MannKind Corp (MNKD) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation first quarter 2010 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, April 30, 2010.

Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; Chief Financial Officer, Matthew Pfeffer; and Chief Scientific Officer, 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 morning and thank you for participating in today's call. I will summarize our financial results for the first quarter of 2010 as reported earlier today. Next, Hakan and Peter will provide an update on key events. 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 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 and Exchange Act of 1934.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, April 30, 2010. MannKind's management undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

Let's start with the financials.

For the first quarter of 2010, total operating expenses were $40.6 million compared to $57.8 million for the first quarter of 2009; $55.8 million for the fourth quarter of 2009. R&D expenses were $30.5 million for the first quarter of 2010 compared to $42.9 million for the first quarter of 2009, and $43.1 million for the fourth quarter of 2009.

The decrease in R&D expenses for the first quarter of 2010 compared to the same quarter in 2009 was primarily due to decreased costs associated with the clinical development of AFREZZA, as we filed our NDA in March of 2009. The decrease in R&D expenses this quarter from last quarter was primarily due to the recognition of $12.8 million loss on disposable fixed assets last quarter, the fourth quarter of 2009.

General and administrative expenses were $10.1 million for the first quarter of 2010 compared to $14.9 million for the first quarter of 2009, and $12.7 million for the fourth quarter of 2009. The net loss applicable to common stockholders for the first quarter of 2010 was $44.7 million or $0.40 per share, based on a weighted average of 113.1 million shares outstanding, compared with a net loss applicable to common stockholders of $59.4 million or $0.58 per share, based on 102 million weighted average shares outstanding for the first quarter of 2009.

Our cash, cash equivalents and marketable securities at the end of the quarter totaled $31.5 million, which compares to $32.5 million at December 31, 2009 and $30.2 million at March 31, 2009. Our cash on hand and remaining credit facility from [Al] amounted to $176.5 million as of March 31, 2010. Our cash burn is consistent with prior quarter, with $41 million spent in Q1 compared to $39.1 million in Q4 of 2009.

With our cash on hand and the $145 million still available under the credit facility from Al, we believe we'll be able to fund our operations through the first quarter of 2011. We're in the process of assessing our operational plan for the balance of 2010 in order to find ways of extending our cash runway further into 2011.

One additional comment. Earlier today, we filed the shelf registration covering up to $200 million worth of securities. Currently, we have no plans to do an offering. We wanted to have the (inaudible) filed in the event that an opportunity would arise, such as financing or a strategic transaction, which would be in the Company's interest to issue debt, equity, or warrants.

I would now like to turn the call over to Hakan Edstrom. Hakan?

Thank you, Matt, and good morning. To follow up on what you just heard from Matt, it is important to recognize that we have focused a lot of attention towards extending the cash runway. The [oppressive] spending is limited to activities that will ensure a high quality submission of the amended NDA and, hopefully, a recently prompt regulatory approval. We're also looking at all other programs in order to find new savings and ways of deferring expenses.

Peter will say more about the regulatory matters in a moment, but I do want to address one question that comes up from time to time. As you may remember, one of the items that held up the timely FDA feedback to our NDA submission was an uncompleted inspection of a manufacturing facility in France. Well, I'm happy to report that our (inaudible) has now been inspected with a successful outcome. At least that item is now off the critical path.

While AFREZZA is the lead product for our Company and the reason for the investment's community attention, we do have a couple of other projects in development with rather compelling opportunities. Both our cancer immunotherapy and cancer drug programs recently achieved significant data milestones. That encouraged us to continue their development. However, given our need to see AFREZZA through the remaining peer regulatory review, we have decided to seek collaborative or partnership opportunities for our cancer programs at this time rather than wait until the future value inflection point.

Our initial outreach efforts have demonstrated a clear interest in these programs and we are encouraged about these potential opportunities. Also, let me make a few short comments about AFREZZA partnership activities.

