Ladies and gentlemen, thank you for standing by. Welcome to MannKind Corporation Third Quarter 2011 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, November 3, 2011. Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; Chief Financial Officer, Matthew Pfeffer; and Chief Scientific Officer, Dr. Peter Richardson. I would now like to turn the conference over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead.

Good afternoon, thank you for participating in today's call. I will summarize our financial results for the third quarter of 2011 as reported earlier today and discuss the status of our financing activities. Hakan and Peter and Al are also in the line and will comment on our current operations before we open up the call for your questions. Before I proceed further, please note that comments made during this call will include forward-looking statements within the meaning of Federal Securities Laws. It is possible that the actual results could differ from these stated expectations. 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 under 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 3, 2011. MannKind's management undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. Now let's start with the financials. For the third quarter of 2011, total operating expenses were $32.8 million compared to $42.5 million for the third quarter of 2010 and $39.2 million for the second quarter of 2011. R&D expenses were $23.1 million for the third quarter of 2011 compared to $31.4 million for the third quarter of 2010 and $30.3 million for the second quarter of 2011. The decrease in R&D expense is primarily due to lower purchases of raw materials as a result of the termination of our insulin supply agreement. The final shipment of recombinant human insulin from Organon was received and paid for in this third quarter of 2011. Additionally, the decrease from the same quarter and prior year was due to the positive impact…

Thank you, Matt. Good afternoon. Well, since Matt has reviewed with you the status of the financing activities, I will focus on the corporation activities underway, regarding both the clinical trial program and partnering activities. At our last quarterly call, we reported that we were about to meet with the FDA to discuss the design of the 2 clinical studies that the agency has requested we conduct using the next generation inhaler. We held this meeting on August 10 and confirmed the design of the 2 studies. And since that date, we have been aggressively pursuing the implementation of these studies, including the finalization of the product goals and all of the necessary activities such as IRB approvals, the investigative meetings and site qualifications that are required to launch the studies. And I'm happy to report that we are meeting our internal goals for getting these studies underway. We screened our first patients in the Type 1 study on September 19, and we are well underway with recruitment and enrollment in that study. The first patient's first visit in the Type 2 study is expected to take place a little bit later this month and we remain on schedule to hit that target. Let me also make a few brief comments on the topic of partnership activities. As you may remember, we informed you upon the receipt of the second seal that we would stay in a partnership discussion until we had a better understanding of the outcome of the FDA interactions. Well, we are now able to share the minutes of our FDA meetings with potential partners, which has helped to remove considerable uncertainty about the regulatory path forward. We have reengaged with most of the existing interested parties, as well as several newcomers. We continue to hold such discussions and we believe there is genuine interest in AFREZZA and the Dreamboat on the part of significant global and regional pharmaceutical companies. And we are looking to capitalize on that interest going forward. And with that, I will turn the call over to Peter who will discuss with you the current clinical trials in greater details. Peter?

Thank you, Hakan, and good afternoon. Let me talk about the design of these studies requested by the FDA and the complete response letter. Study 171 is an open label study in patients with Type 1 diabetes. After a running period, during which all patients will be optimized on their basal insulin regimen, subjects will be randomized to 1 of 3 arms: the control arm in which patients utilize injected rapid-acting insulin at mealtimes; or 1 of 2 AFREZZA arms, 1 each for our first-generation MedTone device and our next generation Dreamboat device. We will recruit sufficient patients so that we end the trial with the goal of 133 patients in each arm. After the mealtime insulin is titrated, there will be a 12-week observation period on stable doses of the mealtime insulin to assess hemoglobin A1c levels, which is the primary outcome parameter. The inclusion of 2 AFREZZA arms will permit us to perform a head-to-head comparison of the 2 devices and bridge the 2-year pulmonary safety study conducted with the MedTone device. The basic design of this study, comparing different mealtime insulins in combination with the basal insulin regimen, is similar in design to a previous Phase III trial that we conducted in patients with Type 1 diabetes using our MedTone inhaler. In this trial, the FDA is concerned that we need only do simple spirometry rather than the extensive measures of pulmonary function that we collected in the earlier studies. In our previous clinical program, we saw only a small clinically insignificant drop in pulmonary function that resolved upon therapy discontinuation. The other study will assess AFREZZA using the next generation inhaler in patients with Type 2 diabetes, who were inadequately controlled on Metformin with or without a second or third oral medication. Patients will be randomized to treatment with AFREZZA or placebo in the randomized fashion. Each arm is targeted to end with 123 patients. The study will have a 12-week titration period, followed by a 12-week observation period. And the goal of this studies is to evaluate the efficacy of AFREZZA compared to a placebo powder. I'll hand the call over to Al.

