MannKind Corp (MNKD) 2014 Q1 法說會逐字稿

Welcome to the MannKind Corporation First Quarter 2014 conference call.

(Operator Instructions)

Joining us today from MannKind are Chairman and CEO Alfred Mann, President and COO Hakan Edstrom, and Chief Financial Officer Matthew Pfeffer.

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

Please go ahead.

Good afternoon, and thank you for participating in today's call.

I'll be discussing very briefly our Financial Results for the First Quarter of 2014, as reported this morning, and will then turn call over to Hakan.

But 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 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 (inaudible) 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 12, 2014. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

Turning now to the financials.

Net loss applicable to common stockholders for the first quarter of 2014 was $52.1 million, or $0.14 per share, compared with the net loss applicable to common stockholders of $41 million, or $0.15 per share, for the first quarter of 2013, and $53.6 million, or $0.16 per share, for the fourth quarter of 2013.

Research and Development expenses were $26.2 million for the first quarter of 2014, compared to $29 million for the fourth quarter of 2013, and $26.4 million for the first quarter of 2013.

R&D expenses decreased by $0.2 million for the first quarter of 2014, compared to the same quarter in 2013, primarily due to a decrease in clinical trial-related expenses resulting from the completion of the Affinity studies, offset by increases in non-cash stock compensation expense and commercial readiness cost.

R&D expenses decreased by $2.8 million from the prior quarter, primarily due to decreases in clinical trial-related activities and a non-cash stock compensation expenses.

General and Administrative expenses were $15.2 million for the first quarter of 2014, compared to $17.6 million for the fourth quarter of 2013, and $10 million for the first quarter of the previous year. General and Administrative expenses decreased from prior quarter due to non-cash stock compensation expense associated with the achievement of performance grants in the fourth quarter of 2013, which was nonrecurring in the first quarter of 2014.

The increase in the same quarter of the prior year is primarily due to non-cash stock compensation expense and financial transaction costs. Cash and equivalents were $35.8 million at March 31, 2014, which compares to $70.8 million in the fourth quarter of 2013.

Currently, there is $30.1 million of available borrowings under the amended loan agreement with The Mann Group.

On May 6, 2014, Deerfield purchased $20 million in notes under the provisions of the amended facility agreement.

With that, I will now turn the call over to Hakan.

Thank you, Matt.

Good afternoon.

Having completed a very successful AdCom Committee meeting on April 1, we are now eagerly awaiting the finalization of the NDA reviewed by the agency.

While that decision may not materialize until the July 15 PDUFA date, we are currently actively working with the agency to ensure a timely review. In the meantime, we are preparing our Danbury site for commercial production by executing qualification and validation runs and building operational infrastructure.

And we are also working closer with our supplier to ensure that they will be ready to meet commercial forecast requirements.

The [four chip] process, supported by Greenhill and Associates is proceeding (inaudible), and we are quite pleased with the progress.

With those few remarks, business is proceeding as usual. And with that, I will now give the meeting over to Al for some remarks.

Al?

Thank you, Hakan.

Good afternoon all of you who are tuning into this call.

As my colleagues have noted, this is an awkward time to speak publicly of certain import matters which are of interest to you. My comments today will thus be rather limited.

A very significant event that occurred during this past three months was, as Hakan mentioned, the FDA Advisory Committee meeting on April 1. During that meeting, there was an extensive open discussion, after which the panel overwhelmingly voted to recommend approval of Afrezza, 13 to 1 for Type I diabetes, and 14 to 0 for Type II.

Of course, we were really very pleased with the proceedings of the AdCom and with the overwhelming positive vote. There was so much that was satisfying.

Our MannKind team delivered effective presentations on the safety, efficacy, and many valuable attributes of Afrezza. Seventeen public speakers gave very strong endorsements and arguments for approval.

Those public citizens included patients who participated in the Afrezza trials; several physicians prescribing or even themselves using insulin; and senior people of several major diabetes organizations, including the American Diabetes Association, the American Associates of Clinical Endocrinologists, the Juvenile Diabetes Research Foundation, Closed Concerns, Diatribe, and Take Control of Your Diabetes.

Patients indicated very significant attributes never available with other insulins. The AdCom meeting concluded a very open and detailed review,. And the panel provided some recommendations for the agency to consider.

As we reported, the FDA then reset the PDUFA date by the standard three-month extension to July 15, to allow more time for them to review those suggestions. And also some additional information that we had submitted in response to some of the requests shortly before the AdCom meeting.

The agency may not need the full three months, but we cannot predict when it may announce its decision.

