Welcome to the Second Quarter 2017 MannKind Earnings Conference Call. My name is Eric and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now turn the call over to Rose Alinaya. Please go ahead.

Good afternoon and thank you for joining us on today’s call. Joining me today from MannKind are Chief Executive Officer, Michael Castagna; Chief Financial Officer, Steven Binder; Chief Commercial Officer, Patrick McCauley; Chief Medical Officer, Raymond Urbanski. Please note that comments made during this call will include forward-looking statements within the meaning of federal security 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. The conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 7, 2017. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call. I will now turn it over to Michael Castagna, our Chief Executive Officer. Mike?

Thank you, Rose. And thank you everyone on the phone for taking time to dial-in this evening. I wanted to share quickly my perspective on MannKind as I transition into the role as CEO. Over the last 8 plus weeks, I've had the opportunity to meet our hundreds of employees around the country, I've done a deep dive assessment on the pipeline in the history around the pipeline, we've met with potential analysts, we've met with our key stakeholders who own either share in the company and/or hold our debts, and we've also met with several potential investment groups through our [Greenhill] collaboration. And I want to take a step back and think about when I took a tour of our manufacturing facility which is over 300,000 square feet. It reminds you of why a [man] invested in those company the way he did and built the capabilities that we have. This product was destined to be a blockbuster. It was studied by two independent companies as well as others to show what the potential was, and just to get a fresh advice, I myself went in and conducted some market research during the month of June to confirm that we're on track to achieve status that I felt was reasonable in the timeframe as we look out over the 18 to 24 months. What I heard in the feedback from customers was very enlightening and exciting because it reinforced the things that we've been working on for the last year fixing and straightening out and executing are right on track with what we need to be doing. The number one thing I heard the most was continue to show up to my office, continue to be there front and center present, and also as I looked at endocrinologist versus…

Thanks, Mike. Good afternoon. I'm really excited to be part of the MannKind team. I can see and feel the passion and dedication this team has for connecting insulin-dependent diabetes patients with Afrezza. I feel really are making a difference and this means a lot to me personally, so thanks for having me aboard. Moving to the financial, I’ll be discussing selected financial highlights and urge you to read the full financial statements contained in our 10-Q which was filed this afternoon. Please note that I would make comparisons to both Q1 2017 which highlight our activities as an integrated commercial organization post the Sanofi breakup as well as the Q2 2016 were appropriate. Our total net revenues for the second quarter of 2017 was $2.2 million, which included $1.5 million of Afrezza product net revenue, which they 29% increase over the first quarter of 2017. Also included in second quarter net revenue was $0.6 million of other revenue from the sale of oncology related intellectual property to a Chinese company [indiscernible]. Afrezza product gross revenue increased 60% versus quarter one 2017. The difference in the growth rates for the net revenues of plus 29% and gross revenues plus 60% was due to an adjustment recorded in Q2 2017 of $0.3 million in net revenues for wholesale distribution fees that will not occur in the future. The Afrezza gross revenue growth of 60% from quarter one 2017 was generated from a combination of volume growth, a mix change to more favorably priced NDCs and price. McCauley our Chief Commercial Officer will provide additional color for a volume growth later in the presentation. A reconciliation of growth to net revenue is contained in the MD&A section of our second quarter 10-Q. At June 30, 2017 we had $2.6 million in deferred…

Thanks Steve and I'll tell you, I am also very excited to be here at MannKind and be part of the team as well. Based on my first few weeks in this position, I really wanted to share a few observations that I've had but also provide an update on our commercial efforts and successes of second quarter. So first while I have only been here a few weeks, I've been really impressed with the overall commitment and dedication of both the MannKind organization, as well as the commercial team. I've had the great opportunity to meet many employees who are fully committed to working together to ensure that we educate our healthcare providers on the clinical benefits of Afrezza in order to help diabetes patients achieved their treatment goals. And secondly over the past few months there's been a significant amount of investment and focus on building our commercial infrastructure to support Afrezza for both today, as well as the future and I really want to take a moment to just recognize all the great efforts of the team and the wonderful job that they've done. So let's look now at our second quarter highlights from the commercial perspective. As we shared with you on our first quarter earnings call, we completed a significant milestone event which was the expansion, hiring and training of our MannKind sales force in February 2017. The second quarter is very important because it represents the first full quarter that this MannKind team has been promoting Afrezza to healthcare professionals. We're going to review the impact and efforts of this team on prescriptions and writers for the second quarter in just a moment but before we do that, I wanted to highlight a few other areas from the commercial perspective. First from the enhanced…

