MannKind Corp (MNKD) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation fourth quarter 2009 and year-end results conference call. (Operator Instructions). As a reminder, this call is being recorded today February 1, 2010.

Joining us today from MannKind, are Chairman and CEO, Alfred Mann, President and COO, Hakan Edstrom, the Chief Financial Officer, Matthew Pfeffer, the Chief Scientific Officer, and Dr. Peter Richardson. I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead.

Good afternoon, and thank you for participating in today's call. I will summarize our financial results for the fourth quarter 2009, as reported earlier today. Next, Hakan and Peter will provide updates on key accomplishments during the past year. Finally, I will comment on the current situation, and our outlook going forward. We'll then open up the call to your questions.

Before we proceed further, please note the comments made during this call will include forward-looking statements within the meaning of Federal Securities laws. It is possible that actual results could differ from these stated expectations. For factors which could cause actual results to differ from expectations, please refer to the reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934. This conference call contains time sensitive information that is accurate only as of the date of this live broadcast, February 1, 2010. MannKind's management undertake's 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 fourth quarter of 2009, total operating expenses were $55.8 million, compared to $81.8 million for the fourth quarter of 2008, and $42.8 million for the previous quarter of this year. R&D expenses were $43.1 million for the fourth quarter of 2009, compared to $68.8 million for the fourth quarter of 2008, and $30.5 million for the third quarter of this year. The decrease in R&D expenses for the fourth quarter of 2009, compared to the same quarter in 2008, was primarily due to decreased costs associated with clinical development of AFRESA and decreased manufacturing costs associated with raw materials purchases. The increase in R&D expenses this quarter from last quarter was primarily due to the write-off of previously capitalized costs, related to our first-generation inhaler as we pursue the commercialization of the next-generation device.

General and administrative expenses were $12.7 million for the fourth quarter of 2009, compared to $13 million for the fourth quarter 2008, and $12.3 million for the previous quarter of this year. Net loss applicable to common stockholders for the fourth quarter of 2009 was $59.5 million or $0.53 per share on a weighted average of 112.9 million shares outstanding, compared with a net loss applicable to common stockholders of $83.3 million or $0.82 per share based on 101.8 million weighted average shares outstanding for the fourth quarter of 2008. For the full-year ended December 31, 2009, total operating expenses were $209.8 million, compared with $305.8 million for 2008. R&D expenses were $156.3 million in 2009, down $94.1 million from 2008, primarily related to decreased costs associated with clinical development of AFRESA and decreased manufacturing costs associated with raw materials purchases. G&A expenses decreased by $1.9 million to $53.4 million for 2009, as compared to 2008.

The net loss applicable to common stockholders for 2009 was $220.1 million or $2.07 per share, based on 106.5 million weighted average shares outstanding, compared with a net loss applicable to common stockholders of $303 million or $2.98 per share based on 101.6 million weighted average shares outstanding for 2008. Our cash, cash equivalents and marketable securities at the end of the year totaled $32.5 million, which compares to $56.6 million at September 30, 2009, and $46.5 million at December 31, 2008. Our cash on hand in the remaining credit facility for now amounts from to $217.5 million as of December 31, 2009. Our cash burn decreased during 2009 with $76.3 million spent in Q1, $48.3 million in Q2, $52.5 million in Q3 and $39.1 million spent in Q4. With our cash on hand, and $185 million still available under the credit facility for now, we believe we will be able to fund our operations into at least the first quarter of 2011. I would now like to turn the call over to Hakan Edstrom, our President and COO who will provide an overview of our accomplishments for 2009. Hakan?

Thank you, Matt. Good afternoon. The fourth quarter of 2009 certainly was eventful for MannKind. We addressed the number of matches with the FDA, including a series of clinical and CMC questions arising from their review over the AFRESA NDA, as well as the bioequivalency package that will form the basis for a supplemental NDA to seek approval of our next generation inhaler. The preapproval inspection by the FDA facility in Danbury was successfully completed, and we are very pleased with the outcome. Only four minor comments that were resolved entirely prior to departure of the FDA inspectors. This is significant achievement from historical facility, particularly where we are introducing innovative manufacturing and fill in technology on a large scale. Juergen Martens and his team are justifiably very proud of their success. Indeed, I am very proud of the work done by our clinical, regulatory and CMC team, all of whom have worked tirelessly to produce a tough (inaudible) submission and to support the FDA reviews throughout the year.

