Q2 2021 MannKind Corp Earnings Call
And you have to start it's been a great partner.
And then other key topics here as we fought to finalize the debt restructuring we paid off on the legacy that we have no major obligations due in front of us and our PPP loan was 100% for given in July as we did the right thing by keeping people employed doing at worst pandemic, we've seen and really happy because that really settle mannkind to come out of the pandemic.
We continue to beat in our business continuity and keep our teams focused on what's doing ready to help the patients.
The bridge over to five eight so we're right here on this.
But just the box here in Q3, but as I said, we completed our pre approval inspection and now Danbury is starting to begin.
<unk> efforts in terms of product launch.
We're in the process of hiring about 100 people on temporary which is on track. Despite the difficult job market. We know, it's very hard to hire people right now.
The infection is complete.
We are focused on building commercial supply in anticipation of the October launch and also as difficult Danbury to go $24 seven as we get into 2022, we need that.
They have to get that ready and trained them here in Q4.
People give us give an update on the financials related specifically to the supply agreement.
Now, let me talk a little more about Afrezza in Q2, we had 9% overall, our <unk> growth and this is due to a lot of efforts of the team. We're trying to increase education increased awareness and really increased sales force effectiveness and execution one.
One of the things we talked about Q1, but I think now we have six months you'll start to see is we made a fundamental business change in terms of our free goods program, we heard from doctors access of Afrezza and <unk>.
Creative.
Copay card program that you can go directly to the pharmacy and there was no friction in the process that we saw in our program cost and kind of lot of money and our shareholders, but the docs just werent doing the <unk> and in order to get formulary coverage you need demand showing up.
To the payers and so we've made a fundamental shift we build a reimbursement hub overlook ended last year with Boston in Q1, it's called a president assist and now you can see here in Q1, we had 641 claims come into our pharmacy, which does not show up in Symphony, that's the blue bars on the right side and Thats, our cash program and our free goods were <unk>.
Buying the two because the day Grand scheme, some patients pay cash for 100, $200 a month, but some patients get free drug and we just want to show transparency of what's happening in this channel because you can see Q1 to Q2 that grew 50%. So even though our overall sales grew 6% and the Symphony reported data, we're seeing significant early indicators of new patient.
And getting started on the product and just went from about 49 scripts a week Q1 to 74 scripts a week of Q2 and that base will continue to build as we build up demand, even though patients should come off go into paid prescriptions I'll just becomes our feeder pool in terms of new prescription.
Really feel the agenda on the left that's really the base refill based business and on the right is what we see as new patients coming into the future. So really excited about that and just some early indicators of that.
Q1, we had six of nine districts have been positive quarter over quarter growth and now we look to Q2 be at 890 <unk> quarter over quarter. So we look at this on totality of the early indicators are there and what's going to propel our future demands.
We are fully focused on accelerating afrezza growth and.
Youll see that these investments as we look at year over year.
And our free goods now are starting to show up in our E. Hub. This is meant to streamline the process and bring transparency and now we can see over 1000, new prescriptions. This year come in and how the doctors are writing though.
Testification using I'd love to get rid of it completely but we know that.
Difficult given the PPA models that exist today.
But we could see almost two or three patients get approved for present when they come into our hub and then the remaining 30 to golf free goods or they pay cash.
And we continue to cover them hopefully until we can get that through the system.
Neither getting effectiveness and satisfaction or not.
Also in the quarter, we ramped up our digital advertising and a re targeting on Youtube social media platforms.
We sponsor counter daily and Andy Carmody, and he's on to regional cardiovascular kit is going to start to think about how do we prepare ourselves for pediatrics in the future and we've also got we had a product theater virtual booth at 88% and we have various webinars.
As we progressed throughout the quarter and really looking to see how do we accelerate growth here in Q3 and beyond.
I'll turn it over to Steve to talk about the financials and I'll close out on the pipeline.
Thanks, Mike and good afternoon.
Pleased to review select second quarter and year to date 2021 financial results.
To supplement this call by reading the condensed.
Elevated financial statements and MD&A contained in our 10-Q filed with the FTC. This afternoon.
Let's start out by looking at revenues for the second quarter of 2021.
Afrezza net revenue was $10 million versus $7 million in 2020, a growth rate of 43%.
The components of growth include a demand increase consisting of symphony reported Trs growth of 14%.
