MannKind Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2023

There are 8 speakers on the call.

Operator

Afternoon and welcome to MannKind Corporation 2023 Second Quarter Financial Results Earnings Call. As a reminder, this call is being recorded on August 7, 2023 and will be available for playback on MannKind Corporation website shortly after the conclusion of this call until August 21, 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 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.

Operator

I would now like to turn the call over to Mr. Castagna. Please go ahead, sir.

Speaker 1

Thank you and thank you everyone. Happy afternoon. It was a year ago in Q2 when we were notified that United Therapeutics got FDA approval for Tyvaso DPI. At that time, we said that would put us on the path to profitability. And as we kick off a year later, We are proud to say that we've achieved our 1st operating income, making us a long term sustainable company, which helps us live our mission, Ultimately, give people control of their health and the freedom to live life.

Speaker 1

Today, we probably have between 15,000 to 20,000 people taking one of our diabetes products There are thousands of people benefiting from TAVESIS PPI. We're really proud of all the hard work and really excited to share this quarter's earnings with you. Let me first start off by a couple of highlights here in Q2. Orphan Lung Disease business is off and running. United Therapeutics is doing an amazing job, strong patient demand.

Speaker 1

We received royalty revenue of $19,000,000 or 63% growth just over the Q1. We also took a step to improve manufacturing capacity through efficiencies and yield, increasing that by about 2 50%. Additionally, our orphan lung pipeline is starting to come into the purview. We expect to have 2 INDs filed going into Phase 1 and Phase 3 in the next 12 months. And Hill 101, as we just notified you previously, there was a fire unfortunately.

Speaker 1

We are now moving GMP Manufacturing to Danbury, Connecticut. And fortunately, we have facilities there where we can move the equipment into. Our chronic tox study is now complete and we'll have a full study readout on that here in Q3. OMAHIND-two zero one, we did receive FDA feedback on our helvetitanib program. For those of you following the IPF market, That is a generic for OFET, which is marketed by a company named Barbell Engelhind.

Speaker 1

We are planning to progress that to IND filing shortly And kick off a Phase 1 study next year. We're super excited to get that in the humans. On the endocrine area, we have now Afrezza and V Go both Synergizing our success. Starting in July, we have now moved everything to 1 sales force, 1 management team, One focus to help people with mealtime control in type 1 and type 2 diabetes. As you look at Q2, Afrezza TRxs grew 16% versus last year, mainly driven by the Medicare access that was created under law in January of 2023.

Speaker 1

I'll share more with you that shortly. Additionally, INHALE 1 is continuing to roll nicely. We had our best enrollment in the month of June ever. And inhale 3 just kicked off and that's already enrolled patients. And that's the first study we're doing to show you where, how and the conversion factor for pump Switching, we have no data on that in our package insert and it's a question we get which is can you switch from Afrezza to a non pump And that is the study that will drive that, which is built upon the pilot study we did last year.

Speaker 1

And now it's been over a year that we closed the V Go deal And that is achieving our 1st year forecast of net revenue. We gave a guidance of $18,000,000 to $22,000,000 and we are coming in exactly on the high end of that forecast Overall, what does this mean for shareholders? Our operating GAAP income was $2,000,000 driven by the strong growth in DPI year over year And our non GAAP operating income is $8,000,000 when adjusted for certain non cash items that will be described later. Avesa DPI saw strong demand and we were able to supply that demand with our increased manufacturing. There was an IP update from United Therapeutics in their recent quarterly Earnings where we heard the patent for ILD should be issued and give allowance through 2,000 and 42.

Speaker 1

We have revenue expectations and continued strong patient demand. I want to give clarity for our shareholders that for every 10,000 Paying patients, we expect annual revenue to ManKind between $250,000,000 to $300,000,000 Additionally, we are on track to complete our high volume capacity expansion between now and the end of next year. We have full spray drying scales happening with 2 new spray dryers being installed as we And we have a fill finish line coming in here in August that hopefully will be online between now and early next year. As we look at the Tyvaso quarterly revenue from Q2 of last year all the way through Q2 of this year, you can see growth consistently quarter over quarter and this has continued to put us on the path of profitability. We're very proud of the launch.

Speaker 1

We think it's doing amazing. We hear great patient stories and we see nothing really slowing us down as we keep going. I just want to say thank you to our partner A9 Therapeutics for helping so many patients on our technology. Now, I want to bridge over to our diabetes business. This is one of the things that we control every week and every year.

Speaker 1

We're trying to do a better job this year at improving patient access and keeping patients on therapy on Afrezza as we also turn around V Go into a growth driver for the company. As we think about Afrezza, a couple of highlights. For those of you who don't know, Medicare payouts a lot that all of it will be $35 starting in January of this year. And you can see Afrezza was underpenetrated in this market because it was never put on a not it was always on a non preferred formulary, which forced patients to That was huge cost differential. We could not do anything to close that gap.

