MannKind Corp (MNKD) 2006 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation fourth-quarter 2006 conference call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this call is being recorded today, February 2, 2007.

Joining us today from MannKind are Chairman and CEO Alfred Mann; President and COO Hakan Edstrom; and the Chief Financial Officer, Dick Anderson.

I would now like to turn the call over to Dick Anderson, Chief Financial Officer of MannKind Corporation. Please go ahead.

Good morning and thank you for participating in today's call. I will summarize our financial results for the fourth quarter of 2006 as reported earlier today. On the call with me is Dr. Peter Richardson, our Chief Scientific Officer. Next, Peter and Al will provide an update of our activities. We will then open up the call to your questions.

Hakan Edstrom, our President and Chief Operating Officer, is unable to join us today, as he is recovering from a recent accident. We expect him to return to the office in the next few weeks.

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 could differ from these stated expectations. For factors which could cause actual results to differ from expectations, please refer to the reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 2, 2007. MannKind's management undertakes no obligation to revise or update any statements to reflect events and circumstances after the date of this call.

Let's begin with the financials. In the fourth quarter of 2006, total operating expenses were $71.8 million compared to $35.0 million for the fourth quarter of 2005 and $61.1 million for the third quarter of 2006. R&D expenses increased $31.2 million to $59.7 million from the fourth quarter of 2005 and by $9 million from the third quarter of 2006, primarily due to increased costs associated with the clinical trials and manufacturing for Technosphere Insulin.

General and administrative expenses were $12.1 million compared to $6.5 million for the fourth quarter of 2005 and $10.3 million for the third quarter of 2006, driven by increases in stock-based compensation expense, largely as a result of the implementation of SFAS 123R, and also due to higher headcount and increased consulting fees and various other general and administrative expenses, such as compensation expense and legal and accounting fees.

The net loss applicable to common shareholders for the fourth quarter of 2006 was $71.3 million or $1.30 per share, based on 54.7 million weighted average shares outstanding, compared with a net loss applicable to common shareholders of $33.3 million or $0.66 a share, based on 50.3 million weighted average shares outstanding for the fourth quarter of 2005.

For the year ended December 31, 2006, total operating expenses were $233.8 million compared to $118.1 million for 2005. R&D expenses were $191.8 million in 2006, up $96.5 million from 2005. General and administrative expenses increased $19.2 million to $42.0 million for 2006 compared to $22.8 million in 2005.

On November 1 of last year, we filed a shelf registration statement with the SEC for the issuance by MannKind of up to 500 million of our equity and debt securities from time to time in one or more transactions. The shelf registration was intended to provide us with the flexibility to take advantage of financing opportunities. We indicated on our third-quarter conference call that we had expected to move forward with plans of some type of equity and/or debt offering in the near future, depending on market conditions.

We were pleased on December 6 to complete a public offering of 20 million shares of common stock at $17.42 per share. Of the 20 million shares, approximately 5.8 million were sold to certain of MannKind's officers and directors, including 5.75 million shares sold directly to Al. The underwriters did not receive any underwriting discount on the shares sold to the MannKind officers and directors. An additional 3.0 million shares were purchased by the underwriters, who exercised their full overallotment option in connection with this follow-on stock offering.

The number of common shares outstanding at December 31, 2006, was 73,360,154. MannKind also completed a concurrent public offering of 115 million aggregate principal amount of 3.75% senior convertible notes due 2013, including $15 million aggregate principal amount of notes sold pursuant to the full exercise of an overallotment option granted to the underwriters. The notes are convertible by holders into shares of MannKind's common stock at an initial conversion rate of 44.5 shares of common stock per 1000 principal amount of notes, subject to adjustment in certain circumstances, which represents an initial conversion price of approximately $22.47 per share.

Together, the aggregate net proceeds to MannKind from the offerings, after payment of the underwriting discounts and expenses, was $495.9 million.

Our cash, cash equivalents and marketable securities at the end of the fourth quarter 2006 totaled $436.5 million. This compares to $145.6 million at December 31, 2005, and $50.1 million at September 30, 2006.

