finance.yahoo.com/news/edited-transcript-mnkd-presentation-24-041520792.htmlEdited Transcript of MNKD presentation 24-Jun-15 1:30pm GMT
Mannkind Corp at JMP Securities Life Sciences Conference
* Jason Butler
JMP Securities - Analyst
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Presentation
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Jason Butler, JMP Securities - Analyst [1]
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So thank you again for joining us this morning at the JMP Securities life sciences conference. The next company we have presenting to us is MannKind Corporation. MannKind is a Company that is primarily focused on the development and the now commercialization of Afrezza, a novel inhaled formulation of insulin for the treatment of diabetes.
Presenting to us today is the Company's CFO, Matt Pfeffer. Matt, I will turn it over to you and thank you for being with us.
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Matt Pfeffer, MannKind Corporation - Corporate VP and CFO [2]
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Thank you, Jason. It's actually a great pleasure to be here. Before I get started, I have to give the usual cautionary statements. I will be making some forward-looking remarks and suggest you look at our SEC filings for fuller information about that.
So I'm going to talk a little bit about Afrezza first. Afrezza is our lead program, as Jason mentioned. And talk a little bit about the pipeline as it is, what I'm calling the future of MannKind -- with tongue slightly in cheek here -- and a little bit about our financial performance. Then wrap it up with a few extra comments.
Starting with Afrezza. Afrezza, as was mentioned, is a new formation of insulin. It's an inhaled insulin. We think it's a paradigm-changing product with tremendous potential. It is approved now for both Type I and Type II diabetes. And it's being marketed by a world leader in this area: Sanofi. I don't think we could have chosen a better partner for something like this. And it was launched in February this year.
So why do I think -- why am I so optimistic about this product? It really comes down to the alternative. So it's a great challenge to get people to take insulin and to take it properly. Most patients -- over two-thirds -- are very concerned about hypoglycemia, which is a very common side effect and probably the scariest one you can experience, sometimes resulting in things as extreme as death, especially if it's nocturnal hypoglycemia.
Partly as a consequence of that, I believe, about a third of patients don't take their insulin as they should. Insulin is a fabulous product. It's very good for diabetes, but if you don't take it, it's not obviously going to help you.
So having something that they're more likely to take as they should is a huge advantage here. And will greatly reduce the long-term complications of diabetes that stem from not taking insulin or having too long prolonged high blood glucose levels.
Physicians report that they have a lot of trouble getting their patients, again, probably a result of this, getting them to their A1C targets. So 88% of physicians talk about this as a significant issue.
And why is this? Patients don't want to start taking insulin for a lot of very good reasons. It's not just because necessarily, they are afraid of injections, although that's often true. But there's certainly stigma and other things associated with insulin usage, or things that people associate with insulin usage that makes people very reluctant to start. So they tend to put it off.
I've heard it often referred to as the lost decade, but surveys say typically the delay in the initiation of insulin from when most doctors think they should start taking it to when they actually do is in the order of five years, during which time they are doing significant damage to themselves. You don't see it right away: it's a cumulative thing. It tends to cause mass microvascular damage.
But that's why we have such a problem with blindness, loss of limbs, organ failures, and so forth. Some of -- the leading cause of some of those things is still diabetes today, in spite of the best treatments we've come up with. So clearly, we have a problem and an unmet need here and that's why we came up with Afrezza.
Afrezza is, we believe, a preferred patient experience. It's certainly smaller, easier to use, more discreet. It's not like having to inject yourself in public. For those of you who haven't seen the device, I almost always have one in my pocket.
This is what it looks like. It is quite small. You see pictures of it, but it doesn't really fully -- you don't get the full impact from a picture. And it's quite small and very discreet.
People report and I see it in the social media a lot that they take it and nobody gives them a second glance. But if you wanted to hide it and not be known, it's something you could easily conceal -- if you have a hand like mine, at least, you can easily conceal it in hand, take an inhalation, and probably nobody would know. That said, people don't feel the stigma for asthma inhalations and so forth. It's a different kind of thing. It's not like an injection.
