MannKind Corp (MNKD) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation third quarter 2008 conference call. At this time, all participants are in a listen-only mode. (OPERATOR INSTRUCTIONS). As a reminder, this call is being recorded today, November 5th, 2008. Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; the Chief Financial Officer, Matthew Pfeffer; and the Chief Scientific Officer, Peter Richardson.

I would now like to turn the call over to Matthew Pfeffer, 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 third quarter of 2008 as reported earlier today. Next, Hakan and Peter will provide an update on key accomplishments during the past quarter. And finally, Al will comment on the situation and our outlook going forward. We'll then open up the call for 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 that 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, November 5th, 2008. 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 start with the financials. For the third quarter of 2008, total operating expenses were $69.1 million, compared to $80.9 million for the prior quarter and $75.6 million for the third quarter of 2007. R&D expenses were $55.6 million for the third quarter of 2008, compared to $67.6 million for the prior quarter and $64.8 million for the third quarter of 2007. These decreases in research and development expenses were primarily due to decreased costs associated with the clinical development of AFRESA and the related manufacturing costs associated with the clinical trial materials, partially offset by increased stock-based compensation expense and facilities related expenses. General and administrative expenses were $13.4 million for the third quarter of 2008, compared to $13.3 million for the second quarter of 2008 and $10.7 million for the third quarter of 2007. These general and administrative expenses increases were primarily due to increased employee related and consulting expenses and increased stock compensation expenses.

For the first nine months of 2008, operating expenses totaled $224 million compared to $228.3 million in the same period of 2007. R&D expenses for the first nine months were $181.7 million compared to $190.1 million in 2007, primarily due to decreased costs associated with the clinical development of AFRESA and the related manufacturing costs associated with clinical trial materials, partially offset by increased stock based compensation expense and increased facilities related expenses. G&A expenses increased by 4.2 million to 42.4 million for the first nine months of 2008, primarily related to increased employee related and consulting expenses and increased stock-based, compensation offset by decreased professional fees. The net loss applicable to common shareholders -- stockholders for the third quarter of 2008 was $68.5 million or a $0.67 per share loss, compared with a net loss applicable to common shareholders of $73 million or $0.99 per share for the third quarter of 2007. The net loss for the first nine months of 2008 was $219.7 million or $2.17 per share compared with a net loss of $218.2 million or $2.97 per share for the first nine months of 2007. Our cash, cash equivalents and marketable securities as of September 30, 2008, totaled 95.2 million compared to 180.5 million at June 30, 2008, and 368.3 million at December 31, 2007. Our cash burn during the past three quarters was 99.2 million in Q1 '08, 88.6 million in Q2 '08, and 85.2 million in Q3 '08.

We anticipate our cash burn to slowly decline over the several quarters with the completion of our phase three trials and of our new manufacturing facility, subject to fluctuations in the quarterly burn rate over the next few periods, due to the timing of our expenditures for our clinical trials and for capital costs for the new plant. With the availability of the 350 million credit facility from Al, none of which has yet been drawn, we continue to believe that we'll be able to fund our operations into 2010. I would now like to turn the call over to Hakan Edstrom, our President and Chief Operating Officer. Hakan?

Thank you, Matt. Good morning. As you may well understand, MannKind is focused on bringing the entire phase 3 program to entire conclusion at this time, allowing us to submit our NDA early in the first quarter of 2009. The execution of our NDA filing package is proceeding on schedule, including the additional bioequivalent study that was requested by the FDA at our July pre-NDA meeting. We're also in the implementation mode of the first of our phase 3B trials, Study 119. And as you'll hear from Peter in greater detail, we've now closed all of our pivotal phase 3 studies and initiated data analysis. We expect to complete data review of Studies 102 and 030 sometime in December and share it with you soon thereafter. The exact timing for press releases and presentations will be dependent upon NDA submission work load priorities and the ADA abstract deadlines. The NDA (inaudible) will be submitted, as I said, in the first quarter of 2009 upon completion of the inhaler bioequivalent study.

