Good afternoon, everyone. My name's Balaji Prasad, the Analyst for the spec pharma space. Continuing our spec pharmaceuticals track for the day, delighted to have the management team from MannKind with me, Michael Castagna and Chris Prentiss, CEO and CFO respectively. Mike and Chris, thank you so much for taking your time today and joining us at the Barclays Healthcare Conference.
Thank you for having us down here. It's been great.
Maybe to begin with, Mike, could you—I mean, you recently reported your Q4 results. Walk us through the key points and the highlights there, and then drill it down further into the 2025 outlook that you see, and what are the key events, milestones we should look for?
Yeah. I mean, Q4 was a record quarter for revenue. We had a great quarter in terms of Afrezza growth. It went really well year over year. We got our India approval to launch for Afrezza, hopefully there later this year. We were able to take out most of our convertible debt. We started kicking off our phase three trial on clofazimine. We'll talk more about that. We kind of closed out the year just really getting ready for 2025. We're really excited about this year and all the momentum happening in the company.
Maybe as the business stands itself, could you provide an overview of the company too, for those who are new to the story, focus on the strategic goals they have?
Yeah. Yeah, for those who haven't followed the company a while, I was really known for a diabetes endocrine focus for 20 some years. Back in 2018, 2020 timeframe, we started pivoting to orphan lung, with the first deal with Tyvaso doing the DPI deal with United Therapeutics back in 2018. In 2019, we kind of said, where do we best use our technology to drive a difference? Many people may not realize, when you look at dry powder technologies, most of them are lactose blends. There is really nothing unique or special about most, I'll say, third-party CMOs that are making powders. Our technology is the only one really like it. When you look at the landscape of dry powder technologies, a lot of companies have not survived. I think MannKind is one of the few that's still independent, still growing there.
We look at the novel excipient we have is called FDKP. No one else in the world really plays with that. You got to think about it as a delivery vehicle, kind of like the Halozyme technology, right, with biologics. This is just a different technology to deliver drugs into the lung and really get deep absorption and consistent absorption. We have a proprietary device platform in addition to how we make the powder. It is not just the powder, it is the device. You really need both hand in hand. That is really what we did. We pivoted that into orphan lung and said, where do we best help patients and how do we best create shareholder value? I think that strategy has really paid off.
Got it. I think with multiple things happening on the pipeline side, let's start there. Walk us through the current state of the pipeline. What is it that you find the most exciting within your pipeline?
Yeah. It's an exciting time, MannKind. We have really, Chris and I were talking earlier, the first phase III asset outside of diabetes that the company's ever done in 34 years is clofazimine. It's in phase III. It's obviously very important to get that trial moving in the right direction, really help patients get to market as soon as we can. That trial in particular has got 75% of the sites activated. We'll be about 30% enrolled by the end of the quarter in terms of the number of patients needed for the interim analysis. That's the most exciting thing we have right now that's near term that really is a big enough opportunity to be meaningful for patients and shareholders. The second thing that we have that's moving forward is inhaled nintedanib. That can be so amazing for patients.
We'll talk more about that today, I'm sure. That one's going into phase two. Hopefully, we'll meet with the FDA very shortly and be able to see hopefully two assets in phase two, three. We started these projects five, six years ago. It's nice to finally see them getting into humans and scaling up.
Understood. I would imagine as you go through the enrollments, at certain points you'd be updating the market and your investors about it.
Yeah.
Maybe starting with clofazimine, how should we think about this drug versus the existing drugs in the market? Where are the points of differentiation for the product?
Yeah. I think first, the market's really divided between two phases in my mind. You got the early treatment population, mostly taking off-label generic drugs that are very cheap, not that effective, but it's all they have. You got ARIKAYCE approved in the later lines of treatment and refractory. The refractory population has been growing. There are more and more patients getting diagnosed and treated. We think that's where we're going to start. We're following the same model that ARIKAYCE did, start with the refractory and go earlier. Mainly because if you had to enroll a trial in the early patients, it's a mixed population, and it's quite hard to recruit that population. It takes a long time. Ironically, it's just faster to enroll to get to market through the refractory population, which is what we're doing.
