Welcome to the MannKind Corporation Second Quarter 2019 Earnings Call. As a reminder, this call is being recorded on August 7th 2019 and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call until August 21st, 2019. All participants will be in a listen-only mode for the duration of this conference. [Operator Instructions] The company will take questions from analysts after prepared remarks. This call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty, which could cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see there 10-Q report filed with the Securities and Exchange Commission, the earnings release and the slides prepared for this presentation. Joining us today from MannKind are Chief Executive Officer, Michael Castagna; and Chief Financial Officer. I would now like to turn the conference over to Mr. Castagna. Please go ahead sir.

Thank you. Hello, everyone, and welcome to our second quarter earnings call today. As you can imagine, we're very excited here at MannKind, as today's call is important, given the caps off, the recapitalization journey we started two years ago when I became CEO. Since then we've raised over $160 million, paid off our senior secured lender, signed multiple partnerships, including a $105 million deal with royalties from United Therapeutics, as well as laid the foundation for our future. This journey has been a bumpy ride for our shareholders, our debt holders and our employees and I want to say thank you to everyone involved in getting us to this point. I believe we are now in a solid position to deliver on shareholder value going forward. Over the past 24 months we transformed MannKind into a growth engine for years to come, when you look at these four pillars: First, we have announced five key partnerships since 2017. UT is progressing very nicely as we just completed the build up of our high potency area within our factory and the teams are now in the process of preparing commercial batches. This program should move very quickly to the next stage of development where we expect to bring in $37.5 million in milestone payments in the next 15 months. Additionally, we received approval for Brazil in Q2 and we expect to ship our first commercial supply in Q3 for an October launch. We are very excited about our partnership there as well as India as we get ready to start the Phase 3 trial. And finally, AMSL is working on preparing our file for submission in Australia. In addition, our recent announcements with OneDrop, is our first partnership to move Blue Hill forward as we think about ways to make…

Thanks, Mike and good afternoon. I'm also very excited by the announcement of both our recapitalization as well as our second quarter results. I'll be breaking my discussion into two sections. The first will be addressing our recap. The second will be a review of second quarter and June year-to-date results, where I’ll be discussing select financial highlights and urge you to read the condensed consolidated financial statements and MD&A contained in our 10-Q, which is filed with the SEC this afternoon. In addition to Mike’s high level review, we issued an 8-K after the market closed today, which provides the details of our recapitalization. Now it's time to dig into some of those details. Starting with the graph on the left, we entered the third quarter of 2019 with $108,000 in debt. Since then we executed four debt transactions over the last 30 days to reduce our debt by approximately $28 million, while pushing out $100 million 2021 debt maturity overhang. And we brought in MidCap financial with initial $40 million funding, which puts our total debt outstanding post these transactions at approximately $120 million. As Mike said earlier, MidCap financial is a firm with deep roots and experience in lending in the life sciences industry who've done extensive research on our company before lending money to us. We feel really good about our partnership with MidCap and the support we have received so far. So looking at the big picture, we have increased cash by $30 million, while increasing debt by only $12 million and pushed out debt maturities to better align with future increased operational cash flows. There are a lot of moving parts, which are more fully described in our 8-Ks and we will answer questions in Q&A at the end of our presentation to help…

Thank you, Steve. Nice work. So when we look at Afrezza, we really strive to simplify diabetes treatment. So we look at the top of this pyramid, our first goal obviously is to continue to grow and accelerate Afrezza’s growth. Additionally, we've tried many different things over the past couple years. And as you look forward, we're going to do less and place targeted bets. It's really about executing what we have and continue to balance the cash in the company with the expectations of revenue. We're going to paraphrase with CGM, as you saw our first deal today with One Drop, we think that's exciting given where they are with integrating some come into the platform. We're going to remove and reduce payor hurdles as we go forward and expect to have continued positive news in this segment as we go forward. When you look at these four underlying pillars, it's about driving consumer demand which we're currently doing in the billboard, no mind campaign, removing friction along the journey which is really around the access copay card program we launched this year as well as reduction of prior authorizations or minimization of prior authorizations in payors. We're going to build partnerships with third-parties around the CGM, JDRF, ADA, AADE as well as ACE . And we're going to continue to focus on enhancing the sales force capabilities. We've really taken about half of our sales force through Tier 2 training, which has really helped close the gap and bring them from the middle to the top performance. Now when I look at Afrezza growth over the last three years between in each quarter, you can see we've had a 4x revenue, whether you’re looking at gross revenue, net revenue, by the quarter or by the half, we continue…

Thank you. [Operator Instructions] We will now take our first question from Pasha Sarraf of SVB Leerink. Please go ahead.

