Q3 2022 MannKind Corp Earnings Call
The conference will begin shortly.
Raise your hand during Q&A, you can dial star one one.
[music].
Yeah.
Good morning, and welcome to the Mannkind Corporation third quarter 2022 earnings call.
As a reminder, this call is being recorded on November eight 2022.
It will be available for playback on the Mannkind Corporation website. Shortly after the conclusion of this call until November 22022.
This call will contain forward looking statements such forward looking statements are subject to risks and uncertainty, which could cause actual results to differ materially from these stated okay.
For further information on the company's risk factors. Please see their 10-Q report filed with the Securities and Exchange Commission. This morning, the earnings release and the slides prepared for this presentation.
Joining us today from Mannkind are chief Executive Officer.
Gastonia.
Chief Financial Officer, Steven Binder.
I would now like to turn the call.
Oh, yes.
Okay.
Good morning, Mike has done and I Hope you can hear me okay.
Okay.
Okay.
Alright sure Dennis.
Okay.
We have the second question is just how to make sure everybody can you hear me before I get started.
Good morning, and thank you for joining us for our earnings call today.
Hey, Mark at the beginning of the new Mannkind.
Turning to see our execution from a single product to a sustainable growth company, we've never been more excited about our future is now.
When you look down you see four sources of revenue growth and 74% growth quarter over quarter.
<unk> business is really starting to shape up as you look at the collaboration and service revenue.
As I'll talk about capacity moving forward.
In the current business will also do well double digit growth, 28% quarter over quarter with Afrezza and Vigo revenue.
Yeah.
When you look at the orphan lung, we're well positioned with tomato DPI significantly as we go forward.
Let me start entering patients hopefully in 2023.
Our EBITDA has grown year over year, but in Q3, we made some changes and integrated Vigo.
As youll see in a minute that we started to make some <unk>.
Changes took place we started to grow market share month over month quarter over quarter.
Okay.
And it's having some side, you'll see our first quarter of commercial manufacturing one of the first questions I get is this full manufacturing. The answer is no. This is just the beginning.
First one quarter commercially by U K, our royalties earned have about $6 million, which.
Which is slightly higher than wall Street expected.
Our capacity expansion is ongoing and quickly.
And here in Denver.
On our pipeline, we have reported out in September our phase one results that were generally well 90 milligram no significant adverse events of Qt prolongation and we plan to meet with FDA here in late Q4, we're very excited about this program and excited to get this product to patients.
On a Fraser really focus on pay T Rx, which grew 10% year over year at 4% Q3 to Q2.
And then he'll one we're currently on track to hit our goals for enrollment this year with an expectation of completing enrollment by mid next year and results six months later.
We also will be presenting our ABC results very shortly.
Our present basal combination trial, where we switched some patients up we added a present to a pump.
<unk> added people on the pump.
On the <unk> side, we feel good that we've stabilized the revenue and we're ready for growth.
Overall, we have the $170 million of cash to fund our growth and our five year plan.
Here's a quick picture just to see the team and then Barry working through and making our devices 27, not just devices, but also product and dry powder cartridges, it's very exciting time for people mankind and our future.
With the purchase of <unk> really do become the Mealtime solutions company.
Let me start off by talking about our president and what we're doing to kind of continue to grow market share there.
We pivoted this year to focus on a subset of doctors as well as well as ultra acting.
Analog insulin you.
And so that market share if you look amongst our key targets has continued to grow after years of decline and watching our competition continue to take all tracked in market share away from us and we believe they are reaching for a faster insulin and our presence will be the first of the kind of choice and with that refocus. This year, we've continued to grow market share quarter over quarter.
Month over month.
You look year over year very excited that the newer <unk> are a leading indicator of our Trs and you can really see that in Rx growth Q1 to Q2 to Q3, where we had 18% <unk> growth year over year, and how that translates to the Trs growth.
Third quarter year over year.
On the Vigo, we gave guidance of $18 million to $20 million. We purchased the fact that we're at the higher end of that expectations with revenue of $5 4 million here in Q3, and we continue to see positive momentum as we go here in Q4, and we're planning to implement this and to 60 additional sales reps in January of 2023.