We've differentiated the product profile in a couple of different ways. Number one, we've added M. abscessus into our trial. There are patients who would be co-infected with MAC and M. abscessus NTM. What that does is a lot of these patients have co-infections. Because we know clofazimine works on both, we want to enroll as many people as we could as quickly as we can. That will help us hopefully hit some enrollment timelines. The second part is the dosing. Today, the only other drug approved is nebulized every single day. If you treat for six months and you do well, congratulations, you have a whole another year of treatment. We tried to make that dosing burden once a quarter. When you think about clofazimine, it's got about a 90-day, 70-90-day half-life, depending on what study you look at.
It's got a very long half-life. We saw that in our animal models and the lung concentration and lung tissue. What that means is you can load the lung up over 28 days and then take a break for two months and then load the lung again. We kind of have a one-month cycle off for two months, one-month cycle. What that's going to do is really help patient copay burden, administration burden, and cleaning the nebulizer, new parts for the nebulizer to really reduce a lot of that friction. We think that's important for these patients. These are patients who will be on treatment probably for at least six months. If they do really well, they got a whole another year. It's really, and unfortunately, a lot of these patients relapse.
If they had a response, for example, it's in the water system, it's in the soil, they often will get reinfected at another time point. Hopefully we'll be able to show durability of effect in our trial as well. That'll be something here. I would just say dosing, administration, hopefully tolerability, and efficacy we're benchmarking comparable to ARIKAYCE. We don't think there's a wide enough data set to say you can get better than they're getting. Let's see what happens.
As regards the market itself, help us contextualize the total addressable market as you see for the product and maybe the market, and then translate that to potential revenue size.
Yeah. I think there's a huge unmet need in this area. Unfortunately, last year at this time, there were two other companies working on assets that haven't made it. Patients just, they don't have a choice for trials. They don't have a choice for treatment. They really do need options. When you think about ARIKAYCE as a great drug, Insmed is doing a great job building the market up, really raising awareness, raising treatment diagnosis rates. We think that that's going to continue, whether it's Japan or the U.S., those are the two biggest markets. The current brand is on track to do over $400 million this year.
Sorry?
$400 million is what ARIKAYCE is on track to do. We watch that closely because we think this is a multi-billion dollar market opportunity and there's enough room for two players to do well. We really look and see, do we think clofazimine will be used in addition to ARIKAYCE? Could be some patients. What will be used instead of, I'm sure in certain situations? Do we expand the market and treat more people, right? I think that's the real opportunity for everybody. We see this as a $500 million-$1 billion opportunity when we look out there.
Got it. As we look at the progress of the trial, what are the key events or catalysts we should be looking forward to?
Yeah. I mean, the first catalyst is just, fortunately, site activations are going pretty well. We are almost done with that in Q2. It is going to be the speed of enrollment. I will be honest, this year started off very strong. As we look at Japan, South Korea, Australia coming on board, they are really active at using clofazimine in that part of the world. We expect to see faster adoption in the trial because there is already a belief that the drug works. They know the side effect profile, and they really do hope that this has a better side effect profile. We have seen about, we will see about 20 some patients come into trial just in Q1 by the time we close out the quarter.
The interim analysis, which is based on the first 100 patients, will be very important because that's going to determine the size of the trial. We've said publicly we expect to get the interim analysis by the, we expect to finish enrollment by the end of this year. It is a six-month endpoint. Call it mid next year, you'll hit that endpoint. The data people will review it at that point and tell us, is the trial sized appropriately? Do you have to go bigger? One of the things is we'll probably keep enrollment going just in case they tell us you need to go bigger, at least we already have the patients in.
Got it. Remind us again, what is the data that you would see that would give you a decision, at least create a confidence in continuing on with the trial? What would you like to see it as to also help it commercially?
Yeah. In the interim analysis, we're just going to know, is it powered appropriately for the two endpoints? One's a PRO, one's a sputum. That's for the U.S. In Japan, you only need sputum. We don't have to necessarily power it for Japan. It is 180 patients is our goal for the trial. Two-to-one randomization. What the interim analysis is going to tell us is, do we need more patients to make sure we hit the statistical validity of the trial? We won't necessarily know is the response rate 40%, 20% until we get the final results. At least they'll tell us if the trial is futile, then I think it'll just tell us to stick at 180, not go any higher. That'll be kind of just the answer you wait for on that one.
