Good morning, and welcome to the MannKind Corporation Third Quarter 2022 Earnings Call. As a reminder, this call is being recorded on November 8, 2022, and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call until November 22, 2022. This call will contain forward-looking statements.

Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from these stated expectations.

For further information on the company's risk factors, please see their 10-Q report filed with the Securities and Exchange Commission this morning, the earnings release and the slides prepared for this presentation. Joining us today from MannKind are Chief Executive Officer, Michael Castagna; and Chief Financial Officer, Steven Binder.

I would now like to turn the call over to Mr. Castagna. Please go ahead..

Good morning. This is Mike Castagna and I hope you can hear me okay? Okay. Sorry, if you not hearing us. I just want to make sure everybody could hear me before I get started. Good morning, and thank you for joining us for our earnings call today. Today marks the beginning of the new MannKind.

You can start to see our execution from a single product to a sustainable growth company. We've never been more excited about our future than now. When you look down, you see four sources of revenue growth and 74% growth quarter-over-quarter.

Order of the lung business is really starting to shape up as you look at the collaboration and service revenue with Tyvaso, as I'll talk about clofazimine moving forward. The Endocrine business also did well at double-digit growth, 28% quarter-over-quarter with Afrezza and V-Go revenues.

When you look at the orphan lung, we're well positioned with Tyvaso DPI growing significantly as we go forward and clofazimine starting to help patients hopefully in 2023.

Our EBU has grown year-over-year, but in Q3, we made some changes in integrated V-Go and as you'll see in a minute, that we started to make -- as those changes took place we started to grow our market share month-over-month and quarter-over-quarter. In the Tyvaso, you'll see our first quarter of commercial manufacturing.

One of the first questions I get is this full manufacturing? The answer is no. This is just the beginning. The first full quarter commercialized by U.K., our royalties earned were about $6 million, which is significantly higher than what he had expected. Our capacity expansion is ongoing and quickly progressing here in Danbury.

On our pipeline, we have reported September our Phase I results that were generally well covered up to 90 milligrams, no single adverse events or QT prologation. And we're planning to meet with the FDA here in late Q4. We're very excited about this program and plan to get this product to patients.

On Afrezza, really focused on pay TRx, which grew 10% year-over-year and 4% in Q3 to Q2. On the INHALE-1, we're currently on track to hit our goals for enrollment this year with an expectation to complete enrollment by mid-next year and results six months later.

We also will be presenting our ABC results very shortly, which is the Afrezza basal combination trial, where we switch some patients off a pump, we added Afrezza [dual] pump where we maintained other people on the pump. On the V-Go side, we feel good that we stabilized the revenue, and we're ready for growth.

Overall, we have $170 million of cash to fund our growth in our 5-year plan. Here it’s quite precious to see the team in Danbury working through making our devices 24/7, not just devices, but also product and dry powder cartridges. It's a very exciting time for people at MannKind and our future.

With the purchase of V-Go, we really do become the mealtime solutions company. Let me start off by talking about Afrezza and what we're doing to kind of continue to grow market share there. We pivoted this year to focus on a subset of doctors as well as ultra-acting analog insulin, URAA.

And so that market share, as you look amongst our key targets has continued to grow after years of decline and watching our competition continue to take attractive market share away from us that we believe they're reaching for a faster insulin and Afrezza should be the fastest in [ton] of choice.

And with that refocus this year, we've continued to grow market share quarter-over-quarter, month-over-month.

If you look year-over-year, I'm very excited that the NRxs are a leading indicator of our TRx's, and you can really see the NRx growth in Q1 to Q2 to Q3, where we had 18% NRx growth year-over-year and how that translates the TRx growth quarter-over-quarter and year-over-year.

On the V-Go, we gave guidance of $18 million to $22 million that we purchased this asset. We're on the higher end of that expectations with revenue of $5.4 million here in Q3, and we continue to see positive momentum in V-Go here in Q4, and we're planning to implement this into 60 additional sales reps in January of 2023.

