MannKind Corp (MNKD) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation first-quarter 2011 conference call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session.

(Operator Instructions).

As a reminder, this call is being recorded today, May 9, 2011. 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.

Thank you. Good afternoon, and thank you for participating in today's call. I'll summarize our financial results for the first quarter of 2011 as reported earlier today. Next, Hakan and Peter will provide an update on our recent meeting with the FDA. Finally, I will provide further details on the meeting 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's possible 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, May 9, 2011. 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 first quarter of 2011, total operating expenses were $38.1 million, compared with $40.6 million for first quarter of 2010 and $32.1 million for fourth quarter of 2010. R&D expenses were $26.3 million for the first quarter of 2011, compared to $30.5 million for the first quarter of 2010 and $24.2 million for the fourth quarter of 2010. The decrease in R&D expense for the first quarter of 2011 compared to the same quarter in 2010 was primarily due to a decrease in raw-material purchases resulting from the February 2011 termination of an insulin supply agreement. As a consequence of terminating the agreement, the Company did not take delivery of any insulin in the first quarter of 2011.

General and administrative expenses were $11.8 million for the first quarter of 2011, compared to $10.1 million for the first quarter of 2010 and $7.9 million for the fourth quarter of 2010. The increase in current quarter compared to the same quarter in the prior year was primarily due to employee severance and other related termination benefits associated with the February 2011 reduction in force.

The net loss applicable to common stockholders for first quarter of 2011 was $41.5 million, or $0.34 per share, based on weighted average of 121.1 million shares outstanding, compared with a net loss applicable to common stockholders of $44.7 million, or $0.40 per share, based on 113.1 million weighted average shares outstanding for the first quarter of 2010. Our cash, cash equivalents, and marketable securities at the end of the quarter totaled $47.5 million, which compares to $70.4 million at December 31, 2010, $31.5 million at March 31, 2010. Our cash on hand and the remaining credit facility from Al amount to $144.9 million as of March 31, 2011.

Our cash burn has decreased from the prior quarter, with $32.7 million spent in Q1 compared to $42.0 million in Q4 of 2010. We do expect to accelerate our spending in 2011 as we conduct two additional trials in response to the FDA's complete response letter. With our cash in hand and the $98 million still available under the credit facility still available from Al, we believe we will have -- we will be able to fund our operations through the first quarter of 2012. I would now like to turn the call over to Hakan Edstrom, our President and COO, who will provide an overview of our meeting with the FDA. Hakan?

Thank you, Matt, and good afternoon. As I'm sure you know, we recently had an end-of-review meeting with the FDA, and I did attend this meeting in person. And I'm pleased to report that the meeting was very productive. We achieved a great deal of clarification about the design of the two additional required trials, one in type 1 diabetes and one in type 2 diabetes. Much of discussion was centered on the details of evaluating the pulmonary safety of Dreamboat versus MedTone in a head-to-head comparison.

The agency agreed that the absurd changes in pulmonary function do not differ between type 1 and type 2 patients. They also considerably simplified the requirements of pulmonary-function testing by requiring spirometry alone, as compared to the previous pulmonary-safety studies in which we also collected a more complicated and less generally available measurements DLCO and TLC. This gives us the opportunity to implement just the Dreamboat versus the MedTone bridge in just the type 1 study. This trial is an efficacy study with its primary endpoint of HBA1C lowering, but we will also evaluate FAV1 measures at baseline at week 12 after titration period, and at week 24. There will also be a four-week follow-up at the end of the treatment period.

Regarding the type 2 trial, we had a fruitful discussion about a number of developments of the proposed study. The agency indicated they wanted to consider certain details further and that its minutes of the meeting would provide additional advice regarding the trial design. And we expect to receive these minutes in approximately three weeks. In the meantime, we are well underway with our preparations to implement both studies once we finalize the protocols. We are completing our contract with the CROs that would support us in conducting these studies in United States, Europe, and Latin America.

