Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation third quarter 2008 conference call. At this time, all participants are in a listen only mode. Later, instructions will be given for the question and answer session. (Operator's Instructions). As a reminder, this call is being recorded today, November 5th, 2008. Joining us today from MannKind are Chairman and CEO Alfred Mann, President and COO Hakan Edstrom, the Chief Financial Officer Matthew Pfeffer, and the Chief Scientific Officer Peter Richardson. I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead.

Good morning, and thank you for participating in today's call. I will summarize our financial results for the third quarter of 2008 as reported earlier today. Next, Hakan and Peter will provide an update on key accomplishments during the past quarter, and finally, Al will comment on the current situation and our outlook going forward. We will then open up the call to your questions. Before we proceed further, please note that comments made during this call will include forward looking statements within the meanings of federal securities laws. It is possible that the actual results could differ from the stated expectation. For factors which could cause actual results to differ from expectations, please refer to the reports filed by the company with the Securities and Exchange Commission, and the Securities and Exchange Act of 1934. This conference call contains time sensitive information that is accurate only as of the date of this live broadcast, November 5th, 2008. MannKind's management undertakes no obligation to revise or update any statement to reflect events and circumstances after the date of this call. Let's start with the financials. For the third quarter of 2008, total operating expenses were 69.1 million compared to 80.9 million for the prior quarter and 75.6 million for the third quarter of 2007. R&D expenses were 55.6 million for the third quarter of 2008 compared to 67.6 million for the prior quarter and 64.8 million for the third quarter of 2007. These decreases in research and development expenses were primarily due to decreased costs associated with the clinical development of AFRESA, and the related manufacturing costs associated with the clinical trial materials, partially offset by increased stock based compensation expense and facilities related expenses. General and administrative expenses were 13.4 million for the third quarter of 2008 compared to…

Thank you, Matt. Good morning. As you may well understand, MannKind is focused on bringing the entire phase three program to its final conclusion at this time, allowing us to submit our NDA early in the first quarter of 2009. The execution of our NDA filing package is proceeding on schedule including the additional bio equivalent study that was requested by the FDA in our July pre-NDA Meeting. We are also in the implementation mode of the first of our phase 3B trials study 119. And as you will hear from Peter in greater detail, we have now closed all of our pivotal phase three studies and initiated data analysis. We expect to complete data review of studies 102 and 030 sometime in December and share it with you soon thereafter. Exact timing for press releases and presentations will be dependent upon NDA submission, workload submissions, and the AVA abstract deadlines. The NDA file will be submitted, as I said, in the first quarter of 2009, upon completion of the inhaler by the equivalent study. This study is now well under way and will complete in mid-December. And since we have completed all pivotal phase three studies and the build out of our manufacturing operation in Danbury and with the NDA submission soon behind us, we are now transitioning from a development focused company towards commercial readiness. And we are also undertaking a number of clinical (inaudible), phase 3B studies for AFRESA, that we expect will show its superiority as a brand of insulin compared to rapid acting analogues, and Peter will comment on the status of those studies a little bit later in this call. Having all of the phase three clinical data in our hands shortly, we intend to reinvigorate our (inaudible) discussions in 2009 that was suspended last spring following the turmoil of Exubera. And given the current uncertain financing environments, we've also devoted significant time focusing on reducing capital spending and program expenses. That's allowing us to operate on existing funds and loans into 2010 with the potential of an NDA approval for AFRESA within this timeframe. This will however, not preclude us from making what we believe to be strategically important investments, if and when appropriate. And in closing, let me touch upon one other item that's under way right now. As you know, we've signed the agreement with Pfizer to sue some of the Exubera patients that were left stranded when Exubera was withdrawn from the market. The transition of patients is under way and we have experienced a high level of interest from previous Exubera patients and their doctors. And now, here is Dr. Peter Richardson, our Chief Scientific Officer.