Speaker 1

When it was covered by $35 you can see we quickly got Back to what you see as a standard of care rapid acting insulin, about 28% of all prescriptions are for Medicare Part D recipients. And Afrezza now in Q2 has now gotten that back up to where the market is for rapid acne. Really proud of the teamwork here And hopefully, we continue to grow and help more people living with diabetes in the Part D space. Additionally, in order to make our access message simple, We lowered our we jumped at our commercial co pay to be $35 to be consistent with Medicare. And you can see our TRx and our NRx growth on the next slide here Has grown consistently and we really have had an inflection if you look from last year to this year Q1 and Q2.

Speaker 2

Hopefully, we continue this

Speaker 1

as we go into the second half and we continue to see really good momentum year over year, quarter over quarter and we'll kind of keep watching this on a weekly basis. I wanted to share also, I think it's important, I get a lot of questions why can't we grow Afrezza faster. I think we had a lot of things to fix over a long period of time. Most of that is behind us and a lot of the fruition of that work will come out next year. In the meantime, we continue to push forward While we don't have any new data to share and you can see how patients feel about our product.

Speaker 1

When you look at the right side of this picture, innovative, adventurous, Smart, complex, exciting, bold. We are pushing the envelope in mealtime control. This is a completely different drug. It takes a completely different approach on how you manage your sugars day to day. And when you look at patient satisfaction, we rank the highest of all real time insulins spreaded out there by patients.

Speaker 1

This is an independent analysis by Deep Q and A and it's something we'll continue to watch as we go forward. Now I want to bridge over to V Go. We achieved the high end of our forecast as I just mentioned. What's nice to see here is when you look at our TRx trajectory, We started telling you last quarter it was flattening out on NRXs and TRXs should follow. And I'm really proud to show you now in Q1 going into Q2, We have slowed the decline and now we're back on a growth trajectory, which we expect to continue for the foreseeable future.

Speaker 1

So we have 4% growth in TRxs in Q2 over Q1 and this should continue that we feel like we've hit bottom that the white space This continued to decline while the rep targeting efforts on call volume doctors continues to go up. So we feel like we hit that inflection I hope we continue to see V Go do well and help more patients as we go forward. There's another slide just showing you NRx and TRx year over year. Obviously, NRx is a leading indicator what's going to happen in the future and you could see from Q2 of last year negative 8% on NRx's up to a +4 percent of the 12% difference year over year and that's contributing to that positive TRx growth that we're seeing. On the scientific front, our medical team is working really hard to start to articulate the benefits of this product with the new dosing arrangements that we've been studying.

Speaker 1

As we look here, we want to expand the eligible population for Afrezza as we go forward. In particular, when you think about diabetes and the transformation of the insulin pump market or the It always started with kids. Doctors and parents are very progressive. There's a life threatening disease. Hypoglycemia is a life threatening condition.

Speaker 1

And we believe we'll be able to demonstrate in this trial hopefully positive benefits when it comes to the safety of lipoglycemia as well as the efficacy. This is a non inferiority trial, but we do know from a lot of our analysis that hypoglycemia is lower with Afrezza. Now we'll have to see how the data pans out. This is more than halfway enrolled at this point and we will have some insight here in Q4 of this year with the primary endpoint wrapping up mid next year. Simpler Phase 2, I got a lot of questions on when the data was coming out.

Speaker 1

We did receive the data. The data analysis is being finalized. We don't expect the data to become public till sometime in 2024 once Cipla is done finalizing their plans here for India. On inhale 3, we call this our Type 1 AKA pump sparing study because this is the first study we're doing Head to head showing you how to rotate off an insulin pump or how to rotate off injectable insulin to really just Afrezza, Tresiba, DexCom. That's where the 3 comes from.

Speaker 1

We only think you need 3 things to manage your diabetes. That's really these 3 secondret ingredients, hopefully give you really tight control and give you the ability to live your life. There will be quality measures running this trial as well improved dosing regimens from our previous trials and this is a 4 month primary endpoint with additional 3 months of follow-up. So everyone in this trial will switch to Afrezza by the end of the 7 months. Now, I'm going to turn it over to Steve to talk about our financials.

Speaker 1

Thank you, Steve.

Speaker 2

Thanks, Mike, and good afternoon. I'm pleased to review Select's 2nd Quarter 2023 financial results. Please supplement this call by reading the condensed consolidated financial statements and MD and A contained in our 10 Q, which is filed with the SEC this afternoon. Our total revenues grew 157% versus Q2 2022 and 189% for the 6 months ended June 30 versus the same period in 2022, which highlights the 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 31, 2022. Revenues from our collaboration with United Therapeutics totaled $30,000,000 in the Q2 of 2023, which is made up of royalties of $19,000,000 And collaboration and services revenue of $11,000,000 Royalties earned on the net sales of Tyvaso DPI of $19,000,000 with the result of strong patient demand for innovative product and our low double digit royalty rate.

