Q1 2021 MannKind Corp Earnings Call
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Good afternoon, and welcome to Mannkind Corporation first quarter 2021 earnings call.
Minder. This call is being recorded on May 12, 2021, and will be available for playback on the Mannkind Corporation website. Shortly after the conclusion of this call until May 26 2021.
This call will contain forward looking statements such forward looking statements are subject to risks and uncertainty, which could cause actual results to differ materially from these state and expectations for further information on the company's risk factors. Please see their 10-Q report filed with the Securities and Exchange Commission on this morning the earnings.
Please and the slides prepared for this presentation.
Joining us today from Mannkind are Chief Executive Officer, Michael Gastonia, and Chief Financial Officer, Steven Binder, I would now like to turn the conference over to Mr. Castagna. Please go ahead Sir.
Thank you and good afternoon, everybody and welcome to our Q1.
2021 quarterly earnings.
First I want to highlight our total revenues for the quarter were $17 4 million or 7% versus 2020, and as you may or may not recall, we had a tough comparison in 2020 because of the pull forward of COVID-19 demand, whether it was the wholesalers or patient stocking, which made a president as we'll talk about in a second looks slightly increased as much as we would expect.
Quarter to quarter year over year.
On the orphan lung disease and partnerships.
And that's our United Therapeutics collaboration with pay based on DPI was submitted to the FDA by United Therapeutics.
Both the pulmonary arterial hypertension indication as well as ILD and with OCA.
Look forward to hopefully, having and acceptance from the FDA with TT later this quarter and it.
Approval by year and on.
On the pipeline side, we completed our first toxicology studies for <unk>, which is M. N. K D. 101, we are now just finished dosing and the dog study, which was a large animal for tox and that'll be wrapped up very shortly and we are now currently making API supplies and.
And identifying the right here for the phase one by year end.
We started several new formulations for new collaborations we are quite busy there and Danbury, we've increased our staff on R&D as you see and excited to continue to move the pipeline and new collaborations food and we continue to progress in 2021.
As we look at the endocrine area Afrezza grew $8 1 million and 1% versus Q1 and 2020, but what's really important to look at is true demand growth and the marketplace and what I mean is when you strip away and.
Inventory shifts from wholesalers pull forward of patient prescriptions here and there.
Volume mix and price you really show a true demand growth from $7 3 million to $8 8 million or 21% year over year.
As many of you may notice on our earnings we did expand our investments behind the price but that debt.
$3 million increased expenses, not 100% related to our president and a lot of moving parts to that number number one we did expand our sales force and Q2 of 2020, you're just seeing that and get out the door here in Q1, 2020. One Q2, we increased our medical liaisons and what Youre just happening here in Q1 of 2021.
All things related to our present that really took effect either late in 2020 or early 'twenty. One that we're just going to start to see the impact of those extra hires and extra expense here as we progress and the rest of this year.
Pediatric trials and other area, we've increased our investments and getting ready for that trial and the FDA recently, and we'll be providing a final comment but gave us the green lights and move forward. The IRB just approve the protocol with some minor changes and we are on track to start this trial and the second half and extremely excited with all the work that the team has done and getting this trial scrambled.
We've also with liquidity co promote here late in Q1, and we'll continue to see progress in Q2 as the team gets additional marketing materials and getting out there a cluster targets as COVID-19 opens up the world.
And on the balance sheet, Steve and the team has done and very nice job as you look at our cash balance at the end of March was $278 million, mainly due to the convertible debt issuance of $230 million and we've also completed our debt restructuring where now the majority of our debt is due in 2020 six and we would do some of the.
So with the legacy debt, we had on the company.
And in April.
On the Afrezza when you look at the moving parts here with the bridge program, which was a free goods program that showed up and the symphony and it could be a prescription that ended January one and so it's hard for the market to see the gives and takes and the prescription and so we're trying to show you. If you look at T Rx plus our free goods that we see flash cash.
<unk> pay and you look Q4 to Q1 generally flat and if you recall, we typically see a Q1 decline versus a Q4 because patients generally still one extra scrip at the end of the year to Max out their benefits. So I think you see this looks pretty good relative to what you're seeing on the marketplace of strips dropping.
But just know a lot of those scripts dropped about 15%, which traditionally we call. The day Bridge program and Thats now gone and our history.
And you look at some of the work we did here in Q1, we had a sales meeting that was virtual we got the sales reps new materials with a new message focused on speed.
And launched a nationwide CME focus on ultra rapid insulin with P. C Y O D and.