Good morning, and thanks, Hakan. Once again I am happy to be able to report that AFRESA, previously known as Technosphere Insulin has progressed according to plan over the past quarter. The preparation of our NDA is well advanced with the goal of submission early next year. The pacing event to filing is the bioequivalency study asked of us by the FDA. With the protocols that were submitted last month, and that trial has been initiated and is tracking to complete in time to meet our aggressive goal for filing. I am very happy with the team's exceptional performance in getting this study up and running in record time. All of our phase three studies are now complete and databases have been locked in recent weeks. I don't have further data from the pivotal studies available to report today as we're following a carefully designed process to complete the many tables and analyses required for submission to the FDA, and with the internal consistency that will allow us to pull these in our integrated summaries of efficacy and safety. Our goal is to be able to present abstracts from the main study for next year's meeting of the American Diabetes Association, but we will of course look forward to updating you with the top line summary data before the end of the year. We've made good progress with the unveilment of our phase 3B program, and we are now actively recruiting in two of the three presently planned studies. MKC119 is a meals variation trial to demonstrate that carb counting and complex meal titration are essentially unnecessary with AFRESA. Additionally, this study will indicate what minimal sacrifice, a person's standard fixed dose of AFRESA may become excessive. MKC117 is a three months treat to target study in type I patients…

Thank you, Peter. We can now see the light at the end of the tunnel. All of our pivotal trials have been completed and our clinical staff is busy analyzing the data. As Peter noted, we recently reported top line data on the MKC103 and MKC009 trials, and will soon be in the position to present additional data on those and data on the MKC030, the two year safety and efficacy trial, and also on the MKC102, the one year type two efficacy trial. Our clinical program has been very large and robust. More than 40 trials with more than 5,000 people in almost 300 clinics, so far presenting a consistent story of the unique benefits of AFRESA. Peter has described this program which was far more extensive than those of others exploring inhalation of insulin, and we believe we have more than met the FDA's draft guidelines for pulmonary insulin that was published earlier this year. We have already reported that our team attending the pre-NDA meeting with the FDA on July 14th was pleased with the agency's responses to our questions. Our team leader said it was the most positive of the 18 such meetings he has attended throughout his career. One additional request from the agency, as noted, was to conduct a small bioequivalency trial comparing the inhaler use in the clinical program to the commercial version of that device that is more rugged and less costly to manufacture. That trial is under way in Europe and Peter noted that the last patient's last visit is scheduled for mid-December. Preparations for our NDA submission are progressing well, and even with this additional trial, the NDA should be filed shortly after year end. Our trial program over these past three years has been directed toward regulatory approval. The…

Thank you. (Operator's Instructions). Our first question today comes from Tom Shrader of Rodman. Thomas Shrader - Rodman & Renshaw: Good morning.

Good morning, Tom. Thomas Shrader - Rodman & Renshaw: Hope you guys are enjoying the calm before the storm. So, Al, you are talking a lot about basal insulin. Is this a new molecule, is this someone else's that you like more than Lantus? Can you give us a hint of what you're talking about?

I can't really discuss it yet, Tom. It's not at a point where we can make it public, but we are looking at an interesting solution to the basalproblem. Thomas Shrader - Rodman & Renshaw: Okay. And the trial where you try to get fasting glucose less than 100, is that 317?

No. It's 117, and the protocol, we try to get it down to under 110, but the doctors were so worried that we ended up it's under 120, but we're going to try to get as many as we can, at least with the AFRESA, to get them below 100. Thomas Shrader - Rodman & Renshaw: And is that trial enrolling, or are you nervous that Lantus just won't let you do that trial the way you want to? Is that trial—are you going to do that with Lantus?

Is it rolling? Peter, do you want to comment?

Yes. It's actually enrolling and it's enrolling quite nicely at the present time. What we did there was we've actually gone and, after a lot of discussion with the opinion leaders, we actually changed the Lantus dosing from that which we used in '09 to allow for them to split the dose which is very commonly done in type I patients in order to try and smooth out the Lantus profile, because clearly what we've seen is that if you dose in the evening, you're really getting insufficient by 25 hours later to maintain that control. And we want to be able to show that using Lantus in the best way we could and with the really very distinguished group of opinion leaders that we had on this study, they thought that was the appropriate way that we should approach this to show what AFRESA could really do if we got the best that we could for the basal insulin. Unfortunately, that requires twice daily dosing at the moment. Thomas Shrader - Rodman & Renshaw: So the protocol is for twice daily Lantus or you will allow it? Will you stratify?

We had a great deal of discussion as to how to deal with it. It is allowed once or twice daily according to an investigator identified needs. So, it's not mandated in the protocol, but it is certainly something that quite a few investigators are already doing with their patients because they find others in need.

Let me add one more comment, Tom. One of the things that we have learned is, as we said, we would like to see a better basal insulin, but because we don't have it just yet that we can speak about, we are doing a trial to show that we can bring most people within normal A1C control with AFRESA plus what would be a better basal insulin. We're going to simulate that better basal insulin with an insulin pump. Thomas Shrader - Rodman & Renshaw: Okay. And then one quick question on the changes to the inhaler. You talk about it being more rugged; are there pieces in the inhaler that actually come in contact with insulin? Are they all the same — or how big are the changes?

