Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation Third Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, November 1, 2012. Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; and Chief Financial Officer, Matthew Pfeffer. I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead.

Good afternoon, and thank you for participating in today's call. I will summarize our financial results for the third quarter of 2012 as reported earlier today. Hakan will then discuss our current operations, and I will conclude with an overview before we 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 meaning of federal securities laws. It is possible that 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 and at 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 1, 2012. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call. So for the third quarter 2012 total operating expenses were $35.5 million compared with $44.1 million for the second quarter of 2012 and $32.8 million for the third quarter 2011. Research and development expenses were $25.5 million for the third quarter of 2012 compared to $26.6 million for the second quarter of 2012 and $23.1 million for the third quarter in 2011. The increase in research and development expenses for the third quarter of 2012 compared with the same quarter in 2011 was primarily due to increased clinical trial-related activities in the third quarter of 2012, partly offset by the settlement of the terminated insulin supply agreement in the third quarter of 2011. There was a slight decrease in R&D expenses this quarter from last quarter due to timing of clinical trial-related expenses. General and administrative expenses were $10.1…

Thank you, Matt, and good evening. During the third quarter, the organization has been heavily involved with finishing the recruiting of the type 1 and the type 2 studies. Our staff and the CROs were certainly challenged by the task of recruiting almost 3,000 patients across U.S., Europe and South America. But I'm happy to announce that it's now behind us, and our focus have now shifted to execution. As a reminder, we are running 2 Phase III studies, the first of these studies, study 171, is an open label study in patients with type 1 diabetes. And that's a running period during which all patients are optimized on the base of the insulin regimen. At least 471 subjects are to be randomized to 1 of 3-arms for mealtime insulin: a control arm in which patients utilize injected rapid-acting insulin. 1 of 2 AFREZZA arms, one with the MedTone inhaler and the other for the next-generation inhaler. After the mealtime insulin is titrated, there is a 12-week observation period on stable doses of the mealtime insulin to assess the HbA1Cs level, which is the primary outcome parameters. And now the objective of this study is to compare the safety profile of the 2 AFREZZA treatment groups. The other study, study 175, is assessing AFREZZA using the next-generation inhaler in patients with type 2 diabetes, whose disease is inadequately controlled on metformin with or without a second or a third oral medication. Again, after running period during which the subjects remain on the oral medication, at least, 328 patients would be randomized to additional treatment with AFREZZA or to the Technosphere inhalation powder, the placebo group. The study will also have titration period, followed by a 12-week evaluation period to assess the HbA1C levels. Patients recruitment for both Phase III trials…

Thank you, Hakan, and good afternoon, ladies and gentlemen. As Hakan noted, MannKind recently achieved 2 major milestones. We completed recruitment for both the MKC-171 and 175 trials. We thus now have a clear timeline to the end of both studies. Those 2 key registration trials are intended to lead not only the FDA approval of AFREZZA, but also to support a potentially significant and valuable label. Together, these studies should enable us to validate AFREZZA as a safe and effective therapy that would be valuable throughout a broad range of the entire diabetes spectrum. The major features of the protocol for these 2 trials were generated in close collaboration with the FDA. The agency wanted us to enroll patients with baseline A1Cs targeting an average of 8% to 8.5%, so that we would be able to show truly meaningful improvement in A1C with AFREZZA over the course of the studies. Throughout our extensive clinical and preclinical program for AFREZZA, we have seen no signals to raise any safety concerns about our formulation or our delivery. Both the insulin and the carrier quickly crossed into arterial blood, there is no accumulation in the lungs. Some patients do react with a tiny cough when first inheriting a powder, but we have seen no unusual adverse effect throughout the long series of more than 60 clinical trials. There are patients who have been using AFREZZA and enjoying this therapy for almost 5 years. The main objectives of MKC-171 are to bridge our next-generation Dreamboat delivery device to the data from the earlier trials conducted with the MedTone inhaler and to compare the glycemic effects with the patients -- those with the rapid-acting analog. The primary endpoint for approval is simply not inferiority for the latter comparison, though a secondary endpoint is defined…

[Operator Instructions] The first question is from Simos Simeonidis from Cowen and Company.

First one for Matt, just to make sure I have the cash arithmetic correctly. You finished the quarter with $2 million, you added $86 million from the offering. And you had, I believe, $21 million from Al. And then finally, if I heard you correctly, you said that you're going to have another $120 million that Al is restoring back to his line of credit. Are all these assumptions correct?

Well, yes, except that the $120 million that I talked about is the total amount available after adding that back. So that would add back.

Okay. So it will be $100 million that's available under Al's line of credit.

Well, we're adding back a little over $100 million because of those -- if you look into the text, you'll see he spent about $104 million buying the stock and warrants. And we're doing that by a reduction of the loan. But we're making that amount of the facility available again for reborrow. So you take that and add it to what was available previously, and it comes to around $120 million.

Okay, okay, great. And then you said for 171 -- for 175's last patient visit, May 2013, and for 171 last patient in shortly thereafter. So we should assume that you're going to announce the data sometime in June or July next year?

Early August is probably more accurate, Simos, but yes, it will be around there as quickly as we have it all gathered.

Okay, okay. And it might be too early to ask this. But I mean, what's the partnership interest looking like? Are people talking to you now and they'll wait to see the data, or can you say anything about that?