Our plan to investigate in meetings IRB submissions and other related activities are all quite advanced. As we finalize the final trials, we are doing so with a view towards the requirements for a European submission, collecting the appropriate data now to allow us to avoid duplicate clinical trials and achieve some obvious cost benefits. One other area that merits some brief comment. We continue to monitor and prioritize our spending, and, as Matt discussed, this continuing focus has already yielded benefits and extended our cash runway, even without the benefit of financing. But, with that, let me now hand the meeting over to Peter.

Thank you, Hakan. And as you've heard, we believe that the [faster] approval of AFREZZA has been greatly clarified by the FDA, with several more details to come in the next few weeks. The research and development team has been working in a very focused manner to be able to initiate the required studies as soon as we are fully aligned with the FDA. In order to minimize recruitment time, we're incorporating additional center in countries and are using well respected global CROs, as well as partners with whom we've worked well in the past.

In addition, the use of a fully electronic diary to recording to the direct from patients and from [fin] investigators will allow us to follow carefully the progress of the studies and expedite the eventual analysis of the data as it is completed. We are preparing investigative meetings at which we will give detailed training to the sites to ensure a thorough understanding of the state-of-the-art titration-to-target algorithms we have developed. These algorithms are based upon the pilot data with the new inhaler from our completed handling study 159 and the ongoing pilot for study 162 that we put on hold following the CRO.

The algorithms were also discussed with the FDA during the meeting last week. The ability to take advantage of the very convenient dosing available with the Dreamboat inhaler has allowed us to introduce the new key concepts in dosing, based upon observed blood-glucose readings, while still keeping a simple titration that does not require complex-carbohydrate counting. We shall be presenting the first data from the pilot within study 159 at this year's ADA, and I'm very encouraged by what has been achieved A1C reductions in this patient population.

With the clinical plans well in place and an aggressive but realistic schedule underway, it's time for me to focus on an area of the business about which we have said relatively little but have developed an excellent early program. Over the past years, we've been diligently following exploratory projects in cancer and have two programs underway. MKC1106 is a novel immunotherapy program focusing on the delivery of a variety of DNA fragments and small peptides directly into the patient's lymph nodes to stimulate an immune response targeted at the patient's own tumor. Initial data from our first two studies have shown a clear immunological effect and some tantalizing biological responses that we are hoping to confirm in an ongoing phase 2-A study in patients with malignant melanoma. We plan to carefully review options and continue modifying our approach here, either alone or in a partnership.

The other program results from molecular biology and is focused on a novel biological mechanism with importance in a variety of disease states, including cancer, neurogeneration, and inflammation, is only beginning to be understood. This area of biology, known as the unfolded protein response, has received a great deal of interest recently in the scientific field. We've made a tremendous program in understanding this pathway. A key modulator, this response is an enzyme known as IRE1, and we focused for the last three years on developing a novel series of inhibitors of this enzyme. The results to date have been very encouraging, and we compounds now ready to enter the very last phases of testing before we can administer them to man.

Several major players have expressed interest in our approach, and indeed we are in an area that is clearly going to become highly competitive in the next three to five years if the preclinical data we have generated in tumor models are confirmed. At present, although we seem to have a leading position in this area, the resources that we can apply to this program must compete with the ongoing needs of the AFREZZA program. We started a concerted approach to export partnering opportunities and financing approaches that will allow us to rapidly progress one or more of these compounds into the clinic and potentially significantly increase the value of this asset.

As such, Al, Hakan, and I have decided that in order to allow me to focus on the unique science in this area at this critical time, I will devote more of my energy to these programs, while Hakan, as Chief Operating Officer, oversees the operational aspects of completing the AFREZZA studies. This change will allow us to explore appropriate business models where we can potentially enhance the oncology program within the new organizational structure, whilst ensuring that appropriate resources are applied to AFREZZA as we continue towards registration and commercial partnership. I will continue to be involved in the scientific and clinical aspects of the insulin and other [tax-free] programs and work with Al as we explore other potential approaches in this area, as well as maintaining the partnership communications regarding AFREZZA.

In the meanwhile, under my personal leadership, the oncology team will focus on efficient and rapid further development to the pipeline and the creation of a sustainable business model that will allow our exciting science to enter one of the most important phases of the development of an endlessly innovative pharmaceutical agent. The importance of our science has already been demonstrated by the generous funding we have received from the Multiple Myeloma Foundation and the American Leukemia Society. In collaboration with some of the world's leading authorities, I'm determined to realize the potential for addressing several devastating diseases to keep our single legacy of outstanding science that Al has consistently championed as the foundation for building a great business. And, now, I'd like to turn the call over to Al.

