Good afternoon and welcome to the MannKind Corporation 2023 Third Quarter Financial Results Earnings Call. As a reminder, this call is being recorded on November 7th, 2023, and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call until November 21st, 2023. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see their 10-Q report filed with the Securities and Exchange Commission this afternoon, 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, Steve Binder. I would now like to turn the conference over to Mr. Castagna. Please go ahead, sir.

Thank you, DD. Thank you everyone for joining us today. It's been six years since Steve and I became CEO and CFO. We've turned this company from losing well over $100 million a year to our first profitable quarter in our history. We've helped over 20,000 people on a MannKind manufactured product last quarter and our pipeline is moving faster than ever to help more as we continue to live our mission to help patients live a better life. As you think about our highlights this quarter, we've made great progress on the clinical and financial aspects of our Company. In the orphan lung space, we've seen Tyvaso royalty revenue of over $20 million and manufacturing of $13 million. On the pipeline, MannKind-101 cannot be in a better position. We came from our last earnings call when we just had learned of a fire in our facility, our partnership in Germany, to successfully moving CMC here in Danbury, and we have manufactured our first clinical batch in record time. On MannKind-201, our inhaled nintedanib program has continued to progress towards filing an R&D and starting our Phase 1 trial in the first half of '24. Feedback from our quality [ph] users has been very positive on this program and we're excited to get this into humans as quickly as possible. On the endocrine business, we've achieved our first quarterly positive contribution. This is one quarter ahead of our expected Q4 goal. We made $0.5 million in Q3 of this year. That was driven by our Afrezza 24% growth year-over-year. As we think about INHALE-1 and INHALE-3, we were super excited on the clinical progress these two trials have made as they are pivotal for our future in the diabetes business. On INHALE-1, we achieved our pre-specified interim analysis, which was…

Thanks, Mike, and good afternoon. I'm pleased to review select third quarter 2023 financial results. Please supplement this call by reading the condensed consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC this afternoon. Let's start by looking at the total revenues at the bottom of the table. Our total revenues grew 56% versus third quarter 2022, and 121% for the nine months ended versus the same period in 2022, which highlights the second quarter 2022 launch and the subsequent revenue growth associated with Tyvaso DPI and to a lesser extent, our endocrine business, which included the results of the V-Go product acquisition from May 31st, 2022. Focusing on revenues from our collaboration with UT, revenues totaled $33 million in the third quarter of 2023, which consists of royalties of $20 million and collaboration services revenues of $13 million. Royalties earned in the net sales of Tyvaso DPI of $20 million was a result of continued strong patient demand for an innovative product. We recorded $13 million of collaboration and services revenue, which is primarily related to revenue associated with manufacturing Tyvaso DPI. This revenue grew 27% over the prior year as we sold more product at a higher price to United Therapeutics. For the September 2023 year-to-date period, total revenues from our collaboration with UT were $87 million as compared to $25 million for the first nine months of 2022, representing strong patient demand for Tyvaso DPI. Additionally, the 2022 nine month period included the start of commercial manufacturing of Tyvaso by MannKind midway through the second quarter and the commercial launch of the product by UT towards the end of the second quarter. Moving down the table to our endocrine business. Total endocrine revenues were $18 million. Afrezza net revenue of $13…

Thank you, Steve. It's never been a better time for MannKind employees, shareholders and partners. We're in the strongest position we've been and we're well diversified as we look out whether it's our inline brand opportunities or pipeline opportunities or Tyvaso DPI growth in addition to any other business development things that come our way. We're super excited at the orphan lung business as we look at IPF and specifically nintedanib and the TGF-beta programs. These are programs that have moved up in the priority list in terms of treatments coming down the pipeline in IPF as we've had so many failures, which is not good for patients but unfortunately good for MannKind as we are now closer than ever to help more people in IPF. We feel very strongly that MannKind-201 can provide a differentiated product for those people and the drug that's already approved on the market. But lowering the dose and deliver directly into the lung we think will provide a huge benefit around the GI side effects and hopefully efficacy as people can dose higher. There's been over $400 million in the last year just in funding an ALK-5 inhibitor as well as other inhaled therapeutics around the nintedanib or [indiscernible]. As we look at the next three quarters, I want to share with you the endocrine updates here as well as orphan lung. Our 2024 milestones will be shared on the next call, but for now, today, as we look out this year, we've completed everything we've said we are and we're on track to wrap up the year strong. Andy is on track to file our -- their regulatory submission there for India, which will be an approval if all goes well in 2024. INHALE-1 will be fully randomized and hopefully reading out sometime…

Thank you. [Operator Instructions] And one moment for our first question. Our first question comes from Gregory Renza of RBC Capital Markets.

