset is there. The head to head data is now out there. We'll be presenting 5 new data sets next week at the ATTD conference. And I think you're starting to see KOL support, I think we'll be excited for the kids. So I look at Afrezza, it's had an inflection. And one of the hangups has been around safety of inhaled insulin. That's really hard for 10 years when you see no safety signal to say that there's a safety issue, right? We've treated tens of thousands of patients at this point. We've seen nothing in our databases. So it's really exciting now to finally see the pediatric data because that's what we've been waiting on, right? If pediatric lungs were safe and effective, that now gives you a whole new population with a whole new data set and looking at lung function data, and we saw no difference in the 2 arms of the trial. And that was the key goal of the peds study was what does the 1-year safety look like? We have 85% of that data and at this point. So now it's really nice to be able to see that and confidently go out there and say, we have a drug that's safe and effective for a broader population. And that will now set Afrezza to be a growth engine as we go forward in the company.

Sure. So the sNDA submission is still on track for the first half of the year?

So we're meeting the FDA in a few weeks. And so that will just drive -- when the 6-month data is already done, we can file that in April if they let us. If they want the 12-month data, that data set will be wrapping up in April. So we'll have that filed already in June, July. So it's about 1 quarter difference between the 2 data sets. But we think the patients deserve an option. This is really the first time in 100 years that a kid living with diabetes will have an alternative choice. They've had no choice but injectable insulin. And so we think it's important to get this to the population to get this here and really bring options to patients that have never had anything else. And so we're excited about that. And hopefully the FDA in a few weeks will agree that we can file this sooner because we'll have a full data set, so it's not like there's any guesses here. We know 85% of nothing really is going to change in the last 15%.

Got it. And help us understand what this means in terms of incremental market opportunity and also the overall market opportunity for Afrezza. And where do you see the peak sales for the drug?

Yes. So I don't see Afrezza -- I mean, between now and 2040, pick your year. I don't see a generic coming. I don't see a peak sales year. I think this drug will keep growing for the next 10, 15 years because we're going to go international expansion. You're going to go population expansion. You're going to go into, hopefully, helping bigger and broader population. So it's really a function of marketing spend and marketing investment and sales execution. And we're at that point now with the new data sets that, that really can drive that. So what we kind of said on the last earnings call was think about every 10% share in pediatrics is about $150 million of revenue. And so that gives you a baseline of -- we had to kind of feel like that's a reasonable expectation as we go out there. And then last year, we did about $65 million of revenue. So that takes you to call it $210 million, $220 million. And then all those kids turn to adults. And so they're going to live. I mean how many brands and companies have you talked to today that have a 60-year patient life cycle value. 60 years is a long time to be living with the disease. And if you're 12 years old, you're likely to live 60 years. And so as those kids grow, you're just going to see Afrezza compound year after year after year over the coming decades, and that's really exciting for us. So that's why I said, I see this just starting to compound faster as we go into kids. And so that puts you at a $200 million, $300 million run rate in the near term, but the near term is '27, '28. I think we can debate that, but that kind of gives you that plus Tyvaso plus the pipeline, all of a sudden MannKind is a real reputable differentiated company.

Got it. Great. Changing tax slightly on the commercial side still early this morning, we had Amphastar where they speak about their collaboration with you on BAQSIMI. So take us through that? And what does it mean, this promotional collaboration, that you have and also the implication of this for your overall strategy?

I mean Amphastar has been nothing but a great partner since I got here 9 years ago. They have been so flexible and the company was in a deep financial constraints, and I would just say that, that company and the leadership there has been amazing to work with. We came to them last year with an opportunity with sales force capacity because we stopped marketing V-Go. And we said, "hey, would you be open to a collaboration next year." And they quickly stepped up and we came up with a quick -- easy deal structure was key to us was let's not make this complex. We have a 60-person sales force. How do we just drop an opportunity to help BAQSIMI faster while continuing to have a different reason to shelf it to our offices, right? 95% of customers do not write Afrezza on every single visit. So how do we increase our shots on goal and how do we increase the productivity of our sales force. We think this is a great opportunity with BAQSIMI. In addition, what that does is it allows us to go into pediatrics and start to educate that market faster in terms of BAQSIMI and expand deeper into that population and build that reputation with MannKind. So that's one of the opportunities we have in the second half of this year is really expanding the footprint of our sales force with BAQSIMI in the bag really going out there during the back-to-school season for those guys while hopefully getting us ready for pediatric launch.