Well as wholesalers, increasing inventory levels in the second quarter, which favorably impacted net revenue by approximately $5 million.
And more favorable mix of Afrezza cartridges.
Including a more favorable gross to net percentage at 40% versus 41% in 2020.
And the negative impact of the onset of the COVID-19 pandemic and the prior year period, when patients and wholesalers stocked up in the first quarter of 2020 only to reduced demand by about $5 million in the second quarter.
A more normalized view of Afrezza growth as demonstrated by looking at the year to date growth of 21%.
Which normalizes the prior year Covid stocking issue.
But still showed strong demand growth was simply reported Crs up 9%.
A more favorable mix of Afrezza cartridges and price.
A 2% more favorable gross to net percentage.
Please note that the change we made to our free goods program as of January one 2021 is paying off and helping lower our gross to net as we can.
Not pay wholesaler fees and discounts on free product, which is now distributed directly for mankind.
Going to the wholesale and retail channels.
This will also have a beneficial impact of future product returns as less profit is sold into the distribution channel that can be returned unused.
Moving to collaboration and services revenue for the second quarter was $13.3 million versus $8.1 million for 2020, representing a 64% increase.
The increase was mainly due to a change in the period for recognition of the license agreement revenue, which is now estimated to end in October of this year the expected <unk> date as.
As well as additional type ACO DPI pre commercially commercialization activities agreed to with United Therapeutics in the fourth quarter of 2020 in the second quarter of 2021 and.
In addition, when comparing to the prior year, we are recognizing revenue from our co promotion agreement provide liquidity as well as new collaborations protect spirit formulation work.
The table on our next slide shows the first and second quarters of 2021, plus June year to date Afrezza gross profit and gross margin on a GAAP basis.
And on a non-GAAP basis adjusted for the expense recorded in the second quarter for the influence supply agreement amendment fee of $2 million.
As Mike mentioned earlier, we've amended our income supplier agreements during the second quarter of 2021 by moving approximately $10.5 million of insulin purchases out of the 'twenty one to 'twenty three time period to 2027 when is better aligned with demand.
Unfortunately, we had to pay a fee to accomplish that.
Focusing on the second quarter, which is the first column on the left you.
You will see that Afrezza GAAP gross margin was 56%.
But when adjusted to exclude the onetime amendment fee of $2 million.
Non-GAAP gross margin was 76%.
During our first quarter earnings call I had mentioned that the first quarter GAAP Afrezza gross margin of 47% seen in the second column.
It was lower than the previous quarter and 2020 because of the low amount of afrezza manufacturing activities in that quarter, which negatively impacted the expense recognition.
Meaning that there was less manufacturing cost capitalized inventory on the balance sheet and more that were recognized as cost of goods sold the income statement.
With a pickup in manufacturing activity in the second quarter, which was expected the non-GAAP afrezza gross margin improved to 76%.
It may be best to look at the last column of the table, which shows the year to date non-GAAP gross margin of 63% to see a more normalized representation of current afrezza gross margin as if adjust for the onetime amendment fee and for fluctuations in the level of manufacturing by quarter.
Looking to the future as we start to manufacture commercial scale <unk> DPI, we expect the afrezza gross margin to be favorably impacted.
Reviewing select second quarter expenses, let's start with R&D expense, which increased by <unk> 9 million or 59% from the second quarter of 2020, which is attributable to increased development activity related to the product pipeline, including MNK 101 <unk>.
Increased formulation activities with collaboration partners. The Afrezza dosing study completed in the second quarter and increased Afrezza Medical science liaison head count.
Help analyze increased expenses year over year included in SG&A, we broke out the increase into two buckets as depicted in the Pie chart on the right side of the slide.
One bucket includes the impact on spending in 2020.
Instead of the Covid impact.
For example, we implemented reductions in compensation and there were lower TV expenses due to the inability of the field force to physician offices.
There is also increased non cash stock compensation expense and increased bonus expense per expected payment of 2021 corporate objectives.
The other bucket includes our increased investment behind our Afrezza commercial efforts, such as marketing spend with an accelerated digital focus and our new patient reimbursement hub.
During the second quarter of 2021, we restructured our debt, including renegotiating more favorable terms on the mid cap and manned convertible debt.
When terms are invented the accounting literature makes you determine whether there has been a debt modification or debt extinguishment.
