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MannKind (NASDAQ: MNKD)
Q3 2024 Earnings Call
Nov 07, 2024, 4:30 p.m. ET

Overview of MannKind’s Q3 Earnings Call

• Key Highlights
• Discussion and Question Period
• Participants in the Call

Key Highlights:

Operator

Good afternoon, and welcome to MannKind Corporation’s earnings call for the third quarter of 2024. This call is recorded on November 7th, 2024, and will be available on our website for approximately 90 days. Please remember that this call includes forward-looking statements, which are associated with risks that may lead to actual results differing from expectations.

For more details on the company’s risk factors, refer to our 10-Q report filed with the SEC today, along with our earnings release and presentation slides. Today, we have MannKind’s CEO, Michael Castagna, and CFO, Chris Prentiss, with us. I’ll now pass the call to Mr. Castagna.

Michael E. Castagna — Chief Executive Officer and Director

Thank you, Operator, and to our entire MannKind team for their efforts this quarter. I’m feeling optimistic and motivated about our growth opportunities ahead. I will begin by sharing our operational highlights and pipeline progress, then Chris will discuss our financials, and we will conclude with a Q&A session.

In our third quarter, we achieved record-setting revenue and manufacturing output through our collaboration with United Therapeutics on the Tyvaso DPI project, exploring further growth opportunities. Our pipeline has become a major focus, particularly following the completion of the Phase 1 study for TENA this week, and we are underway with Phase 3 studies for clofazimine inhalation in both the U.S. and Asia. Our net revenue for the quarter reached $20 million, a 10% increase year-over-year, though our Afrezza sales felt some pressure amid realignment efforts. Notably, we did see an 8% rise in new prescriptions (NRxs) year-over-year as we prepare to ramp up Afrezza sales in 2025.

Recent Developments and Future Plans

As we approach the end of Q4, our pediatric study results will be released soon. We currently have a strong cash position of $268 million and generated $15 million in non-GAAP operating income this quarter. This places us well to fund innovative initiatives such as clofazimine-101 and 201.

The clofazimine-101 program aims to address the significant unmet needs in non-tuberculous mycobacterial (NTM) lung disease, especially given the limitations of existing treatment options. Our inhalation suspension, in development since 2020, intends to deliver medication directly to the lungs while limiting systemic exposure and potential side effects.

We are excited about our Phase 3 ICoN-1 study, which aims to enroll around 180 patients. The trial is structured for a unique dosing cycle of 28 days of treatment followed by 56 days off, with the main goals being sputum conversion and patient-reported outcomes in the U.S.

Furthermore, we are working actively to open sites in Asia and conduct kick-off meetings with investigators, ensuring progress under our FDA Fast Track designation, which grants us 12 years of exclusivity as we move forward.

Technological Innovations and Future Strategies

We are also excited about our nintedanib DPI opportunity. Our Technosphere technology provides a solid foundation for product development, allowing us to understand how our products distribute in the lungs. This knowledge stems from earlier studies which demonstrated the effective distribution of PTKP, the main component of our Technosphere insulin inhalation powder.

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MannKind Reports Progress and Growth Opportunities in Q3 2024

Tyvaso, a medication for patients with lung diseases, has now been taken by over 5,000 individuals. Many of these patients suffer from rare conditions like pulmonary hypertension and interstitial lung disease. With two products approved already, MannKind is upbeat about its upcoming product, MannKind 201. This new product targets idiopathic pulmonary fibrosis (IPF), a growing market that reached over $4.2 billion in sales in 2022.

Current treatment options for IPF include some effective drugs, but many have serious gastrointestinal side effects that limit patient adherence. MannKind aims to improve upon these treatments by reducing systemic exposure while enhancing targeted lung delivery. In a Phase 1 study involving various dosing groups, the results showed no significant safety concerns. MannKind plans to meet with the FDA to move MannKind 201 to Phase 2/3 clinical trials by 2025, representing a significant step for the company.

Additionally, MannKind’s diabetes division achieved a milestone this year with the completion of a large trial. This trial evaluated the efficacy of Afrezza, a rapid-acting inhalable insulin, compared to traditional insulin pumps. After 17 weeks, patients taking Afrezza showed marked improvements in blood glucose control. The 30-week follow-up data highlighted that nearly 42% of patients on Afrezza reached their A1c goal, showcasing the drug’s potential efficacy in managing type 1 diabetes.

Year-to-date, MannKind has reported a 16% increase in Afrezza sales. Though V-Go sales dipped as the company shifted its focus to profitability, overall business performance improved by approximately $12 million compared to last year. Despite experiencing challenges such as payer restrictions and inventory adjustments this year, Afrezza’s new prescriptions increased by 8% in October 2024 compared to the previous year.

