Post by 4Balance on Jun 2, 2014 19:04:50 GMT -5
MannKind (MNKD) at Jefferies Global Healthcare Conference (Transcript)
Jun. 2, 2014 7:25 PM ET | 1 comment | About: MannKind Corporation (MNKD)
Executives
Matt Pfeffer - CFO
Analyst
MannKind Corporation (MNKD) Jefferies Global Healthcare Conference June 2, 2014 2:30 PM ET
Unidentified Analyst
Good afternoon. Welcome back to the 2014 Jefferies Healthcare Conference. My name is [Sean] (ph). I am from the Research Department over here.
It's my pleasure to introduce Matt Pfeffer, CFO of MannKind Corporation.
Matt Pfeffer - CFO
Thank you very much. As you know here I am to talk about MannKind Corporation. Before I start, I am going to say as I always do that I probably will be doing a few forward-looking statements, so please refer to our SEC filings for additional risk factors and other information.
This is a pretty exciting time in our history at MannKind, right on the bank of another PDUFA date appearing closer rapidly. Obviously I can't talk too much about the FDA progress or partnering progress. So I am going to confine most of my remarks to kind of general background with the product and how we got to where we are.
So AFREZZA is the first of what we consider a new kind, a new class of insulins. We've coined the term ultra-rapid acting insulin to differentiate it from normal regular rapid-acting insulin, but it has a very unique profile that's much more physiologic and it's in fact to [led] (ph).
If you look at the curve of action for AFREZZA, and you'll see it little later on, you'll see that it's pretty close to what you would get from a health person and what's created by the pancreas naturally and that kinetic profile or a time action profile is what gives us some very important advantages.
Just by way of background, I probably don't have [time] (ph) to do this, but diabetes is a huge and unfortunately very, very rapidly growing problem, not just in the United States where we often associate with things like obesity and another big problem, but worldwide, even in countries you wouldn’t inspect.
And in fact if you look at the top 10 countries for incidence of diabetes, you might be surprised to find that it tend to fall in the Mid-Eastern some rather poor island regions and things. So it's a big problem. It's growing worldwide, unfortunately in the United States as well.
And as a consequence, probably to no surprise, the insulin use for diabetes is growing as well. So still not as high as we might like it because people for reasons that are probably well understood are rather reluctant to take insulin. It's viewed as kind of the treatment of last resort, but it's growing very rapidly and we find we have about 500,000 additional new insulin users each year.
As a consequence, the market for rapid-acting analog is large and growing, showing a 22% compound annual growth rate, partly because of additional patients and partly because the prices have been pretty consistently increasing as well.
So we have a huge market that we are looking to address. This is $4 billion of sales just in the United States and that's only for existing rapid-acting analogs. Given the reluctance of many people to use a rapid-acting insulin, we hope we can penetrate a big portion of market beyond that.
So why do we think that? Well, we know from studies that about a third of patients fail to take their insulin as prescribed. They don't bother to take it. The needles have grown very small and is perhaps not as painful as it once was, but it's still not convenient.
There is a fair amount of stigma associated with it and there is a lot of fear associated with it beyond the stigma because it's difficult to use it correctly because it's a very potent medication, but if you used it incorrectly, you end up with hypoglycemia, which can result in a number of complications and unfortunately including even death.
So as a consequence, we find that patients and the doctors are very worried about hypoglycemia. It's the thing that is most likely to land a diabetic patient in the emergency room and so it scares people.
If it were not for this, we hear from many other studies that you would be much more likely to get effective treatment from insulin. You achieve to target more effectively and get better outcomes.
Other complications of insulin use beyond hypoglycemia are the slow absorption, so it takes a while to become effective and it's hard to arrest the rising in glucose following a meal very well.
If you start insulin, you typically will gain weight, which tends to be an exacerbating factor obviously amongst diabetics and of course the inconvenience of injections is obvious. People don't like to do this in public places, but typically find a place to excuse themselves and they don't see one more reason why people don't always take it when they should.
So it's said by most of the experts out there that what you are really shooting for is to get as normal glycemic profile as possible without except the awaking of hypoglycaemia and that's been very challenging with insulins today.
But we think we can change that with AFREZZA. Here we have a product that has excellent control, while at the same time, decreasing risk. It has what we call the ideal PK/PD profile. It's much more physiologic in the way it acts and I will show you those curves in just a moment.
It synchronizes much better with you meal. So when the body reacts to the start of a meal with a big peak of insulin in response we replicate that peak very nicely.
When you finish your digestion at which point your body will stop producing insulin, we replicate that very well as well. So it's a very fast onset, but also fast offset medication and it's in a nice form factor, it's very simple and easy to use.
As a consequence of all this, we see this as really a blockbuster opportunity. It's the first of a new class of insulins. We think it's going to get ultimately very rapid acceptance and hopefully penetrate down through different markets peers, which I'll talk about in just a moment.
And we plan to be very safe up to this point. We don't have any important safety signals that we've shown, even though it's been used in catalyst studies in over 6,000 patients at this point.
So I talked about the different people that we might target for this product. Some of them are more obvious than others. We do have 4.2 million prandial insulin users. So getting some of those patients to switch because they are not very well controlled or they just don't like the current regimes. It's a really obvious target and often viewed as low hanging fruit.