But it's simple, easy to use. It's breath-powered. You don't -- and no timing or anything like that. Once you start sucking on it, you pull the powder out; it empties in about a half second.
There is not much you have to remember except to take a full inhalation, which is pretty simple. If you just go whoosh, it only goes as far as your cheeks. It's not going to get into your lungs, obviously, so just a full breath. It empties right away, but you have to pull the air in. And really, that's about all the training that is required.
It uses single-use cartridges. They come blister packed, usually in packages of three, because three meals a day is the concept here. This is a prandial insulin after all. I think it's a very efficient delivery to the deep lung, which is what you want. It's a very heavily vascularized area. It's a very easy path into the bloodstream.
And here, you are essentially going into the arterial system and bypassing the immune system altogether, for those of you who remember your anatomy. So it's going straight down into the system very quickly and you get peak insulin concentrations very quickly as a result of this.
Here is a curve that demonstrates that. Now this is a graphical representation of a response to an infusion of glucose done in a lab, but you will see that the curve for Afrezza, which is the right curve here, has a very, very rapid uptake, pretty close to, very similar to the normal pancreatic function in a healthy individual. So in this sense, it mimics normal physiologic activity for a healthy patient.
By contrast, if you look at a typical RAA curve, you'll see here it comes up much more slowly. And then it lasts much, much more longer, which is a problem when you are thinking about things like hypoglycemia. So people tend to find they are feeding their insulin, so to speak, to keep themselves out of hypoglycemia. It becomes sort of a problem.
And for those who are lucky enough to have things like a continuous blood glucose monitoring, which is becoming more common, you can see the effects of this. If you are seeing a rise in your blood sugar levels -- chasing the curve, so to speak -- with an injection of insulin is pretty tricky, because by the time it starts to work, you may find you are coming down already and then you end up crashing.
But something as rapid as Afrezza, people are finding in real use can arrest that rise much more quickly and then go away much more quickly, too, in a much more physiologic way.
So this is really the secret to Afrezza and why we are confident in its ultimate success. And I think this curve more than anything else demonstrates why people are getting the kind of results they are getting, that you see widely reported out there.
So patients surveyed clearly prefer Afrezza over insulin injection. It seems like a no-brainer, but it's obvious. Of those who expressed a preference, the vast majority prefer something like Afrezza, either for their initial use of insulin or for intensification.
So these are people that -- intensification means you are already taking a basal insulin and you need better control, which is a pretty big group of people. So you're adding another insulin, you're adding a prandial insulin. If you're going to do that, the vast majority here would prefer something like this. Not a big surprise, really.
Maybe less well understood is doctors feel the same way. They see this as something that will very likely make it easier to convince their patients to start taking insulin as they should. And that they can use it in this context.
Because that is a constant struggle for these doctors, to get the patients to use insulin as they are supposed to. So compliance is a major issue. Something that is easier and with less stigma, it is hoped will go a long way to combat that.
So how are we going to do it? Obviously, MannKind doesn't have a sales organization, so we've partnered with a leader in the space, Sanofi. And the only big insulin player that doesn't have a clear conflict here. So they are responsible for sales distribution and all the things -- reimbursement, management, and all the things they have armies of people to deal with.
We remain responsible for manufacturing and further product development. So this is sort of how the responsibilities breakout.
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It's potentially a very lucrative partnership. It is a profit-sharing arrangement, which in something like this has a lot of advantages because it doesn't sunset out with a patent or anything like that. As long as this product is being sold, we still share the profits.
And we think that will happen for a good long time. Not only do our patents go out very long, but we have a lot of manufacturing know-how and other things that would make it very tricky to try to genericize a product like this.
We did get $150 million up front. We have a lot of different milestones we can earn. Two of them have been earned already for a total of another $50 million. So we have up to potentially another $725 million of milestones still to go.
Most of these are sales-based milestones, but there are some that are development or launching in other countries and so forth. Those have been announced previously, so I won't go into the details here.
So what is Sanofi's strategy? Clearly, they're going after the Type II market. You'll see they are getting a lot of traction in the Type I market as well, and those people tend to be very vocal.