Our technical expertise has recently been recognized externally. Our Danbury facility has been awarded two Facility of the Year category awards. These awards are sponsored by the International Society of Pharmaceutical Engineering, by INTERPHEX and by Pharmaceutical Processing magazine. Our facility was a winner in two categories, equipment innovation and process innovation. Two such awards to one facility has never happened before in the history of this program. Each of the category awards winners at Biogen Idec, Genentech, Pfizer and MannKind are eligible to win the overall Facility of the Year award which will be announced in November at the ISP annual meeting.

Of course, the recognition that is on everyone's mind these days is the actual letter from the FDA. As we announced previously, we were told by the agency in early January that they would be unable to complete their review before the mid-January PDUFA date. They stated that they needed to complete an inspection of a manufacturing-related facility belonging to one of our suppliers. In order to allow our people and their counterparts at our supplier to focus on their responsibilities, we are not going to comment today on the status of the outstanding inspection, and on any potential deficient date from the FDA. Our ongoing dialogue with the agency is continuing, and we have not been given a new PDUFA date by the FDA. And we will not get a new date since this delay appears to be dealt with as just an administrative delay. And when we have something material to disclose, including a complete response or approval, we will certainly make an announcement.

Along with the supplemental NDA for the next-generation inhaler, the other major work for us this year will be the partnership discussion. We have reengaged with our previous candidate, and we have also opened discussions with a few new parties. And as we said last quarter, we will await the final label before we initiate serious discussion and negotiations. Given that we will only launch AFRESA with the next-generation inhaler, we have time to approach the partnership discussion in a well-planned and deliberate manner. Although AFRESA gets most of the attention internally and externally, we are also very encouraged with some of the results that we have seen in our oncology program. This year we will initiate a Phase II clinical trial of our immunotherapy regimen for melanoma, and we will also undertake the pre-IND work for a promising small molecule. Well, at this point I would like to hand the call over to Peter who will cover these topics in greater detail. Peter?

Thanks, Hakan, and good afternoon. The first quarter continues has be a busy and productive time for the research and development groups at MannKind. We've focused on ensuring prompt and considered response to FDA questions during the review process. I've been very pleased with the dialogue that we have had around the CMC aspects of AFRESA and the Technosphere platform, as well as the clinical aspects of our product. This clears the time spent creating our fully electronic dossier, this large NDA, with vigorous quality control, has produced a document that has been well able to support the FDA's review. The agency is undertaking a number of inspections at our clinical sites and suppliers. We've not had any findings that I anticipate would impact the validity and assessment of our data.

As you've heard, we've also had an extensive approval inspection of our Danbury manufacturing operations. Although it's frustrating to see our PDUFA date pass without a decision, I anticipate that the delay will only have a minor impact on the potential outcome of our review. The FDA continues to work with us on data presentations, that may be represented on our eventual label, as well as on the proposed (inaudible) that we submitted at the time of our NDA. I'm pleased with the progress we made with input from the FDA on the pediatric program. As we announced in our press release last month, the initial device handling studies in children have progressed well. We've moved forward aggressively with the development of our next-generation device. We have feedback from the FDA in November when we reached agreement on the activities we need to complete in order to submit a supplemental new drug application.

We've already completed the clinical part of the formal bioequivalence testing, and are now conducting a short-term device handling series that are needed in order to allow the agency's review of this device, along with a CMC package. We anticipate being able to submit this file in the second quarter of the year. I would expect the agency to take approximately six months to review this type of dossier. Given that the new device not only significantly improves the efficacy of insulin delivery, further simplifies the taking of the dose, and removes the need for cleaning the device, we believe that this is the device that will provide the platform for optimal commercial launch. We've now switched nearly all patients in our ongoing clinical programs to the new device, and we're happy with the results to date.