Another major activity during this past period has included rather intensive discussions and negotiations with a number of potential partners interested in commercializing Afrezza. We have said that we will only make an announcement on these matters upon finalizing of an agreement.

So on today's call, we cannot discuss any such progress. We apologize that we cannot talk about the very subjects which are of such significant interest to many of you on this call. Yet we do say that we are making progress and that we expect much to report on those important matters within a matter of weeks.

We look forward to making announcements as soon as we have something substantive to report. So please be patient.

Thank you all for joining us today, and we will now open the call for your questions. But keep in mind that we cannot provide substantive information about certain key subjects.

Operator?

(Operator Instructions)

Our first call comes from Mr. Graig Suvannavejh from MLV and Company. Please go ahead

Great. Good afternoon everyone, and thanks for taking my questions. First, let me congratulate you on the very positive AdCom that you had down in the DC area. So that was a great turnout for you guys.

Thank you

Sure, no problem. My first question just has to do with, post that event, given the positive vote, can you give us a sense at all of what the nature of your interactions with FDA have been like?

And in particular, I'm curious to know if you guys have made any progress on what seems to have been the desire by the AdCom to see long-term follow-up in terms of particular items like diabetic ketoacidosis and potential lung cancer? Just given uncertainties on how you would monitor for things like that?

Please understand that the primary task of the agency at this point, in addition to making their final decision, is the preparation of the license -- I'm sorry, the label. The REMS project, which is what you're referring to, and also probably the phase IV study for children.

There has been interaction in between our people and the agency on our REMS program, so it is progressing. It's still under, certainly, the consideration by the FDA.

Okay. My second question has to pick up on a comment, Al, that you made in your prepared remarks.

You had mentioned something that, while you can't really talk about -- whether it's partnership discussions or perhaps other aspects of your discussions with FDA. But you had mentioned, I believe, that we could expect to see news in a few weeks. And I don't know if you could maybe expand on that, in terms of what specifically you might have been referring to?

There are discussions going forward. Of course, the FDA has approximately -- what -- maybe eight or nine weeks to make their decision. They don't need to take eight or nine weeks; they could do it much sooner than that.

Obviously, it would be nice to do it sooner, so that we could have a more open session at the American Diabetes Association meeting in another month. But the other -- whether it takes four weeks, or eight or nine weeks, I can't answer.

As to partnership discussions, there are conversations going on now, and those don't necessarily have to wait for the NDA to be finalized. I believe that the -- there's enough expectation of approval now. It's just really a question of the details of the label in the REMS program that are the only issues really outstanding at this point. But one never knows what's going to happen with the regulatory process.

Graig, this is Matt. Just to make sure we're all on the same page, I wouldn't say within a few weeks inside the coming weeks, or in the weeks ahead. So that's a little less -- a little more vague than I think you implied by your question. So I wanted to make sure you didn't misunderstand.

Okay, I just -- yes. That's exactly what I was trying to drive at, to see if there was something that you were trying to manage expectations appropriately, in terms of news coming out on either end. And then maybe, Matt, I'll ask a question about current cash, and then I'll jump back in the queue.

How are you thinking about cash right now? I think on the last call, you said you felt you had enough cash through third quarter of this year. And certainly, we are where we are right now. So what are your latest thoughts? Or how should we be thinking about how you're thinking about cash right now?

Yes, maybe I should have elaborated on my one simple sentence in the discussion I gave. But in addition to the cash we already had on hand, which could've gotten us pretty close to the revised PDUFA date, but again, pretty scarily close to the edge at that point. We did draw $20 million from Deerfield, and that's additional straight debt, to give us more a little more breathing room.

And so between that and the -- if we need to, I guess we could go back to the coffers, to our credit facility with The Mann Group, where we have another $30 million there. So we feel pretty comfortable we can get us to a decision point, and then see what happens.

Okay, great. I've got a ton more, but I'll let others ask questions. I'll jump back in the queue. Thank you very much for taking my questions.

Thank you

(Operator Instructions)

Then we also have Mr. Christopher James from Brinson Patrick Securities

Good afternoon, and thanks for taking my questions. And let me also add my congratulations on the tremendous progress you've made.

I understand the sensitivity around not discussing the discussions with partnerships. But could you perhaps let us know if you are able to share some of the back and forth with the FDA regarding label and REMS discussions with potential partners during the process? Or is this something that will be discussed after?

Actually, we do have sharing sessions that -- in between our regulatory people and the regulatory people of those people that we believe to be top potential for partnerships. So yes, we are trying to address that in an appropriate, say, collaborative manner

Great, that's helpful. And in the past, I think you said you would be able to, from a manufacturing standpoint, support commercial launch within six months of approval in partnerships. Have any those timelines changed since the PDUFA was pushed back?