But the general strategy here is to go after the big markets, which are people who are resistant to starting insulin. And you can see the numbers here how many people that is; about 2 million patients is their target after you remove all the people that might not be eligible or are already under good control.
So this is removing smokers and people with lung disease and so forth that are excluded in the label. But also people that are already well controlled. And presumably if you are under good control, you aren't going to try something different. That doesn't seem to be the way doctors work. But if you're not in good control, it leaves you open for something new and we think we have it.
By the same token, if you are not well controlled on just a basal insulin, which tends to be the first insulin people use, adding something and a prandial insulin is an obvious next step. You'll find as your A1C numbers go up, the amount that is contributed by basal versus prandial starts to shift and there is only so much you could do with a basal insulin. So you need to add a prandial insulin at some point. And here we think we have something that will be much easier to do.
The other advantage to the second group is that essentially, let's be frank, Sanofi kind of owns that market. You're talking mostly Lantus or Toujeo users, so they know those people very well. And giving them a nice add-on, which is another product in their portfolio, is a nice thing to be able to do.
So where are we? As I mentioned, we launched in February, so we're kind of at the -- sort of in between the first two dots on this chart. So we have the early launch. The next phase will be to go into DTC advertising, start thinking about ex-US launches, and bringing the margins up a bit by introducing Sanofi-manufactured insulin. So that would be the next step here and we are right on the brink of all those things.
And then with further label expansion studies, many of which are planned by Sanofi, there is a lot of hope that we can expand the label and do away with some of the more onerous requirements that are currently in the label.
So what have we seen so far? The prescription uptake, for a variety of reasons, has been a little bit modest so far. But I think we are right on the brink of changing that. And we're certainly getting a lot of attention in the media and places that I, frankly, had never been before, like on Twitter. I have to admit, I guess I am too old to have had a Twitter account typically, but I do have one now, mostly because I wanted to follow what's happening out there.
For those of you who are younger than me and have a Twitter account, I encourage you to go take a look, because there is a lot of buzz out there, especially in the Type I community, which is very active. You will see they are posting regularly about the product and their experiences with it and I have yet to find one that was not positive.
So it's pretty exciting. It's very active and the buzz is increasing and increasingly positive. We saw that also at ADA, by the way, just a few weeks ago; a lot of buzz about the product, a lot of exposure. And so I think things are on the brink of turning around.
You won't see it in the numbers yet, because there's -- prescription numbers are interesting. They tend to be affected by a lot of things and if you have a holiday one week, you can see all the numbers go down. But that's everybody, not just us.
Or if everybody is at ADA, they are obviously not writing prescriptions. So that was a factor in the last numbers and may affect the next ones a little bit as well. But stay tuned. I think we are on the brink of some pretty interesting things.
But you also see articles in regular print media, TV, radio, and so forth. Very interesting. So the buzz is growing and out there. And we can contribute to that with what's coming up soon. And I'm going to talk about some recent developments here.
So what are the updates? Some of these are newer than others. But clearly, we are increasing our manufacturing capacity in our Danbury manufacturing facility. We have one line that has been in operation since day one, but we are tripling that to three lines as we speak. If the third line -- or the second and third lines are not in operation today, I'm confident they will be by the end of the month. They may actually be; I haven't checked lately.
But first off those new lines will be the new 12-unit cartridges recently approved by the FDA. Which is a nice thing; it's a convenience thing for the patients. For those who need pretty heavy doses of insulin, it just means they don't need to do as many cartridges.
While it's not a major burden to open the device and put a new cartridge in if you need more than one, if you get to too many, it becomes kind of a inconvenience. So having higher strength cartridges we think will help that in the Type II market.
We are also playing with the idea of introducing a two-unit cartridge as well, so that's going to the low end. Frankly, most of our studies didn't indicate that would be of tremendous value, because most -- pretty much any indication in the clinical studies where they might use the two, they could easily use a four also and it was perfectly fine.
But we are seeing a lot of interest in that in the marketplace, so that's being revisited right now. We had thought that might be something we would consider for the pediatric market, but we are currently looking at accelerating that a little bit and we will see if that makes sense or not.