We are still in continuing contact with potential global partners, some of which have been included in our preparations to meet with the FDA. But we do not expect to engage in any detailed discussions or negotiations until at least after the meeting with the FDA, when all parties will have a better understanding of the process and timeline going forward.

And with those few short comments, I'd now like to turn the call over to Peter. Peter?

Thank you, Hakan. I'd like to concentrate today on giving an update on the progress we've made in preparing our response to the complete response letter we received last month. As we indicated at that time, we believe that the questions raised to us by the Agency can be answered based upon data we have available and the studies that we've completed in recent months.

Shortly after the receipt of the complete response letter, we requested an end of review meeting with the FDA. The Agency granted this request and has set a meeting date in June. The briefing package, which will be sent to the Agency in advance of the meeting, is almost ready to go and will present new information that addresses the Agency's questions and that was not available at the time of the original NDA or during review. The response will be based upon our decision to launch with our second-generation inhaler and the excellent results that we've seen from our tests of this innovative device in the laboratory and in clinical studies.

We will present very clear data from our recently conducted bioequivalent study, which compared our second-generation device, which we refer to as Dreamboat, with a device used in our long-term clinical studies known as MedTone Model C. In this study, we have concerns that we can achieve a pharmacokinetic profile, which is essentially indistinguishable between the two devices, but using only a single inhalation per dose and the 30% reduction in the amount of insulin powder in the new cartridge compared with that which was necessary in the original device.

The protocol we've used is that which we had previously agreed with the Agency and we will fully address the questions raised in our complete response letter around the assay methodology in Study 138, the bioequivalency study that bridged MedTone Model D to Model C.

The generation 2 device also allows us to address the questions of product labeling that were raised in the complete response letter. Specifically, the cartridges and packaging will meet the FDA's requirements for product identification and dosing, as well as being able to label the product in insulin-equivalent doses as requested by the Agency, and preferred by ourselves and prescribers.

We've also completed studies of clinical experience with the second-generation product in use in volunteers and in patients with diabetes that confirms the device performs well in the clinic. We've been able to examine and test several hundred devices in our laboratories following their use by patients for two weeks -- the anticipated usage periods in our proposed label for the new device, and without the need for cleaning or other complexities required for the first generation inhaler, which had been proposed for use for one year. We're able to do this because of the major improvements in the device manufacturability and the significant reduction in the cost of goods for the inhaler.

In addition to the technical questions, you will no doubt recall that we've been asked to discuss the so-called clinical utility of the product on the basis of currently available data. Because of the rather unusual wording of the request, we've sought [clarification] from the Agency, who replied with the following, and I quote from their email -- We are basically asking you to clarify where AFREZZA fits in the treatment armamentarium for diabetes -- a line which is very similar to that which I used at our update last month.

In that regard, we've been following up on additional analyses that explore the use of AFREZZA against other therapeutic agents. Much of the data was collected in our large, long-term usual care Study 030, which was presented in the original NDA as primarily a safety study; but where the HbA1c was followed carefully for two years in approximately 600 Type 1 patients and 1,500 Type 2. The pre-specified analyses across the groups as a whole showed comparable reductions in HbA1c versus usual care regimens in both Type 1 and Type 2 patients, and meet the criteria for non-inferiority.

In addition, the detailed subanalyses we prepared looking at the various subgroups of therapies comprising usual care will help us in describing clinical utility. In addition, we have recently completed Study 117 and the topline results are now available. The full report will be completed into our response to the Agency. This was a four-month study in Type 1 patients comparing mealtime AFREZZA in combination with a long acting insulin analog, thus as a rapid-acting analog, again, combined with a long-acting analog, widely considered to be the standard of care.

The pre-specified, primary endpoint of the study is to demonstrate non-inferiority in the change in HbA1c between the two groups. In this study, we aim to ensure that fasting blood glucose was better controlled at baseline before starting treatment, and our titration algorithm was more aggressive than in previous studies, based on our knowledge that we are less likely to cause hyperglycemia.