Thank you, Peter, and good afternoon. Let me start with our Q2 call, in which we spoke of the 2 new trials that we're called for in last January's complete response letter from the FDA. We also described how those studies have begun to evolve based on suggestions from the agency during and after the May 4 and the review meeting. Perhaps a review and some color on what transpired would be helpful. Keep in mind that the first CRL raised certain questions about the MedTone device, including labeling of the cartridges and the methodology employed by the laboratory doing the insulin assays used in the bioequivalency trial, a trial that we had run to qualify and improve regularized version of the MedTone that was designed for automated mass production. It would have been difficult to satisfy the labeling direction on the cylindrical MedTone cartridges. And since the blood samples were no longer available, we would have had to repeat the bioequivalency trial in order to resolve the assay matter. However, at the time of the CRL, we have developed a next generation device that we had nicknamed Dreamboat. We were already performing a bioequivalency trial to compare Dreamboat to the MedTone device used in our extensive clinical program. And we were able to complete this study using insulin assay methodologies that address the FDA's constructive comments in the CRL. We determined that we could address the other labeling and other device questions if we responded to the CRL with the Dreamboat submission. Moreover, the next generation device is so superior to MedTone that we, as well as our potential partners, have already decided that it only made sense to launch AFREZZA with Dreamboat. After consultation with the agency at the end of review meeting, we responded to the CRL…

[Operator Instructions] The question is from Jason Butler from JMP Securities.

I guess the first one on the enrollment on the Type 1 trial, can you talk about what your assumptions were for the duration of the titration period and whether you're actually seeing that in the early experience in the trial?

Yes. They're not really assumptions, they're vertical defined and we've agreed with agency in terms of what the titration period would look like. So you're looking at a 12-week titration.

We actually started with 8 weeks and the agency came back and said we'd more comfortable with 10 weeks. And we decided to increase it to 12 because with the 12 weeks and 12 weeks of observation, we can meet the European standards.

Okay, great. And then on the balance sheet, a question for Matt. I know you said you can't talk much about the ongoing process, but can you give us any additional color on what you're doing on how that process is going?

I wish I could. As you probably know because you've been doing this for a long time, Jason, that when you do private placements, you're really not allowed to discuss them because, by their nature, we can't promote them in any way or anything that the attorneys using a very, very broad view might view as a promotional thing which kind of includes anything about terms or anything else. So I can't address that. I mean, I'm sure anybody who's opened the paper recently knows market conditions have been challenging. We've seen the slowdown of deals of all kinds. But beyond that, I can't say anything about this specific deal.

Okay. And then is it fair to say that you have contingency plans?

Absolutely. We have lots -- I mean, we've said many times that we have a range of things available to us, most of them out there are still are. And so there's always plan B, plan C and probably plan D behind that.

Okay. And do at least some of those contingency plans enable you to get something completed by the end of this calendar year?

Yes.

Next question is from Mike King from Rodman. Michael G. King - Rodman & Renshaw, LLC, Research Division: I wanted to just see if I could get a little more color on the -- are there any other items that need to be achieved before the Type 2 study starts?