The new inhalers and the validation of the Technosphere platform have allowed us to progress with discussion and assessments of other potential agents that can take advantage of the unique pharmacokinetics, and result in clinical benefits produced by our proprietary technologies. We continue to explore other peptide hormones in preclinical models, and look forward to further clinical studies with GLP-1 delivered via this route. In the area of oncology, we have advanced our 1106-MT program into Phase II. The next group of patients with metastatic malignant melanoma are anticipated to start therapy this quarter. This is a group with very significant medical need for whom there is no effective therapy available today. The results we reported in terms of germinable clinical response and a defined subset will be presented in more detail at scientific meetings later this year. But have already resulted in considerable interest from the experts in the field.

In addition, we've seen the progression of a lead drug candidate from our IRV 1 inhibitor program into formal GLP preclinical testing, the last stage before testing in man. I'm very excited about the unique opportunity presented here for the first in a new classification targeting these mechanisms that seems desegulated in a number of conditions, including cancer and inflammatory disorders. Our success in discovering a way to access the target, design novel drug candidates, and successfully progress through the necessary research stages is a major milestone for the Company. We continue to work with our academic partners and the Multiple Myeloma Foundation to whom we are very grateful for their tactical and financial support. The next months are crucial times as we support the prelaunch clinical activities for AFRESA, including the submission of our SNDA, We will continue to expand our clinical knowledge with AFRESA further Phase IIIb and IV studies, ideally in partnership with an organization that shares our vision of the product and the contribution it can make with patients with diabetes. I would now like to turn the call over to Al.

Thank you, Peter. 2009 was a significant year for MannKind. It was the beginning of the new beginning for the treatment of diabetes. The main activity for us this past year was the submission and review of our NDA for AFRESA. We hear so much criticism of the FDA, but I must say that I am very impressed with the quality and professionalism that we have seen in the agency's review of AFRESA.

When the FDA accepted our NDA for filing on May 21, I was surprised that even in the acceptance letter agency was already well along in its review process, with a number of high quality and detailed comments and questions. In addition to detailed review of the extensive NDA file last year, the FDA has performed a number of significant audits of the clinical sites, our suppliers and also the pre approval inspection of our Danbury facility. We have approved the name AFRESA.

Importantly, they have also approved our pediatric protocol as a Phase IV study. And actually as such lowered the minimum age from our proposed 12 years to 4 years. Yet despite all the agency's efforts, as we have said, the PDUFA date passed without an action letter. We were told that they needed to complete the inspection of a facility belonging to one of our suppliers that is involved in manufacturing the insulin that we have been using. This brief regulatory delay is really of no consequence to us, because we had already decided to delay commercialization, until we could launch with our next generation device. All our registration trials were done with the MedTone inhaler which is an excellent unit. However, the new device is smaller, thumb size, very discreet, and is much easier to use. It is less expensive to manufacturer, so we can provide a patient with a new device every two weeks, so that there was no need to worry about cleaning it.

Most importantly, it is much more efficient to achieve the same level of plasma insulin that is delivered with a 30-unit MedTone cartridge, the new device needs only 20 units. Last summer we approached the FDA for guidance regarding approval of the new device, and we received a written response as defined to key elements. At this point, as Peter just said, all of the necessary activities are either already completed or are underway. We plan to submit the supplemental NDA for the device change in the second quarter, and anticipate a roughly six-month review cycle by the agency. As we plan and carry out our strategy for AFRESA we have resumed discussions with a number of potential partners. With a considerable interest in AFRESA that we are currently experiencing, we expect to achieve a partnership that will recognize a value of this unique product. Indeed I now believe AFRESA would be more important than even I had ever thought. The development process is intended to approve the benefits of AFRESA as a prandial insulin.

As a consequence, our registration trials, except for MKC-103, compared AFRESA to current prandial insulin regimens. In those trials, we saw with AFRESA better post-prandial control, lower risk of hypoglycemia, less weight gain and no need for complex meal titration. A superior prandial insulin will be important as a basal/bolus insulin therapy for type 1 and late-stage type 2 patients. Yet in our involving Phase IIIb trials, we are beginning to show that the potential market for AFRESA is far greater than I had realized. Indeed, I believe that AFRESA will be an important tool for even early stage type 2 diabetics, as an alternative to other glycemic control therapies.