Great. Good evening, Michael. Congrats on the progress to date, and thanks for taking my question. As you certainly have that commitment to the manufacturing on DPI and kind of get that in the right place. I just wanted to ask a little bit on Afrezza, and while you're guiding to sort of the INHALE series of trials, just curious if you can articulate just a little bit about how you see that actually shaping the trajectory of Afrezza? And depending on the outcomes of one and three, you know, how will that kind of shape your commitment to the endocrine business and to Afrezza itself?

Hey, Greg. Great questions. And I think the data is going to drive some of these decisions, right. The good news of MannKind, we have the capital to place bets if we see opportunities to grow faster. We -- our goal is to run the business to profitability. But if we can see a way to cause a major inflection into that growth curve after all this time, I think we'd be more than excited to place that bet to show shareholders what can really happen with Afrezza. The INHALE-3 trial is a ground breaking trial in our mind. It's one of the largest switch trials done, and it's got the new dosing regimen, and I didn't talk about that. But one of the things we got the FDA to agree to is we could basically double the dose up front, and we're testing the first dose in the office to ensure patients' safety and comfort. And we're hopefully able to see, and we've already run those presentations that we are crushing the first two hours of postprandial control. Now, if that carries out through a trial over 12 to 14 weeks or six months, that should provide opportunity for improved time and range, lower hypoglycemia, as well as hopefully better overall efficacy and tolerability and sustainability on the product. So the trial results are going to drive a big part of that outcome. But we've done everything we can after all these years. These are the pivotal trials I would have loved to do years ago. But it's a stepwise way to work with the FDA to get the dosing right, to get the thought leaders right and these are US trials. When you think about it, we have 60 trials, top centers in the US, many academic centers. These people have never had real exposure with inhaled insulin. So it's a real opportunity to change our future. And I think we need good data to support that. I think we've done everything we can to make sure the data is the best outcome we can possibly hope for. And we'll be ready to cause that inflection if we get good supporting data behind it.

Got it. Now that makes sense. And maybe just one more, maybe even for Steve, perhaps. But just remind us on the economics on DPI, just for our own modeling purposes, so we kind of get that right. To what extent are the royalties fixed dynamic, and just how that flows through? Thanks again, guys, and congrats on the progress.

Thank you, Greg. I'll turn it over to Steven.

Thanks, Greg. We have two pieces to our contract with United Therapeutics that show up in our P&L. The first, under collaboration services revenue is the revenue associated with the manufacturing of the Tyvaso DPI product. That is on a cost-plus basis. If you look in the P&L, you'll see revenues and the costs associated, and you'll see a margin a little over 20% for collaboration services this quarter. That fluctuates up and down depending upon our revenue recognition with United Therapeutics and some other areas outside of the actual manufacturing of the product. And the other is royalties. Our royalty rate is 10% on net sales, and that's the net sales for United Therapeutics of Tyvaso DPI to their customers.

And does not vary by sales threshold.

That's great. Thank again guys.

Thanks, Greg.

Thank you, Greg.

Thank you. One moment for our next question. And our next question comes from Ron Feiner of Oppenheimer.

Hi, guys. This is Ron on for Steve. Congrats on the quarter. I just wanted to ask about gross margin. It was really strong again this quarter. Maybe you guys can give us a little bit about your outlook for margins sequentially and in '24. Thanks.

Thanks, Ron. The margin this quarter for our commercial products was 78%. There was up sequentially from previous quarters, mainly around two things happening. One is we're getting a better handle on our margin for the V-Go product. And the second is, we're getting increased efficiencies in Afrezza as the factory is producing both Afrezza and Tyvaso DPI. So we don't give forward-looking statements, but I think that the 78% feels in the right territory for right now. So I think it's a good number if you're thinking about modeling going forward.

