MannKind Corp (MNKD) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation first quarter 2008 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, May 5, 2008. Joining us today from MannKind are Chairman and CEO, Alfred Mann, President and COO, Hakan Edstrom, the Chief Financial Officer, Matthew Pfeffer, and Chief Scientific Officer, Peter Richardson.

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

This is Hakan Edstrom. Good afternoon, and thank you for participating in today's call. 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 that the actual results could differ from these expectations, and for factors that could cause actual results to differ from expectations. Please refer to reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Let me start by recapping our activities during the past quarter. All of our key programs are on-schedule, and are on and below budget. We are nearing the end of our pivotal Phase III trials and put in place the necessary personnel and systems, so that we can lock the databases this fall, and conduct the analysis leading to the NDA filing. We are also approaching the completion of construction phase of our manufacturing facility in Danbury.

Much of the equipment has already been installed, and our validation activities are well under way. Our target submission date for the NDA, particularly Insulin remains the end of December 2008. Although this target is still considered an aggressive goal. Our clinical operations especially Study 117, a Phase III clinical trial that will examine the effect of TI, in patients with tightly controlled fasting glucose levels. As you know out of fear of hyperglycemia, patients to-date tend to be managed at high fasting levels, so high as to invite the risk of long-term complications, and at these high levels, fasting glucose, not standard glucose, primarily controls the A1C.

Our goal in this study is to use insulin more aggressively by taking advantage of TI's superior hypoglycemia profiles and observe the effect of this aggressive insulin use on A1C levels. We also have a number of non-insulin trials under way having recently initiated a second clinical trial of our inhaled GLP-1 product, the MKC253, and a trial of the second cancer nanotherapy product, the MKC1106MT, and these other programs also appear to be outstanding opportunities. We believe that we have done everything that we have told you that we would do and even a little bit more.

Nonetheless in the wake of the withdrawal of Novo Nordisk and Eli Lilly from the inhaled insulin market, and more recently the revised labeling of Exubera, many investors and analysts have changed their perception of the inhaled insulin opportunity, and MannKind's prospects, and our stock price has plummeted. All of this has led to a great deal of discussion and additive speculation in the last few weeks about the future of MannKind Corporation, and of inhaled insulin generally. The bottom line is this, Technosphere Insulin is progressing well. There is nothing that we have heard from Pfizer, Lilly, or Novo Nordisk that has caused us to change our opinion about the safety or expectation of Technosphere Insulin.

We still believe that we have a very safe, effective, and differentiated diabetes therapy. Of course, we have not yet completed our Phase III clinical trials, and as you know we are still blinded to the data. When the data are available, we and you will have substantially more information about the safety and efficacy of Technosphere Insulin, than what is currently available. You will mately we believe the exit by these companies may enhance our opportunity with TI, even though we first must be able to deal with some of the negative perceptions that they have created.

We are only prepared to make decisions about the future of our product, based on solid clinical data, not on the basis of suggestions and speculations. All of our data to date, and also our extensive underlying science, supports the safety and efficacy of Technosphere Insulin. Thus we have every reason to move forward, and we are continuing the clinical development of Technosphere Insulin, as one of the completions of the build-out of our manufacturing facilities.

Indeed assuming that the data from our pivotal trials continues to support the view that Technosphere Insulin is safe, effective, and a significant improvement of today's standard of care, as has all our data consistently demonstrated until now, we shall proceed towards submission of a new drug application with the FDA, and with the preparations, with the preapproval inspection of our manufacturing facility in Danbury. The cloud of uncertainty that has formed over the inhaled insulin space has nothing to do with Technosphere Insulin, and we believe that we can best dissipate these doubts by obtaining approval for our product.

I know many of you participating in this call have questioned what the FDA will do with our inhaled insulin, in light of the numeric imbalance in lung cancer cases with Exubera. I certainly cannot predict what precision the Agency will ultimately take on this issue, but I can tell you that we maintain an open and constructive dialog with the FDA, and that we expect this dialog to continue unabated. Please keep in mind that unlike others exploring the inhalation of insulin, in addition to extensive toxicology studies, that have shown no effect on tissue, we have specifically evaluated the cancinogenicity of our product in studies, not just in one, but in two species.