We stabilized Prs decline thats been happening for over 18 months and exited Q3 around 200 <unk> a week.
Additional business units with batch oven symphony and distributors as well as some of the Tri care accounts.
These will be in a pizza positioning salesforce as we exit this year going into next year.
So people ask me what does that mean for product segmentation, which has got the ABC results and market research, telling us where we need to fix on our president to continue to accelerate the growth.
We expect to focus on 2023 on a narrow focus on it.
<unk> providers that write both veeco and our friendship which is around 3000 providers.
Additionally, I want to make this business cash flow breakeven and really choose the wind where we choose to play.
On the front of the side, you'll continue to see us focus more on type one younger population commercially insured endocrinology focus on the visa side continue to focus on type two for patients looking for a simple way to deliver their epsilon basal control <unk>.
Older population, typically Medicare and Endo NPA PCP.
The bottom right corner shows used a phrase there'll be a <unk> target for our core sales force and like to be a <unk> target and we will be in position to target and that sales force.
As we go forward, we're very excited about the integral business unit our pipeline I'll talk about gives us today as well as the impact of this is going to have on the future of mankind I'm.
I'm going to turn it over to Steve. Thank you.
Thanks, Mike and good morning.
I'm pleased to review select third quarter and September year to date financial results. Please supplement this call by reading the condensed consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC. This morning.
This is the first full quarter of revenue activity across all four sources of commercial revenue our friends in vivo for our endocrine business and type Acer DPI manufacturing and Televisa DPI sales royalties for orphan lung business.
Looking at how our business is growing year on year. Please focus on the bottom of the table, where it shows we had a 48% increase in total revenues, which amounted to $32 8 million for the third quarter of 2022.
Breaking down the third quarter by source of revenue Afrezza net revenue was $10 $8 million versus $9 8 million in 2021, a growth rate of 11%.
The increase was mainly driven by price, including a more favorable gross to net percentage and higher patient demand with pay T Rx growth of 10%.
Partially offset by wholesale inventory ordering patterns, which resulted in lower channel inventory levels for the third quarter of 2022.
Lower channel inventory levels have been recurring theme. This year as we have seen channel inventories lowered by approximately $1 1 million in the six month period ended September 30, and almost $2 million since a year ago at September 30 of 2021, which has adversely impacted our revenue or net revenue.
<unk> growth this year.
We believe that the Afrezza channel inventory levels have likely hit their minimum maintenance balances and shouldnt lower much more.
Year to date and further growth came in at plus 13%, which was mainly due to favorable price, including a more favorable gross to net percentage higher product demand and a more favorable cartridge mix.
Next is our net revenue for the recently acquired wearable insulin delivery device, where we had $5 4 million in net revenue for the third quarter and $7 5 million for year to date, which represents a four months of June through September we expect net revenue for the 12 months post acquisition to be in the range of 18%.
$22 million and we are tracking to the mid to high end of that range.
Moving to collaboration and services revenue for the third quarter was $10 3 million versus $12 5 million for 2021 the.
The main driver of collaboration revenue has shifted from the amortization of United Therapeutics milestones in 2021 to try VSO DPI manufacturing revenues in 2022.
Included in the third quarter 2022 collaboration and services revenue number of $10 3 million at $9 9 million of <unk> DPI manufacturing revenue.
The September year to date revenue of $18 4 million is mainly lower in 2022 versus 'twenty, one because of the prior year you'd see milestone amortization in the first half of 'twenty to deferral of revenue associated with the delay in the start up commercial manufacturing.
In addition to UT related revenue recognized in 2022, we had $32 $2 million of deferred revenue on the September 30, 22 balance sheet associated with United Therapeutics, which we recognize the income through 2031, which is the remaining term of the commercial supply agreement with.
The United Therapeutics.
And lastly, we recorded royalties on sales of <unk> DPI by United Therapeutics to their customers.
The third quarter was the first full quarter of sales of <unk> by UGG, and we earned $6 $2 million of royalties for those sales based on a low double digit royalty.
Net of Therapeutics released third quarter earnings last week.