We stabilized the TRx decline that's been happening for over 18 months and exited Q3 around 1,200 TRxs a week, with additional business here does not show up in Symphony and distributors as well as some of the TRICARE accounts. V-Go will be in a P2 position in the Afrezza sales force as we exit this year going into next year.

So people ask me, what does that mean for product segmentation? We discussed the ABC results and market research telling us where we need to fix on Afrezza to continue to accelerate the growth. We expect to focus on 2023 on a narrow focus on a set group of providers that write both V-Go and Afrezza, which is around 3,000 providers.

Additionally, we want to make this business to cash flow break even and really choose to win where we choose to play. On the Afrezza side, you'll continue to see us focus more on type 1, younger population, commercially insured and the [chronology] focus.

On the V-Go side, continue to focus on type 2 for patients looking for a simple way to deliver their insulin to basal control. Older population typically, Medicare and Endo, NP, PA, PCP.

This bottom right corner shows you Afrezza be a P1 target for our core sales force and type 2 will be a P3 target and V-Go will be a position 2 target in that sales force.

As we go forward, we're very excited about the Endocrine Business Unit, our pipeline, I'll talk about at the end of today as well as the impact Tyvaso is going to have on the future of MannKind. I'm going to turn it over to Steve. Thank you..

Thanks, Mike, and good morning. I'm pleased to review select third quarter and September year-to-date financial results. Please supplement this call by reading the condensed consolidated financial statements and MD&A contained in our 10-Q, which is filed with the SEC this morning.

This is the first full quarter of revenue activity across all four sources of commercial revenue, a present V-Go for our endocrine business and Tyvaso DPI manufacturing and Tyvaso DPI sales royalties for orphan lung business.

Looking at how our business is growing year-on-year, please focus on the bottom of the table, where it shows we had a 48% increase in total revenues, which amounted to $32.8 million for the third quarter of 2022.

Breaking down the third quarter by source of revenue, Afrezza net revenue was $10.8 million versus $9.8 million in 2021, a growth rate of 11%.

The increase was mainly driven by price, including a more favorable gross-to-net percentage and higher patient demand with paid TRx growth of 10%, partially offset by wholesale inventory ordering patterns, which resulted in lower channel inventory levels for the third quarter of 2022.

The Lower channel inventory levels have been a recurring theme this year as we have seen channel inventories lowered by approximately $1.1 million in the 6-month period ended September 30th and almost $2 million since a year ago at September 30, 2021, which has adversely impacted our revenue -- our net revenue growth this year.

We believe that the Afrezza channel inventory levels have likely hit their minimum maintenance balances and shouldn't lower much more. Year-to-date Afrezza growth came in at plus 13%, which was mainly due to favorable price, including a more favorable gross net percentage, higher product demand and a more favorable cartridge mix.

Next is our net revenue for V-Go, -- the recently acquired wearable insulin delivery device where we had $5.4 million in net revenue for the third quarter and $7.5 million for year-to-date, which represents the four months of June through September.

We expect V-Go net revenue for the 12 months post-acquisition to be in the range of $18 million to $22 million, and we are tracking to the mid to high end of that range. Moving to collaboration services. Revenue for the third quarter was $10.3 million versus $12.5 million for 2021.

The main driver of collaboration revenue has shifted from the amortization of United Therapeutics milestones in 2021 to Tyvaso DPI manufacturing revenues in 2022. Included in the third quarter 2022 collaboration and services revenue number of $10.3 million is $9.9 million of Tyvaso DPI manufacturing revenue.

The September year-to-date revenue of $18.4 million is mainly lower in 2022 versus '21 because of the prior year UT milestone amortization and the first half '22 deferral of revenue associated with the delay in the start of commercial manufacturing.

In addition to UT-related revenue recognized in 2022, we had $32.2 million of deferred revenue on the September 30th, '22 balance sheet associated with United Therapeutics, which will be recognized to [income] through 2031, which is the remaining term of the commercial supply agreement with United Therapeutics.

And lastly, we recorded royalties on sales of Tyvaso DPI by United Therapeutics to their customers. The third quarter was the first full quarter of sales of Tyvaso DPI by UT, and we earned $6.2 million of royalties for those sales based on a low double-digit royalty. United Therapeutics released third quarter earnings last week.

