MannKind Corp (MNKD) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation Third Quarter 2007 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, November 7, 2007. Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; and Chief Financial Officer, Dick Anderson, and the Chief Scientific Officer, Peter Richardson. 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 would like to summarize our financial results for the third quarter of 2007 as report earlier today. Next, Hakan and Peter will provide an update option key accomplishments during the quarter, and Al will comment on the current situation and our outlook going forward. 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 could differ from these stated expectations. For factors which would 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, November 7, 2007. MannKind's management undertakes no obligation to revise or update any statements to reflect events and circumstances after the date of this call. So, let's start with the financials.

For the third quarter of 2007, total operating expenses were $75.6 million compared to $61.1 million for the third quarter of 2006 and $75.4 million for the second quarter this year.

Total operating expenses were essentially unchanged from the second quarter of 2007.

R&D expenses were $64.8 million for the third quarter, compared to $50.8 million for the third quarter of 2006, and $61.5 million for the second quarter of this year, a 5% increase. This increase in R&D expenses was primarily due to increased costs associated with the clinical trials and associated manufacturing costs such as the clinical supplies for Technosphere Insulin.

G&A expenses were $10.7 million for the quarter compared to $10.3 million for the third quarter a year ago and $13.9 million for the previous quarter. G&A expenses declined for the second quarter of 2007, primarily due to decreased professional fees.

At the end of September, we had approximately 640 employees, which represents an increase of 2% from the end of the second quarter of 2007.

The net loss applicable to common shareholders for the third quarter of 2007 was $73 million, $0.99 a share based on 73.5 million shares outstanding, compared with a net loss applicable to common shareholders of $61.0 million, or $1.23 a share based on 49.7 million shares outstanding for the third quarter of 2006.

Our cash, cash equivalents and marketable securities at the end of the third quarter of 2007 totaled $204.2 million. On October 5th of this year, we received gross proceeds of $250 million from a registered direct offering of common stock. Thus our cash, cash equivalents and marketable securities as of that date totaled approximately $454 million, which compares to $284 million at June 30, 2007 and $436.5 million at December 31, 2006. This offering of common stock totaled approximately 27 million shares and was sold to Alfred E. Mann, our principal stockholder, CEO and Chairman of the Board, and two groups of investors including accounts managed by Legg Mason Capital Management and affiliates of Fidelity Management and Research Company.

In addition to the $250 million in equity funding, we also announced on October 2nd a new credit facility providing up to $350 million in credit available until December 31, 2009. This credit facility is the result of a new loan agreement entered into with Al Mann and replaces the $150 million credit facility we established with Al back in August. The loan agreement, along with the registered direct offerings of common stock represents new commitments of $600 million which we believe with enable us to continue to advance our Technosphere Insulin program and fund our other operations through the third quarter of 2009.

Our cash burn so far this year has been $70.9 million in Q1, $81.6 million in Q2 and $79.8 million in Q3. We anticipate our cash burn could increase significantly over the next two to three quarters and then decline. The fluctuations in the quarterly burn rate over the next two to three quarters will be due, in large part, to the timing of our capital expenditures for the new Danbury plant. We will continue to look for ways to tightly manage our expenses and capital investments while we remain focused on the regulatory filing and approval of Technosphere Insulin.

I would now like to turn the call over to Hakan Edstrom, our President and COO, who will review our product development and commercial readiness activities for the quarter. Hakan?

