Mannkind Corp Q2 FY2023 Earnings Call

Good afternoon and welcome to MannKind Corporation 2023 Second Quarter Financial Results Earnings Call. As a reminder, this call is being recorded on August 7, 2023, and will be available for playback on MannKind Corporation website shortly after the conclusion of this call until August 21, 2023. 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 afternoon, 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, Steve Binder. I would now like to turn the call over to Mr. Castagna. Please go ahead, sir.

Thank you, and thank you, everyone. Happy afternoon. So a year ago in Q2, when we were notified that United Therapeutics got FDA approval for Tyvaso DPI, at that time we said that would put us on the path of profitability. And as we kick off a year later, we are proud to say that we’ve achieved our first operating income, making us a long-term sustainable company, which helps us live our mission to ultimately give people control of their health and the freedom to live life. Today, we probably have between 15,000 to 20,000 people taking one of our diabetes products. And there are thousands of people benefiting from Tyvaso DPI. We’re really proud of all the hard work, and we’re really excited to share this quarter’s earnings with you. Let me first start off by a couple of highlights here in Q2. Our orphan lung disease business is off and running. United Therapeutics is doing an amazing job with strong patient demand. We received royalty revenue of $19 million, which is a 63% growth just over the first quarter. We also took a step to improve manufacturing capacity through efficiencies and yields, increasing that by about 250%. Additionally, our orphan lung pipeline is starting to come into the purview. We expect to have 2 INDs filed and going into Phase 1 and Phase 3 in the next 12 months. INHALE-101, as we just notified you previously, there was a fire, unfortunately. We are now moving GMP manufacturing to Danbury, Connecticut. Fortunately, we have facilities there where we can move the equipment into. Our chronic tox study is now complete, and we’ll have a full study readout on that here in Q3. On MannKind 201, we did receive FDA feedback on our inhaled nintedanib program. For those of you following the IPF market, that is a generic for Ofev, which is marketed by a company named Boehringer Ingelheim. We are planning to progress that to IND filing shortly and kick off a Phase 1 study next year. We’re super excited to get that in humans. On the endocrine area, we have now Afrezza and V-Go, both synergizing our success. Starting in July, we have now moved everything to one sales force, one management team, one focus, to help people with mealtime control in type 1 and type 2 diabetes. As you look at Q2, Afrezza TRxs grew 16% versus last year, mainly driven by the Medicare access that was created under law in January of 2023. Additionally, INHALE-1 has continued to roll nicely. We had our best enrollment in the month of June ever. And INHALE-3 just kicked off, and that’s already enrolled patients. This is the first study we’re doing to show you how and the conversion factor for pump switching. We have no data on that in our package insert. And it’s a question we get, which is, can you switch from Afrezza to a non-pump. That is the study that will drive that, which is built upon the pilot study we did last year. Announcement over a year that we closed the V-Go deal, and that is achieving our first-year forecasted net revenue; we gave guidance of $18 million to $22 million. We are coming in exactly on the high end of that forecast from a year ago. Overall, what does this mean for shareholders? Our operating GAAP income was $2 million, driven by the strong growth in DPI year-over-year, and our non-GAAP operating income is $8 million when adjusted for certain non-cash items that I’ll describe later. Tyvaso DPI saw strong demand, and we were able to supply that demand with our increased manufacturing. There is an IP update from United Therapeutics in their recent quarterly earnings, where we heard the patent for ILD should be issued and give allowance through 2042. We have revenue expectations and continued strong patient demand. We want to give clarity for our shareholders that for every 10,000 paying patients, we expect annual revenue demand of about $250 million to $300 million. Additionally, we are on track to complete our high-volume capacity expansion, which is now expected by the end of next year. We have both spray drying scales happening with 2 new spray dryers being installed as we speak. We also have a fill/finish line coming in here in August, which will hopefully be online between now and early next year. As we look at the Tyvaso quarterly revenue