There's been no changes at all to the flow path, that was one of the things that we really took a great deal of trouble to make sure that we maintained. The changes are really around robustness, just getting some of the clicking, some of the things that give the feedback to the patient that have engaged this in the right position and also the cap which closes down over the cartridge, we've put a new fixator on that so that it maintains in place. So the changes don't influence the flow path of the powder at all and are really all related to making it more robust and easier to manufacture in bulk, so that's why it was important that we did this. And I think that we've demonstrated this very effectively to the agency. They asked us to do a study to confirm that there were no differences between those two, and that we would certainly not expect to happen. Thomas Shrader - Rodman & Renshaw: So we should think of it as kind of a cooler grip or something?

You could think of it that way. Thomas Shrader - Rodman & Renshaw: All right. Thanks a lot.

Thank you. Your next question comes from Thomas Wie of Piper Jaffray.

Hi. Thanks. Just wanted to ask a little bit more on the financial stuff and then a clinical question. Can you give us a sense of how much more needs to be spent on CapEx for the plan from now to the point of approval, and then also if you can give us a sense of where you expect the R&D expenses to level out at now that the phase three program is complete.

Sure, Thomas. I'll try. That's a little bit hard to answer precisely. The capital spending for the plan is essentially done. There are small things happening there still, so it's going to go down to a fairly normalized level compared to what it has been. If you look at the long-term trends on capital spending you'll see we, just in the last few quarters, we spent quite a lot, but prior to that it was much lower and if you go back as far as early 2007 it was running around the 6-7 million range compared to the twenties to thirties in recent quarters. It should get back to those kind of levels maybe a little bit more just to support a large infrastructure. The R&D is a little harder to predict. We have a lot of studies going on. They're certainly going down with the completion of the phase threes, but giving precise guidance at this point would probably be premature.

And the CapEx part with the additional modules that you could add, is that planned to be a post approval decision that you make?

At this point, yes.

And then I did want to ask a question about some concerns that have been raised about the delta between TI and NovoLog in the recent studies, and I understand that from a statistical standpoint you've met the criteria for non inferiority, but numerically it seems as though the TI arm seems to fall slightly short of NovoLog. Is there a risk of a meta analysis that's done on efficacy by the FDA and that they pool the data together and it actually looks statistically inferior?

Perhaps I'll take that one. The quarter point difference you mean is something that first of all we prespecified as being clinically insignificant when you design these studies. There's really very clear guidance in terms of what's considered non inferiority, we do meet that. And indeed the quarter point difference is really of no clinical consequence in the eyes of most of the opinion leaders that we've spoken to around this. In terms of meta analysis, we don't anticipate that to be an issue, and obviously we haven't got the data of the upcoming studies, but I would anticipate that with the designs that we've had, with 102 in the type II population we're going against a premixed insulin. It's a different comparator. It's an important comparator in the type II ones and I would be anticipating that we'll have the best results there, and I would also be looking as we look across the studies that we've had, we will see a consistent pattern of efficacy from AFRESA.

Let me add one more comment, Tom. What I think maybe you need to consider is that when you're starting a very high fasting glucose level as we are, the problem that we see in our trials is that if you're using rapid acting analogue as a comparator, the post prandial reduction in glucose levels really offsets and masks the benefits that we have. When you get down near normal glucose levels and of fasting glucose levels, you're going to see enormous benefits from AFRESA compared to the other products, but you have, if you're talking about A1Cs, you're looking at the average and the average of the RAAs is masked or is really largely controlled by that drop in post prandial glucose levels which we don't have.

That's very helpful. And then just kind of in that same vein, it sounds like this 117 study could be a very important marketing study from an efficacy standpoint. What are the powering assumptions to show superiority to the Humalog Lantus arm? What are you trying to show in that study?

Well, there are two things in terms of that. One, we have powered to look for a delta in HBA1C, I can't remember the exact number that we've chosen there. We've got about 500 patients participated into that study, one to one randomization between the two groups. And here we'll be looking very aggressively at bringing them down to target. And if you notice in the '09, we saw absolutely no difference in the numbers of patients that we could get to target between those two treatment regimens. What we're looking at here is when you become more aggressive, what's the number of patients that you can get to the target goals that's less than seven and less than 6.5, and I think that that will be very—it's a very interesting outcome from this study at the edges of what you're able to do with present insulins.