Thank you, Dick. Good morning. It is my pleasure to share with you the status of our product development activities, our commercial readiness initiatives and the significant progress we made in the third quarter of 2007. Also, this morning, I have the pleasure of having our Chief Scientific Officer, Dr. Peter Richardson, to provide and update on our product platform and pipeline achievements. We've previously said that 2007 is the year dedicated to keeping our TI program on schedule. Last quarter we reported that we had completed enrollment of all of our pivotal trials for the TI program, the 009, the 102, the 030 as well as for study 103. All of these trials are progressing well, with centers in the United States, Europe and Latin America. To date, we've treated approximately 3,000 patients with Technosphere Insulin, representing more than 450,000 days of exposure. So, let me briefly recap our ongoing Phase 3 trials. Study 009 is our 12 month pivotal study in patients with Type I diabetes, evaluating the efficacy of TI versus a prandial rapid-acting insulin analog, both use in combination with basal insulin. And we enrolled about 590 patients in this study as planned. Study 102 is our pivotal efficacy study in Type II diabetes, comparing TI to pre-mixed insulins over one year. And there were approximately 650 Type II diabetes patients enrolled in this study. Trial 103, which is a non-pivotal study, is evaluating the efficacy of TI alone or in combination with Metaformin in Type II diabetes patients who are not achieving the desired glucose control with the combination of Metaformin and/or [salgonaria]. This study of approximately 500 patients will be useful in establishing TI as an effective therapy earlier in the progression of disease thus enabling label expansion. Study 030 is our two-year (inaudible) safety study of Technosphere Insulin. We consider the 030 trials to be our critical path milestone for filing and the last patient (inaudible) for this trial is scheduled to take place in about 10 months, at the beginning of next September. With the continued progress of all of our pivotal clinical trials, which are fully enrolled, we now remain on target to file and NDA for TI in December of 2008. While in addition to advancing our Phase 3 trials, we've also continued to focus on our commercial [readiness] and as an example of our manufacturing progress in our Danbury plant, we have to date manufactured approximately 10 million cartridges in support of our Phase 3 clinical trials, tox studies and manufacturing testing. The major construction Phase of our Danbury manufacturing plant expansion to commercial levels is proceeding on-plan, with completion targeted for the end of 2008. And we're also preparing for and FDA pre-approval inspection shortly after the filing of the NDA. Recently, we successfully completed the inspection process at Danbury site for both ISO 9001 covering clinical supplies and manufacturing, and ISO 13485, which covers device design, development, manufacturing and the packaging of a dry, powdery inhaler. And I'm happy to report that we have received both the ISO 9001 and the ISO 13485 certifications last week. And I want to take this opportunity to congratulate our technical operations team for achieving these important certifications. Now, I'd like to turn the call over to Peter Richardson, our Chief Scientific Officer, who will update you on our product pipeline expansion program. Peter?

Thanks, Hakan and good morning. As we stated in our call in August, we've completed a Phase 1 trial with MKC-253, a Technosphere formulation of GLP-1. This inhales using our [medturn] device. This trial was designed to evaluate patient tolerability and safety in healthy individuals and also to measure levels of jerk, glucose and insulin over several hours. We are pleased to report that we observed steady, rapid absorption of GLP-1, with a T-max of less than 3 minutes. The patients that received one of the higher two doses, 1.05 mgs or 1.5 mgs, blood concentrations of GLP-1 exceeded 100 [beeker mls] per liter. Yet, even in these patients, there were no reports of side effects normally associated with such levels of GLP-1, such as profuse sweating, nausea and vomiting. The most common side effect was cough, which was generally mild, a single event and transient in nature, common in initial use of such inhalation and not reported as a serious event. Interestingly, we observed the greater proportion of GLP-1 remained intact following administration by inhalation than that which has been described in studies using subcutaneous or IV in administration. In this study, as much as 67% of the GLP-1 in the bloodstream was in the active form early after inhalation, as a percentage of the total amount which was circulating. This compares to the 20% or 30% reported following subcutaneous or intravenous injection. We believe that this observation may reflect the fact that the living, active GLP-1 to the arterial circulation, via the lungs, avoids much of the degradation by DPP4 that would normally occur prior to the drug reaching its primary site of action. We've also hypothesized that the rapid delivery of MK-253 simulates the release of GLP-1 that's normally observed in healthy persons around meals and by mimicking the GLP-1 physiology, we may be able to achieve a more effective response than that seen subcutaneous or intravenous administration of GLP-1 on analogs. I offer this speculation because in this Phase 1 study we evaluated 26 healthy subjects, none of whom suffered from diabetes. In these subjects, particularly with higher doses, we observed in indigenous insulin response that peaked in less than 6 minute after inhalation of MKC-253. The release of insulin from the pancreas is concerned by corresponding increases in [C-peptide]. In many subjects, again, in the higher dose cohorts, glucose concentration subsequently decreased for approximately 20 minute before returning to baseline. These pharmaco-dynamic effects were surprising, given the reports in the literature about the tight coupling in healthy subjects between blood glucose levels and GLP-1 mediated insulin release. Our ability to overcome this coupling with MKC-253 bodes well for therapeutic potential to treat Type II diabetes and perhaps even obesity. We're in the process of planning our next trial and I hope to provide more information on our next quarterly call. Now, let me provide you with an update on our cancer immunotherapy program. In January of this year, we commenced an open-label, Phase 1 clinical trial of MKC-1106, the first of our several cancer immunotherapy program product candidates. The timely objective of this Phase 1 clinical trial is to evaluate the safety, tolerability and pharmacological response in cancer patients with advanced solid malignancies in a variety of tumor types. Measurement of objective tumor response is the secondary endpoint. This is a small, Phase 1 trial being conducted at several clinical sites. We plan to file an IND for our second cancer product in December, which will evaluate a second immunotherapy regimen that targets [Melin-A] and [Tyrosine-A's] antigen in patients with advanced melanoma. These are just two of the pipeline expansions that demonstrate our commitment to providing a variety of therapeutic products for the treatment of diabetes and cancer. And I'd now like to turn the call back to Hakan Edstrom.