In the meantime, there is increasing doctor interest. We've given out a boatload of samples -- 54,000 sample packs -- so that's 1.6 million cartridges. That's quite a lot, so they are out there and in the hands of Sanofi being delivered to doctors.
More recently, Sanofi has greatly stepped up their efforts in the doctor seminar series. So these are peer-to-peer dinners and lunches and other kinds of meetings where they talk about Afrezza or doctors talk about their own experiences as opposed to some Sanofi salesman pitching it. It's very impactful and that has just started in a big way, and I'm hoping we will start seeing the advantages of that.
Likewise, what they call their coach program has very recently kicked off, just a couple weeks ago. This is something that is a patient aid program to help them use the product effectively, answer questions and so forth, and just make it a lot easier for them. It's something they've had a lot of success with in their other product lines and we are real pleased to see it being introduced for Afrezza as well.
And finally, we got a lot of questions about this DTC advertising. So this is a product, obviously, that seems like it would lend itself to DTC advertising. Most large pharma companies, by tradition, don't do that in their first six months of launch. It's really a courtesy to the doctors who don't like it when their patients come in and ask about things they haven't heard about yet.
So that's on the brink of kicking off. We've said early Q3; pretty much everybody has interpreted that correctly as being in July. But -- so watch for those. You will see them initially mostly in online and print media. People ask a lot about TV. I think that is in the cards and there will be some production efforts this year, but at best, you will see later in the year. So we're talking print and online things.
And those have kind of duplicate advantages. It not only reaches patients, it also may reach doctors, especially GPs, who maybe have not been reached by the rather large, but not as large as the GP community sales force out there. So it can have a kind of double whammy impact here. So I'm looking forward to that.
We are on the brink of a lot of stuff here. I know this has been something of battleground stock and it's been moving around. So I get a lot of questions about that; there's a lot of people that have bet on our not being successful. You can see that in our short interest.
It occasionally gets me down, but when that happens, I go talk to my greatest mentor, Al Mann, who has always advised me wisely. Even though he is a very passionate -- if you ever heard him speak about Afrezza, you will know how passionate he is.
But he is actually quite hum about the stock price. And he said Matt, you know, I've invented a lot of new groundbreaking technologies. And paradigm-changing technologies tend to attract short interest and skeptics.
But it's always worked out pretty well for me in the past. So I'm not too worried. Just remember: take care of the patients first and the stock price will take care of itself. So I'm confident that will happen here. I think we are on the brink of it, so stay tuned.
So turning now to other opportunities for this delivery technology. Clearly, this is just the first of what we believe will be a line of products that are lung-delivered. The underlying Technosphere technology can be used for a variety of different things.
We've been spending a lot of time talking about what might be the best things to go after. In retrospect, insulin was probably not the optimal choice. Largest market, but not the easiest choice, certainly, but we are happy now that we have it.
That said, there's a lot of other opportunities that we are going after and we are trying to fill the gaps in that pipeline as quickly as we can.
So this is something that allows for pulmonary administration. So it goes into the system very, very quickly, essentially mimicking injection. So you get the kind of kinetics you can't get outside of a doctor's office or hospital, but it can be done at home, which has some advantages in itself.
Sometimes the advantages are speed, sometimes the advantages are convenience, sometimes the advantage is just skipping that first past metabolism and the avenues through the liver. So all those things can potentially be very valuable, depending on the particular setting. And we've been hard at work figuring out what the best things were to do there.
Now, people have been asking me about these deals. Clearly, we have three things going on. We have efforts with approved API using our essentially approved delivery technology to create new products that are faster and have other advantages.
So this path is the fastest path and it's the least expensive path, because you can get to a proof-of-concept relatively quickly and that is the optimal partnering point. Sometimes you can do it sooner.
We are also looking at some new chemical entities. And there is at least one out there that keeps leaking out, mostly because I think they talk about it more than us. And we think this is very exciting. It's potentially the highest risk area, but it is -- and potentially the highest reward as well.
But it takes a long time. So don't wait for anything. You may see some announcements, but that is not going to make or break the Company.