Let me explain. Early dose escalation trials indicated that increasing doses aggressively lowered the rise of post-prandial glucose, and did so without hypoglycemia. That led us to conduct a reverse study, MKC-119, which is a meal escalation study. In this trial, patients were given multiple meals after a standard dose of AFRESA. All the meals at 130 calories from protein, 130 calories from fat and carbohydrate content of 150 or 25 grams. In the fourth arm, a standard dose of AFRESA was taken with absolutely no food, no carbs of any kind. These tests were repeated for breakfast, for lunch and for dinner meals, and the trial included cohorts of both type 1 and type 2 patients.

The objective of this study was to demonstrate conclusively that complex meal titration is not needed. Almost from the beginning of the AFRESA program, I've expected a very wide therapeutic window for AFRESA and especially so in type 2. But I was surprise when the subject had no hypo problems at all. Even if they ate absolutely nothing. Let me be more specific. Both prandial excursions for the type 2 patients were within plus or minus 35 milligrams per deciliter, no matter what they ate, even if they ate nothing. The patients all achieved good glycemic control by taking a standard dose of AFRESA no matter what they ate, and without the risk of hypos. And if there is no need for titration and little risk of hypos, there would be little need for regular prandial glucose measurement.

We will need to conduct more of these studies in order to demonstrate these findings on a larger scale. I have discussed these results with several key opinion leaders. They explain that the ultra fast kinetics of AFRESA replace the early phase insulin spike that turns out gluconeogenesis This rapid spike is missing in early Type II diabetes. Restoring this signal seems to help normalize overall glycemic control in these patients. Thus, AFRESA may offer an important alternative to oral and injected glycemic control drugs for type 2 patients that still have a residual indogenous insulin capability, and have not yet progressed to basal/bolus insulin therapy.

We need to conduct additional larger trials to support these findings, and several phase IV trials are already in the planning stages. If additional studies confirm these observations, the potential market for AFRESA could be several times greater than even I had expected. And by now you all know that I am very confident when it comes to projecting the market opportunity for AFRESA. In summary, we are very pleased with our progress. We look forward to the action letter from the FDA, and to a partnership as we undertake the last year of preparations before the launch of AFRESA.

Thank you all for joining us today. And we'd now like to open up the call for your questions. Operator?

Yes, thank you.

(Operator Instructions).

Our first question -- (inaudible)

Our first question comes from Simos Simeonidis from Rodman & Renshaw. Your line is open.

Hi, guys. I know you said you cannot speak about the timing of the visit to France, but could you tell us if, as far as you know, that visit to the Organon plant is the only outstanding item for the FDA to complete the review of the NDA?

Yes, as far as we know that is. We have been obviously answering the FDA questions, and continuing a dialogue with them. We actually don't know further details in terms of the timing of that inspection. It actually involves cost division at communication within the agency. We communicate directly with the endocrine metabolic group, and the group responsible for that inspection with scheduling it separately. We have not reached out to them in terms of trying to determine a date for that.

Peter, could you tell us if all the required bioequivalency studies between MedTone and Dreamboat have been completed. And based on your talks with the FDA, how quickly could you file the sNDA for Dreamboat if the MedTone NDA is approved?

Well, as I said, we actually were very pleased in terms of November. We waited a little while for the agency to give us the feedback on the studies. And we got in that November. But essentially they agreed with us in terms of the design, and we're able to move relatively aggressively in conducting the bioequivalence study which we completed by the beginning of January. So we now have all the subjects through the studies, and we're in the process of conducting the rather expensive analysis of the samples for the various measures that you have to take. We also have some relatively limited handling studies to do, which show the assessments of the device in use, showing that it works over the two-week period. And we have to get returns back from the clinical studies for that. As well as some other CMC aspects, which are around the stability of the drug and the new device and new cartridge, et cetera. So with that, we are anticipating being able to file in the second quarter of this year.

Okay, and then finally, what can you tell us about status of the label negotiations, and the status of your discussions on the REMS program for AFRESA?