And on their earnings call they said that the physician engagement and enthusiasm around Tyvaso DPI is extremely high, and we continue to manufacture on a 24/7 basis to supply UT. I consider MannKind to be a new commercial growth story. The next slide shows our revenue growth quarter-to-quarter for 2022.

Moving from the left to the right, we grew total revenues from $12 million in the first quarter to $18.9 million in the second quarter, a 58% increase and then grew total revenues from $18.9 million in the second quarter to $32.8 million in the third quarter, a 74% increase. Our quarterly revenues grew almost 3x from first quarter to third quarter.

Driving the revenue growth are our three new sources of revenue, Tyvaso DPI manufacturing revenue, royalties associated with the sales of Tyvaso DPI, and sales of V-GO. We're pretty focused about the future revenue growth potential across all four revenue streams. Now let's look at the profitability of our endocrine products, Afrezza and V-Go.

Afrezza gross margin increased from 61% in the third quarter of 2021, 81% in the third quarter of '22, and the gross profit associated with Afrezza increased to $8.7 million in the quarter.

The increase in the third quarter gross margin versus '21 was due to an increase in Afrezza sales, coupled with the decrease in the cost of goods sold, mainly due to a decrease in excess manufacturing capacity costs.

When looking at the profitability for September '22 year-to-date, Afrezza has a gross margin of 75% and gross profit of $23.6 million, driven by higher sales and lower cost of goods sold, mainly due to a decrease in excess manufacturing capacity costs and a $2 million fee incurred for an amendment of our insulin supply agreement in the second quarter of 2021.

Please note that there will always be some variability in Afrezza gross margin between quarters due to the timing of manufacturing spend and activity as we are not at maximum production capacity. The far right table shows V-Go September year-to-date gross margin of 44%, which is about where we expected the margin to date.

Let me conclude with some final comments around liquidity and performance. We ended the third quarter with $178 million in cash, cash equivalents and investments. And with our growth across all four commercial revenue streams, we're able to invest behind our pipeline and strategically behind Afrezza and V-Go.

Our collaboration with UT is tight and the Tyvaso DPI launch is off to a strong start. I feel like the company has turned a corner. We are focused on maximizing the potential of our collaboration with UT.

We are focused on profitably growing our endocrine business, and we are focused on developing and bringing innovative products to patients from our emerging pipeline. Thank you. And now I'll turn it back over to Mike to review key milestones to provide a pipeline update..

Thank you, Steve. Great summary. Great future. Looking over the next 18 months, I'm just going to share a couple of things. We have a good purview on the endocrine business unit and where we are with Afrezza. First, we wanted a QuickStart program to get patients started quickly here in Q4 to pilot that as we get ready for next year to scale our business.

In 2023, we fully expect that Afrezza will be covered in Medicare at $35 under the Inflation Protection Act bill that was passed.

That changes the game as one of the major objectives for Afrezza's around access, and we really want to continue to see that patients can only have to pay $35 for Afrezza and is not [sure we will have a] low-cost cash program available.

We expect to finally launch BluHale VIS, which is our patient edition integrated with CGM in Q1 as a pilot with a full-scale launch in Q2 next year, assuming that goes well. CIPLA has fully enrolled in a type 2 study, and we expect that readout to happen by Q3 next year and then INHALE-1 readout repeat could happen late Q4 or early Q1 at the latest.

I'm going to bridge over to our MannKind pipeline. This is a position that we started three years ago when we look at the orphan lung business. In 2019, we decided to pivot and focus on orphan lung as we hope that was the best opportunity to help patients.

Hearing the patient stories on nontuberculous mycobacteria as well as Tyvaso DPI are heartbreaking, but we are fundamentally going to extend and enhance people's lives as it comes to using our product and our technology to give them the freedom to live their life.

With clofazimine, we are fully engaged in getting this ready for FDA submission in terms of a Phase II HOPE-3 study, that's one study. On nintedanib, we're progressing that rapidly into Phase I. On 301, the team is working hard on the formulation. We're almost ready to go to the next stage there.