As MannKind moves into Q4, they removed V-Go from their sales strategy to concentrate on Afrezza’s growth. The company anticipates a fundamental change, possibly transitioning Afrezza from a focus on profitability to growth in 2025. The pediatric market for type 1 diabetes also holds promise, with a study (INHALE-1) gathering data from children aged four to seventeen. Results are expected by the end of the year, which could lead to a pre-NDA filing meeting with the FDA in the first half of 2025.

MannKind’s upcoming studies include not only their pediatric trials but also the INHALE-3 study, which seeks to enhance Afrezza’s label indication. Chris Prentiss, the CFO, will elaborate further on the financials in the next segment of the call.

Christopher B. Prentiss — Chief Financial Officer

Thanks, Mike, and good afternoon, everyone. I am pleased to discuss our third-quarter 2024 financial results. For a summary of our financials, please refer to our press release issued prior to this call and our 10-Q, which is on file with the SEC. As Mike mentioned, our business demonstrated robust double-digit revenue growth compared to last year, led by revenues related to Tyvaso DPI.

Third-quarter revenues were $70 million, which represent a 37% increase compared to last year’s quarter. For the year-to-date, we recorded revenues of $209 million, a 49% increase over the prior-year period. Looking at the details, Tyvaso DPI royalties contributed $27 million.

United Therapeutics Reports Significant Revenue Growth in Q3 2024

United Therapeutics saw impressive financial performance in the third quarter of 2024, posting a substantial increase in revenue compared to last year. The total revenue reached $282 million, marking a 34% rise from the same quarter last year. For the first nine months of 2024, revenue climbed to $756 million, reflecting a more pronounced 48% increase.

Patient Growth and Price Increases Fuel Revenue Surge

During the Q3 earnings call, United Therapeutics highlighted that this revenue growth was primarily driven by a rise in patient numbers and an increase in pricing across their offerings. Company representatives noted that patient referrals and enrollment trends remain strong, reinforcing their optimism about sustained growth. Collaboration and services revenue reached $23 million, a significant 78% increase from Q3 2023. Over nine months, this figure soared to $74 million, an impressive 108% increase compared to the previous year, primarily attributed to heightened manufacturing activities for Tyvaso DPI.

Details on Revenue Sources and Trends

The collaboration and services revenue mainly come from manufacturing activities sold through to United Therapeutics and the recognition of deferred revenue. Notably, approximately $3 million of revenue from specific scale-up activities in early 2024 contributed to a slight expected decline in the latter half of the year. Additionally, the company’s net revenue from Afrezza was $15 million for the third quarter, up 12% due to increased demand and improved pricing strategies. For the nine-month period, Afrezza revenue totaled $46 million, a 16% increase from last year’s figures.

In contrast, revenue from V-Go was approximately $5 million for Q3, reflecting a slower growth of 5%. Over the nine-month span, V-Go revenue declined to approximately $14 million, a decrease of 6%, primarily due to reduced product demand, though somewhat balanced by better pricing and net adjustments. Overall, annual revenue trends from 2020 through the most recent 12 months reveal consistent double-digit growth year after year.

Promising Financial Outcomes for the Company

This revenue growth has positively impacted United Therapeutics’ bottom line. For Q3, the company reported GAAP net income of $12 million, which adjusted for non-GAAP items, yields a non-GAAP net income of $15 million. This is a considerable increase compared to a GAAP net income of $2 million and non-GAAP net income of $4 million in the same quarter last year. Over the nine-month period of 2024, net income was $20 million, with non-GAAP net income at $45 million, demonstrating a significant turnaround from a net loss of $13 million and a non-GAAP net loss of $1 million during the same timeframe in 2023.

Last year, management shifted focus toward profitability in their endocrine business unit and saw an operational income contribution of about $11 million year-to-date. This positive financial performance, alongside net royalty income and collaboration margins, has enabled continued investment in promising development programs. The healthy cash and investments balance stood at $268 million at the end of September, positioning the company well for future growth.

Looking Ahead to Future Opportunities

CEO Michael E. Castagna anticipates significant developments in 2024, with a focus on key regulatory updates for their products, including discussions concerning the INHALE-1 trial readout and ongoing site activations for Tyvaso DPI and other initiatives. Notably, Castagna expressed enthusiasm about the potential of several ongoing treatments, such as ARIKAYCE, which is on track for approaching $400 million in annual sales by 2025. He estimated that each additional 1,000 patients on therapy could represent $100 million in revenue for their offerings, particularly in the NTM space.