Our cash burn for the fourth quarter was $20.2 million per month compared to approximately $17 million per month for the third quarter of 2006. We anticipate our cash burn will increase significantly over the next few quarters, as all of our pivotal Phase III trials are underway and the major construction phase of our Danbury manufacturing plant expansion has begun.

I would now like to turn the call over to Dr. Peter Richardson, who will review our product development activities for the quarter. Peter?

Thanks, Dick. Good morning. It is my pleasure to share with you the status of our clinical programs and the progress that we have made in 2006.

On November 27, we announced the clearance of our investigational drug application, or IND, with the FDA for our cancer immunotherapy program's lead product candidate, MKC1106-PP. We have opened up patient enrollment in the study and are proceeding as planned with the initiation of our Phase I clinical trial to evaluate the safety, tolerability and pharmacological effect, with objective tumor responses a secondary endpoint.

The clinical study is designed to target two tumor-specific antigens -- preferential antigen of melanoma, otherwise known as PRAME, and prostate-specific membrane antigen, PSMA -- on the basis of their level of expression in commonly occurring adult malignancies, such as ovarian, prostate, renal, pancreatic, breast, colon carcinoma and melanoma.

PRAME is expressed by cancers cells, whereas PSMA is primarily expressed by the tumor vasculature, hence the two Ps in the drug's clinical name. MKC1106-PP is the first investigational study of our immunotherapeutic products, with clinical trials planned in the near term.

The initiation and progress of this study represents an important and exciting milestone for us as we continue to dedicate ourselves to providing therapeutic products for people suffering from diabetes and cancer.

Furthermore, all of our key Phase III trials for Technosphere Insulin, or TI -- that is Study 102, 103, 009 and 030 -- are progressing satisfactorily as planned at centers in the United States, Europe and Latin America.

Allow me to take a moment to update you on the progress we have had with each of our key studies. Study 102, our pivotal study comparing TI to premixed insulins over one year, is currently well underway. Patient enrollment for this study began in the first quarter of 2006, and we expect to enroll approximately 650 type 2 diabetics.

Study 009 is our 12-month study evaluating TI versus prandial insulin analog, both used in combination with basal insulin, in approximately 600 patients with type 1 diabetes. We began enrollment in Study 009 in the first quarter of 2006.

Study 103, evaluating the efficacy of TI alone or with an old drug versus a combination with metformin in over 500 type 2 diabetics who are not achieving desired glucose control with a combination of metformin and sulfonylurea, another older medication, is also progressing as planned. This study is not a required FDA Phase III study, but we believe it is important in establishing TI as an effective therapy earlier in progression of the disease. We began enrolling patients in this study in the second quarter of 2006, and the study is moving forward as planned.

Study 030 is our two-year pulmonary safety study, incorporating two design strategies. The first compares pulmonary function in two groups of patients for either type 1 or type 2 diabetes using either TI in combination with another [antibiobertic] therapy or treated with our existing therapies, oral and/or injectable.

The second component to the study is a comparison of pulmonary function in the patients with diabetes who are not treated with TI to a group of subjects with normal glucose control. We consider this trial to be on the critical path for filing, and we completed enrollment for this study in September of 2006 with 2051 patients.

Based on the progress of our clinical trials, we remain on target to file an NDA by the end of 2008.

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

Thank you, Peter, and good morning, ladies and gentlemen. 2006 was another exceptional year for MannKind. We've continued to grow as an organization, remaining committed to our goals. And I would like to thank all our shareholders for making that possible.

We are especially pleased with our recent offering. After my investment to date of $419 million, the next largest shareholders of MannKind are Fidelity and Legg Mason. I am proud that some of the country's largest and most respected institutional investors recognize what we are striving to achieve at MannKind.

