Q4 2020 MannKind Corp Earnings Call
[music].
Good morning, and welcome to Mannkind Corporation fourth quarter, and full year 2020 earnings call.
As a reminder of this call is being recorded on February 25th 'twenty 'twenty, one and will it be available for playback on the Mannkind Corporation website. Shortly after the conclusion of this call until March 11 2021.
This call will contain forward looking statements such forward looking statements are subject to risk and uncertainty, which could cause actual results to differ materially from these stated expectations for further information on the company's risk factors. Please see their 10-K report filed with the Securities and Exchange Commission. This morning, the earnings release and.
The slides prepared for this presentation joining us today for Mannkind are Chief Executive Officer, Michael Castagna, and Chief Financial Officer, Steven Binder, I'd now like to turn the conference over to Mr. Castagna of please go ahead Sir.
Good morning, and thank you everyone for joining US today, we had never been busy on more excited about our future transformation.
Let me start by acknowledging our founder of El Mann, who passed away five years ago. Today is off of the day that I decided to join Mannkind and take our journey forward.
We would not be here today without the generosity of him as well as the trustee to of course.
We support us through the transformation over the last five years.
Yeah.
I want to thank everyone again, and look forward to share and you the strategic direction, we're laying out for 2021 and beyond.
Okay.
I want to go back to what we laid out in January of 2020, and that is our strategy around the focus of endocrine diseases and orphan lung.
Starting to see how that breaks the shape out on what we did in 2020 of that set us up for that direction in the future.
Additionally, you can see with our acquisition of Quorum will not be limited by our current proprietary technologies, but we'll look for the best opportunity to bring shareholder value.
And therefore when regarding carve out of the mean is an example of taking the nebulizer product and hopefully we can apply our technology, but even if we can't we believe it'll be of great asset for patients in the future.
And then we will focus execute and deliver it to generate shareholder returns as we go forward.
The last thing I'd also add as we begin 2021, I think you'll quickly see our technology is becoming a platform plus the partner with other kind of on pharmaceutical companies.
In December.
On the endocrine disease space of friends of had record quarterly net revenue of $10 1 million of 30% versus Q4 19.
Bunch of order growth more importantly of 38%.
During the timeframe that we pulled our full sales force will be out there, but we're not out there in full force due to the Covid shutdowns.
Despite the decline in new patient starts from 2020, we're able to grow net revenue of 28 per cent versus 2019. This is mainly due to the fact that we revamped our commercial model to ensure the patient on boarding experience was stronger on routes.
More of our patients and ensured proper dosing and training.
That work paid off as you can start to see in 2020 of rural transition versus 2019, and patient build and retention on refills.
We also were able to engage the FDA on the clinical protocol with our phase III pediatric study I look forward to share a little more insights shortly with you on that one as well.
And then finally, we ended the year with the enter into a co promotion with liquidity, which we're excited to be launching this week throughout our sales force.
On the only that it's the first time since I've been here CEO of the we have a full staff in all key leadership functions, Chief Scientific officer head of regulatory and medical as well of reimbursement and access.
We're very excited about the talent of joining the company on the direction, we're going throughout all functions.
On the price on the 10 days of DPI timeline here.
You can see we completed all key opportunity here in Q4 youth or just released the topline Breeze and PK study results, which I'll talk about in the second and.
And the submission will be ready pretty much by the end of Q1 here.
We expect hopefully the ETE will get an ILD indication for their time based on the <unk> product here in April and then we will be filing the NDA filed with the T. We're responsible of the BMS part of it.
Here in early 2000 in Q2, 2021, and we would expect the FDA to accept the NDA submission on the same quarter.
In Q3 will be developing the manufacturing preclinical batches as well as start to scale up of our manufacturing facility as we expect the ILD of future indications will put constraints on the demand and therefore, we have to start expanding the factor now to hit those expectations.
And then finally will be the Q4 approval and if all went well with the FDA.
Yeah.
Let me talk about the top line results in case of our shareholders and analysts of not seen the yet.
First the primary objective was achieved with the safety and Tolerability, which was the switch study from <unk> BPI.
Two things Youll notice of 96% of people completed the treatment phase no serious adverse events and also we over enrolled at the end of the trial. That's just great. As we've had patients go on on four year, given us great long term data on dosing as well as safety and outcomes.
The secondary objectives are really around some of the efficacy and quality of life measurements around the six minute walk test overall satisfaction and heroes.
And all three of these parameters, we improve overtime, so nebulize formulation, which really points to the fact that they get deep lung penetration less variability and consistent dose the dose impact when you inhale with our technology.
The optional extension phase of $49 50 on patients.
We need to go into that phase and that's provided us great insights into what we think will happen in the real world when it comes to dosing and titration.
On the PK study, we didn't expect any changes there, but we had the confirm that the new manufacturing process on the scale up versus clinical match each other and our primary objective was achieved and look forward to getting that data out there with U T is the future day.
You do see patient variability continues to be less per ton based on DPI over time based on maybe what's formulation on the.
The safety side, there were no significant findings on these are all consistent process cycling effects as well as cost of cabins of cover so DPI or of friends.
Yes.
Sure.
We're just now starting to see that some of the analysts are now looking to add the future type of its the DPI with this new data coming out into the models and the recently two of two upgrades in terms of price targets on our stock by Oppenheimer as well as <unk> I just want to say thank you for that.
And one of these are now analysts we saw that the increase the United Therapeutics forecast for <unk> of revenue in the Blue here and you can give us the future glimpse glimpses of the majority of the the.
Sales, we expect to be the type of ACO DPI formulation versus nebulizer.
This provides a great patient experience.
Help improve patient retention and also drive of a great opportunity to scale up new indications on the new populations.