And the TGF-beta we'll be getting final study report very shortly in the next couple of weeks. On the cannabinoid program, RLS just released recent data, they're going forward with their second trial. And on the Fosun continue to watch that progress in the oncology space.

One of the things I was talking to some investors yesterday was how do we start to help people understand our pipeline and the opportunity that we're going after. I think this slide is a good summary. When you look at NTM, pretty much a big unmet need, most of the drugs are generic and have severe toxicities.

Competition is narrow, and our market value for this is in the $3 billion to $4 billion range. We look at this as about 58,000 patients [all for] orphan here in the U.S. with 15,000 in treatment as well as Japan is another large market for this opportunity. In the IPF space, the market is littered with failure. It's a very tough disease.

It's called idiopathic pulmonary fibrosis because it's very hard to treat. It is very hard to diagnose, very hard to get a consistent patient population.

However, we believe the only two products approved are nintedanib and pirfenidone gives us an opportunity to reformulate nintedanib, [an] orphan lung-delivered product, where we know one of the [great looming] side effects of nintedanib is a dose-related adverse events, they cannot dose much higher.

We're excited about this as there are 100,000 patients at IPF who need more options. On the cystic fibrosis side, I was actually privileged to be at the CF conference this past weekend, hearing all the great progress and life expectancy that's been extended in this patient population.

Despite the life expectancy extension, there's a subset of patients that will continue to be sick and as a subset of patients will continue to have exacerbations and infections.

In fact, one of the conversations there was the fact that people [indiscernible] getting better are masking the infections because these patients are no longer producing sputum and how you continue to treat an infection if you can't culture the sputum.

These are great opportunities and challenges to develop drugs in this space, but I think the point to the unmet need in the CF community and the interest that CF Foundation has in our product pipeline as we go forward. As every year, we lay out all of our milestones, we feel pretty good that we're on track to hit all of them.

Nothing here is a surprise. And in Q2, we released the 101 presold ABC results and the MannKind 501 results will be [in shortly]. Q4, we're lined up to have a great quarter, close out the year strong and get ready for 2023. I'll stop there and get ready for questions..

[Operator Instructions] And our first question comes from Brandon Folkes with Cantor Fitzgerald. .

Congratulations on another very good quarter. Maybe just two from me. You talked about the manufacturing of Tyvaso running 24/7. Can you just give us an update in terms of how you -- for how you -- has it been with staffing.

You obviously had staffing challenges across the board in 2022, but do you have the staff there? Do you have sort of the ability to kind of ramp up should this strong ramp on Tyvaso DPI continue? And then maybe just a point of clarification. I think you mentioned 60 additional sales reps that are going to target -- they're going to [detail V-Go].

Are these current risks that you have detailing Afrezza or are these new hires to the company?.

Great, Brandon. Thank you for dialing in this morning. Just to answer that one easily. It's our existing infrastructure. Why we bought V-Go is not to add a ton of more infrastructure to the diabetes business, but to leverage the existing infrastructure we have.

So we have 60 current Afrezza salespeople across the country, and we'll be dropping V-Go in that bag around late January. So that's hopefully clarifying that one. On the Tyvaso 24/7 manufacturing, fortunately, we've had a really good year of staffing, very low turnover relative to the market.

And on the ramp, the real issue on the ramp is continued production. I think that's the biggest thing is when equipment starts and stops, that's when we have headaches. When equipment is running 24/7, it actually gets more efficient over time.

And so I think that's really where the team is focused on is making sure as you ramp up production, that equipment continues to manufacture and fill cartridges [at the right] we need. And then hopefully, we get better on the supply chain in terms of packaging and shipping to the pharmacies.

So we don't anticipate having to hire more people in the near term for production. Outside of the scale-up facility, remember, we're building a major expansion in Danbury, and that facility requires some extra employees next year, which will be reimbursed by UT.

So currently, we've already worked with UT to anticipate upside demand, and we will make sure we're able to supply that demand in 2023..

