MannKind Corporation (NASDAQ:MNKD) H.C. Wainwright 2second Annual Global Investment Conference September 14, 2020 3:30 PM ET


Michael Castagna – Chief Executive Officer


Oren Livnat – H.C. Wainwright

Oren Livnat

Good afternoon. Welcome back to H.C. Wainwright 2second Annual Global Investment Conference. My name is Oren Livnat. I am a specialty pharmaceuticals analyst here. And I am happy to our next company. It’s MannKind. With us today is CEO, Michael Castagna. I do cover the company with a buy rating. They have, what I think, a really differentiated, really interesting products in Afrezza, an inhalable insulin, but also a really unique platform technology and I am sure we are going to talk about that today. And let’s get into it.

Mike, welcome.

Michael Castagna

Thanks Oren. Thank you for having us. I appreciate it.

Oren Livnat

So Afrezza held up surprisingly well through the worst of the COVID shutdowns and continues to grind slowly higher. I am just wondering if you can just talk to us about the current commercial landscape with regards to offices opening back up. What kind of access are you guys and your field force getting now? Are we seeing new patients coming back into the office and that NRx share can keep going up? It has seen some spikes lately in the prescription data. So can you just tell us about that?

Michael Castagna

Yes. I mean I think we were very happy with how we performed in Q2 during the worst pandemic in the world and end the quarter where we did. We are very proud of the team and everything they pulled through. I think when it comes into Q3, you can see scripts are starting to climb over the last few weeks, especially as after the Labor Day. So we are starting to see NRx’s approach levels where we were in Q1. So we are that growth happen in the new prescriptions, which means doctors are opening back up. We are starting to get new starts again. We also expanded our sales force. So those reps have now been in the territories 60 to 90 days. They have been out there as well. And so while we are not getting all the customers, the fact that we can hit more customers and reach out to them is great.

The other part we are seeing in our data is because we can get to as many places as we were back to seeing an increase in depth of prescribing. So we are able to get into the docs who already understood Afrezza, who were prescribing Afrezza and they are comfortable continuing on new starts on Afrezza, even during the COVID pandemic. So I think overall, net net, what I would say is that the new sales force kicking in, the depth of existing prescribers is there. And then when it comes to just access to offices, it’s probably 30% to 50% depending on the day. I did a field ride a few weeks ago just to get out of the office for once and see what’s going on out there and really had a great dialogue, met with over 20 physicians over two days. And so I feel very good.

The questions we are getting now are much more pertinent about how to start a patient as opposed to, I am never going to start a patient. And I feel like as that momentum starts to build and we hire those new people, remember 11 of our new reps are going into territories we haven’t had a rep in three or four years. So they were starting from scratch. In fact, they are probably, that audience is where we were four years ago, in terms of knowledge and experience. So we need to build that market up and those other markets.

So we are pretty excited in terms of where things are and where they are going and I think we are just getting started here in Q3. We are exiting what looks like on a good, positive trajectory. And a lot of that is a lot of new people. We hired between the new sales force, the new commercial people, new medical people and the talent just keeps bringing in stronger and stronger talent. So as we get out there in Q4 as people will start to come together with their new managers and new home office team, I am pretty excited about where we are going here in Q4 and beyond.

Oren Livnat

So you mentioned that you have got some docs, as in, how do I start instead of I am not going to start. And so that’s an interesting comment. The product has been around for a long time. Inhaled insulin was a less successful product before you and you know obviously insulin has run 90-something years or 100 years at this point. So it’s a tough small change in practice. But can you just talk about how does, in your experience, a doctor get over the hump? Does it just take that one patient, that one experience? Because I know, in my anecdotal experience, because I would say direct market research, it seems to be a game changer for people who switch to it. And so the question always for me is, what’s the resistance from the doc? What’s the hurdle for patients getting access?