In addition we have a lot of patients that are on basal treatments only because doctors have found that it's easier to commence their patients to start insulin with just one injection a day of our basal insulin, than going into something like a prandial insulin, which require one for each meal, but that has limited effectiveness and sometimes in duration and so people that need addition intensification of insulin giving them an easier alternative than three additional injections per day is viewed as being somewhat very attractive and we are hoping to capture a good portion of this market very quickly as well.
And then ultimately the big gold mine is everybody else are the [slow] (ph) type 2 diabetics that have not taken insulin yet. I know there are a lot of people out there and kind of them my day to day life that really probably ought to be on insulin and their numbers suggest that they should be, but they resist heavily doing that for a number of reasons.
Some of them very good. I've had people talk to me about the nature of their jobs and they can't risk the possibility of hypoglycemia and becoming disoriented even briefly or just is not convenient for them to do it based on what they are doing, but frankly for the most part they just don't want to admit that they have a serious disease, which comes from taking injections of insulin or in a bit of denial I would say and speaking of people I know directly who are in that situation.
So we think hopefully we can start to penetrate that market as well. It's going to take a little longer, but that's where the real big numbers are going to come from and that's -- that are two areas where you will see numbers beyond the rather large impressive numbers I showed just to rapid idea of insulins today.
So if you look at the curves because this is really what the product is all about. It is a very convenient product. We think the form factor and ease of use is nice. It will in fact I believe encourage compliance and better patients taking their insulin as they ought, but really it's all about the kinetics of the product and here you can see the colors are not as distinct as I would like them.
You can see that very rapid uptake curve, which is AFREZZA compared to best in time rapid-acting analogues, which is obviously much slower because their peak is high and then importantly lasts for a very long time.
So you can see within minutes, in typically 10 to 12 minutes, we are peak concentrations in the blood stream, very similar to what a healthy pancreas can do within a minute or two of the same speed. We can also replicate that for space and thin response, which has some important benefits as well.
For example, that firstly phase in home response tune to signal other parts of the body or just the meal, we don't need other sources of insulin such as the glucose that's accretive or level between meals.
And then also importantly when you finish your digestion, you want that big spike of insulin to be gone and you can see within a couple of hours, we are essentially back to baseline or heading back that way and as a consequence of that, you don't have the severe risk of hypoglycemia from the post-digestive burden of insulin in your system.
The bottom curve shows essentially the same thing. It's just the different way of measuring the effective insulin. So one is showing the insulin levels in the blood stream, the second one is showing the usefulness of the insulin or showing its activity,
But these are very unique profiles and you can see why they'll lead to some of the advantages that we see in the studies and I'll recount some of those later.
The preferred patient experience is obvious. It is a very small palm size device. It looks little bit like a whistle in use. So we do it at least for the stigma of an injection by any means and if you wish to, it's one if you could easily conceal within your hand, but I think most people will not need to do that.
It's very simple. Its a few molded plastic parts. So inexpensive to make. So we essentially are giving them way along with the product and like razorblade model I suppose.
It is with power you just power by inhalation. There is nothing complicated involved. It's a dry powder form of product. So there is no [aerosol] (ph) or compression or anything else and it's pretty intuitive how you use the product.
It's quite simple and we found in a lot of end use handling studies that most people can figure out frankly with no instructions whatsoever, but just a few minutes. It is almost always efficient and help people understand how it's properly used because of the entire cartridge of insulin is emptied within about half a second and then you just have to make sure you do a deep enough breath to get it down in the deep lung. So that's pretty simple concept for most people to understand.
As I said, the devices are inexpensive enough. We essentially give them away. So in the older devices, when they are a little more costly, we say every two weeks just clean it with warm water to wash it out. At this point, we said just not even worth bother doing that. Just pass it away every two weeks or so. We'll include two in every box of a month's supply.
So I said it's like a little bit about the trials. This is kind of old news for most of you, but these are trials that wrapped up, gosh, it's approaching a year ago now. These were our most recent round of Phase 3 pivotal trials.
So that who've been following the company for a while will remember that we had an earlier generation inhalation device that we used to generate some pretty impressive data in the first rounds of pivotal Phase 3 trials, but we did change that device. We updated -- we took it back even though we had already demonstrated of our equivalency, that bigger I do the show some more prolonged patient experience data in an efficacy study. So we did that.
This was the type 1 study in which it had three arms instead of two. We've traditionally done pretty traditional design studies where we had some comparison against best in kind of rapid-acting analog.
Both arms in the background of Lantus or excuse me, a long acting insulin and this one was differed only because we included both the old device and the new device in different arms at the FDA's request. So that we could show a nice bridge between the two devices and show a similar safety profile.
So this was essentially a six month stay and what we found was it was a non inferiority study design and we showed in fact non inferiority in HbA1c with high statistical significance.
At the same time we showed less risk of hypoglycemia, so with similar efficacy, we have less hypoglycemia. These numbers have varied a little bit, but they've been very consistent between all of our trials, sometimes as much as two thirds less, which I think is the data we found in other earlier Phase 2 pivotals, but in every case, it's not only in the percentage of people getting severe hypoglycemia, but also the event rate of hypoglycemia are consistently less.