On their earnings and on their earnings call said that the physician engagement and enthusiasm around type basis Epi is extremely high and we continue to manufacture on a 24 by seven basis to supply Ut.
I consider mannkind could be a new commercial growth story. The next slide shows our revenue growth quarter to quarter for 2022, moving from the left to the right. We grew total revenues from $12 million in the first quarter to $18 9 million in the second quarter, a 58% increase and then grew total revenues was $18 9 million.
In the second quarter to $32 8 million in the third quarter at 74% increase our quarterly revenues grew almost three X from first quarter to the third quarter.
Driving the revenue growth or a three new sources of revenue pervasive DPI manufacturing revenue royalties associated with the sale of the peso DPI and sales of Vega, we're pretty pumped about the future revenue growth potential across all four revenue streams.
Now, let's look at the profitability of our endocrine product, our president and CEO .
Afrezza gross margin increased from 61% in the third quarter of 2021, 81% in the third quarter of 2002, and the gross profit associated with Brexit increased to $8 7 million in the quarter.
The increase in the third quarter gross margin versus 21 was due to an increase in our present sales coupled with decrease in the cost of goods sold mainly due to a decrease in excess manufacturing capacity cost.
When looking at the profitability for September 22 year to date, our brands had a gross margin of 75% and gross profit of $23 6 million driven by higher sales and lower cost of goods sold mainly due to a decrease in excess manufacturing capacity cost and a $2 million fee incurred for an amendment of our insulin <unk>.
The agreement in the second quarter of 2021.
Please note that there will always be some variability in Brexit gross margin between quarters due to the timing of manufacturing spend and activity as we are not at maximum production capacity.
The far right table shows <unk> September year to date gross margin of 44%, which is about where we expected the margin debate.
Let me conclude with some final comments around liquidity and performance.
We ended the third quarter with $178 million in cash cash equivalents and investments and with our growth across all four commercial revenue streams, we're able to invest behind our pipeline and strategically partner President and Vigo.
Our collaboration with UT is tight and the <unk> ACO DPI launch is off to a strong start I feel like the company has turned the corner. We are focused on maximizing the potential of our collaboration with UT. We are focused on profitably growing our endocrine business and we are focused on developing and bringing innovative products to patients from our emerging pipeline.
Lynn.
Thank you and now I'll turn it back over to Mike to review key milestones and provide a pipeline update.
Thank you, Steve Great summary, great futures.
So looking over the next 18 months I'm just going to share a couple of things that are a good prior view on the endocrine business unit and where we are with the president.
First we lost a quick start program to get patients started quickly here in Q4, the pilot as we get ready for next year to scale our business and.
In 2023, we fully expect that are presently cover to Medicare at $35 under the inflation Protection Act Bill that was passed.
That changes the game is one of the major objections for phrases around access and really want to continue to see that patient.
Pay $35 for Afrezza and is not a short while the low cost cash program available.
We expect to finally launch Blue Health is which is our patient addition, integrated with CGM in Q1 as a pilot with a full scale launch in Q2 next year, assuming that goes well.
Simple is fully enrolled and type two study and we expect that readout, perhaps by Q3 next year.
And then one readout for peace could happen late Q4 early Q1 at the latest.
I'm going to bridge over to our Mannkind pipeline.
Position that we started three years ago, when we look at the orphan lung business in 2019, we decided to pivot and focus on orphan lung as we felt that was the best opportunity to help patients.
Hearing the patient stories on non tobacco mycobacteria as well as the peso DPI are heartbreaking, but we're fundamentally going to extend and enhance people's lives as it comes to using our product our technology to give them the freedom to live their life.
<unk>.
We're fully engaged in getting this ready for FDA submission in terms of our phase II hopefully three study Thats one study.
On the tenant we're progressing that rapidly into a phase one of.
301, the team is working hard on the formulation, we're almost ready to go next page there and the TGF beta will be getting.
Final study report very shortly in the next couple of weeks.
I mean cannabinoid program are less just released recent data and they're going forward with the second trial.
And on the first one which continue to watch that progressed in the oncology space.