The acquisition of quantifying that and then the <unk> was a milestone for our company. We purchased <unk> in December of 2020 for $12 $75 million in cash and stock you can see how that was accrued for in the accounting here in Q4.
The <unk> is the development of <unk>. The initial indication we're looking for is non tuberculosis mycobacteria or NTN <unk>.
Difficult unmet medical need with no effect the medications in treating MTN.
This product and the team there has worked to obtain FDA orphan designation as well as Q IDP designations, which really helps puts us on hopefully a fast track at some point as we go forward.
We expect the answer this in the phase one here in late 2021, and the NIH is currently funding the development of <unk> TB and we just got in the early readout on the road in the data, which looks very positive.
I'm also excited about pilot Hoffman the founder of.
Joining us as the Chief Scientific officer.
Dr Hoffman of the pediatric Pulmonologist and extensive experience with inhaled drug discovery and development.
Been extremely helpful, especially as you went with the FDA on our held from the product I Havent Pulmonology on staff with great opportunity.
Yes.
So why do we want to be excited about forum I think it's really important to understand why are we one of the questions I get is why do we buy such an early asset.
Number one we could see of highly potent and the minimum inhibitory concentration of activity versus the MTM in both MF sepsis and Mac types of MTN infections.
It's a really efficient lung penetration with the <unk> formulation over the oral tablet formulation and it has a long half life.
And the penetration along and up two and a half fold oral clofazimine.
The low dose and non continuous dosing, maybe possible, providing a nice treatment opportunity for these patients who are going to of chronic administration for an antibiotic for a while and they probably will come in and out of the treatment is this is a really difficult drug to treat.
The positive animal efficacy data in the mouse models with end of obsesses. The Mac continue the positive.
And the GOP Tox studies are ongoing and on schedule.
And as a potential for a DPI formulation that the team is currently working on.
We will keep you posted on how the proceeds on our pipeline.
Let me walk you through some of the early data that the team generated there at Corp.
So we are now going to refer to this product of MNK 101 going forward, just so everybody's clear as we look at the pipeline.
With this product with superior to Oracle size of any after 28 days of dosing so that the.
The animal word of the 14th treatments every other day on what you saw was Oracle has had a minimal reduction versus ceiling, which is what you're using the studies.
And this is consistent with previous studies likely no effect due to the short duration of the trial and it takes a while for the bodies of buildup lung concentrations in.
On the oral tablet formulation. However, you can see at 90, 999% reduction in MNK 101 versus selling controls so significant reduction in the oral delivery in terms of the lung.
Formulation, we would.
Expect this to be maintained if we would have what it gives us two of DPI formulation.
We know from our research that the population will be happy with the Nebulize formulation and they'll be even happier with the DPI. So we don't think it's critical to get the PPI, but if we can do it and it will be really nice for patients on the experience.
Now, let me talk a little bit about the president now that we've finished off the orphan lung area.
Number one we really established of present now and should continue to expand sales in 2021 and beyond.
Take a look back over the last three or four years, we've been able to generate a significant amount of publications and presentations on efficacy safety and dosing.
The underlying dosing parameters of Afrezza had been one of the biggest hurdles that the market didn't clearly understand as well as the packaging and all of those things have now been fixed are now established and we can communicate out appropriate dosing safety and efficacy information and reference of publications that have all of our data out there.
The base of prescribers of almost 3000 doctors that we can now build upon and grow year over year for years to come.
Our commercial and medical teams on how stable and the talent base joining the company is expanding rapidly.
The safety profile now be on the market is well established which was always one of the questions of inhaled insulin and we can now see if of thousands of patients over the last five years no surprise safety signals of horizon, all of our surveillance of monitoring.
We are looking to move toward expansion now with indications on pediatrics and are also evaluating an investigator collaborative study progestational diabetes here of 2020.
Let me flip over and talk about the pediatric design. We just recently received FDA feedback as well as on it I guess the zoom meeting these days with the FDA and we're really happy and pleased with the interaction the insights and discussion on how we take the fragrance forward with them, especially as it pertains to the dosing and conversion.
Of which we think is one of the bigger hurdles.
The patients and doctors on the AD out there in the marketplace.
We're looking to do a usual care of on in with the switchover randomization to Afrezza plus basal versus multiple daily injections on it's really important to us is that very first dose in the office and showing that patients can tolerate.
Not have any safety concerns on a higher dose right at the start.
Really the first time of running the study of this way we think based on all of the data. We've generated this is warranted at this time.
Well then at the end of 'twenty six weeks everybody on the study will be able of slow over to our president and then go on to collect safety data from the 52 weeks on approximately 260 patients.
And then there'll be discontinued in the before week follow up for F&B one at the end of this trial.
We're really happy with those on.
The FDA appears the agreed with the design.
Finalizing the protocol based on the FDA feedback, we expect to start the trial in late 2021.
Yeah.
Now what are we doing here to drive performance for our friends at <unk>.
Tomorrow.
Number one increase the awareness there are several opportunities this year that we've already taken advantage of and sponsoring take control of your diabetes College diabetes network as well as Sami to educate the marketplace out there Theres force CME event that will take place in Q1 and Q2.
Additionally, we've been in many discussions with CMS on thinking about how afrezza can have a better position on the Medicare population, including the $30 per month pilot program of Cmos is running and presenting all of our clinical data to the payers and making them aware of all of them. The data. We generated has been critically important over the last three months.
We're also looking to meet with FDA and have a meeting set up for Blue health for the consumer launch addition to make sure. The this can go forward on the safe and effective manner for consumers'.