Thank you, Peter, and good afternoon, ladies and gentlemen. The delay in approval of AFREZZA as a result of the January TRL presents issues for MannKind, yet we view the recent exchanges with the FDA and the Agency's response to our pre-meeting briefing book to be especially significant, helping us to better understand the potential labeling for the product and its implications for promotion and potentially positioning us to expand the market opportunity for AFREZZA. The May 4 meeting itself was positive and collaborative, resulting in a redirection of the type 2 trial that should enable to us support use of AFREZZA as an alternative to oral therapies in early type 2 diabetics. If the trial date is supportive, I view this as a substantially increased opportunity for MannKind and for patients.

Hakan and Peter already described two areas of discussion with the Agency, pulmonary function and insulin titration. I will now provide some details about the third area of the discussion, the design of the study to be conducted with the inhalation device. At the meeting, the FDA indicated agreement with the proposed type 1 study, a basal bolus design in which AFREZZA is compared to a rapid-acting analog as a mealtime insulin, in both cases with daily administration of LANTUS. However, we will not actually start the trial until we receive the minutes from the -- with the Agency's written confirmation. Our proposal for the type 2 study as submitted in the briefing book was also a basal bolus design substantially similar to that in type 1 patients.

However, in early stage disease, type 2 patients have many more treatment options, which led us into a discussion of the various potential trial designs for the use of AFREZZA in patients with Type II diabetes, including monotherapy as a [net-out to Informin], as an oral failure, as an -- and so forth. The FDA was careful not to opine in the meeting as to the best trial design, but nonetheless, they provided some very useful comments about how we would be able to promote AFREZZA if approval -- if approved on the basis of the study that we will now run in the population of earlier type 2 diabetes patients. They also indicated that their minutes of the meeting would contain certain additional thoughts on what was discussed.

We left the meeting with a clear sense that our type 1 study is on the right path and that the marketing considerations can and should play a greater role in our plans for the type 2 study. We expect to receive the minutes in the next three weeks or so, at which time we will finalize the protocols and implement the trials. At this point, we expect that the type 1 study will get off to a faster start than the type 2 study, but by no means do we intend to waste time and finalize that protocol and getting it underway. Based on the science and prior clinical experience, we believe that we will be able to effectively manage the execution risk of these studies.

However, to enroll the number of patients that are projected to be needed to establish clear, statistical significance will take a considerable amount of time. From my prior phase 3 experience, as well as input from our CRO, we currently project the latter half of next year for completion of the study. Once we have finalized the protocol, we'll be in a better position to provide a more definitive estimate. While the primary regulatory issue in the CRL related to the impact on safety and efficacy resulting from substitution of the Dreamboat inhaler, the CRL also cited the need for several additional human-factor studies with the new device. We have moved forward quickly regarding the CMC human factor matters raised in the CRL, and those studies are now mostly completed. We are planning to meet further with the FDA this year to close out all these matters so the only known remaining requirements going forward will be the requested clinical trials.

Of course, as we get the clinical development of AFREZZA on track, we still must deal with the reality that the delay due to the CRL required additional funding for the Company. I remain committed to MannKind and I'm exploring ways to make additional monies available. We are also studying several non-dilutive as well as dilutive funding opportunities. We'll keep you all informed as these plans progress. I want to thank you all for joining us today, and we'd now like to open up the call for your questions. Operator?

Thank you.

(Operator Instructions)

Steve Byrne, Bank of America.

Good afternoon. Peter, I was wondering if you're anticipating any challenges with the providers on the forced titration aspect of the Affinity 1 trial. I recall that was a challenge previously, and is that something that you think you'll have to be very actively involved in providing that guidance to the physicians?

