Q1 2022 MannKind Corp Earnings Call
Good afternoon, and welcome to the Mannkind Corporation first quarter 2022 earnings call. As a reminder, this call is being recorded on May five 2000 journey and will be available for playback on the Mannkind Corporation website. Shortly after the conclusion of this call until May.
19 2022.
This call will contain forward looking statements such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from these stated expectations.
First further information on the company's risk factors. Please see the reports filed with the Securities and Exchange Commission. This afternoon, the earnings release and the slides prepared for this presentation.
Yesterday from Mannkind are Chief Executive Officer, Michael Goose, Danya, and Chief Financial Officer, Steven Binder.
I'd now like to turn the conference over to Mr. Lucas Tanya. Please go ahead Sir.
Thank you and thank you all for dialing into our earnings call today.
We're in unprecedented times as we look at the volatility in the stock market as well as our biotech sector, having lots of unfortunately mishaps. These days in terms of companies, including on a daily basis, which mankind perspective, we're expanding in hiring so we are able to find great talent, but from an industry perspective, we see lots of change ahead.
When I think about Q1, we had some great opportunities to continue to advance our transformation and our present, which I'll talk about today as well as advance our pipeline progress with Clofazimine and we'll give you an update we know today on top of asos. So those would be the three focuses of our conversation.
I personally just got back from our HGTV diabetes conference in Europe , and I was able to meet about 10 to 15 of the top regional thought leaders in those.
And those countries that are represented in the European Union.
Talk about afrezza potential afrezza as well as the pediatric trial and the studies that we're doing.
Walked back invigorated on opportunities on how we can continue advancing science within.
Within diabetes.
We've also had several FDA interactions on our president in the pipeline as we think about trying to think about the label change as well as <unk>.
Preparing to go to advance <unk> into phase III.
And we also had advisory board with roughly 10 of the top.
Thought leaders of non trabecular micro bacterium for the first time, where we could really assess how we think about MTM, how we're positioning clofazimine and to confirm our strategic direction relative to where we're going.
Clinical trial before we go to the FDA.
So within the UT collaboration here on the slide.
Our <unk> date is may of 2022, we eagerly await for the FDA to give us notification or actually Ut.
We are focused on preparing to support the expected commercial launch of <unk> in June .
On the pipeline are set trial is almost complete I'll describe that in a second we expect full results from the Mad section in Q3.
And then 201 in 501 both of these are progressing nicely. We're in doing animal inhalation studies and really looking at the levels as well as the bleomycin.
Models here in Q2 and Q3.
On the Afrezza side, we had $9 $8 million of revenue for the quarter, 21% growth year over year, our Afrezza pediatric trial site certifications continue to increase each month and we're on track for a patient goals for 2022.
We also kicked off the present basal combination study, which I'll show you some progress on that very shortly and finished the quarter with $233 million in cash.
Yes.
Teresa DPI update we are deferring unitary any questions related to indications FDA approval timelines.
Any questions on the label that will all go through units, they're handling the day to day communications with the FDA.
We do eagerly await the decision and we are excited to continue to focus on what we can control, which is manufacturing commercial product for launch in Q2 as well as building out the plant expansion to support the additional readouts that you'd expect for COPD and IPF.
Mankind, 101, which is our <unk> product, we have completed part a yesterday that good and so we have done cohorts a.
One <unk> II <unk> III, we've now dosed patients up to 90 milligrams, which is the highest dose we thought we should go and.
So far I've seen great Tolerability with no safety signals.
Now wait for the full data set to be analyzed along with PK and PD and assess the proper doses here for part B. We will know on the low end will go to 30 milligrams, which we think is more than enough to overcome any mic's and we are debating whether to go to 90 or 60 based on the data coming out of part a we think we can go to 90 and it would probably make sense to go to 90 just to have the Max tolerated.
Dose.
Topline are expected here in Q3 from the park, obviously in part a we know the safety and Tolerability of <unk> looks very strong in the <unk> formulation.