And we've done more surround sound and amplification to increase the awareness and reminder, around the president and inhaled insulin.
See more journals digital EMR advertising and a friend to assist our new reimbursement hub got 25% of our <unk> and Q1 and continues to progress here in Q2.
On the patient side, you'll see expanded digital marketing, we pilot it and a couple of states increase that here in late March early April so all of our covered states. We've seen a 40000 clicks and increase in traffic and our dealer website and we've also increased our support of third party advocacy groups and here you can put a little cargo running a pilot and wanted to key markets here on cars.
Let's see if that helps increase awareness of inhaled insulin.
So currently we are finalizing our plans to invest to get Afrezza growing faster now that cover it looks like it's behind US, we believe 85% of our field employees and roughly vaccinated and so we're basically back to where we were pre COVID-19 of last year as we expected debt all of those back up and running here in Q2.
On the 10 day, so timeline, we completed everything we've stated here in Q1, and Q2 and Q4 and we're just waiting upon acceptance, but as you may look on a job board. We are hiring quite a number of employees to gear up here for Q3 and manufacturing of Televisa and the site Buildout, which is an expansion opportunity to support the future.
For additional indications on <unk>. So so a lot of work going on and Danbury and I just want to thank everyone for listening to the call and that's been a tremendous amount of work under a really tough circumstances with given all the extra equipment, they've got aware during COVID-19 and making a high potency molecule and.
We hope it will be on track for a day at the end of this year, Steve I'll turn it over to you.
Thanks, Mike and good afternoon.
<unk> first quarter 2021 financial results and a number of favorable changes we've made the debt terms with our lenders.
Please supplement this corp.
<unk> consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC. This afternoon.
Let's start up and looking at revenues for the first quarter of 2021.
And that's a net revenue was $8 1 million versus $8 million and 2020, a growth rate of 1%.
As Mike said, you may recall that in the first quarter of 2020.
And was favorably impacted by approximately $5 million due to shipments to wholesalers related to patient stockpiling as the COVID-19 pandemic started to heat up.
Excluding the impact of the first quarter 2020, stockpiling non-GAAP reported growth was approximately 8% mainly due to favorable price, including gross to net.
Also as Mike spoke about Afrezza demand sales increase of 21% for the first quarter of 2021 versus first quarter of 2020 demand sales and reported by the company and adjusted by Mannkind for growth net the most significant reason, we don't see a similar increase and Afrezza net revenue.
Cause of wholesaler buying patterns.
Specifically, the increase and the first quarter 2020 inventory levels for patient stockpiling and it just mentioned plus as we expected wholesalers and lowered the inventory levels and the first quarter of 2021, primarily related to the termination of a free goods program as well as seasonality, which impacted our spreads and net revenues by approximately 1 million.
Yeah.
Moving to collaboration and services revenue for the first quarter was $9 3 million versus $8 2 million for 2020, representing a 13% increase.
The increase was mainly due to higher revenue related to our United Therapeutics collaborations as we prepare for the commercial manufacturing launch on the cadence of Epi as well as revenue from the Fi Quiddity co promotion agreement.
By Quiddity was launched approximately midway through the first quarter.
In addition to the new site Quiddity collaboration revenue, we expect new business development deals will further add to our collaboration revenues this year.
We've been quite busy raising capital and restructuring our balance sheet to make the company financially stronger.
And early March we raised $230 million by issuing two 5% senior convertible debt, taking advantage of strong market conditions and demand for mannkind convertible debt reflected and a substantially oversubscribed offering.
The cash received from the convertible debt offering has resolved the significant risks and uncertainties regarding sources of liquidity, which previously raised substantial doubt about the company's ability to continue as a going concern.
Our 10-Q filed today with the SEC reflects the absence of a going concern disclosure.
And April with our improved financial condition.
Some of the proceeds and the convertible debt issuance to pay down some of our higher cost debt and negotiated more favorable terms with our vendors.
Specifically, we paid down $10 million and mid cap debt and interest rate of 875%, which reduced the outstanding balance of $40 million.
We also paid off the Mann group term loan with an interest rate of 7% and the amount of $35 1 million and outstanding accrued interest and demand group and the amount of $4 9 million.
Overall in April we decreased higher interest rate debt by almost $50 million.
Yeah.
In addition to reducing debt. We also renegotiated terms on the mid cap and then debt.
For our senior secured credit facility with mid cap, we increased tranche, three and 25 million to $60 million, which and available to us between December 2021, and June 2022.
Based on DPI as approved by the FDA.