Speaker 2

We recorded $11,000,000 of collaboration and service revenue in the Q2, which was almost double the prior year. This amount is primarily related to revenue associated with manufacturing Tyvaso DPI, which we started to manufacture commercially for UT in the Q2 of 2022. Total revenues from our collaboration with UT $53,000,000 for the first half of twenty twenty three, again representing strong patient demand for Tyvaso DPI as compared to $8,000,000 for the 1st 6 months of 2022. The 2022 6 month period includes the start of commercial manufacturing of Tyvaso DPI Moving down the table to our endocrine business. Total endocrine revenues were $18,000,000 which is made up of Afrezza net revenue of $14,000,000 Envigo net revenue of $5,000,000 Afrezza net revenue of $14,000,000 compares to $11,000,000 in 2022, A growth rate of 27%, which is very consistent with our Q1 growth rate.

Speaker 2

The growth was mainly driven by higher patient demand With underlying paid TRx growth of 16% year over year, increased channel inventory to support higher demand and price. For the June year to date period, total endocrine revenues were $36,000,000 Net revenue from VIGO was $5,000,000 Q2 of 2023. We purchased V Go on May 31, 2022, so the increase over 2022 is mainly from a 1 month versus 3 month comparative. For the 12 month period post acquisition, V Go had net revenue of $22,000,000 which is at the top end of our forecasted range. The next slide shows our revenue growth by source on a quarter by quarter basis From the Q1 of 2022 to the Q2 of 2023.

Speaker 2

We'd like to show this graph because it really highlights how dramatically our business has changed in the last 2 years. We started 2022 recognizing revenues primarily from Afrezza, and now we have 2 revenue streams from Tyvaso DPI plus 2 endocrine products delivering commercial revenue. In the Q2 of 2023, we grew total revenue by 20% From the Q1 fueled by the growth of Tyvaso DPI royalties. Below the graph, I've plotted the loss per share for each quarter And you can see the impact from the increasing revenues, in particular from Tyvaso DPI Royalties, which don't have any associated expenses. We recorded a loss per share of 0 point 0 $0.02 in the 2nd quarter, representing an 82% decrease from the Q2 of 2022.

Speaker 2

The Q2 of 2023, we had our 1st quarter of GAAP income from operations Since I joined the company 6 years ago in the amount of $2,000,000 There's been a long time coming, but the growth in revenues associated with UT collaboration and had a significant impact on turning this positive. Starting with this quarter, we will communicate a GAAP to non GAAP reconciliation so that investors can clearly see the impact of certain non cash items on our P and L. Looking at the table, we had positive GAAP income from operations of $2,000,000 in the Q2 of 'twenty three as compared to a GAAP loss from operations of $21,000,000 in the prior year. When adjusting for the non cash items of stock compensation of $6,000,000 and the loss of foreign currency of less than $1,000,000 We had positive non GAAP income from operations of $8,000,000 for the Q2 of 2023. When looking at EPS, we recorded a GAAP net loss of $0.02 per share, which when adjusted for non cash items of stock compensation, Loss on foreign currency and a gain on available for sale securities, we had non GAAP EPS of 0 for each share.

Speaker 2

The primary difference between our income from operations and net income included in EPS is interest income and interest expense. We plan to continue to show a reconciliation like this each quarter to enable more transparency

Speaker 1

into the

Speaker 2

impact of our operations on cash. We continue to tightly manage our cash outflows while benefiting from the increasing revenues associated with Tyvaso DPI And our Endocrine business as we move the company towards profitability and being cash flow positive. We continue to believe that our current level of cash, Cash equivalents and investments, plus anticipated operating cash inflows and outflows, will allow us to adequately invest in and grow our business without a need for any follow on stock offerings. Thank you. And now I'll turn it back over to Mike.

Speaker 1

Thank you, Steve. First, I want to talk about a new addition to our leadership team. We hired Doctor. Burkhard Blank, who is our Executive Vice President, Head of R and D and Chief Medical Officer. We've had the pleasure of working together over the last 2 months as we've done a deep dive on all of our assets.

Speaker 1

He's visited our facility through the fire And it's really helped build the team and helped us think about the future structure of how we move these assets forward. And I get the question of what's going to be the next leg up for MannKind over the next It really is the R and D coming into fruition, which we thought it was now time to bring in someone like Doctor. Burkhard to help us put the government structure in place And manage these assets as we have 4 or 5 great assets coming down the road. He has more than 25 years of global development experience Several companies starting his career out of Boehmringerheim, going to Acorda and ending at a company recently in France. He's experienced multiple disease areas, 8 early preclinical and successful NDA submissions and he's got small molecules, Drug device combo as well as in health therapeutics.

Speaker 1

It's very difficult to find somebody with such breadth and depth of experience and we're very fortunate to have someone like Doctor. Blank join us and help us lead our efforts here over the next several years. As you can see the next slide, the pipeline we'll be working on, we have All the work with Afrezza Pediatrics and the filing that will come with that. We have the international work coming to get us back into Brazil and India. We have V Go's, we continue to evaluate that for other opportunities and grow here in the U.