United Therapeutics plans to present updates at various upcoming conferences, providing opportunities to engage with the scientific community and stakeholders. These presentations will cover important data sets and future growth strategies as the company looks forward to building on its momentum in 2025.

Now, we will open the floor for questions and answers.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is from Andreas Argyrides of Oppenheimer. Your line is open.

Andreas Argyrides — Analyst

Thanks, operator. Congratulations on the progress this quarter. I have two questions. First, regarding 101, could you explain the market penetration figures for ARIKAYCE and where 101 fits in? Also, what is its potential for growth? Secondly, for 201, could you provide more details about the Phase 1 results and how they will impact the Phase 2/3 study design? Lastly, it would be helpful to hear a bit more about the timelines.

Michael E. Castagna — Chief Executive Officer and Director

Certainly, Andreas. Your first question is about ARIKAYCE penetration and the role of 101 in that context. I’ll address that now…

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Inside the Future of Nintedanib: Insights on MNKD-101’s Efficacy and Development

As we explore the landscape of NTM treatment, a key objective is to potentially replace ARIKAYCE in the refractory patient demographic. We anticipate that if MNKD-101 proves effective like we believe, its administration and tolerability will play a significant role in this transition.

Formulation Selection and Longer-Term Goals

Currently, we are nearing the final selection of the formulation for MNKD-101. In the mid to long term, we also plan to introduce a dry powder version that could be used in earlier treatment stages. Our ultimate aim is for both dry powder and nebulizer formulations to serve as options for first and second-line treatments, with nebulizers being the quicker route to market.

Future Studies and Regulatory Engagement

These strategies position us to compete effectively in both early and late treatment settings for NTM. We will provide strategic updates regarding our bridging or naive study in 2025. A crucial element of preparation has been confirming the chronic toxicity data, which is a foundational step for advancing in this area.

Phase 1 Study Highlights and FDA Planning

The Phase 1 study primarily focused on identifying any gastrointestinal side effects and concerns related to nintedanib. Fortunately, we did not observe any significant issues, confirming our expectation of minimal side effects. This trial marked our first substantial administration of nintedanib to healthy volunteers, instilling confidence in our findings about FTKP. Both the control and treatment groups showed no concerning indicators.

This sets the stage for our Phase 2 study, which the FDA has indicated will require a dose range-finding study. We intend to discuss either a Phase 2/3 transition or a single dose aimed at testing down dosing for patients with tolerability issues when we meet with the FDA, likely in Q1. Until that meeting, predicting regulatory feedback remains uncertain.

Insights From Analysts and Future Directions

Andreas Argyrides — Analyst
Our thanks for the important developments thus far.

Operator

Next, we have a question from Olivia Brayer of Cantor Fitzgerald. Your line is open.

Olivia Brayer — Analyst
Good afternoon. What more can you share about the profile of MNKD-201? Given that you’re not the only players developing an inhaled version of this drug, do you have any insights into pharmacokinetics versus the oral formulation?

Michael E. Castagna — Chief Executive Officer and Director
We are poised to move swiftly to a larger patient base with our dry powder formulation. Our CMC is almost ready, along with our trial design, so the focus now is on getting approval from the FDA.

Differentiating Factors and Market Considerations

Considering the options between nebulizer and dry powder, our experience with Tyvaso DPI reinforces a preference for dry powder administration. Our goal remains to improve patient lives, fostering innovation in the market. It’s worth noting that patients using OFEV often take significant amounts of loperamide to manage side effects, which is an area we aim to address.

We plan to propose a combination study including both treatment-naive and experienced patients to evaluate side effects from OFEV versus our inhaled formulation. While patient administration might not vary much, the side effect profile of OFEV is our primary focus. We anticipate higher lung concentrations with our formulation.

Data Presentation Plans

Regarding our plasma and PK data, it’s too early to specify a timeline for disclosure. Our goal is to ensure we align this data with insights from preclinical studies. Discussion continues on whether we should run a smaller Phase 2 for earlier efficacy data, which could provide certainty at a faster pace compared to a larger Phase 3 approval.

Operator

Next, we have a question from Faisal Khurshid of Leerink Partners. Your line is open.

Faisal Khurshid — Analyst
Thanks for taking the question. Could you expand on the adverse event profile you observed during the Phase 1 study of inhaled nintedanib, specifically concerning the FEV drop and cough instances? What might be behind those events?

Michael E. Castagna — Chief Executive Officer and Director
Throughout the seven-day study, we closely monitored if any participants experienced worsening conditions. Ultimately, there were no severe issues reported, and no patients discontinued due to adverse effects. Some individuals had symptoms on Day 1 but not on Day 7, and vice versa, showing no consistent pattern or escalating severity.