Understood. Shifting from clofazimine to nintedanib. Remind us of where this asset stands currently. I know you have had some interactions with the regulatory agencies for an end of phase one meeting. What's the update there?
Yeah. We have submitted all the work for the FDA. We will be meeting to talk about the phase II trial design. It is a four-arm study, 25 patients in each arm. We will be comparing ourselves to nintedanib. The way to really think about that is one of our hypotheses is that we can dose higher doses directly into the lung over the oral OFEV. There is a big debate out there. Do you need the systemic exposure or is the lung exposure enough? Even within lung exposure, is it a Cmax issue, AUC issue, a frequency issue? Given some of the failures we have had in IPF, it is obviously a very hard target. Therefore, we are going to design this trial to have multiple shots of success, right? One is a comparable efficacious dose.
One is a higher dose just in case miscalculated or can we get better efficacy. The third one is going to look at higher frequency. Could you dose the patient more often and see what happens? We think that that's important. The good news in this disease, we've seen another company prove that an inhaled IPF treatment can actually work as good as the oral delivered treatment. We think the proof of concept's there that you really can deliver an appropriate lung dose and get the outcome you need. Hopefully, our big goal here is better safety, right? The population of IPF, they really just cannot tolerate the existing drugs out there. It's a very tough disease from that respect.
I know it's still in a slightly early stage, generally for analysts like me to start modeling out the market and putting a number to the drug and the potential opportunity, but help us understand the market opportunity for this drug.
Yeah. So I mean, you look today, oral OFEV is about $4 billion in sales. And 50% of the people drop out pretty quickly. And only about 15% of people who have IPF even take a drug. When you think about the marketplace, 85% of the people who were given a death sentence would say, "I'd rather be dead than to take the current drugs." It's a pretty dismal outlook. That's because the safety and tolerability of these products are so tough on the patient. The quality of life is really rough. They're not feeling a benefit. We really think that opportunity is, can you help the 85% who can't tolerate what's out there? Can you get them in the treatment?
I think whether it's our treprostinil program that we have partnered with United Therapeutics and IPF or nintedanib, we think there's a real opportunity to bring dramatic change to these patients and help them. You got the people on the drug, and that's who we're going to start the study with. There's a population here, it's about 15,000, call it, that you can really help bring them a more tolerable option. The real opportunity in my mind is helping all those that can't tolerate what's out there. That's a five times bigger market than where we're at today.
Got it. Understood. Maybe final question around the pipeline side of things. What do you see as a scope for possible expansion of the pipeline? Is that a priority for both of you? How are you thinking about it related to your other goals that you have?
Yeah. I think on the company, when we take a step back, you're looking at innovation over the next 10, 15 years. Obviously, we have a platform technology that can be applied to more molecules. We just picked up an extra research facility last year through our Pulmatrix collaboration there. What that brought us was another team, another expansion, more spray drying capacity. Because when you look at what we're doing from where we were even five years ago, we have clofazimine moving forward. We have nintedanib moving forward. We have Afrezza work happening. You have Tyvaso work happening. There's a small team working really hard to keep all that moving. We need more capacity for R&D. That is now, we basically doubled the size of that team. Now we can actually put some more work into the pipeline.
We're not out of ideas yet. There's still a couple more ideas we have to push forward here. We'll start formulating those and sharing those later this year, early next year. We want to make sure we get the right formulation, the right target dose, and the right animal studies moving. We definitely have more ideas coming beyond what we see out there.
Understood. Shifting more a bit towards the commercial side of things, talk to us about Afrezza and the level of adoption you're seeing currently. How does the drug fit into the broader treatment paradigm?
Yeah. The good news on Afrezza, I mean, it's been around 10 years now. When you look at the insulin pump market, which is only type 1s worldwide, is about $5 billion. When you think about Afrezza doing $65 million last year, there's nothing but upside for continued growth. The biggest challenge that I think we are at this point is really awareness and marketing, right? I think that's something that we've run the brand for profitability the last couple of years. While we waited for these data readouts to just happen last year, we've now filed with the FDA a labeling change that really will change hopefully the dosing configuration or label, as well as pediatric expansion. Those are two big opportunities in the next 12 months that we'll wait for.