Well, I've been pleased with the questions that we've had from the agency. As AL said, I think that they've been in the area I'd expect the agency to be asking. They've concentrated on the clinically important features that we have around the proposal that we have for the label. And we've been able to respond to those within a very short time frame. And I'm very proud of the team's ability to do that, and to do that promptly.p and it is based on the date that we've had. So (inaudible) no data at all, would lead to something would be considered -- something that would expand the review time in a formal sense with the agency. As you know, we had taken the position, that in this day and age, it's normal to have a REMS proposal. And we put in an extensive managed proposal at the time of NDA submission. And we had feedback on that. And we've not received anything that's significantly different from that which we were discussing. Until we know the final details, I can't say exactly what the REMS proposal will be, but we're comfortable with the discussion that we've had far.

Right. Thank you.

One moment, please, for our next question. Our next question comes from Keith Markey of Griffin Securities.

Hi, thank you for taking my call. I know that you have been -- your proposed -- or your NDA has been under review by several sections of the FDA. I was wondering if could you review those with us? And then tell us, how is that it you are actually discussing the labeling with the FDA? Is it with a single group, or is it within one of the subgroups?

As I said, the lead review division is metabolic endocrine, and they are the primary contacts that we have -- thats expected -- distribute. They cross-consult within the various divisions, including the group that would be responsible for the new product, as well as -- this is a combination product, so there are other groups that are involved. We, of course, have dealt with extensive CMC questions. I think we've been able to answer those well. And we've seen good coordinations between those groups that have approached this process -- review of what I hope will eventually appear in our label.

Thank you. We've had a number of questions come in from various places, regarding the status of the inspection of the French plant. I was just wondering, I assume that you are going to be notified of when the inspection takes place, but at this point at least you are not going to make public the timing of that? Is that correct?

That is correct. We will certainly be notified by our friends at the facility, when the inspection will actually take place. I'm not sure that we will be notified by the FDA when the inspection is scheduled.

Okay, but you would be -- you would be notified by the actual plant itself?

Perhaps. We believe so, but an independent company, and it's a third-party investigation by the agency.

Okay. Thank you very much. Peter, you had mentioned that there was -- you tried to tell us a little bit of an update on the GLP-1 product. I was just wondering -- I couldn't quite get that all. Could you review that please?

Yes, we're hoping that we'll be able to conduct further studies this year. We've been in the process of looking at the results in our GLP-1 data and have prepared abstracts. We presented some at ADA, and I think we were encouraged by those data. And are looking how we can move forward with that in clinical studies. Of course, a lot of that is dependent on the activity and the focus that we have on AFRESA at the present time.

Thank you very much.

Our next question comes from Doug Dieter of Imperial Capital. Your line is open.

Thanks for taking my questions. In this new go-round of negotiations with potential partners, I guess I wanted to ask how your view has changed in approaching the negotiations to find a partner, your expectations? Have new partners, potential partners, come to the table, or are you really still actively just focused on the handful of pharmaceutical companies that you were in discussions with six to eight months ago?

Doug, as I mentioned in my commentary, we have discussions both with companies that they've been at the table before. But we've also been approached by a number of other companies, certainly realizing that we are hopefully very quickly approaching the agency action time. So at this point in time, we are entertaining discussions with new partners, as well as those that have been involved with us previously. Certainly with a minimized risk, according to product, and increased understanding of what's necessary going towards commercialization, the terms and the conditions or any contracting arrangement would certainly be reviewed.

I guess I ask this question because we're six to eight months past where we were thinking the about, and your liquidity position has changed somewhat. And so I just ask the question, in the sense of would you be looking for something with more upfront opportunity than back end? Has that changed at all? Expectations on how do you get paid in milestones and so forth?.

Let me say, that certainly there will be some adjustments to what we were discussing before for upfront payments. Because after all, we've conducted some of the studies that our partner was going to be doing. And we've also reduced the risk significantly, and we've also, in some of our IIIb studies, are showing significantly increased value. So we will be reviewing all of these terms, as we sit down with our potential partners.

Thanks, Al. And just one other question for Matt. As Matt commented, that you have liquidity through, I think you said first quarter 2011. I get a sense from a burn rate from where you stand now, that's pretty similar to what you've been burning this past quarter. And I guess I'm inferring from that, and just correct me if I'm wrong that you're assuming a similar R&D expense moving forward, just because of the increased studies of a future phase II study for -- in your earlier stage products. Would that be correct to assume?