No. And the first test is rolling out and we're starting to initiate centers very shortly. Michael G. King - Rodman & Renshaw, LLC, Research Division: Okay. And then forgive these next couple of questions because I'm still learning the story, but I wanted to know. To my knowledge, Dreamboat has not been approved for commercial use with any other inhaled drug, correct?

That is correct. Michael G. King - Rodman & Renshaw, LLC, Research Division: So the comparison trial between Dreamboat and MedTone will both suffice for efficacy, as well as safety. I mean, the FDA is not -- I guess, my question is, whether the FDA is going to ask additional questions about Dreamboat safety in terms of other pulmonary effects notwithstanding what was done and seen with Dreamboat?

The agency has not raised any questions about safety for some time. Of course, they always ask for an update of our clinical reports on patients with adverse events. But they've not asked -- they've not raised any question about safety of Dreamboat or MedTone, for that matter.

The primary end point of the study is hemoglobin A1c and that was the primary comparison. The design and the discussion with the agency has been to form that bridge back to the extensive pulmonary safety data that we generated over the large and long previous studies out to 2 years. So that was where there was considerable discussion as to how exactly this would be approached and it's been agreed in terms of the numbers that we've gotten to this study have been agreed by the agency as adequate to look at that using, as I said, the simple spirometry. So we've actually dropped some of the more complex measures which we had in the previous protocols because of the terms and agreement that the simple measures are sufficient to make the comparison that has been asked. Michael G. King - Rodman & Renshaw, LLC, Research Division: Okay. And so therefore, things like smokers or asthmatics or other special populations have already been satisfactorily answered by the data that you generated with MedTone?

We believe so. And you can see now we've done short measure in those populations demonstrating no difference in the pharmacokinetics, or the dynamics from the drug in those areas. So that has not been an area of discussion or concern. Smokers and patients with asthma are excluded from these protocols. Michael G. King - Rodman & Renshaw, LLC, Research Division: Okay. Would you envision doing a smokers/asthmatics study postmarketing or...?

There is a study in patients with asthma and COPD which is ongoing, but it will not be a requirement for submission. Michael G. King - Rodman & Renshaw, LLC, Research Division: Okay. And then just in terms of the trial design, 2 questions. The A1c, is it a noninferiority design?

In the Type 1 study, it's noninferiority with a margin of 0.4 and the standard design feature around that. In the Type 2 study, it's the superiority versus placebo. Michael G. King - Rodman & Renshaw, LLC, Research Division: And then finally, just in terms of -- what are your assumptions for -- have you said what your assumptions are for dropout rates over the course of 171 and 175?

Well, looking in terms of the initial recruitment will be approximately 30% greater than those coming through to allow us a comfortable margin. Michael G. King - Rodman & Renshaw, LLC, Research Division: So you'll over enroll?

Yes.

And the next question is from Keith Markey from Griffin Securities.

I was just wondering, sometime back, you had an announcement about Juvenile Diabetes Association having been interested in conducting a clinical trial with AFREZZA and I was wondering what the status of that is.

They have contracted with a major diabetes clinic to do a -- what's really a closed loop study using AFREZZA, with the basal pump with the closed loop operation of the basal pump, which frankly is a damn good idea because you eliminate the enormous swings that you need to deal with, and also, the excessive persistence of hyperinsulinemia you can see with -- when you're dealing with prandial insulin. So this really sounds like a very good study. And that study, it's underway. The early part of the program was mostly analysis, but they're moving now to a human study shortly.

Perfect. And I was also wondering, you have done a little bit of testing of the Dreamboat inhaler with children. Obviously, not with medicine involved. But I was wondering, can you elaborate on what your interests are in that area and how you see it moving forward?

