Q3 2021 MannKind Corp Earnings Call
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Good afternoon, and welcome to the mine Mannkind Corporation third quarter.
'twenty one earnings call.
As a reminder, this call is being recorded on November nine 2021.
And will be available for playback on the Mannkind Corporation website. Shortly after the conclusion of this call until November 23 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-Q report filed with the Securities and Exchange Commission. This afternoon.
The earnings release, and the slides prepared for this presentation.
Joining us today from Mannkind are Chief Executive Officer, Michael Tonya, and Chief Financial Officer, Steven Binder.
I would now like to turn the conference over to Mr. Chris Tanya. Please go ahead Sir.
Good afternoon, everyone and I apologize for that delay we were having a problem with the audio and couldn't quite figure out who is under one <unk>.
Apologize I will jump right in and I'll try not to speak faster.
So quickly I'll talk about our operational highlights, where we've been and where we're going first I want to thank our shareholders for the support and feedback over the last few months. Obviously the news we received a few weeks ago was not something we expected, but we do think its something manageable then we will get through that I'll talk about.
I also want to thank our employees, who worked so hard during Q3 to ensure we are executing on our three key priorities.
So DPI production and scale progress of our pipeline and driving our present growth in the U S.
As you look at our revenue, we're really really happy to see that in Q3, 'twenty 2021 'twenty $2 million in revenue, which was 45% over last year.
When we look at our President we grew 34% to $9 8 million over last year.
And overall year to date, 35% of total revenue growth and 25% on a further.
Really proud of those results and look forward to continuing to drive future growth as we move forward.
Yes.
And you often long area I want to talk about a couple of things number one our units or collaboration I'll talk about here on the next slide I want to let you know that we have begun commercial manufacturing and we continue to hire and expand our facility in Danbury to handle the expected future demand.
Yes.
On the pipeline I'm going to share some new data with you today and we had some really positive data coming out in our pre IND Tox studies can help <unk>.
To start phase one here in Q4.
Additionally, we're just wrapping up formulation work with our TGF data for IPF and we're also near done of asthma.
Dosing in terms of inflation.
And the endocrine area.
16% growth year over year in paid prescriptions as you may recall, we ended our free goods program.
January of this year.
We launched our pediatric trial in Q3.
Currently enrolled patients sites.
Sites up and running as of today.
In Q3, as we ended the quarter, we werent happy with the direction we're going.
I had to refocus our resources here in the U S. As we came into Q4 by removing any distractions related to that.
One we exited MSL in Australia, and we see co promote liquidity and effective in Q4.
Our resources are best.
On these three priorities, which is driving us to present.
The pipeline and Ut collaboration.
We will continue to look for potential global partners for helping our ex U S strategy going forward.
Best short term impact to drive faster growth here in the U S, which will ensure our success worldwide.
On the liquidity front, we're really happy today to close the sale leaseback or $102 million in proceeds.
$181 million, we had at the end of September I think as you see towards the end of my discussion today, we are well positioned for future growth and that capital will be used for great purposes.
I'll dive into GPI, we do expect to be approved hopefully C&I therapeutic by the summer.
2022 or earlier.
Please responses received noting a single deficiency on opening.
Second issue at third party facilities that performs analytical testing them.
No drug substance.
This deficiency had absolutely nothing to do with your possible for our teammates and DPI product.
The Great News is we did get directly link and we can see that we can have the same indications.
<unk> solution.
<unk>, we didn't have any contraindications or box warnings in the label.
The citizens petition is now completed.
The efficiency and the CRM.
Do you think there is focused on resolving this issue in getting approvals, so asap, but no later than the summer of 'twenty, two where earlier.
Mankind, we are focused on manufacturing prelaunch products and scaling up our factories for future indications.
As we look at.
Or is it in the U S. We had a very strong Q2.
With some headwinds early in Q3 as we focus on Delta.
Open to shutdown offices again.
That is a distraction trying to get liquidity off the ground, which wasn't going the direction everyone limit that caused us to refocus our energy in Q4, as we got ready to end the quarter.
Number one.
The pediatric study is scaling for enrollment as we as we get more sites on board number two we've hired at primary care pilot in the southeast.
You're about 30 ftes between the sales force and the commercial team running it and that's on track for a January launch.
Third focus is launching a consignment model top three pharmacy chain and what does it mean.