This study is now with the underway and will complete in mid-December. And since we're completed all pivotal phase 3 studies and the buildout of our manufacturing operation in Danbury, and with the NDA submission soon behind us, we are now transitioning from the development focused Company towards commercial readiness. And we're also undertaking a number of clinical marketing phase 3B studies for AFRESA that we expect will show its superiority as a (inaudible) insulin compared to rapid-acting analogs; and Peter will comment on the status of those studies a little bit later in this call. Having all of the phase 3 clinical data in our hands shortly, we intend to reinvigorate our (inaudible) discussions in 2009. That was suspended last spring following the turmoil of Exubera. And given the current uncertain financing environment, we've also devoted significant time focusing on reducing capital spending and program expenses, thus allowing us to operate on existing funds and loans into 2010 with the potential of an NDA approval of AFRESA within this time frame. That will, however, not preclude us from making what we believe to be strategically important investments if and when appropriate.

And in closing, let me touch upon one other item that is under way right now. As you know, we signed the agreement with Pfizer to assume some of the Exubera patients that were left stranded when Exubera was withdrawn from the market. The transition of patients is under way, and we have experienced a high level of interest from previous Exubera patients and their doctors. And now, here is Dr. Peter Richardson, our Chief Scientific Officer.

Good morning, and thanks, Hakan. Once, again I'm happy to be able to report that AFRESA, previously known as Technosphere insulin, has progressed according to plan over the past quarter. The preparation of our NDA is well advanced, with a goal of submission early next year. The pacing event to filing is the bioequivalency study activated by the FDA. With (inaudible) submitted last month, and that trial has been initiated and is tracking to complete in time to meet our aggressive goal for filing. I'm very happy with the team's exceptional performance in getting this study up and running in record time.

All of our phase 3 studies are now complete, and data bases have been locked in recent weeks. I don't have further data from the pivotal study available to report today, as we're following a carefully designed process to complete the many tables and analyses required for submission to the FDA; and with the internal consistency, that will allow us to pull these in our integrated summaries of efficacy and safety. Our goal is to be able to present abstracts for the main studies for next year's meetings with the American Diabetes Association; but we will, of course, look forward to updating you with the topline summary data before the end of the year. We've made good progress with the enrollment of our phase 3B program and we've now -- and we are now actively recruiting in two of the three presently funded studies. MKC 119 is a meal variation trial to demonstrate that carb counting and complex meal (inaudible) are essentially unnecessary with AFRESA. Additionally, this study will indicate at what minimal snack size a person's standard fixes dose of AFRESA may become excessive. MKC 117 is three-month treat to target study in Type 1 patients comparing AFRESA plus Lantus to Humalog plus Lantus. Fasting glucose is targeted to below 120 milligrams per deciliter, using continuance glucose monitoring for safety.

Lantus will be given in the morning or twice daily according to physician's judgment, and we expect this study to see superiority of AFRESA over Humalog in A1C and/or hyperglycemic risk. We're planning another trial in Type 1 patients comparing AFRESA to (inaudible) delivery of Humalog by an insulin pump, in both cases with basal insulin delivered by the pump. What we learned from the 009 study, as well as from experience elsewhere, is that we really need a better long acting insulin. The currently available drugs do not last long enough for many people, and the kinetics are not physiologic or even sufficiently flat. Many key opinion leaders insist on two injections of Lantus (inaudible) daily to cover 24 hours, and even that does not create (inaudible) upon delivery. This study will demonstrate that superior control and even normal A1Cs can be more readily achieved with AFRESA plus the more physiologic basal insulin. MannKind has been evaluating several basal insulins, and this trial will provide support for adopting a better basal insulin. In addition to our phase 3 pivotal efficacy and safety studies, we've now completed enrollment in all clinical pharmacology studies to be included in our submission, other than the bioequivalent study requested by FDA (inaudible) NDA meeting. I'm pleased to report the FDA study is progressing well and we should have all patients treated the by mid-December. Thus, 29 of the total of 30 planned clinical pharmacology trials are complete and analyzed, or in the final stages of data analysis.