Thank you, Peter. And I'd like to end with a short commentary on our partnership efforts. With regard to our partnership activities, we are continuing discussions with potential partners, with the goal, certainly, of reaching a collaboration agreement for TI. And the decision by Pfizer to remove Exubera from the market has not seemed to impact the ongoing discussions we have with our serious potential partners. And with that short comment, now I'd like to turn the call over to Al Mann, our Chairman and Chief Executive Officer. Al, please go ahead.

Thank you, Hakan, and good morning ladies and gentlemen. We are pleased with our continuing progress. As Hakan discussed, all of our Phase 3 trials are fully enrolled and are progressing as planned. Dick reported at our recent $600 million financing will provide our required funding to the next two years, allowing our team to remain focused on executing our plan for TI. Our commercialization operations are moving forward and remain on-schedule. We are executing according to our plan, and are on track to file our NDA for TI in December 2008. Before I comment on other development, I want to clarify one news story that appeared about MannKind on October 15. Several of you raised questions about this. This story stated that MannKind would establish a manufacturing factory in Israel. I do not know what led to this news story. We have no definitive plans at this time to establish any additional manufacturing operations in Israel or anywhere else for at least several years. Our factory in Danbury, Connecticut, when fully equipped, will ultimately be able to manufacture up to two billion TI cartridges a year. Also, no company has been hire to market any MannKind product. Another recent development leading to some questions was the October 18 announcement by Pfizer that it was abandoning its inhaled insulin product, Exubera. People who do not understand the difference between TI and Exubera seemed to wonder whether it's the inhaled insulins as a class will be affected or even if that segment will survive. Please understand that we were not surprised by the Pfizer decision. Certainly there are, and should be, questions about the viability of products such as [Epidra] and now Exubera that offer no clinical advantages over existing therapies. Our studies to date support substantial advantages in both safety and efficacy for Technosphere Insulin. Diabetes experts are recognizing TI as the first of a new class of diabetes therapies. Thus, I want to clearly state that Pfizer's decision regarding Exubera has no impact on our commitment to continue aggressive pursuit of TI towards an FDA filing in late 2008 and subsequent regulatory approval. We are by no means changing our plans. Certainly by now, those of you have been following this phase realize that TI is clearly differentiated from Exubera, from the other exhaled insulins and all other insulins. The people at Nectar and Pfizer that have pioneered this concept should be recognized and respected for what they have done. But in the end, Exubera is what it is, a rather inconvenient way to deliver insulin with no clinical advantage over the current standard of care and having what appeared to be a minor impact on lung function. Nectar and Pfizer have been working to date to make the device smaller and simpler to use so as to improve the convenience, but the therapy would still be expensive and there's no expectation of any clinical advantage. All that Exubera did was eliminate the needle for a mealtime injections. But most patients requiring insulin therapy, and note that was Pfizer's actual target market, still need a basal insulin by injection. Another major factor was that Pfizer referred to as the Exubera burden on physicians practice. Referring to the extensive patient training needed for the use of a large, complex device that also required special cleaning and frequent maintenance. Additionally, Exubera's dose in milligrams instead of units, dosing is not linear and there is complexity in determining the appropriate mealtime dose. After all, most Type II diabetes patients are managed by primary care physicians, and these physicians rarely have the in-office support infrastructure for intensive insulin therapy, let alone for the additional Exubera requirements. All of these factors resulted in a risk-benefit profile not attractive to either physicians or patients and thus, no clear reason to switch from existing therapies. On the other hand, TI represents a clearly differentiated therapy that effectively addresses these concerns. While we do deliver insulin, the same insulin I might add, and while we deliver it by inhalation, what is important first and foremost, is TI's unique kinetic profile that mimics a healthy bodies normal insulin response. Entering the plasma quickly and leaving