Net of having middlemen involved in our inventory chain of command will now have inventory stockpile with a third party chain, which will improve patient access ultimately decrease the cost of along the value chain.
Fourth we will be launching the pilot to improve patient retention during the first 12 weeks of treatment.
To kick off in December.
And we just launched something called the new part of the challenge with CGM called seeing is believing.
First focus is about 160 doctors who've never written is present, we can see in the first 10 days, we've had about 30% of the Doctor site and the first prescription for president.
You can see in our president our reimbursement hub or new prescriptions coming in are up 45% in the latest four weeks versus the Q3 average. So we see early signs of Q4 continued determined bundle from what we saw as we exited Q3.
One thing I want to share with you a new data set that just got presented.
Yes.
The oral presentation on Thursday, with Patrick Kevin or me.
We're really focused on driving to be the mealtime control company I have been discussing with the FDA, how the best update our label to better reflect the dosing upfront with the trends.
We were recently informed by the SBA and accepted into the net.
<unk> pilot program with a bottle form drug development program.
Hope that does potentially help us understand how we can actually change the label. So that the conversion chart. Our label better reflects upfront does that will get better glycemic control.
Maybe you could themis trial here this is the dose.
Or you have any kids, which is basically a <unk> your injectable dose ramp down to the nearest to present cartridge. We're trying to really streamline and simplify the effective dose conversion for new patient starts on our president.
And what you can see on this chart on the left is dose one is what's in our label.
History, we hear a lot of people say they didn't get adequate control when they switch from injectable insulin.
You can see is when you use our new formula two X round down from here.
For example, if you want five multiplied by two that we turn around the depth of the newest cartridges.
And that's what you see here is a two X ramp down.
Almost a 50 milligram per deciliter by the end of two hours that would translate to about a 1% to 2% <unk> reduction to be able to maintain that over 24 hours.
And this is consistent with the newest data we generate on our presence where we show switching from sub Q2, a presence does improving one fee and just changing nothing else at all besides your input.
Now I'm going to turn it over to Steve and I'll close off talking about the pipeline.
Thanks, Mike and good afternoon, very pleased to review select third quarter and year to date 2021 financial results.
Please supplement this call by reading the condensed consolidated financial statements MD&A contains our 10-Q.
As filed with the SEC this afternoon.
That's what I've been looking at revenues for the third quarter of 2021.
<unk> net revenue was $9 8 million versus $7 3 million in 2020 growth rate of 34%.
The components of growth, including demand increase consisting of <unk> reported <unk>.
<unk> growth of 16% and price, including a more favorable gross to net percentage of 40% versus 41% in 2020.
Trs for the third quarter of 2021 and 2020, we're both adversely impacted by the Covid pandemic.
Year to date growth of 25% was driven by Symphony reported paid to your ex growth of 11%.
A more favorable mix of afrezza cartridges, and price, including a 2% or favorable gross to net percentage.
Moving to collaboration and services revenue for the second quarter was $12 5 billion versus $8 1 million for 2020, representing 54% increase.
The increase was mainly due to additional contracted activities associated with our UT collaboration and a decrease in the recognition period used for the warranty services and license performance obligations.
The year to date revenue from collaboration and services was 44% to $35 1 billion and consists mainly of revenue from our collaboration with United Therapeutics, and the amount of $33 5 million.
The graph on our next slide shows the quarterly in September year to date of friends at gross margin on a GAAP basis and on a non-GAAP basis for September year to date, which is adjusted to exclude the expense recorded in the second quarter.
Insulin supply agreement amendment fee of $2 million.
Our gross margin has been increasing each quarter during 2021 and stands at 55% year to date on a GAAP basis, and 62% on a non-GAAP basis, which excludes the amendment fee.
We continue to have excess manufacturing capacity for afrezza, which impacted cost of goods recognized in our gross margin can fluctuate significantly quarter to quarter, depending on the timing of the manufacturing of bulk and finished product.
Looking at the year to date numbers provides a better perspective on tracking where our margin is running for current credit performance.
Looking to the future we expect to have a favorable impact to our gross margin as you start to manufacture commercial scale type it could DPI.
Absorbs overhead costs and makes our plant more efficient as well as anticipate margin expansion from growing compressor revenues.
This slide is an update to the information presented during the second quarter earnings call.
It's a different performance obligations with United Therapeutics, and how we are recognizing revenue associated with each performance obligation as of September 2021.