The outcome of this exercise that the changes to the midcap debt where modification.
The changes for the manned convertible note were considered a debt extinguishment for accounting purposes only.
Recall that we amended the band convertible notes lowered the interest rate from 7% to two 5% saving the company over $800000 annually.
When Dennis extinguished for accounting purposes, but still exist like demand convertible note.
The accounting literature says we have to record the new debt at their fair value, which was significantly higher than the face value of $18.4 million because the convergent feature of the note within the month.
This is very complicated and I hope that I Havent lost anybody at this point I'll keep going.
The fair value of the debt was approximately $40 million at the time of the extinguishment in April which means that mannkind recorded a noncash loss on extinguishment of debt of $22.1 million.
And recognize the additional paid in capital on the balance sheet with the debt premium and the same amount.
The loss on the extinguishment of debt as a noncash loss, which resulted in no change in the financial position of the company.
We feel that this is a real head scratcher, because we restructured the debt with more favorable terms to mankind, but has it recorded board because of the increased value of the debt to the holder of the debt not mannkind.
This noncash charge significantly impacted our net loss and net loss per share for the second quarter on the bottom half of the slide we have adjusted our net loss and net loss per share to show up. These would have looked like without this noncash charge, our GAAP net loss of $35.5 million for the second quarter of 2010.
41 become $13.4 million on a non-GAAP basis.
And our non-GAAP loss was <unk> <unk> per share.
I don't know Im confused everybody.
Go a little deeper into GAAP account.
Last quarter I promise to shed some light and how will you be accounting for the expected manufacturing and royalty revenues associated with time based on DPI.
This slide outlines the different revenue streams from our collaboration with the United Therapeutics.
Starting with the license agreement, we have been recognizing revenue on a ratable basis over the expected clinical development time period, which started at contract signing in 2018.
And went through the date of the expected FDA approval, which estimated date was changed from December 2021 to October 2021, this past quarter with the acceptance of the <unk> DPI NDA filing by the FDA under an expedited review process.
In May we updated the development plan associated with the license agreement and there is approximately $13 billion of deferred revenue remaining as of June 30 that will be recognized as collaboration revenue in the period July through October 2021.
Next on the slide and also included in the original license agreement as royalty revenue, which we expect to recognize a net sales of <unk> DPI once approved by the FDA and sold by United Therapeutics.
Previously disclosed the royalty rate in the low double digits.
In May of this year, we agreed with United Therapeutics on an updated development plan, which included additional pre commercialization activities and an expansion.
Of our manufacturing capacity.
Revenue for the pre commercial activities will be recognized as costs are incurred between may 2021 and 2023.
The revenue associated with the manufacturing expansion, which is a pass through of clogs, the United Therapeutics will be recognized once commercial product manufacturing begins and we sell product to United Therapeutics.
Next on the slide is the research agreement signed in 2018, which whose associated revenues were fully recognized as of the second quarter of 2020.
And finally, the commercial supply agreement, which is expected to be signed shortly will allow mannkind to recognize revenue under two different revenue streams.
For product produced by United Therapeutics, We will recognize revenue on a cost plus basis as product is released by quality assurance to United Therapeutics.
There is expected to be certain other costs, which will be incurred by mankind allows the invoice United Therapeutics as a pass through cost with no additional margin.
Yeah.
I know that this was a lot to digest for the quarter with the unusual accounting for the loss on extinguishment of debt.
The insulin supply agreement amendment fee included in Cogs, and the different revenue streams associated with United Therapeutics collaboration agreement.
Focusing on the drivers of our business in the first half of 2021, we grew afrezza net revenue 21%.
Revenue from collaboration and services by 38% and total revenue by 30% all while executing during the continuing pandemic.
Our non-GAAP net loss and loss per share after adjusting for the loss on extinguishment of debt was $13.4 million five per share, which were pretty much in alignment with analysts' expectations.
In summary, we're executing our plan preparing for the commercial manufacturing of pay visa DPI investing it in moving our pipeline forward and accelerating afrezza growth.
Thank you and I'll turn it back over to Mike for additional comments.
Thank you, Steve and I hope everyone's us still keeping up with us.
It was a complex quarter and some of these onetime items that hopefully they are mostly behind us as we go into Q3 and beyond.
On execution.
Today Mannkind has a very very strong foundation, we've never been as good of a position between the pipeline afrezza growth near term referencing enough SBA.