Michael Castagna

Yes. So I think on the doctor’s side, when you think about disruptive technologies, to your point when I was out in the field, some of these doctors, 65 to 75 years old, talking about they are going to be treating patients till they are 85 and they have been treating diabetes for 40, 50 years. So they have been around half the time as much as insulin has been around and in their entire career, they have never had a physiologic insulin.

And so this is really one of the first times we talk about control, you talk about the hypoglycemia as a tale of insulin and all the challenges that have come with dosing in insulin over the last 100 years, it’s almost like they have never seen, they don’t believe that something is here that works the way it does. And once you explain the science behind Afrezza, the monomeric form, how it’s starting to work, what that means to a patient, it’s interesting because when somebody starts to use it and I will hear doctors hear all the time, my patients on it just love it.

And I said, so why aren’t you using it on more patients? And they say, I don’t know. I guess I don’t think about it. I don’t remember. And then you get into the simplicity of the product, the newer doctors I am talking to, like as we are getting ready for pediatrics, we explain how people on carb are counted in our trials and they say, well, that’s impossible, you need to carb count. That’s what diabetes and insulin are based on, from carb counting. I go, yes, a 100 years ago. And that’s the reality as when you think about disruptive technology, you have got to do a lot of training, a lot of education and getting our scientific data out there. And that’s really what we have done over the last three years is get all the information out there.

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Now we can package that up, put that in educational seminars and start to educate the market where before we didn’t even have the data to talk about because it was stuck in our warehouse. And so when it comes to unique dosing of pulmonary deliverance or when it comes to the hyperglycemia profile, the weight profile, the timing of your meal, we have all that data now getting published, including the safety studies from 20 years ago we are just getting published in a few weeks.

So you think something like that was published 20 years ago. Well, it’s not. It’s a 51 page article coming out very shortly on all the positive data we have seen in our development program on animals and growing lungs and all the questions people have. So I feel like the science is finally there. It’s all going to be nicely delivered in various reprints with the medical team and now we can start to get that in front of people and that’s really what’s exciting now is, you know, their question is, how do I prescribe it.

And what’s holding them back is really, they think they need to tinker the doses. They think they need to count carbs. And when you start to explain how it works, then it’s about getting their experience and they have got to get their experience in five or 10 patients, not one or two. And so that’s really where it’s going and I think with kids, we are doing a lot of market research right now, with adults, the pediatric endocrinologist as well as the adults with the children. And we are hearing what we think is going to be really nice way to educate the market so that when we get ready for kids, the market’s more informed and more educated than they were as we did in the adult market.

But now we can leverage that we are doing for the adults very quickly and start getting pediatric market up to speed as we get ready to launch as well as the adult market, taking the insights from ped and saying, why they are using insulin pumps? Why are they still fixated on certain things? Those insights are relevant for kids as much as they are for the adult market. So we are getting a lot of good cross synergies of insights right now that tell us what we need to do and where we need to keep going. But really, it’s disruptive.

And that’s, to your point, how do you change the disruption? You kind of just keep building the evidence, you keep building different ways that solve the problems. And access-wise, I think your last comment here was, patients pay $15 commercial, Medicare’s $40, $50 for our insulin we are trying to get into that for 2021. But cost is a perceived option and perceived objection. It’s not a real objection.

We just ran 100 tests the other today just to see where the patients are. 30% go through now with no prior auth, 70% have a prior auth. The majority of those get approved in a couple days. So we don’t see that being the biggest barrier. It’s a perceived barrier, but not a real barrier. So I think you will see some nice things we are launching here in Q4 that will overcome those barriers.

Oren Livnat

And with regards to those prior auths, I believe you had a specialty pharmacy program that you are rolling out and that related to helping with adjudication? Or is that just a separate channel?

Michael Castagna

Yes. There’s two things related to that. So one of the things we hear about drug cost is all the prices of drugs. What people don’t realize is, 40% to 60% of all the price of a drug goes to the middle men. And I think that’s when they increase is the wholesalers are taken up $0.22 on $1. There is no reason the wholesale channel should be making $0.22 on $1. They don’t innovate anything. And how do we change that distribution model so that we can pas those savings along ultimately to the patients and that’s really what we are doing.