Thanks. And then maybe one more. Do you guys -- are you guys modeling in any impact from GLP-1s on your diabetes business? And you know, now and for the future, are you seeing any impact? And maybe on any of the products in the pipeline are you thinking about something like that? Thanks.

So when you look at Afrezza, about 55% of our business is Type 2 and 45% is Type 1. That fluctuates from time to time. But in general, our focus since last year has been growing the Type 1 market and our clinical Trials around Type 1. The reason that's important is GLPs are not going to change a Type 1s patient need for insulin in a meaningful way. And so as you think about the Type 2 market, eventually most patients are still going to need mealtime control. So even if they go on GLPs, we already knew there was a seven to ten-year delay from the time somebody needs mealtime control to when they get it. And my guess is GLPs are just going to push that off a year or two. But as you can see, the insulin market and the diabetes market is continuing to grow. It's a pandemic in this country, and I don't see a need for insulin going away. Will the growth slow because of GLPs? Absolutely. But will that impact Afrezza? Absolutely not. I don't see that as a major impact given that we have less than 1% of the share where we target doctors in 0.2% of the whole country. So we've been able to increase our market share significantly where we put reps versus when we don't. But the GLPs are used much earlier and our population is much sicker. So we just have a very different segmentation of where Afrezza plays and we don't expect much impact there.

Great. That's very helpful. Thank you, guys.

Thank you.

Thank you. One moment for your next question. And our next question comes from Oren Livnat from H.C. Wainwright.

Thanks, guys. I have a few questions. It is an exciting time indeed for someone who's covered the name after the tough times. First, just to clarify quickly on the discussion around the transitional period, this breakeven period you talked about sort of fluctuating back and forth. Is that for non-GAAP as well or is that just a GAAP number? And is that just a function of R&D investment timing or is potentially even just gross profit going to be lumpy around here?

Yeah. So Oren, without getting really specific, it's probably going to be for GAAP and non-GAAP. You can see there's not a tremendous amount of -- amounts that go between the two. And we've got this foreign exchange gain or loss depending upon the US dollar Euro exchange rate because our purchase commitment for insulin is done in euros. So that can swing in one direction or another over a quarter by $2 million or $3 million or $4 million. So I think just over the next few quarters, we're going to jump back and forth, we're going to be spending a little bit more in R&D as you would expect based on what Mike presented on the pipeline. But we're going to have revenues that are growing at the same time in particular or expect revenues to grow at the same time for Tyvaso DPI royalties in particular, as well as our endocrine business. And I think some of the timing of the FDA feedback and when those R&D expenses kick in, some of that will be a GAAP issue, some will be a cash flow issue. But in general, we got enough cash to fund those things. But until we get some of that data clarity and the INDs filed and approved, that's just going to give us a little bit of fluctuation.

Got you. Got you. Talking about INHALE, I guess the pump switch study in particular, I think we talked about this last quarter. But can you remind me, you know, what do you think some biggest -- assuming the data is compelling and what you hope to see, what do you think the biggest immediate impact from that is? Is it the education and awareness, hopefully dramatically increasing amongst physicians and Type 1 patients as a result? Or is perhaps the bigger lever here, the pharmacoeconomic argument you may be able to make with payers or hopefully would be able to make with payers with regards to relative costs of expensive pumps and whether that might get you a significantly better access over time? And I do have one more follow-up. Thanks.

Yeah, I think there's a couple of things Oren. You hit on a couple of them. The first is lung safety. So getting into kids and showing expected lung outcomes that we would expect and inhale free, some of our latest data on FEV1changes has shown that the control arm is worse than the Afrezza. And so I think really showing new lung data and the reversibility of that is going to be really important. And we feel like we've now measured this in a certain way to make it consistent in each trial and timing that reversibility. So that's going to be an important endpoint combined with having a good pediatric outcome for FDA review and approval. Those couple of things will give us a huge halo effect after -- you know, next year will be ten years since FDA approval of Afrezza, and that will give us, hopefully, the length of time on the market, the lack of any safety and surveillance plus these new trial readouts I think are all going to be really critical. Then there's two other things I would add or three other things. Number one is education. We have now really world-renowned thought leaders and academic centers running these trials who can now be on podiums, who can now be on publications, who can now do CME that we just didn't have before. And I think that's going to be critical in conjunction with marketing and sales training. We're really putting a lot of investment in our sales force right now on training, skill sets, clinical knowledge, and really teaching them how a patient lives with Type 1, understanding the insulin pumps and what that's going to mean to a patient and how they position Afrezza in that market. And then as we…

Okay. You anticipated my next question, just regarding IRA, it sounds like for the endocrine business, you know, it's a little bit uncertain, pushes and pulls there. But for Tyvaso DPI, I know that's UT has launched, but is your understanding that that is only a tailwind as far as to whatever extent it has any impact in 2024?