Thank you, Patrick. So as Patrick just described, the commercial strategy utilizing the data we currently have on hand, I’m going to cover the Afrezza clinical strategy basically generating new data to help move us and Afrezza forward. I will also give you some details on the clinical trials that we are planning and are conducting. I’ll then give you a brief update on the label submission and on some of our development compounds that Mike alluded to in his introduction. Although there have been approximately 63 studies conducted and approximately 5000 patients during the Afrezza development program, there still exists significant knowledge gaps. There are several reasons for this. The field of diabetes has advanced but currently looking at different metrics, metrics that include measurements other than A1C and technology has vastly improved. The advancement and uptake of CGM technologies now allow us for patients to have real-time glucose control. This can improve metrics such as time and range of glucose excursions both recent topics at FDA meaning and are being viewed as clinically important endpoints. Afrezza when dosing titrated properly is uniquely situated to help patients achieve these goals especially around these metrics and this is the foundation of our clinical programs. So let me start with the starting and staying on Afrezza. Mike alluded to some simulation data that we have. This simulation data has provided some keen insights into how to appropriately dose and titrate Afrezza. This simulation data was not available at the time the development programs and hence we are implementing it in many of our new clinical trials. So in looking at this data we have designed two studies, the STAT study and the ADD-1. I will show you a high-level view of all the studies on our upcoming slide. And this will…

Thank you, Ray, Pat and Steve. Let me quickly just touch on the pulmonary hypertension market, it’s not something we previously discussed on an earnings call. But based on the FDA meeting we made the decision to accelerate investment behind this program and pull forward to make sure that we don't lose time on time critical path in terms of developing our next pipeline candidate. For those of you who don’t know PAH is a type of high blood pressure affecting the arteries or the lungs, and right eventual the heart. It’s estimated to impact of 250,000 individuals worldwide and is considered an orphan condition. Market size exceeded $6 billion in 2016, but his considerable commercial potential due to the premium price paid for PAH therapies. Currently just to put some context around this, the current prostacyclin costs anywhere between $170,000 to $300,000 in a patient per year. The lifestyle and the quality of life for these patients is dramatically impacted by the current treatment out there. For those of you who don't know, you currently need to take roughly 12 to 20 inhalation a day through an nebulizer and machined to get your effective dose and because of the complexity in the delivery as well as the absorption of the product, it’s very hard to get to the top end of therapeutic doses. We believe we have an opportunity here to deliver appropriate dosing in the current ranges of all upper dose ranges that will really help these patient receive tremendous benefit and get their disease under control. Today, the prostacyclin have about 45% market share and we currently labeled our Treprostinil Type 2 which will compete in this space. That is not the brand name, that is just our internal abbreviation as we refer to it. We are…

[Operator Instructions] And our first question comes from Jason McCarthy from Maxim GRP. Jason your line is now open.

Hi guys congratulations on completing your first quarter with the new commercial team in place. Michael, can you talk a little bit more about the upcoming labeling change maybe give us a sense of the timing of the change and how you expect that to impact revenues in 2017 and going forward into 2018?

Sure thank you Jason. First the label change has a couple aspects to it and I think about it in three steps one there is the ability to articulate that the drug starts working within five minutes. The second part is we can articulate that it is faster than the competition. And the third is asking for a different category altogether. The important of these commercially really vary in terms of impact now in the second half of 2017 but as we go in 2018 and beyond. As repute to communicate we expect PDUFA approval by the end of Q3. So this will be a Q4 event in terms of launch and impact. Depending on which combination of those three activities happen really will depend on the upside in terms of the forecast and the accelerate growth that we expect post the label change. So for example if we were to get a different category that opens up a lot of the managed care access, if we takes that out of the bucket that we’re currently restricted in by the competition. So we don’t always control the buckets they’re consumed by the PBMs that drive 70% of the units in the country that really opens that window a little bit. It also dramatically could change Medicare Part D coverage. When it comes to the speed of onset saying we work within five minutes the reason that's important as we’re running these trials right now with DexCom and what you can see is within three dots on the DexCom you can see whether you got your appropriate dose we need to follow up the dose. Being able to have the clinical data that we kicked off coming out in time frame and read for us internally to know what the label…

No it does thank you very much. And just one more on international expansion you had mentioned Brazil earlier any plans for the Asian markets in particular China and how is MannKind thinking about those additional markets with the new commercial team in place.

So when we think about international markets, earlier this year when the commercial growth wasn't clear to everybody it’s was very hard to think about the right balance of a deal. Now that we have shown our first quarter behind us and its public we can start to show the early success of our commercial team so that the potential deal outside the U.S. can see that when we put the resources appropriately against this and the limited resource that we have and get the kind of growth we’re getting and continue that growth quarter-over-quarter. That will really help solidify some of the deals we’ve been working on. Obviously different markets around the world have dramatically different price points, but we are and have been and we’ll continue to talk to various partners in key markets. When we think of Japan you probably need a second study for Japan that’s typical and there's plenty of Japanese partners to consider for that one. When we think about India and China those are two great markets which have tremendous unmet need for example in India there is probably about 80 million patients with diabetes and their average A1C is about a 10th. So these people are under control and they need something that could be easier it really helps drive that and we have some innovative idea and I think about treatment with insulin in some of these markets. So we’ll continue to look at that and when I think about international markets their business opportunities but there also opportunities to help us turn our inventory faster as we think about scaling up the manufacturing plant insulin purchase commitments we have in the outer years this really helps turn some of that. And so we’ll continue to see nice offsets in terms of our fixed expenses but they’ll also help turn the inventory and some of those commitments that we have in the outer years.