The assessment of FEV1 occurred approximately every 15 minutes during the trial, allowing us to effectively gauge patient responses.

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MannKind Corp Discusses Progress and Strategies for NTM and Diabetes Treatments

Examining the Impact of FEV1 Measurements in Recent Study

In a recent update, the focus was placed on the irritation observed in patients’ lungs within one to two hours after dosing. The FDA’s interest was noted, and although the data collected contains a wealth of information, its definitive implications remain uncertain. Throughout the measurement period, Forced Expiratory Volume in 1 second (FEV1) was repeatedly assessed. The summaries indicate little cause for concern, as similar responses were noted in both the control and active groups. Thus, complications appear tied more closely to the act of delivering dry powder to the lungs rather than any specific issues related to nintedanib.

The Role of Placebo in Clinical Trials

Faisal Khurshid, an analyst, sought clarification on the trial’s placebo group, which utilized an excipient mimicking dry powder inhalation without active medication. Michael E. Castagna, CEO, confirmed that FTKP was the excipient used in these cases.

Evaluating MannKind 101 Against Competitors

Turning to MannKind 101, Anish Nikhanj raised questions regarding its economic advantage compared to existing treatments like ARIKAYCE and oral clofazimine for Nontuberculous Mycobacterial (NTM) infections. Castagna expressed optimism about the drug’s potential, particularly in light of upcoming results from the TETON studies addressing Idiopathic Pulmonary Fibrosis (IPF). He indicated the next steps would focus on the appropriate patient population to maximize trial effectiveness.

Patient Benefits from New Treatment Options

Castagna discussed the positioning of clofazimine within treatment guidelines, noting its wide acceptance among doctors. MannKind is currently activating sites in Asia and Australia to facilitate trials, emphasizing that their nebulizer formulation could show improved safety profiles compared to oral administration, which carries risks like skin discoloration and QT prolongation. In contrast, ARIKAYCE presents its own set of challenges, including ototoxicity. Castagna aims for MannKind 101 to stand out in these respects, while the dosing convenience, featuring a regimen of 28 days on and 56 days off, is expected to simplify patient compliance and reduce costs.

Shifting Focus to Afrezza’s Market Performance

Brandon Folkes shifted the discussion to Afrezza, seeking insights into its growth and prescriber engagement. Castagna explained that while the company has focused narrowly on specific medical professionals—a strategy shaped following a reduction in the sales force—positive trends are beginning to emerge. Despite a slight drop in non-targeted prescriptions, the concentrated effort on existing prescribers seems to foster growth within targeted segments. In recent months, there has been a notable shift in the market, particularly within the endocrine sphere, aligning with overall trends in insulin prescriptions.

MannKind Faces Changes in Diabetes Treatment Landscape

Shifts in Prescriber Focus May Affect Afrezza Sales

The rapid-acting mealtime insulin market is evolving, with MannKind’s product, Afrezza, experiencing a slight decline from Q2 to Q3. This dip is attributed to endocrinologists changing their focus from treating diabetes to weight loss. As these professionals shift their patient volumes, it remains to be seen how this will influence Afrezza’s performance. However, with a sufficient number of prescribers still dedicated to the product, the impact could be manageable.

Broadening Commercial Focus: A Strategic Move

Recognizing the importance of diversifying their commercial efforts, MannKind is strategizing to expand its focus beyond current prescribers. The recent release of the 30-week data from the INHALE-3 study has generated interest, and the findings are expected to be published in a reputable journal within the next four to eight weeks. These publications could play a critical role in shaping market perceptions and prescribing habits.

Future Prospects and Educational Initiatives

Additionally, MannKind plans to increase educational outreach at academic centers and fellowships starting in 2025. This initiative aims to alleviate concerns regarding the safety of inhaled insulin and emphasize the efficacy of Afrezza in managing diabetes. The management team expresses confidence in the company’s direction and their capability to allocate resources effectively to accelerate growth in pivotal areas.

Brandon Folkes — Analyst

Congratulations on your progress.

Operator

This concludes the Q&A session. Please return to management for final remarks.

Michael E. Castagna — Chief Executive Officer and Director

Thank you, Lisa, for moderating today, and thanks to the MannKind team and our shareholders. We’ve had a successful year and aim to finish strong. Looking ahead to 2025, we will keep you updated on our developments and welcome any questions you may have.

Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call Participants:

Michael E. Castagna — Chief Executive Officer and Director

Christopher B. Prentiss — Chief Financial Officer

Mike Castagna — Chief Executive Officer and Director

Andreas Argyrides — Analyst

Olivia Brayer — Analyst

Faisal Khurshid — Analyst

Anish Nikhanj — Analyst

Brandon Folkes — Analyst

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