Yes, Steve, I think that's a really good question. The earlier studies were not forced titration designs. And I think that we have learned a great deal in terms of our development of an algorithm where forced titration is a key component of it in terms of achieving really clear A1C reductions and optimizing therapy. If you remember, in 117, where we started towards the first titration regimen, we were able to get patients down to levels of 6.5 and less in A1C. And I think that we're targeting aggressively in the type 1 study to do that in order to demonstrate the efficacy in an optimized way. As far as state-of-the-art in terms of diabetes studies, this is really now the methodology that would be expected of others by the Agency and by opinion leaders in the area.

Then regarding the phase 2 -- or the type 2 diabetes trial, what are you anticipating as being your -- the comparator arm.

I think that there the discussion with the Agency has really opened up several possibilities in terms of looking at what the most appropriate comparator is. That's something that we need to fix with the Agency and agree on that, and I think that we are not in a position to say that. We're certainly looking at a novel agent, and one which will be meaningful in terms of further demonstrating the clinical utility of AFREZZA in a very important patient population. And we see this as a significant opportunity.

Last one I have is regarding the immunotherapy program. You talked about attracting partners as a source of funding for the program. Is it also a consideration to divest the intellectual property as a source of funding for the AFREZZA program?

I don't know whether the source of funding for the AFREZZA program specifically, but certainly looking at options really to the least of the value from the oncology program is what the structural change we're putting in place is about. And giving the opportunity to look at various business models will make sense so that we cannot only ensure the optimization of the AFREZZA program, but make sure that the oncology program does not slow and lose opportunity just by our inability to move that forward as effectively as it deserves.

Okay. Thank you.

James Butler, JMP Securities.

Hi, guys, it's Jason Butler. Could you give us a little insight into what you've learned from the FDA in terms of how they would view differences in pulmonary safety between MedTone and Dreamboat, both in terms of if Dreamboat showed superior safety profile or an inferior safety profile?

Yes, clearly the discussion upon the new safety has been one that we really wanted to go through in detail with the Agency, and I think it was a very productive discussion that was had in terms of understanding. But first of all, as we said in the script, the Agency is looking for us to confirm the [seller] profile that we've seen with Dreamboat and that of MedTone, or a better one based on FED-1, and not looking at any of the more complex parameters of pulmonary safety, which are logistically more difficult. And that's actually very good news for us.

The specifics of the numbers of patients and the design were discussed with the Agency, and we're looking for confirmation in terms of agreement of the numbers we're suggesting for that, but are very much aligned with the numbers that we've had and put forward to date. So we've got a very good indication that in the one study, by putting in a Dreamboat arm versus MedTone, this is a subcutaneous comparator and will be able to address the questions that the Agency has. And they will be looking for non-inferiority margin, and we're comfortable in that way.

Let me add that the Agency has raised no questions, no safety signals or anything in any of our past trials. What they're looking for is simply a bridge to the past trials with the new inhaler compared to the MedTone.

Okay, great, thanks. And then in the type 2 trial, is it fair to say that you're not focusing on later-stage patients at all, or you're just broadening the population you enrolled in the previous trials to include earlier-stage patients?

Well, I think the thinking here is that actually with basal bolus in effect a late-stage 2 is similar to a type 1 -- they're insulin dependent -- and that we will have a robust basal bolus study in type 1 patients. And we also have a very strong basal bolus study with MedTone, study 102, which I think is also historically important for us. So looking at ways that we can explore a broader type 2 population, looking at patients who would, perhaps, be more normally treated with an oral therapy, is a significant opportunity. And we want to look at study designs that we can do for that. We had been looking at the possibilities of that in a phase 3 B program, but I think to be able to use that as a basis of registration is a very interesting and exciting opportunity.

Really, I expected that we would have to do this basal bolus trial in type 2 as well, and the Agency said that's not necessary, that they are -- with the study with the new inhaler in type 1, that would give them sufficient information to be able to apply basal bolus therapy in both type 1 and type 2.

Okay, great. Finally, can you give us an idea of what proportion of your R&D spend is currently dedicated to the non-insulin programs, and if possible, what that may change during this year as you dedicate more resources to that or more personnel to that, to those programs?

This is Matt. Those are numbers I don't have at my fingertips. I can tell you that the cancer programs are a pretty modest amount of the spend and the changes you might see making, they'll be lost in the noise of the studies. So it's going to be fairly trivial, frankly.