What that allows us to do is promote inhaled one and inhaled three into broader populations and hopefully start people off on the right dose the first time instead of waiting for doctors to titrate up and people struggling in that phase, which is what happens in the real world. Now that the data is out there, you can clearly see Afrezza is a differentiated product. It works faster than injectable insulin. The onset is there. That head-to-head data is now out there. We'll be presenting five new data sets next week at the ATTD conference. I think you're starting to see KOL support. I think we'll be excited for the kids. I look at Afrezza. It's had an inflection. One of the hang ups has been around safety of inhaled insulin.
It is really hard after 10 years when you see no safety signal to say that there is a safety issue, right? We have treated tens of thousands of patients at this point. We have seen nothing in our databases. It is really exciting now to finally see the pediatric data because that is what we have been waiting on, right? If pediatric lungs were safe and effective, that now gives you a whole new population with a whole new data set and looking at lung function data. We saw no difference in the two arms of that trial. That was the key goal in the peds study, what does the one-year safety look like? We have 85% of that data in at this point.
Now it's really nice to be able to see that and confidently go out there and say, we have a drug that's safe and effective for a broader population. That will now set up Afrezza to be a growth engine as we go forward in the company.
Sure. So the sNDA submission is still on track for the first half of the year?
We're meeting the FDA in a few weeks. That'll just drive to the one, the six-month data is already done. We can file that in April if they let us. If they want the 12-month data, that data set will be wrapping up in April. We'll have that file ready in June, July. It's about one quarter difference between the two data sets. We think the patients deserve an option. This is really the first time in 100 years that a kid living with diabetes will have an alternative choice. They've had no choice but injectable insulin. We think it's important to get this to the population, to get this out there and really bring options to patients that have never had anything else. We're excited about that.
Hopefully, the FDA in a few weeks will agree that we can file this sooner because we'll have the full data set. So it's not like there's any guesses here. We know 85% of nothing really is going to change in the last 15.
Got it. Help us understand what this means in terms of incremental market opportunity and also the overall market opportunity for Afrezza and where you see the peak sales for the drug.
Yeah. I don't see Afrezza, I mean, between now and 2040, pick your year. I don't see a generic coming. I don't see a peak sales year. I think this drug will keep growing for the next 10-15 years because we're going to go international expansion. You're going to go population expansion. You're going to go into hopefully helping a bigger and broader population. It's really a function of marketing spend and marketing investment and sales execution. We're at that point now with the new data sets that really can drive that. What we kind of said on the last earnings call was think about every 10% share in pediatrics is about $150 million in revenue. That gives you a baseline of we have to kind of feel like that's a reasonable expectation as we go out there.
Last year, we did about $65 million in revenue. That takes you to, call it, 210, 220. All those kids turn into adults. They're going to live, I mean, how many brands and companies have you talked to today that have a 60-year patient lifecycle value? Sixty years is a long time to be living with a disease. If you're 12 years old, you're likely to live 60 years. As those kids grow, you're just going to see Afrezza compound year after year after year over the coming decades. That's really exciting for us. That's why I said I see this just starting to compound faster as we go into kids. That puts you at a $200-$300 million run rate in the near term. The near term is 2027, 2028.
I think we can debate that. That kind of gives you that plus Tyvaso plus the pipeline. All of a sudden, MannKind is a real reputable differentiated company.
Got it. Great. Changing tack slightly on the commercial side still. Earlier this morning, we had Amphastar. We did speak about their collaboration with you on BAQSIMI. Take us through that and what does it mean, this promotional collaboration that you have and also the implication of this for your overall strategy.