Digital management of diabetes and here to stay and integration with CGM is going to be critical and we believe that has taken a long time to see the day of late in diabetes, but Blue Hill dose detection and proper inhalation are all going to go very well and you can see of CGM lives of its product is on its way to success here in 2021.
We also launched a new reimbursement model in Q4 of our called the Afrezza assist those pilot in Q4 and launched in Q1 and you get seats of the right here on the first pretty much quarter in January we estimated what we see in February March of pretty significant jump in moving our free goods from the marketplace, which was out there on the specialty pharmacies and <unk>.
Retail into a centralized pharmacy the much lower cost, which is why are you seeing of declining prescriptions here in January and you didn't notice it as much into some of the was on the new patients last year. Starting January one all patients had the move to a close pharmacy, which is not reported in the Symphony and you can ask the our cash pay on our free goods significantly.
Jumping in Q4 and Q1, we now have this new fragrance is we expect to be able to Chinese patients into paying patients and will provide on free drug if necessary and if they can't get approved at some point will move into our cash pay program as part.
<unk> is off to a strong start we've had a lot of our reps have the least one patient come in it's been almost the 150 doctors in the first six weeks here of the new year I'll come into the New program. So we're excited about what we see in the early days here.
We also want the strength of advocacy for inhaled insulin. This is across the patient advocacy organizations the payers as well as the doctors. We think it's time to thought leaders start getting on board and sharing the information and educate their peers around afrezza as well as the organizations to start lobbying for access to inhaled insulin with the payers.
And of course on our endocrine focus here on the co promotion with liquidity.
As indicated for hyperthyroidism, it's really meant to help the people that are struggling with dosing and precision of dosing and this liquid formulation of being really important in the pediatric segment. We believe that's where the biggest opportunity is and this has allowed us to expand our sales force footprint into the pediatric endocrinology of years ahead of our launch for our president.
Let me remind you we are only focused on liquidity in the pediatric segment.
And when the Fred's is approved we will now of infrastructure and relationships. So successfully lots of president of couple of years.
On the financial impact of one of the questions. We get is what does this mean the mannkind, we received quarterly payments for our promotional activity as well as royalties on gross profit.
This loss of this week and I can tell you I've talked to a few providers. The very excited the identifying patients loves theme of our reps of managers of arguing over who got the first script. So at this point, we look forward to watch net loss of seeing the impact of our sales force can have to help patients suffering from thyroid disorders I'm going to turn.
Turn it over to Steve to take you through our 2020 financials.
Thanks, Mike and good morning.
I'm pleased to review, our fourth quarter and full year 2020 financial results, which show record quarterly Afrezza net revenue.
<unk> of further growth margin expansion on our continued focus on efficient from managing our cash resources.
The discuss some details of the non binding letter of intent we have entered into for sale leaseback of our Denver manufacturing facility.
During this morning's call from the trucking select financial highlights in the supplement this call by reading the consolidated financial statements and MD&A containment of our 10-K, which was filed with the SEC. This morning.
Let's start up on looking at revenues for the fourth quarter and full year 2020.
Starting with the payable on the left which is our fourth quarter results of Afrezza net revenue was $10 1 million versus $7 $8 million of 2019, the growth rate of 30%.
The increase was driven by volume growth from underlying of threads of prescription demand, which was up 5% year over year.
A more favorable growth to net percentage, 38% versus 44% in 2019.
The continuation of the favorable mix of higher insulin unit cartridges.
And a $1 1 million accrual reversal related to the termination of our prior year free goods program as of December 31, 2020.
The termination of the program is anticipated to negatively impact of Trs by approximately 15% in 2021 versus 2024.
But remember these were three prescriptions and not generating revenue in 2020. So on net revenue will be positively impacted because the portion of these patients will obtain insurance coverage with the help of our president of <unk>.
Fifth patient hub of purchase of projects through our cash program.
Please note that an increase in wholesaler inventories in the fourth quarter of 2020, which levels are anticipated to reduce in the first quarter of 2021 contributed approximately $5 million of of present net revenue from the fourth quarter.
Additionally, the COVID-19 pandemic continued impact on sales and marketing efforts in the fourth quarter position access, including both face to face and digital interaction continues to be constrained to varying degrees across different geographies, which impacted the effectiveness of our sales and marketing efforts.
Looking at full year 2020 comparisons for Afrezza on the table to the right. During the pandemic year of present net revenue grew 28% versus 2019, driven by volume favorable cartridge mix price.
The decrease gross to nets from the reversal of the pretty good the accrual that I just mentioned.
Moving to revenue from collaboration and services, which for the fourth quarter was $8 4 million versus $8 2 million from 2019, while full year 2020 revenue was $32 8 million versus $37 7 million for 2019 the.
The reduction in the 2020 revenue year over year was expected and was mainly due to the recognition of the $10 million Therapeutics research agreement over the period of the fourth quarter of 2018 to the second quarter of 2019, when our performance obligations were substantially completed.
This slide shows the success of our efforts to lower on gross to net the.
The growth to net deductions with 38% of Afrezza gross revenue for the fourth quarter of 2020.
Normalizing the fourth quarter of profit gross revenue and net revenue per the exclusion of the free goods program termination of accrual reversal of the non-GAAP growth from a percentage of 41% consistent with the third quarter, but favorable to the first and second quarters.
The favorable trend in growth from the percentages, primarily resulted from our strategy of shifting business through specialty pharmacies as opposed to wholesalers with higher fees a decrease from the Medicare rebate accrual on the downward trend of our co payment assistance program as patients based on lower deductibles in the second half of the year.
As a percentage of revenues have been increasing so of gross margins.
This table shows gross margin for the first quarter 2019 to the fourth quarter of 2020, where our gross margin reached 64%.