Thank you.

Thank you. Your next question comes from Michael Tong of Wachovia Capital Markets.

Hi. Good morning. Just a quick question. I've been hearing some discussion that the FDA may be coming out with a revised draft guidance as it relates to the development of drugs for diabetes. Just wondering if you've heard the same thing, when you might expect the revised guidance to come out and whether you expect any impact on AFRESA?

Yes. I mean, earlier this year the agency, they've come out with a revised draft guidance. We've been through that in detail and indeed our program, we believe meets and exceeds the requirements that are in there. Obviously, this ongoing debate in this field, this is a draft guidance, agency guidance's often remain drafts for quite a long period and there will be further inputs. So, I'm not aware of the date for the finalization of that guidance and nor have I anticipated anything in the guidance material to be different from that which they have issued which we appear to meet.

Thank you. Your next question comes from Annabel Samimy of UBS.

Hi. Thanks for taking my question. Can you just go over the—I can't remember the number of the study, but it was the study with the Bolus delivery of the basal insulin by pump. Is that really to get the better coverage over 24 hours or is there another reason behind that one?

Well, the idea was simply to try to demonstrate that if you had a really good basal insulin along with AFRESA that you can get most people to normal A1Cs, that's what we really think we'll able to achieve with that study.

I think the important thing to understand is that really with a pump delivery, you're bolus is just not comparable to that which you can achieve with AFRESA because of the unique pharmacokinetics. So here we'll be comparing, trying to do the best that we can with basal therapies in terms of the pump, but then looking at an optimized pharmacokinetic regimen that can be done with AFRESA versus that which is possible using Bolus delivery from a pump.

Okay. And all these phase 3B studies, they're strictly for marketing purposes or not necessarily any requirement of the FDA laid out for you?

They are not required. Clearly 117 is an important study. They're all being done to the standards that we would expect of clinical practice, but yes, they're primarily for marketing and also to help with reimbursement. We're targeting here for them to be available at the times we anticipate, working with managed care organizations and others where we'll be working with that and I think the data around these where we anticipate being able to show the real practical benefits of the product will be very important in terms of our pricing discussions.

And do you have any ideas when these studies might be completed?

We're tracking to have them available so that they can be presented the following year in terms of time of launch and we'll be able to present those data at the time we anticipate arriving at a launch for AFRESA and that's been the plan that we've been following.

Okay. And finally, is there any greater detail around the hypoglycemic events that you are analyzing—I guess it was the 009, that you're looking at more details around the hypoglycemic events; is there any further color on that?

Not as yet. What I hope that we'll be able to do is as we pull the hypoglycemic events from all the studies, we really want to put this into a context that comes across the program. We've now got the programs, the analyses, that we want to apply to all the studies. As it confirms the effect that we saw in 009 but I think we will also see in the type II population, greater benefit, a clearer benefit, and we want to present those in their entirety when we present the results from 102 and 030 shortly.

Okay. Great. Thank you.

(Operator's Instructions). Our next question comes from Tom Russo of Baird.

Good morning, thanks for taking the question. I just wanted to return to Thomas's earlier question and ask it maybe in a little different way. If you do not meet the primary endpoint for non inferiority in A1C control, procedurally, is there still a path forward for the trial to be considered successful, and also, can you remind us which other trials are considered pivotal or registration trials that have A1C non inferiority as a primary endpoint?

Well, let's talk in terms of where we've been in the earlier studies, because the first criterions for sure are, are we safe and effective, and in terms of efficacy we have placebo control study in type II patients which is protocol 08. That demonstrated a significant reduction in HBA1C. Protocol 8005 again demonstrated a both dependent and statistically significant reductions in HBA1C in prandial glucose excursions. Those have been reported earlier. In terms of the non inferiority design, we do meet the requirements of non inferiority. Remember, this is in the type I population, and I think that what is important to look at is the overall effects and clearly there is no question that insulin in this population is necessary and we have demonstrated very clear efficacy in that population. Study 102 is a non inferiority design comparing, I think, mixed and that will be another pivotal study. And then 030 has a comparison. It's a safety endpoint, but of course we are looking at HBA1C and that's a large study with a population of type I and type II patients.

I guess what I'm just asking is if the range went outside of what was predetermined to be acceptable, does the FDA then look at some of the other benefits and the fast action and some of the other things that are unique, or is that potentially a show stopper for that trial?