Mind if I just sneak one more in -- just given your strong cash balance, I know you talked about -- you mentioned sort of getting investors to understand your pipeline. But how do you think about capital allocation going forward, just given sort of the strong position you've built in the company on your balance sheet now? And then that's it for me..

Yes. And I think that's a question we just had with our Board last week around the future of the company, the 5-year plan priorities for investment. I think the way we look at the company is continue to run the diabetes business on a tight leash in terms of budgets and returns for our money that we're spending there.

We think the pipeline has a huge amount of opportunity. And we also will look for external innovation. We haven't really decided on which of those focuses we will be priority for 2023, but we do believe Afrezza and V-Go are off to a great start.

We do believe there are some milestones in that business unit that will give us some information that should we invest more in 2024, should we invest harder in paediatrics. Let's get the data, let's let the data drive some of the up take of Afrezza as we go forward into '24. We also believe you'll start to see V-Go as a platform.

I think that's something I don't want to talk about now, but as we get ready for next year, that's kind of where some of that capital can go, which is how do you re purpose V-Go outside of diabetes. And we think it's a platform device that can be leveraged for other products. So that's an area that we're looking at.

And then I think in the future, there are investments in automation, how do we bring down our cost structure across the company, given the inflation, the impact on employees and the growth we have, we got to get more efficiencies out of the company. So is there ways to invest to bring more efficiencies in the future.

For example, one of the decisions we'll make today is around lab automation and manufacturing automational data and how that transfers from a manual process to a digital process. So things like that bring efficiencies as we continue to scale the company as we go forward.

Steve, I don't know if you have any additional comments on that?.

You answered that Mike..

I am hopeful that I answered your question Brandon..

And our next question comes from Gregory Renza with RBC Capital Markets. Your line is now open..

Great Mike and Steve. Congrats on the progress in the quarter. Mike, just to perhaps piggyback on the previous question when it comes to capacity. I'm just curious if you could maybe provide just some additional color or highlights just on that process through which you intend to meet the advancing demand.

Any color on the runway through which you can lock down product currently, how that engagement works? And maybe [if you could redirect], you've mentioned the collaboration with other is healthy and engaging and strong.

I'm just curious, do those engagement points change? Are there ongoing touch points that provide that closeness or anticipating the demand and meeting the supply now that the product is launched and underway, say, versus the previous development process?.

Yes. There are really two things when it comes to production. Number one is how much product can you spray dry -- and what does that yield? And the second one is how quickly can you fill that cartridge per minute. And currently, there's two different rate-limiting steps in that process.

And as we continue to build efficiencies on the cartridges per minute, one of the product production lines next year that will be coming on line, hopefully, will be the fill-finish part of the cartridges. And that will [tend to bring] and expect to be how much power can we produce to fill those cartridges.

The other part that's shifted a little bit is the dosing. So probably more [diabetes] patients than UTA expected. But on the flip side, higher dose patients also as they titrate off an ILD. So we kind of got bolt-ons of those spectrum. It is a 64-unit cartridge, for example, requires 4x as much pattern as 16 units.

So that -- those are some of the things that drive production volume and time and capacity that [maintain] the balance as -- in its initial launch pace. The good news is, every week, we can adjust that production volume. We can adjust that with the packager.

There's no limitations in the short term that we can see as we continue to watch the launch phase every week. We talk to UT weekly. We feel good about where we are, great communication, collaboration and continue to prioritize the most needed packaging, for example, to get this to patients to make sure there's no stock out.

So -- so far, everything is really tight and going very well. On the capacity side, we are -- we ordered equipment, the manufacturing build-out is happening as you saw, and we continue to see that.

The rate-limiting effect there is really the construction as opposed to equipment, which is what you hear from many other companies buying stuff these days. So we feel pretty good about getting the expansion done next year, getting it ready for 2024.

And when we built the factory, we anticipated high-end of demand from where we are, and we anticipate ILD and [PAH]. So we have enough production capacity to supply the market from where we are today that we can see. I think that answers the questions there..

And our next question comes from Steven Lichtman with Oppenheimer..

This is Ron for Steve Richman. I just wanted to ask if you can guys can give a bit more of an update on the BluHale launch. Are you seeing any easing on the chip shortages that you spoke about in the past? What's -- you gave a new timing for 2Q '23.