Got it. With a few minutes remaining, I do want to discuss some points around the balance sheet. So Chris, walk us through the current state of the balance sheet and as the company has evolved and come to this point, what are the capital allocation priorities for 2025? How has it changed?

So we really transformed the balance sheet in 2024. We had the opportunity to pay down the vast majority of our debt. And so we ended the year with over $200 million of cash and a small stub on our convert of $36 million. So we have a very clean balance sheet that we think really sets us up for 2025. As we think about our priorities, this is the first opportunity we've had really in quite a while to invest in Afrezza with the pediatric opportunity. So Mike highlighted that well, but that's something that we certainly will focus on this year. And then the pipeline, as we commented on having a Phase III asset in NTM is such as an exciting opportunity for us. We will fully fund that to go as fast as we can. And the same is true for our IPF program, excited to move that into Phase II at the end of the year and move that through as quickly as possible as we can, such an unmet need in both of these populations.

Got it. So with these programs ongoing, how should the market be thinking about operating margin directions? And at what point could we also start seeing the return on some of these investments you're planning to make?

Yes. So as we've commented on Afrezza and the [ EBU ] business has been profitable for the last 6 quarters or so. And so that gives us an opportunity to really invest in that business without truly impacting the bottom line. And the revenues are generated through both manufacturing Tyvaso DPI as well as the royalty stream allows us to fund our pipeline. So we've been cash flow positive and profitable over the last couple of years. And we intend to be so on an annual basis. It may vary from quarter-to-quarter as priorities change and just how accounting flows through, but we expect to be able to protect that in the near term.

Got it. Maybe final question for the session with multiple things happening and you're hitting some key event milestones over the next 6, 12 months, a good spot to think about the longer-term vision for the company, what would the company be looking like in 3 years or 5 years from now?

It's funny. If you fast forward, we're just talking to somebody 3 years from today will be 2028. It's hard to believe, number one, but number two, when you think about the company, we should be in the middle of launching clofazimine by then. Afrezza should be off and running in the peds segment. Afrezza should be expanding globally. We should be launching clofazimine in Japan. Nintedanib will have the Phase II readout by then. So now you can -- that will probably be in Phase III realistically. Tyvaso IPF could be launching in the DPI form in that time frame. So all of these are just going to be tremendous revenue growth drivers, and they're only 2, 3 years away. And I looked over 9 years, it's taken me to get us to this point. It's amazing how much more transformative we're going to be if we're sitting here 3 years from today, when you add up all the revenue streams, how much profitable MannKind can be and the additional pipeline opportunities that we'll be getting ready for. It's just going to be an exciting place to be. So we're recruiting great talent in the company right now. We got a great pipeline. We've got great opportunities to bring in some awesome talent to bring us to the next level. But in 3 years from today, it's amazing. I look back 3 years ago, it was 2022, we were just getting out of COVID, things were shut down. Tyvaso wasn't approved. Pipeline wasn't a belief. And now you've got 2 assets in Phase II, III, readouts on Afrezza, everything, no major debt to deal with. I think the company is in a really bright spot. Despite what is the dark side of the market right now, it's really tough -- politically, it's a tough financial markets, we don't have these headwinds to deal with, unfortunately, which is the first time MannKind can say that.

So I think that will be a good spot to leave this conversation at and look forward to updates around these -- the progress, and thank you again for joining us at the health care conference, and I wish you a very productive day of our meetings.

Great. Thank you so much.

Thank you.