Yeah. I mean, Amphastar has been nothing but a great partner since I got here nine years ago. They have been so flexible. The company was in deep financial constraints. I would just say that that company and the leadership there has been amazing to work with. We came to them last year with an opportunity with sales force capacity because we stopped marketing V-Go. We said, "Hey, would you be open to a collaboration next year?" They quickly stepped up. We came up with a quick, easy deal structure. What was key to us was, "Let's not make this complex. We have a 60-person sales force. How do we just drop an opportunity to help BAQSIMI faster while continuing to have a different reason to show up to our offices, right?" 95% of customers do not write Afrezza on every single visit.
How do we increase our shots on goal and how do we increase the productivity of our sales force? We think this is a great opportunity with BAQSIMI. In addition, what that does is it allows us to go into pediatrics and start to educate that market faster in terms of BAQSIMI and expand deeper into that population and build that reputation with MannKind. That is one of the opportunities we have in the second half of this year, really expanding the footprint of our sales force with BAQSIMI in the bag, really going out there during the back-to-school season for those guys while hopefully getting us ready for pediatric launch.
Got it. With a few minutes remaining, I do want to discuss some points around the balance sheet. Walk us through the current state of the balance sheet. As the company has evolved and come to this point, what are the capital allocation priorities for 2025? How has it changed?
Yeah. We really transformed the balance sheet in 2024. We had the opportunity to pay down the vast majority of our debt. We ended the year with over $200 million in cash and a small stub on our convert of $36 million. We have a very clean balance sheet that we think really sets us up for 2025. As we think about our priorities, this is the first opportunity we've had really in quite a while to invest in Afrezza with the pediatric opportunity. Mike highlighted that well. That's something that we certainly will focus on this year. The pipeline, as we commented on, having a phase three asset, an NTM, is such an exciting opportunity for us. We will fully fund that to go as fast as we can. The same is true for our IPF program.
Excited to move that into phase two at the end of the year and move that through as quickly as possible as we can. Such an unmet need in both of these populations.
Got it. With these programs ongoing, how should the market be thinking about operating margin directions? At what point could we also start seeing the return on some of these investments you're planning to make?
Yeah. As we've commented on, Afrezza and the EBU business has been profitable for the last six quarters or so. That gives us an opportunity to really invest in that business without truly impacting the bottom line. The revenues that are generated through both manufacturing, Tyvaso DPI, as well as the royalty stream allows us to fund our pipeline. We've been cash flow positive and profitable the last couple of years. We intend to be so on an annual basis. It may vary from quarter to quarter as priorities change and just how accounting flows through. We expect to be able to protect that in the near term.
Got it. Maybe final question for the session. With multiple things happening and you're hitting some key event milestones over the next six to 12 months, a good spot to think about the longer-term vision for the company. What would the company be looking like in three years or five years from now?
It's funny. If we fast forward, we were just talking to somebody, three years from today will be 2028. That's hard to believe, number one. Number two, when you think about the company, we should be in the middle of launching clofazimine by then. Afrezza should be off and running in the peds segment. Afrezza should be expanding globally. We should be launching clofazimine in Japan. Nintedanib will have the phase two readout by then. You can see that'll probably be in phase three realistically. Tyvaso IPF could be launching in the DPI form in that time frame. All these are just going to be tremendous revenue growth drivers. They're only two, three years away. I looked over nine years it's taken me to get us to this point.
It's amazing how much more transformative we're going to be if we're sitting here three years from today. When you add up all the revenue streams, how much profitable MannKind can be and the additional pipeline opportunities that we'll be getting ready for. It's just going to be an exciting place to be. We're recruiting great talent in the company right now. We got a great pipeline. We got great opportunities to bring in some awesome talent to bring us to the next level. In three years from today, it's amazing. When I look back three years ago, it was 2022. We were just getting out of COVID. Things were shut down. Tyvaso wasn't approved. Pipeline wasn't in belief. Now you got two assets in phase two, three readouts on Afrezza. Everything, no major debt to deal with. I think the company's in a really bright spot.
Despite what is a dark side of the market right now, it's really tough politically. And it's a tough financial market. We don't have these headwinds to deal with, unfortunately, which is the first time MannKind can say that.
I think that'll be a good spot to leave this conversation at. I look forward to updates around the progress. Thank you again for joining us at the healthcare conference. I wish you a very productive day of meetings.
Great. Thank you so much.
Thank you.