Hi. This is Dylan Dupuis sitting in Pasha. Two questions for you. Number one just to kind of look further down the road the pediatric study what steps are going to be next – required next after the current cohort 3 finishes enrollment and in order to get label expansion? And then second question just on other initiatives such as with Kaiser Health How should be thinking about interactions with these groups the growth opportunity there? And how that compares to other key targets such as these the centers of excellence that you're also making a priority? Thank you.

Thank you, Dylan. First on the pediatric, so cohort 3 is really the cohort for 47 year olds. We just recently opened up another site. So this cohort 3 hopefully will go as planned and we can wrap-up the study in the meantime, we're planning to go to the FDA to wrap-up the data we have so far and get alignment on the Phase 3 protocol and then depending how things are and post the FDA meeting, we'll decide how to progress this into the Phase 3 segment. But that's the first step. The second step here is continue to meet with pediatricians and understand how big of an opportunity the pediatric segment can be and then from there we'll accordingly work through the funding plans that we have for it. The second one is around Kaiser. So Kaiser is really starting from ground negative, I'll say meaning, it's a closed system and they have no exposure to a authorize other than a handful of patients, who were there and we have a dedicated person working up and down the channel Kaiser, really starting to make inroads in fact some of our employees, because Kaiser is one of our own health insurers, are going to Kaiser for their own health benefits and their first meeting there was, they didn't even know what Kaiser was. And so I think when you think about impacting all their endocrinologists it's going to take a little bit of time. But when you look at what Kaiser is publishing, it's around $100 million an expense around hypoglycemia, and they really are focused on how do they contain or reduce hypoglycemia rates in their system, and get better outcomes. And so remember they use HUMULIN still as their primary insulin of choice. So we really think we have a good value proposition for Kaiser as it goes forward. But it's not going to happen tomorrow, but we do have a five year contract and excited to continue to work with them to change hopefully, the whole standard of care there. The following one is just around other access contracts, so we would continue to show for example, the top 25 docs, who adopted Afrezza went from 100 scripts two years ago to over 500 scripts in the last quarter. We continue to see as we get people on board and they adopt the drug. They continue to grow. And the question is how do we keep getting the next group of physicians in the next group of physicians and increased depth of prescribing. So with that – that's one of our core focuses and the Med D contracts are just now coming in terms of what the results are for contracting for 2020. And at this point, we're cautiously optimistic and excited that we'll see some good changes in our Med D access as we come into Q3 and get ready for 2020. So I hope that answers those three questions.

Excellent. Thanks.

Thank you.

[Operator Instructions] We will now take our next question from Anita Dushyanth of Zacks Small Cap Research. Please go ahead.

Anita? Are you on mute?

Hello. Can you hear me, okay.

Now we can hear you, yes.

All right. Thank you. Congrats on the quarter and thank you for taking my questions. I wanted to know what sort of percentage growth you expect in the prescribe going forward and also do you plan to turn on the DTC during the rest of the year?

I don't think we've given guidance on prescriber growth. We continue to see prescribers grow quarter-over-quarter. We look at our new copay card data we see that growing month over month. So overall, there's nothing change we expect to gain new prescribers given our sales force footprint. I think what's important is we started the year at about 55 sales reps in the field. We've hired about 20. We think right now we've got two or three openings, so we're roughly fully staffed at almost 75 people and a lot of those people just came out training the last quarter. So they get the lunches and points with their doctors. We know it takes three to six months for them to start to make impact. So we're optimistic in the second half that we'll see more and more prescribers adopting the product and trying the product as we start to fill since January. The second question is DTC. So, on that one I think given the lack of response that we saw and the investment that it took, at this point, I would say, we see more impact from the billboards we launched in the first week. And if anything we will scale that one up before we scale up TV. It's a very expensive proposition. And I think the second part of that would be we probably would make a new commercial at this point before funding that commercial, but as we look forward DTC is not in our current cash flow or spend, and it's not something we expect to bring forward in the near term.

Great. Thank you for the clarifying that. You said a further distribution in Brazil. The launch will be in Q3. When do we sort of expect -- should we expect the shipment for Australia recent time next year?

For Brazil you should expect the shipment in Q3. For Australia we expect -- we're working on the filing now. So that's going to take a little bit of time down there, so I don't give guidance yet as we haven't yet filed the application for Australia.

Okay. And just a last one more question. Could you provide some clarity on the pipeline related to Arlett [ph] agreement with them? Do you have any update on that?

I don't want to speak for Arlett. I know they're working on quite a few things, and they continue to be a great partner and move that product category forward, because obviously a lot of state and Federal laws and country laws they have to get through. But I think that market continues to evolve and our technologies differentiated within that market. So I don’t want to speak Arlett, but I think we'll continue to have news coming out in the second half.

Great. Thank you. That'll be it for me.

Thank you.

One more?

Okay.