These studies can be divided into two groups. 19 early development studies were conducted before the final to be marketed formulation was determined, the results of which have been presented or published over the past few years. And 11 studies have been conducted with the 2B marketed formulation. In the last year, we've examined the pharmacokinetics of Technosphere insulin in subjects with chronic obstructive pulmonary disease and in diabetics with active (inaudible) to tract infections. We've also actively pursued the complete understanding of the FDKP metabolism in elimination, including the finding that dosing adjustments in patients with renal failure or in those with chronic liver disease will be unnecessary. We've recently completed a cardiac safety assessment trial, extensively evaluating any potential for FDKP to affect cardiac repolarization, even as a supertherapeutic dose, as well as two studies characterizing the potential for interaction with an inhaled bronchial dilater, or steroid.

And finally, we continue to evaluate insulin pharmacokinetics as a functionality of escalating doses of TI, as well as the interchangeability of distant TI cartridge strength in subjects with diabetes. All studies to date support the advantages of AFRESA. The (inaudible) projected by the early phase AFRESA development program has been bourne out by years of focused, critical assessment. The administration of AFRESA inhalation powder produces an insulin PK profile never reported with any of the currently available insulins, either injected or inhaled. AFRESA powder has a very rapid absorption, with a time to maximum concentration of (inaudible) of approximately 12 to 14 minutes, with concentrations near baseline of 182 to 240 minutes. Consistent with this PK profile, the onset of action of insulin inhaled as AFRESA powder is much more rapid than subcutaneous insulin (inaudible) and subcutaneous (inaudible) human insulin. And the duration action of AFRESA inhalation powder is shorter than subcutaneous (inaudible) human insulin or of insulin (inaudible), which translates into lower glucose excursions post meal, with a low potential for hypoglycemia.

Aside from our AFRESA program, our cancer immunotherapy program has also made good progress. With our PP regimen and a variety of hemotypes, we have already achieved the primary end point of the study, with meaningful immunological responses being observed in 50% patients, even in the low dose group, well exceeding the prespecified success (inaudible) with 25% in any group. We look forward to seeing better results in the high dose cohort, the recruitment of which is now complete. And similarly, we've approached the end of recruitment with our MT regiment in melanoma. We look forward to reporting on these in more detail as we assess the clinical and immunological responses. And now I would like to hand over to Al Mann, our Chairman and CEO. Al?

Thank you, Peter. We can now see the light at the end of the tunnel. All of our pivotal trials have been completed and our clinical staff is busy analyzing the data. As Peter noted, we recently reported top line data on the MKC 103 and MKC 009 trials, and will soon be in a position to present additional data on those and data on the MKC 030, the two year safety and efficacy trial; and also on MKC 102 the one-year Type 2 efficacy trial. Our clinical program has been very large and robust -- more than 40 trials with more than 5,000 people in almost 300 clinics -- so far presenting a consistent story of the unique benefits of AFRESA.

Peter has described this program, which was far more extensive than of those exploring inhalation of insulin, and we believe we have more than met the FDA's draft guidelines for pulmonary insulin that were published earlier this year. We have already reported that our team attending the pre-NDA meeting with the FDA on July 14 was pleased with the agency's responses to our questions. Our team leaders said it was the most positive of the 18 such meetings he has attending throughout his career. One additional request from the agency, as noted, was to conduct a small bioequivalency trial comparing the inhaler used in the clinical program to the commercial version of that device that is more rugged and less costly to manufacture. That trial is underway in Europe; and Peter noted that the last patient's last visit is scheduled for mid-December. Preparations for our NDA submission are progressing well; and even with this additional trial, the NDA should be filed shortly after year end. Our trial program over these past three years has been directed towards regulatory approval. The almost 300 clinics involved in these studies are located in the US, Europe and Latin America.