We undertook these animal studies not because we feel that insulin is carcinogenic, but because we wanted to thoroughly under the safety of our formulation. All preclinical cancinogenicity data indicated that neither our product, nor the carrier material alone, has any carcinogen potential although the final histology reports from the second study in immune compromised study, will not be received for another few weeks. We also know that our carrier is not biologically active and everything that reaches the lung is excreted in urine unmetabolized. Remember, the target for our product is not really the lung itself, but rather the arterial circulation that drains from the lung.

Our formulation gets insulin, and it is carried into the blood stream quickly, with neither material spending much time in the lungs. We can only speculate how our mechanism of action differs from that of the sugar-based formulation used in Exubera. Suffice it to say, we have not seen any of the adverse effect on the measures of lung function that have been reported to occur with inhaled insulins. Yet the recent publicity raises questions as to whether Exubera causes or accelerates cancer. Even if a casual relationship is eventually established, it does not mean that there is a class issue.

In fact, Lilly and Novo Nordisk as well as MannKind have seen no signal of cancer. All of these products are different. Indeed a minor difference in the formulation of an active ingredient, can have a profound effect of the safety and efficacy and commercial viability of a pharmaceutical product. Those of you who have been following diabetes for some time will recall the problems encountered by users of Troglitazone or Rezulin after it was launched in 1997.

They were a number of cases with severe liver damage and quite a few fatalities. All the Rezulin was withdrawn in 2000 for safety reasons, it's data did not mean that TCD as a class were doomed, not at all. Pioglitazone or Actos was launched in 1999, and has gone on to generate many billions of dollars in revenues. This is just one example that illustrates how the failure of one drug does not define the performance of the entire class.

And this brings me to the other major concern that has been raised regarding Technosphere Insulin that even if approved, the product will be difficult to market in the wake of Exubera's problems and the exit by Novo Nordisk and Lilly. Before we understand the marketing challenge that faces us today with Technosphere Insulin, even before the recent events we were well aware that marketing a novel parity primary care position, would require substantial sales and marketing efforts. For this reason we were pursuing an partnership arrangement with a collaborator with substantial marketing and sales capabilities.

That is still our strategy, but because of the recent publicity and the associated perception, we have temporarily recessed discussions with potential partners. We will resume pursuit of a partnership after pivotal data is available. Although we are still committed to the commercialization strategy, we are as well exploring other models reintroducing a save, effective, and differentiated pharmaceutical product to the marketplace. We believe the Technosphere Insulin is a unique product with significantly improved safety and efficacy, with the potential to change the way diabetes is treated.

Ultimately it is the clinical data that will drive our decision about how to best market our product. And as recently as last week we met with U.S. payers to discuss reimbursement, and based on our data to date they have been very encouraging. They recognize the significance of Technosphere Insulin therapy, and it's clinical benefits that clearly differentiate this from Exubera.

Now as you are aware, Dick Anderson has retired as CFO, and for the next year he has moved to a reduced work schedule in the Office of the Chairman, and we are now pleased to introduce to you Dick's successor, our new Chief Financial Officer, Matt Pfeffer. Many of you may know Matt from his tenure at VaxGen, and earlier at Cell Genesys. Matt will present our financial report, and then Peter Richardson will give you an update on our research and development programs, and finally Al will then present some observations and comments before we open up the call to questions.

Matt, please.

Thank you, Hakan, good afternoon. Before I get into the financials let me remind all of you this conference call contains time-sensitive information, that is accurate only as of the date of this live broadcast, May 5th, 2008. MannKind's management undertakes no obligation to revise or update any statements to reflect events or circumstances occurring.

The first quarter of 2008 total operating expenses were $74.1 million, compared to 77.3 million for the first quarter of 2007, and 79.1 million for the fourth quarter of 2007. R&D expenses were $58.4 million for the first quarter of 2008, compared to 63.8 million for the first quarter of 2007, and 66.8 million for the fourth quarter of 2007. The decrease in R&D expenses from the first quarter of 2007 was primarily due to lower clinical trial costs, and associated costs of packaging for the clinical materials, that was partially offset by higher stock compensation expense.

General & Administrative expenses were 15.6 million for the first quarter of 2008 compared to 13.6 million for the first quarter of 2007, and $12.3 million for the fourth quarter of 2007. G&A expenses increased from the first quarter of 2007, primarily due to a one-time patent expense. The net loss applicable to common shareholders for the first quarter of 2008 was $71.4 million, or $0.70 per share, based on a weighted average 101.4 million shares outstanding, compared with net loss applicable to common shareholders of $73.1 million, or $1.00 per share, based on 73.4 million weighted average shares outstanding for the first quarter of 2007.

Our cash and cash equivalents as of March 31, 2008 totalled $269.1 million, as compared to 368.3 million as of December 31, 2007. Our cash burn during the past four quarters has been 81.6 million in Q2 '07, $79.8 million in the third quarter of '07, $85.7 million in the fourth quarter of '07, and $99.2 million in the first quarter of '08. We anticipate our cash burn may increase further over the next one to two quarters, and should then should decline. Fluctuations in the quarterly burn rate over the next few periods, will be due to large part to the timing of our expenditures for our clinical trials, and for capital costs for the new Danbury plant. With our current cash and availability of the $350 million credit facility from AL, we continue to believe we will fund our operations through 2009.

I would now like to turn the call over to Peter Richardson who will discuss our R&D activities.

Thanks, Matt. On April 9th, 2008, the following information was added to the Exubera packaging insert. In warning, in clinical trials there have been 6 newly diagnosed cases of primary lung malignancies among Exubera treated patients, and one newly diagnosed case among comparator treated patients. There has also been one post marketing report of a primary lung malignancy in an Exubera treated patient.

In controlled clinical trials with Exubera, the instance of new primary lung cancer per 100 patient years of study drug exposure was 0.13, or five cases over 3,900 patient years of Exubera treated patients. And 0.02, or 1 case, over 4,100 patient years for comparative treated patients. There were too few cases to determine whether the emergence of these events is related to Exubera, all patients who were diagnosed with lung cancer had a prior history of cigarette smoking.

We have limited information available on the above report, but note that in both letters both doctors and patients, and as shown on the FDA website, Pfizer exemplifies that Exubera is considered a safe and efficacious treatment for diabetes. To date, our Technosphere Insulin clinical program has enrolled 4,849 subjects, and 25 completed and 7 ongoing trials, of which 2,684 subjects have been treated with Technosphere Insulin, and 2,165 subjects has received control medications. This corresponds to 2,182 patient years of Technosphere Insulin treatments, and 1,708 patient years of controlled treatment. MannKind received a report of one case of primary lung cancer, and a second case of lung involvement in a patient with metastatic colorectal cancer.

In both cases, the patients had a prior history of smoking. Conservatively assuming that both reported cases in the Technosphere Insulin treated group our primary lung treatment, the (inaudible) rate to Technosphere Insulin is 0.091 per 100 patient years, with no statistical difference to the control groups. Based on epidemiological data, the rate does not exceed what would be expected in a similar but untreated population.

To give you an update on toxicology information, preliminary data from 2 carcinogenicity studies in rodents are available. In 104-week study in [spec dolly] rats, inhalation of either Technosphere Insulin or Technosphere-only particles comprised of fumaryl diketopiperazine, which is well tolerated, and there is no indication that either Technosphere Insulin or FDKP had carcinogenic potential in the lungs or other tissues. There was no difference observed in the cell proliferation activity in the lung tissue of the controlled and treated groups. Similarly microscopic evaluations in transgenic [ras h2] mice administered Technosphere Insulin, or Technosphere placebo cutaneously, over 26 weeks indicate no carcinogenetic potential in lung or other tissues.

On the 9th of April 2008, the independent Data Safety Monitoring Board reviewed the public information related to Exubera, together with updated information on the Technosphere Insulin program. On this basis, the Data Safety Monitoring Board recommended that the studies could continue unchanged. We immediately thereafter informed all investigator sites of the information, and to date there have been no sites which have chosen to drop from our studies.

A very few patients have discontinued therapy as a result of this information. In the evaluation of any potential safety issue which may impact our product, we are first and foremost committed to the safety and well being of the patients taking part in our studies. We have seen no reason to alter our studies in any way in light of the reports around Exubera.

We believe our main priority is to proceed with the completion of our ongoing studies, and the start of the important 3b program we are undertaking, to establish the benefits of Technosphere Insulin over existing therapies the patients with diabetes, as well as a thorough understanding of any potential risk that needs to be managed in partnership with regulatory authorities, our patients, and prescribers.

The data with our products indicate that there are important differences in the basic pharmacology of Technosphere Insulin, in comparison to all other insulins, including the inhaled preparations that have been in development by others. Our job is to demonstrate how these differences can be used to allow patients to achieve better control of their diabetes, with less disruption to their lives than is presently possible with existing therapies. We remain on track to do that.

And in the meantime we are continuing our studies and analysis of data with our specialist advisors, in the field of endocrinology, pulmonology, and epidemiology. Our program is not just aimed to demonstrate the safety of Technosphere Insulin, but also to establish the Technosphere particle as a new way to deliver peptides systemically via the lung. This is not a matter of convenience, but a way to mimic the pulsatile release, that settle hormones which are of physiologic importance in endocrine and metabolic diseases. We have seen with Technosphere Insulin how this can open up new possibilities for the use of the product that has been with us over 80 years, and we are now applying this to the delivery of other peptides, where we believe this approach may yield similar benefits, in terms of improved safety and efficacy.

Our goal is to establish the Technosphere platform as the preferred method of delivering peptide hormones physiologically, and the unique characteristics of our proprietary particle allow us to approach this in a truly innovative way. The first of our projects in this area is MKC253 where we deliver glucagon-like peptide absorbed onto Technosphere particles using the MedTone inhaler.

We will be reporting in more detail the exciting data from the first of our studies in normal volunteers, at an American Diabetes Association Meeting, where we have been accepted for an oral presentation. Furthermore, I am pleased to report that we are making excellent progress in our second study in patients with Type 2 Diabetes, where we evaluate the effect of glucose levels following a meal challenge.

In addition we obtained very encouraging results from preclinical studies exploring the use of our technology to deliver appetite suppressing peptides in well-validated rodent models. We started the necessary preclinical testing of the first of these needed, to allow us to start clinical testing early next year.

Our cancer programs have similarly made excellent progress. The first of our active immunotherapy treatments MKC1106-PP, currently in Phase I clinical trial, has now recruited all of the low dose [cohorts] with encouraging results to date.

Our intranodal administration of biomolecules aimed to elicit immunity against cancer cells, appears to be very well tolerated. We have observed sustained immune responses against both targets pursued in this trial, in multiple subjects with various tumor types. And a number of patients are now proceeding onto multiple repeat cycles. We will now stop the higher dose cohort, and as well as study of our second regimen, a Phase I/Strike 2 trial, with an expanded list of objectives, specifically designed to target patients with malignant melanoma, known as MKC1106-MT.

At an earlier stage I am very pleased to be able to give you information on two of our innovative small molecule programs. We have recently received support from two notable non-profit organizations with whom we are partnering, in order to expedite bringing novel drugs to the clinic, initially targeted at devastating forms of blood cancer. Our extract formatory program targeting the IRV1 pathway, which appears to be a fundamental in how cancer cells deal with treatment in the body's defense mechanisms, has received a grant of up to $1 million from the Multiple Myeloma Foundation, to support our molecular [stine] efforts in this area. And in addition we received a grant of $1 million from the American Leukemia & Lymphoma Society, to expedite the further development of a lead class of compounds we have discovered, targeting the cellular kinase, ITK, which we believe is of importance in various types of T-cell leukemias and lymphomas.

ITK is a member of an important class of molecule, Tec kinases. They offer a unique opportunity to tackle additional types of leukemia and lymphoma to a developing compound, based on similarly innovative chemistry. We truly have an exciting program of promising products. And all but Technosphere Insulin are still in early development. Yet from my experience in drug development, I suggest to you that these new products have a better than usual likelihood as successfully moving through development to commercialization.

And now let me turn the microphone over to Al.

Thank you, Peter. Matt provided on first quarter financials, and we are on plan, even somewhat better than planned. Hakan and Peter have spoken about our clinical programs, our progress with the manufacturing facility, some of our product pipeline opportunities, and recent events about Exubera and inhaled insulins.

I would like to take a few moments to make some additional comments about that Exubera report, and about the market's reaction to the announcement by Pfizer of a numerical imbalance in their clinical trials in the number of primary lung cancer cases among Exubera-treated patients versus control patients.

It is an understatement to say that we were dismayed that upon the Pfizer report so many of the analysts were quick to write off Technosphere Insulin and MannKind, and that investors so greatly devalued our stock in the wake of that announcement. It was almost as if we had announced a numerical imbalance of lung cancer patients for our own product, or that we even acknowledged a genuine safety signal for Exubera. The reaction was that strong, but that is not the case.

First of all, as Peter noted, while there was an imbalance in the Pfizer experience, and to two cohorts, the number of cases of lung cancer in the primary patients did not of itself signal a safety risk for Exubera. The actual incidents of lung cancer was consistent with statistics within the general population, and that the incidence was actually low, because everyone of those patients was a smoker. According to Pfizer and the FDA, Exubera remains a safe and effective medicine.

As to Technosphere Insulin, we have seen no lung cancer signaled in our clinical data. Our independent Data Safety Monitoring Board has consistently recommended that our trial continue without change. Even after Pfizer's announcement that DSMB found no basis to discontinue, or otherwise modify our trials.

Let me also remind you that both Lilly and Novo Nordisk announced that there were no safety issues with their products. As well, both Abbott and Aradigm have announced that they have not seen any cancer signaled in the data related to their inhaled insulin programs. So what does this all mean for the future of inhaled insulin? After all, three major companies have withdrawn from this market. But none of those products delivered any clinical advantages over existing standard of care, rapid acting, and some analogs. Without a valid value proposition, reimbursement was a serious obstacle for all of those products, one might even ask why Lilly and Novo Nordisk ever pursued those products. And what really led to the determination of AIR and AIRx.

Consider the business rationale for Lilly and Novo. For both companies, injectable, rapid-acting insulin analogs, our major blockbuster product. Why cannibalize those profit drivers, with a product directed to the same market, but with lower margins? For example, Lilly's AIR system had an effective bioavailability of only 7 to 8%. Thus requiring 13 times more insulin, as well as all of the processing costs, and device costs, and also the payments to Alkermes. As a consequence, the economics made no sense for them.

Lilly also cited the regulatory environment as part of the rationale for termination, but in reality surely the economic issue dictated termination. In the case of Novo Nordisk, the reasoning was similar and even more clear. While pulmonary delivery of a rapid-acting insulin made no sense, Novo has now said it is continuing to pursue an inhalable lung acting insulin. Why? I say because Novo's Levemir, twice-daily injectable basal insulin is not competing well against Lantus from Sanofi-Aventis.

So what can we infer from all of this? After the market failure of Exubera, both Lilly and Novo re-examined their inhaled insulin programs. It seems evident both companies were pursuing this route to delivery only for defensive reasons. I say that after the demise of Exubera, determination of both AIR and AIRx, where thus cases where Lilly and Novo Nordisk simply found those products not to be economically justified within their product portfolios, and found no reason, no defensive reason to continue them.

On the other hand, our product has much better bioavailability than the others, and clear clinical advantages over today's standard of care. With our data to date, we have never had any difficulty explaining our value proposition to physicians, and why Technosphere Insulin will become a valuable addition to their diabetes treatment options, and why it should be prescribed for a broad array of patients.

We are also finding encouragement from payers for reimbursement. After all, ours is not just another inhaled insulin. Instead we have tried to define our product as the first in the new class of ultra-rapid insulins, and the insulin that most closely mimics normal physiologic release by a healthy pancreas. This is not just my view, this was first suggested by Jay Skyler, a world leader in diabetology, and his description has since been embraced by other key opinion leaders. No other product has ever come, or even close to TI's kinetics, and those kinetics and are absolutely needed to avoid the complications of diabetes.

Let me explain. Glucose, of course, is the fuel of the body, but it must be controlled or serious consequences can ensue. A person is faced with two independent sources of glucose, that which is ingested in meals, and that which is provided by the liver to fuel the body between meals.

Basic control science dictates that to control a system with two independent variants requires use of two separate and independent controls. Even nature realizes this. When a person eats a meal the pancreas reacts to the meal by releasing a surge of insulin in minutes, and that turns off the liver during meal digestion. The normal body does deal with glucose load separately from fasting glucose loads. In contrast to the insulin released by the normal pancreas of a healthy person which reaches peak plasma concentrations in less than 10 minutes, subcutaneous [perennial] insulin peak in 2 to 3 hours for regular insulin, and about 50 to 80 minutes or so for rapid analogs and the other inhaled insulins.

Moreover, the activity of those insulins continues for many hours. long after the meal has already been digested. Compared this with Technosphere Insulin with peaks in 12 to 14 minutes. Almost as fast as a normal pancreas, and with the insulin activity closely synchronized to meal digestion. It is gone before there is any excess insulin problem.

These kinetics result in tremendous advantages. TI therapy can produce exceptional control of postprandial excursions, with very little, if any, risk of hypoglycemia, no need for complex meal titration, and no weight gain, even weight loss for prior insulin users. I believe Technosphere Insulin is a truly disruptive technology, that can change the way diabetes is treated.

Independent key opinion leaders have postulated that TI even has the potential to stop, or at least to slow, the progression of Type 2 diabetes. I believe this product has a tremendous future, and I refuse for it to be defined by the failure of others, that do not have viable value propositions. I do understand that we now have to overcome new marketing obstacles, but I say that these obstacles are based on perceptions, not on facts.

Those of you who know me and my history will know that I understand what it takes to pioneer disruptive technology, and I tell you I am up to this challenge. To illustrate this point, let me remind you of a remarkably similar crisis that exploded in the early days of insulin pump therapy when I was at MiniMed. Eli Lilly, Novo Nordisk, and Baxter were early competitors in insulin pumps, along with MiniMed. Another major European company was conducting a trial of it's new insulin pump, and in that trial several people died from severe hypoglycemia. There was an uproar about the dangers of insulin , and the experts offered that the insulin pump market was dead. One by one, Novo, Lilly and Baxter terminated their insulin pump programs. Lilly even paid MiniMed to supply replacement pumps for it's patients, but MiniMed did not follow the herd.

We believe that our device was superior and different from the other offerings, and so we continued. Ultimately we prospered. MiniMed went public in 1995, and was later acquired. MiniMed's value escalated from early price of $1.75 per share, to it's split-adjust $192 at the time of Medtronic's acquisition in 2001. That was return to the early investors of over $100 for every dollar invested. Our lawyers want me to state that MiniMed's past performance is no guarantee of MannKind's future results.

Yet the parallel of MannKind's situation today, to MiniMed, is quite interesting. Even two of the three players are the same. But please understand that I am not being critical of Lilly or Novo for having abandoned their pump programs back then, or their inhaled insulins now. Those companies have always had multiple products in their diabetes franchises, so for them it has simply been a matter of managing product portfolios. The situation for both companies back then, is not so different for what I believe is driving their decisions about inhaled insulin today.

On the other hand, innovators like MiniMed and MannKind, focus on the unique singular qualities of their superior technology, without worrying about balancing the profitability of a mix of products, some of which are potentially competitive with each other. So the situation we find ourselves in today is that all of the other major players have removed their inhaled insulin products from their portfolios, and have left the field open to MannKind. While we must deal with the perceptions of the current doubters, in the end this should be an important positive for MannKind.

I want to reiterate my own conviction about Technosphere Insulin, as well as that of the Company and the entire team. We are all fully committed, and remain so, fully committed to Technosphere Insulin. At all levels of our staff there is widespread confidence in our future. We believe Technosphere Insulin will be the most effective means and indeed the only current means for safely and effectively controlling prandial glucose excursions, and it does this without the historical problems of insulin therapy.

I assert that Technosphere Insulin has the capacity to increase both the safety and efficacy of diabetes therapy in very significant ways, that today are poorly met with available treatments. And MannKind is much more than just a company with Technosphere Insulin. Until now we have not spoken much about our pipeline, even though early it is very strong. Because we have so focussed on TI, all of the other products are still in early stages, and years before commercialization. But exciting as are these other products, our focus over this next period will continue to be on Technosphere Insulin. Our attention has been to find a partner that shares our vision and is fully as committed to Technosphere Insulin.

But given the reaction to the latest Exubera issue, we decided to recess our partnership talks, at least until our pivotal data is available. We view the increase in our challenge for commercialization, to be caused by not anything real, but by the perceptions raised by the exits of the other players, and by the latest Exubera scare.

In summarizing, let me say that MannKind is continuing with it's development of Technosphere Insulin, that we are on course to file our NDA, that we have not to date seen any reason to be concerned about safety or efficacy of this product. That the issues with Exubera may have led to certain hasty, and I believe inaccurate perceptions, that virtually none of Exubera's problems have been seen with Technosphere Insulin, that we believe Technosphere Insulin is the most effective means to control postprandial glucose excursions. That postprandial excursions must be controlled if we hope to safely bring most diabetes patients to a normal A1C, that our factories during completion, and that I and the entire management team at MannKind continue to be committed to this product, and to it's success.

I think now is the time we can take your questions,

Thank you. (OPERATOR INSTRUCTIONS) One moment for our first question, please. Our first question is from Sa'ar Yaniv, JPMorgan.

Thank you so much for taking my call. Can you discuss the carcinogenicity study such as designed, and the study length?

Peter.

Hi, yes, the first of the study is a standard 104-week or two-year rat carcinogenistic study, which we do with inhalation so the rats are exposed to inhaled Technosphere Insulin, or Technosphere powder for that period on a daily basis.

The second study is a six-month using a rat, transgenic mouse, where we actually treat the rodents with subcutaneous Technosphere Insulin, this is more where we are trying to amplify the tumor response, by looking at mice who are particularly susceptible to this, and that is the one where we have the microscopic lack of findings, and are waiting the final histology report.

And will you announce the results of that final carcinogenic data?

I would imagine at the earnings call we do, but I don't think there will be any special announcements around it.

That is great. The second question I have is, we are encouraged by the fact that there have been no [count] of existing data TI, but we are concerned that many physicians may hold off using inhaled insulin, until they see the outcome of the study. Is there any other way to tease out the potential for lung cancer TI aside from the outcome of those studies?

Clearly, the data that we have seen in the patient database we have at the moment is one which is reassuring, in terms of the numbers that we have. Clearly in terms of how we anticipate the Agency and physicians looking at this, there is going to be post-analysis of the risk benefit. And the outcome will be (inaudible-microphone inaccessible), the benefit has been as we have already seen according to the patients with diabetes (inaudible). As we follow those under our alternative methods, during our studies which our normal first marketing surveillance approach is, we will explore with the Agency and with our external advisors (inaudible).

Okay. Are there any plans for a for longer-term outcome study, a Phase IV-type study?

We have not had discussions with the Agency as yet, as to what type of longer term studies, the size and scope of those will be required, although which we would want to do, in terms of launching a product into this market successfully.

Okay. Great. Thank you very much.

Jon LeCroy, Natexis Company.

Thanks for taking my call. Can you guys talk a little bit how much exposure you have given TI to in smokers, and maybe give us update on the O16 smoker study, and then at one point, I think you were going to run a COPD study as well. If you could update on that. As far as exposure in smokers , what is the max length of time a smoker has been on the product, and maybe an average exposure that you guys have had so

In terms of the smoker studies we have not done long term studies in smokers, that has been a point of which we excluded the patient on the basis of being a smoker within a six-month period before starting the studies, and that has been across all of our studies, started our with achieving specifically [denied], which I think is the study you are referring to, which is a PK study in smokers, but we show no difference in smokers and non-smokers in the pharmacokinetic insulin response. Which is (inaudible) of that which has been reported in other insulin therapies.

In terms of our other special population studies in asthma, COPD, and we have had one study in terms of asthma, but we have started now a second study in a mixed COPD/asthma population in terms of looking at that. We anticipate that will be ongoing at the time of filing. This is a difficult area to recruit patients. As we look back at the smoking history across our programs, approximately 30% of patients in our ongoing Phase III studies have been previous smokers.

And then length of time that the longest previous smoker has been on?

Previous smokers have now, our longest studies are up to four years exposure.

Okay. Thank you.

Elizabeth Naldi, Piper Jaffray.

Hi, thanks for taking my call. With today's announcement with the Leukemia & Lymphoma Society can you just comment on what expertise MannKind for developing a Tyrosine Kinase Inhibitor?

Well, if I can comment, I think this is a real exciting area, to be working in, certainly from my point of view, the excitement in terms of having lived through development in Gleevec, one of the reasons why this was a particularly exciting program, we are very well aware of the need in this area.

We are actually doing the preclinical, and we have a small, and actually I think a very talented group in terms of drug discovery, to look at the Tyrosine Kinases, initially in terms of inflammation, but also now looking specifically where we have made good progress in terms of coming to a fundamental role, in terms of the control of the T-cell, and progression to malignancy, which is really a very new area, and in terms of some of our design, we have in-house chemistry, and we have got some very strong external relationships as well, as we develop the chemistries necessary to take that through to development.

Great. Thank you.

Tom Russo with Baird.

Thanks for taking the question. In terms of the perception issue, I was was wondering if there was anything that you have been able to do, or can do around the ADA meeting, to kind of take that piece of it head-on with the opinion leaders, maybe while the Exubera issue is still fresh in folks' minds?

Okay. At the ADA meetings, when we will be, we do have a post, in terms of our clinical study, and we are presenting those phases there. Our dealings so far with opinion leaders, first of course, are our own, the independent DSMB, and the investigative community have all been very reassuring in terms of, they have looked at this very much as part of a novel pattern of development, something external to the Technosphere Insulin platform, and have actually worked carefully and closely with us, in terms of we have been open with the data and shared that.

In our dealings with the external advisory board, we have had several of those over the past couple of weeks, and again the reaction has been very much one where, it is something that will be solved from the basis of data and experience, and the important thing is to keep a level head, and be able to deliver the data from our patients in appropriate studies.

Please keep in mind that by the time cancer in the lungs is detected by X-rays, the cancer has been there for quite a few years, long before these Exubera trials began.

Okay. And then just in terms of the partnership talks, obviously on hold at this point. How far would you be prepared to go alone if the right kind of deal doesn't materialize after the pivotal data, I think you alluded to it earlier, but can you talk a little bit about what you might plan to do in that scenario if you don't find an acceptable partnership, even up to the point of launch?

What we have said in the past is that we are prepared to go it alone. We would probably have to look at a different way of approaching, kind of the market at that point in time, from a say, global point of view. But there are certainly different alternatives that we could look at, one would be say to mention one, would be say the [TKI] approach where you have, say, rent a sales force you start that way, and maybe you take over the responsibilities.

And we have also looked at the alternatives to say one global partnership, would be that you might have very strong regional partnership arrangements. So without being specific, and being revealing in any further details, those at least are some of the options that are certainly under consideration.

Okay. And then just last question. I wasn't sure, is there a forum or avenue for you to request a formal discussion with the FDA, and to kind of revisit the development program that has been agreed to in the past, so kind of in light of the new data that came out from Exubera?

I think our next steps with the Agency will be the standard pre-NDA meeting, to submit our file with them, and that in terms of discussions that we have had with the Agency so far, and what they expect from us.

And is that a meeting that you would schedule potentially even before you have all of the pivotal Phase III data, or will it be after that time?

Yes, that meeting is scheduled according to plan.

Okay. Thanks a lot.

(OPERATOR INSTRUCTIONS) One moment for the next question, please. Tom Shrader, your line is open.

Good afternoon.

Good afternoon.

Good afternoon.

Thank you for providing the numbers about how much exposure you have seen. I guess you gave 2,100 person years in your database so far. I am wondering is that a final number? How much will that number change by the time you submit? Can you give us a sense of how big the number could finally be, in terms of exposure?

Off the top of my head I can't give you an exact number. We still have patients, as you know on treatment, coming to the end of studies at the present time, so it will increase from that. The numbers I gave were those presented at the DSMB on April the 9th when we had a very accurate number there. I can't give you the numbers that will eventually end up with, until we know exactly what the final rates are.

Is that say more than say 75% of the total?

I would have to think about that from the pattern of recruitment. I can't guarantee whether it is 75%. This is a substantial part of the total exposure, but I can't give you an exact percentage.

Okay. And sort of analogous question. Does your population look about like Pfizer's? Was their inclusion criteria also no smokers within six months? So are the rates apples-to-apples rates when we finally see them?

I, again, Pfizer would have more details than I do, but I know that active smokers were excluded from all of their studies, as they have been with all inhaled insulins to my knowledge. Specific studies have been done in smoking populations which have tended to be PK. And I assume that their exposure criteria was similar, whether it is exactly six months or not, I don't know.

Keep in mind that the main reason that Exubera, in Exubera they excluded smokers, was because in that case smoking so greatly altered the kinetics of the drug, so that they have an enormous variation of bioavailability based on how recently the patient smoked, even during that day, smoking within a few hours made a big difference, not just even a few months.

Great. Okay.

We have seen none of that by the way with our drugs.

No, no, I know.

Thank you, Tom.

Our last question comes from Sa'ar Yaniv, JPMorgan.

Guys, I have one more follow-up question regarding partnership. Can you tell us what was the reaction, if any, of the any of the prospective partners that you have had discussions with in the past? And although you are the one that has discontinued the discussions, have any of them expressed any continued interest?

First of all, actually the reaction from a couple of them, was that they thought that this was a smart move at the time, where the market was kind of in a turmoil. And, yes, there certainly is a continued expressed interest.

Okay. And so what would it take for MannKind to continue discussions with these partners?

Well, as we said in our earlier script, upon the availability of the Phase III data, we think that the best way to address, say some of the concerns in the market place right now, but primarily to clearly differentiate the performance of our product.

Okay. Great. Thanks so much, guys.

Thank you.

That is all of the questions today, so thank you all for joining us this afternoon. We think this year is going to only get much more interesting, as we begin to analyze our pivotal Phase III data. We look forward to sharing our progress at the next quarterly call. Thank you for joining us today.

Operator?

Thank you for participating in today's conference. All participants may disconnect at this time. Thank you.