We adjusted for the $1 $1 million of accrual reversal due to the termination of free goods program in the fourth quarter of 2020, the non-GAAP gross margin for the fourth quarter would have been 59% still a healthy increase from the third quarter gross margin of 51%.
Moving on to operating cash efficiency in the next slide we compare the full year of 2020 versus 2019 and 2018 the top of each.
Each vertical bar the present net revenue, which is almost doubled in two years, the $32 3 million in the bottom was non-GAAP net cash used in operating activities, which has decreased by almost half in two years.
The increase of President net revenue helps drive down the cash burn, but two of larger extent, we've been focused on managing our operating spend and chosen the reduction to $53 1 million for the full year 2020.
The bottom of the slide we saw on average quarterly non-GAAP net cash used in operating activities, we have been running fairly steady without large fluctuations on a quarter by quarter basis from 2020, resulting in the quarterly average of $13 3 million and lastly, we ended 2020 with $67 million in unrestricted cash on the balance.
<unk> posted in the fourth quarter by of $12 $5 million milestone payment from the United Therapeutics and $10 million related to the funding of the tranche two of the net midcap credit facility.
During the third quarter earnings call. We discussed the we're considering a sale leaseback of our Danbury manufacturing and R&D facility.
We have now entered into a non binding letter of intent to sell building, one which is our manufacturing facility. Please note that we are not selling of the manufacturing equipment containing the building just the improved structure and lay out.
We're currently in the due diligence phase, which is expected to be completed by the end of the first quarter, resulting in the signing of the definitive agreement the.
The expected sales prices between $95 million to $105 million.
With a 20 year lease term for a five year extension options.
On an annual rent at the start of the belief of between 10 and $11 million annually.
The plan to use the proceeds for general corporate purposes, and May partially paid down the mid cap senior secured debt.
There is no assurance that they will be able to sign a definitive agreement on the terms described the Finalization is also subject to satisfactory completion of due diligence by the buyer.
Before handing the presentation back to Mike, Let me summarize the financial progress.
First we had record quarterly Afrezza net revenue, even when continue to experience the headwinds from the COVID-19 pandemic.
Second we continue to see improving the present gross margin and gross to net.
Thirdly, we remain extremely diligent managing our cash while supporting commercial efforts to grow further.
The factory type of data of DPI for United Therapeutics, and move our pipeline forward, which Mike will discuss in a moment.
And lastly, we are progressing on on approximately $100 million non dilutive financing using a previously secured asset.
Thank you and let me turn it back over to Mike for some additional comments.
Thank you Steve I've heard you don't know we've invested over $250 million in Danbury building out the infrastructure to scale for Afrezza and as well as per day sort of DPI.
It's the right kind of maximize the value of this asset as the market is ideal for these types of transaction given the COVID-19 headwinds that experienced an office and the traditional retail real estate.
This is the long term commitment now on our part, but the part of investors to look out 20 years and believe that this will be of technology here to stay with multiple revenue expansion opportunities in order to payback of the terms that were signing up for.
This does not change our day to day operations, we will still be investing with Ut to expand the facility for today's on DPI.
This provides us the capital so hopefully we're on the company towards cash flow breakeven.
Now, let me talk about the pipeline and collaborations.
First the endocrine you'll see of new view here of what we laid out versus traditional on this should be up there on our website today.
All of the.
Number one is the presence of proved in the U S and Brazil and continue the progress there in those markets and growth.
Number two we expanded with liquidity to give ourselves more more opportunity with our current sales force infrastructure that we invested in.
The third part is around indication expansion are currently focused on the pediatric segment and excited to get this off and work with some very reputable third parties to get this successfully launched hopefully in pediatrics in the coming years I can tell you. The early feedback from sites. The CRO. The these interviewed is very exciting to get the products in the pediatric <unk>.
And as soon as possible.
And then there is international expansion with India, and simpler where they started the phase III trial. This year that should wrap up pretty quickly given the population size of India and we're trying we're experimenting there are executing I'll say with the new dosing protocol that we did here in the rest of the pilot study and that dosing protocol. The type two patients and the largest study and we look forward to getting that.
Data out there in the public domain as I think it will really show the aggressive titration drives dramatic impacts with the president of inhaled insulin.
And then we expect our partner on Australia, MSL relative file of presence there this year and the first half of 2021, if we can.
And the orphan non space U C. Five opportunities here at number one we've talked about today of the DPI of United Therapeutics, and also not only ph the ph ILD and future indications that they are working on.
And then <unk> 101, which is also known as the core of <unk>, plus quorum and MTN will rapidly progressed the phase one in Q4 of this year.
And our three other programs that we have now prioritize the focus on Mannkind 201 in idiopathic pulmonary fibrosis, which we are not disclosing for competitive reasons.
Mannkind 301, which was previously disclosed as Dna's alpha for cystic fibrosis.
And <unk> 701, which again will not be disclosed for competitive reasons. So you can now see that we have five shots on goal with orphan lung disease at the really bolstered up over the last couple of years as we focused on building out of court Technosphere programs.
The other thing I want to highlight the we don't talk about in a while as the collateralized space and the receptor life Sciences partnership.
In this agreement, we will receive milestone and royalty payments.
As it moves forward towards progress and we expect to be the CMC backbone for rls as they move forward.
A fair amount of standard, but they've recently have the new CEO of named Mark who joins us with tremendous pharmaceutical industry knowledge. We've already had our first committed with them and are excited about the direction of the feedback they've received with the FDA to bring of cannabinoid technosphere products forward to the market through the FDA regulated pathway there.
The first focus is on the panic attack is the proof of concept study over the.
Forward to working with the team there to move this product forward.