I don't -- I mean, I think I'll let UT comment, obviously for their future Tyvaso. But what I would say is the Medicare Part D, which is -- you know, Tyvaso was a Part B for nebulizer, and the Part D is what the inhaled version is covered for DPI. And so those patients right now have a huge out-of-pocket cost, which does prevent some of them from switching over. And so as you think about Tyvaso going in the next year and the following year, that out-of-pocket cost should be capped at roughly around 3,000 next year and 2,000 the following year, if I recall. And hopefully, that will help continue to provide incremental demand beyond our current trends for Tyvaso DPI. And so that's something we anticipate as we go forward. That should be a net benefit to patients as you cap those costs as well.

All right. Thanks. Appreciate it.

Thank you.

Thank you. [Operator Instructions] One moment for our next question. And our next question comes from Andreas Argyrides of Wedbush Securities.

Thanks for taking -- Yeah, good afternoon. Thanks for taking our questions here. Congrats on all the progress. Just two questions from us. The company's transformation to an orphan lung story is certainly exciting. Can you provide us with the next steps for submitting INDs for 101 and NTM and 201 and IPF, and then also how you guys are thinking about the Phase 2/3 trial design, endpoints, treatment duration, et cetera? Thank you.

I want to make sure I heard your questions, a little fuzzy on my side. INDs and Phase 2/3 design. So on the INDs, we are the number one long haul [indiscernible] the manufacturing stability. So everything else is pretty much on track to be ready in terms of study reports or filing for the IND. And I remember, we were trying to get that filed for Q4, so we were pretty well on our way for that. And so at this point, it's really, can we bridge some of the clinical supplies from Germany to the US for the dating and for the inventory for the clinical trial? So that's for 101 and that's on track for an early Q1, mid-Q1. I'll say filing, but if we can find a way to get there faster, based on our FDA meeting we have coming up, that's -- we will do that. On the 201, it's just making the clinical supplies which are in the process right now and getting those up on stability in terms of getting the three-month data we need to file that IND. So both of those are on track. It's mainly around just making sure the manufacturing is up and running. Unfortunately, the team that's making 201 had to make 101 on top of everything else. And so you know, they're stacked on top of each other, but they're working hard to get them both ready for IND filing. So those are the main things that are the last steps here. All the talks and everything else pretty much is ready to go. The Phase 2/3 design, we actually have an upcoming FDA meeting where I'll provide more clarity after that, because we're going to the FDA to try to change a few things we had previously -- were focused on looking at the new -- our case data just came out with their quality of life as well as some of the dosing. We think there's a way to continue to streamline these trials. As you may or may not know, we hired a new head of R&D, Dr. Burkhard, and he joined us back in May. So we've taken a fresh look at all the programs, the trials, the FDA feedback, and there's few things we thought could be a little bit clear and ensure the trials go as smoothly as possible, as fast as possible. So we'll get that feedback in the next month and we'll share those updates, hopefully JP Morgan on the official trial design that we're comfortable with.

Okay, great. Appreciate the color and congrats on all the progress. Thanks.

Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I would like to turn it back to Michael Castagna, CEO, for closing remarks.

Just thank you, everyone. I think you can see we've made a lot of progress. We continue to grow our revenue, we continue to help more patients, and we continue to move the pipeline forward. And really our goal to improve our mission, to give people control of their health and the freedom to live their life. As you look at each of our targets, these people are really suffering. And in some cases, they have three to five years to live. And so every day counts to get these patients, our treatments as soon as possible, safely and effectively in the clinical trials to hopefully get them to the market. Thank you, everyone, for everything. We look forward to closing out the year strong and we'll provide continued updates as news comes in. Thank you again.

This concludes today's conference call. Thank you for participating. And you may now disconnect.