So -- and if you can please remind us about the opportunity you see for BluHale?.

I want to make sure I heard your question properly, sorry. I think you asked for any shortages on Tyvaso launch and... .

An update on BluHale. And you've talked in the past that some of the issues with the launch were because of chip shortages. And are you seeing any easing with that? Because we heard some other companies that shortages have been easing up a little bit. So I wondered if that affects you as well.

And if you can remind us of those opportunities you see for BluHale..

Sure. Yes. So on the chip, yes, so BluHale was in terms of large-scale production was limited by chips and in the short term -- the chip -- the main chip that we were using became obsolete. And so we had to reprogram the motherboard and redo all the Bluetooth technology around that.

We're on our next iteration that's almost done and should wrap it up shortly. And so we have enough units we'll be able to make for Q1 launch. By the time we give for Q2 launch, we believe that chip shortage and part storage should be behind us, at least in the short term, that should not be our rate limiting factor.

Much more worried about the reliability and consistency of the device, the patient feedback and the patient experience. So we feel like that's the most critical part of BluHale. The portal looks great. The app looks great. The team did an amazing job, and I think it's going to be really nice for patients.

We are just working through the [licensing] of device violation and technical aspects there. But otherwise, it looks like it should be ready to go in 2022..

Just a follow-up, could you remind us about the opportunity you guys see for BluHale?.

Opportunity, I think the real opportunity is as we continue to go deeper in type 1s we know technology and dosing and feedback loops are important. And so that's really where we're really repositioning Afrezza. We track for a long time to help type 2s. The type 2 market got really crowded with [indiscernible] launch.

We just feel the best place for Afrezza to win is really in that type 1 market. Yes, we'll be able to get [Thompson's Omnipod]. But when we think about Omnipod success with the pay-as-you-go model, Afrezza fits right into that mindset. And I think with the data sets that we're seeing, people do want faster insulin. They do want faster control.

They seal on their CGM. We think Afrezza is really well positioned. And with the [PET] study readout, we think that's going to reinforce a new data set in type 1. And we also know from the market research that the more doctors get used to type 1, they will by default, use it in type 2. And now with V-Go, we think that's a natural segue for them.

They've already been informed -- they really like the device and being able to have a nice simple device for type 2s as a nice growth opportunity. So we feel really good about the co-positioning of those assets and really providing a solution for customers, which is not something we always had..

And our next question comes from Robert Hazlett with BTIG..

Congrats on all the progress. It's terrific to see. So one or two for me. First, on gross margins for V-Go, I think 40% to 45% was where you said that came in, and that was in line with expectations. Is there an opportunity for expansion of gross margin with that product? I’d love to hear the -- what the potential is there..

Yes, I think there is. We just have Jeffrey the Head of Manufacturing yesterday. It's going to require some automation investment, but that's when I think earlier gentleman ask me on capital allocation. These are the types of things we can now do when we have a 2 to 5-year view on capital allocation.

Short term, it's always hard to make any investments in the company because we were just focused on survival. We think now we are focused on gross margin. We are focused on profitability. We are focused on advancing a pipeline. So we've got to make these plans now as they come to fruition.

And I think when you look back in the last five years, right, we made the risk-based decision to bring Tyvaso DPI forward. We made the decision to continue about the paediatrics and Afrezza. Those decisions are paying off now. And I think the same thing is true over the next three to four years, is how do we -- V-Go will be here.

We expect to invest in that product. And you're right, the gross margin can be approved through automation and manufacturing.

We're also going to look at gross to net as we go into '23 and understand are we getting the value for the payers that we expect in terms of formulary access and restrictions? Or are they making it easy for patients to get access. And I think these are all really important attributes to continue to help those two products get more profitable..

That's terrific. And then just one on the pipeline with regards to clofazimine.

If you could just touch on what the goals are for that program? Is it to reduce the AEs, or maybe the skin AE you see with the product in different routes of administration? And what are the next steps? And are we going to see any data anytime in the near future in terms of publications of the results you have?.

