MannKind Earnings Call Insights: Partnership Status and AFREZZA

MannKind Corporation (NASDAQ:MNKD) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Partnership Status

Matthew Luchini – Piper Jaffray: This is Matthew on for Ian. Thanks for taking the questions. So first I guess the one that always seems to come up, and that’s I was hoping you could give us sort of the latest color, the latest take on where you guys are in terms of a partnership status and how diligence is progressing with potential partners? Then I have just a couple of more after that.

Hakan S. Edstrom – President and COO: This is Hakan and which we have indicated before is that we are in discussions and also in diligent discussions with a number of interested parties again seems to be as we indicated earlier with the addition of the type 2 market and significantly increase opportunity that attracted additional potential partnerships. So those say discussions and due diligence sessions are underway as we speak.

Matthew Luchini – Piper Jaffray: Matt one for you. Could you just give us your sense as to expectations for operating expense run rate in 2013 and beyond, particularly once the trials complete?

Matthew J. Pfeffer – Corporate VP and CFO: I will try. So you will remember that I have been saying we are going to burn somewhere in the $10 million to $12 million a month range for a long time. We consistently seem to underspend that so I am getting a little reluctant. But that is what our projections are showing. So I do still think it’s going to pick up into that range as we hit the kind of crescendo period of the clinical trials in the first couple of quarters here after which we should start winding down. There will be a slight offset as we gear up a little bit for this commercialization. I think post filing but you should see some of the certainly clinical trial expenses which have been the major driver for the increases in that side will start coming down a little bit through the latter part of the year. Beyond that I can’t be to term it much more specific.

Matthew Luchini – Piper Jaffray: Somewhat sort of related, I guess, Al actually mentioned in the manufacturing facilities in his remarks and I was just hoping you guys might be able to comment on that in terms of expectations. Is that something that in terms of timing and also is that something that you think you guys would handle yourselves or is ultimately the expectation that the partner would take care of that?

Hakan S. Edstrom – President and COO: Initially, we certainly will handle it ourselves based on the Danbury facility. As Al mentioned, it has a capacity on a commercial basis to service up to 2 million patients. Beyond that, that certainly will be a discussion. We potentially thought as to whether they would have an infrastructure to help build out that and the structure for doing so is still open ended. But if we certainly, I would say have probably a couple of years of that opportunity once we have a deal in place to determine, which is the most efficient way of doing so.

Matthew J. Pfeffer – Corporate VP and CFO: Yeah. Just to make sure we are all on the same page, when we talk about a 2 million patient capacity at the Danbury facility, that’s in a fully built out (stake). We expect to launch with about quarter capacity. We have the footprint in place for that use of the full amount of the 2 million capacity but we haven’t put all the equipment in because obviously we didn’t want to spend all the money before we had to. So it has a 12 (multiple-finish) line capacity. We expect to launch with three. So it’s about a quarter capacity roughly. Then we can just build it out as we need it. Remember, the 2 million capacity while we are talking about it is not very much, equates to somewhere in the $4 billion of sales range. So we are looking forward to starting to worry about outstripping that facility.

AFREZZA

Steve Byrne – Bank of America: I welcome your thoughts on the merits of FDA’s decision to require Novo’s degludec to have a cardiovascular outcome study and more importantly, what data do you have that either shows the lack of or the strength of your view of a lack of cardiovascular signal with AFREZZA?

Alfred E. Mann – Chairman and CEO: Our cardiovascular signal showed a 1.01 cardiovascular effect, which was negligible and the FDA has not pursued this any further. The degludec numbers were enormously higher, and that’s why they got the CRL.

Steve Byrne – Bank of America: With respect to the enrollment in the 175 trial, you had 167 have not completed. I think you said 360 or so were randomized. Can you at this point estimate how many you think will complete at this point?

Alfred E. Mann – Chairman and CEO: We only need 246, but Bob?

Robert Baughman, PhD. – VP, Experimental Pharmacology: Hi Al, this is Bob Baughman in Danbury. We have 124 subjects who have completed the trial in its entirety. We still have about 173 subjects in the study. So that gives it up to 297 subjects to complete 246, and as you know we are well on our way for this study. So we will have more than enough subjects to be able to complete the trial.

Steve Byrne – Bank of America: Bob based on the discontinuation rate, can you estimate how many out of that 173 will complete?

Robert Baughman, PhD. – VP, Experimental Pharmacology: Of that total I would say we will you only lose maybe 15% of them. As you know most of the drops in all of our trials occur early on when patients are still getting used to the inhaler relatively few drop out at the end of the trial. That’s essentially where we are. So I do not expect even say the 15% rate in the 175 Study.

Steve Byrne – Bank of America: One last one for me. Matt can you talk about the adequacy of the $62 million of cash right now to take you through at least the results in August?

Matthew J. Pfeffer – Corporate VP and CFO: Remember $62 million by itself will get us right to about the time of results. Remember we do still have a large amount of credit available from Al across the table from me here. Not only the fact that there was available previous to the last financing but also some monies that were reinstated, so that should be enough to bridge the gap if we decide to use it. That said we have been trying to make that line go away. So we might be looking at other alternatives from that in the meantime. But really what we need to bridge through is just the data which is it is in August as we said. So that should take us right to about that point. Remember also we have in late October the expectation of a large inflow of money on a semiautomatic basis from the warrants we issued with the last financial issual otherwise (expire related) in October with any kind of data at all and we obviously expect very positive data from these studies. We would expect those warrants to be in the money and that should bring in almost ($90 million). Additionally, I think we are going to be generally pretty good, safe financially this year.