Although I do not have the fullest analyses available, the topline data confirmed that we've met the endpoint of a non-inferior change in HbA1c, and that this result is comfortably within the statistical competence interval. We will update with full information on other endpoints when the full analyses are complete.

In summary, we've been busy in preparing a response package that we believe will adequately address the questions raised by the Agency and give us the opportunity to have our second-generation device reviewed expeditiously. We would anticipate that this would be a Class 2b submission and we are still aiming to submit this response within a few weeks of the FDA meeting.

I would now like to turn the call to Al. Al?

Thank you, Peter, and good morning, ladies and gentlemen. It is interesting how history so often repeats itself. 20 years ago, in the early days of MiniMed, Wall Street dismissed our insulin pumps and glucose sensors. Novo, Lilly, and Baxter abandoned their pump programs, and MiniMed was all alone; yet we persisted because we understood the value of that technology.

In 2001, Medtronic acquired that business for about $4 billion. Today, Medtronic diabetes dominates a $2 billion market just for the devices. In that venture, I learned a great deal about diabetes. And while I was certain about the MiniMed opportunity, I also recognized that the best insulins were not good enough. The persistence of the best prandial insulins, the rapid-acting analogs, leads to prandial hyper insulin anemia and hypoglycemia; and insulin that peaks sooner and with shorter, more physiologic persistence was needed.

Technosphere Insulin, now known as AFREZZA, is just such an insulin. Its PK/PD profile is certainly far more physiologic than any current prandial product; yet the path to the market is not easy. Indeed, 15 years ago, rapid-acting analogs faced a similar challenge. In the approval process, they were viewed as having no clinical advantages over regular insulin; only possible convenience because they didn't have to be injected so long before a meal.

Yet today, rapid-acting analog dominates the prandial insulin market. But even so, they're still not good enough. The mantra of diabetes therapy is to reduce A1C. To safely reach a normal A1C with current insulin is an almost impossible challenge. The post-prandial plunge with the current prandial products creates serious short-term insulin hyperglycemia. To minimize the risk, fasting glucose is managed at excessively high levels, and those high levels mask the benefits of an insulin that does not have the excessive persistence that causes the hypoglycemia.

That late post-prandial plunge offsets the prandial high, so the average can be lower than for a super-ultra fast-acting insulin. After all, A1C is essentially an average of glucose levels over about three months. Only when fasting levels are reduced to near normal will the benefits of an ultra-rapid-acting insulin be realized. And only then will a near-normal A1C be possible to be achieved.

To demonstrate this more effectively, last year, we initiated Study 117, an efficacy study of AFREZZA compared to Lispro, in which the fasting level was to be reduced to below 120 milligrams per deciliter, with the AFREZZA arm, and as low as would be safe with the Lispro arm.

Even though the fasting glucose levels for the AFREZZA arm in this study were substantially higher than the protocol's specifications, nonetheless, the A1C for the AFREZZA arm at four months clearly met the non-inferiority standard. Indeed, it was actually slightly better than for the Lispro arm. And moreover, with AFREZZA, it is possible to lower fasting levels as well as to lower post-prandial excursions. Furthermore, there is not only less risk of hypoglycemia than with other insulin products, but there's not the weight gain that is common with other insulins.

The FDA has asked us to explain where AFREZZA fits into the armamentarium of treatment for Type 1 diabetes. Our response, based in part on the new data from Study 117, will be that AFREZZA is a useful product for managing A1C and enabling lower fasting glucose levels since there is simply not the same concern about hypoglycemia as there is with other insulin products.

As you heard from Hakan and Peter, we are preparing for the meeting with the FDA regarding the complete response letter in early June. Our team is assembling a briefing book that will be provided shortly to the Agency. Included in the response is the additional data from Study 117, as well as answers to the several other questions and observations raised in the complete response letter.