So we were able to build out a small specialty pharmacy network that’s local and national in nature. And we saw those sales double this year. So we went from 7% in January to 16% in June. And that’s continued to grow throughout Q3. So we haven’t released those figures publicly. But we do see that specialty channel, that distribution, I think, will provide nice economic upside as we go out, not just this year but for the years out.

Because if we save 5% or 10% on the wholesale fees that drops directly to the bottomline. And so when you are giving away 40% gross to net, we do almost what $16 million to $18 million a quarter of gross sales. So if you can save 10% of that, that’s huge to the bottomline each quarter. So we are really focus on there. In fact, our new trade person just started today and I know she has going to have some great ideas for us on our new Executive Director there. So that’s exciting as well.

Oren Livnat

Now I am curious. Most of the people I know on Afrezza are Type 1s. But obviously, we have an almost unlimited pool of type 2 diabetics out there. And certainly the percentage that are at goal, whether they are pre-insulin or already on insulin, basal or otherwise, is minuscule, right. And I assume when you talk to any of your docs, they know their patients aren’t at goal. Is there any increasing uptake, in your experience, of insulin and mealtime insulin specifically in the Type 2 population? And do you feel if any physicians are aware that Afrezza is probably makes sense to that population because obviously, injections are terrifying for a non Type 1 diabetics?

Michael Castagna

Yes. So I will break that question down two ways. So the first one is about, half our businesses is Type 1, half is Type 2. And the Type 1 with the shift in our strategy this year where we are trying to go deeper into technology and integration within the CGM space and our BluHale platform which we will talk about.

On the Type 2 space, we just released data here at the past ADA in June where we showed, in 12 weeks switching to Afrezza, all you do is switch your mealtime insulin and you got about 0.8 A1c improvement in 12 weeks. That’s as good as one or two new drugs when you are seeing 0.4 reductions in SGLT2 or a DPP-4. So being able to just switch your insulin and get almost 0.8 in 12 weeks, if you are going for 24 weeks where we would have probably sent hose trends continue, so that that study just came out. That will be published shortly.

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Another study called the Levin study just got accepted for publication. That was another story we did in Type 2s naïve where we showed almost like a measured dose or z-pack, that if you just gave Afrezza in a dose titration way like a z-pack where you take four units for three days and then eight units and the 12, this way everybody is on the same dose by day seven and then you titrate from there, we saw 1.6% reduction in that study. So our Type 2 data is really starting to show some promise. And then we have got three studies in Type 2 showing 0.8 to 1.6 A1c reduction. So I think you are right. There is a lot of opportunity there.

The Type 2 naïve insulin will be a little bit harder for coverage and reimbursement versus a Type 2 on insulin. But we think, over time as our coverage continues to improve the ability to go earlier in Type 2 will be even easier. But for now there is plenty. There are six million people on insulin that are there that have Type 1 or Type 2. So we have got plenty of patients to help now in the short term.

And just what’s interesting, I just start looking at the data, the overall insulin mealtime market has been actually declining or stable when I look from the value and prescriptions to where it was five years ago. The GLPs, the SGLT2s are all taking off. And that’s actually delaying the onset of mealtime insulin even that much further back, which means there is a bunch of people who are going to need mealtime insulin in the next of couple years because we are just delaying it, but they still need it. So we will see that happen.

Oren Livnat

I could talk all day about how Afrezza probably does more than these new CGMs and pumps and all the innovative lines the walls of the floors of ADA. But let’s move on actually in the interest of time. But obviously you are known as the Afrezza inhaled insulin company, but as I have been writing about and you have been talking about, you have got this pretty exciting late-stage pipeliners that partner with United Therapeutics, this TreT, as you call it. That’s Technosphere Treprostinil for PAH, right. So that’s the next generation of their almost $500 billion Tyvaso product, right. Theoretically, if all goes well, royalties on that product could easily surpass the value of Afrezza and despite all that many years working hard on that, right. So can you just talk to us a little bit about what you can say at least about TreT? Where it’s at? When it’s coming? And how big an opportunity you think it is? Obviously United Therapeutics people are holding it close to the chest. So with those caveats out, what can you tell us about it?