Yes. Well, first, I just reviewed a publication last night that's getting access to one of the journals. So that's exciting. It's our first animal data. We have reviewed those comments, we're really positive around the unmet need that clofazimine nebulization is going to bring to patients. And so I thought that was really positive.

The Phase I data is just wrapping up and coming in with a complete study report. We'll publish that data as well, showing the dose range of effects and what we see in terms of dosing. And then I think the FDA feedback will be critical here in Q4. We have meetings set up for late December.

That should give us the green light to go forward in the Phase II/III design that we've laid out. That doesn't mean the update going to agree with it.

It doesn't mean all the end-points are going to be aligned, but we hope to be able to find some commonality with the FDA because there was a big difference with clofazimine or any of the NTM assets between [indiscernible] Japan. Japan thinks regulatory-wise from a sputum conversion and the FDA on full form and function.

And so we think clofazimine can improve both. But as you know, this disease is very hard to treat, and it takes a while to get that -- those types of results. It doesn't happen in two to three weeks. And so -- that, we feel good in terms of what we want to improve on clofazimine, I think Lafazanis an incredible drug that's under appreciated.

And the #1 thing, as you think about it is the accumulation of toxicities because in the long half-life, we really will be reducing that for our dosing regimen and our dose into the lung. I think the skin discoloration you nailed it, that's a big one for patients, but we don't foresee that issue so far in our dosing. We haven't seen any complaints.

We don't expect that to be an issue. And then really just getting deep into the lung and getting a very high concentration above MIC, we feel like that's going to give patients the effectiveness that they want without the systemic side effects. And lastly, the QT for prolongation. That's a known side effect of clofazimine.

We have not seen that on our highest dosing patients yet after seven days, and we feel really good about that safety profile given our dose. So I think clofazimine overall should be a better, safer product for patients that really treats that lung infection at the site and it's very hard to penetrate from the oral route administration.

So we'll see at the big unmet need, and we think the struggle will help a lot of these patients..

And our next question comes from Thomas Smith with SVB Securities..

This is Mike on for Tom. Congrats on a really strong quarter.

On Tyvaso DPI, can you provide any color on the preliminary commercial and manufacturing trends that you're seeing? And if you'd expect some seasonality in the first quarter of 2023, are there other dynamics that you kind of flagged for investors trying to get a sense of the potential ramp there?.

Yes. I think one thing I'd say, Mike, is at least from our investors, I've talked a little bit. People are watching Symphony data, and I think that's okay to give some direction. But I don't think UT has a very close distribution network. So not all those scripts probably show up in the framework out there.

So we can only say so much, right? This UT's launch. This is their product, their revenue. We are just the manufacturer and trying to make sure we keep up with their demand and their successful launch. And so we don't see any -- we don't anticipate any problems there.

We're doing a decent job, the team really with the inventory, the demand, the product shipments every week, a lot of constant communication. So I think we're on top of it. Things can always happen beyond our control. We can't see. But as of now, I think every week, we get the orders. We look at the demand, we can adjust our supply chain pretty quickly.

And it takes about 30 days to get through a batch in terms of -- [from the time] it's released and packaged, it's about that time. So we can adjust pretty quickly on that demand forecast. I think what you heard from UT, which I thought was very encouraging is of the patient referrals coming in, 50% for a nebulizer, 50% were for DPI.

And I thought that was a fairly good statistic because we know that this is going to continue to grow. It's going to be $1 billion plus product and how much of that becomes DPI is the billion-dollar question. And obviously, we feel pretty good about that.

And if you heard the patient stories and freedom that they're getting, I think it's going to be a no-brainer that more and more people want this. I think the other question I get around this topic is where do you see the market.

I think the good news is the Medicare Part D, I know that's one of the reasons UT feels there's some limitational conversion. But that [all] closes in 2025. And so those patient out-of-pocket costs will be capped about $125 a month roughly. And that will create the next leg up.

So anyone that doesn't convert [that's] on Medicare, for example, we'll have that opportunity in the next 24 months to get there. So this is a tough disease. People are going to die, and they don't want to die. So they really want to extend their life, enhance their life for the remaining years they have.