Speaker 1

S. And then the pipeline itself With M101 being chlofazamine, 201 and tatinib are both going into IND Phase 1 and Phase 3. And then you have DNase Alpha, which we're continuing to work to get that into patients as quickly as possible. And another asset TGF Beta, which continues to work through its animal models So, we've got a lot

Speaker 2

of work in front of them.

Speaker 1

We've been moving these along and that's the question I always get this, why isn't Afrezza growing faster? And I don't think what people appreciate is it takes a lot of money and time and people to run 4 development programs. And that's the choices we've made, Fund P, pediatrics and Fund 101, 201, 301,501 in order to ensure we have one launch per year starting in roughly 2025 either a new indication or a new product launch. We continue to be focused on that effort and we believe this is going to be really critical to our future success. The next slide shows you some of the milestones associated with these pipeline investments that we're making.

Speaker 1

These should ultimately give us new product revenue As you look at the endocrine business, inhale 3 kicked off here. We expect to have that data in the first half of next year. The INDIA trial readout, that data will be finalized here in the second half and discuss next steps at that point. And the inhale 1 pediatric trial readout should happen late in the first half of next year as the primary endpoint is 6 months. We've added a new milestone here in the second half of twenty twenty three for INHIL-one where we'll have an interim analysis telling us either a trial is Properly sized, it needs more patients, it will take a little longer or it's a few exercise to keep going.

Speaker 1

Obviously, we believe the primary endpoint is sufficiently statistically will be sufficient. But until we get to that interim analysis in October, which will be late October. So we'll have that information by the next quarterly earnings call. That will be important to share with shareholders that we think That will be on track. I would drive that readout there in the first half of twenty twenty four.

Speaker 1

On the Orphan Lung, things that we're in control of, It's the 201 pre IND, it's now the filing of that IND, it's the IND submission for clofazamine, one of the things we're evaluating based on the FDA Post the fire, which is can we use our some of the data that was generated in Germany in order to bridge for the U. S. To keep the IND on track and ultimately get this trial off the ground And early 2024. And then finally, you also have United Therapeutics working on the TESAR study and we know that's critical for continued expansion there for Tyvaso. As we look at the key value drivers, these are real and they're significant.

Speaker 1

The pipeline as we think about 101 going forward, Every thousand patients that we capture in that disease will roughly bring in $100,000,000 in revenue at the time of launch. For 201, this is a multi $1,000,000,000 opportunity littered with failure. We've taken the market leader, made it into an inhaled version, hopefully minimizing the systemic toxicities and being able to enable patients to have a well controlled therapeutic dose in IPF for 201. As it comes to DPI, you can see the strong start there. At the end of the day, there are multiple ways that you can see this growing to over 10,000 patients.

Speaker 1

We want to give you clarity on is how we think about that from a shareholder of mankind. Obviously, we're not in control of the launch, but we feel very good about United Therapeutics' investments and opportunities to continue to help as many patients as possible suffering from PAH, ILD as well as IPF hopefully in the future. The pediatrics is the thing we highly anticipate next year and every 10% kids fundamentally changed the long term trajectory for Afrezza and let that compound for the next 20 years. But right now, I want you to understand for every 10% share in kids is roughly $150,000,000 in revenue. We're investing in the INHALE 3 study because we Believe if we get great data on ENHAL-one, that's versus rapid acting insulin.

Speaker 1

The next question we get is what happens if you switch off an insulin pump? How does the data look? And we hope to show you that we're as good or better depending on the data, but hopefully not worse. And our pilot study would show that we were as good as Using Infantump versus not. And the reason that's important is we expect a once weekly basal to be on the market in the not too distant future.

Speaker 1

So we literally could get people live with diabetes down to 52 injections a year plus inhaled and their mealtime insulin plus the CGM. That's game changing for patients and providers. V Go, we are focused on stabilization. As you can see, growth is now in front of us. We want to continue to make that a more profitable product as we go forward into 'twenty four and beyond.

Speaker 1

Now I'll turn it over and answer questions. Thank you.

Operator

Thank you. One moment for our first question. Our first question comes from the line of Steven Lichtman of Oppenheimer and Company. Please begin.

Speaker 3

Thank you. Good evening, everyone. Mike, you mentioned the real Benefit that you've seen in insulin reimbursement this year in Medicare. How are you guys balancing, you wanted to drive profitability in the business versus investing and getting the word out now, because it does It seems like this is a big change for the Afrezza business as you showed into the Q2 here. So Talk a little bit about how you're getting that word out versus I know you want to start driving some leveraging

Speaker 1

in the business as well. Steve, thank you for the question. I think first, as you know, we've tried different reimbursement support programs over the years and they haven't always resulted in The trend break. I think this year we saw that the Medicare patients, A, the approval ratings are very high. They're in the 90% plus range.

Speaker 1

And so that makes us feel confident that we can continue to help more patients. And now that we can see the market share in 2 quarters Get up to where injectable insulin is as a percent of their business. That gives us some confidence to push even harder in this segment. In terms of profitability, we have submitted rebates for Medicare Part D over the years and they've mostly been rejected because of the rebate Game of the competition, the PBMs. And so there wasn't a lot we could do.