quickly. With TI insulin becomes available almost instantly and reaches a peak plasma concentration in 12 to 14 minutes, almost as fast as from a healthy pancreas in response to glucose challenge. By comparison, Exubera peaks in about an hour, as do all the rapid-acting insulins and the other inhaled insulins. With the time action profile of TI, almost all the glucose lowering effect occurs within three hours, about an average time for meal digestion, while for other insulin therapies, most of the effect occur after the meal load is already gone. The kinetics of these other insulins are really responsible for most of the problems with conventional insulin therapy. But, TI is very different. What we've seen in the many studies we have conducted to date is that TI can reduce post-prandial glucose [discursion] to a level similar to, or even lower than, that observed in a non-diabetic individual and with TI this happens with almost no risk of severe hypoglycemia including nocturnal hypoglycemia. With essentially normal post-prandial discursions, and without the usual risk of hypoglycemia, there's really no need for complex meal titration or between meal snacks that lead to weight gain. In addition to the clinical benefits, TI will be dosed in units, which represents a current standard for diabetes treatment. This is another difference between TI and Exubera. Our product is simple and easy to use. The device is small in size and needs very little maintenance. Overall, the unique advantages of TI essentially eliminate the obstacles to prescribing insulin therapy by primary care physicians. As for pulmonary concerns, while a small effect has been seen with Exubera and other inhaled insulins in development, our existing data for TI from four separate trials to date of up to six months, do not show any decline in lung function that is different than that observed in our controls that use injectable insulin or oral drugs. We believe that these results will be further confirmed by a long-term safety study, 030, which will conclude in ten months. Lastly, we must note that, while in registration studies Exubera was evaluated relative to regular sub Q insulin injections, TI's comparator in our clinical trials is a subcutaneous rapid-acting insulin analog, which represents today the current standard of care. In short, the diabetes [opinionlators] with whom we speak, view TI as much more than just inhaled insulin. They recognize TI as a new form of diabetes therapy, a super rapid-acting or ultra rapid insulin that could change the way diabetes is treated. My belief in TI is really demonstrated by my recent purchase of $150 million of common stock, bringing my equity investment in MannKind to a total of $566 million, in addition to my commitment of $350 million in a credit facility that was mentioned by Dick earlier in the call. I am committed to seeing that TI is made available to diabetes patients who desperately need improved therapeutic options. I believe that TI has a differentiation in clinical benefits that meet current unmet needs, offering significant advantages to growing numbers of people who suffer from diabetes. In the U.S. alone, over 21 million people suffer from diabetes, and the CDC expects that number to rise to 48 million by 2050 and to over 100 million later in this century. And this epidemic is not just in the U.S., it is worldwide, even in developing countries. In summary, our trials continue to differentiate TI from all other diabetes therapies. We continue to make progress on our clinical studies and commercialization readiness and to meet our program milestones. We remain on track to file our NDA for Technosphere Insulin in December 2008. And while TI is our lead product and a huge opportunity, don't ignore our pipeline of other interesting products. Imagine a GLP formulation delivered without injection that does not cause any nausea or sweating. Interesting. And our second oncology product is nearing clinical trials. We are grateful to all of you for your ongoing support and commitment as we pursue our mission and strive to reach and exceed our goals. Thank you all for joining us today and now we'd like to open up the call for your questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS) Our first question today comes from Elizabeth Bernstein of Banc of America.

Good morning and thank you for taking my questions. My first question is on the lung function, if it is confirmed in the pivotal trial, have you been in conversations with the FDA since Exubera and do you think that agency would be open to not requiring lung function tests for TI if this is a confirmed, once again, by a pivotal trial? And then, second question on the GLP, was this the analog or native formulation for that agent? And then, why do you think we aren't seeing the nausea? Thank you.