The interest rate on the loan was lowered by one 5% the LIBOR interest rate floor was lowered by 1% and we added and interest rate cap of 825%.
We also extended the interest only periods of one year to August 2023.
In addition, financial covenants were relaxed specifically, our minimum cash balance was lowered from $30 million to $10 million and upon FDA approval of <unk> for DPI and the minimum cash balance requirement is eliminated entirely.
And as long as we maintain and at least $90 million and unrestricted cash and equivalents with Brexit and 12 months trailing and net revenue covenant is suspended.
For the remaining man group debt.
And how material could that be actually this year ahead of approval potentially and do you book that and then also you know I guess as you try to figure out of somebody that is gonna be a big product.
How do we gauge manufacturing revenue as a percentage of and the sales so to speak and what sort of margin is there on that.
The question on breathe. Thanks.
So.
And I think on a couple of things one of them. We're just finalizing our commercial supply agreement here with your team and I think we will have further guidance as we get the Q3.
And when we have those up and Q2 on on some of the the margins on a percentage of sales and.
In terms of looking revenue when we can expect I'm going to.
Separately, where the Steve here I'm Gonna stay with the going to do the same thing will provide some perspective once we get the manufacturing agreement completed and we know.
There are a few different ways.
The revenue could possibly be reported and we want to make sure we get it right and so once we get that done we should be and the second quarter, we will provide that.
Feedback to you.
The short answer to your question of oranges, there will be impacts this year and a positive Blake.
And we'll be booking.
Hey, just one of ours in that regard.
Alright, So I guess, we'll cross that bridge later.
I think I've asked you about this before and I don't know if you could talk about it or not so you could shut me down and if not.
You know obviously they filed with the Breeze results, which I think was just like a dose for dose switching study.
From Teva and so the old formulation of I'm, just curious was there or is there ongoing extension.
Extension to that study, perhaps studying at higher tolerable or Max tolerable doses using the DPI such that maybe we can learn that in fact, you can go a lot higher with your product and maybe you can give even superior efficacy, even if it's not statistically controlled head to head study.
Yeah, Great question so you're.
And you're right. The first I think the three weeks, which was the dose the dose conversion and making sure. We were no worse, then and didn't have any surprise safety signals from those patients.
If you recall the enrolled 51 patient I believe 49 and rolled into an optional extension phase and the net outflow extension phase we have patients going on over a year I think all the time and get approval should be almost three years many.
Of these patients so we're going to have good long term follow up on the efficacy and safety and in the optimal extension phase people quote titrated up to higher doses and so the who know what that looks like when we do more of the average dose from where they start up of where they end up with a one or two years and.
And I think that's that'll be important data right from the from overall.
And on the label to also demonstrating the safety and and as you recall, we were able to get to the Max tolerated dose of.
The 150 micrograms and the law.
On people and.
And I guess, the United and fairness, allowing people to go up that high.
And the extension of things and so I can tell you the majority of people.
On the incrementally more but there is a subset of people that the do those higher.
Okay, and if I may be greedy and I apologize I just missed going forward also are they using your device for additional extension label expansion studies.
They're talking about now you'll COPD et cetera or are they easing Taipei. So the old formulation and then plan to maybe wait for approval of the BPI to then try to expand that and you know label after approval or are they using your device going forward, even pre approval for clinical trials.
I think and fairness of everything Youre doing outside of the extension study and so all of the other indications or on their time based on nebulizer, and whether or not the switchover to the DPI formulation I think will be TBD.
The approval, so I wouldn't expect until we see and approval.
Got it thanks.
Thank you.
The next question comes from the line of Thomas Smith SVP Leerink. Your line is open.
Hey, guys. Thanks for taking the questions and congrats on all of the progress.
A couple of my on the.
First of all of I guess now that the NDA has been submitted for private and so <unk> can you talk about your expectations for preapproval inspection and I guess, how are you preparing for this and do you have any expectations on timing.
Yeah, I mean, we'll be prepared for a preapproval inspection on whether or not we need one and I think of the question. We don't know the answer to.
And that's up to the FDA.
The factory is just inspected I wanted to say and the 1919 of Evercore mid 18, but we had no 43 of everything looks really clean and so if there was there recently since we got approval that was the first of all and they were there five years. So we feel pretty good about the readiness of the factory, we're not too worried and we always because of those things and of course, there once the momentum.
Would you expect that and we'll be ready for that when that happens. The good news is and I'll have to go international Everything's here and the U S packaging here and it pretty well.
All of this place and the Boston office of FBA willing on FY <unk>.