Speaker 1

Maybe going into next year that could change, meaning most of our patients just The doctors need to do a prior auth and we're seeing very high approval rates. So maybe as we go into 2024, we'll start to see either PAs be removed completely in Medicare Part D Or continue the success that we're seeing this year and we can help even more patients next year beyond what we're doing. But It's nice to see in 6 months we can get back to the market share of injectable insulin. We've always felt that patients were not getting the product properly because of The difference is in Medicare Part D reimbursement co pays to a patient. And we worked pretty closely with CMS to explain this and they understood it and fortunately helped Patience.

Speaker 1

And so I think that's really what you can see is that cost is hurting people at the end of the day. And we did everything we could, but there's only so much you can do on Part D.

Speaker 3

Got it. Great. And then I guess as we think about the back half, Steve, Based on your visibility, how should we think about DPI royalties sequentially

Speaker 1

here in

Speaker 3

the 3rd Q4, 2Q coming in Certainly a lot better, higher than we expected. And so, is this a good level or based on your visibility, can you give us directions Directionally into the 3, 3rd Q4 and then also on gross margin, first half strong on Afrezza, V Go, I think around 70%. Is that Pretty good level for the back half?

Speaker 2

So Steve, as you know, we don't provide forward looking Guidance or forecast. So if you listen to UT's call, they're very bullish on Patient demand for Tyvaso DPI as you can see through our royalties and the manufacturing of the product. So without providing any Guidance for the second half of the year, we just believe there will continue to be strong patient demand And we'll report those revenues in the 3rd Q4 as they come in. As for the margin, 72% It's right for a combined Afrezza and V Go. Afrezza has got a better margin than V Go does.

Speaker 2

We don't provide those separately anymore, just combined. That is a pretty good margin There's variability quarter to quarter with the amount of manufacturing we do on Afrezza that impacts The Afrezza margin from quarter to quarter, but we feel that it's in the right ballpark for The margins for our commercial products at this point. Okay, great.

Speaker 3

Thanks, Steve. Thanks, Mike.

Speaker 1

Welcome. Thank you, Steve.

Operator

Thank you. One moment, please. Our next question comes from the line of Olivia Breyer of Cantor, your line is open.

Speaker 4

Hey, good afternoon. Thank you for the question. Can you guys talk about the decision to take an interim look at And INHALE 1 and whether that was built into the trial design initially? And then just what's the clinical bar for success in order for that study to continue as planned? And then I got a follow-up question on DPI.

Speaker 1

Sure. This interim look was always planned in the original statistical plan analysis, so that's not changed. It's the only thing we didn't know is when we would hit 50% enrollment in the trial that was the driver of that day. And so now that we know that we hit that milestone, It was a matter of when they could crunch the data and meet together as a DSMB. Mankind will not know the data.

Speaker 1

Unfortunately, it's Confidential to the DSMB, but at least we'll know at that point the trial futile and we'll keep going, we'll need more patients And we obviously powered it, so hopefully hit the endpoints we need to hit and wrap up in 6 months after that. As a primary endpoint and The secondary implant will be the 2nd cohort, and the control arm switching over to Afrezza for additional 6 months. So We expect the primary endpoint of that trial will be wrapped up hopefully 6 months after that early November date and we'll go from there.

Speaker 4

Okay. Got it. And then second question is, it looks like you guys increased DPI revenue assumptions per every 10 ks patients to $250,000,000 to $300,000,000 Can you give any color on what's driving that increase?

Speaker 1

Yes. I think as we continue to fine tune Tabeso each quarter, we get a little bit more clarity What does it look like in terms of pricing, packaging, dose, all those things go into account? I'd really We don't break out the details of the forecast, but we wanted to give people some guidance because I think the one thing as you hear about Different indications and the different factories being built between our expansion and UT's plan. We want you to at least have a range of number And some of that changes over time because of discounts or manufacturing revenue assumptions. That's what we gave a range as opposed to more Anything else with the number of patients.

Speaker 4

Okay. Got it. That's helpful. Thanks, Michael. Appreciate it.

Operator

Thank you. One moment please. Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is open.

Speaker 2

Hi, Mike and team. It's Anish on for Greg. Congrats on the quarter and thanks for taking my questions. Just a couple for me on 201. Maybe just for some color on differentiation, other than drug delivery of nintedatib, how would you describe 201's ability to Differentiate against a drug like profinidone in patients with IPF?

Speaker 2

And how would you characterize the received FDA feedback? How are you incorporating it into the development path going forward? Appreciate the time and thanks again.

Speaker 1

Yes, great questions. I think the good news is there has been some data out there on inhaled profenasone and that tells you delivering And inhaled brow via these products could work. I think our particular product and our focus has been on We originally had both in development. We actually picked this one to go forward versus trying to develop both. And the reason is we believe the Limiting side effects of Ofev is around the GI side effects of the dosing.

Speaker 1

And by putting in the inhaled route, it's got very Low bioavailability via the oral route and that allows us flexibility here in our design and our thinking around inhaled. We believe we should be able to minimize some of the side effects that patients see. Obviously, we have to get this into human trials, but that's going into our thesis. And the FDA feedback gave us some flexibility to think about healthy volunteers versus IPF patients and how we think about the Phase 1 to Phase So that work will be finalized. I was waiting for Burkhart to start before I really put my fingerprint down which way we should go And that will be aligned and that will go to the IND filing here very shortly.

Speaker 1

So we feel pretty good about the product profile, the long delivered dose And the ability to differentiate hopefully on the tolerability side as you may or may not realize, we believe 30% to 40% of people drop out Of Ofab, because they just cannot tolerate the product and that's a pretty significant population that's not getting help. And so again, product may or may not go generic by the time we get to market, but the fact that people cannot tolerate and get the efficacy when they got 80% probability dying in 5 years is Significant unmet need. And so we feel pretty good about the FDA feedback. There's always things to work through, but nothing that was a showstopper for us.

Speaker 2

Great. Thanks so much. Appreciate

Operator

it. Thank you. One moment please. Our next question comes from the line of Thomas Smith of Leerink Partners. Your line is open.

Speaker 5

Hey guys, good afternoon. Thanks for taking the questions and let me add my congrats on the solid results. Just on the endocrine business unit performance, I think you're now guiding to profitability in 2024. I think previously you talked about your expectations being to get to breakeven by the end of this year. Just wanted to check-in and get your updated thoughts.

Speaker 5

Has anything changed in terms of timing or outlook for the rest of the year? And then Maybe as a follow-up,

Speaker 1

if you could just give us

Speaker 5

an update on how you're thinking about investment here in the pipeline and platform broadly? How should we think about the R and D spend over the next couple of years As you guys think about bringing glofazamine and inhaledinib and some of these other pipeline programs forward, balancing that versus desire to maintain profitability? Thanks.

Speaker 1

Thank you. Great questions. I think on the breakeven in Q4, that's still our intent To get there, will we be exactly there plus or minus a couple $100,000 the year will wrap up. But I think we're still on track. I don't think Steve has anything to add, but I'm looking at them.

Speaker 2

Yes. We're on track, but could be off by a little bit.

Speaker 1

But yes, it shouldn't be any major thing in the grand scheme. So that should be profitable as we look into 2024 overall. The R and D spend, I'd answer that in 2 ways. 1, we don't intend to launch these products ourselves outside the U. S.

Speaker 1

So We will be seeking partnerships for Rest of World. And we think about product like NTM with clofazamine, the Asia Pacific area is a large Market that we would hopefully find one partner to launch and take over some of the costs associated with the development there. Within the There's a couple of things wrapping up next year. So the first will be INHAL-one and the second will be INHAL-three. So those two trials do cost us Quite a bit of money each year and we would expect some of those costs as they wind down to shift towards clofazamine.

Speaker 1

So we haven't given quite Exactly, I didn't check because some of this is the timing and the upstart of the patients on the clofazamine trial, which as you look at the timeline, a large majority of those expense 'twenty five as opposed to 'twenty four. There will be some expenses, for example, some of the manufacturing expense, but that will hit cash flow versus, I think, Collin, amortization on a quarterly basis?

Speaker 2

It's going to be a mix of things that are put on the balance sheet and amortized over the Clinical trial period and others that are expensed as incurred.

Speaker 1

So Yes. And then I think the Phase 1 studies aren't that expensive in The grand scheme of things, so I don't even if we got clofazmin in Phase 3 and they've gone into Phase 1, I don't think that's an unbearable Expense and that we should be okay as we look at 2024 to 2025 timeframe. Keep in mind, Afrezza should continue to grow. V Go looks like it's Starting to grow and Tyvaso should continue to do well. So I think as a company, we want to make sure we're not in a position that we started in 6 years ago and that's our number one focus.

Speaker 1

But we think when we look at orthologics, this is a big growth area for the company and future revenue that we want to make sure we're able to capitalize on for our shareholders and patients.

Speaker 5

Got it. That makes sense. Thanks for taking the questions guys.

Operator

Thank you. Thank you. One moment please. Our next question comes from the line of Oren Livnat of H. C.

Operator

Wainwright. Your line is open.

Speaker 6

Hi, thanks. A couple of questions. First on Tyvaso DPI. I know you're not giving guidance and users product to talk about, but you did point to their call where They certainly are quite bullish, but they did call out $30,000,000 in stocking this quarter and sort of linked it to your Advancements and improvements in capacity and yield for the product. And so I guess, can you just help us understand where are you at now And going forward in terms of supplying that, whether it's hand to mouth or if you're actually now well ahead of demand And do you expect, I guess, to keep having to fulfill like orders that we should Keep seeing that grow if demand is growing going forward versus we've really filled the channel up a lot now and we could take a breather.

Speaker 6

I have a follow-up.