Okay, great, thanks a lot for taking the questions.

Seamus, Cowen and Company.

Thanks for taking the question. Will the type 1 trial still be about 435 patients, about 180 per arm for AFREZZA (inaudible) injectable and 75 for MedTone?

Yes, it will. The numbers of MedTone are the final confirmation with the Agency in terms of the numbers of patients that we'll put in there. So we'll update when you we reach final agreement with that. 75 will be minimum. I think it's likely to be upwards, as we're not going to put patients into the type 2 study.

Okay. Then for Affinity 1 and 2, are they going to be non-inferiority studies?

Yes.

They are. So in the Affinity 2 trial, given the shift to an earlier-stage type 2 diabetes patient, has the Agency told you that these studies will be sufficient for approval if successful, given that you're looking at a new patient population?

I'm sorry, Seamus, actually my comments around Affinity 2 is not -- we will not be doing the basal bolus immediately in the type 2 patients. So whether that will be a non-inferiority design or superiority is something that we have to discuss and finalize with the Agency. The type 1 study certainly will be a non-inferiority, and yes, the indication from the Agency is that these will be adequate for approval of the (inaudible) AFREZZA as an insulin measurement.

I would say that was very clear at the meeting that it would be sufficient for approval.

So basically the thinking is that you're not doing -- you're doing only one trial in type 2s, but the data from type 1, because the patients are similar to the early type 2 patients will help to support such an application?

What they're saying, really, is that the one basal bolus study, be it in type 1, will be sufficient for both type 1 and type 2 in basal bolus therapy. And the suggestion is that we go to earlier-stage type 2s and show the utility of using AFREZZA in early-stage disease.

Okay, great. Thank you for taking the questions.

And the purpose, of course, is that would enable us to promote it in the earlier stage rather than just off-label use. That was very significant, we thought.

Right. Thank you.

Cory Kasimov, JP Morgan

Hi there. It's actually Matt Malloy in for Cory today. I was just wondering if there's any change to the thinking around the 15-month timeline from when you start the trials to when you're able to resubmit? And secondly, if you could share any more details around the trial design, specifically around the margin of error between the two devices? Thanks very much.

In regards to the timeline, until we actually have the written response back from the FDA, it is hard to give you a specific timeline. As we have said before, we hope to have the opportunity to complete the trial by the end of 2012. And your second question was?

Just around the trial designs, if could you give us any more detail around the margin of error between the two devices?

Yes, the primary endpoint will be on the efficacy. We'll be looking at the pulmonary function, and that will be really a descriptive statistic in terms of the margin of differences acceptable, but we'll be putting sufficient power into the studies to be giving a meaningful assessment in order to support that bridge. But we've not reclassified the margin that we're putting in.

Some of those margins were discussed with the Agency, but until we get their minutes, we don't want to make any comment about that.

Okay, that's great. And then any update on any partnering talks, or is it too soon after the meeting to have any real progress there?

Yes, I would say that's too soon. What we wanted to do, we certainly maintained the contact with potential partners, but until we had a good understanding of the outcome from the meeting with the FDA, we have not aggressively pursued that. So I would say that will follow, following the minutes of the meeting of the meeting with the FDA.

Okay, great. Thank you.

Avik Roy, Monness, Crespi, Hardt.

Two questions for you. One, you did do the TI103 study, which compared AFREZZA to [Secretagog] plus metformin to AFREZZA plus metformin. I'm curious to know if that study, the results of that study, helped inform your discussion with the FDA about studying the drug -- studying AFREZZA more thoroughly in patients who are taking oral anti-diabetic agencies.

Secondly, given the back and forth around the clinical utility of AFREZZA and the fact that the second complete response letter made no reference to clinical utility, there was some thought that maybe the clinical utility concerns of the FDA had been satisfied. Do you feel that maybe this discussion around the type 2 study helps illustrate what they meant by clinical utility? Or did that not come up in discussions? Thank you.

Actually, the expressional clinical field did not come up in the discussion with the FDA during this time. I think the explanation that was given before is that how does this trial fit into the (inaudible) of choices the doctors have? It's still valid, but, no, it was not referenced in regards to either of the trials.