We’ll now take our next question from Robert Hazlett of BTIG. Please go ahead.

Hi, guys. This is Jake on for Bert.

How are you?

Okay good. I was just wondering if you guys could comment on your progress with type 1 patients?

Yeah I think the type 1 segment in particular that's an area that we're going to continue to focus more on. They make up about 40 – 40% to 45% of all insulin use in the country, on meal time. But when you think about our product and CGM adoption, it's an ideal platform for type 1. One of the challenges I know, we've seen in this historical. Uptake in the type 1 is that they've used it more as an add-on to make their pump work more effectively or to tap out a high – stubborn high that they were experiencing. So I think the real question is how do we continue to drive fundamental adoption as a real true meal time insulin full time as opposed to this add-on concept that we've seen. And some of that's, how it was adopted in California, that's driven that? I know we have a lot of pump-ins in California, but we really do believe type 1s and we see them everyday working for us that they have a phenomenal experience with the presence, they got phenomenal time and ranges. And the thing is just how do we continue to get that out there and that's really the goal is starting to utilize the unique aspects of a presence PK/PD showing you that that almost real time feedback that you see on CGM with Afrezza. And that's part of the in human insulin campaign where you kind of see the real world perspective of someone having to wait to inject their insulin and I think that's, that's our main focus is, how do we continue to bring this into the lifestyles of people that they can live in that spontaneous moment. And so, that's one area. We continue to look at other ways to penetrate the Type 1 market. My work went to top leaders as well and looking as one investigator initiated trials that we think will help differentiate the product and that segment. So that’s a big focus for us. The short answer.

Got it. That makes sense. And then you guys also mentioned expectations for numerous new publications. I just wondered, if you could provide additional color on what you expect to convey in these publications?

Yeah just refer back to the slide real quick. If you look in the real focus for us is continuing to build out the scientific story around the altar acting aspects of the product. So we think that's important to get this data published because we believe at some point between the ACE and the ADR guidelines there will be an old directing category and getting our data published to highlight the PK/PD profile of our product is one of those things that will be important for them to build a reference to when they create that category. I think the other aspects of the product are really around time and range and hypoglycemia and showing you the dosing and so there's a whole host of publications around that. And then finally it's really around pulmonary safety and helping people understand the data we do have on pulmonary and what's been studied historically and fortunately, Pfizer just published a data from 2012 recently, showing you that inhaled insulin is relatively safe and effective. And I think that all that scientific data continues to support the efficacy, safety, balance of this product and this category of treatment as we continue to grow.

Thank you. If I could just ask one more. I was just wondering if you could kind of talk about the response prescriber -- you've gotten from prescribers based on the 88 data you've presented specifically around the more simple titration regimen and the need to get on higher doses?

I think I might add another couple of times since that data came out and the customers, but I think the general feedback from customers is this the ones who use it their feedback is that matches their clinical experience and reinforces their confidence. And the ones who haven't used it, it helps them understand what they need to get to. And for example we just look back at one of our pharmacist just present an information from our 2006 trial and in the Type II segment there we actually cap the dose to roughly eight units of relatively eight units Afrezza with the average dose. And here in this trial, you can see people got the 16 to 20 units per million. So it just shows you how far we've come in understanding the dosing of the product and what's required to truly get a nice response output and I think that's people misunderstand, trying to compare an injectable to an inhaled. And they really are different. And I think that's what we're trying to explain to people is don't look at an apple and an orange really look at them as two different products, two different ways they work fundamentally indicated for mealtime control and I think that's where you start to see the summary of our data going forward and that don't mix up the units really look at this as a unique option and a fixed dose way that helps you get to the specialty under control without a lot of complexities. Go there and we're implementing that protocol in India too. So I think that's partly what that study is very helpful for all the new trials we have that should be a protocol pretty consistent that we go forward with.

Okay, great. Thank you and congratulations on all the progress.

Thank you.

I'd like to turn the conference back to you for any additional or closing remarks.

I want to say thank you everyone. We're very excited about the second half in 2020 and beyond. It took us a little bit longer than we wanted to do to finish up the recapitalization, but we want to make sure that we signed up for covenants and partnerships and people in the partner we work with them on debt. That was the right timing and we really do feel the company is at a place where this was the right time with Deerfield ending and starting him with a new partner and that we can hopefully minimize any dilution going forward, so that we can continue to run the company, but the stock price respond appropriately and continue to grow Afrezza within the U.S. and outside the U.S in addition to moving Treprostinil forward as well as our pipeline. So thank you again for everyone. Thank you for the MannKind team working behind the scenes. There's a lot of effort -- a lot of late nights getting here, but we made it happen. And just thank you to everyone around us and all the support. With that said, look forward to keeping in touch and a few comments updates in September at some of the healthcare conferences, so we'll talk then. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.