Look at Afrezza, it's really going to start to become an approved growth driver. When we think about the U S adult population.
Forward, the pediatrics, which I'll talk about in a second as well as continued international expansion.
Number two.
<unk> are now basically DPI is on track I want to commend the teams at three years from the time, we got our results. We signed this agreement with UT to ultimately the filing has been a team effort truly excited to start to help patients with ph auto as well.
Q4.
The pipeline of partnerships. So robust we really can't take on much more work that we have I want to thank our partners for having the confidence in US you start to see the pipeline in retail. It gets next year a lot more will have on the pipeline, but we'd be very excited about many aspects of the pipeline I'll talk about that.
As well.
First let's talk about the Afrezza, because it's literally on the heels of starting our trial.
Scheduled for two investigator meetings, so we hope it doesn't someone else down.
But there'll be plan here in August and we will have about 15 sites up and running very quickly with site initiations in October and help their first patients no later than October.
So the team's done a great job to study it.
S IRB and we're excited to get this started as we go forward here.
Secondly is clofazimine continue to work really hard with the team we have completed detailed GOP Tox studies in two species.
These are 28 day dosing in Pts was 56 days of recovery because there is a very long half life uncle.
All of these are kind of on to wash out and see what happens there was no drug associated clinical science observe and now we are well on our way towards the protocol for a phase one healthy volunteers study is expected to start a year and it will be a forum study with the combination of a single ascending dose and multiple seven day ascending dose design with Tolerability in PK.
Endpoint we've also.
<unk> completed some of the formulation work on a dry powder version of the <unk>.
<unk> and all of these continue to remain on track and are progressing nicely and the team is also working on making sure we have GMP quality drug supply hopefully not only for the phase one for getting ready for the phase III in 2022.
Positive outcomes.
He is one.
And if you look at our 2021 milestones we are on track to meet or beat all of them and a couple of the ones that left for once we didn't anticipate doing when we started our guidance for the year, but as you can see.
And on track, we're very excited and I just want to thank the shareholders our employees and everyone's families for putting up with all the stress in the organization as many people to do a double time over the summer to get ready for the PDI inspection and getting ready for scale up and the hiring of 100, plus people, which for a company of our size for about 250 coming in hiring 100, plus there's a lot of people.
For years, the team has done a great job I'll stop there and take questions and look forward to the discussion.
Thank you if you'd like to ask a question. Please press Star then the number one on your telephone keypad.
First question comes from the line of Brandon Folkes of Panther.
Gerald.
Hi, Thanks for taking my questions and congratulations on all the progress.
Firstly, just on the Fraser and I appreciate the additional color around the free goods program, but any color on the profitability of a cash script. This is Barry.
Showing up in Symphony and then maybe.
But I'll ask it.
Yes.
Any indication of the split between cash and the net.
964 characters you show your day.
Then secondly, maybe just.
Yes, I appreciate the color Steve.
Right, Yes, I think I, followed, but I just wanted to.
You gave us kind of crazy.
Crazy gross margins, how should we think about company gross margins going forward.
With a posture of manufacturing expansion is that running through Cogs.
Any color there and then lastly.
The hiring of the 100 additional people and.
How quickly do you need.
Need to bring them on board and how many do you need to meet the initial demand.
Around COVID-19.
Thank you.
Okay.
Brandon if I got the cash profitability per script I'll talk about that Steve will take the gross margin on the company and the manufacturing kind of flows through and then I'll also comment on the under people expansion.
Pete.
So on the cash program My first objective is to make sure.
Doctor and a patient do not get offered a present because of cost I think the health care system. This country is not fair to patients and as you think about patients are paying 20% cost share the insurance companies want to high double digit rebates on injectable insulin and our models very different we're taking care of the people that have failed injectable income for the most part and we're not getting there.
We're not giving up a 100% market share for.
For those rebates that are competitors, giving them. So it's a very different business model and so the cash program for us as it means that we're not going to lose money, we're not looking to make money, which is looking to make sure patients have access. So that's why we don't report it.
Significant contributor to earnings became thousands of scripts for the quarter, then, yes, I think that's a different story, but.
The percent of prescription that paid versus free is maybe 40.60.
But that's we want to make sure now talk to them at our cost and Thats really the key point here is we kind of all the middleman.