What I would say, you haven't mixed it -- as we expanded the market opportunity with type 2 patients, we certainly had newcomers that are actually in different levels of due diligence right now. We, ourselves, are also very enthusiastic about the opportunity here with an expanded type 2 patient market. So, we -- I would say, we expect that we would, in earnest, start the negotiations, say in the early part -- early to mid-part of 2013.

All right. And final question, I will jump back in the queue. What's the -- do you have the general breakdown for -- geographic breakdown U.S. versus outside U.S. for the 2 trials?

I would say, guide about 60%-40%.

60% U.S., 40% X U.S.?

That's correct.

The next question is from Ian Somaiya from Piper Jaffray.

It's Matthew on for Ian. Two questions. First, and sort of following up on the partnership question. How has the commercial partnership strategy been impacted or changed given the recent financing in terms of either timing or the type of deal that you might be seeking?

Actually, the fact that we have been able to finance and we now see -- I mean, the incremental finance that would certainly take us clearly into 2013. And with the warrant also being -- and now the opportunity for incremental funding in 2013, I would say, at this point in time, the money situation has not impacted our ability or our strategy in regards to partnership discussion.

Okay. And then on the trials, I know the goal was to get an average HbA1c level of 8.5% or 8%, 8.5%, and I just wanted to confirm or know, did you achieve that goal? And if so, what do you -- how do you view the implications of that in terms of outcomes, trial outcomes either in terms of the non-inferiority and/or superiority end points?

I'm going to refer that to our Senior Vice President of Clinical Research, Bob Baughman.

Hi, Matthew. Again, that was, as we've mentioned before, we had to screen more patients than we planned, and the purpose was, or the need there was to ensure that we were keeping only those subjects with A1Cs that were in the range of 7.5% to 10%. So we have done that, all of our subjects being randomized into the trial were elevated above 7.5%, which gives us the room to be able to measure the effect of the drug. So we're confident that we've been able to bring in the subjects that are necessary to be able to show its effect.

The second part of your question related to what do we expect out of it. I gave an example that if you get the AFREZZA patients titrated to the target of under 120, most of these patients are going to be at near-normal A1Cs. And so you're talking about 6% or under -- starting with 8% lower, you're going to see 2% drops for a lot of the AFREZZA patients. And that's probably not possible with many of the rapid-acting analog patients. So we should expect far more than just non-inferiority, but we can't make any claims until we see the data.

[Operator Instructions] The next question comes from Steve Byrne from Bank of America.

I wanted to better understand 171. In the titration phase, are there adjustments being made to both the AFREZZA dose and the basal insulin dose targeting the blood glucose levels at different time periods during the day?

Yes, this is Bob again. During the basal optimization, we're focusing there under basal insulin. But then, once randomized, we're putting them into a titration period, a 12-week period where we're focusing on the prandial insulin but we continue to monitor fasting blood glucose. So if it's necessary to keep that at the appropriate level, we will elevate or decrease the basal insulin as well. So again, that first period of 4 weeks is focusing on the basal, the next 12 weeks is on prandial, but with adjustments as necessary, so that the final 12 weeks, they are on stable insulin dosing.

And how do you view the potential impact of this type of titration versus the conventional prandial insulin on weight gain?

All of our data to date says that AFREZZA has minimal impact on weight gain. Because of the pharmacokinetics of the drug, we are not having to "feed the insulin later on after the meal." So in this case, because by 2.5 to 3 hours, the insulin from AFREZZA is now gone, we do not have to continue to add calories to control their potential hypoglycemia. So we're very comfortable with where we think we'll end up with weight gain or the effect on weight gain in the patients on AFREZZA.

And while it's shown no real increase in weight certainly not from AFREZZA, people gain weight from other things, but we believe that AFREZZA is really weight neutral.

And Bob, can you review quickly the secondary endpoints for both studies?

Not quickly. What I can address for you is that, what we're looking at, as you know is the primary is in the 171 study is to evaluate A1C, and that will be compared as a non-inferiority trial. The secondary objectives are looking at the proportion of subjects that have A1Cs that fall below 7, that fall below 6.5. Those incidences of 6.5 or 7 with no significant or severe hypoglycemic events, and we'll be also looking at their 7-point glucose from different points throughout the study, and the change in body weight is also a secondary objective.

Okay, and on 175?

In the 175 study, again, we are looking at A1C as our primary endpoint in that trial. And the secondaries again are those subjects that reach 7, those subjects that reach 6. We also are looking at fasting plasma glucose, change in body weight. And importantly, in the type 2 studies, we're looking at the proportion of subjects that require rescue therapy.

Okay, and now that 175 has enrolled, can you roughly describe the proportions that are on metformin monotherapy versus those that are on 1 or 2 additional orals?

I'm sorry, I don't have that data in front of me. I couldn't comment on those that are on metformin alone or 2 or more either agents or those on metformin plus 1 or 2 other agents. I do not have that data available.

We have no further questions at this time. Mr. Mann, would you like to make any closing remarks?

Thank you all for joining us today. I know it's been difficult given the change in timing because of the hurricane, but thank you all. We look forward to our next call in 2013, announcing the status of our clinical trials and other corporate developments. Thank you all.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.