The second program of people may not realize was something that was told the folks on a few years ago and many of kind of eligible for royalty payments.
The small molecule enzyme inhibitor for oncology per song.
<unk> is of particular, which was fast tracked by the FDA, we will get mid single digits on royalties if that continues to progress and get approved ultimately by the FCA.
So with CDC multiple shop of revenue operating expansion opportunities over the coming years between our current marketed products are orphan lung pipeline as well as of third party programs that we partner on overtime.
While the early indicators of the future for us of how many formulations, we're working on.
So we didnt, we don't really disclose exactly who of what we're working with but you should know on 2020, we worked on five different formulations several of which were COVID-19 related that we never announce but we do know that we worked on several therapeutic opportunities there and already in 2021, we have about 10 formulations on the goal that we're working towards.
Some of those have been completed some of those end of process on many of these programs of partnered with external partners that we hope will turn into the future business development deals that we'll announce later in 2021 of beyond.
Additionally, there are four assets that you probably saw on our pipeline slide before around epinephrine Palo Sumatriptan that we will look the license out to a partner or partners over the next few months of all goes well the.
On the part of this should start to see as our dreamboat family here on the left and our single use cricket family on the right. We believe cricket provides a real nice opportunity for some of these pipeline compounds as well as the formulations were currently working on from other companies. So I think youll continue to see more on the cricket side and we think this is of great opportunity for acute use products.
Especially like the Ross the opportunities.
Yeah.
As we look to 2021 of highlighted many of these milestones. We can look here at city of a busy year ahead of us and it's only February from the team.
On the progress very rapidly on many fronts in terms of the pipeline we.
We will endocrine and marketed product as well as just corporate priorities.
I didn't talk about is new data coming out at Ada and ATT day, which will have data coming out in the June the Q2 of June timeframe. We're very excited about the state of looking at time and range of friends as well as the pediatric data in terms of the PK study has generated so far.
I'll just remind people that we also have of $25 million debt troughs available upon pervasive DPI approval. So I hope what you see as the company is on a solid financial position will take us a while to get to where we are but we're really proud of the work that the team has done here across the company all functions and I just want to thank Steve for being a fantastic partner and his team because it really of transformed mannkind from of struggle.
And the company to a major growth company as we go forward for years to come.
Thank you for all of your time today, and we look forward to taking the questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using the speaker phone. Please be sure. Your mute function is turned off the lot of your signal to reach of our equipment. Once again press star one to ask a question and we'll take our first question from Brandon Folkes with Cantor Fitzgerald.
Alright, Thanks, taking my question and congratulations on the progress.
Maybe just three on the firstly just on.
On the phrase that.
On the gross to net how should we think about this and Tony of 'twenty one.
On.
Maybe on it often.
On capacity at <unk>.
Marie the profile general corporate and debt Paydown.
I'm kind of in terms of how much you expect to reinvest in the business on that should it got it and then lastly.
On the business development is the party and lots of being at the moment.
And with that pipeline on on the posture towards passive scanning.
Getting the commentary.
Programs two proof of concept and then looking to partner has that changed now just given all of the progress you have made over the last maybe 12 to 18 months. Thank you.
But to make sure I heard your question. So I got on one of growth from that which Steve will answer now the volume is use of proceeds on how we think about that and then the third one is around the pipeline of how we previous communication on business days, one of the capture offering.
Thank you.
Yeah. So let me let me let me take the first one on gross to nets. So our expectation for 2021 is that you'd have growth to net between 40% and 42%. So we continue to work on the strategies to drive down our gross to nets.
Sometimes.
In the marketplace there may be.
Transactions that happened that helped us from some kind of can they go against us Wesco, we're estimating between 40% and 42% for 2021.
In terms of Denver the investment.
So I think all of this will continue to be prudent with cash Brendan just because we have more cash doesn't mean, we want to spend a lot more money I think we're going to make sure of the companies on a secure cash position for the long term and it.
It provides us opportunities as we see the grow the business faster of redeploy capital to advance the pipeline faster we're in a position to do that sort of back to your question on the BD side.
If we wanted to take something now the phase II phase III, we believe of adequate capital resources to do that between the cash on hand, plus the royalties coming in in the future.
We haven't changed our strategy to continue to want to fund the pipeline.
The narrow focus on orphan lung disease as we do expect to continue to bring those products forward and probably build out commercial infrastructure down the road for <unk> as well as the other ones. We're working on the or the formal because of our recommended out licensing. We are still debating internally do we can go ahead and funded sumatriptan. The phase one and does do we have a per.
Partner lined up that will take that on and part of that out. So that's under discussion right now so I won't speculate what happens, but I will just say those programs. We believe we can partner with somebody at this point, but then funded the phase one and collect the upside of the share in the success on that.
Those products, but the orphan ones that we announced today.
Most of those we would look to bring forward, maybe one or two of those will go into the partnership with Google Cloud keep one or two for ourselves so.
So that's how we're thinking about it but we'll always be opportunistic on open minded, but right now things are looking pretty good for the company to be able to fund our innovation.
Or does it make sure we deploy capital efficiently and effectively to grow shareholder value. So that's our main focus right now.
Great. Thank you very much.
Thank you.
The next we'll go to orren of live not with H C. Wainwright.
Thanks, So you've got a lot going on and all of a sudden or at least it seems like all of a sudden to us like the.
The follow up real quickly first on the on the Fresno.
The follow up on branded the question about gross to net I guess I just want to clarify separate from the actual gross to net just in terms of realized value per script in terms of the scripts, we see given your fully transitioning now what's started already it looks like in <unk> now fully into Q1 of the switch of free drug into the specialty pharmacy, we should.
To see additional incremental increase in Q1, and then going forward.