I'm now going to bridge, a little bit over to our president because we haven't spent a lot of time on a Friday last year has caused but I thought we should share with you some of the activities, we're doing and what's changed over the last few months starting.
Starting in February we had a refocused effort.
Sure. It is starting to show early signs of impact on driving <unk> Ultra acting sure. So on the left side you can see here. This is our patient funnel when we look at all patients coming into our present assist which is our reimbursement hub as well as our cash program as well as our free goods program, which takes a lot of the costs that used to exist in our old program and you can see on <unk>.
Average we're at about 187 patients a week now involved in one of these three programs up from 122. So these are patients that don't necessarily show up in symphony after free goods or cash pay but this is activity is showing continued growth and momentum of the <unk>.
Diabetes franchise.
When we look on the right side, we started refocusing our efforts on ultra acting share, which is defined as fee us Loon, Jeff and Afrezza.
We've had a multiyear decline in share and this year, we changed our field incentive comp as well as our target list to really focus on moving market share back in the right direction. We had our first sales meeting in person.
The last three years due to Covid and that meeting happened and you can see early signs here on <unk>, which is where youll see that progress we gained almost 1% market share through April since January with this new focus will continue to watch. It closely. This is one of our key metrics for 2022.
We're excited about what that can bring.
An inhaled one this is our pediatric trial. We now have 18 sites confirmed these are high quality U S investigators from leading academic centers as well as some of the top private practice doctors.
We met with our colleagues in Europe , and there was a lot of there is some interest in a couple of countries, such as Germany, Israel, and Italy to add a pediatric site in those countries to get experience for those investigators who have a strong desire to learn more about <unk> as we think about filing in Europe for some time down the road.
Well you can see here on the U S. Only focused so far as we are meeting and exceeding our target enrollment.
And we are the randomization theres a delay of a couple of weeks between timing, we get enrolled in the time they actually randomized. So it's not that we've lost 16 or 17 patients. In these numbers is just a delay from the time they actually entered the trial for the time, they actually randomized I think only one randomization failure has happened so far.
Otherwise. This track is once this trial is on track to continue to hit our goals for this year.
The next.
Charlie I wanted to talk about which again, we haven't given much focus on when we referred to previously as the pump switch trial. If you look up on clinical trials Gov, It's called the Afrezza with basal combination study.
And one of the things we've realized about a phrase a lot of people enjoy their insulin pumps that have type one diabetes and a lot of them when we get questions about our script refilled trends.
It turns out a good proportion of type one user friendly for special occasions or their meal time on top of their pump.
And so we have no clinical data and showing what our friends at plus an AB publix like and greater than one dose for some of the trials were done years ago.
We also have zero data on switching a patient often insulin pumps. So we can show people safely how to switch from their insulin pump to Afrezza Tresiba and show that they can have hopefully equal or better glucose control and quality of life. This is the first time in history that we can see that there's a pump switch from a from a pump over to Frazer.
And we also decided to maintain the control group. So we can see what happens if we take people on a pump and continue that one of the pump for the duration of the 12 weeks. So we'll really be able to compare in this pilot study staying on your pump having a presence here only for your base.
Only for your mealtime using pump just for your basal and are switching off call.
A detached lifestyle.
Over to appraisal plus receiver.
And the reason this is important as we do see an opportunity in the future where we see once weekly basal is coming that's a very compelling proposition for patients as well as oral basal potentially with watching where am I will do later this year with a readout in type twos.
We want to understand how best to use a present different combinations.
This trial's primary output is no difference in <unk> between the three treatment options.
Good news is pretty much by the end of this month. This trial will be fully enrolled and we should have the results here in late Q3 early Q4.
I think when you look at clinical trials the excitement around enrollment tells you the excitement around the trial and the fact is this trial enrolled literally in 60 days. These 25 patients. So we're very excited about it. It's two sites very focused here and we'll await these results very shortly in the next quarter or two.