As you may recall, our clinical trials were done with the MedTone inhaler and our plan is to launch only with the new device. Our strategy has been to obtain initial approval of the Technosphere Insulin platform with MedTone and soon thereafter to file a supplemental NDA with our next generation inhaler, so that approval of the launch configuration would be obtained late this year.

We sought guidance from the FDA regarding the approval path for the new device, and have reviewed and endorsed our proposed plan. All the steps in that plan have now been completed. However, given that we received a complete response rather than an outright approval, we have revised our regulatory approach. Instead of the sNDA, we plan to file an amended NDA incorporating the new device soon after the forthcoming meeting with the Agency. While we cannot predict FDA action, if it completes the review of the amended NDA and approves AFREZZA within the allotted six months, this change in strategy would still complete the regulatory review without delaying our launch that is planned for next year.

However, we would not have an interim approval of AFREZZA with the MedTone inhaler. And this has several important consequences that we must now address.

First of all, as you heard, we've instituted a number of measures to cut our cash burn rate. Clinical studies of AFREZZA that are not on the critical path for regulatory approval are being postponed. We have even suspended initiation of a Phase 2 study of our immunotherapy regimen for the treatment of melanoma. We are continuing to look for additional areas where we can reduce or slow spending in order to extend our cash runway even longer into 2011.

Second, we are continuing to engage in partnership discussions with several pharma companies, and remain open to strategic options for AFREZZA that can extend our cash position further into next year. We are exploring several additional opportunities, but there is nothing to report at this time.

Third, we have initiated an earnest effort to partner our oncology program. Because the investment community is so focused on AFREZZA, we haven't really talked much about these programs; so let me take a couple minutes to briefly describe them to you.

Our most advanced oncology program is our immunotherapy platform MKC1106 with three therapeutic vaccines so far for the treatment of various solid tumors and melanoma. Our approach utilizes standardized off-the-shelf preparations of DNA and peptides that is designed to induce the immune system to recognize and attack only tumor cells, not healthy cells.

Our compounds are aqueous sterile solutions and [lyophilic] powders, made using established manufacturing processes. Unlike the first generation cancer immunotherapy product that was just approved by the FDA, MKC1106 is not custom-manufactured for each patient and does not require a complex supply chain. The unique feature of our immunotherapy platform is that the compounds are delivered by entering the lymph node injection. The lymph node is a readily accessible [deephole] to the immune cells.

By going straight to the source, we were able to generate a more potent and specific immune response. At this point in our clinical development program, we have administered thousands of [entering the] lymph node injections or infusions, and have consistently observed that the procedure is feasible and well-tolerated.

What gets us very excited about MKC1106 is that even in Phase 1 trials, we have observed significant clinical responses without the adverse consequences of today's primary therapies. These were unexpected findings from studies designed just to evaluate safety and tolerability of the regimens. Specifically in a study of 26 advanced cancer patients with diverse tumor types, 10 patients had a best clinical response of stable disease. In another study, a clearly defined cohort of four of 18 patients with advanced melanoma had similarly responded with stable disease and even partial clinical responses. At enrollment, all of these patients had essentially no hope for survival for more than two or three months.

Although these are very intriguing findings, according to conventional wisdom, cancer therapy programs are not -- I'm sorry -- cancer immunology programs are not partnerable until Phase 3. However, our Phase 1 results are so very encouraging that we've already begun an outreach effort. Our goal is to perform a collaboration to fund and accelerate the Phase 2 and pivotal studies of MKC1106, which we believe could be an important entry into the oncology space.

Our other immunology program is MKC204, a small molecule that inhibits an enzyme known as IRE1 alpha, which plays an important role in the Unfolded Protein Response, or UPR. The UPR is an important signaling pathway that helps to restore normal function to a cell during times of cellular stress. If the stress is prolonged due to a pathological condition, the UPR triggers program cell death. There's good evidence that the UPR is inappropriately up-regulated during certain disease states, such as in multiple myeloma, thereby helping disease cells to survive.