Sort of realized net value of reported revenue per like IQ via script correct.
Yeah.
Basically I wouldn't worry about as much Q4 oriented but.
Starting here in Q1 net largely because of large majority of the stations of our refill is not new patients and starting in Q1 January.
Shifted either out of the market because of no longer given the pretty drug of retail or the will find out when they need there are a lot of patients stockpile afrezza in any info on <unk>.
So once they run out of that supply the the hopefully coming in back into our reimbursement hub will not make sure of one of the level of the things. We found was piece, we're not being done.
So we're providing free drugs that would have been reimbursed by insurance.
But so we changed that process to ensure the ppas are now done and we can see transparently why the patients getting rejected and what we need to do to help get that insurance coverage because when we talk to the insurance companies. They want to see the demand so long story short.
Here in 2021 majority of the scripts I'll say, 98%.
We will be.
Paid prescription so you should see your average revenue per script go off on your models the free goods and cash do not show up in Symphony of our Ikea.
Okay. So if the volume went down 15% all else equal in Q1 versus Q4 of your revenue would be flattish correct.
Correct roughly correct, yes, okay.
And of course innovative enough right.
Nick of different.
Okay, and then onto more exciting things on Teva. So D. P. I I know you're limited in what you can say you know given that you have of partner here, but just it seems like a crucial part of this.
Adding revenue story is both on the expansion of the indications in the April timeframe for Thai base, though and also users the ability to file.
The DPI formulation with both indications included ph and the of ph ILD can you just remind us why you sort of so confident in the ability to sort of immediately after the the Dupont.
Include both indications in the DPI I did you not need or did they not need the study the DPI and the ph ILD population at all is it just the bioequivalence pathway or did they in fact include some of those patients in that work and breathe or otherwise of other places.
Yeah.
Yeah on that one of those two things.
Or rather leave we want number one is we actually went to the FDA in the pre meaning when the unit who did.
And they went to the FDA and asking the pre NDA filing can we expect to get the ILD.
It was approved 45 day, so would it be extrapolated to type of ACO DPI and the FDA came back and that response and said, yes. So thats the stuff gives us the confidence of why on.
The second part is to your question is we did include ILD patients in our human factor studies. So that we know they can handle the device of inhaled properly.
So that was something that we did proactively to make sure we were able to file with <unk> that we did that study back in the Q3. So there are two things we did to make sure they're on when you think about the products.
Whether it's the Taipei, so being equivalent for the.
Ph or ILD.
Same molecule to making sure we deliver consistently and of the dosing is roughly correlated.
And I think that you can expect this duty goes forward with other indications.
We'll continue to hopefully file those for the 10 day, so GPS formulations of the expectation so.
And I've done this in other biologics and previous lines of where we can extrapolate.
Of these situations, where the title side visa EBITDA.
Okay. So the the fact that on their increased study they saw higher.
Dosing, let's say.
Higher micrograms per day, and this population versus the P. H that's fine because your product is essentially the epi is essentially the bio equivalent so if they dosed higher on type of base, though and they just higher on year, that's still apples to apples and I'll get in terms of the dose proportionality of their products.
Correct and remember we prove that we can dose of much higher than <unk>. So net realized up to 150 micrograms with no safety concerns. So I think what you'll see is even as patients those higher you're probably going to see.
Better Tolerability.
And we can see that already.
With the T and I think the published at the present that data is what happened in the extension phase how high the patients go on how powerful of it.
It's really good to have that now we have patients going on every year and on extension phase.
We're excited very excited they're a great partner and we look forward to continuing to work with them.
Alright, and I won't hog anymore time, I'll jump back in the queue. Thanks.
Thank you on.
Yeah.
The next we'll go to Thomas Smith with SBB Leerink.
Hi, Good morning. This is Don on the piece of the in for Tom.
The real quick first on the United Therapeutics partnership I'm sure. You know can you give us a little bit of a sense of the differences in the tolerability profiles between so based on <unk>, and basically DPI and well how much of a production expense and you see based on patients lobbying being suitable for the DPI formulation.
<unk>.
And then the follow up question of on the.
On the pediatric study.
Like how long do the study of considering and wondering.
What the.
Titration plan. This was based on whether it'll be incorporating from from the 11th of Louis.
Yeah.
Last question either on the pieces.
On the.
On the pediatric study.
How large of a study anticipating the skiing and whether what the.
Titration strategy for the program on whether Youre incorporating of.
The findings from from Dr 11, as far as the study that was presented at 80, a couple of years ago.
Perfect. Okay. So on.
On on the Tolerability of I would say you can see that on the majority of patients on switching from <unk> to the basically the GPI I think it was 49 out of 51 were able to complete the three week switch. So that shows you. The majority of patients will tolerate dry powder, who already taking the net realized formulation. So that's pretty well established at the.
Point and not only of that you can see the percentage of people you will see very shortly that the law.
Large majority of patients can tolerate the drug.
Based on the GPI are going on over a year.
So we don't expect.
On the eligible patient population that cannot tolerate the Thai base with Upi, We think will be very low net.
There's a separate question here that we don't have data on with beauty, which is how does the naive patients was titrated up feel in terms of tolerability versus today, so nebulizer versus type of ASO.
And I think that will be worked the ETE works on over the coming years, but in general we haven't seen any signal of our concerns between the two formulations people get caught up on annualized is that of course on DPI against.
Against the possible, whether the flushing and things like the assets anything happens so.
We do think the less variability of imported and we do believe hopefully better lung activity will result in great outcomes and I think that's what you saw on the early release of Ut.
So thats good lung penetration, we think will be great. If we can have less systemic absorption that's even better. So that we think is really important.