Then we have an ongoing effort to license out the technology for others to use. This is not the primary focus of the Company, although it's what I get asked about the most, because it doesn't tend to be -- and we are not a tools Company. We want to be a products Company. So, not surprisingly, we are focusing on this first area first and the other areas will come along as they come along in an opportunistic fashion.
So we spent a lot of time screening potential compounds, which we did through the latter part of last year into this year. Going through a feasibility analysis for the ones we've come up with and a screening process, trying to assess the market value and the costs of development and so forth through the first quarter into the second quarter. And developing plans in the second quarter, which is where we find ourselves now.
So current status -- I changed the slide a little bit from the last time. The first product is in development. I said the second would enter development by the end of the year. I have changed it now in saying it's kind of in development, too. For some reason, that one has leapt forward a little bit, so they are kind of neck and neck at the moment.
These products generally tend to be -- and this was mentioned in our last conference by Hakan, it's an 18 to 24 months to proof-of-concept. But that means -- usually, proof-of-concept is kind of Phase 2 studies. So this is pretty far along. Sometimes you can do it with a Phase 1b.
But this is the optimal usual partnering point, but it depends on the product. Often, you can do it much earlier than that. And you are going to be generating some very useful data. It's not like you are not going to hear anything for 18 to 24 months. So stay tuned. I think we would expect these should be in the clinic next year and we will have a lot more to say about it at that time.
We'd like to get something new in the clinic every six months or so. We've certainly identified the first four candidates and the development pathways are underway. And it should be noted these are real programs.
We have -- I was recently at a conference with a lot of my peers and was reminded that a lot of biotech companies are only in the 35- to 40-people range. We've got 35 people just working on these new development programs, so I kind of think of it as a company within a company. It's a development effort within MannKind beyond what's going on with Afrezza, although there is new development going on there as well.
The four leading indications, while we've only specifically identified three, would be in pain management and pulmonary disease. In no particular order are the two that are currently in development, with an oncology support product back further in the pipeline. And there are some other things that we've not been specific about yet.
There is at least one that is -- they are a specific API and a specific indication identified, so this isn't just a handwaving, yes, it would be good if we could do something kind of thing. This is for real.
But we are being, for a variety of reasons, coy. Sometimes it means we need a license to some technology; sometimes it means we just need to get a little further along and develop some intellectual property before we are too forthcoming about what it is. But they are fully in development.
Financially, clearly, we ended the last quarter with a decent amount of cash; certainly a lot more than we had previously. But more importantly, we are dramatically decreasing our burn rate. So it has come down by about half and it is continuing to decline over the prior year as we reduce and streamline operations.
So we've already eliminated one of our three sites. One of the other sites is in the process of being folded into other places and being downsized. We are trying to streamline and centralize within the Danbury facility, mostly for cost savings, but also there's some efficiencies to be gained there as well.
And we are selling a surplus building and equipment, which will raise a little cash. We own our facilities in California, for example, and those are currently on the market. We own a tract of land and the adjoining building and labs and so forth.
So I mentioned previously that we had a couple milestones we've already earned totaling $50 million that we earned in December, collected earlier this year. We still have another $725 million to go. Most of those are not disclosed, unfortunately. I wish they were, but suffice it to say, I think we announced at the time we were confident we could get them and we just need to execute as we plan to.
Here we are. We are on the brink of a lot of very interesting things I think at MannKind. We have a really what we still continue to believe is a blockbuster product opportunity in Afrezza.
It hasn't demonstrated it yet, but it's on the way. All the earmarks are there. Patients obviously love it. They are having great results with it and that tells me it's going to be successful at some point.
And we're working on that. We've have barriers to overcome, but those are all in the process as well. And we are pleased with the responsiveness of Sanofi and the plans they have in place.
Beyond that, we have a lot of opportunities with the Technosphere platform, with some very interesting properties which we think will lend themselves very nicely to a lot of different products. And when those are in process, so stay tuned. We do see that as the future of MannKind Corporation and so it's getting maybe even almost the lion's share of our attention at this point.