We have identified a compound that selectively inhibits IRE1 alpha, and believe that this compound could be the basis for a new therapeutic approach for myeloma, with possible further applicability in diseases related to autoimmunity, inflammation, coronary artery disease, stroke, and neurodegenerative defects such as ALS, Alzheimer's, Parkinson's and Huntington's.

In a mouse xenograft model for myeloma, we have observed that our compound inhibits tumor growths. We are now ready to initiate the toxicology and other preclinical studies that will enable us to file an IND. We appreciate the early support on this program from the Multiple Myeloma Research Foundation, which has contributed $1 million to this development effort.

Although MKC204 is a very early-stage product, we are already seeing considerable interest from potential partners. We believe our progress is significantly ahead of others and also that we will have substantial patent protection. Our goal is to collaborate on the further development of MKC204, while leveraging our considerable expertise in the UPR field to discover new opportunities to down and up-regulate this important pathway.

In summary, our R&D and Business Development groups are engaged in a number of exciting pipeline activities. Our immunotherapy and other pipeline products using our proprietary technology are exciting and may create significant value. However, our primary commitment continues to be for AFREZZA, and the complete response letter has mobilized us on multiple fronts.

The resulting delay in approval of AFREZZA will unfortunately force us to slow progress on our other pipeline products, but we recognize that our priority must be approval of AFREZZA. Our clinical and regulatory teams are preparing to work with the FDA to address its questions, and we believe we are well-positioned to satisfy the Agency. Our entire team is confident that AFREZZA will become a major tool in the battle against the global diabetes epidemic, the most significant health challenge facing the world today.

Now let us invite your questions. Operator?

(Operator Instructions). Simos Simeonidis, Rodman & Renshaw.

Thanks for taking the questions. I had a question about the clinical utility comment that Peter made. I'm still, to be honest, a little confused still. Where else could AFREZZA fit in, in the armamentarium? It's a prandial insulin, so it would be potentially trying to replace other prandial insulins. What do you think the confusion is? Is it, do you think the way you proposed that AFREZZA is used? Or is it a confusion on their end? Could you help us understand that?

Yes, I think that the -- I don't think this is confusion. We understand very well where a prandial insulin should be utilized in patients with diabetes in both Type 1 and Type 2 patients.

The questions really are, how do we apply this, I think, in a Type 2 population, where it would be showing the greatest benefit and the minimal risk. And there we have, as you know, very strong data in Study 102, which has demonstrated that with the more a physiological insulin, such as we have, we can achieve a significant lowering in HbA1c comparable to that seen with [Femix insulins], which is a very significant target to actually compare against. Most [continents] and therapies have only been able to match that and do better with significant increases in hypoglycemia. And we see --- or less hypoglycemia events in that study.

We also see no weight gain, which is the usual problem there is to Type 2 patients in trying to achieve prandial therapies and use them well. So I think that the discussion has to be how do you use a prandial therapy and how do we take advantage of the opportunities that are afforded by a therapy that delivers less hypoglycemia and less weight gain.

And also, how do we bring this into -- really patients with Type 1 diabetes, whereas you know in Study 09, we checked noninferiority. But I think the data were not as robust as we would have wanted there. But Study 117, where we've really pushed more aggressively in the titration regimen and been very successful there, we've been very pleased with the data that we're seeing and I'm encouraged. And I think that will form a very important part of our response, in terms of how this is positioned for patients with both Type 1 and Type 2 diabetes.

So, do you think--?

Let me just add the question -- a point, if I may. Simos, you are familiar with the early data we got on the small trial of MKC119. Remember that the Agency is only interested in programs where we have significant trials that can be incorporated into the label. And while we've shown that AFREZZA is very useful early in the treatment of Type 2I diabetes before basal/bolus insulin, the fact is that that won't be part of the initial label.

I see. Okay. A question for Peter again, on the 117 study. Do you have the top line numbers on the primary endpoint in terms of HbA1c reduction and confidence intervals that were used?