Can see online or price per box of $99 and $199 or our cash script Andrew.
The reason, we're able to offer at that low price as we've cut out the wholesalers.
Yes, all the returns issues, it's all at our inventory our costs, we basically tried to make sure we're not losing money as best we can but it is really meant to takeaway any type of cost reimbursement.
Objection that somebody can bring up and that's really one of the things we hear from docs to talk about but we kind of remind them all the programs we put in place to avoid.
<unk> are starting to chunk for these reasons. So that's why it's there hopefully that helps you and it's consistent with probably the cost of other income in the marketplace. We see what people are paying for the cash.
100 people, we got about 50% of the way there by July which was our goal because that's what we needed to have hired in order to continue to hit our timelines for production training quality systems etcetera, and so we were on track for that and then the.
Higher will continue but we can only trained so many physical people at one time and so we are staging it exists and it's much more about the onboarding and training of people and the hiring of people. So if we can find some extra talent will bring them in sooner, but I think Stewart our head of HR team has done a great job of recruiting people and the next phase of the training will be.
Getting people ready for the overnight shifts do you want to train them during the daytime and then has it moved to 20% of production.
Sure.
Up to overnight, so again, finding those people who want to Merck ship work, finding and training during the day.
Being ready for that shifts out here as we go.
Thanks Julien.
Stuart I Miss anything.
60% now it tells me so we're on track, we need them and mainly diesel because it takes time and up to three months to train somebody on the manufacturing process to make sure the capable and competent and we're comfortable we can have people make mistakes.
Mission critical tomorrow.
Yes, Steve.
Ms market.
There are two pieces to the gross margin versus Afrezza gross margin.
Focusing right now on the.
Non-GAAP gross margin for the first half of the Europe, 60% I think that gives you an approximate.
Margin for where the manufacturing.
Cogs are right now as we move into <unk>.
Virtual production for <unk>, DPI and start to absorb more costs from the factory <unk> DPI.
Two steps that are going to happen. One is we'll start manufacturing by the end of the third quarter and then in the first half next year, we actually increased the manufacturing to be running 2047. So as we continue to crank more volume through <unk> DPI, it's going to impact.
Positively.
The gross margin.
Take out into the future and the expansion of the manufacturing capacity when that additional manufacturing capacity comes online.
In a few years, then that will also will be cranking out more units and the cost per unit of both high base of DPI as well as Afrezza should go down. So we look forward to the continued growth.
Gross profit the gross margins.
Great. Thank you very much.
Next question comes from the line of Danielle <unk> of RBC capital markets.
I've got a couple more on <unk>.
As a.
First with respect to the pickup in Afrezza sales I realize there are a lot of moving parts, but are you able to tease out how much incremental contribution in the second quarter can be attributed to your sales force expansion and other recent commercial initiatives and then second can you talk a little bit about progress in growing the Afrezza prescriber base.
Thank you the last time, we spoke you were at about 3000 physicians.
You made any progress growing that number and as we look out over the next 123 years, Kevin specific targets in place with respect to prescriber growth.
Yes, great question, Daniel on the Prescriber base, they actually just engaged in a conversation to speak which is do we go deeper on the 3000 or trying to get to 4000.
And we think we can have and I think there is a lot more we can we can drive success in the shorter term by getting doctors to have already brought the product to write more and so that's our short term focus I think especially with Covid where access is still.
Difficult I mean, it's a kind of went through the numbers. This week with the team that's at about 40% in person in 2030% of virtual 25, roughly percent dosing and that varies by area of the country.
And then so I think until we can fully open let's continue to help those who understand the product and get them to help more patients and I think we had silver kind of upside within our 3000 prescribers.
The basis.
In terms of.
Which driving some of the improvement.
I think its consistency across the district and across the territories to support some of the sales force expansion, but it generally takes six to nine months for a rep to come in and make their impact retrained feel confident.
But some of the numerous which is higher and obviously you have come in and hit the ground running I think two or three in the top 10.
As we get into Q3, so I mean, they just started last three months.
So we do see that new people come in and are able to impact.
The historical.
And that could be part of it but I think it's more consistency across all districts alternatives right now.
As mentioned in.
In the past we grow in the third will grow a lot of third may shrink and then a third stay flat and we're kind of like slow growth now we're looking at having more consistency across board territories.
That's what you're starting to see and then on the.