So it's a less risky product to use and you can kind of understand why that would be from the kinetic profile we talked about earlier.
When we talked about safety before, one of the two safety things that consistently comes up is lung function and the most typical measure that would be sub1, which is for its respiratory volume.
So what we've shown is that we do have a small, but measureable decrease in lung function. A few years ago, we probably wouldn’t even been able to measure it, but we have sophisticated ways to do that now and we can, but it's not clinically significant and importantly it doesn’t change.
So especially it's less obvious here that the study went longer and if you were to go back and look at our two-year safety study, you will see the lines went directly parallel throughout the duration of study. There is no divergence. You see a separation immediately from the first time it's measured. It ran parallel all the way through until it stopped and then it converged back at the end.
And the convergence at the end is important because it demonstrates, there is not a tissue change or any kind of permanent duct happening. We believe this is just the natural reaction to the inhalation of a powder and it's not atypical to see for powder medications inhaled through the lung.
So our conclusions did show non-inferiority, which is what we are trying to show in the study as agreed to into discussions with the FDA, but at the same time we showed important advantages in terms of less hypoglycemia and less weight gain.
We typically do not see weight gain when we switch to AFREZZA versus what you usually see when you adopt the use of insulins. So when we swapped out regular insulins for AFREZZA, typically we actually saw a weight loss, but sometimes we saw less weight gain then was previously seen. I think that's the more likely claim.
At the same time, the important third thing we accomplished in the study was to show that they are important safety bridge from between the old device and the new device at the FDA's request. So we could use that rather large database we had acquired with the original device with the current application.
At the same time we also did a type 2 study and this one is a little different than most of the ones we've done in the past and that the FDA when we originally talked to them about the study said, we understand if it works in type 1 in a base setting, we understand why it would work just in a type 2 indication in that same setting.
Once you take this opportunity, I am paraphrasing here obviously to go earlier and use it in earlier stage disease, which we were frankly at once surprised and thrilled by because it's something we always had intended to do anyway, but we assumed that they didn’t way to say in that similar setting of late stage disease.
But here where we ended up ultimately was I'll call them essentially metamorphic failures. So people that have gone metamorphic for a while, by definition are not doing very well and need something more and here we are introducing AFREZZA as an ad-on therapy in combination with what they are on before.
So we are either adding AFREZZA or adding a placebo and looking for the effect. Obviously you are looking for superiority here and in fact we did see that.
It was a little troubling that the placebo group did pretty well too, but we still saw significantly better effect for AFREZZA, which is of no surprise and did show just statically significantly better results in HbA1c, which is the primary endpoint of the study.
So what they show it is an important and very effective first insulin end. This is important because it opens up a much broader swath of the market from day one than we originally had anticipated having and we hope there is a good chance mostly people of all age might use it, but would be on label from the get go and now we can safely say that it will -- can be promoted to this group.
So talking about the safety somewhat, I may give a little more detail. So it has involved more than 5600 patients at this point and say up to two years. There's been some better demand in that, but it's just a handful.
We haven’t seen any clinically meaningful differences in pulmonary function and that's important. We saw a small non-progressive changes I mentioned before, but does this continue after or just resolved after you discontinue the product.
We have seen a couple of cancer cases and this is important to bring out because it was talked about a lot by the FDA and the Advisory Committee and it really stems from our prior attempted inhaled insulin where they had some odd data that came up frankly after it was pulled from the marked based on retrospect that they were getting a higher incidence of lung cancer in their treated patients versus the controlled group.
And what was funny about that was that if you look at the incidence rate that would be expected in a similar population of patients, what they saw was pretty similar. So it was kind of what you would expect in the population. What's unusual is that the controls arms in the study in this case we are talking injected insulin users had less and there is no obvious reason for that except potentially reporting by us.
But that led to some concerns and it was talked about at some length of the Advisory Committee. It's important to note that we too, we only have had a couple of cases. So it's really small. It's very hard to draw any conclusions and the number we've seen is not in excess of what you would expect in a similarly matched target group.
So we don't think there is a signal here, but it doesn’t mean the FDA isn’t concerned about it as they should be with anything like this.
Finally, we do not show an increase in cardiovascular risk. Now this is something that's tripped up a few other diabetes programs, not because necessarily they always had a cardiovascular risk, but they couldn’t prove that they didn’t frankly and sometimes as a result of their study size and the variability of their data, but you have to calculate a cardiac risk ratio and you are looking for something that even it ends the conference and if exceed 1.3 or you have to do some sort of post approval study and if you exceed 1.8, they'll ask for something pre-approval is what their guidance says.
Here we had -- our risk was 0.96, which would I guess on a surface say it's -- because it's less than you would expect or maybe it's cardio-protective, but I think it's just a natural consequence of the variable is different data.
The important thing here is though if you look at the upper end of the confidence and we are still well below 1.3, which would indicate you do not need to worry about this and I think this has a lot to do with frankly the good news is about having done so many patients we have a pretty extensive data base, so we are able to keep that confidence fairly tight and demonstrate we don't have a problem here.