In 2006, we accomplished the following -- we completed an important Technosphere Insulin study in type 1 diabetes patients demonstrating that TI can be very effective in that patient group. We observed significant improvement in postprandial glucose control compared to rapid acting analogs, comparable reductions in HbA1c, and weight loss for the TI patients compared to weight gain for those using injection therapy. And once again, we saw no adverse impact on pulmonary function.

We initiated our remaining pivotal Phase III trials, 009, 102 and 103, as Peter described. We completed enrollment for our two-year pulmonary safety trial, 030, last September, with over 2000 patients participating in this study.

Our IND for our first cancer product was approved, and this Phase I trial is now underway. We broke ground in Danbury for our expansion of our commercial manufacturing plant for TI. And as Dick indicated, we raised about $500 million to fund operations and our planned expansion.

As Peter outlined earlier, the clinical progress we are making only strengthens our confidence in Technosphere Insulin. We have treated over 2000 patients with TI, and moreover, as evidenced by our findings, our trials are consistently demonstrating the previously identified differentiating qualities of TI, not just compared to other pulmonary insulins, but compared to all other diabetic therapies.

With each passing month, new data continues to affirm what we have long known to be true. We have seen essentially no need for meal titration, no abnormal post-meal excursions, virtually no risk of severe hypoglycemia, no weight gain and no adverse effect on pulmonary function. Jay Skyler, the world-renowned diabetologist and the leading authority on insulin dynamics, has said, and I quote, "Technosphere Insulin represents a completely new class of diabetes products, what I call super-rapid-acting insulins. Technosphere Insulin could change the way we treat diabetes."

As more and more people are realizing, TI is in a class of its own and no longer represents just a potential diabetes therapy, but is rapidly becoming a reality. If insulin could be delivered safely and conveniently with kinetics that essentially eliminate abnormal postmeal glucose excursions, both up and down, and without weight gain, virtually all the obstacles to prandial insulin therapy would be eliminated.

And while our Technosphere Insulin therapy does deliver insulin, and while it does deliver it by inhalation, what must be realized is that because of its kinetics, TI behaves like no other insulin therapy and addresses the issues commonly associated with insulin treatment.

Our dedication and commitment to our organization runs deep. We have at MannKind a team of extraordinarily skilled and experienced people leading it. They have spent years developing this extraordinary diabetes therapy that we believe will be adopted as a new and disruptive technology, changing the landscape of diabetes treatment and research for years to come.

Also, the value that we have created has not just been realized by the medical investment communities -- potential partners, too, recognize our value. Although we are not yet ready to comment on collaboration talks, we are committed to reaching a partnership agreement that will serve the interests of MannKind and our stakeholders. Our discussions are ongoing, but we have yet to conclude a transaction and are currently unable to provide you with a timetable.

Further recognition is being awarded to MannKind as the recipient of the 2006 Frost & Sullivan award for product innovation. The Frost & Sullivan Best Practices Award is given to a company that demonstrates outstanding achievement and superior performance. This award recognizes MannKind and our lead product, the Technosphere Insulin System, as the leader in product innovation for diabetes. On behalf of MannKind, I thank Frost & Sullivan for this award.

2006 was also a year of growth. We strengthened our ranks with additional leading pharmaceutical professionals. We continued the expansion of our manufacturing operations in Danbury. We completed a successful round of financing. We made important strides in the progress of our cancer immunotherapy program, and we are performing preclinical studies on our next Technosphere product.

In 2007, we will continue on our path and successfully approach a new and exciting threshold in the history of MannKind. We are on course to file our NDA for TI late next year and plan filing in Europe within a quarter thereafter.

Thank you all for joining us today, and thank you for your continued support. We'd now like to open up the call for your questions. Operator?

Thomas Wei, Piper Jaffray.

I have some questions on the guidance. And looking at cash burn here, can you be any more specific about how we should think about the cash burn run rate at the end of the year?

What we said both in the second- and third-quarter conference calls last year is that at that time, we were running at about $17 million a month, and we expect it to go up significantly. In the fourth quarter, it went up. It didn't go up significantly, but it did go up to about $20 million a month.