Michael Castagna

I think, Oren, that’s right. We go from a story that’s been Afrezza for 20 some years of MannKind being around publicly to a story of the pipeline over the next two, three years. So when you look at TreT, we are on track to finish up, in partnership with UT, they are doing half of the work, we are doing the other half. So the manufacturing is almost ready to go in terms of getting the last batch stability done, we got running human factor study and the PK study is pretty much wrapped up at this point.

So the last thing is the BREEZE study. But when you think about the BREEZE study, that was a two weeks switch study for safety. And so now we got patients almost on the product for a year. We are able to see their dosing. We are able to see it’s safe and effective. So we are pretty excited about where that product is going to go. And I think everything related to that filing should be wrapped up by the second half of this year, by December, which sets us up for an early filing in 2021. So that’s going to be really exciting.

We went from two years ago, literally this week we announced the deal to almost Phase 3 filing in the next months here. So we are super excited about TreT and what that means for patients. We are seeing the dosing. We are seeing hopefully better improved 6-minute walk test where people can start to titrate higher what does that correlate to efficacy, not just safety, right. And I think that’s going to be really, really important as we finally get that data. We have not seen any data out there in terms of they have not analyzed that data and presented it.

But when you think about TreT today does 500 million, the new indication for interstitial lung disease that they just announced will be hopefully approved in April next year, that’s 30,000 patients. Today, they are 3,000 taking Tyvaso just on the nebulized formulation plus the oral plus the IV. So you are talking 5,000 to 10,000 patients on all the forms of formulations. And now the interstitial lung disease, that’s 30,000 patients in interstitial lung disease. So this could take this asset from $500 million to $1 billion-plus and MannKind will get double-digit royalties. So to your point, that alone could bring in $50 million to $100 million-plus a year.

Then the other thing that people don’t realize, we will be the manufacturer of this product as well. So we are the contract manufacturing organization which means it bring more efficient for Afrezza and more profitable and we are able to get COGS plus X. So that will also bring in additional revenue and expense, offset for the Afrezza franchise. So I think when you look at the company now, it really is a multiproduct company going forward as we get this thing filed.

And that just sets up the pipeline discussion as well, because the Treprostinil will be the first thing that’s hitting on the pipeline that will be our first non-Afrezza inhaled insulin product. But there is multiple other products that we are working on right now, not all of them are on our website, really looking at orphan lung disease. And we think that as you look at the company, there will be a metabolic division and an orphan lung division. And really, we are excited because this is where we are going to transform people’s lives. It’s really exciting what we are hearing, what we are seeing in that space.

Oren Livnat

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So it sounds like, there is echo on the call, but perhaps you hear that.

Michael Castagna


Oren Livnat

Okay. Great. So it sounds like you are going to customize the [indiscernible]. I am going to turn down the volume [indiscernible]. So you are also [indiscernible] sumatriptan, right. Migraine has been super high, acute migraine, heavy migraine, [indiscernible] prevention therapy [indiscernible]. Co can you just talk about your sumatriptan entering Phase 1 next year, I think? How is that differentiated, in your mind from the other oral, injectable, nasal sumatriptan formulations out there?

Michael Castagna

Yes. So I think that the first things is like, nasal technology just has its limitation. Your nasal cavity just doesn’t have a ton of absorption area where the lungs are half the size of a tennis court. So when you can deliver drugs to the lung and you need a fast onset of symptoms, it’s just 1,000X to nasal cavity, right. So that alone you get a competitive advantage relative to that delivery system.