Now I'm going to turn it over to our CFO Steve Binder.
Good afternoon.
To review select first quarter financial results. Please supplement this call by reading the condensed consolidated financial statements and MD&A contains our 10-Q, which is being filed with the SEC afternoon.
Let's start by looking at revenues for the first quarter of 'twenty two.
Afrezza net revenue was $9 8 million versus $8 1 million in 2021, a growth rate of 21%.
The increase was driven by wholesaler inventory ordering patterns. During the first quarter of 2021, which were adversely impacted as wholesalers decreased inventory levels plus price, including a more favorable gross to net deduction of 38, 7% and underlying T Rx growth.
Moving to collaboration and services revenue for the first quarter was $2 2 million versus $9 3 million for 2021.
Revenue in the first quarter was mainly associated with United Therapeutics, specifically, the Nexgen R&D efforts clinical supplies for patients in the Breeze study extension and some pass through expenses.
Did not have and did not expect to have revenue from our commercial supply agreement with the United Therapeutics in the first quarter.
We expect to start recognizing revenue associated with the UT commercial supply agreement in the second quarter.
Recognized as revenue until we sell product to U K, which we expect in the second quarter of 2022.
For the first quarter of 'twenty, two we had $7 4 million and manufacturing expenses recognized in our P&L without any corresponding revenue offset.
Since the second quarter of 'twenty, one the amount of manufacturing expenses recognized in our P&L without a corresponding revenue offset totaled $21 million, which sits on our balance sheet as of March 31 2022.
Deferred revenue will be recognized over the manufacturing services agreement life, which currently runs to 2031.
<unk> Therapeutics is funding this cost as we have been invoicing and collecting from Youtube.
Now do we have look at Afrezza and collaboration services separately lets look at the gross profit and gross margin for both side by side.
Please note the collaborations and services is mostly associated with our agreements with <unk>.
Afrezza gross margin increased from 47% in the first quarter of 21% to 77% in the first quarter of 2002 as discussed earlier and the gross profit associated with our spreads have increased almost 100% to a record seven $5 million.
The collaboration services closing loss for the first quarter of 2002 was mainly due to the revenue deferral I just spoke about.
We expect this to turn positive once revenue is allowed to be recognized when we start selling product to Ut.
Let me conclude with some final comments.
Having done our convertible debt and sale leaseback financings in 2021 before the capital market downturn this year.
We are in a strong financial position to fund our growth with a cash and investments balance of $233 million as of March 31.
In addition, with rising interest rates, which are likely to continue for some time, we are well positioned with minimize interest rate risk. The vast majority of our debt, which includes the convertible men debts.
Or at a fixed rate of two 5%.
Keep in touch with us and around the small molecule inhibitor and how thats progressing and development.
We'll continue to look for more collaborations on our technology platform.
As we continue before.
Didn't accept the action date with Televisa.
When we look at our milestones for 2022, clearly ladies out every year and you can see so far we're on track to meet most of these milestones or exceed them.
Obviously, it did not hit the first one which we think was very important Televisa DPI Paducah date, that's been extended to May and we remain optimistic about that and our ability to hopefully get today sort of patients here in Q2.
Yeah.
So while I think important thing when we come to you on our next earnings call will be two additional sources of revenue as it relates to south back in Q4 earnings call on today's on manufacturing and Televisa royalties the bars of revenue growth for Mannkind continue to grow and we look very.
Look up very forward about the exciting opportunities we have to exponentially grow revenue over the coming years between Afrezza collaboration services business development as well as manufacturing and royalties.
We're going to stop there and open it up for questions.
Thank you I did want to ask a question. Please vote now by pressing Star then one on the telephone keypad again Thats Star then the number one telephone keypad and please stand by all the compile the Q&A roster.
Your first question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is open.
Hi, Thanks for taking my questions and congratulations on another good quarter.
Go on to do obviously, you sound quite confident on the tie they said the PAE approval.