We are continuing with our guidance that says it will go up significantly this year. And that will probably continue into next. We have said that 2007 and 2008 represent peak years for the development of TI because of all the clinical trials and because of the manufacturing preparation for FDA [extension] and launch and because of the capital program.

Can you remind me -- didn't you disclose before, like, the magnitude of at least the capital expenditure part of things? How should we think about that component of the cash burn for this year?

We said that the -- if I remember right from the third-quarter conference call, we said that the plant will be in the range of about $150 million. That is the construction only. That does not include validation and some of the other expenses. There have been increases in the cost of basic raw materials. We are currently factoring that in. And so that $150 million may be on the low side.

And is most of that to be incurred in 2007?

And 2008 -- expected over the two years.

And just lastly, maybe, if we think about the global cost for clinical development for the entire Phase III program, numbers that have been thrown out there for large diabetes programs like this are sometimes on the order of $0.5 billion. Is that in the ballpark of how we should be thinking about the Phase III trials for TI?

That's a difficult question to answer, because you have to talk about -- is that the cost of each trial from the very inception to the time that you have totally completed it, or is that the cost just for 2007 and 2008? I haven't heard the $500 million figure before for other companies' programs, but just giving it some rough thought, it is probably in the ballpark.

Thank you very much; that's very helpful.

(OPERATOR INSTRUCTIONS). Hari Sambasivam, Merrill Lynch.

(technical difficulty) Exubera run into considerable difficulty in terms of physician acceptance and among the endocrinologists, and Pfizer is just about to roll it out to the primary care physicians. So my question is, as you see Pfizer struggling with this, are you retelling your strategy in terms of what type of partner that you might bring on board? I'm just wondering how your thinking has changed or not changed because of Pfizer's experience here. So that is the first question.

And a second quick question to Dick, which is, could you please provide the stock option expense for the fourth quarter, please?

Hari, the first question, we don't really consider Exubera a direct competitor of ours. We believe it's a very interesting product that competes with rapid-acting insulins. We believe that we established a new class of diabetes products in our super-rapid-acting insulins that really behave much differently than Exubera or any other of the pulmonary or rapid-acting insulin therapies.

And so what is happening with Exubera is hard to say. I think it's too early to say, because for whatever reasons, Pfizer has not rolled it out very effectively so far. And it's really a product that is going to be consumer driven, not physician driven, and they won't be starting -- now they are saying they're not going to start the D-to-C advertising program until the second half. So I think that it's too early to comment on Exubera.

But mainly, the problems they have had, at least in Europe, are related to the fact that they don't add any clinical benefit and as a convenience product they're running into reimbursement problems. We don't think that will happen with us because we have really made significant clinical improvements both in safety and efficacy. So we believe that we will not have that limitation. And we are not changing our strategy at all as compared to what we have seen with Exubera.

If I can just maybe ask a follow-on there, is your strategy primarily to go after the endocrinologists, unlike Exubera, then?

What our clinical advisors are suggesting to us is that we initiate the launch with the endocrinology community. But we intend to roll it out in the general population of primary care physicians relatively early.

Hari, the answer to your question on stock comp expense -- for the fourth quarter of 2006, it was approximately $3.6 million.

Elliot Wilbur, CIBC World Markets.

I have two clinical questions, and then I want to ask a financial question of Dick. First, I hate to bring up Exubera once again, but Al and Peter, you guys had talked earlier about potentially launching some I guess more marketing-oriented studies and comparative studies of TI versus Exubera, and then last quarter suggested maybe those were deferred on a -- I guess based on physical conservatism. And I guess with what has happened thus far in the marketplace with Exubera, are you still thinking about running those studies? Or are you thinking now that those may not really benefit TI and may not really be necessary?

I think if I can take that in terms of where we go with comparisons with Exubera, there are some very clear elements where there are opportunities to demonstrate benefits of the TI product versus Exubera. And we have plans in terms of specific studies. The scope and expense of those will very much depend subsequently on market uptake and how we see the need for comparative studies according to how the market evolves in that area.