What I've said is that we've seen the top line data. It is actually very hot off the press because that's been only completed very recently. We've seen noninferiority versus the prandial regimen that we compared against both arms at Lantus insulin glargine as the background insulin. Those confidence intervals lie comfortably below the 0.4 margin and actually we were very happy with what we're seeing in terms of the [H31c] results.

We'll report more as we've got a bigger picture and I can give you the entire sets of numbers. But I think that we are confident around the numbers that we've seen so far.

And one final question, do you -- I don't know if I heard this correctly, but are you saying now that the patients will be getting a new inhaler every two weeks versus once a year?

Yes, indeed. That's actually one of the major advances of Dreamboat in our opinion. The cost reductions are very significant in terms of the simplification and manufacturing the number of components are markedly reduced. We've met -- there was a requirement to take the mouthpiece off and wash that out once a week or so. And the device, Dreamboat, is actually so simple that you don't need to do that.

And most inhaled products are delivered with devices that are usually changed around about every month. Patients really like the idea of having a device that they can use and then discard and replace with a nice clean one at that time. And that's something that we believe is a major advantage for the product as we move forward. And so that's, again, been part of our strategy in trying to deliver that to patients.

And you're saying that the cost is actually lower despite the fact that they'll be using 24 devices a year versus one?

(multiple speakers) It actually works out lower, yes.

Keith Markey, Griffin Securities.

Good morning and thank you for taking my question. I was wondering if you would consider partnering AFREZZA on a geographic basis, perhaps carving out the US and Europe from other regions?

Well, what we have said certainly, our preference is for a global partnership, but there are certainly parts of the world that may be of lesser significance overall, but still could be in significant areas where diabetes is a major disease plaguing the country. So yes, we are not excluding those opportunities still, kind of viewing them under the purview of a global partnership.

Okay. So you would look for a partner who's capable of carrying the data forward from that -- that you've already accumulated and perhaps adding to it on their own?

Yes, that could be an option.

Okay. All right, I'll jump back into the queue. Thank you.

John Newman, Oppenheimer.

Thanks for taking the question. I'm just wondering -- a couple questions. You announced that you made a shelf filing for $200 million this morning and you talked a little bit about it on the call. I'm just wondering, should we expect that you would effectively draw your credit line down to $0 before you would think about raising additional cash? I know you've talked about some cost reduction, but it looks like you've burned about $40 million in the first quarter.

And in terms of conversations that you've had with the FDA regarding the REMS program, what have those been like? I mean, what are the types of safety issues that the FDA wants discussed and how do they think that those should best be approached?

Well, let me start with the first part of your question, John -- this is Matt -- and I'll turn the latter part over to Peter on the REMS program.

Yes, we were in the process of reducing our burn to extend the cash runway. And the expectation should be that we continue to draw upon Al's line rather than do a financing any time soon. We did file the shelf. It's a matter of good corporate housekeeping, but don't have any immediate plans to do anything with it. It's just there. So that once the [SP] has completed their review, which usually takes at least a month, it could be there if we need it at some point in the future, whether it be for financing or some sort of strategic transaction.

So we're just leaving our options open. But yes, you should assume we'll continue to draw on Al's line for the foreseeable future. But again, there's been a lot of focus on cost reductions and I hope you'll see that continuing in future quarters.

And with that, I'll turn it over to Peter.

John, we've had two real sessions of feedback with the Agency regarding the REMS program. If you remember, we had actually proactively suggested the REMS program for this at the time of the submission. I think that's a perfectly normal thing to do with a product at this stage, and we're fully anticipating that we would have a REMS dialogue with the Agency.

And basically, back at the end of last year, we had acceptance that our REMS proposal was largely an agreement without which the Agency was looking for. And in the complete response letter, again, they reiterated that all the REMS discussion is not complete. And that the proposals that we'd made, which primarily look at how do we ensure the safe use of the product using medication guide and show that this is prescribed appropriately. And in particular, avoiding those patients where we don't want the product to be used, which would be those patients who have pre-existing or severe lung disease.