One of the things I was talking to some investors yesterday was how do we start to help people understand our pipeline and the opportunity that we're going after.
I think the slides a good summary.
When you look at MTN.
Pretty much big unmet need most of the drugs and generic and have severe toxicities competition.
Competition is narrow and our market value for this isn't the $3 to $4 billion range. We look at this is up 58000 patients ultra orphan here in the U S was 15000 treatment as well as Japan, another large market for this opportunity.
In the IVF space to market is littered with failures of very tough disease, it's called idiopathic pulmonary fibrosis, because it's very hard to treat it's very hard to diagnose.
To get a consistent patient population.
However, we believe the only two products improved on a tentative pirfenidone gives us an opportunity to reformulate and attentive in an orphan lung delivered product.
No one of the bright limiting side effects and that tenant is a dose related adverse events and cannot dose much higher.
We're excited about this is there is a 100000 patients with IPF, who need more options.
On the cystic fibrosis side I was actually privileged to be at the CF conference. This past weekend hearing all the great progress and life expectancy, that's been extended in this patient population.
Despite the life expectancy extension there is a subset of patients will continue to be sick and as a subset of patients with container of exacerbations in infections. In fact, one of the conversations there was the fact that people as long as Youre getting better are masking the infections. Because these patients are no longer producing sputum and how do you continue to treat infection. If you can't culture. The sputum. These are great.
Opportunities and challenges to develop drugs in the space, but I think I would point to the unmet need in the CF community and the interest that the CF Foundation has in our product pipeline as we go forward.
As every year, we lay out all of our milestones we feel pretty good that we're on track to hit all of them nothing here surprised in Q2, we released 101.
<unk> results in our Mannkind firewall wholesale being shrunk.
Q4, we're lined up to have a great quarter close out the year strong and get ready for 2023.
Stop there and get ready for questions.
To ask a question you will need to press star one one on your telephone.
Again to ask a question you will need to press star one on your telephone.
Please standby, while we compile the Q&A roster.
And our first question comes from Brandon Folkes with Cantor Fitzgerald. Your line is now open.
Hi, Thanks for taking my questions and congratulations on another very good quarter.
Maybe just two from me you talked to box the Monistat cooling client base are running 24 seven.
Can you just give us an update in terms of how you.
So we'll have being with staffing obviously, we've had staffing challenges across the board in 2022, but.
Do you have the staff.
Sort of.
The ability to kind of ramp up should.
Strong Graham on <unk> Epi continue.
And then maybe just a point of clarification Greg.
I think you mentioned.
60, additional sales reps that are going to target that they are going to detail Sega.
Current risks that you have detailing Fraser or are these new hires to the company.
Great. Thank you for dialing in this morning.
To answer that one easily it's our existing infrastructure and we bought <unk> to add a ton of more infrastructure to the diabetes business, but to leverage the existing infrastructure. We have so we have 60 current afrezza salespeople across the country that will be dropping.
And that background late January .
So with that hopefully clarifies that one.
On the <unk> hundred 20, <unk> manufacturing Fortunately, we've had a really good year staffing very low turnover relatively to the market.
And on the ramp the real issue on the ramp has continued production.
The continued production I think thats the biggest thing is.
An equivalent starts and stops thats when we had headaches when equipment is running 24, 7%. It actually gets more efficient over time, and so I think thats really where the team is focused on is making sure.
As you ramp up production that equipment continues to manufacturing fill cartridges at the rate we need and then ultimately get better on the supply chain in terms of packaging and ship it to the pharmacies. So we don't anticipate having to hire more people in.
In the near term for production outside of the Scaleup facility remember we're building a major expansion in Danbury and that familiar requires some extra employees next year, which will be reimbursed by Ut.
So currently we have already worked with duty to anticipate upside demand and we will make sure we're able to supply that demand in 2023.
Thank you for prices do you mind, if I just sneak one more in.
Just given your given your strong cash balance I know you talked about you mentioned sort of getting investors to understand your pipeline, but how do you think about capital allocation going forward just given the strong position both in the company on your balance sheet now.
Thank you.
Yes, and I think that's a question we just had with our board last week around the future of the company the five year plan priorities for investment.