But how should we think about opex spending just in the case, where it does not get approved this month, perhaps pushed off a little bit just any color in terms of how we should think about maybe some level and you kind of opex spend that may come down and then secondly, maybe just on Afrezza.
Can you just elaborate I guess.
Apologize if I missed this but when it was wholesale inventory at the end of this quarter. Thank you.
Okay.
Zinc.
The first one.
Steve Correct me Opex on <unk>, there was a delay.
Mostly.
So I picked up by UT and that's why you see some of the deferred revenue on our P&L, so that doesn't impact our particular cash burn or anything around mankind.
Our inventory inventory remained constant between.
December of 'twenty, one in March of 'twenty, two so it wasn't much of a wholesaler inventory channel change.
Great. Thanks, and one more if I may obviously, just with that very strong cash balance you have how do you think about maybe bringing in licensing a few more pipeline projects, obviously, you've built a pretty robust pipeline, but I guess do you have the capacity maybe asked a different way to bring in additional products just given valuations.
For in licensing maybe coming down thank you.
Hey, Brad I think M&A is going be something we continue to evaluate as a company. We've had a lot of inbound interest on looking at different opportunities so far in 2022.
Obviously, a lot of companies I think there's about 170 companies trading for less in cash value. So there's opportunities in that space. There's also opportunities for com.
Companies continuing to streamline their product that they're going to focus on.
And then there's plenty of pipeline opportunities to go but I think on the pipeline, we feel pretty good about the shots on goal that we have in progressing those on the ability to find additional cash generating assets I think is where our focus is because we think we can continue to harmonize the G&A expense in the P&L that we have as well as the infrastructure. We've built up so I think we'll continue to watch out for those as valuations up.
Become more normal the last couple of years things were just ridiculous, but I do think things are finally coming.
And in a good range that we're sitting in a good spot as a company to continue to look at these things.
Thanks, that's very helpful. I appreciate it congrats again.
Thank you.
Yeah.
Your next question comes from the line of Gregory <unk> from RBC capital markets. Your line is open.
Hey, good afternoon, Michael and Steve Congratulations on.
On the progress and thanks for taking my question, maybe just building on the previous question just with respect to.
Basically a DPI decision coming up and maybe just around scenario planning I think you answered. The question just around Opex I'm just curious how.
Our various scenarios playing out weather of course.
Approval, but as mentioned delay or otherwise.
How you think about the potential permutations of your strategy.
Earlier mentioned of.
Business development or their accelerants that we would see or other things to contemplate with respect to that that decision coming with Taipei, So coming up thank you.
Okay, Great I don't want to comment too much I think we're literally within weeks of the FDA decision.
We just got to wait for that to come through and I think that will bring a lot of clarity around the anxiety I hear from our shareholders.
What does this mean from indication what does this mean from the platform. What does this mean for mankind and like I said I think our focus is making sure we have product supply available.
Upon launch and approval and I think that's what we want to make sure we're ready for with Youtube, but I want to really defer a lot of ibs related questions for us we have enough cash we throw off the balance sheet last year.
Even if there was another delay it doesn't fundamentally change how mankind operating we look at this is all upside to the current operating plan that we have and Thats. Some of the decisions. We made last year around the sale leaseback of the convertible debt.
We can fund our pipeline and fund our growth and not be fully dependent on unit their decisions and the FDA some of the interactions there, but obviously want. This we think is important to get the patients. We're excited to partner with Ut they've been an incredible partner and we want to get this to patients as soon as possible we want to make sure we can supply and be there and so I was hoping that gives you some clarity but I.
Thank you.
Things are delayed it doesn't shift anything we would do that much we still want to build up inventory, we still want to be ready day, one of launch and <unk>.
Focused on our pipeline and our platform.
Equally as much right now.
Great. That's really helpful. I appreciate all the color and looking forward to the update.
Okay.
Okay.
Your next question comes from the line of Thomas Smith from SBB Securities. Your line is open.
Hey, guys. Good afternoon, thanks for taking the questions and <unk>.