Increased marketing investments.
Doing things like outcome health with an office television advertising more commercials, we've done some math.
Our outreach programs on Facebook really trying to recruit.
So we have talked about our president and I think the number one thing we still continue to see is we have to get doctors comfortable prescribing cascade.
The try five or 10 patients so they really see the clinical merits of the drug.
We can see people arent operating.
Scripps is if you're going to write five or 10 scripts and I'd tell me, they're not covered or whenever excuse me when it make that's fine, but we got to get doctors really comfortable with the product and I think it's been on the market for enough time that theres really no excuse.
At this point to not offered through patients and in fact, we just had an advisory board on Friday on that.
From a document unembarrassed to offer its my patients now because they're gonna entity wide an offer for the last five years.
And so they're starting to believe in the data they've seen the data. They think it's meaningful we were able to share.
Just called the Das trial, what's really looked at almost a two X dose right upfront and you saw really beautiful results, there, which will be shared shortly.
Well. This is really convincing me the EMA small study youre seeing would've Brexit could do real time, CGM and I think that that's important data as important as meaningful, but we got to get them, adding it to their patient regiment and adding to choice.
The big part of our focus here.
Salesforce expansion.
We're looking at a primary care pilot may be here to launch in Q4.
Continue to drive faster growth.
A lot of things in the works share more as we get through Q3.
Specifically on that question.
For us it grew.
Crx's, 14% year over year, and we had a favorable <unk>.
<unk> mix, which continues to help our net sales gain and I'd kind of put those two together tenants with salesforce.
Yep.
And that's important Daniel because as you titrate appropriately it's natural that patients are going to go to a 12 unit cartridges.
For you to cartridges, there's a benefit.
Here as well.
Great I appreciate all the color.
Okay.
Next question is from Steve Lichtman.
A one timer.
Thank you hi, guys.
On the free goods program.
What are you seeing in terms of conversion to paid prescriptions and what do you think is a reasonable goal on that metric.
Yes, we look to some of them that come in and don't have a prior off up to have a prior off so the overall number of 100 scripts came in 65 will go through whether it's it or no. We see 65 go through so that means you now have 35 patients.
That would move into free goods or cash and what are the sports because we offer the free goods for a limited period of time. So they can show the merits of the drug get the benefit affected the Ccs side effects and make sure they're comfortable with it and then that gives the doctors the evidence to appeal that to an insurance company and get that appeal of returns so I think overtime.
Time will be able to take that 65% hopefully I would.
At 80 plus percent as we go forward because some of what we're learning Steve as doctors don't know what failure, because they don't want to admit a seven 5% is failure in their minds and so they've been able to tell us how youre doing good you are at a seven 5% to three four years and now let's switch to our friends at <unk> to six 5%.
And part of the insurance company. They just want a document that patient tried and failed to preferred agent and then the doctor's mind $10 five may not be failing for example, we just got to get them comfortable documenting certain things for the joined the company 3% coverage.
But thats feedback, we get from the hub and we share that back to the Doctor and patient.
And so we do expect as people learn how to properly prescribe it probably through the <unk> and.
Lately and that's all feedback we get.
Peru.
Now we can see like on express scripts, you got 85%, 90% approval I'll suggest you have roughly 75% approval. So we're able to see on a too big assurance companies Youre talking 80% average.
And then we deal with the smaller regional one <unk>, 50% now, let's go and they are focused on making up on Texas.
In that local market. So that's the answer.
As such we're getting right now which are extremely helpful. Now we've gone to the payers and say Hey, we had 200 people come in and.
Here's what's happening.
Hopefully that brings some clarity for you.
Great. Thanks, Mike and then.
If you could provide some more color on the headwinds you experienced prior to CMS recently.
Seeing the restrictions relative to <unk> just to give you specifics.
Things change in the field and it would yes.
Also in the Q on the private pay fiber or was it just the Medicare.
Yes no.
Specifically CGM they issued their CMS coverage, Paul and I wanted to say it was 2018 I could be off maybe in 2017, but think of 2018 are they initiated coverage for the Max to decide how to properly cover CGM. It's been simply stated you need to be on injectable and client X percent of times, a day and so we had <unk>.
So either we're hesitant to prescriber president because they really value the CGM at sites, where we have patients who run our friends, who can really land CGM and theyre getting rejected by Medicare. So we kind of reached out for Medicare last year and the hesitated because they don't want to open up the <unk>.