I think the way we look at the company is continuing to run the diabetes business on a tight leash in terms of budgets and returns for our money that we're spending there we think the pipeline has.
That's a huge amount of opportunity.
And we also will look for external innovation, we haven't really decided.
Each of those focuses will be priority for 2023, but we do believe our president and <unk> off to a great start we do believe there is some milestones in that business unit that will give us some information that should we invest more in 2024 should we best hardware pediatrics, let's get the data, let's let the data drive.
Some of the uptake of our friends as we go forward into 2004.
We also believe you'll start to see <unk> as a platform I think that's something I don't want talk about now, but as we get ready for next year, that's probably where some of that capital could go which is how do you repurpose Vega outside of diabetes, and we think it's a platform device that can be leveraged for other products.
So that's an area that we're looking at.
And then I think in the future as our investments in automation, how do we break down our cost structure across the company given the inflation impact on employees and the growth. We have we got to get more efficiencies out of the company. So is there ways to invest to bring more efficiencies in the future. For example that one of the decisions. We make today is around lab automation and manufacturing while based on data and how that.
Transfers from a manual process to a digital process, so things like that bring efficiencies as we continue to scale. The company as we go forward, Steve I'll, let the other additional comments.
Okay.
That answers the question Brett Thank you.
Thank you everybody and congratulations on all the progress.
Thank you. Thank you.
Thank you.
And our next question comes from.
Margaret <unk> with RBC capital markets. Your line is now open.
Great Good morning, Mike and Steve Congrats on the progress in the quarter and thanks for taking my question.
Michael just to perhaps piggybacking on the previous question when it comes to your capacity I'm just curious you could.
It provides us some additional color or highlights just on on that process through which you intend to meet the the advancing demand.
Any color on the runway through which you can lockdown product currently.
How that engagement works and maybe to BP directly you've mentioned the collaboration with you there is healthy and.
Engaging and strong I'm, just curious do those engagement points change.
Are there ongoing touch points that I'll provide that closeness, we're anticipating the demand and meeting the supply now that the product is launched and underway say versus the previous day moment development process. Thank you very much.
Yes. This is really.
Two things when it comes to production number one is how much product can you spray dry what does that yield.
How quickly can you fill that cartridge permitted.
Currently there are two different rhythm next steps in that process and as we continue to build efficiencies on the cartridges per minute one of the product production lines next year that'll be coming in online wholesale that fill finished part of the cartridges and that will then debate unexpectedly how much powder can we produce fulfill those cartridges and the other part of that has shifted a little bit.
Dosing, so probably more <unk> patients than the DTA as expected, but on the flip side higher dose patients also titrate up and ILD. So we kind of got both ends of the spectrum.
64 unit cartridge for example.
<unk> four times as much pattern 16 units. So that those are some of the things that drive production volume at time and capacity.
We've seen a balance as well.
The initial launch phase the good news is.
Every week, we can adjust that production volume, we get suggest that with the packager. There's no limitation in the short term that we can see as continuing to watch the largest phase every week, we talked beauty weekly we feel good about where we are great communication collaboration and continue to prioritize the most needy packaging for example to get this to patients to make sure that the stock.
So so far everything is really tight and going very well.
On the <unk>.
Capacity side, we are we ordered equipment in manufacturing to build out is happening as you saw and we continue to see that the rate limiting.
In fact, there is really the construction as opposed to equipment, which is what you hear from many other companies buying stock these days.
So we feel pretty good about getting the expansion done next year getting it ready for 2024 and when we built the factory we anticipated high end of demand, where we are and we anticipated ILD and ph. So so we have enough production capacity to supply the market from where we are today that we can see.
I think that answers the question Sir.
Absolutely. Thanks, so much that helpful color and congratulations again.
Thank you. Thank you. Thank you Craig could come in the <unk> business.
Thank you.
And our next question comes from.
Steven Lichtman with Oppenheimer. Your line is now open.
Hi, this is on for Steve Lichtman.
Wanted to ask if you.
You guys can give a bit more.
Date on the <unk> launch.
Are you seeing anything on that.