And our next question comes from Robert LeBoyer from Aegis Capital. Robert your line is now open.

I'd like to get a better feel for the one drop collaboration and having read the press release. Is there anything that you could add to what was has been publicly disclosed about what you're trying to do and how this will impact usage and patient management?

When we announced memorandum of understanding back in Q2 it was really focused on three things right really round coaching and education of patients and I have been thinking about how Afrezza can benefit from their platform. The second one is on Bluetooth technology and the third was around trying to build a model that really helps transform patient care. So I break that out into three sections so we just announced the first part of that collaboration which is around launching this clinical trial with that will help us build out will be some of the platform around coaching and education. It’s also running a role up study in type 2 patients which really haven't had, it’s a cost-effective way to do that. And it will help kind of help people stop monitor when it comes to FEV1 and it will also show how we can dose and titrate and build coaching applications within the app for future growth as we think about the collaboration. The second part of the collaboration that we really did spend a lot of time during Q2 into Q3 is really around thinking about a membership-based model. So we knew the cost of insulin is high for many patients. We also see roughly $300 million in sales and cash pay market alone and that is now all the Walmart rely on brand there is a lot of people paying for analog insulin out-of-pocket. And then we look at the number of prescriptions which are significant in this market, and I have sorry just feel I want to stop my head but there are significant number of cash prescription in addition to the dollars. So we think about one drop and we look at the membership model for unlimited insulin test strips we’re looking and…

That's helpful, that gives a little bit more insight as to what you doing. And just one other are there any other updates on the pipeline maybe the epinephrine program or prostacyclin.

This is Ray Urbanski. So with the epinephrine program we are still progressing albeit slowly the inhaled epinephrine for anaphylaxis the conversations with the FDA are ongoing around what the clinical program will look like for registration. As you can imagine there were several complexity around an autoinjector versus inhaled epi so the FDA and MannKind are trying to get this quite right. [indiscernible] trial and we still then we started formulation and aerodynamics without devices et cetera but that also progressing as quickly as would like it at this point in time. We also have four or five other compounds that we have evaluated at various stages of development again there resource as capital become available we’ll probably progress from these more than others. I just also want to make a note of the 45 compounds that we have ever looked that to formulate we have been successful with 43 of them. So we’re pretty confidence that whatever compound we look at we’ll be able to put it into our formulation technology as well as our devices and moving forward.

And just to add that some of these are in why we engaged [Indiscernible] because they are of interest because we think they served real on the need, but they may not be like epinephrine we are really going to build out a large primary care sales force to sell epi. So when we think about potential partners that we line up with these programs is one of the things we look for to offset some of those development costs is to bring the right partners around some of these programs.

And our next question comes from Bill Tanner from Cantor Fitzgerald. Bill your line is now open.

I had a couple for you and as it relates and you guys walk through good detail the efforts that are being undertaken to grow Afrezza and so if you think about sales force expansion payer coverage, the one drop, the label, which is your label update international expansion in additional clinical data if you had the rank order which ones are or what ones you think are the most important maybe the most likely to be successful most likely to move the needle – what those be just in terms of investors wanted to pay attention to the impact that they are having or do you think it's – the constellation of all of these things that are going to potentially have an impact. And then I had a follow up on treprostinil program please?

Bill great question I think you can see that come we’ll continue to make tremendous progress on a lot of fronts pushing a lot of things down parallel paths and I think we all seen SSLs we trying to do too much at the same time and we can refocus our energy sometimes. But I think the answer to your first question around privatization I think getting Afrezza success and execution here in the U.S. is number one, two and three priority I am glad to have Pat here whose got tremendous amount of leadership and experience in leading sales teams and cross functional alignment. I believe we’ll continue to see an accelerated fine tune of our sales team in terms of their impact and their execution and also recruitment of key talent to continue to. We have probably about seven field openings around the country and I think those. We are not in a rush to fill them, these we want to make sure we have the right type of people in the bus. And this is really important because we see actually one example we just hired rep recently in the East Coast and literally in one month she grew that territory 600% which is unbelievable but you just get the right person and the right passion and the right understanding and you could just see tremendous growth. And that’s when we look across the territories the good advantage of our last year as we've seen what works and what doesn't work and the types hiring profiles. And we continue to get picker and picker as we go forward in the types of people that we believe will be successful as we go forward. And so that's in terms of number one priority. The other reason that that…

And just on the Treprostinil program. I'm wondering if you could just whatever you're willing to disclose, kind of provide some idea as to what the different, the profile the differentiation profile of the product would be relative to other inhaled prostacyclin. I mean I am assuming the aspirations not to create a me too product and I guess as you think about longer term with the pipeline the notion would be what in terms of trying to leverage the technology converting things that are normally delivered pulmonary or perhaps the [PK] profile being better as it is with insulin.