With such broad participation, we have seen that throughout the world, the general standard of care for diabetes is frightening. There is such fear of hypoglycemia that fasting glucose is managed at dangerously high levels. With such high passing levels, it is no wonder that so few people reach target A1Cs. We've also seen the current basal insulins are not physiologic, and we are committed to bringing a more affective and safer basal insulin to market. We have been evacuating several approaches to more affective basal control. Together, AFRESA with a more physiologic basal insulin could create what I believe could become the standard of care for Type 1 diabetes and for most of Type 2 -- certainly for those without gastroparesis. As we continue to harvest the clinical data and move forward towards launch of AFRESA, we will seen be prepared to restart our partnership discussions that we suspended after the Pfizer announcement in April.

Since that time, we have continued discussions with potential partners, but have not conducted any negotiations. As we restart this process, we are now in a different and much more advanced situation. Some of you have doubted that a relatively small Company like MannKind can complete such a complex program and bring such a product to market , insisting that only a major pharma Company could pull this off. To be sure, the job is not yet done; but consider what MannKind has already accomplished. We have developed a therapy to reduce meal time glucose (inaudible) with an insulin that truly addresses the problems seen with earlier (inaudible) insulins, resulting in unique benefits for patients with diabetes. We have completed a comprehensive and robust clinical program to demonstrate the unique properties of AFRESA compared against the present gold standards of insulin regimens in both Type 1 and Type 2 diabetes. We have demonstrated safety of AFRESA with our extensive preclinical and clinical studies. We see absolutely no indications of toxicity or carcinogenicity or pulmonary function impact.

Our long term safety study 030 was recognized by the American Association of Respiratory Care for setting new quality standards in pulmonary studies. We have constructed and dedicated a manufacturing plan under budget and ahead of schedule that has already been equipped with the first of the modular equipment. This facility will be able to treat almost 400,000 patients, and further modular equipment insulations will enable us to expand production to many times that level as revenues grow. We have demonstrated the capability of to scale up powder manufacturing from clinical batches to ten full larger commercial batches, with success on the very first batch. We prepared for and held a very successful pre-NDA meeting with the FDA that our very experienced regulatory leadership described as the most positive they had ever experienced. Our five teams are on course in preparing the NDA submission, which will include the bioequivalency study comparing our clinical and commercial inhalers. What we have demonstrated in our very extensive program is that AFRESA is the first and only insulin to date that really mimics the kinetics of a healthy pancreas in reaching -- in reacting to meals. With so-called rapid acting insulins, about 60% of the glucose lowering activities occurs after the meal is already essentially digested.

The hypoglycemic risk from this extensive persistence leads to glucose management at such high fasting levels that there is danger. These high levels, coupled with the resulting between meals glucose lowering, mask the advantages of AFRESA and prevent reaching normal A1Cs. Day long snacking is employed to compensate for the lack of synchronization, adding to the problems of a person with diabetes. Even more important may be that not only is snacking needed with those insulins, but also the liver works very hard to deliver more glucose to deal with the persistent tail. By contrast, we have seen in our trials that AFRESA's elimination of that excessive persistence significantly reduces a fasting glucose level, even long after AFRESA is gone from the body. Although we've not yet established the mechanism action for this affect, it appears that the kinetic synchronization may restore more natural hepatic function by reducing the excess gluconeogenesis with current insulins, that along with between meal snacking, lead to weight gain and are needed to avoid hypoglycemia from that long persistence.

Interestingly, a key opinion leader recently commented they had learned from continuous glucose monitoring that the current insulins are not nearly good enough. Indeed, AFRESA is truly different and fills a poorly met need today. It is the most affective drug for controlled prandial glucose excursions, and we're now alone in the market for pulmonary insulin, and we expect to be so for the next four to five years or more. Buoyed by the exceptional trial results, the manufacturing progress and the revenue forecast supported by independent market research, our team is absolutely committed to and competent of the success of AFRESA. And now, let us open up the call to any questions.