So we did do a resubmission last year following the completion of those trials. We think it does address the issues by the FDA and their complete response letters, demonstrating the efficacy of the new device and also bridges to the pretty extensive safety to database compared with the old device.
Subsequently the FDA asked for and we didn’t have and I've alluded to at a couple times an Advisory Committee, we actually are pretty pleased that they did that and especially now that we have the outcome, but it was pretty overwhelming in favor. As you probably know they typically treat type 1 and type 2 diabetes as separate indications and both separately upon them. And in this case, the Advisory Committee voted 13 to 1 in favor of approval for type 1 and 14 to 0 in favor of recommending approval for type 2.
With that -- at that point, we had two weeks left before the PDUFA date and the FDA decided to extend that for a few months, which is the natural normal two month extension. So our PDUFA date, which is now rapidly approaching is July 15. Large speculation of those that'll actually need that length of time, will see, we'll keep our fingers crossed.
So turning a little bit more towards commercialization. Obviously with the kind of market we are talking about, it's important to address where we are going to make this stuff and we happily have a very nice data facility located in Danbury, Connecticut that has been our commercial facility for some time.
We didn’t fully build it out because it's quite expensive to do so pre-approval, but the facility is scaled to do up to two billion cartridges per year fully built out and by that, we're really talking about filing the rooms with the equipment that they are sitting there waiting to have installed.
So the primary bottleneck facility has mostly the fill finish machines. You can probably imaging two billion cartridges is a lot of cartridges and you need a lot of equipment to fill those, almost no matter how fast you do it.
At launch, we expect to have three of those finish lines in place, which should give us a $375 million per year capacity, that's a quarter of the total capacity of the facility to some of the layer once it have a little higher than if you are doing the math and it doesn’t quite work.
You have to trust me on this, but it can go up to two billion cartridges a year at full capacity and we can add the capacity in a very nice relatively rapid modular way, which is one of the advantages of having built this very nice expensive facility with all the clean rooms and things in place, just waiting to drop the machines in.
Financially we finished last reported quarter with $35.8 million in cash. We do still have other sources of cash that we have yet to tap if we need it and some money that's already come in.
So I should probably talk about that. You must know that our Founder and CEO, Alfred Mann has been very generous with the company and has put in, in excess of $950 million of his own money to date and at one point it just really give us a line of credit for $350 million.
We still have $30 million under that line of credit. We [indiscernible] potentially pull if we needed to. That said, I've always kind of kept that for a rainy day and have no particular plans to do that. But some of you'll remember we did a funding with Deerfield about a year ago now that provided for tranches of funding.
We restructured that facility slightly earlier this year and allowed for the [rest] (ph) borrow up to additional $90 million, $20 million of which could be taken at any time, with the remainder of only following approval.
We did it that way because you just never know with two weeks between an AdCom and a PDUFA, we knew the FDA was trying really hard to stick to that date, but that was pretty tight and it turns out it was and we wanted to be able to pull that $20 million just in case to cover us for our delay.
Now that we are in that situation, we are really glad we did it that way because we did in fact pull $20 million from them in May.
Remember though that we still have another $40 million that will come from that original financing automatically upon approval and that restructuring gives us access to another $70 million on top of that if we need it and that's all just straight that. It is not dilutive. It's not convertible. It's just that.
The new tranches are about eight and three quarter percent. We may or may not need it is optional and we have cube really to pull it if we wanted or needed or whatever or even it's just to demonstrate to a potential partner, we have access to the funds beyond just our, which is always a nice thing to have but I guess this is the flexibility.
Now the thing our cash flow has been in the $10 million to $12 million range as long as I can kind of remember and it's mostly been in there. A lot of you'll thought it might start going down after our Phase 3's were completed and to the extent we are talking about clinical expenses it did, but those have largely been the planted by the build-out of their Danbury facility and things comparing for commercialization. So they are staying kind of in that range.
There you go. So summing up, we've a product here with certainly blockbuster -- a blockbuster capability. We are pretty excited about that. It's unfortunate the need is so great, but it's nice to be able to introduce a new option that we think it has some pretty dramatic advantages of our existing options for treating this very serious disease.
With the new class of insulin therapy, first ultra-rapid acting insulin that really closely mimics natural immune physiology and it's sped of onset and it's actually the speed of offset and in so doing offers some important advantages as far as glycemic control, lack of hypoglycemia and less weight gain.
At the same time, it delivers you a very nice form factor inhaler about the size of a whistle, but usually that it's simplistic to use, requiring very little training of any kind, certainly if you compare it to the training you need to have to inject yourself with insulin is drastically easier even for elderly or very young populations.
So now we are just waiting for the PDUFA date. It's coming on us very rapidly. It's just a few week away. On July 15, we'll see if we need to go all that way, but we are pretty excited about that.
So stay tuned and we'll hopefully have lot of exciting things to talk about next summer. Have a chance to talk to in front a group like this. So thank you very much.
Unidentified Analyst
There is going to be a breakout in the Broadway room downstairs.