Yes. The device actually tests very well in children. The handling and the characteristics you look at which is ensuring that you have a linear emptying of the device across the range that we provided. It showed that children could handle this down to the age of 4 years and actually of course the other affiliate that's potentially [ph] down the loop in current population. So those handling studies have actually been very well in terms of that. We've not embarked on the studies using active treatment until we gain approval in the adult population. So I think that's the appropriate way to approach this. But we certainly believe that the device will be well suited to be used in children.

And finally, I was just wondering if you thought there would be a considerable amount of lost label use when the drug first launches, maybe within the first year for children?

I don't think we can comment on that.

The next question is from Ian Somaiya from Piper Jaffray.

I just had a couple of questions. The first was, on the financing, I know you can't be specific with the financing, but I was wondering if -- depending on your ability to execute the financing, does that really play into timing for a potential partnership? Are you less likely to partner the drug if financing is successful before approval?

Those are independent issues that we will deal with separately. We're moving forward with financing. And we're also moving forward with the partnership discussion. We would like to complete the financing first, but they're independent.

So does one have any implications on the other in terms of structure, where the structure of the deal defer depending on your ability to complete the financing?

Probably not.

Okay. And the one other question I have is I know you've been fairly steadfast in your opinion that AFREZZA has a multibillion dollar opportunity and your partners -- your potential partners have shared that opinion. I was wondering if any additional trials need to be done to sort of maximize that opportunity just in terms of the Phase IIIb program?

We had a list of some half a dozen Phase IIIb programs that were planned. And in fact, one of them is being resolved with the new 175, which is where we believe that we will be able to show very significant opportunity to treat early stage Type 2 patients. All of the other drugs today have problems and all of the other insulins have problems and we have an insulin that mimics normal physiology. And we believe that it will, by eliminating the hepatic and pancreatic stress, it will enable us to treat these people more effectively and probably much more safely than with any other method.

Is that something that you would assume would lead to a labeled claim or how would that be incorporated into the product label?

Well, what the agency has done is they stirred it into a trial in early stage Type 2 and metformin failures or metformin plus 1 or 2 other orals and that will enable us to have a label that will permit us to market the product into the early stage Type 2 patients, incredibly increasing our opportunity. We -- virtually all of our studies were done in late stage Type 2. There was really only 1 of our 50-odd studies that we had done that was not in late stage Type 2 or Type 1. So this is -- this significantly increases our potential market opportunity in it, right from the get-go.

And then I would ask one final question. Do you feel in your Phase III program or Phase IIIb program that it makes sense to do a head-to-head study versus an active agent to put -- or potentially look at a strategy where you evaluate switching patients who are effectively under control and moving them to AFREZZA to just sort of maybe...

Comparing them to what?

Well, if you're talking about first-line therapy, then an act of control would be obviously an oral drug.

That's what we're doing. That's what 175 is.

175, you're correct is against placebo. And I think that was designed -- one, that was the most straightforward design that we could adopt in this population and give us the highest certainty. Certainly, in IIIb discussions, the plans for head-to-head against the appropriate insulins and oral therapies have been discussed not only with potential partners, but we have outlined trial designs. But we're not going to embark on those until we have clarity as to where we are with the IIIb -- the III -- the program as it exists which is our focus at the present time.

[Operator Instructions] Next question is from Avik Roy from Monness, Crespi. Avik Roy - Monness, Crespi, Hardt & Co., Inc., Research Division: Al, have you given any further thought to whether your debt will be involved in any transaction or deal outside of the financing that you're attempting, some of the other things that you're looking at, the contingency plans?

Let me let Matt answer that since I might be conflicted here, okay?

Unfortunately, it fell squarely in the category of things we can't talk about, I'm sorry to say.

[Operator Instructions] There are no further questions. I'll hand the conference back to you.

Thank you, all, for joining us today. And let me just say that a great deal is evolving for MannKind in all fronts, so we look forward to updating you as the various elements of the trials continue and also the financing, the partnership discussions as they develop. And again, thank you for joining us today.

Thank you. Ladies and gentlemen, this concludes your conference call for today. You may now disconnect.