The pivotal studies now that we have at the moment are aiming to show the clinical benefits of the product, which will emphasize its differentiation at the time that it comes to market. And I think that what we're seeing from the data of the early studies, if confirmed in our late studies, will give us a very robust platform for that differentiation. Going head to head will be done very specifically, and we do have plans in place for that, but we are being careful in the rollout of that, as would be appropriate.

And a follow-up question for you, Peter, as well -- one of the things that has also been suggested about the TI program is that there could be a possibility at some point of either pursuing separate studies or publishing data with respect to the possibility of eliminating postprandial glucose monitoring. Can you just remind us -- is that something that would have to be initiated as a separate study or could that actually just basically be culled from the data that you would have as part of the current pivotal study programs?

I think we would need to study that specifically. And I think that as we really develop the optimal way of using TI for the clinicians, how that relates to the need for monitoring will be one of the very important thing that clinicians will be understanding. I think we have talked before in terms of the challenges of how that would appear on a label and how we might move that forward. So we will take that in step-wise fashion and look at what is appropriate based on the clinical data as that emerges. In the present studies, we have monitoring in place as would be appropriate for the pivotal studies, and we have not initiated a study where we are reducing that amount of monitoring as yet.

Let me just turn to Dick with a follow-up question on cash burn expectations for '07. I'm sure one of the things that you were sort of after in the course of the offering is that the proceeds raised -- will that be sufficient to carry the program through completion of the current Phase III program? So to the extent you commented on that during the roadshow, Dick, maybe if you could just repeat that commentary on the call.

Sure. What we explained during the financing roadshow was that of the proceeds, $70 million would pay off the money that we have borrowed from Al. Taking the remainder of the funds and assuming two things -- first, that we did not have a partnership; second, that we did not borrow against what is now $150 million loan facility from Al, so that is the most conservative case -- no partnership, don't borrow on the $150 million loan revolver -- then we would come back to the market sometime in either late 2007 or early 2008 for additional funding.

One thing to keep in mind is that under the current auditing rules, we are required to show a year's worth of cash at the time that we file our 10-K. And so part of our financing requirements is to make sure that we meet our audit requirements.

And if you don't mind, I lied here -- I actually have one more question for you, more of a strategic question. If I had to guess, it sounds like you think the data basically will work in your favor, obviously, in terms of negotiating better economics on a partnership eventually. But you also have plans to retain some promotional rights to the product. So when might we start to hear something from you guys on your own internal plans with respect to actually establishing a selling and marketing infrastructure, assuming that you will eventually have some copromo rights on the product?

I think what you would need to assume there, because we haven't said anything publicly beyond the fact that we would like to copromote Technosphere Insulin in the United States, I think you just have to look at what other companies typically do as they are getting ready to launch a product and assume we will do something similar.

We have also said that the vast majority of diabetes patients, in the U.S., at least, are treated by primary care physicians. So we or our partner and us will have to prepare for addressing that particular market.

Annabel Samimy, UBS.

Good progress since this past year. Can you help us understand -- are there going to be any interim looks at any of the data from the studies that are ongoing this year? And is there going to be any kind of dissemination at all at any of the medical meetings coming up?

I don't think it would be appropriate to be disseminating internal looks from pivotal studies. So that in terms of that, you would not expect to see presentations at any of the meetings of the ongoing studies. We of course will be planning to update information at the meetings as appropriate from the studies that have completed.

And another question -- I guess this is obviously a sensitive topic and one that you don't like to give much guidance on, but in terms of the partnership, can you help us sort of frame what that rate-limiting step for a partnership might be, given that there's clearly no lack of need for pharma companies to fill their pipelines and look for new product to market?

Annabel, all we can say is what we have said in the call, and that is our discussions are ongoing, but we have yet to conclude a transaction.

Maybe another question -- have you conducted the long-term tox studies? Are they ongoing? Are they expected to complete sometime this year, or have these already been completed?

The tox program has been completed, in large part. There's some remaining studies that need to be completed over the course of this year. And the long-term studies are just coming to an end at the present time.