Question-and-Answer Session
[No Q&A for this event]
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!
seekingalpha.com/article/2249603-mannkind-mnkd-at-jefferies-global-healthcare-conference-transcript?uprof=46&dr=1
Jun. 2, 2014 7:25 PM ET | 1 comment | About: MannKind Corporation (MNKD)
Executives
Matt Pfeffer - CFO
Analyst
MannKind Corporation (MNKD) Jefferies Global Healthcare Conference June 2, 2014 2:30 PM ET
Unidentified Analyst
Good afternoon. Welcome back to the 2014 Jefferies Healthcare Conference. My name is [Sean] (ph). I am from the Research Department over here.
It's my pleasure to introduce Matt Pfeffer, CFO of MannKind Corporation.
Matt Pfeffer - CFO
Thank you very much. As you know here I am to talk about MannKind Corporation. Before I start, I am going to say as I always do that I probably will be doing a few forward-looking statements, so please refer to our SEC filings for additional risk factors and other information.
This is a pretty exciting time in our history at MannKind, right on the bank of another PDUFA date appearing closer rapidly. Obviously I can't talk too much about the FDA progress or partnering progress. So I am going to confine most of my remarks to kind of general background with the product and how we got to where we are.
So AFREZZA is the first of what we consider a new kind, a new class of insulins. We've coined the term ultra-rapid acting insulin to differentiate it from normal regular rapid-acting insulin, but it has a very unique profile that's much more physiologic and it's in fact to [led] (ph).
If you look at the curve of action for AFREZZA, and you'll see it little later on, you'll see that it's pretty close to what you would get from a health person and what's created by the pancreas naturally and that kinetic profile or a time action profile is what gives us some very important advantages.
Just by way of background, I probably don't have [time] (ph) to do this, but diabetes is a huge and unfortunately very, very rapidly growing problem, not just in the United States where we often associate with things like obesity and another big problem, but worldwide, even in countries you wouldn’t inspect.
And in fact if you look at the top 10 countries for incidence of diabetes, you might be surprised to find that it tend to fall in the Mid-Eastern some rather poor island regions and things. So it's a big problem. It's growing worldwide, unfortunately in the United States as well.
And as a consequence, probably to no surprise, the insulin use for diabetes is growing as well. So still not as high as we might like it because people for reasons that are probably well understood are rather reluctant to take insulin. It's viewed as kind of the treatment of last resort, but it's growing very rapidly and we find we have about 500,000 additional new insulin users each year.
As a consequence, the market for rapid-acting analog is large and growing, showing a 22% compound annual growth rate, partly because of additional patients and partly because the prices have been pretty consistently increasing as well.
So we have a huge market that we are looking to address. This is $4 billion of sales just in the United States and that's only for existing rapid-acting analogs. Given the reluctance of many people to use a rapid-acting insulin, we hope we can penetrate a big portion of market beyond that.
So why do we think that? Well, we know from studies that about a third of patients fail to take their insulin as prescribed. They don't bother to take it. The needles have grown very small and is perhaps not as painful as it once was, but it's still not convenient.
There is a fair amount of stigma associated with it and there is a lot of fear associated with it beyond the stigma because it's difficult to use it correctly because it's a very potent medication, but if you used it incorrectly, you end up with hypoglycemia, which can result in a number of complications and unfortunately including even death.
So as a consequence, we find that patients and the doctors are very worried about hypoglycemia. It's the thing that is most likely to land a diabetic patient in the emergency room and so it scares people.
If it were not for this, we hear from many other studies that you would be much more likely to get effective treatment from insulin. You achieve to target more effectively and get better outcomes.
Other complications of insulin use beyond hypoglycemia are the slow absorption, so it takes a while to become effective and it's hard to arrest the rising in glucose following a meal very well.
If you start insulin, you typically will gain weight, which tends to be an exacerbating factor obviously amongst diabetics and of course the inconvenience of injections is obvious. People don't like to do this in public places, but typically find a place to excuse themselves and they don't see one more reason why people don't always take it when they should.
So it's said by most of the experts out there that what you are really shooting for is to get as normal glycemic profile as possible without except the awaking of hypoglycaemia and that's been very challenging with insulins today.
But we think we can change that with AFREZZA. Here we have a product that has excellent control, while at the same time, decreasing risk. It has what we call the ideal PK/PD profile. It's much more physiologic in the way it acts and I will show you those curves in just a moment.
It synchronizes much better with you meal. So when the body reacts to the start of a meal with a big peak of insulin in response we replicate that peak very nicely.
When you finish your digestion at which point your body will stop producing insulin, we replicate that very well as well. So it's a very fast onset, but also fast offset medication and it's in a nice form factor, it's very simple and easy to use.
As a consequence of all this, we see this as really a blockbuster opportunity. It's the first of a new class of insulins. We think it's going to get ultimately very rapid acceptance and hopefully penetrate down through different markets peers, which I'll talk about in just a moment.
And we plan to be very safe up to this point. We don't have any important safety signals that we've shown, even though it's been used in catalyst studies in over 6,000 patients at this point.
So I talked about the different people that we might target for this product. Some of them are more obvious than others. We do have 4.2 million prandial insulin users. So getting some of those patients to switch because they are not very well controlled or they just don't like the current regimes. It's a really obvious target and often viewed as low hanging fruit.