Well, I don't want to make it too granular, Doug, so I'm not going to help you too much. But I'm happy that we've seemed to approach, on a burn rate, very much where I thought we would, a year ago when we were talking about this. We do say we have $217 million of financial resources. Then if you do that math, that assumes if you -- it ought to take us well into or through first quarter. So it's going to be very similar to here, being this last quarter. The reason I'm hesitant, is because you can see from our past experience, our burn rate is kind of lumpy, that in we tend to get big chunks that flow through. Usually those are related to the timing of insulin purchases. So it varies a little bit. But I have pretty consistently said, assume $15 million to $20 million a month, and you won't go too far wrong. That is a fairly consistent rate. We did better than that obvious in the fourth quarter of 2009, but that's a fairly safe assumption for kind of an ongoing burn rate with the various new trials and things that we have planned.

Thanks a lot.

Our next question comes from Leah Hartman of CRT Capital Group. Your line is open.

Thank you very much. I did want to focus on Mr. Mann's loan terms. Has anything substantially changed?

No. That's because of the nature of that kind of a loan. That would be very well announced.

Okay, I assumed so, but I just wanted to double-check. With respect to the pediatric studies, assuming that there is approval on AFRESA, how soon with those studies be launched? Is that something would you look for the partner to fund? Would you fund them?

I mean, obviously a small series of studies, where we look at the handling, which we've already start to actually look at both MedTone device, and compare that with the Dreamboat device to look at the handling. We're anticipating that the Dreamboat device will be most suitable for the pediatric population. When we review the data, and we've then got the ongoing commitment now to the larger studies, to define the safety and efficacy in the pediatric population. Those other things will be much later in the year when we actually embark on those studies.

Okay, that's what I anticipated. And then with respect to re-engaging and discussing potential partnering with additional candidates, what is your sense with respect to MedTone versus Dreamboat? Do you think it's something that clearly they want to -- partners would like to see the label, but is it something that you think you have to have the accepted supplemental new drug application? Or is that a major change in price?

Nobody is really concerned about the approval. The process is very straightforward. The test has been completed. That's the major -- the major part of the protocol. The partners, as we do, look at the next-generation device as being much more effective, and much more desirable for the patient. And the difference is so significant, even though the MedTone is a wonderful device, and frankly, far better than what some other people have tried to do, bottom line is that the next generation device is so much better, that we don't want to confuse the market with two different products. So it's only a difference of a matter of months -- six months.

Right. So that's why we made the decision to wait.

All right, I understand that, and we certainly wish you good success in these coming few weeks. Thank you.

Our next question comes from Tom Russo of Baird. Your line is open.

Hi, good afternoon. Thanks for taking the questions. Regarding the comments on label negotiations, are you able to be specific at this point, whether FDA is looking for any class type language for potential cancer risk? Or look for monitoring of lung function? Can you be specific on either of those?

We have no guidance from the agency. Go ahead, meter.

Al, you're right in terms of no, at this point I have no guidance to give on that.

Okay, and then just revisiting the financial position. Can you comment as partnership discussions move forward on whether there's any plans, or what the plans would be to raise additional capital in parallel with that, just kind of to manage your balance sheet, so it doesn't weaken your position in negotiations?

Obvious it would be foolish to pre-announce plans to do financing of any kind. But obviously we're looking at opportunities in that area, and anybody that wouldn't be, would be foolish, too.

Okay, thanks.

Our next question comes from Michael Tong of Wells Fargo securities. Your line is open.

Hi, thanks, a quick question for Matt. I was momentarily disconnected from the call. So if you have addressed this, I apologize. How do you think about capital expenditure shaping out for 2010?

Well, I mean, we obviously have at this point a budget that addresses that. It isn't so very different from the past. We're not looking at huge build outs in 2010, so you shouldn't be expecting anything really big. That said, that could always be altered as we get closer to commercialization, to the extent our projections show we need to expand capacity more quickly than we projected, we might consider increasing that, but at this point, it's fairly modest.

Okay, great, thank you.

Our next question comes from John Newman of Oppenheimer. Your line is open.

Hi, guys. Thanks for taking the question. Just had a couple. You mentioned you had submitted a REMS program to the FDA. I may have been mistaken, but in the past I believe you said when you filed the NDA you submitted a risk map. So just wondering if you had submitted a risk map, and then later in the process submitted a REMS, or where you are in that process.