from Q2 of last year all the way through Q2 of this year, we have seen significant growth consistently quarter-over-quarter, and this has continued to put us on the path of profitability. We’re very proud of the launch; we think it’s doing amazing. We hear great patient stories, and we see nothing really slowing us down as we keep going. And I just want to say thank you to our partner, United Therapeutics, for helping so many patients with our technology. Now I want to bridge over to our diabetes business, which is one of the things that we control every week and every year. We’re trying to do a better job this year in improving patient access and keeping patients on therapy with Afrezza as we also turn around V-Go into a growth driver for the company. For those of you who don’t know, Medicare passed a law that all insulin will be $35 starting in January of this year. You can see Afrezza was underpenetrated in this market because it was never put on a preferred formulary, which forced patients to have a huge cost differential. When it was covered at $35, you can see we quickly got back to what you see as the standard of care for rapid-acting insulin. About 28% of all prescriptions are for Medicare Part D recipients, and Afrezza now in Q2 has gotten that back up to where the market is for rapid-acting insulins. We are really proud of the team work here and hopefully continue to grow and help more people living with diabetes in the Part D space. Additionally, in order to make our access method simple, we lowered our commercial co-pay to be $35 to be consistent with Medicare. You can see our TRx and NRx growth on the next slide has grown consistently, and we really have had an inflection going from last year to this year, and we’ll kind of keep watching this on a weekly basis. I wanted to share also, it’s important to acknowledge that I get a lot of questions on why we can’t grow Afrezza faster. I think we had a lot of things to fix over a long period of time. Most of that is behind us, and a lot of the fruition of that work will come out next year. In the meantime, we continue to push forward, even without new data to share. When you look at patient satisfaction, we rank the highest of all mealtime insulins rated out there by patients. This is an independent analysis by dQ&A, and that is something we’ll continue to monitor as we go forward. Now I want to bridge over to V-Go. We achieved the high end of our forecast, as I just mentioned. Looking at our TRx trajectory, we started telling you last quarter that it was flattening out on NRxs and TRxs should follow. I’m really proud to show you now in Q1 going into Q2 that we have slowed the decline, and now we’re back on a growth trajectory, which we expect to continue for the foreseeable future. So we had 4% growth in TRxs in Q2 over Q1, and we feel that we hit bottom and that the white space has continued to decline while the rep targeting efforts on reaching doctors continues to increase. So we believe we’ve hit that inflection point and hopefully will continue to see V-Go do well and help more patients as we move forward. On the scientific front, our medical team is working hard to start to articulate the benefits of this product with the new dosing arrangements that we’re studying. We want to expand the eligible population for Afrezza as we look ahead. In particular, when you think about diabetes and the transformation of the insulin pump market or the CGM market, it always started with kids. Doctors and parents are very progressive because this is a life-threatening disease. Hypoglycemia is life-threatening. We believe we will be able to demonstrate in this trial hopefully positive benefits regarding the safety of hypoglycemia as well as the efficacy. This is a non-inferiority trial, and we do know from our analysis that hypoglycemia is lower with Afrezza. We’ll have more insight here in Q4 this year with a primary endpoint wrapping up mid next year. Cipla Phase 2, I got many questions on when the data was coming out. We received the data; this analysis is being finalized. We don’t expect the data to become public until sometime in 2024 once Cipla finalizes their plans here for India. On INHALE-3, we call this our type 1 or pump-sparing study because it’s the first study we’re doing head-to-head to show how to rotate off an insulin pump or injectable insulin to just Afrezza, Tresiba, and Dexcom. This trial will have quality medications run as well as improved dosing regimens from our previous trials, and this is a 4-month primary endpoint with an additional 3 months of follow-up. So, everyone in this trial will switch to Afrezza by the end of the 7 months. Now I’m going to turn it over to Steve to talk about our financials. Thank you, Steve.