I think what was important is that we were going down the direction of doing trials basically in late stage type 2 as well as type 1 in basal bolus therapies, looking for a label that would talk about treating hyperglycemia. But at the same time, what happened, what evolved during the meeting is that an opportunity is opening up for us to treat early stage type 2s with this AFREZZA.

Do you plan to present, or have the results of the TI103 study been presented anywhere? Or do you plan to present them anytime soon, at ADA or anywhere else?

I'm trying to remember whether those have been presented in abstract form. It's quite awhile since we did 103, so I don't have that information at hand. Just to give you information that, yes the results from 103 are helpful in terms of designing and understanding the group of patients that we're targeting in this, but we also learned a lot from that study in terms of things that we need to get right in any comparison with an [old].

But that study was not discussed at the meeting.

Okay. Thanks, guys.

Kevin Tang, Tang Capital.

Can you hear me?

Yes. How are you, Kevin?

Hi, thanks for taking my question. I'm just trying to firstly get this -- the timeline approximation right. So you're saying you're not going to start either study until after you review the minutes. Is that correct?

That is correct.

That's expected in about three weeks.

Okay. So call it June when you start the studies. And you're saying you hope to complete enrollment in the second half of 2012, or actually have top-line data?

We hope to finish it, but it's too early to talk about the precise timeline, Kevin.

But I'm just repeating what you said in your prepared remarks, which is you hope to complete the studies in the second half of 2012.

Yes, but we aren't going to pick a date any more clear than that until we get --

I'm not asking for a more clear date. I'm just trying to define complete study. So complete studies, you mean top-line results, or do you mean complete enrollment?

Complete top-line results.

Okay. So if I just take the outside of that, that's 18 months, and I'm just wondering -- the last two phase 3 studies you ran, study 102 and 009, took 15 to 18 months just to enroll, not to complete the actual studies. So is it fair to say you're assuming that the enrollment period will be half of what it was in those studies?

Do you remember what they were?

I can't remember the exact enrollment time, but these are based on the assessments that have been done with our CRO and with some really careful diligence in terms of how we can optimize the set-up of this, and these are the best estimates that we have at the present time.

And if I remember correctly, those both also contained a much bigger patient number.

Okay. I don't think they actually -- how many are you going to include in these studies?

150 completers per arm.

I think that's the same as the size of the prior two, right? Okay. Anyway, we can take that offline. All right. And then my second question is in terms of the change in the type 2 study, just the way to think about this, if you're going to compare now to an oral agent, is it not -- wouldn't it be sort of meaningless to do non-inferiority? Wouldn't you need to show -- if you're going compare an inhaled therapy you have to take several times a day to a pill that's once or twice a day, wouldn't it need to be superior to be clinically relevant?

As I said, I think we're looking at what the appropriate design and endpoint that is, and we'll come back on that one. Your point there is well taken. The [also involved] thing is to ensure approval of the product, and that's the very [test skill].

But as a clinician, you would tend to agree to me. If you show -- if you have to inhale something with every meal, if you're only equal to a once-a-day pill, that wouldn't be a very compelling clinical argument to use it, right?

What I can indicate to you, Kevin, is that in the discussions with the FDA, the specific question was asked, and their inferiority designs were discussed. It may be a different margin in regards to (inaudible), a .4 in a basal bolus, but it was not necessarily a superiority design that was being looked for. But those are critical items that even the FDA wanted to have discussions around, and that's why we are eagerly awaiting the minutes.

Okay. And lastly, and I appreciate you taking my questions, did you -- were you successful in -- for the type 1 study, in persuading the FDA to use LANTUS twice a day as opposed to once a day?

I think actually a very good compromise was reached with the Agency, because what we don't want to do is use LANTUS an off-label way so the approach that's taken is to approach it in once a day, but if patients require twice a day for the reasons of hyperglycemia, or other problems with dosing in that way, or if they're already on twice-a-day LANTUS, that will be acceptable to the Agency.

Okay. But they'll start on -- it will largely be once a day, not twice a day.

If they are not already on twice a day.

A lot of patients are already on twice a day, Kevin.

Okay. Okay, great. Those were my questions. Thank you very much.

thank you.