Starting with the R&D services, we have been recognizing revenue on a ratable basis over the expected clinical development time period for <unk> Asa DPI, which started in 2018 through the <unk> date in October 2021, when our performance obligations would substantially completed.
We recognized $9 9 million in the third quarter and $28 $4 million year to date.
There was about $1 $5 million of deferred revenue associated with this performance obligation on our balance sheet at September 30 that we anticipate being recognized in the fourth quarter.
The technology license relates to royalty revenue, which we expect to recognize a net sales of <unk> DPI once approved by the FDA and sold by United Therapeutics.
As previously disclosed the royalty rate is in the low single digits I'm, sorry, low double digits and we plan to be more specific once <unk> is approved by the FDA.
The next performance obligation is manufacturing services, which is associated with the commercial supply agreement signed in August.
Then amended in October which extended the agreement from five to 10 years.
Revenue will be recognized as we sell commercial products United Therapeutics.
As of September 30, we have begun manufacturing commercial product, but had not begun to sell product to Youtube.
<unk> to begin selling products that you'd see in the fourth quarter.
The next performance obligation as pre commercialization services, which were recognized between the second and third quarter of 2021, the amount of <unk> $8 million year to date.
The revenues did not have a profit margin and.
And it represents costs incurred by mankind with delivering the agreed upon services.
And lastly, the performance obligations for <unk> TPI next generation R&D, which is being recognized on a percentage of completion method.
Second quarter of 2021, and the first quarter of 2022.
This revenue also does not have a profit margin and represents costs incurred by mankind when delivering the agreed upon activity.
We recognized $2 4 million and $4 3 million in the third quarter and September year to date periods respectively.
The accounting associated with our United Therapeutics collaboration has certainly confusing and I hope I was able to.
Shed some light.
I Hope you understand this area a little better.
If you strip away the technical accounting mumbo, jumbo or collaboration with Ut yielded over $100 million in upfront and milestone revenues, which we recognized over a three year period.
We have agreed to perform additional work associated with title PPI for which we are being compensated by duty and our commercial manufacturing effort has started producing product for which we.
To begin selling to you'd see in the fourth quarter.
Let me conclude with some final comments on our financial resources and liquidity.
Today, we are financially stronger company than we have been over the past five plus years, we ended third quarter with approximately $180 million in cash and investments and added approximately $100 million to our cash and investments balance with the closing of the non dilutive sale leaseback of our Danbury manufacturing facility yesterday.
We are now in good shape to fund, our growing pipeline, which Mike will update you momentarily.
Make targeted investments behind the Brexit and look for business development deals that are complementary to our business, which can provide provide a higher rate of return for our shareholders with.
With this I'll turn it back over to Mike for some additional comments.
Thank you, Steve and thank you everyone.
The sale leaseback now closed you can see the proceeds really are focused on how we can take opportunistic opportunities on our president, which we've not been able to do in the past.
Additionally, our pipeline today is robust and growing rapidly.
It's growing so fast that we simply cannot do any more than we are doing without hiring a lot more people.
Next year, we don't talk about the pipeline as we're not going to talk and have another shareholder call in March February Q4 closes, but theres a lot of positive things happening in the pipeline between now and then but I really wanted to take a step back for shareholders to kind of have a glimpse of what's coming.
On this slide in particular, you can see the cannabinoid did go into phase one that started and they're looking at.
Q panic disorder, as well as our guidance. So there is a focus on that in their phase one. The next slide is really really important.
We are pleasantly shocked with this data we are excited to be sharing this with you for the first time.
<unk> works.
We were already excited about the public border and through our acquisition of Quorum last December but it's really good to see that this effect last 56 days post season, absolutely amazing.
New talk David just recently got it.
To put that as high medium and low dose relative to the minimum inhibitory concentration, which is the green line on the left side the dose for 28 days and then we follow these animals for another 50 68 post dosing to look at how fast the drug clears, how much will that impact as malone versus the plasma and urine.
I'm showing you the loan levels at day 84.
You can see that.
Really less infill bumps for a long time before it comes out it's lipophilic drug and that's exactly what you'd want to.
And we can tell you the plasma theres not very high concentration.
Plasma much faster, but this is a lung disease once the joint the stand alone and this is it.