In addition we have a lot of patients that are on basal treatments only because doctors have found that it's easier to commence their patients to start insulin with just one injection a day of our basal insulin, than going into something like a prandial insulin, which require one for each meal, but that has limited effectiveness and sometimes in duration and so people that need addition intensification of insulin giving them an easier alternative than three additional injections per day is viewed as being somewhat very attractive and we are hoping to capture a good portion of this market very quickly as well.
And then ultimately the big gold mine is everybody else are the [slow] (ph) type 2 diabetics that have not taken insulin yet. I know there are a lot of people out there and kind of them my day to day life that really probably ought to be on insulin and their numbers suggest that they should be, but they resist heavily doing that for a number of reasons.
Some of them very good. I've had people talk to me about the nature of their jobs and they can't risk the possibility of hypoglycemia and becoming disoriented even briefly or just is not convenient for them to do it based on what they are doing, but frankly for the most part they just don't want to admit that they have a serious disease, which comes from taking injections of insulin or in a bit of denial I would say and speaking of people I know directly who are in that situation.
So we think hopefully we can start to penetrate that market as well. It's going to take a little longer, but that's where the real big numbers are going to come from and that's -- that are two areas where you will see numbers beyond the rather large impressive numbers I showed just to rapid idea of insulins today.
So if you look at the curves because this is really what the product is all about. It is a very convenient product. We think the form factor and ease of use is nice. It will in fact I believe encourage compliance and better patients taking their insulin as they ought, but really it's all about the kinetics of the product and here you can see the colors are not as distinct as I would like them.
You can see that very rapid uptake curve, which is AFREZZA compared to best in time rapid-acting analogues, which is obviously much slower because their peak is high and then importantly lasts for a very long time.
So you can see within minutes, in typically 10 to 12 minutes, we are peak concentrations in the blood stream, very similar to what a healthy pancreas can do within a minute or two of the same speed. We can also replicate that for space and thin response, which has some important benefits as well.
For example, that firstly phase in home response tune to signal other parts of the body or just the meal, we don't need other sources of insulin such as the glucose that's accretive or level between meals.
And then also importantly when you finish your digestion, you want that big spike of insulin to be gone and you can see within a couple of hours, we are essentially back to baseline or heading back that way and as a consequence of that, you don't have the severe risk of hypoglycemia from the post-digestive burden of insulin in your system.
The bottom curve shows essentially the same thing. It's just the different way of measuring the effective insulin. So one is showing the insulin levels in the blood stream, the second one is showing the usefulness of the insulin or showing its activity,
But these are very unique profiles and you can see why they'll lead to some of the advantages that we see in the studies and I'll recount some of those later.
The preferred patient experience is obvious. It is a very small palm size device. It looks little bit like a whistle in use. So we do it at least for the stigma of an injection by any means and if you wish to, it's one if you could easily conceal within your hand, but I think most people will not need to do that.
It's very simple. Its a few molded plastic parts. So inexpensive to make. So we essentially are giving them way along with the product and like razorblade model I suppose.
It is with power you just power by inhalation. There is nothing complicated involved. It's a dry powder form of product. So there is no [aerosol] (ph) or compression or anything else and it's pretty intuitive how you use the product.
It's quite simple and we found in a lot of end use handling studies that most people can figure out frankly with no instructions whatsoever, but just a few minutes. It is almost always efficient and help people understand how it's properly used because of the entire cartridge of insulin is emptied within about half a second and then you just have to make sure you do a deep enough breath to get it down in the deep lung. So that's pretty simple concept for most people to understand.
As I said, the devices are inexpensive enough. We essentially give them away. So in the older devices, when they are a little more costly, we say every two weeks just clean it with warm water to wash it out. At this point, we said just not even worth bother doing that. Just pass it away every two weeks or so. We'll include two in every box of a month's supply.
So I said it's like a little bit about the trials. This is kind of old news for most of you, but these are trials that wrapped up, gosh, it's approaching a year ago now. These were our most recent round of Phase 3 pivotal trials.
So that who've been following the company for a while will remember that we had an earlier generation inhalation device that we used to generate some pretty impressive data in the first rounds of pivotal Phase 3 trials, but we did change that device. We updated -- we took it back even though we had already demonstrated of our equivalency, that bigger I do the show some more prolonged patient experience data in an efficacy study. So we did that.
This was the type 1 study in which it had three arms instead of two. We've traditionally done pretty traditional design studies where we had some comparison against best in kind of rapid-acting analog.
Both arms in the background of Lantus or excuse me, a long acting insulin and this one was differed only because we included both the old device and the new device in different arms at the FDA's request. So that we could show a nice bridge between the two devices and show a similar safety profile.
So this was essentially a six month stay and what we found was it was a non inferiority study design and we showed in fact non inferiority in HbA1c with high statistical significance.
At the same time we showed less risk of hypoglycemia, so with similar efficacy, we have less hypoglycemia. These numbers have varied a little bit, but they've been very consistent between all of our trials, sometimes as much as two thirds less, which I think is the data we found in other earlier Phase 2 pivotals, but in every case, it's not only in the percentage of people getting severe hypoglycemia, but also the event rate of hypoglycemia are consistently less.