Let me make the comment there. We have received—at least I have received some inputs from the leaders of the FDA that they are very concerned about post prandial excursions, not just A1C, and of course they are certainly qualified to understand the effects of the persistent tail that you get with other drugs that reduce A1C. So they are very conscious of what's going on and we don't think there is a problem, nor do we think we will have a problem in meeting the target of non inferiority.

Okay. And then second question, I think when the Pfizer deal was signed, one of the benefits you saw there was in getting some of the clinical trial data from those patients that were going to be transferred over to TI. I was just wondering if you've got any of that data yet and if there are any learnings that you'd be able to share.

I don't think I want to comment particularly on learnings. The collaboration with Pfizer around that in terms of addressing the patient need in this area has been very good. Both of us have a clear goal here in terms of making sure that those patients who need and can benefit from AFRESA who were previously treated with Exubera are transferred over carefully and we have had very good cooperation getting a full understanding and managing the implications of that and we're comfortable with that.

Okay. Thanks very much

Thank you. Our next question comes from Cory Kasimov of JP Morgan.

Hey. Good morning, guys. All but one of my questions have already been answered. I'm just now interested in your take on the FDA requiring a REMS program for Exubera, even though that project is no longer commercially available? So basically, do you believe there's any read through into any lingering safety concerns that the agency has for pulmonary insulin and also is this issue been discussed with you since these patients who were on Exubera have been or are being transferred over to AFRESA? Thanks.

To answer the second one, we've had no specific dialogue around the rems program with the agency. We of course have had agency input to the protocol by which patients are being transferred and we've collaborated closely with the agency in terms of making sure that they're comfortable with that. In terms of the rems program and any impact for those, well, first of all I think you're going to see a lot more rems programs in the FDA. If you look at the details of what happened there, it was basically a transference of the previous risk management program, the risk map which Exubera previously committed to, and it seemed that the agency was formalizing that within the new rems mandate that they have. We don’t see a specific impact for AFRESA, we will of course by looking in terms of making sure that we have an appropriate plan for the risk management of a new product as you'd always be expected to do with any new product coming in, and we'll be looking at the best way of doing those with the agency as we approach the submission.

Great. Thank you.

Thank you. Your next question comes from Leah Hartman of CRT Capital.

Thank you for taking the question. Just some housekeeping details, could you repeat please the capital expenditures for the quarter?

Total capital expenditures were about $24 million for the quarter.

Okay. And when you talked about, per Thomas's question about more normalized spending levels, is that more down towards the $5-6 million on a per quarter, or can you pull it in from there?

I think it will be down in that range. It could be a little bit more, but the facilities are much larger and that's just a normal level of replacement. There's not any major construction program planned prior to commercialization, so it should get back to kind of normalized levels.

And then with respect to the founder loan, you still have that full availability?

Yes.

Okay. Thank you and best wishes in the coming weeks. It's very exciting.

Thank you.

Thank you.

Thank you. And your last question comes from Richard Diamond at Evolve Capital.

Yes. Good morning, gentlemen. You have a new facility in Danbury. Can you take us through the path and the timeline to full commercial manufacturing please?

What we're doing right now, it's certainly—we're in commissioning in terms of the different components of the facility in making sure that we have a fully validated manufacturing operation in Danbury. We are currently in preparations for the PI inspections and we are actually working closely both with the FDA and the regional components of the FDA. So our plan certainly is that upon approval we will be fully validated and able to start manufacturing at that point in time, and as we have indicated, we have a modular approach and even with the first modules we're able to supply up to 400,000 patients of their daily medication. And so far we've been very, very successful in terms of our even going a scale to commercial scales from clinical scales. So upon approval, we expect to be able to start immediately manufacturing.

So, do we see this as a first quarter or a second quarter event just in terms of timing?

Well, I would say in terms of readiness, I would say that by the fourth quarter of 2009, we will be ready in terms of planning. Right now we assume that we will see a full FDA approval in the first quarter of 2010 and by that time we will certainly be able to assume the responsibility of commercial manufacturing.

Thank you very much. I appreciate it.

Thank you.

And at this time there are no further questions.

Thank you very much, ladies and gentlemen, for joining us today. Of course, we are in a period of completion of all of the work so there is not as much trial information to provide, but some of that will become public as the weeks proceed through the rest of this year. We thank you all for joining us today and we look forward to seeing you again at the next quarterly call.

Thank you and this concludes today's conference. You may disconnect at this time.