<unk> eight times that might see which means we have a wide therapeutic dose window, we saw no dose limiting side effects and drug levels significantly higher stage, four which really starts to make us think about how we can dose differently. How you design it and there'll be a trial.
We're going to get this in phase one by year end, we expect patients to read out in Q1, but as it goes really are already thinking about the phase III design and how we work with the FDA to do something interesting here, but not super excited about this product rather than last year and comments from the team there continue to an incredible job in moving forward.
The next step that we Havent preclinical development that we probably this year that we're really excited about TGF beta for IPF.
It was announced in June we've already just kind of stuff.
Dry powder inhalation formulation.
About the puts us into breath, PK and PD and that will tell us what the levels are along those levels are in the plasma and how long have places.
Then just as we believe all of our technology continues to show rapid lung levels with minimal systemic circulation.
I think we want to see in this particular target because it has a known side effect profile.
Circulation increase headings for patients.
The metered dose dosing window.
Agreement that we have withdrawn allows mannkind to exercise certain rights to seek a full license to treat fibrotic pulmonary diseases just to remind you sirona is developing this for a dermatological application of keloid scarring and they also retained rights for everything except for fibrotic Lumpiness that we're focused on.
So as we look out over the next really five quarters that I've just.
Just to talk about 2022 for right now you could see a couple of things number one in Q1, we will get the Toronto program into Rat PK PD.
We will have the phase one readout on <unk> 101, which is called <unk>.
We will know by then the cannabinoid Technosphere phase one readouts, so that'll come out here in Q1.
We'll be moving and then <unk> hundred one in the Tox studies roughly in Q2 and all of this data will then generate meetings with FDA and alignment that should get us into phase two initiation on 101 by the end of the year and phase one initiation by MNK EV 201 by the end of the year.
This is our estimate our best guess today on what we know what we have coming there's a lot of work to get done but why.
While we are raising the money because we looked at over 12 months to 24 months, we could see the pipeline starting to advance and we can see the ability to scale is present, all the safety data that's.
Published we see opportunities to continue to grow this company more rapidly over the next couple of years, we have the previous five years.
This data is excluding any new opportunities that may arise because of external collaborations.
Sort of working on a few formulations those are wrapping up and they may turn into additional collaborations.
So lots of excitement on the pipeline I want to share with you.
We look at 2021 milestone wrap up the year I can't believe it's already November it's absolutely crazy.
That figure has gone by but you could see we had a very very successful year, obviously want to get a win of asos.
CPI for an approval Unfortunately got a CRM and our control, but I would say the team did an amazing job getting the manufacturing process ready scalability ready.
The United Therapeutics team did an amazing job on the clinical data.
And getting its filed in record time so.
Due to anyone for lack of effort.
And a lot of dry powder inhalation products do struggle. The first round in this particular case, we had a clean approval in front of us on the phone a technicality.
A few words.
But we are happy with the progress we've made as a company mannkind stronger today than it's ever been the last five years and our future is brighter than it's ever been with double digit growth. This week as far as you can see.
Thank you to everyone, who will stop there and we'll take questions.
At this time I would like to remind all participants in order to ask a question you will need to press star one on your telephone keypad.
Yes.
Again that is star one to ask a question.
Our first question comes from the line of Gregory Renter.
RBC capital markets. Please ask your question.
Hi, This is Nick <unk> on for Greg. Thank you for taking our questions and congrats on the progress here.
Can you hear me.
Hi, operator can you hear me.
Okay.
Yes, ma'am I can hear you I do apologize if I got analysts and our shareholders. As we are obviously experiencing technical difficulties from the start of the meeting.
Give him one more minute.
You guys can hear your question.
Sure.
Excuse me presenters could you here could you hear me.
Okay.
Our analysts are on hold I apologize, we cannot hear you, but we will take your calls and obviously gives you have any update.
After this earnings call today.
Thanks, David.
Okay.
Apologize for the technical difficulties that we started late.
The challenge here.
Jinx ourselves say, how smoothly the eventual fire alarms to where we are but.
Thank you to everyone I apologize for that I know, we have a retail shareholder meeting tomorrow and look forward to that I am pleased that retail retail shareholders listening today email roeser IR. If you want to join that meeting and any questions. Please submit those in advance that we're going to try to go through the the topics and organize that effectively and hopefully we don't have.
Any issues here.
Okay.
Okay.
Thank you for your time.
Thank you again for participating this concludes today's conference call.
You may now disconnect.
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