Thanks, Mike, and good afternoon. I’m pleased to review select second quarter 2023 financial results. Please supplement this call by reading the condensed consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC this afternoon. Our total revenues grew 157% versus second quarter 2022 and 189% for the 6 months ended June 30 versus the same period of 2022, which highlights the revenue growth associated with Tyvaso DPI and to a lesser extent our endocrine business, which included the results of the V-Go product acquisition from May 31, 2022. Revenues from our collaboration with United Therapeutics totaled $30 million in the second quarter of 2023, which was made up of royalties of $19 million and collaboration and services revenue of $11 million. The royalties earned on the net sales of Tyvaso DPI of $19 million resulted from strong patient demand for innovative products and our low double-digit royalty rate. We recorded $11 million of collaboration and services revenue in the second quarter, which was almost double the prior year. This amount is primarily related to revenue associated with the manufacturing of Tyvaso DPI, which we started to manufacture commercially for United Therapeutics in the second quarter of 2022. Total revenues from our collaboration with United Therapeutics were $53 million for the first half of 2023, again representing strong patient demand for Tyvaso DPI compared to $8 million for the first 6 months of 2022. The 2022 6-month period includes the start of commercial manufacturing of Tyvaso DPI by MannKind midway through the second quarter and the commercial launch of the product by United Therapeutics towards the end of the second quarter. Moving down the table to our endocrine business. Total endocrine revenues were $18 million, made up of Afrezza net revenue of $14 million and V-Go net revenue of $5 million. Afrezza's net revenue of $14 million compares to $11 million in 2022, a growth rate of 27%, which is very consistent with our first-quarter growth rate. The growth was mainly driven by higher patient demand with underlying paid TRx growth of 16% year-over-year, increased channel inventory to support higher demand, and price. For the June year-to-date period, total endocrine revenues were $36 million. Net revenue from V-Go was $5 million for the second quarter of 2023. We purchased V-Go on May 31, 2022, so the increase over 2022 is mainly from a 1-month versus 3-month comparative. For the 12-month period post-acquisition, V-Go had net revenue of $22 million, which was at the top end of our forecast range. The next slide shows our revenue growth by source on a quarter-by-quarter basis from the first quarter of 2022 through the second quarter of 2023. We’d like to show this graph because it highlights how dramatically our business has changed in the last 2 years. We started 2022 recognizing revenues primarily from Afrezza, and now we have 2 revenue streams from Tyvaso DPI plus 2 endocrine products delivering commercial revenue. In the second quarter of 2023, we grew total revenue by 20% from the first quarter, fueled by the growth of Tyvaso DPI royalties. Below the graph, I have plotted the loss per share for each quarter, and you can see the impact from the increasing revenues, particularly from Tyvaso DPI royalties, which don’t have any associated expenses. We recorded a loss per share of only $0.02 in the second quarter, representing an 82% decrease from the second quarter of 2022. The second quarter of 2023, we had our first quarter of GAAP income from operations since I joined the company 6 years ago, amounting to $2 million. There’s been a long time coming, but the growth in revenues associated with our collaboration that had a significant impact on turning this positive. Starting with this quarter, we will communicate a GAAP to non-GAAP reconciliation so that investors can clearly see the impact of certain non-cash items on our profit and loss statement. Looking at the table, we had positive GAAP income from operations of $2 million in the second quarter of ‘23 compared to a GAAP loss from operations of $21 million in the prior year. When adjusting for the non-cash items of stock compensation of $6 million and a loss of foreign currency of less than $1 million, we had positive non-GAAP income from operations of $8 million for the second quarter of 2023. When looking at EPS, we recorded a GAAP net loss of $0.02 per share, which when adjusted for non-cash items of stock compensation, a loss on foreign currency, and a gain on available-for-sale securities, we had non-GAAP EPS of $0 for each share. The primary difference between our income from operations and net income included in EPS is interest income and interest expense. We plan to continue to show a reconciliation like this each quarter to enable more transparency into the impact of our operations on cash. We continue to manage our cash outflows while benefiting from the increasing revenues associated with Tyvaso DPI and our endocrine business as we move the company towards profitability and being cash flow positive. We continue to believe that our current level of cash, cash equivalents and investments, plus the anticipated operating cash inflows and outflows will allow us to adequately invest in and grow our business without a need for any follow-on stock offerings. Thank you. Now I’ll turn it back over to Mike.