Peter, if I can ask--

Okay. To answer your first question, no, we've not bee in formal discussion with the FDA around (inaudible) since the Exubera situation, but we remain in terms of expecting, based on our early data reassuring pulmonary profile for Technosphere Insulin and not seeing any of those changes that reported with other inhaled insulin preparations. I think it will be an interesting discussion with the agency, pre-NDA filing, when we've confirmed results of this in our larger Phase 3 study. In terms of our formulation on GLP-1, it is a native GLP-1, on the Technosphere. In terms of the reason why we failed to observe the expected nausea, vomiting and profuse sweating, which would really be very characteristic with other routes of administration reaching these plasma concentrations, and this actually comes back again to a fundamental of endocrinology in terms of differences in time action profile. And a short, rapid peak may be very different from an extended, prolonged action and, therefore actually differentiating in that way. I think this is an area where we may see a very differentiated product. We've got considerable work to do in terms of confirming the efficacy is maintained but it really is a very interesting result, which surprised many of the experts who've seen this data. Next please.

Our next question comes from [Jeff Vigum] of JP Morgan.

Hi, this is Matt Roden in for Jeff today. Thanks for taking the questions. First question is on Exubera. Al, you gave a litany of reasons why Exubera did not succeed commercially. I was wondering if you could distill that down a little bit to, in your view, what is the single most impactful reason that Exubera failed commercially.

Well, basically, as I said, it really is a rather inconvenient way to deliver insulin with no clinical advantage. The device is huge, it's difficult to use, it could require one to four inhalations, each one is difficult. And you're targeting people who are already on insulin with that product and those people are already used to getting injections so it really didn't add any convenience, it practically added inconvenience. And the results are, at best, comparable to those of a rapid-acting insulin analog. By comparison, TI is totally differentiated in all of these areas.

Okay, thanks. And then the follow up is on GLP-1. Realizing it's a little bit early to talk about partnering, just wonder if you may have a partnering strategy for GLP-1, or how long you would try to develop that internally, and whether or not you would intend to bring that to the market alone or in partnership?

Yeah, this is Hakan. In regards to the GLP-1, it is clear that it has peaked the interest, significantly with potential partners and those we are in discussions with. And since it really addresses the whole [combetabolic] and disease area, including certainly diabetes, there is one of the aspects of a potential partnership that could be again in combination with Technosphere Insulin or as a separate, but most likely in combination with our Technosphere Insulin.

Great. Thanks so much for taking the questions.

Thank you.

Thank you. Our next question comes from Thomas Wei of Piper Jaffray.

Thanks. A couple of questions just on whether or not that you can provide any details around the drop out rate so far in the Phase 3 trials, how those are tracking relative to your expectations.

Thomas, in terms of these are large multi (inaudible) programs so drop out rate is expected in these programs and is not outside our expectations. (inaudible) very actively in keeping a very active program to try and minimize that, but as you know, in this type of studies, there will be drop out.

And, can you remind us with a single capsule or cartridge of TI, how many units of insulin can be put in.

Well, today, we are offering only, we're building only 15 and 30 unit cartridges. That's filled, a filled dose. And we're going to come to market just with those two sizes. However, we will shortly afterward introduce 45 and 60 unit doses. We found in our clinical trials that many of the physicians and patients prefer the larger doses and without the significant risk of hypoglycemia, why not. But we don't want to delay the approval, so we will start with the 15 and 30 and then add the others afterwards.

And what proportion of patients require doses higher than 60?

I'm not sure we could say require, we could say use, or prefer. And I don't know the number maybe something like 10%, maybe?

That's very helpful. And then lastly, on the inhaled GLP-1, can you just help us understand if I were to look at the data for a DPP4 inhibitor, say, what is the increase or what was the peak [ml] per liter before total and active GLP-1 levels, if you were to give it DPP4.

Actually, Thomas, I don't know the answer with a DPP4. Here you're comparing these levels with those which has been with IV infusion or subcutaneous administration of the peptide and as high as ever been described, to my knowledge, in the literature. So, we really on much higher levels than I think have associated with the DPP4 but I'd have to go and have a look at those numbers. This is the prandial administration and actually the levels as being just like you would have with an IV bolus.

Okay. That's very helpful. Thank you.

Thank you. Our next question comes from Salveen Kochnover of Jefferies and Company.

Hi. Thank you for taking my questions. When should we expect to see results from the 103, 102 and 009 studies and is there any chance that we could see data from the 103 in the first quarter of '08?