Chip shortages that we spoke about in the past.
You gave any timing for.
<unk> 23.
And if you can please remind us about the opportunity you see for Blue Hill.
Thanks.
Congrats.
Thank you Rob I wanted to make sure I heard your question properly sorry.
I think you asked for it.
Any shortages of <unk> launch.
Lewis.
Sorry, and update on hotel and.
You talked in the past that.
Some of the issues with the launch will because of chip shortages.
Are you seeing any anything with that.
Some other companies.
The shortage of equipment eking up a little bit so I wondered if that affected you as well and if you can remind us about the opportunity you see for telehealth.
Sure.
Yes, so on the chip, yes, So Blue Hill was in terms of large scale production was limited by shifts in the short term.
The chip the chip that we were using became obsolete and so had to reprogram the motherboard and redo all the Bluetooth technology around that.
We're on our next iteration thats almost done or should we wrap it up shortly.
So we have enough units will be up Q1 launch, but how do we get for a Q2 launch we believe that chip shortage of parts shortage should be behind us.
At least in the short term.
Would that be a rate limiting factor much worried about the reliability and consistency of the device the patient feedback and the patient experience.
So we feel like Thats, the most critical part absolutely ill.
The prototype looks great. The App looks great. The team did an amazing job and I think it's going to be really nice for patients, which is working through the placement of device.
Finalization of technical Ash.
Aspects, there, but otherwise it looks like it should be ready to go in 2022.
Thanks.
A follow up could you remind us about bucket can you guys give quick wilco.
Opportunity I think there are opportunities as we continue to go deeper in type ones, we know technology and dosing at feedback loops are imported.
And so thats really where were really repositioning afrezza. We tried for a long time to help type twos. The type two market got really crowded with the <unk> launch, we just feel the best place for President, which is really that type one market, yes, we'll be able to get to 12 pumps omnipod, but when you think about omnipod successful to pay as you go model Afrezza fits right.
So that mindset and I think with the datasets that we're seeing people do want faster installed they do what they have to control the seal on their CGM. We thank him for this is really well positioned and with the Pea study readout, we think thats looking to reinforce a new dataset type ones and we also know from the market research that the more doctors get use of type ones. They will by default use it in type two.
And now with Vega, we think Thats, a natural segue for them. They are already using <unk>, they really like the device and being able to have a nice simple device type chooses a nice growth opportunity. So we feel really good about the positioning of those assets and really providing a solution for customers which is.
We always said.
Okay.
We can't hear you.
Thank you guys. Thank you so much and congrats again on that program.
Thank you.
Thank you.
And our next question comes from.
Robert Hazlett with <unk>. Your line is now open.
Okay.
Thank you for taking the question and congrats on all the progress it's terrific to see so one or two for me first of all.
Gross margins for Veeco.
40% to 45% was where you said that came in and that was in line with expectations is there an opportunity for for expansion of gross margin with that product.
Love to hear the.
What the potential is there.
Yes, I think there is just.
Jeffrey head of manufacturing yesterday.
Got it.
It's going to require some automation investment, but thats I think earlier, John lastly on capital allocation.
The types of things we can now do when we have the two to five year view of capital allocation in the short term is always hard to make any investments in the company. Because we were just focused on survival and when you think now we are focused on gross margin. We are focused on profitability. We are focused on advancing a pipeline. So we've got to make these plants now as they come to fruition I think when you look back in the last five years.
While we made the risk based decision to bring pervasive DPI forward, we've made a decision to see how best the pediatrics and our president.
Percentage of paying off now and I think the same thing is true over the next three or four years is how do we <unk> will be here that we expect it to invest in that product and youre right. The gross margin can be approved through automation of manufacturing. We're also going to look at gross to nets as we go into 'twenty three and understand.
Are we getting the value from the payers that we expect in terms of formulary access and restrictions or are they making it easy for patients to get access and I think these are all really important attributes to.
We continue to help those two products get more profitable.
That's terrific and then just one on the pipeline with regard to <unk>.
<unk>.
If you could just touch on what the goals are for that program is it to reduce the aes, maybe the skinny you see with the product.