The next part of this is peds and so on that one of its roughly a 260 person study, we expect about 20% dropout rates of it I would tell you we got to get to about 210 to 20 of the final numbers.
We are down the two finalists in terms of the Crows.
Which will be selected very shortly we are waiting on the FDA feedback to make sure. We didn't have any other major protocol changes I can tell you. The FDA has been very collaborative on the study and the titration protocol is probably the most important discussion we had with the FDA as we basically reinforced that we don't want patients to under dose we've seen that consistently and some of the trials.
Brian you know historically, the mannkind or even on the peds PK dosing as well as the Yale study, we did on the integrated within insulin.
The logarithms that the the other dosing of Afrezza really does not cause a strong reduction in postprandial controls. So we really want to show that the first two hours post inhalation.
Really strong postprandial control, we think that first dose in the office is really critical and I believe we are of a path forward.
We literally just got comments back of the lineup of knock on through all of them, but the high level of feedback from my team has been we got we got a great path forward. We have some work to do on the saturation, but we believe we'll get to a good solution with FCA and it's really it's starting out the trial right. So as long as we can start off right. We believe of really fantastic results. If we continued on the dose we're not going to be a copy of.
We're not going on to let that happen so.
Hopefully the answers the question on piece, but we're excited.
We've done enough of small pilot studies over the last three years to show what the dosing should be and we've done a lot of retrospective analysis.
We believe the study and really the first head to head large trial with pipelines with new dosing will really show significant improvements in outcomes versus what we've seen historically.
Great. Thank you very much of cases worth of that right. So we got to make sure. We do great in kids for the future of the franchise that that's where you're going to transform the standard of care over the next 10 of 20 years.
Alright, and next we'll go to Steven Lichtman with Oppenheimer.
Thank you Hi, guys, Mike you, you've been putting up pieces in place around Afrezza with the president of says to Blue Hill wondering if you could just the update us on the on the commercial side.
Any perspective on the changes out of hundreds of them, making.
The impact you're seeing on the ground.
Yeah, I mean, I think number one of thing Alejandro from bringing on as I call them because of the muscle of reflects really starting to get everyone in churn across all territories all geographies all managers moving in the same direction to the same sheet of music I think thats one of the big things that we weren't always consistent across.
The field that we really spend a lot of time on the new year. We just had our sales meeting which was like a couple of hours each week over many weeks since I think bringing up the discipline and bringing the business acumen down to each manager and helping them understand within their business. The run has been a very nice shift.
I think the second part of this is having the ability to invest when we see opportunities there.
<unk> always had the opportunity of fact, that's always been of cost reduction.
Load, whether the last year because of the COVID-19 or the year before because we didn't see the PTC.
So I think right now were on the team was Hey show US what's working you have your budget, but we have capital to deploy if we could start to see things work kind of thing.
That's really what he's trying to show is hey, This works really good for example, we got telemedicine, we launched how do we show that the works as that works, we can scale it up but if it's not working we're not going to continue to push money there, but we think needs of the opportunities. Now for example, we just scaled up to more than half the country on a pretty large digital campaign.
As of this pilot in five states in Q4, it looked great and the team just scaled it up last week.
You'll see a lot more opportunities of what's working and what's not working and then how do we disproportion of invest there. So I think that's where you're going to run the business.
The second part of this will be the overall.
The reimbursement process, so having a smooth process getting the insights out of the of fragrances program and being able to share that back with payers. The Gen. Linda just joined US on the payer side. She that she is a great asset and the great Great leader and I think just having somebody full time dedicated to building those relationships with the payors and taken on the they didn't place as shown.
On how they are.
Current health in patient care and.
And streamline those will really go forward there. So I think youll see quite of few not everything's going to happen in Q1, So we're not trying to over project on it.
Media bump here, but I think what youre seeing is that transition from.
From Alejandro in the second half of last year of getting as grounding two now I'll start on implemented plans here in Q1, and we should see fleet growth.
Number one thing we're all dealing with has concluded I think just seeing that our reps can get out there make impact as the number one thing of waiting on as you know they are out there, but there's still restrictions across the country and so I think just as we get out there and as we scale up we'd have the exponential growth opportunity expansions that we're kind of looking at.
Got it.
And then Mike you mentioned <unk>.
I wasn't sure if you mentioned the sort of.
Some of the areas of focus that we could see the in terms of.
Of.
Our paper of presentation, but what should we be what should we be looking for generally.
Yeah, I think the two things it's interesting because one of the things we learned with our interaction with the <unk> program with the FCA as they are not there on timing range.
And using CGM to measure some of these I'll call them.
New ways of looking at diabetes control. The FDA does not feel like these metrics have been validated and.
And therefore, they are still at the traditional a once the reduction mindset finger sticks of hyperglycemia, which is unfortunate because we designed the study to really show significant advantages with CGM.
But that is not where the FDA is so we're happy to revert back we still think where the good spot we will still have CGM data and they also agree that next two or three years.
The the shifter position, so collect the data and I'll deal with the statistical plan is great before submission, but but at this point, they're not correlating timing range two outcomes or time of less than 70 for example on how we measure of that so.
None of the big surprise in terms of where they are they'll catch up to the market. They just need to see more and more data service to correlate the two.
But I think what Youll start to see is we're ahead of the plan. We started doing CGM studies, where the phrase over the last three years I think we've had three studies presented almost published now.
You'll see here at Ada.
One of an interesting insights we guidance around nocturnal hypoglycemia, and we think thats going to be critical for children, but we did see.
Some opportunity there to improve our reduce nocturnal hypoglycemia with Afrezza and Thats one of the datasets.
We generated as well as improvement in daytime tightened the range. So those will be the two areas.