So it's a less risky product to use and you can kind of understand why that would be from the kinetic profile we talked about earlier.
When we talked about safety before, one of the two safety things that consistently comes up is lung function and the most typical measure that would be sub1, which is for its respiratory volume.
So what we've shown is that we do have a small, but measureable decrease in lung function. A few years ago, we probably wouldn’t even been able to measure it, but we have sophisticated ways to do that now and we can, but it's not clinically significant and importantly it doesn’t change.
So especially it's less obvious here that the study went longer and if you were to go back and look at our two-year safety study, you will see the lines went directly parallel throughout the duration of study. There is no divergence. You see a separation immediately from the first time it's measured. It ran parallel all the way through until it stopped and then it converged back at the end.
And the convergence at the end is important because it demonstrates, there is not a tissue change or any kind of permanent duct happening. We believe this is just the natural reaction to the inhalation of a powder and it's not atypical to see for powder medications inhaled through the lung.
So our conclusions did show non-inferiority, which is what we are trying to show in the study as agreed to into discussions with the FDA, but at the same time we showed important advantages in terms of less hypoglycemia and less weight gain.
We typically do not see weight gain when we switch to AFREZZA versus what you usually see when you adopt the use of insulins. So when we swapped out regular insulins for AFREZZA, typically we actually saw a weight loss, but sometimes we saw less weight gain then was previously seen. I think that's the more likely claim.
At the same time, the important third thing we accomplished in the study was to show that they are important safety bridge from between the old device and the new device at the FDA's request. So we could use that rather large database we had acquired with the original device with the current application.
At the same time we also did a type 2 study and this one is a little different than most of the ones we've done in the past and that the FDA when we originally talked to them about the study said, we understand if it works in type 1 in a base setting, we understand why it would work just in a type 2 indication in that same setting.
Once you take this opportunity, I am paraphrasing here obviously to go earlier and use it in earlier stage disease, which we were frankly at once surprised and thrilled by because it's something we always had intended to do anyway, but we assumed that they didn’t way to say in that similar setting of late stage disease.
But here where we ended up ultimately was I'll call them essentially metamorphic failures. So people that have gone metamorphic for a while, by definition are not doing very well and need something more and here we are introducing AFREZZA as an ad-on therapy in combination with what they are on before.
So we are either adding AFREZZA or adding a placebo and looking for the effect. Obviously you are looking for superiority here and in fact we did see that.
It was a little troubling that the placebo group did pretty well too, but we still saw significantly better effect for AFREZZA, which is of no surprise and did show just statically significantly better results in HbA1c, which is the primary endpoint of the study.
So what they show it is an important and very effective first insulin end. This is important because it opens up a much broader swath of the market from day one than we originally had anticipated having and we hope there is a good chance mostly people of all age might use it, but would be on label from the get go and now we can safely say that it will -- can be promoted to this group.
So talking about the safety somewhat, I may give a little more detail. So it has involved more than 5600 patients at this point and say up to two years. There's been some better demand in that, but it's just a handful.
We haven’t seen any clinically meaningful differences in pulmonary function and that's important. We saw a small non-progressive changes I mentioned before, but does this continue after or just resolved after you discontinue the product.
We have seen a couple of cancer cases and this is important to bring out because it was talked about a lot by the FDA and the Advisory Committee and it really stems from our prior attempted inhaled insulin where they had some odd data that came up frankly after it was pulled from the marked based on retrospect that they were getting a higher incidence of lung cancer in their treated patients versus the controlled group.
And what was funny about that was that if you look at the incidence rate that would be expected in a similar population of patients, what they saw was pretty similar. So it was kind of what you would expect in the population. What's unusual is that the controls arms in the study in this case we are talking injected insulin users had less and there is no obvious reason for that except potentially reporting by us.
But that led to some concerns and it was talked about at some length of the Advisory Committee. It's important to note that we too, we only have had a couple of cases. So it's really small. It's very hard to draw any conclusions and the number we've seen is not in excess of what you would expect in a similarly matched target group.
So we don't think there is a signal here, but it doesn’t mean the FDA isn’t concerned about it as they should be with anything like this.
Finally, we do not show an increase in cardiovascular risk. Now this is something that's tripped up a few other diabetes programs, not because necessarily they always had a cardiovascular risk, but they couldn’t prove that they didn’t frankly and sometimes as a result of their study size and the variability of their data, but you have to calculate a cardiac risk ratio and you are looking for something that even it ends the conference and if exceed 1.3 or you have to do some sort of post approval study and if you exceed 1.8, they'll ask for something pre-approval is what their guidance says.
Here we had -- our risk was 0.96, which would I guess on a surface say it's -- because it's less than you would expect or maybe it's cardio-protective, but I think it's just a natural consequence of the variable is different data.
The important thing here is though if you look at the upper end of the confidence and we are still well below 1.3, which would indicate you do not need to worry about this and I think this has a lot to do with frankly the good news is about having done so many patients we have a pretty extensive data base, so we are able to keep that confidence fairly tight and demonstrate we don't have a problem here.