It could be an issue, but I mean, I know some other companies out of issues on this side, we don't expect that to be one of our issues of yellow.
Okay got it got it and then.
Some of.
These comments suggested that you are looking into new business development deals and maybe you could just speak to some of the types of deals you're evaluating and any sense. When we could expect to hear on the excess here.
Yes, so the one of the things we started doing the reason with a few partners is lowering the I'll say the.
Cost of upfront to do some formulation work. So that we can look at feasibility studies and the kind of sharing the risk with our partners.
So that we can take our technology and someone else's product and really make this an opportunity to scale up all of the BD opportunities and manufacturing deals and.
Royalty of ultimately very slow I think that's what we're working on right now we've added several come in the last few months.
And on those were already formulating things coming up on the stability and then there's new not new molecular entities will look on that could the MTBE thinking about created and so on that.
The combination of other People's products, maybe in terms of lifecycle management and then there was opportunity look at earlier stage of innovation that we think our technology and someone else's molecule.
And well together and the either one by soft doesn't makes sense of together there could be really powerful and.
Treating some of the working on the areas. So that's our main focus for those types of collaborations that the.
Collaborations with our partners are likely to be non orphan lung areas, where we will partner.
They start off on the.
And that could compete with where were wrong and our pipeline.
And then something.
Still something of on COVID-19 Bubbling up that people are working on that they want us to explore our pattern development and formulations for us. So we'll continue to explore those but were not directly going to focus on COVID-19 personally.
As we speak because theyre going through the molecules are things that we can formulate with them we'd love to continue to look at this.
And we think of a scalable technology that can deliver.
Steeping of the loans that provide the clinical benefit and many diseases.
That's where we're looking to see how can we continue to help.
And more patients as we go out there so.
Hopefully you'll see the.
The times of getting done I think the first thing and given the formulations on ensuring they get the right PK and the burdens and then once we know we are dosing and I think those will turn into development deals and go forward.
Got it got it alright, thanks, Mike and that's helpful and sorry, and then maybe the last question with.
No.
And right around the corner.
Maybe you could just.
Talk to expectations for data and we should be watching out for at the conference.
Sure. There has to cover of is it actually ATB, which is coming up and I think two and a half weeks of the.
Distribute our poster for that.
And so that one is gonna be nocturnal hypoglycemia.
Growth from our Stat study of the new analysis that was done and then and 88, we had two posters. There one is around the daytime tightening the range and Thats based on the moving data just got published and we're.
Showing that afrezza can improve daytime and control and give you a better time and range and the other study that will be presented at <unk> will be the piece of PK study and I think that will be one of the first times without the if I recall and what will be the start as we start to prepare the market for pediatrics and understanding how it splits what it looks like and then.
Getting into some of the free market preparation of it and the build over the coming years.
And that's where the second phase in a day.
Got it great. Thanks, Mike.
Thank you.
Your next question comes from the line of Robert <unk> from <unk>. Your line is open.
Hi, This is Terry on the line for Bert Thanks for taking the question.
And additional question on potential development opportunities specifically for Taipei, So DTI.
Has it been any ongoing discussion with the achieve regarding additional indications ph COPD.
And that they are currently investigating.
Okay.
And could we expect any any any future update regarding additional opportunities.
Yes.
And clear from Us and you see that.
And I think the good news and the FDA and when I listen to the earnings call.
Is that we havent right from the FDA and they havent, writing that any additional indications of <unk> guests, our formulation will be eligible to fold into the label, although it may be protected with Ut and orphan orphan and patents and things like that and.
So COPD was to get approved for them and with IPF got approved and those of indications that could expand for the per vessel TPI label, So low preparing for success and those markets and those opportunities and.
And so we just plan.
The file with the ILD and ph free and I'll just speak.
I think they expect the readout on the COPD next year, if I recall and in the following the IPO.
And we'll keep watching those that we've got to get and we've got to get ahead of those of the clinical manufacturing we can't wait for the <unk>.
We got to be ready to go there as of this.
The markets.
Great.
Makes sense. Thanks for thanks for taking the question.
Thank you Terry you and.
Next question comes from the line of Steven My friend from Oppenheimer and company. Your line is open.
Hi, guys.
On the front.
The estimate of how much channel inventory is out there that might still get work down to.
And at the end of the free goods program.
That's the the uptick.
Steve we don't.
We believe that the reduction of the channel inventory was mainly.
Q1.
And what we've seen in April we haven't seen further worked out of the inventories that are expected to all of the embraer.
Great. Thanks, and thanks, Steve and then.