That youll start to see the headlines here at the upcoming conferences.
Great.
Thanks, Mike and just lastly, Steve.
Of course margin continues to push up higher here, obviously can you remind us sort of of runway here.
Anything we should be thinking about in terms of a step up in cost of goods required over the next several quarters or.
We continue to see a nice day Paul.
From a refresh perspective, we'd expect the cost of goods to remain within the same range. As we saw in 2020, we will be scaling up manufacturing for our base of DPI. So there will be some shifting of costs within the manufacturing operation. So I'll put that question out there we haven't.
Totally.
Calculated what that'll be but it should be more absorption going to diagnose the GPI, but we'll see the as the year. So on select 2021 to be very similar to 2020 per of Rosa.
Yeah.
You got that David and the.
Jeremy of the first three quarters there'll be a phrase or still in terms of production and in Q4, we'll start ramping up so there won't be a significant shift from where we are.
We are working on the commercial supply agreements and that will once we get all of the finalized that'll bring some clarity that will share with you.
No significant.
You'll see a little bit year over year on employee costs, but nothing that's the.
The scale of the sales force last year, so youll start to see that flow through this year, but nothing significant.
This year, we continue to look at managing the cost rate per prudently. So.
We'll watch that closely.
Got it thanks guys.
The next one next we'll go to Bert Hazlett with B P. I G.
Thanks, just a couple of quick ones in terms of the timing.
If everything goes well with regard to the sale leaseback at what point do should we actually start modeling the impact of that and then with regard to Ross when should we get the data again was cut out so apologies if you've addressed this already and I have one or two more.
Okay.
On the sales leaseback pretty much of efficacy as the announced you could.
I'll start amortizing them off of wheat.
Pretty shortly thereafter.
That's.
Once you see that finalized then we can start.
Corporate debt.
<unk> any sense of the timing yes.
Roughly Q2, and Q2 I'd say early to mid Q2.
Okay.
And Ross.
On our Rls.
I don't want to speak too much for them, because I know, they're going to have a lot to come out so.
But the group will be a partner here, we talked about what the CMC could look like of devices. It looked like in house Mannkind.
On the play strong support role in revenue as they go forward. So I think youre, just kind of see a lot of renewed.
The positive information coming out of them.
And I think that would be great.
Not much the share at this point, there I think youll see more and more of them.
Just one or two more on partnerships and liquidity.
We see a nice deal could you just discuss whether or not you have an appetite for more of that type of deal on the near term and then with regard to Ut and there are other elements discovery as well as research elements to that deal do you expect any visibility on either of those components in 2021.
On.
On slide Quiddity I think look this is our first time, leveraging our infrastructure with the second product.
There are other products I've looked at in companies that talked with that we can bring in on other product that maybe even hire more reps to get more coverage of afrezza.
To make sure we handle this one on appropriately we do a good job on launch of our team executes well and I think of walk and chew gum by selling of friends as well as liquidity with two products. So assuming we see from some nice continued focus here in Q1 and Q2.
Yes, we will have a bigger appetite to take on more and later this year early next year.
So that's something that we'll continue to look forward, having single product companies.
Very hard as you know and so we think diversifying our revenue base of bringing in more products on leveraging the infrastructure. The good thing and I think we want to just show that this opportunity to take advantage of I'm pretty happy I mean honestly, we went into this pretty quickly with the partner here.
Yes.
We have the infrastructure and expertise in this particular segment. There are actually focused on just so you know primary care there kind of another sales force out there covering a larger audience than ours and as well as all the other are not going to expect so we're really just focused on endocrinology as the.
The responsible for starting a lot of patients, but they don't always maintain patients.
And so thats exciting there and I am trying to show that we can make impact and other products outside of Afrezza sort of that to me is.
The important.
On the UT I think the main thing there with our conversation look martijn in the company.
Is there is additional opportunity to work on current I've talked about many ideas.
As well as our team. So we feel like there are I think number one two and three is we don't want to mess up on shall possible. So nothing is more important than both sides of the equation here make a short type of ACO Dpi's filed in early April and that this is moving forward that's critical to their future. It's obviously the large impact of our future and so once all of that is off.
On the ground I think youll start to see.
This of opportunities to work with them on the research side that we've put the.
The previously disclosed of an agreement there.
We do have discussions and we expect that there'll be more partnership opportunities beyond just the two possible.
Okay. Thank you.
Yeah.
And that does conclude today's question and answer session I'll now turn the call back over to Michael Castagna for any additional or closing remarks.
Thank you Tal the analysts for your coverage of continental questions I appreciate it and the team here Doug I would appreciate your reports on the insights you provide which kind of gives us the guidance that we're looking at and make sure. We're all aligned on the right direction here.
You want to say, thank you to everybody. It's been a long journey to get to where we are we know we have always placed on the right decision on the right best.
And there are some twists and turns on that road over the last couple of years, but I think we can see the foundation, we laid out which is really the commercial infrastructure on endocrinology and orphan lung focused pipeline and leveraging technosphere is going to provide multiple revenue streams for the company of the coming years and now we have the capital to deploy to grow the company faster and so that's really our focus.
Making sure we're prudent we execute.
Successfully and we now think of measured approach on how we take the company from here to the next level. So thank you everyone and thank you to all of our employees I know 2021 of the tougher on everybody.
Got through and we came out with flying colors and everyone here made huge sacrifices on behalf of shareholders and I just want to say that get everybody. The it all worked and we came out of the stronger as a company hopefully for society states the things calm down and Covid gets behind us and we can March back to a normal world on the second half of 2021.
If it goes faster, we'll be ready to go faster here in 2021. So thank you again and I hope everyone has a great day.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
Okay.
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