I’m going to let Ray take that question. One thing I will add before it goes is, we’re going to have investor updates twice in the month of September and we’ll give a little bit more clarity around how we sequence out the pipeline and the filter that we use, so that will be coming out in September timeframe. But just to focus on Treprostinil for now. Ray maybe you can comment.

So, one of the things I want to emphasize and the things will articulate in the future meetings, is that all of our development programs and even though they may be following 505(b)(2) registration pathways, are not being developed just for the mere convenience. Right, we’re not developing and inhale Treprostinil simply because it happens to be more convenient than walking around with a battery-powered nebulizer, where you have to take multiple inhalations for single dose. We firmly believe and in having conversations with some very high-level thought leaders that our drug delivery technology will deliver Treprostinil in a more effective way increasing tolerability, but also improving the safety, profile, but also the efficacy profile of the inhaled drug. So when we describe our other pipeline products you’re going to see this recurring theme throughout our presentations. That we’re not only meeting an unmet medical need through our improved safety and tolerability, but also we feel there is a real efficacy advantage and it's not purely as a say again it's not purely a convenience play. So, that's where we think treat sits and as I say, we've had conversations with some very high-level practitioners as well as KOLs. They think the therapeutic advantage of the Technosphere Treprostinil is incredibly high especially as related to currently marketed inhaled Treprostinil.

For competitive reasons I don’t want to go into this one too, but I would say we have talk to couple of key positions that, when you articulate what we’re trying to articulate what we’re trying to achieve with this development program, what we think is possible and their articulation of what the journey is for this patients. It’s something that we get very excited about, but we want to walk before you want to miss one, but we but we do believe as we get through the first phase of this, the timelines will move rather fast.

I mean that was a question, I mean obviously Technosphere insulin is groundbreaking as it relates to delivery of insulin and just wanted make sure curious as to other things that you would put in the pipeline or use the inhaler for the formulation technology for they were also be viewed as being very much innovative and understand the 505(b) (2) does not necessarily mean lack of innovation. Just to kind of wanting some color. But obviously we’ll get more detail when we get more detail. Thanks for answering that.

Wanted to comments this one, I think the big surprise, or segment I guess for our part is, when you are delivering a drug to [indiscernible] already, the FDA’s barrier in terms of what they expect and one out of the studies that comes a lot less of a burden in something like insulin which was a first time for us going in that direct with all the development cost. When you deliver drugs to lungs the FDA as a little bit better understanding and expectation around hat. So that’s helpful to us as well.

We have no additional questions at this time. I would like to turn the call over back to Mike for closing remarks.

We have some other questions that we mailed in, but I am told off bit just expect some continued future updates as we progress into Q3. I want to thank everyone for their patience. I think you see the first quarter of a fully built MannKind sales team is continuing to accelerate our growth. The excitement I have is that, you can see, as we grow units, revenue exponentially increases. So even those mailing be growing 20%, you see gross and net sales growing probably in upwards of 50%, 60%. We expect that trend to continue as we migrate through a dose titration schedule for patients and packaging changes that we made as really helped to make it easier for patients to titrate up and staying start on the drug. I get lots of question on refills and news access and I just want to remind people that just because you see a 100 or 200 NRxs, they are my all new patients. Sometimes the patient switching doctors, they are switching pharmacies, it’s an annual renewal. So the subset of patients is what's new and when we look at our refill rates, we don't see a tremendous difference between us and rapid acting analogs insulin. So that's a question I know we get a lot, it’s not one that that concerns us. We think as we grow and we do some of these studies and continue to increase our titration schedule, we think our retention rates will go even higher than the rapid acting class. But in general, we are not seeing anything that scares us, at this point when it comes to retention. We had to pass our refills, within our stroke which we did in June and July continues to be a strong month as we sit here today going into August. So from this perspective we have some time in our side to solve the capital structure of the company. We are working diligently on that one - we know it’s an overhang as we stand here today but it's not an overhang that we will sleep over because we we've had several great meetings and expect that to continue. So I want to thank my team, I want to thank all of you and most importantly thank patients who depend on us to be here today and tomorrow and the future. So, thank you everyone. Have a great evening.

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