I certainly think we talked in terms of risk maps, I think some time ago, when we put this in, the agency was already talking in terms of REMS. We followed that development very carefully, and we put in a REMS. The agency issued a guidance in September around the format of that, and some of the things that done. So subsequently, we put our REMS in compliance with that guidance, which came into quite a lot of detail around there. But I think we did a pretty good job of anticipating the areas that would be appropriate to REMS.

So you had submitted something resembling a REMS in September then?

At the time of the original submission, we submitted a REMS.

So you submitted a REMS with the original filing. Okay. Then I was just curious, you had mentioned that if all goes well, would you plan on submitting the sNDA for the Dreamboat inhaler sometime in the second quarter of 2010. Should we take that, that you're assuming FDA approves AFRESA before that time, since would you --

Well, what you can only put in an sNDA following an approval.

Right. Okay. And then I was just curious, have you guys received any kind of note, or any kind of follow-up to the FDA's phone call just in terms of a written letter, just anything reiterating what they said on the phone call?

No, and that wouldn't be their normal policy. So we obviously continue in terms of discussion with project management group at the agency, and follow that very carefully. But I think there's no intention of issuing a written response.

Okay, and then if you -- if there wasn't a partnership in, say, second quarter next year, or third quarter, do you anticipate how much you might want to draw from your credit line? You mentioned that you have financing until first quarter 2011, but just curious if it was some kind of a range or --

No, is the simple answer.

No, okay. Last one. You're still not anticipating any kind of FDA panel going forward?

I think we've answered this for quite a long time now. Neither us, nor as far as we can make out has the agency got any expectation of a panel. And we have specifically asked them around that.

Okay, great. Thanks a lot, guys.

Our next question comes from Josh Schimmer's line. He is of Leerink Swann. Your line is open.

Hi, this is Steve, calling for Josh Schimmer. I just had a couple questions. Have you met with the Office of Drug Safety at the FDA yet?

Well, once you start with the REMS discussion, that's the Office of Drug Safety that is dealing with that. So yes, there has been that discussion around the rims. We've responded to that proposal. So that's the involvement of that discussion. We've not had direct discussion with them on any point.

Okay, and I was also wondering, besides the raw material purchases in 2010, can you give us some sort of outlook on that, like how much you expect to be purchasing in 2010?

No, because that could change. So I would rather not project exactly what that will be. I hope we'll have that hammered out by the time you see 10-K filing, and you will see it in there.

Is there a minimum requirement? Hopefully will you have to purchase a lot more because you will be launching, but I was wondering if there was a minimum that you had to hit this year.

There isn't with the contract that's being discussed.

Okay, thank you.

(Operator Instructions).

Our next question comes from Gabe Hoffman of Accipiter Capital Management. Your line is open.

Thank you for taking the question. In the press release, when you had gotten that phone call, you had indicated that there were no pending answers to any FDA questions, or other deliverables due on MannKind's part. Is that still the case? And then, Al, I was remembering your remarks from your presentation at the JPMorgan conference, that your guess would be that would you hear back from the FDA in two to four weeks. Given that it's three weeks later, just wondering, was your initial guess wrong?

What I said at that time, is that we've had no guidance from the agency, that it would be hard to imagine that they could get a team over there and get it done in less than a couple weeks. And my guess is it would be somewhere more like four weeks. But I never really said it would be done in four weeks, and I'm not saying it won't be done in four weeks. It could be done. We have until the middle of February. This is the first. We have another couple of weeks, and we'll see.

Obviously, the real answer is, we don't know, and we'll know when we know.

And in terms of outstanding issues and questions to the agency. We continue in dialogue with them, so they have questions which we turn around and answer for them very promptly . But there are no significant things outstanding at all. We're really in an ongoing dialogue, I think is how I would describe

Okay. Great, thanks, you're correct. You've got a couple more weeks for your -- still approve right, thanks.

And at this time, I'm showing no further questions, so I would like to turn the call back to Mr. Mann.

Thank you all for joining us today, and we look forward to updating you at our next quarterly call. Hopefully we'll have more to say before then. Good day.

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