Thank you. (OPERATOR INSTRUCTIONS). Our first question today comes from Tom Shrader of Rodman.

Good morning.

Good morning, Tom.

I hope you guys are enjoying the calm before the storm. So Al, you're talking a lot about basal insulin. Is this a new molecule? Is this someone else's that you like more than Lantus? You can give us a hint of what you're talking about?

I can't really discuss it yet, Tom. It's not at a point where we can make it public. But we are looking at the interesting solutions to the basal problem.

And the trial where you tried to get fasting glucose less than 100, is that 317?

No. It's 117. And the protocol -- we tried to get it down to under 110 but the doctors were so worried that we ended up -- it's under 120, but we're going to try to get as many as we can, at least with the AFRESA, to get them below 100.

And is that trial enrolling or are you nervous that Lantus just won't let you do that trial the way you want to? Is that trial -- are you going to see that with Lantus?

It's enrolling. Peter, do you want to comment?

Yes. It's actually it's enrolling quite nicely at the present time. What we did there was we've actually gone, and after a lot of discussion with the opinion leaders, we actually changed the Lantus dosing from that which we used in '09 to allow them to split the dose, which is very commonly done in Type 1 patients, in order to try and smooth out the Lantus profile. Because clearly, what we've seen is that if you dose in the evening, you're really getting insufficient by 25 hours to maintain that control, and we wanted to be able to show that with using Lantus in the best way that we could, and with the really very distinguished group of opinion leaders that we had on this study, they thought that was the appropriate way that we should approach this to show what AFRESA that we could do if we got the best -- we cover the basal insulin. Unfortunately, that requires twice daily dosing at the moment.

So you -- the protocol is twice daily Lantus? Or will you allow it? Will you stratify?

No. What we -- we had a regular discussion on how to deal with it. It is allowed once or twice daily according to investigator identified needs. So it's not mandated in the protocol, but it is certainly sensing what quite a few investigators are already doing with their patients, because they find that is the need.

Let me add one more comment, Tom. One of the things that we've learned, as we said, is that we would like to see a better basal insulin; but because we do not have it just yet that we can speak about, we are doing a trial to show that we can bring most people within normal A1C control with AFRESA, plus what would be a better basal insulin. We're going to simulate that better basal insulin with an insulin pump.

Okay. And then one quick question on the changes to the inhaler. You talk it being more rugged. Are the pieces in the inhaler that actually come in contact with insulin -- are they all the same, or how big are the changes?

There's been no changes at all to the flow path. That was one of the things that we really took a great deal of trouble to make sure that we maintained. These -- the changes (inaudible) around the robustness, just getting some of the clicking, some of the things that give the feedback to the patient that have engaged this in the right position, and also the cap which closes down over the cartridge, we put a new fixate on that so that it maintains in place. So the changes don't influence the flow path of the powder at all, and are really all related to making it more robust and easier to manufacture in bulk. So that's why it was important that we did this. And I think that when we -- we've demonstrated this very affectively to the agency. They asked us to do a study to confirm that there were no known differences between those two, and that we would certainly not expect to have.

So we should think of it as kind of a cooler grip or something?

You could think of it that way.

All right. Thanks a lot.

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

Thanks. I wanted to ask a little bit more on the financial stuff, and then a clinical question. Can you give us a sense of how much more needs to be spent on CapEx for the plant from now until the point of approval? And then also if you can give us a sense of where you expect the R&D expenses to level out at now that the phase 3 program is complete?

Sure, Thomas. I'll try. That's a little bit hard to answer precisely. The capital spending for the plant is essentially done. There are small things happening there still, so it's going to go down to a fairly normalized level compared to what it has been. If you look at the long-term trends on capital spending, you'll see we -- just in the last few quarters, we spent quite a lot, but prior to that it was much lower. And if you go back as far as early 2007, it was running around the 6, $7 million range compared to the 20s to 30s in the recent quarters. It should get back to those kind of levels, maybe a little bit more just to support a much larger infrastructure. The R&D is a little harder to predict. We have a lot of studies going on. That's certainly going down with the completion of the phase 3, but giving precise guidance at this point would probably be premature.