At this point for Afrezza, it's more block and tackling and producing the product. And so much of it is in the hands of Sanofi. We do offer our opinions and they do listen in our joint Afrezza committee, as it's called. But much of the development work in the Company is focused on these new product opportunities. And our financial position continues to strengthen, and I feel very confident there.
So with that, I didn't leave myself a lot of time for questions, but I have a couple minutes left if anybody has something they'd like to ask.
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Questions and Answers
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Jason Butler, JMP Securities - Analyst [1]
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Maybe I will start off, Matt, and thanks for the presentation. You mentioned that the RX uptake being modest. You think you are on the brink of a change there. I know you talked about DTC coming in.
But I guess the question is are there any other things that you've learned or modifying or changing in the commercialization strategy or marketing message based on the first few weeks of the launch?
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Matt Pfeffer, MannKind Corporation - Corporate VP and CFO [2]
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Yes, absolutely. I think we found that there were two essential impediments to prescribing the product. The first one was expected and known, which was the need for spirometry. So lung function testing.
A relatively simple requirement. We are not talking about a full pulmonary workup. We are just talking about FEV1. It's a very simple thing. Most GPs have the equipment to do that in their office. Mine has it. I have it as part of a normal physical, even though there was nothing expected. These people tend to treat asthma patients and so forth, so it's there.
The problem is that endocrinologists, to the extent that they are prescribing the product, don't typically have that. Some do, but most of them do not. Although, we are seeing that slowly change.
So how we deal with that is something the salesman have been working on. And the simple thing is either A, you've convinced them they should buy one, because they're not terribly expensive and it is a reimbursed coded procedure. You can get a payback relatively quickly. And there has been some traction there and the Sanofi people, when they show up, will have a sheet for where they can get them. They do have an organization that sells those.
But if that doesn't work, they will come armed to the doctor's office these days with a list of places that can be done. Maybe it's in their same medical group or an associate. Or maybe it's down the hall or maybe it's across the street, to make it then -- have it done quickly and easily.
So that's well underway and we are seeing that it's no longer a major impediment to sales. And the statistics I've seen have borne that out, so that's not a big factor anymore.
The other thing we've found is reimbursement, a problem for most products, certainly ours as well. Much more than in prior years we find that the insurance companies are requiring prior authorization for new products like this until they get a chance to do their analysis and find permanent formulary placement.
So we are right in the midst of that right now. That typically happens in the 6 to 9 month range. So I think a lot of that problem is in the process of fixing itself.
But to the extent it hasn't, Sanofi has put together some new programs they have rolled out in the last month or so to make that easier for doctors, which is something I think Hakan called the concierge service. But it basically makes it simpler for the doctors to do that. They can provide a lot of support in how to fill out the form and how to get it approved quickly and easily.
So I think we haven't seen the benefits of that, but I think we are going -- it's one of the many -- there is a crescendo of things coming that I think are going to have the impacts that I am talking about.
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Jason Butler, JMP Securities - Analyst [3]
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Great. Thanks. And just one last quick question from me. And I get that you won't be able to give full details around this. But when we think about the launch today and the profit split with Sanofi, how do we start to think about where the product reaches profitability and where you start to have the ability to pay down any of the loan that you get from Sanofi during that launch period?
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Matt Pfeffer, MannKind Corporation - Corporate VP and CFO [4]
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Yes, well, you're right. That's a question I don't usually feel comfortable to answer. We are not giving forecasting sales or sales growth, so it's a little tough.
I said in the last conference, and it was widely quoted out of context, something I thought was fairly obvious that we're -- I said we are not there yet, because we are clearly not profitable. I thought that was apparent from our financial statement. But it will happen very quickly is the message I wanted to send.
The margins improve dramatically with increased volume, so it doesn't take very much and you will start seeing that happen. But going that far out on a limb and say exactly when or what level set will happen is not quite -- we are uncomfortable going yet. But stay tuned.
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Jason Butler, JMP Securities - Analyst [5]
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I appreciate it. All right. Thank you very much, Matt.
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Matt Pfeffer, MannKind Corporation - Corporate VP and CFO [6]
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Thank you.