And also, in terms of how we understand the longer-term pulmonary function and the requirements of pulmonary function testing, I think they're likely to be an area in terms of that and how we follow that up. But otherwise, there hasn't been anything in the REMS in terms of other safety areas or concerns, which we found very reassuring.

Okay. And just one quick follow-up. In Study 117, it looks like you were measuring the change in hemoglobin A1C from visit five to 14. And that was a 16-week study. And it looks in the 009 study for Type 1, you were looking at the change versus the baseline. I'm just wondering why you measure the change in HbA1c beginning at visit five versus beginning a visit, say, one or two in that study?

Yes, that is a really good question -- and it's quite simple. In 117, we actually employed a run-in period. We wanted the patients to have a better fasting control, so we were looking at how we optimized the basal.

If you look at the FDA guidance as well in terms of -- they tend to recommend run-in periods to our studies of diabetes. 09 was a study which was designed actually quite some time ago, and I think one of the learnings was that we would have done better to have had a run-in period with that. And I'm very pleased that we chose to take that approach and that's the reason for that by comparison.

Tom Russo, Baird.

Good morning and thanks for taking the question. The first one, I just wanted to revisit the comment that you guys are filing an amended NDA versus a response to the complete response letter. Is that indicating any change in the approach? Or is that just different ways of saying the same thing?

It's -- exactly. It's different ways of saying the same thing. The only way you can actually submit a complete response is to file an amendment to the original file or file a completely new NDA. So we are still following up in terms that the Agency is now giving us a complete response to their review.

So the formality is that we now go, we have the opportunity to have a discussion with them with our briefing package and I'll go down -- we have that meeting in June. And we anticipate being able to amend our NDA with the data and filing that we have. So it's not a complete review of a new dossier. And as we said, we will anticipate that this would be a Type 2 resubmission.

Okay. And then you referenced earlier an email interaction with FDA. I was wondering if as part of that or any other interaction, they've indicated any agreement or concurrence with the approach of changing the device at this stage of the process?

No, I mean, we haven't indicated that. Remember for -- as this is a straightforward technical discussion around bioequivalence and whether the device performs technically in the same way that the MedTone did or better. And our data are very clear in terms of showing that.

So we're anticipating, just as we did when we talked to them in terms of how we would make that substitution in terms of an sNDA. The regulatory part of this is really quite well-placed, and you have the opportunity by using careful bioequivalence. And the data we've talked about today showing that we've demonstrated that, I think, very clearly, will go a long way in terms of how we can look at that.

And then it's around how we can ensure the technical aspects of the device performance, how it [lacks] in clinical utility testing, which we've done and performing that. We've got a good round for the discussion with the Agency. And based on the information that we had previously and their feedback is how we make that substitution, we're confident that the Agency will see a path forward with us here.

Okay. And when you do meet with the FDA in June, is it all three divisions? Or is it just the lead division that you have to meet with?

Yes, I think -- you're quite right. It involves quite a number of divisions. Because we have the device, we will have pulmonary, we'll have biopharmaceutical and we'll have the clinical group as well. So yes, there's a lot of interest at the Agency with us on this.

I think that's one of the challenges in terms of scheduling the meeting. We maybe anticipated it a little earlier, but I think they had a lot of people to pull together for this meeting. Yet there's a lot of people that we need to work with in terms of understanding this. And I'd say a lot of interest because the device, it certainly is a very exciting device.

Okay. And then my last question and I'll hop out. Can you just, I guess, confirm at this stage which of the trials are going to be considered the pivotal trials and that there's been a lot of discussion of Study 117?

And then also, the last time that FDA kind of reiterated its agreement that a 0.4% difference in A1C is acceptable?