Thank you, Steve. First, I want to talk about a new addition to our leadership team. We hired Dr. Burkhard Blank, who is our Executive Vice President, Head of R&D and Chief Medical Officer. We’ve had the pleasure of working together over the last 2 months as we’ve done a deep dive on all of our assets. He’s visited our facility where we had the fire, and he’s really helped build the team and think about the future structure of how we move these assets forward. When I get the question of what’s going to be the next leg up for MannKind over the next few years, it really is the R&D coming into fruition, which we felt was time to bring in someone like Dr. Burkhard to help us put the governance structure in place and manage these assets as we have 4 or 5 great assets coming down the road. He has more than 25 years of global development experience at several companies, starting his career out of Boehringer Ingelheim, then going to Acorda, and ending at a company recently in France. He has experience in multiple disease areas, early preclinical and successful NDA submissions, as well as with small molecules, drug/device combos, and inhaled therapeutics. It’s very difficult to find somebody with such breadth and depth of experience, and we are very fortunate to have someone like Dr. Blank join us and lead our efforts here over the next several years. As you can see on the next slide, the pipeline we’ll be working on involves all the work with Afrezza pediatrics and the filing that will come with that. We have the international work to get us back into Brazil and India. With V-Go, we continue to evaluate that for other opportunities and grow here in the U.S. The pipeline itself, with M-101 being clofazimine and 201 nintedanib, are both going into IND Phase 1 and Phase 3. We’ll continue to work to get DNase alfa into patients as quickly as possible. Another asset is TGF-beta, which continues to work through Thirona models until we get into a preclinical formulation ready for testing. So there’s a lot of work in front of us. We’ve been moving this along. The question I always get is why isn’t Afrezza growing faster? I don’t think people appreciate that it takes a lot of time and resources to manage four development programs. That’s the choice we’ve made—fund pediatrics and fund 101, 201, 301, and 501—to ensure we have one product launch per year starting in roughly 2025, either a new indication or a new product launch. We continue to be focused on this effort, and we believe this will be critical to our future success. The next slide shows some of the milestones associated with these pipeline investments we’re making. These should ultimately give us new product revenue or expand the product revenue with existing products. As you look at the endocrine business, INHALE-3 kicked off here. We expect to have that data in the first half of next year. The India trial readout will finalize here in the second half, and we’ll discuss next steps at that point. The INHALE-1 pediatric trial readout should happen late in the first half of next year as the primary endpoint is 6 months. We’ve added a new milestone here in the second half of ‘23. For INHALE-1, we’ll have an interim analysis telling us whether the trial is properly sized, if it needs more patients, or if it will be a field exercise that keeps going. We believe the primary endpoint will be sufficiently statistically significant. But until we get that interim analysis in late October, we won’t know; this information will be ready by the next quarterly earnings call. That’s important to share with shareholders, as we think we will be on track to drive that readout there in the first half of 2024. Regarding orphan lung, our focus is the 201 pre-IND, which is the filing of that IND submission for clofazimine. One thing we are evaluating based on the FDA's thoughts post-fire is whether we can use some of the data generated in Germany to bridge for the U.S., thus keeping the IND on track to ultimately get this trial off the ground in early ’24. Finally, we also have United Therapeutics working on the Tyvaso study, which is critical for continued expansion there. So, as we look at the key value drivers, these are real and significant. The pipeline, particularly thinking about 101, will bring in significant revenue at the time of launch. For 201, this is a multibillion-dollar opportunity that is littered with failure. Our goal has been to take the market leader and produce an inhaled version hopefully minimizing the systemic toxicities while enabling patients to have well-controlled therapeutic doses in IPF. As it relates to DPI, there is a strong story there. Mentally, we can see this growing to over 10,000 patients, and we wanted to clarify how we think about this from a shareholder perspective. Obviously, we’re not in control of the launch, but we feel confident about United Therapeutics’ investments and opportunities to continue to help as many patients suffering from PH-ILD as well as IPF in the future. Pediatrics is what we highly anticipate next year; every 10% of share in kids fundamentally changes the long-term trajectory for Afrezza, and that can compound for the next 20 years. For every 10% share in kids, it represents roughly $150 million of revenue. We’re investing in the INHALE-3 study because we believe if we get great data on INHALE-1, that answers the question of how effective we are compared to rapid-acting insulin. We’ll also address whether the data looks favorable if switching off an insulin pump. In our pilot study, we showed that we were as effective as using an insulin pump. The reason this is significant is we expect that a once-weekly basal will become marketable in the not-too-distant future, fundamentally changing the patient experience. We are currently focused on stabilizing V-Go and are proud to see growth ahead. Now I’ll turn it over to answer your questions. Thank you.