Congrats on the progress.
Just one today, so DPI I understand you would see is handling all of the FDA communications directly but I was wondering if you could comment on whether there's been any other requests where you've had to provide data to the agency since the last submission I think it was back in February that led to the major amendment.
<unk>.
I would.
I don't want to speak on behalf of <unk> ones, having face to face.
Request.
From my knowledge perspective, I don't think there's been anything major that's come in since the initial request, but I'd have to defer to you to answer that properly.
Okay. Okay.
Okay.
Mannkind I can tell you that.
Okay.
That's helpful and then just on.
On the tobacco DPI.
Commercial manufacturing preparations could you just give us an update on where you are in terms of scale up activities.
Has there been any changes to your plans or your forecast on manufacturing here over the last couple of months.
As we get closer to the anticipated launch later this year.
No I think the only thing we continue to try to do as you know.
We purpose a lot of equipment over the years that we had and we want to make sure that equipment's operating optimally how do we increase yield how do we increase.
Product loss in the process. So I think we're just trying to continue to improve everything that this team has set out to do and honestly a lot of it's been operator training and sort of more proficient they make a lot of clinical batches that made some practice wrong I've spoken validation. So I think that's helping all the new employees gained a lot of experience with our process and our equipment and that's probably the biggest.
We can be doing to just continue to build proficiency because this operation is gonna be running 24, 7% for the foreseeable future. So I think that's number one is making sure we're keeping our talent.
Training, our talent and we're getting the proficient and how the operator operator.
A very a multiple step process with different teams involved so I think just getting each of those teams.
24, seven basis operating running equipment properly is really important.
Okay got it and then just.
One last one maybe on the Afrezza pediatric study can you just remind us how many sites you are ultimately targeting and then as you think about expanding your sights here into Europe . How are you thinking about the balance of the original enrollment between the U S versus ex U S sites.
Yeah, I think on the sites, we've gone back and forth, but somewhere between 2500 $40 45 at the Max you would go to.
We've got a couple of investigators about seven patients <unk> patients and growing.
I think it's no matter you know if we had 25 sites each each getting 10 patients would be done in the next nine months.
Excuse me in terms of enrollment so I just think it's how are we rolling how are we tracking and it's taken it takes time to get a lot of these academic centers up and running from a contractual basis. So several great sites like Jonathan in Boston Stanford.
These guys are just coming on board right now so we haven't even really started a lot of the academic centers.
Let's see how they are progressing I think in Europe .
Have a target number I think it was more nice to hear some thought leaders that are really podium type presenters I want to be involved in the trial and so we're looking to see if we werent trying to go to Europe , but it doesn't hurt us to have a few sites in Europe collect some patients there.
And I think in that market you know Medtronic.
Medtronic <unk> with all the hype at ATT and thinking about an alternative opportunity to those patients who aren't on pumps is a real market opportunity in Europe that are going to look at and I think some of these countries have decent reimbursement and many of them don't have decent reimbursement. So I think it is just trying to understand.
What is the value proposition of our present for example can you justify the cost of nickel and pumper voids of the pump and that cost is equal to afrezza versus MDI injection. So I think it's really understanding our pumps switch trial that we're doing how that's gonna show outcomes and efficacy as well as the efficacy we getting peds will start to drive some of the strategy for <unk>.
But ultimately just getting piece done and getting good results will be important and.
But we think probably 25 to 35 sites is going to get us there.
Got it that makes sense alright, guys. Thanks for taking the questions I appreciate it.
Okay.
Your next question comes from the line of Bert Hazlett from <unk>. Your line is open.
Yes, thanks, Congrats on all the progress and my apologies if some of this has been touched upon but.
That came on late but just with regard to <unk> and the focus on the ultra acting sure nice to hear everybody's been able to get back together with Salesforce meetings.
Is there any contemplation of potential sales force expansion should this gain traction down the road or is that something Thats me.
Maybe.
Maybe really not under contemplation, you're really trying to find out more about what strategies are working.