And Tyvaso DPI is doing an amazing job changing those lives. I mean I just wish our shareholders and our investors and analysts could hear the stories of the patients and the doctors have been extremely motivating and positive, and our team is so encouraged by the feedback that's happening.

It just gives us that much more motivation for our pipeline because really are changing lives and extending lives. So it's just super-exciting times here..

Got it. Yes, I really appreciate the helpful commentary there. And then just a separate one for me. With respect to Afrezza, you really did a nice job kind of laying out the important -- kind of -- new milestones that you have coming up there.

Is there a certain one in particular, either clinical or regulatory that you think could be important for seeing that next leg of growth for product sales?.

I think next year is really an execution year. Every year, we try to do something different to try to spike growth on Afrezza, and we just seem to travel along and then COVID hit for a couple of years, and I don't think it's fair to investors to keep guessing where Afrezza is going to go.

And so what we really have done for the business is purchasing V-Go, integrating those two next year and really just focus on execution and alignment. If we have an asset and a franchise that's going to do $80 million to $100 million of growth 10%, 20% a year for the foreseeable future, that's a good business for MannKind.

And so we will continue to hope the data readouts to demonstrate upside opportunities, but I think being real about where we are for as much time of getting this to be a profitable division for the company, helping as many patients as we can and really placing some strategic bets and paediatrics is one of them.

We believe kids is where you're going to change type 1 care. We think being able to show you as good as an AID system will be important. Those are the actions that we're focused on. Those are going to happen in the next six months.

But those are really the key milestones we're looking at saying, how does Afrezza do in kids? Is that really going to be the game-changing opportunity to transform growth in 2024. And the data readout [then] will be important. But a little less so important, meaning, I think important for India, but we're really focused on [Afrezza] type 1.

And so India studies for type 2s, that would be nice to have additional data set to support what we think is a great drug for type 2s. But recognizing there's 1.5 million people live with type 1 diabetes. They're half the insulin market.

We [have got to give the] kids opportunity for us to get that really foundation built, work with [JDRF] a lot more and the patient walks and raising our awareness out there in the society. There's still too many patients not aware in type 1, especially that inhaled insulin is an option.

And so we think we just -- when we look at next year, it's really about making sure Afrezza is a choice amongst the doctors that we're targeting. And I just think we're not in the choice set. We're like #8 out of the eight things they could do. And we got to move up that ladder a little bit. And year-by-year, we'll get better [going out].

But we have a map, we have a plan, and we've got the team to do it, and I feel very good about 2023 as a team we have..

I would now like to turn the conference back over to Michael Castagna, CEO, for closing remarks..

Thank you, Daniel. Overall, a monumental quarter for the company. Super excited about where we are at Tyvaso. The company is in the best shape it's ever been. We got the best talent we can possibly have. We feel really, really good about our future. We continue to make change and pivot us for the next five years.

Afrezza and V-Go will be great in 2023 in terms of pivoting to an endocrine focus, making sure that business is a cash flow positive unit by the end of the year.

I think on the pipeline, you're going to see really nice progress over the next 12 months of moving assets from preclinical formulation stage in the Phase I, Phase II, Phase III, and we think that's going to be a monument opportunity for investors to start to really understand that value.

Just like Tyvaso for years, we had signed a deal with UT in 2018. No one really appreciated it until probably 2021. And I think when you look at the pipeline, we started this progress in 2019. I don't think we have a lot of value or attributes on the pipeline.

I think you're going to start to see that come out over the next couple of quarters, and we think that's a nice upside for investors where we are and ultimately position the future of the company. And Tyvaso is just going to continue to rock the world. It's just a great product. It's helping a lot of patients.

This doing an amazing job, and we will do everything we can to make sure we stay ahead of the demand curve and build that inventory to make sure we can supply the patients. And so overall, great year. The company is well-positioned for 2023 to be a great year.

It's a tough economy, tough biotech investors, but we feel MannKind's well positioned for investors that double-digit growth for the foreseeable future. And we're very excited about where we are. Thank you..

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect..