MannKind Corp (MNKD) 2005 Q4 法說會逐字稿

Welcome to the MannKind Corporation Fourth Quarter 2005 Conference Call.

[OPERATOR INSTRUCTIONS]

As a reminder this call is being recorded today, February 6, 2006. Joining us today from MannKind are Chairman and CEO Alfred Mann, President and COO Hakan Edstrom, Chief Financial Officer Dick Anderson. Also available for questions at the end will be CSO Peter Richardson. Now I'd like to turn the call over to Mr. Dick Anderson, Chief Financial Officer of MannKind Corporation. Sir, you may begin.

Good morning, and thank you for participating in today's call. We'll begin with prepared remarks and then we will take your questions. First, I will summarize our financial results for the fourth quarter of 2005 as reported earlier today. Next, Hakan Edstrom will provide an update of our Technosphere Insulin in clinical trial program, and then Al Mann will close with an overview of MannKind as we advance into 2006. We will then open up the call to your questions.

Before we proceed further please note that comments made during this call will include forward-looking statements within the meaning of Federal Securities laws. It is possible the actual results will differ from these stated expectations. For a discussion of risk factors, please review MannKind's Form S-1 from the company's Initial Public Offering and our annual report on Form 10-K, in addition to periodic Form 10-Q and Form 8-K reports, and Form S-3 as filed with the SEC.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 6th, 2006. MannKind management undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that, let's begin with the financials. For the fourth quarter of 2005 total operating expenses were 35.0 million, compared to 21.7 million for the fourth quarter of 2004, and 32.9 million for the previous quarter.

Research and development expenses increased by 4.1 million, to 28.6 million from the previous quarter primarily due to increased costs associated with the company's expanded clinical trials and related support for its Technosphere Insulin program. General and administrative expenses were 6.5 million, decreased by 1.9 million from the third quarter this year primarily due to the decrease in the stock compensation expense. For the year 2005 operating expenses totaled 118.1 million, compared with 77.1 million for 2004.

R&D expenses were 95.3 million, up 35.9 million for the comparable period in 2004, again related primarily to the expansion of clinical trials of MannKind's Technosphere Insulin program. G&A expenses increased by 5.1 million to 22.8 million for 2005 as compared to 2004. Our cash and cash equivalents, and marketable securities at December 31, 2005 totaled 145.6 million, compared to 90.5 million at December 31, 2004 and 182.4 million at the third quarter--at the end of the third quarter of this year.

In the fourth quarter our cash burn rate averaged 12.3 million per month compared to 10.1 million per month in the third quarter. We anticipate our cash burn rate will significantly increase over the next few quarters reflecting the expansion of our Phase III clinical trial program and the expansion of our TI manufacturing operations. I would now like to turn the call over to Hakan Edstrom who will outline the TI clinical program.

Thank you, Dick, and good morning. It's my pleasure to review our progress on the Technosphere Insulin clinical trial program. We recently announced the positive results from our Study 005, a Phase IIb randomized double-blind placebo-controlled forced titration study in which we evaluated the effect and safety of different dose of Technosphere Insulin given at mealtime in patients who also received a daily dose of a long-acting basal insulin. Doses ranging from 14 to 56 units of Technosphere Insulin were evaluated and compared to placebo.

Technosphere Insulin was observed to improve glycemic control in a dose-dependent manner as measured by decreases in Hb1c levels, and by reductions in glucose excursions following a meal. And importantly, there was no indication of a negative affect on pulmonary function, and no weight gain at any dose of Technosphere Insulin over 12 weeks of treatment.

We continue to evaluate patients in our two-year Phase III pulmonary safety study, the 030 trial, which was initiated in June of 2005. The objective of this trial is to compare the pulmonary function of type 1 and type 2 patients randomized to either Technosphere Insulin or standard care. And we have now completed our first Phase III clinical trial Study 014, a 6-month efficacy study conducted in Europe comparing Technosphere Insulin to subcutaneous injections of a rapid-acting insulin analog, NovoLog, in 280 type 2 diabetes patients. Our goal is to share the results of this trial this summer.

Study 014 will be followed by a larger study, the 102, in about 650 type 2 diabetes patients, again comparing Technosphere Insulin to premixed insulins over a 12-month period. We completed the special recall assessment with the FDA last fall, and we are now proceeding with site identification and initiation of this study. Our clinical plan also includes two trials that compare the efficacy of Technosphere Insulin to subcutaneous rapid-acting insulin in people with type 1 diabetes who are also using a basal insulin.

We've already completed the first of these, a three-month trial Study 101 and we are currently finalizing the data analysis. We expect to announce top-line results from this study this spring. And we will begin our next study in type 1 patients, Study 009, in a few months. This is a 12-month study in 650 type 1 patients comparing Technosphere Insulin versus subcutaneous injection of a rapid-acting insulin analog along with a basal regiment. We also plan to begin Study 103 in the first half of 2006. This six-month study will evaluate the efficacy and safety of adding or substituting TechoSphere Insulin in patients with type 2 diabetes who are failing to achieve glycemic control with an oral agent.

And now I'd like to turn the call over to Al Mann, our Chairman and Chief Executive Officer.

Thank you, Hakan, and good morning ladies and gentlemen. 2005 was an exceptional year for MannKind. We've strengthened our balance sheet and have significantly expanded the depth of our management team. We have created an organization with highly qualified experienced people leading carefully focused teams organized to ensure success.

As indicated by the clinical program outlined by Hakan, we have added to the growing evidence of the safety, efficacy, and differentiating qualities of Technosphere Insulin. Additionally we are making solid progress in preparing for trials of our cancer vaccine therapy to begin later this year. Our clinical experience continues to confirm our confidence in Technosphere Insulin. We have treated over 800 patients with Technosphere Insulin with over 60,000 patient days of use.

Each month, we increase our experience significantly. With all of this data we continue to see little need for meal titration, no abnormal post-meal excursions, virtually no risk of severe hypoglycemia, no weight gain, no treatment-induced antibodies, and no impact on pulmonary function. Indeed, Technosphere Insulin is unique. It is not just another pulmonary insulin product.

More and more endocrinologists, investors, and research analysts are beginning to realize the unique advantages of Technosphere Insulin over other therapies for diabetes. We are pleased that analysts are recognizing Technosphere Insulin's potential to be the best-in-class. I myself believe that Technosphere Insulin represents a new class of diabetes therapy that will be adopted by people throughout the entire spectrum of diabetes severities, not just those using or, that should be using insulin.

Also our value is being recognized by potential partners, but we are not yet ready to comment on partnership talks. We are continuing our expansion of Technosphere Insulin manufacturing operations. The recent approvals of Exubera by both the FDA and the European regulatory agency represent a major advancement for the treatment of diabetes, and these approvals bode well for Technosphere Insulin.

Now we'll be happy to take your questions. Operator?

[OPERATOR INSTRUCTIONS]

Our first question comes from Michael Tong. Your line is open.

Hi good morning. Thanks for taking the question. Just a couple of questions, actually financial ones for Dick. What's your CapEx expenditure expectation for '06, and at the end of '06 what equipment or facilities would be in place as far as your manufacturing capability is concerned? And secondly, is there any update on the litigation with your former chief medical officer?

The manufacturing expansion program or commercial manufacturing will be a multi-year program. We currently have sufficient capacity to handle all of our clinical manufacturing requirements. We have not given guidance specific to the amount of capital that we'll be spending but my comment on the burn rate includes both capital and operating expense. In terms of the situation with our former chief medical officer, the situation is the same as we reported it at the last conference call, namely that this suit will be coming to trial sometime over the next year or so.

Great, thank you.

Yes.

Our next question comes from Tom Shrader. Your line is open. Please state your company name.

Harris Nesbitt. Good morning, everybody. Al, I just--I listen very closely to what you say, and you're now saying almost no risk of serious hypoglycemia. Can we assume you had one in 014, and can you tell us about it or --?

We have not yet seen any severe hypoglycemia in any of our studies.

So still none.

We had one case in the Extension program of a person who did everything possible to get a severe hypoglycemic incident and she did.

Well congratulations.

She did everything you can imagine. I think a healthy person would have gotten hypoglycemia in that particular --.

So which Extension trial meaning what?

The 010 trial. This is a person who had been on our earliest--one of our earliest trials and had been on the drug for a year. She was a person who was prone to hypoglycemia. She had a number of hospitalizations before she started on the program. This was the only therapy that ever controlled her and the doctor after the trial, put her on Lantis plus our drug and about 6 months later increased the amount of Lantis from 10 to 60 units a day, and then 60 units of our drug at dinnertime. And on this day she went to work, and left work and went for a very aggressive exercise program. And then went to dinner, ordered the chicken Caesar salad without croutons and took 60 units of our drug. So she had ample.

Yes, okay.

She's the only hypo we've seen.

So, to ask a little bit of a longer range question, I mean, one of the things that striking about the Exubera label is it's the same as, it's the same as, it's the same as, it's almost no differentiation. The label almost suggests, almost entirely a convenience drug. How do you get some of your properties into your label? Do you feel your trials are set up now so that you have a good chance to get no weight gain in the label, to get no hypoglycemia in the label? Do you feel you're on track or, were you shocked by the lack of differentiation in the Exubera label? What can you say about long-term planning?

Peter?

Hi, it's Peter Richardson here.

Hello. We weren't shocked by the expectations that the label [won't be] selling in that way, making changes to a label does require the data and often the [inaudible] as well, [suited] to actually trying to demonstrate the advantages of Technosphere Insulin. The specifics around what will be the eventual label will be subject to the negotiation. And as you know, there is a standard insulin label which is the basis that we will be providing data to demonstrate differences from.

So do you--have you had conversations yet with the FDA about what kind of signal you need to get various comments in the label? Is it too early for that?

It's too early for those specific discussions with the agency.

Okay, thanks.

Our next question comes from [Laurie Schiller]. Your line is open. Please state your company name.

Hi everybody. Al you mentioned MannKind had a great year last year, and yes the stock price does reflect that. But looking at earnings when do you expect the company to turn positive?

Well that's--that's a big question. Obviously it's--I don't know that I'm ready to give you a specific guidance, but obviously we can't turn positive until we develop some significant revenues and that's certainly not going to happen until the 2010 and 2011 period.

Okay. Thank you.

You have a question from Jon LeCroy. Your line is open and please state your company name.

Yes thanks for taking my call. Its Natexis Bleichroeder. Just a quick question on options expensing. I know you said you expense some options, but with the new FAS 123 coming in does that alter your income statement going forward? Thanks.

We're still completing the study of FAS 123R, and I won't see the results of that for another few weeks.

Okay, thanks.

Rachel McMinn your line is open. Please state your company name.

Yes from Piper Jaffray. I wanted to ask you if you'd had a chance to look at some of that antibody data from the most recent EU study that you reported on?

Peter?

The antibody data won't be available for some time yet.

Okay, okay and then just one more follow-up question from that--from that study, Was the HbA1c data that you were presented with was that an ITT analysis or a completer analysis?

That was an ITT.

Okay. And then lastly just talking about the type 1 study that recently completed, should we take away from your comments that there's no--there were no problems? This is really your first study in type 1 patients, so no hypoglycemia problems? Any drop outs that you can comment on that study?

Nothing that would be anything other than expected at this point.

And was that type 1 study conducted in the U.S.?

No, that study was conducted in Europe.

EU, okay. And then sorry, one more additional question. The two-year safety study can you give us an update where you are on that? When you expect to complete enrollment in that study? And have U.S. sites actually started enrollment or, is that primarily ex-U.S. at this point?

Well.

It's--okay Peter go ahead.

[The U.S.] site has started enrollments and we expect to complete the recruitment as planned.

When is that?

Early third quarter.

And is it primarily--so all sites are up and running at this point?

Not all sites. We still have other sites being done around the world.

Okay, but it's primarily U.S. or is it equally distributed?

We have our sites around the world--there are sites in the U.S. open.

Okay, all right. Thanks, very much.

[OPERATOR INSTRUCTIONS]

Your next question comes from Adam Walsh. Your line is open. Please state your company name.

Hi, good morning, Adam Walsh, Jefferies. How are you guys?

Good thanks.

Okay thanks for taking my question. My first one here is, can you describe from the company perspective now that Exubera is approved and has prescribing label, from your perspective are there any surprises at all in the Exubera label?

Yes there's one surprise that I had is they keep comparing Exubera performance to that of what they say is fast-acting insulin, but that really mean regular insulin.

Yes other than the commentary from Al I would say that there is--there are no surprises really in the Exubera label at this point in time based on what our expectations have been in--and really contact with the clinical community over time.

Terrific. And this is a bit of a follow up to an earlier question. But now that Exubera has been approved and you can see the label have you launched or, do you plan to launch any additional product that we currently don't know about, to possibly try to get a better label than what we see with Exubera?

Certainly we'll be doing some trials comparing our performance with Exubera in various populations.

And would you try to get that into the prescribing label? In other words, these are not kind of supplementary trials. These are actually trials to try to get a comparative difference in the label.

At this point in time I would say that we have not made that determination in terms of availability of Exubera and how we can fit this into our clinical trial program. Initially the importance, of course, for us is to file for approval and get the labeling whether that will be a kind of Phase IIIb study or Phase IV study or part of labeling, I really could not give you a definitive answer at this point.

Okay terrific. So is it safe to say that your current strategy is to get Technosphere Insulin to market as quickly as possible? Or, would it be okay to say that you're trying to get there with a better label than Exubera? Which one?

Well we certainly do expect that we will get there with a better label than Exubera even based on our own Phase III clinical trials, but certainly the priority is an early approval.

That's great. Thank you.

You have a question from Kevin Kotler. Your line is open. Please state your company name.

Good morning.

Good morning.

I just was--was just curious, Al, did you talk about the partnering activities and just because someone asked a question about significant--and you mentioned significant revenues in 2010 timeframe, just given the burn rate, just on the financing side how you can just review your strategy on that?

Well, as we have said repeatedly we don't intend to discuss our partnering discussions until we have something specific to announce. Of course, we have been in conversations with people and those conversations are continuing, but at this point we have nothing to announce.

I see. And just as far as a potential need for financing it seems like somewhere in the second half of this year can you make any comments about that in terms of what kind of I guess structure or I guess you've participated in the past in those financings. So just is there any statement you can make as far as that goes?

When we did the pipe last summer, we told the investors that absent a partnership we would need to raise money in the third quarter of 2006. That is still our guidance.

I guess Mr. Mann participated in that. I was just wondering if he was willing to commit to that?

I committed and did participate in the pipe, and I will participate in any additional financing that the company does.

Okay thank you.

And we have a question from Michael Taylor. Your line is open and please state your company name.

Michael Taylor, DiamondBack Capital. Thanks for taking my call gentlemen. I just had a quick question concerning Sanofi, and you may or may not be able to answer this. Are you aware, yes or no, if they signed a non-compete for this area when they gave up Exubera rights back to Pfizer?

I don't think we should comment on behalf of Sanofi-Aventis. They've entered into an agreement with Pfizer, and they have not outlined the details of it yet or publicly and I think we should leave it to them.

Thank you.

We have no further questions from the phone lines at this time.

Well thank you, ladies and gentlemen. Thanks for joining us today. As I said, we were very pleased with the way 2005 rolled out. It was a successful year for MannKind on many fronts, and we look forward to updating you on our progress again next quarter. Thank you all, for joining us this morning. Thanks.

That concludes today's conference. Thank you for participating. You may disconnect at this time.