The migraine space, as you know, has been around a long time. It’s really heated up lots of competition. But there is still an unmet need in the acute space, right. And that’s where people try and fail multiple products. But sumatriptan has been the gold standard for, I don’t know, 20-plus years now. And that, when you look at our profile, we released this data publicly in one of our investor decks, but you got like almost like an IV-like response in that first of couple minutes here soon as you inhale. But you don’t have that lag effect that you get with the oral which you got that oral that’s hanging in there for a little bit of time because it gets some time to get absorbed. So you get the fast throw and you get the fast ball, just like you see in our insulin.

So hopefully, we are going to see when we actually get the clinical patients is, you get a really fast onset impact in terms of working and a really fast offset. So once it’s working, it’s out of its way and your migraine, hopefully, should function more normally. So that’s what we are hoping. And it looks like when you look at oral and nasal, you have got this delayed absorption. When you look at the IV subcu formulation, you get a very fast absorption. And it looks like our profile nails exactly the benefit between nasal, oral, tablets and the subcu formation. So I think we have got a nice PK/PD profile. We have to obviously test it in patients and see that that looks like. But we are excited about that.

And then just back on the United Therapeutics that, to me, they also licensed our technology exclusively for PAH. So we are looking for additional assets to work with them so that we can hopefully bring more forward because every asset they put on the platform, we will get $10 million upfront and $30 million milestone. So I don’t expect UT to be a single one and done product. I think you will see us continue to partner and find opportunities to help patients in that space. Plus, everything else we are doing in the orphan lung, looking at things like interstitial lung disease, ILD, what else we may helping idiopathic pulmonary fibrosis, there is whole bunch of different small lung disorders that we think our technology can make a huge difference. And so we are excited about those opportunities as well in the coming months and years that you will see in some of the work that we are doing.

Oren Livnat

We just have a couple minutes left here. And since you mentioned milestones, I wanted to ask you about your balance sheet. It’s about as robust as it’s has been in years, probably all the years I have covered you. Can you just remind us what milestones, derisked or otherwise, do you expect to come in, in the near future with our partners and your cash runway and how you are feeling about your ability to execute to get to the next major value inflection point?

Michael Castagna

Yes. So I think the good news is, we have enough cash to kind of get TreT on the right track and see Afrezza continue to grow and invest in opportunities for faster growth. So that’s all positive. We finished Q2 with about $63 million in cash. And then we have about $37.5 million in accessible capital between a $12.5 million milestones from UT here in Q4 and we have a $25 million third tranche in our debt available to us between now and June of next year. So when you all-in, call it roughly $100 million in accessible capital between now and June of next year. And in the first half of this year, we have earned about $27 million.

So when you think about cash burn runway, access to capital and where we are, remember every quarter as we keep growing, we decrease our burn rate, that’s just less cash we need. So the pipeline investments we are making aren’t going to dramatically increase our cash burn because a lot of that investments are made by shareholders in terms of the infrastructure, the people, the knowhow. They are pretty good at making the powders pretty efficiently and the Phase 1 sites aren’t that expensive. So we feel like we can move multiple assets in and then by the time we start to need to funds the Phase 2 or Phase 3, Treprostinil will then hit the market by then launched and that will help fund our innovation.

So we are pretty excited about where we are on the cash balance. And really, to your point, the best shape we been in recent years I have been CEO. And Steve, our CFO, has done an amazing job managing everything. So we are super excited. Our cash has been great. We just modified our debt covenant to make we didn’t trip on paying up the debt. So that’s in good shape now. And we have a Q4 milestone we expect to hit publicly, we stated, for TreT. So that will be our last and fourth milestone. And that’s in our control. We don’t see COVID or anything going messing that up. It’s really things that we are in control of. And the team in Danbury is working really hard to make sure it hits those things. So overall, net net, very positive.

Oren Livnat

All right. Well, these are short slots. I don’t mean to cut you off. But I think we have covered all the salient points. So thanks for coming. I want to give my condolences for your Philadelphia Eagles and we will talk to you next time. Everyone have a good conference, okay.

Michael Castagna

All right. Thank you Oren. Good luck. Thank you for having us.

Question-and-Answer Session