So we did do a resubmission last year following the completion of those trials. We think it does address the issues by the FDA and their complete response letters, demonstrating the efficacy of the new device and also bridges to the pretty extensive safety to database compared with the old device.
Subsequently the FDA asked for and we didn’t have and I've alluded to at a couple times an Advisory Committee, we actually are pretty pleased that they did that and especially now that we have the outcome, but it was pretty overwhelming in favor. As you probably know they typically treat type 1 and type 2 diabetes as separate indications and both separately upon them. And in this case, the Advisory Committee voted 13 to 1 in favor of approval for type 1 and 14 to 0 in favor of recommending approval for type 2.
With that -- at that point, we had two weeks left before the PDUFA date and the FDA decided to extend that for a few months, which is the natural normal two month extension. So our PDUFA date, which is now rapidly approaching is July 15. Large speculation of those that'll actually need that length of time, will see, we'll keep our fingers crossed.
So turning a little bit more towards commercialization. Obviously with the kind of market we are talking about, it's important to address where we are going to make this stuff and we happily have a very nice data facility located in Danbury, Connecticut that has been our commercial facility for some time.
We didn’t fully build it out because it's quite expensive to do so pre-approval, but the facility is scaled to do up to two billion cartridges per year fully built out and by that, we're really talking about filing the rooms with the equipment that they are sitting there waiting to have installed.
So the primary bottleneck facility has mostly the fill finish machines. You can probably imaging two billion cartridges is a lot of cartridges and you need a lot of equipment to fill those, almost no matter how fast you do it.
At launch, we expect to have three of those finish lines in place, which should give us a $375 million per year capacity, that's a quarter of the total capacity of the facility to some of the layer once it have a little higher than if you are doing the math and it doesn’t quite work.
You have to trust me on this, but it can go up to two billion cartridges a year at full capacity and we can add the capacity in a very nice relatively rapid modular way, which is one of the advantages of having built this very nice expensive facility with all the clean rooms and things in place, just waiting to drop the machines in.
Financially we finished last reported quarter with $35.8 million in cash. We do still have other sources of cash that we have yet to tap if we need it and some money that's already come in.
So I should probably talk about that. You must know that our Founder and CEO, Alfred Mann has been very generous with the company and has put in, in excess of $950 million of his own money to date and at one point it just really give us a line of credit for $350 million.
We still have $30 million under that line of credit. We [indiscernible] potentially pull if we needed to. That said, I've always kind of kept that for a rainy day and have no particular plans to do that. But some of you'll remember we did a funding with Deerfield about a year ago now that provided for tranches of funding.
We restructured that facility slightly earlier this year and allowed for the [rest] (ph) borrow up to additional $90 million, $20 million of which could be taken at any time, with the remainder of only following approval.
We did it that way because you just never know with two weeks between an AdCom and a PDUFA, we knew the FDA was trying really hard to stick to that date, but that was pretty tight and it turns out it was and we wanted to be able to pull that $20 million just in case to cover us for our delay.
Now that we are in that situation, we are really glad we did it that way because we did in fact pull $20 million from them in May.
Remember though that we still have another $40 million that will come from that original financing automatically upon approval and that restructuring gives us access to another $70 million on top of that if we need it and that's all just straight that. It is not dilutive. It's not convertible. It's just that.
The new tranches are about eight and three quarter percent. We may or may not need it is optional and we have cube really to pull it if we wanted or needed or whatever or even it's just to demonstrate to a potential partner, we have access to the funds beyond just our, which is always a nice thing to have but I guess this is the flexibility.
Now the thing our cash flow has been in the $10 million to $12 million range as long as I can kind of remember and it's mostly been in there. A lot of you'll thought it might start going down after our Phase 3's were completed and to the extent we are talking about clinical expenses it did, but those have largely been the planted by the build-out of their Danbury facility and things comparing for commercialization. So they are staying kind of in that range.
There you go. So summing up, we've a product here with certainly blockbuster -- a blockbuster capability. We are pretty excited about that. It's unfortunate the need is so great, but it's nice to be able to introduce a new option that we think it has some pretty dramatic advantages of our existing options for treating this very serious disease.
With the new class of insulin therapy, first ultra-rapid acting insulin that really closely mimics natural immune physiology and it's sped of onset and it's actually the speed of offset and in so doing offers some important advantages as far as glycemic control, lack of hypoglycemia and less weight gain.
At the same time, it delivers you a very nice form factor inhaler about the size of a whistle, but usually that it's simplistic to use, requiring very little training of any kind, certainly if you compare it to the training you need to have to inject yourself with insulin is drastically easier even for elderly or very young populations.
So now we are just waiting for the PDUFA date. It's coming on us very rapidly. It's just a few week away. On July 15, we'll see if we need to go all that way, but we are pretty excited about that.
So stay tuned and we'll hopefully have lot of exciting things to talk about next summer. Have a chance to talk to in front a group like this. So thank you very much.
Unidentified Analyst
There is going to be a breakout in the Broadway room downstairs.
Question-and-Answer Session
[No Q&A for this event]
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!
seekingalpha.com/article/2249603-mannkind-mnkd-at-jefferies-global-healthcare-conference-transcript?uprof=46&dr=1