And.
Different routes of administration and what our next steps.
And.
We're going to see any data anytime in the near future in terms of publications of the results you have thanks.
Yes.
First I'll just review the publication last night, that's getting accepted to one of the journal. So that's exciting it's our first animal data review of comments were really positive around the unmet need that qualifies me David.
<unk> is going to bring to patients and so I thought that was really positive.
The phase one data is just wrapping up and coming in with a complete study report will publish that data as well showing the dose range effects and what we see in terms of dosing.
And then I think the FDA feedback will be critical here in Q4.
The meeting set up for late December that should give us the green light to go forward in the phase III design that we've laid out that doesn't mean, the updates, but I agree with the.
<unk> is gonna be aligned, but we hope to be able to find some commonality with the FCA because theres a big difference critical SaaS I mean are any of the MGM assets between how the Japan, Japan, Thanks regulatory wise from a gym conversion and the FDA will fill form and function and so we think <unk> can improve both but as you know this disease.
Very hard to treat and it takes a while to get that those types of results. It doesn't happen in two to three weeks.
And so that we feel good in terms of what we'd want to improve on <unk> I think lovaza is an incredible drug that's underappreciated and the number one thing as you think about it is the accumulation of toxicities because of the long half life, we really will be reducing that through our dosing regimen in our dose into the lung.
The skin discoloration you nailed it that's a big one for patients.
But we don't foresee.
That issue so far in our dosing.
Any complaints.
Don't expect that to be an issue.
And then really just getting deep into the launch and getting a very high concentration above that might speak we feel like thats going to get patients the effectiveness that they want without the systemic side effects and lastly, the Qt prolongation thats, a known side effect profile.
We have not seen that on our highest dosing patients yet after seven days and we feel really good about that safety profile given our dose. So so I think <unk> overall should be a better safer product for patients that really creates that lung infection at the site, that's very hard to penetrate.
Oral route administration so.
So we'll see as the big unmet need as the infra struggle a lot of these patients.
Terrific look forward to more progress there.
Thank you Barry.
Thank you.
And our next question comes from.
Thomas Smith with SBB Securities. Your line is now open.
Hi, everyone. This is Mike on for Tom Thanks for taking my questions and congrats on a really strong quarter on to that the DPI can you provide any color on the preliminary commercial and manufacturing trends that youre seeing and if you'd expect some seasonality in the first quarter of 2023 are there other dynamics that you can kind of flag for investors trying to get a sense of the potential ramp.
Sure.
Yeah, I think one thing I'll say, Mike is yes.
At least one investors ive talked a little bit people are watching symphony data and I think thats, okay to give some direction, but I don't think UT has a very close distribution network. So not all of those scripts probably show up in the framework out there. So we can't we can only say so much rates us <unk> launches their product their revenue.
We are just the manufacturer trying to make sure we keep up with their demand for their successful launch.
And so we don't see any we don't anticipate any problems there we're doing a decent job team.
The inventory the demand the product shipments every week a lot of constant communication. So I think were on top of it.
Things can always happen beyond our control that we can't steeper, but as of now I think every weekly we get we get the orders we look at the demand we can adjust our supply chain pretty quickly.
<unk>.
It takes about 30 days to get through a batch in terms of that if we make it in the photonics relief package. It's felt that time, so we can adjust pretty quickly on that demand.
<unk> forecast I think what you heard from Ut, which I thought was very encouraging.
As of the patient referrals coming in 50% or for nebulizer, 50% were for DPI.
I thought that was a fairly good statistic because we know that this is going to continue to grow it's going to $1 billion plus product and how much of that becomes CPI is $1 billion question and obviously, we feel pretty good about that and if you heard the patient stories and freedom that theyre getting.
I think it's going be a no brainer that for more people want this I think the other question I get around this topic is.
Where do you see the market I think the good news is the Medicare part D I know.
That's one of the reasons Ut feels there is some limitation on conversion, but thats.
That whole closed as of 2025, and so those patient out of pocket costs be kept about 125, a month roughly at that.
And that will create the next leg up so anyone that doesn't convert that's what Medicare for example.