Speaker 1

I think, Lauren, if you were to take away the $30,000,000 in revenue, you could see With the royalty range, you can see it's growing quarter over quarter. I don't think TAVESO is anywhere near capped out in terms of You listen to United around new starts and continued conversion and ILD is not fully penetrated obviously. So as each quarter goes on, that will chew up more inventory, more days on hand. And ultimately, we got to keep stocking and keep building that inventory. So we're not giving exact guidance on how much we have on hand, but I would say we don't think it's flat And therefore, we expect continued growth as we look out.

Operator

Yes. And I don't misunderstand me.

Speaker 6

I think it's pretty clear demand has grown as well. I guess I'm just trying to understand, were you just basically catching up to where inventory sort of needed to be in general to keep supplying the market as expected? Or have you made such that you expect it or do you feel any pauses as they now work through that inventory on the wholesaler side?

Speaker 1

Yes. I mean, we're not privy to their contractual obligations with the pharmacies and days on hand. I know they 1 or more than we could give the pharmacy at the time as we close Q1. So I think we've made some changes here in Q2 to enhance that. And I think as we close out the quarter, you can see We did a good job with the increased demand.

Speaker 1

And so again, I don't want to comment for UT on terms of what inventory will project to be in Q3 or not. I think our job is to make as much time as we can and we're doing that.

Speaker 6

Okay. And I'll move on to the pipeline. On 201, I just want to clarify your earlier comments. You mentioned some of the FDA feedback relates to clinical work either in healthy or IPF patients. And I'm just trying to understand, are we talking about theoretically, is this just a discussion for Phase 1, Whether that needs to be in healthy versus patients or in theory, are we actually talking about deeper into the development timeframe given we already know about these I'm just speculating, is it possible that you could do, I guess, a streamlined or abbreviated full registration quality Development program potentially that would just be, I guess, PK or bioavailability based and not necessarily even have to do a full clinical trial in patients?

Speaker 1

I would say, I wish. And the second part of the question, I think if you look at the FDA, typically as you're changing route of administration, they'll always require A clinical trial, and so that would be our expectation in treatment disease experience, disease patients. How we designed that trial and the endpoints of that trial, I think are still things we won't go public with. But The fact that the Phase 1, we're going back and forth in terms of do we do healthy, so do we do some in IPF, it does appear we have flexibility to make that call on our side. And like I said, Burkhard here now, we'll talk about the pros and cons of it.

Speaker 1

Obviously, if you do Healthies, it can go a lot faster than if you do people with IPF, they just take they're harder to find and get them into trial and it just takes a little bit longer. And they don't want to spend days And a clinical research site, so that's always something we're trying to manage around what insights are we trying to get and what are we trying to prove and what's the right thing to do. So But no, we would fully expect the Phase 3 trial to at least be in patients who have IPF.

Speaker 6

Okay. And just lastly, I guess building on Steve's question upfront, where you talked about sort of the trade offs between contracting, profitability. In general, where are you guys at in terms of contracting? Clearly, you have a high margin, higher margin product, higher priced product With small market share, and I'm just wondering, given the high positive feedback you get relative to all these other therapies, What opportunities have you explored in terms of being able to I mean, of course, you're never going to match injectables on price, but Is there a possibility that you could get substantially better coverage and get a real step function in access next year or maybe 2025, depending on the bidding cycle such that you're willing to give up some economics for a chunk of volume.

Speaker 1

So I was looking at Steve, was there a question for Steve or Steve Lichtman's question. So I think you're spot on in terms of we always weigh giving discounts for faster growth versus being profitable. And I think based on all the programs we've done historically, we've not seen that relieving some of the administrative burden has actually caused Any faster growth for Afrezza. I think it's really about conviction that efficacy and safety wise, you're as good as an insulin pump Or you could safely switch from MDI and get equal or better outcomes. So that data sets will come out with next year.

Speaker 1

If The rebates are going away as I suspect they are with all the price and scrutiny around injectable insulin and the contract in which really did prevent us Gaining open access to Afrezza in a preferred way. If what I suspect happens in 2024, There could be an opportunity to move up our discount range a little bit and that would hopefully result in greater volume. The way contracts are structured in general in the payer space is they could choose to put the product on formulary And collect a little bit higher rebate. They just have not made that choice over the years. And so not every PBMs has that contract, but a couple do.

Speaker 1

And so we're not made aware right now that that's going to change for next year. But I do plan to go out and meet with some of the big players to talk about this, Because we see the Medicare Part D success and we'd like to continue to help patients gain access to our product. But we're not looking to Part of the value proposition with Afrezza is you don't need to pay 100 of dollars a month in insulin pump supplies. You don't need to pay for the pump. You don't need to pay for The maintenance and everything else, but you still need to pay for the insulin when you get a pump.

Speaker 1

So the whole economic value prop, whether it's an Omnipod or Medtronic or Tandem pump plus the cost of insulin Plus better efficacy is really what we focus on with payers and that's some of the work and data sets that will read out next year. So to your point, Maybe we get some plans next year, but hopefully we'll push for 25 as we think we really have a differentiated product and results hopefully will bear that out in the clinical trials. But I wouldn't expect that to change margins. All right. So if

Speaker 6

I'm hearing you that data is going to get something really new to talk to the payers about next year for the 2025 cycle.