Salvi, this is Dick. We have been saying that we would expect to have the ability to show some top-line data from 103 in Q2 from study 009 in Q3 and just to be conservative, the data from 102 and 030 would appear in the filing package as we said earlier on the call, our goal is to file by the end of 2008. So, we expect to have all of the data available by the end of 2008.

Great. And then could you comment on any additional studies that you're planning for TI, apart from these trials.

(inaudible) there's been a special population studies which are underway. There are some further smaller pharmaco-kinetic studies and final ones which we'll be conducting next year. And we're now starting on our Phase 3 (inaudible) program, where we're looking in terms of (inaudible) supporting the commercialization of the product. Some of these are special interest in terms of (inaudible) to target and optimizing in terms of simplification of regimen, the need for carbohydrate intake exception. We've got an interesting program which we'll building out of in the next year.

Thank you.

Our next question comes from Michael Tong of Wachovia.

Hi. Good morning. Hakan, you mentioned that the status of Exubera has not changed the level of interest from potential partners, but have you sensed any less risk tolerant from a partnership perspective, in a sense that they may be less willing to front money and look for approval and (inaudible) as more of the milestones to hit. And then secondly, Dick, if you can update us on what your capital expenditure budget might be for '08.

Michael, I can not say that I've seen any, say, hesitation or change in attitude from the (inaudible) based on the Exubera decision by Pfizer. I think the critical component here is that those have been gone through the detailed due diligence of our product do understand that we are a clearly differentiated product in terms of both the clinical practice and the clinical results. And they do understand also that regardless of (inaudible) by Pfizer, there is certainly a significant upfront investment in preparing the market for a product like this. So, I cannot confirm, at this point in time that their Pfizer decision has changed partners attitude and willingness to invest in this opportunity, certainly at this point in time.

Let me make one additional comment here, if I may. In our original business model several years ago, a couple years ago, we had expected Exubera to actually catch on to a point where it would capture about 6% of the Type II diabetes market and we figured that we would capture two-thirds of their market share. And, earlier, about six months ago, we revised our business model and decided that two-thirds of nothing is nothing.

Michael, on the second part of your question, we haven't broken out the capital expenditures in that level of detail. What I can say, and this is difficult because the timing of our capital expenditures can change significantly from quarter to quarter, is that I would not be surprised to see a significant increase in our burn rate in Q4, primarily due to the timing of the capital, and then a decline over the next few quarters. So, really it's the next two, possibly three quarters that can cause our burn rate to go up and then both capital and operating expenses I expect to be sliding down.

Okay. That's helpful.

Our next question comes from Scott Henry of Oppenheimer.

Thank you. Just a couple questions. First, I fully recognize the differences between Exubera and your device, but my question is now that Pfizer is not out there doing a lot of the heavy lifting in creating the market, does that change your launch trajectory or launch cost profile for Technosphere Insulin, or does it have no impact whatsoever in your forecast?

I would say that, maybe it's too strong to say, that have any impact at all. Certainly what we did learn, and Al and I spent significant amounts of time with European doctors recently, is that the approach that Pfizer took in going into, say, the clinical (inaudible) and [divetologists] demonstrated a clear lack of understanding what was necessary from the practice point of view. And the feeling was that the doctors were educating the reps than the reps providing insight to the doctors on how to prescribe the product. And again, the issue of the inconvenience and the necessarily serviceability of the inhaler was certainly again, a major deterrent. So, I think from our point of view, we need to understand that in selecting a partner, which has been part of our criteria, we need to have someone that's familiar with the diabetes disease and disease management and dealing with divetologists and also have a primary care. So, that I think are the significant learnings we've seen thus far.

Thank you and I know you had mentioned that one of the hurdles for Exubera that at least your hearing from physicians, involves the cleaning of the device. Could you just talk a little bit about your device and how easy it is for patients to maintain.

Yeah. Basically, if you look at our device, first of all we see a durability of a minimum of a year, and I mean it is inexpensive enough that we probably would be able to give away a device to the patients that are using our product. And cleaning it is very simple. You pull apart two pieces and you rinse the mouthpiece. You air dry it and then you put it together and it's ready for use the next time around.

It just pulls out and goes back in. It's very simple.

And as you know, the size is actually even smaller than a cell phone. So, I mean it's very easy for a lady to carry it in her purse or a man to have it in his shirt pocket, without kind of signaling to the rest of the world that you are on diabetes treatment.