I was wondering guys. If you could update on some of the initiatives you highlighted some already.
And maybe if you could talk a little bit more about how our president of assist is per.
Forming for you guys and then any update on Blue here I didn't I didn't see anything on that.
The two great processes and thank you.
And the further assist you saw 25% of our volume went through there in terms of the new prescriptions, we're seeing anywhere between 60 and 90 prescriptions a week come into further assist all the.
We have in front of what our sales force to improve that and.
The example of the areas we're looking at.
And one large PVA and and saying what we're focused on the claims we're getting approved and that helps us fine tune our contracting strategy and so now we can see you know 90% of claims and get approved on PV on one and 80% of GBM too. So it's really given us really important insights and as we think about how do we remove friction from the prescribing process. That's one of the things we continue to work on.
Our fragrance business given the most roadmap on the ability.
And to improve and certainly with the Steve and the process for example of doctors.
And out of other prescription growth rate of.
The new prescribers and now it and go back and educate them and say Hey, this is how it should be written.
Or we see they don't feel LTA, Aubrey and many times the payers of says Hey did you say all of the competition or not and as long as they tried the competition that will get approved and now we see NFL growth.
A lot of times of the doctors are starting of the document that's the fee.
The premise and that's causing the delay and from the time of prescriptions and the conversation starts. So we're getting a lot of good insights that allow us to keep working off of those teams to keep the move in the friction and get those offices to be more efficient and the <unk>.
We have no problem with the prior off most of the Ta the label and some cases of step edits to the through the preferred agent, which again, we're targeting the three and 5 million people on insulin of today and so that's more than enough patients to grow of successful company around.
So that's the size of the we've got about 200 patients honestly and in the wings right now and just waiting for the PAA for the Doctor the completed or Pbms.
And so let's say there is some kind of perception of the.
Low the patients that should come out over the next three months.
And a couple of hundred per.
On Blue Hills, we've acquired this quarter, mainly because of waiting for the FDA to grant us the meeting and give us feedback on how they are going to categorize the device.
We think it's an exempt of ice we just want to make sure of that before we talked much more about it.
But otherwise and continue to invest on bluegrass and important partnership with beauty is an important partnership here.
On the income side, and then really looking at how we integrate that potentially putting out the software to feed it with CGM and dosing.
So all of that continuing to progress the spending of mobile money as the go forward on this one and you'll continue to see that get elevated as we have the best this year and the next year. So.
And.
But still front and center and important part of our.
And in the future.
Future growth hormone.
Thanks, Mike.
Lastly, as Steve.
Gross margin ticked down here sequentially.
Are you seeing on the sort of steady rise anything unusual and product revenue cogs that you'd call out or anything else that you would highlight on the gross margin. Thanks.
Yes. Thanks for the question it's related to the manufacturing activity for the first quarter of course present.
Since we didn't have a lot of friends and manufacturing in the first quarter the.
Excess manufacturing costs fell through to the Cogs line without getting capitalized as it would if there is actual of manufacturing activity. The second quarter, we have a lot more manufacturing activities. So you should expect the gross margin to be higher than the first quarter.
Got it thanks guys.
And welcome.
There are no further questions at this time I'll turn the call back over to Michael Gastonia for closing remarks.
Great well, thank you everyone I think.
The good news for hopefully knock on wood that COVID-19 is slowly getting us back the normal I personally the upgrading customers the last week and.
And very excited and being able to meet the large practices and understanding where we have and have not gone right and wrong with Afrezza and where we can kind of turn the corner and thank all of Hunter is doing a great job and getting everyone focused on the right things. We're currently looking at how do we get each of our district managers, leading growth quarter to quarter and I think we're on track probably this quarter for the first time of <unk>.
Seven out of the nine going double digit positives as we close out of Q2 so it.
It looks like and to see the momentum we've got a lot of great new salespeople out there and a lot of our current reps had the work through the pretty good lending here in Q1 and that was a little bit of friction and they had to overcome but I think of lot of that is now behind us and.
Expect and receive would seem like the stabilization at this point with the free good behind US and you may have and I realize there was some sort.
And the coverage changes here in April, which we mostly worked through and so I think we're seeing the bottom here and we should start to continue to see growth as we go forward and that's.
We're at two and up four and Thats were investing for sort of look forward everyone. I'm talking here in Q2 getting on new datasets out there and continue to move of ACO and our pipeline forward.
And we are and the best position we've been in the last four years and looking forward. The continued in March alone and 2021, and hopefully starting to grow this company a little bit faster. So thank you for everyone's support and look forward to talking to you soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
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