Speaker 1

I think that's going to be important. Do some payers say with the price changes, they move us up, they might, But I would expect better discussions as we get new data readouts.

Speaker 6

All right. Thank you.

Speaker 2

Thanks, Oren.

Operator

Thank you. One moment, please. Our next question comes from the line of Anthony Petrone of Mizuho, your line is open.

Speaker 7

Thanks and congrats on a good quarter here. Couple on Tyvaso and then I'll follow-up with a couple On diabetes, just on the renewed outlook there for 10,000 patients, dollars 250,000,000 to $300,000,000 Mike, I'm assuming again that doesn't include idiopathic pulmonary fibrosis, the new, the IPF label expansion. And Are there any early kind of views as to what IPF could add to that $250,000,000 to $300,000,000 And then for Steve on that question as well, just From a manufacturing capacity standpoint, can the Danbury facility at the current capacity handle that label expansion? Or will you need to Have a little bit of an acceleration in growth CapEx if that label is secured. And then I'll have

Speaker 1

a couple of follow ups. I think the way you're going to look at that statistic is regardless of where the 10,000 patients come from being IPF, ILD, PAH, obviously, they don't have the approval for IPF right now. But if that was to drive incremental volume in a new market for them, That's roughly the revenue we would expect for every 10,000 patients. So it's not just there's really not a when you think about the price of the product, it's more of an annual cost as opposed to an Indication costs. And the same thing is true as we built out the manufacturing.

Speaker 1

The original facility That we launched with was meant to handle really PAH and ILD. And then as it expanded, UT invested in additional capital improvements In new spray drying capacity as well as full finish, that is really setting us up for IPF and continued upside forecast. If TAVASO keeps still well in ILD, NPH, then they want to make sure we have enough safety manufacturing capacity Beyond whatever we could expect, so we don't ever stock out. This is a life saving drug. And then UT has announced they're building a duplicate facility Down North Carolina and that will be important when you got a drug that's doing this great.

Speaker 1

You don't want to have a single source failure. So we're helping them With that as well. So hopefully, I answered your question on the IPF as well as manufacturing.

Speaker 7

No, helpful. And then on diabetes, just Is this the is this a full quarter of V Go? I know you guys I think it was straddling the 1Q, 2Q full launch. So is this sort of the Quarterly run rate of full quarter for V Go. And then on just any update on the BlueHale VIS launch Integrated with DexCom, just maybe a little bit there, is that going to be launched with G6 and G7 or is it One version of DexCom and I guess maybe even more important to that is when you think about the inhaler and the overlap with DexCom, I mean is there any statistics That you have on the current inhaler patients that are active DexCom users at this point in time?

Speaker 7

Thanks.

Speaker 2

Anthony, let me answer the first question on V Go. We acquired the product on May 31, 2022. So our revenues for 2022 in the Q2 were about $2,000,000 and they were about $5,000,000 in Q2 of 2023. So it's not a great comparison because you only had 1 month last year, but going forward you should have

Speaker 1

Comparability.

Speaker 2

That's helpful.

Speaker 1

And I think On V Go, as you may or may not realize, it was a turnaround that was on a decline for a long period of time. So we had to stabilize before we get the growth and we started seeing that stabilization NRX is back in Q4, Q1. You can finally see that translate to TRX's this last quarter. So hopefully, as we go forward quarter over quarter, we can start Year over year comparisons, but we're proud that we hit the 1st milestone, which was our high end of our $18,000,000 to $22,000,000 guidance. The Bluehill VIS, so we are planning to use that in inhale-three.

Speaker 1

So inhale-three just kicked off this month. We almost got all the sites activated And that will be the beta test in that Phase IV trial. And then assuming that goes well, then we'll evaluate continued improvements It is currently with DexCom G6 or G7 from my knowledge. I know it was because I tested it on G7. So it does import it.

Speaker 1

It does work well on both. And we're not planning to limit it to just DexCom. We're happy to partner with Libre or Senseonics or other parties. But that is the current integration is with the API and DexCom G6 and G7.

Speaker 2

Thanks again. Hello.

Operator

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Michael Constanza for any closing remarks.

Speaker 1

Thank you and thank you everyone for your patience as we continue to turn around the company. We do feel like we're on the right growth track. We have great growth drivers between our in line assets and our pipeline assets. It's been a long journey to get here, but we're really proud of the team, the work and the energy going into it and all the patients we're helping to benefit from I just want to say thank you to our analysts for covering us and our shareholders and our employees and all of our stakeholders. I look forward to talking to you again.

Speaker 1

I'll be at a conference tomorrow in New York meeting some new investors as well as September will be in New York for several conferences. So hopefully as updates happen, we'll provide them at those opportunities. Thank you.

Operator

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

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Earnings Conference Call
MannKind Q2 2023
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