Thank you for taking the question.

Thank you. Our next question comes from [Anabel Cimimmi] of UBS.

Hi. This is [Stacey] calling in for Anabel. Thanks for taking my question. As far as your Phase 3-b program, are you considering conducting any additional studies that maybe would more explicitly demonstrate the difference between Exubera as part of that Phase 3-b program you were talking about?

Well, we were planning to do some studies against Exubera but, under the circumstances we probably won't but we are conducting studies against the standard of care which is a rapid-acting insulin analog. And there we will show significant advantages.

Okay. Question about the GLP-1's. Would you expect to see nausea even after one dose of the product? I don't know the timelines on that.

Yes. As the data is very clear on that in terms of reported studies to date. And the experts who have used other formulations of GLP-1 wouldn't have expected to see nausea and vomiting.

Thank you.

Thank you. Our next question comes from [Ari Zimbosivan] of Merrill Lynch.

Yes, thank you. Just a quick question about the reimbursement for inhaled insulins. What we saw in the UK case was that they were asking for certain outcomes for Exubera, which obviously the drug could not provide. I'm just wondering in terms of TI, what type of outcome studies might you have to - or outcomes data would you have to show? And I'm just wondering can you reasonably expect that type of outcomes data out of your pivotal studies today, or what is it that you might be planning to actually start, to actually sort of demonstrate certain outcomes, differences? And I'm just wondering whether it's just simply [A1-C] or whether you have to sort of think about some of the outcomes for the reimbursement agencies, both in the U.S. and also in Europe?

Right. This is Hakan. And, what I can tell is that actually one of the physicians that we met with in Europe was sitting on the [NICE] committee. So, we got some insight there. And, if you'll look at right now the lack of (inaudible) your hypoglycemia events. The lack of weight gain and certainly there is positive opportunity in terms of weight loss and some of the softer patient benefits, quality of life measures that we have, can make a significant difference in regards to the opportunity to see a product reimbursed. And certainly also the 3-b studies that we're looking into which certainly we expect to demonstrate, again, significant advance in terms of treat to target and lack of severe hypoglycemia. So, we understand that we need to provide data that are beyond just the pivotal clinical trials which is non-superiority by demonstrating superiority and also focusing on certain, say, aspects of disease management, will facilitate and certainly gave us (inaudible) a great opportunity for reimbursement, reimbursement for the product, even in European arena.

Thank you.

Our last question comes from Bill Tanner of Leerink Swann.

Thanks for taking the question. Maybe it could be a question for either you or for Al, or Al or you, Hakan, just thinking about how long you guys have been talking to potential partners, is it fair to think about this that most of the real buyers have really concluded all the due diligence as it relates to the data and manufacturing and it's really just coming down now to more of a financial consideration?

Well, certainly financial consider has always been part of the discussions. And sometimes it comes back to simple things like potential partner needs to manage their own quarterly results and their own investments and we've also been experienced where significant partners have made significant reorganizations while the discussion's been ongoing so they had to determine who was eventually decision making, maker, inside those companies. So, there has been a slew of, say, reasons and rational. But, I think overall, the issue is that people do see a clearly differentiated product, they do understand it will take a significant marketing investment in the opportunity as well as certainly in a deal structure itself. But, I really don't have any more specifics than that to share with you.

And then, should we just think that for the most part the numbers of what you would think would be real buyers have already done all this, I mean there's not many more players that are likely to come into the picture at this point in time.

That I actually cannot say or cannot confirm because we certainly focused primarily on the say, global partners, but we've also had a number of interest from other say, potential partners that might represent say, a stronger regional representation. And there are parts of the world that that might be an option so, I would not exclude that there are other strong potential partnership arrangements that could be realized as we move forward.

So then it sounds like it's possible that this could ultimately be not so much a global development commercialization program, but could you actually parcel it out, I guess?

Well, there is an option if you look at most of the diabetes products and their sales and profitability, you have usually in excess of 70% of the sales out of the U.S. market so, it's an option that I'm not excluding from consideration for our purposes.

Okay. Thank you.

Your welcome.

Are there any other questions?

There are no further questions.

Thank you very much, ladies and gentlemen. We appreciate your continuing interest in Technosphere Insulin and in MannKind Corporation and we look forward to speaking with you in the meantime and again, of course, at our next quarterly conference call. Thank you.