We will have that opportunity in the next 24 months to get there so.
This is a tough disease people are going to die and they don't want to die and so they really want to extend their life and hence the light for many years. They have antibodies with BPI has done an amazing job change of those lives I mean, just wish our shareholders.
Investors and analysts could you give the stories of the patients and the doctors.
Extremely motivating a positive and our team is so so encouraged by the feedback that's happening it just feels but that much more motivation for our pipeline because it really are changing lives and extending life since it's just super exciting timeshare.
Got it really appreciate the helpful commentary there and then just a separate one from me with respect to Afrezza.
You really did a nice job kind of laying out the important milestones that you have coming up there is there are certain one in particular, either clinical or regulatory that you think could be important for seeing that next leg of growth for product sales.
I think next year is really an execution year every year, we try to do something different to try to spike growth on Afrezza and we just seem to try to log in a COVID-19 hits for a couple of years.
I don't think its fair to investors to keep guessing where price is going to go. So we really have done for the businesses purchasing Vigo integrated as to next year and really just focus on execution and alignment.
If we have an asset in a franchise that is going to do $80 million to $100 million of growth, 10%, 20% a year for the foreseeable future. That's a good business for mankind.
And so we will continue to hope to data readouts demonstrate upside opportunities, but I think being real about where we are if there is much time of getting this to be profitable division for the company, helping as many patients as we can and really placing some strategic bets in pediatrics is one of them.
We believe cases, where youre going to change type one care, we think being able to show you as good as in Aig's system will be important.
Those are the actions that we're focused on those aren't going to happen in the next six months, but those are really the key milestones. We are looking at saying how does the phrase into our kids that really going to be a game changing opportunity to transport growth of 2024.
Data read out and then there'll be important but a little lesser important meeting I think important for India, but we're really focused appraisal type ones. So the India studies for type twos that'll be nice to have.
Data set to support what we think is a great drug for type twos, but recognizing there is one 5 million people live with type one diabetes are hefty installed market we've got.
The kids opportunity one to get that really a foundation built work with JD RF a lot more on the patient walks in raising our awareness out there in the society, there's still too many patients not aware and type one, especially that yield us about adoption.
So we think we just when we look at next year, it's really about making sure our present as a choice amongst the doctors that we're targeting and I. Just think we're not the choice said, we're like number eight out of the eight things. They can do and we got to move up that ladder, a little bit in that year by year will get better from here on out, but we have a map we have a plan that we've got the team to do it and I feel very good about 2020.
Three with the team we have.
Great. Thanks, very much again for the color and congrats on the strong quarter.
Thank you.
Thank you.
I would now like to turn the conference back over to Michael Gastonia CEO for closing remarks.
Thank you Danielle.
Overall monumental quarter for the company Super excited about where we are today. So the company is in the best shape. It's ever been we've got the best talent. We can possibly have we feel really really good about our future. We continue to make change and pivot us for the next five years Afrezza in vivo will be great. In 2023 in terms of pivoting to an endocrine focus make sure that businesses.
As the cash flow positive unit by the end of the year I think on the pipeline you are going to see really nice progress over the next 12 months of moving assets from preclinical formulation stage in the phase I phase II phase III, and we think thats going to be a monumental opportunity for investors to start to really understand that value just like five Asa for years, we have signed the deal with <unk> in 2018.
The only really appreciated it until probably 2021 and I think when you look at the pipeline.
This progress in 2019, I don't think we have a lot of value or attributes of the pipeline I think it will start to see that come out over the next couple of quarters, and we think that's a nice upside for our investors, where we are and ultimately positioning the future of the company and <unk> is just going to continue to rock the world. It's just a great product that's helping a lot of patients Ut has done an amazing job.
And we will do everything we can to make sure. We stay ahead of the demand curve and build that inventory to make sure. We can supply to patients and so overall great year company is well positioned for 2023 would be a great year, it's a tough economy tough biotech investors, but we feel mannkind is well positioned for investors that double digit growth for the foreseeable future. So very excited about where we are.
<unk>.
Okay. Thank you. This concludes today's conference call.
Thank you for participating you may now disconnect.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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