And the CapEx part ,with the additional modules that you could add, is that planned to be a post approval decision that you make?

At this point, yes.

And then I did want to ask a question about some concerns that have been raised about the Delta between TI and NovoLog in the recent studies, and I understand that from a statistical standpoint you've met the criteria for non-inferiority; but numerically, it seems as though the TIR falls slightly short of NovoLog. Is there a risk of a meta analysis that is done on efficacy by the FDA, and that they pool the data together and it actually looks statistically inferior?

Thomas, I'll take that one. The core point difference in (inaudible) is something that, first of all, we prespecified as being clinically insignificant. When you design these studies, there is really basically guidance in terms of what is considering non-inferiority, and we do meet that. And indeed, the core to point distance is really of no clinical consequence in the eyes of most of the opinion leaders that we've spoken to around us. In terms of the meta analysis, we do not anticipate that to be an issue. And obviously, we haven't gotten the data of the upcoming studies; but I would anticipate that with the designs that we've had -- we have one or two in the Type 2 population, where we're going against a premixed insulin. It's a different comparator, it's a important comparator in the Type 2 ones. I would be anticipating that we'll have the best results there. And I would also be looking -- as we look our across the studies that we've had, we will see a consistent pattern of efficacy from AFRESA.

Let me add one more comment, Thomas. What I think maybe you need to consider is that when you're starting at a very high fasting glucose level, as we are, the problems we see in our trials is that if you're using a rapid acting analog as a comparator, the post prandial reduction in glucose levels really offsets and masks the benefits that we have. When you get down near normal glucose levels -- fasting glucose levels -- you're going to see enormous benefits from AFRESA compared to the other product. But if you're talking about A1Cs, you're looking at the average, and the average of the RAAs is masked or is really largely controlled by that drop in post prandial glucose levels, which we don't have.

That's very helpful. And then just kind of in that same vein, it sounds like this 117 study could be a very important marketing study from an efficacy standpoint. What are the powering assumptions to show superiority to the Humalog Lantus arm? What are you trying to show in that study?

Well, there are two things in terms of that. One, we have power to look for a delta in [Hb,1c]. I can't remember the exact number that we've chosen there. We have about 500 patients participating into that study, one to one optimization between the two groups. And here we'll be looking very aggressively at bringing them down to target. And if you notice in the '09, we saw absolutely no difference in the number of patients that we could get to target between those treatment regiments. What we're looking at here is when you become more aggressive, what is the number of patients that you can get to the target goals with less than 7, less than 6.5? And I think that that will be a very interesting outcome from this study, at the edges of what you're able to do with present insulins.

Thank you.

Thank you. Your next question comes from Michael Tong of Wachovia Capital Markets.

Hi. Good morning. Just a quick question. I've been hearing some discussions that the NDA may be coming out with a revised draft guidance as it relates to the development of drugs for diabetes. I'm just wondering if you've heard the same thing, when you might expect a revised guidance to come out, and whether you expect any impact on AFRESA?

Peter?

Yes, I mean earlier this year, the agency did come out with a revised draft guidance. We've been through that in detail; and indeed, our program, we believe, meets and exceeds the requirements that are in there. All this has its own ongoing debate debate in this field. This is just a draft guidance. Agency guidance remains drafts for quite a long period, and there will be further input sought. I'm not aware of a date for finalization of that guidance, and nor have I anticipated anything in the guidance materially different from that which they've issued, which we appear to meet.

Thank you. Your next question comes from Annabel Samimy of UBS.

Hi. Thanks for taking my question. Can you just go through the -- I can't remember the number of the study, but it was the study with the bolus delivery of the basal insulin by pump. Is that really to get the better coverage over 24 hours or is there another reason behind that one?