Doug Dieter, Imperial Capital.

All my questions have been answered except for one, which -- what's new here is that you are waiting for the minutes to start the clinical studies, and I just wanted to know, in the past, the FDA has taken much longer than anticipated. Do you have any contingencies for that potential delay from the FDA? We've had a couple of rounds now of minutes where there's been a huge delay.

Well, they certainly did state that we should expect the minutes within four weeks. However, in terms of preparing for the study, investigative meetings, IRB contacts, we are building mitigation strategies and tactics around that so that we can start as soon as possible upon having the minutes in our hand.

Thanks a lot.

Tom Russo, Baird.

Good afternoon. Thanks for taking my questions. You were careful to comment when discussing the type 2 study that a number of different options were discussed, and FDA didn't opine on the best design. And since this is critical to approval, I'm just wondering if you're planning in any way to disclose the meeting minutes.

We haven't really had that discussion internally, so -- I've been very clear to say the design of our type 2 trial will become public knowledge. Beyond that, I would not expect that the meeting minutes as such would be a public document.

Okay, maybe to ask a little differently then, when you decided to change device at the stage of responding to a complete response letter, at least from the outside looking in, it seemed like an approach that could have financial or timing benefits if successful but maybe was a higher-risk approach. If FDA opines on various designs for the phase 3 trial in type 2, will you choose the most conservative approach, the one that's got the least uncertainty around approvability from FDA's standpoint?

No, your question is very academic. It's very hard to -- I would say use the word opine on that as well until we actually have the minutes. Of course, if information would be forthcoming that would be significant to change the approach that we are taking as a Company, I think we would feel say compelled to share that with the market. But beyond that it really is speculation at this point in time.

Okay. And last question, maybe for Matt. Can you give us a sense of what the underlying levels were for R&D and SG&A, excluding anything related to restructuring or what the go-forward levels look like for the rest of this year and into the first quarter of next year?

Well, yes, you can kind of do the math and get to most of those numbers. The problem is that it's going to vary a lot from month to month and quarter to quarter as we start trials and so forth. If you kind of do the math, you can see where we're going to be spending for the next year or so roughly $11 million or $12 million a month. We're not spending that right this second, but that's anticipating some ramp-up with the trial starting up, so that's how we kind of get there. The kind of ongoing burn rate has been closer to in the $9 million to $10 million range right at the very moment, if you leave out the restructuring charges and that sort of thing.

Okay. Thanks, Matt.

John LeCroy.

Thanks for taking my call. I wanted to circle back on the type 2 trial one last time here. Are you envisioning a monotherapy AFREZZA arm versus maybe a monotherapy oral? Or are you thinking all patients will be on LANTUS? How are you thinking about the combinations in the arms?

Yes, right. It will be monotherapy, and not using background LANTUS. I think that's one of the key take-aways from the meetings and the discussion with the Agency, that that would be an acceptable and interesting design.

So then, is your intention to do mostly new to treatment patients, patients who've failed diet and exercise?

We haven't said that we're going do monotherapy. The question is do we want to do monotherapy or those maybe failing as an add-on to metformin, something like that, or whether we want to go further in the area. Those are the areas we're trying to evaluate right now.

But you're not envisioning using LANTUS as --

LANTUS will not be used in that trial at all.

Okay. Thank you.

Jason Butler, JPM Securities.

Hi, guys. Thanks for taking the follow-up. I was just wondering, given that the FDA now views the new type 1 trial as applicable to latest-stage type 2 patients, do you still think you need two new trials for approval? The follow-up on that is if the type 2 trial you run in earlier stage patients isn't successful, will you still be able to file on the back of just the successful type 1 trial?

Yes, what I would say -- it was very clear in terms of basal bolus trials in type 1 patients that the FDA did see, as really with other insulin product, that you are approved for type 1 and type 2 patients. So, we certainly see that applicability with our (inaudible) as well. And I would agree with you that, yes, there is an opportunity to make a filing based on the type 1 trial alone, which would have applicability for both type 1 and type 2 patients. However, we certainly do expect that to happen.

Okay, great. Thanks a lot.

There are no further questions at this time.

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