No, we still are operating with, certainly, the fact that we will be -- have -- ready to support commercial launch within six months of approval. And quite honestly, if approval is around July 15, we may even be a little bit faster than the six months, because we cannot wait to do our validation runs and make the manufacturing ready for commercial operation type of scale.

All right, that's helpful. And then, regarding the supplemental NDA for the 9 and 12 unit cartridge. Could you maybe walk us through the necessary steps for this and how much additional preparation is needed for that application?

When it comes to the 9 unit, that is worked on very actively right now. And again, the assumption is that, immediately upon approval of the Afrezza, you would submit the supplemental SNDA. And hopefully then get such a response within six months on that one. So that should be almost in approval in conjunction with the launch, or very shortly upon launch.

When it comes to the 12 unit, it's a little bit more involved, because of the fact that we most likely will need to change a little bit of the concentration of the ingredients into that one. So that's further up in terms of submission. I would say that would probably happen, certainly following launch, and during maybe late 2015.

The difference for the 9 unit is simply putting a little more powder in the cartridge, where as Hakan says, we are adding a little more insulin onto the carrier particles for the 12 unit. How long it will take is hard to say. Hopefully, the agency will not require much for that approval, as well, because we really need both of those as soon as we can.

Great, that's helpful. Thank you, and good luck.

Thanks.

Our next question comes from Mr. Cory Kasimov from JPMorgan. Please go ahead.

Hi, this is actually Brittany on for Cory today. Thanks for taking the questions. Just curious what your launch plans are, it you don't sign a partnership agreement this year?

We certainly do intend -- that's our plan is to launch in conjunction with a partner. Do we have continued plans in place which would be appropriate for a company like ours? Yes, we do, but at this point in time, I would say we feel comfortable in regards to the partnership opportunities

We have several different approaches to how we are going to do this, but we don't doubt that we are going to get there, so we are not worried. At least I'm not.

Okay thank you

Thank you. And our next question comes from Graig Suvannavejh from MLV and Company.

Thanks so much for the follow-up. Just two quick questions. One, how are you thinking about ADA right now, given that it's less than or about a month away? How does -- how do you guys prepare for that meeting, given how important that is, and without knowing what's happening with the PDUFA?

Unfortunately, since we don't really know for certain when we are going to be approved by the FDA, or we have no decision yet on the table by the agency, we are questioning whether we should have a formal operation at the ADA. There are going to be couple papers about Afrezza, but -- and we had reserved a booth there.

But whether we should spend the money unless we know we have the approval is a question that's before us now. And we are wondering whether we should spend the money to have the booth under the circumstances.

Okay, great. And so what is -- if there's a default plan right now? Do you have one in place around ADA activities?

Not specifically, but I could -- what we could say is that the amount of money that we would spend, potentially in vain, for a booth, depending on the timing of approval, we could do a lot in terms of information meetings and other activities in conjunction with the ADA. Plus the fact, we may even be in a situation where we would have a partnering opportunity there, if we have both the partner and the approval in place at the time. So I think we will have to be just a little bit fast on our feet, and do the best we can.

Graig, I think you can safely assume from what you hear, if I can recap. We will all be there. And there will be some presentations that we will be giving at ADA, so we will all be around.

The question is just whether we have a booth on the floor or not. But we will still be pretty actively involved at ADA.

We would like to have the booth. The problem is that if we can't have open discussions, it probably isn't worth spending the money. And we can't have open discussions unless we have approval sometime, probably days if not a week, before the ADA meeting. And we have no guarantee of that.

Sure. Just one last question, if I may. Just to summarize the comments that you have made on this particular call.

It sounds as if you guys are pretty comfortable, not only on just the straight up FDA approval, but also in terms of partnering opportunities. And if I read in between the lines, I read body language, how I think you said you weren't worried about much. So can I confirm that?

You don't see our bodies, so I don't know about body language. (laughter) But we are so confident of the significance of this product. And there are partners out there that recognize that this is going to be a very, very significant product. So we are not really worried.

It's just a question of how we are going to launch it. There are several opportunities that we are considering.

Graig, obviously, nothing is done until it's done, and we have been confident before. But I could tell you, I'm sitting only a few feet from Al, and he looks -- doesn't look at all worried to me. (laughter)

Okay, that's great to hear. Thanks very much, and good luck with the process going forward.

Thank you

At this time, I am showing no further questions. I will now turn the call over to Mr. Mann for final remarks.

Thank you all very much for joining us today, and we look forward to further and hopefully much more open communications with you during the coming weeks. Thank you all.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation, and you may now disconnect.