Are we going to be hearing anything about those sometime in the near future?

We will update on that as the results are available later this year.

The longest study is the two-year carcogenicity study. That was completed in October. Of course, there is an enormous amount of work that needs to be done in analyzing all of the tissue samples, and those are still ongoing, won't be completed for a couple of months yet, although a large amount of it has been done. And since we have heard nothing, we are pretty confident we are okay.

I'm sorry, can you just help me understand -- there was a two-year long-term tox study and there was another study that's just completing now, or is it the analysis that is completing now?

The analysis is completing now.

Geoff Meacham, JPMorgan.

This is Matt Roden in for Geoff today. If you could just provide an update on manufacturing, where you are there and what milestones you expect to achieve -- in other words, what, along with timeliness, do you expect progress on the manufacturing front?

You could divide that into three parts. In terms of clinical manufacturing, we have sufficient capacity to meet all of our clinical requirements. In terms of the validation and preparation of the commercial manufacturing, and all the associated work that will go along with filing, we believe we are on schedule with all that, so that manufacturing will not be a critical path element for filing. And on the construction, that is underway. And we will really know more about the timing of the construction over the next two quarters.

And also, just on the Phase III programs, the 103, the 102 and the 009 studies, can you provide an update on where we are with enrollment in those studies?

As you know, we don't provide interim looks at enrollment. But I believe we have said in the financing roadshow that we anticipate completing enrollment for those studies in the first half of this year.

Salveen Kochnover, Jefferies & Co.

Just to follow up on Annabel's question, could you provide us with some guidance for when we would see data from each of the four pivotal Phase III trials? And should we definitely not expect any data in 2007?

So in the four pivotal studies, they will be the time-limiting entries to the NDA, and so they will be tied in terms of the time when we submit that. So the results will be coming out towards the end of 2008.

Even for 103, 102 and 009?

We are not, at the present time, giving the exact times and releases of those information -- it would be premature because it depends on the exact time when we complete the recruitment of those studies. But 2008 is going to be a busy year for us in terms of conducting those analyses and rolling that out for the NDA, and that is our focus.

Are you initiating any additional trials this year?

We have further profiling studies in terms of some special population studies and some pharmacokinetic studies, which are important for the NDA.

Tom Shrader, BMO Capital Markets.

Dick, your comment about needing to show a year of cash -- should we think of that as about $300 million at this point?

I'm just thinking about the guidance we have provided on the roadshow. $300 million, probably on the low side, understanding that we need to show both capital and expense. So I'm talking about the total burn.

Right. And could that be configured including Al's rolling loan? Is that part of what you can show?

Absolutely. And there are other things you could also do. For example, you can anticipate that as trials complete, you'll need less cash, because it's a year's worth of cash going forward. And these are our peak years. So we will meet that requirement, of course, this year. We expect to have no difficulty in meeting that requirement for next year.

So without raising cash at the end of '08, you can still show a year's cash?

No, no, I said we anticipate that we will be able to do that. I didn't say we would do that without cash. Earlier in the call, what I said was that without a partnership and without using Al's loan, we would have to finance between the end of '07 and early '08.

And if I can just change gears a little bit, so yesterday there was -- or dated yesterday, there was a New England Journal article that makes no mention of using inhaled insulins earlier, which is I think kind of what you guys are all about. I understand your product is different, but the very narrow view that this position has on the field, how general is that? And what I am really asking is, how difficult is it to enroll Trial 103? How much of this author's view are widely held, if you can talk about that a little bit?

I think what you are referring to is the positioning of insulin in conventional therapy and where it comes in the treatment regimen. If you look at the proposition that we have, it's actually very different to anything that has been there before in terms of the simple, rapid-acting prandial insulin with the profile that we have discussed. And that is a very different proposition. And the positioning, I think, in its use in the treatment of patients with diabetes offers a new possibility. You are correct in terms of saying that that is a considerable amount of education, and also in terms of how we move that positioning.