Yes, the 0.4% is actually in the guidance industry in terms of diabetes drugs, so that would be a good reference to look at, in terms of where the 0.4 margin is accepted.

And in terms of -- the word pivotal is actually one that's thrown around -- we're looking at adequate and well-controlled studies here, which we have settled. And clearly, our approach is that 117 is an adequate, well-controlled study, which is very important in terms of adding additional data for the Type 1 indication; but also, overall, in terms of, again, showing the comparison of a prandial basal regimen in patients with diabetes, which is widely applicable.

Because we've been asked the question in terms of clinical utility, that gives us a great opportunity of showing some of the [detailed analyses] in the large Study 030. And if you were watching last week, we actually already started presenting some of these, in terms of the large end of Type 1 and Type 2 patients in their usual cast setting, where we can look at the data and explore it against various different treatment regimens and again, provide some useful insight in terms of that. And those will be very supportive data.

So we have the pivotals, as you've said, in terms of the Type 3 studies, and we're adding additional data with the Study 117, which I think will be adequate and well-controlled for the purposes of evaluation. And the detailed analyses that we're now able to submit within the framework of the question for 030.

Jon LeCroy, Hapoalim.

Thanks for taking my call. Just a couple of questions. First on 117 trial. If the groups had different fasting levels on entry or at week five, is that really an apples-to-apples comparison?

And then also, are there any lessons from that trial that may be applied to Type 2 diabetics?

I didn't say they had different levels of entry. What we're interested in is trying to optimize both groups as well as you can, in terms of the run-in period to optimize their basal insulin; and then the trial compares the use of AFREZZA which it's very-short-acting compared with the rapid-acting analog, and see at the end of the study, over that period, what impact we have on the fastings.

And those will be very interesting data to see. And if our hypothesis -- and I think it's one which we've seen a lot of data to support, will be the case -- we should see a lower fasting at the end of the study, whereas we started with matching.

Okay. And then in terms of the CV requirements for diabetes drugs, what was your relative risk in that pooling, the upper limit there?

I can't remember. We came well below the (multiple speakers) --.

1.01, Peter -- it was 1.01.

Thank you, Al. Al remembers the numbers. I just remember the importance of the fact that we actually came well within the -- what would be something that I think we've given [a letter] to that. And we have no questions from the Agency regarding the cardiovascular risk of insulin, which I think is not an issue.

A point -- the FDA guideline, for those of you who aren't familiar with it, is 1.3 as being acceptable and we're at 1.01. If you're at 1.80, you have to do additional studies. But we're at 1.01; essentially no effect on cardiovascular matters.

Okay. And then in terms of partnership, do you think that's something that will need a finalized label? Or do you think that's something that could happen prior to a final label?

We are in continuing discussions, as I mentioned; actually, we have collaborated with some of the key potential partners here, even in regard to our response to the complete response letter. So I would say that it certainly is an opportunity, even prior to a, say, a complete label.

Okay, great. And then just last one -- so, with clinical utility, I know sometimes panels address that, for expert panels. Are you guys still assured that you're not going to need a panel?

There is no panel scheduled and requested or required by the FDA.

Let me just say, Jon, though, you're right in terms of a panel can be called at any time. We've had clear instruction from the Agency that that's not their intent. I would be delighted to have a panel to discuss the data that we have and to present that. In that sort of forum, it would be a very exciting opportunity to give a very good overview of AFREZZA and the data that we have.

Okay. And then just one last one. Do you know what you're going to present at the ADA meeting?

When the abstract book turns up, you'll see that we've been busy in terms of preparing exciting abstracts.

Okay, great. Thanks.

(Operator Instructions). At this time, we have no further questions. Thank you for joining us today and I will turn the call over to CEO, Alfred Mann, for final comments.

Thank you, ladies and gentlemen, for joining us today. I expect that the next announcement from us will come when we submit the amended NDA to the Agency. Of course, we will also update you in our next quarterly call. Thank you again for joining us.