Well, the idea was simply to try to demonstrate that if you had a really good basal insulin, along with AFRESA, that you can get most people to normal A1Cs. That's what we really think we'll be able to achieve with that study.

I think the important thing to understand is that even with a pump delivery, you really -- your bolus thing is just not comparable to that which you can achieve with AFRESA because of the unique pharmacokinetics. So here we'll be comparing -- trying to do the best we can with basal therapies in terms of a pump; but then looking at an optimized pharmacokinetic regimen that can be done with AFRESA, thus is not which possible using bolus delivery from a pump.

Okay. And all of these phase 3B studies, they're strictly for marketing purposes? They are not necessarily any requirement that the FDA has laid out for you?

They are not required. Clearly, 117 is an important study. They've all been done to the standards that we would expect of clinical factors. But yes, they're primarily for marketing, and also to help with reimbursement. We're targeting here for them to be available at the times we anticipate working with managed care organizations, and that's why we'll be working with that. I think the data around these where we anticipate being able to show the real practical benefits of the product will be very important in terms of our pricing discussions.

And do you have any ideas when these studies might be completed?

We're tracking to have them available so that they can be presented the following year in terms of time of launch, and we'll be able to present those data at the time we anticipate arriving at a launch for AFRESA, and that's been the plan that we've been following.

Okay. And finally, is there any greater detail around the hypoglycemic events that you're analyzing of -- I would was Study 009, that you were looking at more details around the hypoglycemic events? Is there any further color on that?

Not as yet. What I hope that we'll be able to do is as we pull the hypoglycemic events from all the studies, we really want to put this into a context (inaudible) across the program. We have now got the programs and analyses that we want to apply to all of the studies, as we confirm the affect that we saw in 009. But I think that we'll also see in the Type 2 population a greater benefit, a clearer benefit, and we want to present those in their entirety when we present the results from 102 and 030 shortly.

Okay, great. Thank you.

(OPERATOR INSTRUCTIONS). Our next question comes from Tom Russo of Baird.

Good morning. Thanks for taking the question. I just wanted to return to Thomas' earlier question and ask it maybe in a little different way. If you do not meet the primary end point for non-inferiority in A1C control proceduraly, is there still a path forward for the trial to be considered successful? And also, can you remind us which other trials are considered pivotal or registration trials that have A1C non-inferiority as a primary end point?

Well, let's talk about in terms of where we've been in the earlier studies, because the first criteria is to show are we safe and effective? And in terms of safety and efficacy, we have placebo controlled study in Type 2 patients, which is protocol 08, and that demonstrates a significant reduction in Hb A1c. Protocol 005 again demonstrated a dose dependent as statistic and significant in reductions in Hb A1c in prandial glucose excursions. Those have been reported earlier. In terms of the non-inferiority design, we do meet the designs for non-inferiority. Remember, this is in a Type 1 population, and I think that what is important to look at is the overall effects; and clearly, there is no question that insulin in this population is necessary, and we've demonstrated very clear efficacy in that population. Study 102 is a non-inferiority design comparing the mixed insulins -- that will be another pivotal studies. And then 030 has a comparison -- it's a safety end point, but of course we are looking at Hb A1c, and that's a large study with a population of Type 1 and Type 2 patients.

I guess what I'm just asking is if the range went outside of what was predetermined to be acceptable, does the FDA then look at some of the other benefits and some of the fast-action and some of the other things that are unique, or is that potentially a show-stopper for that trial?

Let me make a comment there. We have received -- at least I have received -- some inputs from the leaders of the FDA that they are very concerned about post prandial excursions, not just A1C. And of course, they are certainly qualified to understand the effects of the persistent tail that you get with other drugs that reduce A1C. So they are very conscious of what is going on, and we don't think there is a problem, nor do we think we will have a problem in meeting the target of non-inferiority.

Okay, and then second question. I think when the Pfizer deal was signed, one of the benefits you saw there was in getting some of the clinical trial data from those patients that were going to be transferred over to TI. I was just wondering if you've gotten any of that data yet and if there re any learnings that you would be able to share?

I don't think I want to comment particularly on learnings. The combination of Pfizer around that in terms of addressing the patient need in this area has been very good. Both of us have a clear goal here in terms of making sure that those patients who need and can benefit from AFRESA who were previously treated with Exubera were transferred over carefully, and we have had very good cooperation getting a full understanding and managing the implications of that ,and we're comfortable with that.

Okay. Thanks very much.

Thank you. Our next question comes from the Cory Kasimov of JP Morgan.

Hey, good morning, guys. All but one of my questions have already been answered. I'm just now interested in your take on the FDA requiring a REMS program for Exubera, even though that product is no longer commercially available. So basically, do you believe there is any read through into any lingering safety concerns that the agency has for pulmonary insulin? And also, has this issue been discussed with you since these patients who were on Exubera are being transferred over to AFRESA? Thanks.

In terms of the second one, we have had no specific dialog around the REMS program with the agency. We of course have had agency input to the protocol by which the patients are being transferred, and we've collaborated closely with the agency in terms of making sure that they're comfortable with that. In terms of the REMS program and any impact there, well, first of all I think we're going to see a lot more REMS programs from the FDA. If you look at the details of what happened there, it was basically a transference of the previous risk management program -- the risk which Exubera previously committed to, and it seemed the agency was formalizing that within the new REMS mandate that they have. We do not see a specific impact for AFRESA. We will, of course, be looking in terms of making sure that we have an appropriate plan for the risk management of a new product, as we've always been expected to do with any new product coming in, and we'll be looking at the best way of doing those with the agency as we approach the submission.

Great. Thank you.

Thank you. Your next question comes from Leah Hartman of CRT Capital.

Thank you for taking the question. Just some housekeeping details. Could you repeat, please, the capital expenditures for the quarter?

Total capital expenditures were about $24 million for quarter.

Okay, and when you talked about -- per Thomas' question about more normalized spending levels, is that more down toward the 5, $6 million on a per quarter, or you can pull it in from there?

I think it will be down in that range. It could be a little bit more. Remember, the facilities are much larger and there is this normal level of replacement, but there is not any major construction program planned prior to commercialization, so it should get back to kind of normalized levels.

And then with respect to the founder loan, you still have that full availability?

Yes.

Okay. Thank you, and best wishes in the coming weeks. It's very exciting.

Thank you.

Thank you. And your last question comes from Richard Diamond of Revolve Capital.

Yes. Good morning, gentlemen. You have a new facility in Danbury. Can you take us through the path and the time line to full commercial manufacturing, please?

Well, what we're doing right now, is certainly we're in commissioning in terms of the different, say, components of the facility in making sure that we have a fully validated manufacturing operation in Danbury. We are currently in preparation for the PAI inspection, and we are actually working closely -- both with the FDA and the regional components of FDA. So our plan certainly is that upon approval we will be fully validated and able to start manufacturing at that point in time. And as we've indicated, we have a modular approach. And even with the first modular, we're able to supply up to 400,000 patients of their daily medication. And so far, we've been very, very successful in terms of our even going a scale to commercial scales from clinical scales. So upon approval, we expect to be able to start immediately manufacturing.

So do we see this as a first quarter or a second quarter event, just in terms of timing?

Well, I would say in terms of readiness, I would say that by the fourth quarter of 2009 we will be ready. In terms of planning, right now we assume that we will see a full FDA approval in the fourth quarter of 2010, and by that time we'll certainly be ready to assume the responsibility of commercial manufacturing.

Thank you very much. I appreciate it.

Thank you.

And at this time, there are no further questions.

Thank you very much, ladies and gentlemen, for joining us today. Of course, we are in a period of completion of all of the work, so there is not as much to -- trial information to provide. But some of that will become public in the next -- as the weeks proceed through the rest of this year. We thank you all for joining us today and we look forward to seeing again at the next quarterly call.

Thank you. This concludes today's conference. You may disconnect at this time.