Policy, but they did open up a policy for comment which was due to our efforts.
The good news for patients at the end of the day is next comp component and for Libre jumped on it and everyone, including the companies there as well as the patients benefit from the change is basically eliminated the need to be on the checkpoint on sticking your finger.
And that just goes to show you.
It also opened up dialog with CMS.
US around here's our clinical data and here's why Medicare needs to be more forcefully covering afrezza because we've shown it to be the two studies at $60.65 year olds, where we got really good results just by switching from excellent onto Afrezza, we prove they won't see improved quality of life.
Yet.
We still see Medicare providers restrict patient access and drive up the comp, we really want to be aware of that because.
Taxpayer dollars.
Patients shouldn't have to suffer complications from diabetes, and so help us create that dialogue with CMS and <unk>.
Also as well as the payers know that CMS is paying attention and we are lobbying for.
30, <unk> pilot program to include a president or just approved formulary coverage for Medicare.
I think we're having good dialog with the conversation I think over time.
<unk> is on its way, we continue to get better and these are long term plays. These just don't change overnight and we do see good coverage I think 20% of our sales today are Medicare I think if you look at the entire insulin market, 30% roughly.
We're slightly below book.
So.
Older patients.
That's fine.
To help you on that.
Okay. Thanks, Mike and thank you Steve Thanks for the breakdown on SG&A.
Q, how should we be thinking about trends.
Trend on that line in the back half.
Yes, Steve we generally.
Talk about our future.
<unk> earnings or anything but.
I don't think I think it's going to be in the same ballpark.
Approximately without getting very specific about it.
How much of the timing.
<unk> pizza and kick off so depending.
Telco could never holdup could change some of the expense line on R&D with part of this headwind.
In general.
We're being prudent with our cash.
Got it great. Thanks, guys.
Next question comes from the line of Thomas Smith of.
Also need the leerink.
Hey, guys. Good afternoon, thanks for taking the questions and congrats on the progress.
On the FDA pre approval inspection.
Can you provide any more color or granularity on the inspection process itself. It sounds like Youre expecting the formal report within the next 30 days, but anecdotally we have some cases, where if there are issues cited during the inspection that communicated onsite in real time.
Can you just comment on what youre experiencing like with SBA.
Yes. Thank you for the question you originally remain for it so.
<unk>.
What I'd say is the FDA completed theres two parts of the inspection of the preapproval inspection of ACO and then they completed different tiers, roughly a GMP inspections, but it came back lesson was 2018 and so they also did that back to back.
Overall should be proud of the work the team did an enduring that FDA inspection.
There was only one finding and it was not related to the product much more related to the equipment qualification, but does not impact our timeline or anything so we'll wait for the full report for making any comments, but theres no showstoppers here that the feedback we got resolved the onsite inspection.
Okay.
Okay, and I guess, Mike did they indicate.
First one on the one finding that it was.
And there are certain designation I guess voluntary action indicated or <unk>.
Mandatory action indicated.
I think the.
Turning to <unk>.
It's one that's a one finding.
They're bearing degrees right. There is a major theres a warning letter and then there is minor 40 threes I'd put us in the category of 43 minor.
And then I think that's okay.
Perfect FDA has to look for.
Thanks.
And Thats, our job and our job is to make sure we correct those things as quickly as possible.
But specifically around <unk>.
Equipment.
Specification around how do you validate some of the qualification and actually installed.
Equipment.
So theres nothing something that can be resolved.
Not contingent upon that review process.
We're comfortable.
The team did a great job.
I wont go into lot of details on it.
A minor in the Grand scheme of things and it's a pretty in depth inspection of investigated wonderful job in a very collaborative dialogue with subject matter experts. So I was very thorough.
Hum Opex.
Okay I appreciate the color on that and then.
Just one on the prelaunch preparations here.
Obviously, though.
The early days of no loss for <unk>.
The population looked really strong.
Can you talk about how youre thinking about the three launch manufacturing plan in light of that launch and how much is Paul David last three months, obviously, youre hiring pretty aggressively in Danbury, but any additional color on how the prelaunch manufacturing plants have evolved.
And we work closely rutile manufacturing launch planned for SKU mix.
The sequencing of that.
As you know.
Rather complex you've seen the Denver facilities very large multiple.