Work at this point.
I think Bert.
We will always if we see ways to grow the company faster, we now have the capital to deploy so if alejandro abandon our team leading leading efforts over there you can start to show some consistent week over week and month over month growth trends in the marketing programs are starting to work I think we have a good plan for <unk>.
So we have some good conferences this year some good podium presentations.
So again.
His is positive we're seeing the momentum we're happy to fuel fuel that fire to make it grow faster, we're not looking to spend more than we are in a meaningful way until we start to see some additional progress, but we are willing to any event. We do see that continue okay. Great and then just with regards to Zalviso DPI maybe.
Maybe you touched on it but I apologize if you have if you talked about expectations for the label.
And then could you just comment on <unk>.
Competitive landscape as you think about DPI rolling out again, obviously with.
A great partner, but love to hear your thoughts on the competitive positioning of the molecule of the program.
Yeah.
I think I'm not going to comment on the label I think UTI their earnings call yesterday, they were pretty silent about that so I'm going to defer to them.
On any any comments on that question and I think on the competitive landscape again I know there is some patent wars between Youtube and liquidity I'm going to defer to ultimately to the experts over there on those questions. So I don't want to too much comment only because we're so close to the zoo fleet, let's get that data across the finish line and then happy to talk further around those things.
Okay I had to try though thank you.
And then just won't be birth. So thank you.
Okay.
Yeah.
Thank you Brian .
Your next question comes from the line of Steven Lichtman from Oppenheimer. Your line is open.
Hey, this is David on for Steve Thanks for taking the questions.
For me regarding what's your latest outlook on sort of the.
<unk> landscape are you seeing any supply disruptions or inflationary pressures.
If so how does that impact your gross margin outlook for the rest of the year. Thank you.
Yes, I think overall as a company we have to give slightly higher raises that historical.
We know some of our suppliers are going up a little bit, but I'll, let Steve comment, but obviously inflation is impacting everybody.
But fortunately a lot of our operations, our fixed costs and a little bit of variable, but with Stifel and a lot of our large supply agreements we have locked in for a period of time some of them will expire during the year and we'll have to renegotiate them. So I don't expect right now a huge increase but there is definitely a slight increase over the previous year, but.
Pretty well locked in for a period of time.
And if you think about the flip side, the euro at $1 going in our favor and we have done.
Margins on supply commitments, and Thats actually been coming down from a cost perspective.
Nice Lisa so.
Fortunately, probably balancing each other out but we're not seeing any major supply disruptions, we bought safety stock, where we can see risk and.
There's things here any other pop up but we want to make sure a $2 pumper hose doesn't cause us to have a delay so.
Biggest impact honestly has been our Blue Hill device that we've been working on the chips are going out of stock in manufacturing, we got to redo the motherboards.
Probably the biggest headache, but again, it's not impacting our friends at <unk>. So these are launch opportunities enhancements to accelerate growth, but they're not they're not on the critical timeline, yet, but those are a part of little things that familiar with us.
Alright, great I appreciate the.
Color guys.
Negative.
Thank you Steve.
Yeah.
And there are no other questions at this time, let me turn the call back to Mr. Michael The Sanger CEO for closing remarks.
Just want to say, thank you to everyone for listening today I know, it's a turbulent time in neuro and there is a tremendous amount of stress to continue to perform and Fortunately we come out of Covid, but we're entering into an inflationary period with a volatile stock market mannkind in a really good position to weather. The storm, we weathered worse over the last five years and we feel very optimistic about the position we're in as well as the opportunity to <unk>.
To grow the company on behalf of shareholders and help patients. So I just want to say thank you to everyone for all the work and really looking forward to executing the rest of this year hopefully you're having a great 2022. Thanks.
Thanks, again, and we'll look forward to I think we have a couple of investor conferences coming up in the month of May so you'll be hearing.
Those very shortly.
This concludes today's conference call. Thank you all for participating you may now disconnect.
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