Study 103 is our first step in moving into a slightly earlier population with type 2 diabetes, but as we move into whether we will be able to see this insulin used even earlier in the condition or used in terms of benefits there, will depend on the outcomes of further studies. But that is not the focus of the pivotal program at the moment.

But when you talk to people about enrolling patients in 103, say, insulin just after metformin, do they look at you like, what are you talking about? Or is that already in the lay of the land? I'm really curious what you are up against now, if people -- are people aware of your value proposition?

The short answer is yes. And 103 has been perfectly reasonable to recruit to.

It has, okay. And have you said when we think we would see some data from that?

That will be, as I have said, in 2008.

And endpoint -- what do you think is the most commercially interesting endpoint? It's a tough thing, right? Because the more moderate people are, the harder it is to show you are influencing their disease in a reasonable amount of time.

I think as with all studies, it is the overall benefit of efficacy and risk in that population. As we design the studies to really address that where we can show a risk benefit compared with other therapeutic alternatives earlier in diabetes, that is where the message will come. 103 addresses a specific population, positioning it as monotherapy or with other hypoglycemic agents. And that is an important piece of data for the physician to have in choosing the right therapy. That is what the program is about.

One think that we have talked about recently is almost year ago, we contracted with a branding company, first of all, to pick a name for this product. But secondly, they wanted to do a number of other studies in order to establish a branding program. And they looked at -- they surveyed 425 physicians -- 150 general practitioners, 150 internists and 125 endocrinologists. These were physicians who were not familiar with Technosphere Insulin or the Company.

And they presented just a handful of slides to them showing the kinetics and the synchronization with meal and so forth. And they divided the progression of type 2 diabetes into seven stages, beginning with even before diet and exercise, all the way through progression of the disease. And it was remarkable how quickly these people realized that the benefits of this kinetics would eliminate the problem that they see with other insulin therapies. And if you just averaged all of the numbers together over the entire spectrum, 42% of all people in type 2 diabetes would be prescribed with this product, according to that survey. And if you applied demographics, it would even be higher.

So the interesting thing is how quickly these people realized what the benefits would be. So while we are beginning -- I just came back the other night from a trip, and one of the things on the trip was we had a meeting with some of our advisors setting forth our educational program. We are planning that now. But while we expected to have a major educational requirement to be able to teach physicians and patients the benefits of the therapy, it may not be as significant a challenge as we thought, given that people saw the benefits just from looking at the data that we have presented and a very limited amount of data that was done by this independent marketing organization. So just as background, yes, we are planning to teach these differences, but it may not be quite so difficult as we thought.

Jon LeCroy, Natexis.

My question is on the titration of Technosphere Insulin. Specifically, what dosage vials are available? And then in your trials, how many different vials are being used for each dose? So are patients just on one vial before each meal, or are they taking two or three? And then also, some of the complains we're hearing about Exubera have to do with the milligrams versus units -- where physicians and patients are used to using units, Exubera is only available in milligrams. And are you guys looking at potentially marketing in units as opposed to milligrams?

We will be marketing in units, in common international units of insulin, which has been around for many, many years. That is our plan today. And today --

And if I can amplify on that just a little in terms of -- we are looking at the optimum label to simplify for physicians in terms of addressing that very real question that is out there in the field of how you translate milligrams into units. We are looking at what can be done within the regulations, but also looking at what will be most helpful for the prescribers. And that is a very active thing that we are undertaking at the present time.

In terms of dosing out in the clinical studies at the moment, we have two dosage strengths labeled 15 and 30 units. Patients will be able to go up to 90 units total before the meal. So some patients are taking more than one cartridge with the meal. But that's the very -- because of the design of the device, putting in a cartridge, that's not proving to be a problem for patients in any way.

There are no further questions at this time.

Well, thank you, ladies and gentlemen, for joining us this morning. And we would like to look forward to our next quarter's report and talk to you about further progress that we are making at MannKind Corporation. Thank you again.

Thank you. All parties may disconnect at this time.