Part of the feed incidents in the packaging parts. So we've got to get that right and we expect the ILD indication in October along with the page. So we're prepared for a launch quantity launched supply to deal with both at <unk>.
The good news is we're able to launch <unk> start to see if they are on track and that feeds into our forecast as we go into 2022 and scale.
Scalable facility itself, so I think overall <unk>.
<unk> is on track to the objectives for 2022 and.
So and I think that's great for patients and shareholders as we want to get our product in their hands as quickly as possible. As we think patients are going to have a tremendous benefit unable to try to drive commerce.
We remain on track with them in our forecast, we're not going to get into specifics, but we'll be able to supply the market adequately.
Okay, great. Thanks, Mike I appreciate the color.
Next question comes from the line of Great Hazlett of <unk>.
Yes, thanks for taking the question congrats on the progress just Mike you mentioned in the <unk> trial, just in general terms what were the goals of the study and in kind of the.
The achievements made in.
A little more detail if we can and then secondly, you may have talked about this but could you just discuss the broader applications of blue hail both on.
Fraser and otherwise or whatever you.
The direction you're headed thank you.
Great.
Thanks for dialing in I know you had your conference this week and thanks for hosting us yesterday and I appreciate you dialing in today.
The Dutch trial, one of the things for the FDA ph trial that we really want to make sure we do right.
Those patients right off the bat from the first dose they get and we proposed the specific dosing recommendations that FDA wants.
They understood and agreed.
Agreed to and before we kicked off the peace trial, we wanted to test this in adults to get some comfort around the protocol how it works and see contribute we called hypoglycemia. That's an important safety issue you want to make sure we see and we were able to successfully dose about 20 patients in two sites and really show that if you came in you dose afrezza.
On your normal conversion table. According to the pie what was your glucose control two hours later and we measure them every 15 minutes and then we said okay. Now it's double that dose of your numbers you're going to take for now let's give you a detailed how your sugar control is over the next two hours.
There are some good significant finding a small study, but I think 20 patients.
<unk> been able to see meaningful results.
And so it was really meant to give us comfort piece protocol before we went live and these were done under clinical supervision and so that's how the pizza there'll be run for the first dose.
That will give us the comfort in helping investigators to comfort that this is safe and effective and.
We will publish that data now what we'll do is use that going forward for conversion and our future clinical trials. So we're looking at two other studies right now and wanted to use that dose in adults and feel good about that as well. So I think it just sets us up for the future in terms of making sure the very first dose.
Don't need all these complicated if youre sugars does take a follow up to an hour later, we're trying to eliminate that give you real time control and take away. All the guess work that happens and so that was the goal and I think we.
We did a good job on our global share those results probably remember our comments.
That's terrific and then just generally on Blue Hill.
Yes.
Fortunately thinking about the chip shortage across the World has also been impacted by the chip shortage, though.
We were able to run a pilot on Blue Hill confirms some of the binding.
The accuracy of the dose detection. We've also submitted a meeting we've suspended in inquiries and FDA on how they wanted to do this.
That's just getting granted we just got feedback recently and were looking to now that the P&I advances behind us.
How do we start to move forward from a <unk> side as well as the premise side, so it'll be ready appropriately times, but <unk> would want to use Blue Hills, we would support and diabetes are very different but it will become more important.
Aspect as we look at 2022 beyond.
Building, our own App and building our own digital future with inhaled until we think it can be critical components of that business strategy.
Okay terrific looking forward to that thank you.
Thank you.
Thank you Bert.
Brandon Daniel Steve Thomas John I appreciate the calls into question and your time today and all of our shareholders. Thank you for your patience, we are moving to.
Right direction I know, it's been a long journey, but there has not been kind of firing on all cylinders.
Want to thank the Mannkind team members for all the work in energy that we're putting in this year.
Scott will final month to close out the year strong we got to get through these.
The FDA approval process and hopefully we see it.
<unk> here in Q4 and continue to drive Afrezza forward advance our pipeline. These are very exciting times and I look forward to share more updates on the guidance for investor conferences in September alone.
We will keep you guys updated on a weekly basis, probably starting in September on how things are progressing.
Again feel free to reach out anytime we can answer questions.
There are no further questions at this time I would now like to turn the call that the Mr. Michael at this time, all CEO for closing remarks.
Thank you for closing.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
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