Thank you. Our first question comes from Steven Lichtman from Oppenheimer & Company. Please go ahead.

Thank you. Good evening, everyone. Mike, you mentioned the real benefit that you’ve seen in insulin reimbursement this year in Medicare. How are you guys balancing wanting to drive profitability in the business versus investing and getting the word out now because it seems like it is a big change for the Afrezza business, as you showed into the second quarter here. So, talk a little bit about how you’re getting that word out versus I know you want to start driving some leverage in the business as well.

Steve, thank you for the question. I think, first, as you know, we’ve tried different reimbursement support programs over the years, and they haven’t always resulted in a trend break. I think this year we saw that the Medicare patients, A, the approval ratings are very high—over 90%. That makes us feel confident that we can continue to help more patients. Now that we have seen, in just two quarters, the market share get back up to where injectable insulin is as a percent of their business, that gives us confidence to push even harder in this segment. In terms of profitability, we have seen better rebates for Medicare Part D over the years, but they have mostly been rejected due to the rebate structures in the competition within PBMs. As we look towards next year, this change could potentially shift, meaning that patients just need their doctor to do a prior authorization, and we’re seeing very high approval rates. So, as we move into 2024, we may see either someone removing prior authorizations completely in Medicare Part D or continued success beyond what we’re currently doing. It’s nice to see how in just 6 months we can get back to the market share of injectable insulin since we always felt that patients were not getting proper access to the product due to the reimbursement issues. We’ve worked closely with CMS to explain this, and they understood it in order to better help patients. The real issue is the cost impacting patients at the end of the day, and while we do what we can, there’s only so much we can do with Part D.

Got it. Great. And then, I guess, as we think about the back half, based on your visibility, how should we think about DPI royalties sequentially here in the third and fourth quarter? 2Q coming in certainly a lot better or higher than we expected. Is this a good level? Or based on your visibility, can you give us directional guidance into the third and fourth quarter? Also on gross margin, the first half was strong on Afrezza and V-Go—around 70%. Is that a pretty good level for the back half?

So Steve, as you know, we don’t provide forward-looking guidance or forecasts. If you listen to United Therapeutics’ call, they’re very bullish on patient demand for Tyvaso DPI, as you can see through our royalties and the manufacturing of the product. Without providing guidance for the second half of the year, we believe there will continue to be strong patient demand, and we’ll report those revenues in the third and fourth quarters as they come in. Regarding the margin, 72% is appropriate for a combined Afrezza and V-Go. Afrezza has better margins than V-Go, but we don’t provide those separately anymore, just combined. That’s a pretty good margin for us. There’s variability quarter-to-quarter with the amount of manufacturing we carry out on Afrezza that impacts the Afrezza margin quarterly; however, we feel confident it’s in the right ballpark for our commercial products at this point.

Okay. Great. Thanks, Steve. Thanks, Mike.

Welcome.

Thank you, Steve.

Thank you. Our next question comes from Olivia Brayer of Cantor. Your line is open.

Hi, good afternoon. Thank you for the question. Can you guys talk about the decision to take an interim look at INHALE-1 and whether that was built into the trial design initially? Also, what’s the clinical bar for success in order for that study to continue as planned? And then I’ve got a follow-up question on DPI.

Sure. The interim look was always planned in the original statistical plan analysis, so that hasn’t changed. The only thing we didn’t know was when we would hit 50% enrollment in the trial. That was the driver of that, and now that we know that we’ve hit that milestone, it was a matter of when they could crunch the data and meet together as a DSMB. MannKind will not know the data; unfortunately, it’s confidential to the DSMB. However, at least we’ll know at that point whether the trial is futile and if we’ll need to continue or get more patients. We powered the trial to hopefully hit the endpoints we need to hit and ramp up 6 months after that as the primary endpoint. The secondary endpoints will involve the second cohort and the control arm switching over to Afrezza for an additional 6 months. We expect the primary endpoint of that trial will wrap up hopefully 6 months after that early November date. We’ll go from there.

Okay, got it. And then the second question is, it looks like you guys increased DPI revenue assumptions for every 10,000 patients to $250 million to $300 million. Can you give any color on what’s driving that increase?

Yes. I think as we continue to refine Tyvaso each quarter, we get a little more clarity on what it looks like in terms of pricing, packaging, dose, all those factors come into account. We don’t break out the details of the forecast, but we wanted to give people guidance. One thing to note is the different indications and the various factors built between our expansion and United Therapeutics’ plan; we want you to at least have a range of numbers there. Some of that changes over time because of discounts or manufacturing revenue assumptions. So, that’s why we gave a range instead of a specific number.

Okay, got it. That’s helpful. Thanks, Michael. Appreciate it.

Thank you. Our next question comes from Gregory Renza of RBC Capital Market. Your line is open.

Hi, Mike and Steve. It’s Anish on for Greg. Congrats on the quarter and thanks for taking my questions. Just a couple for me on 201. Maybe just for some color on differentiation. Other than drug delivery of nintedanib, how would you describe 201’s ability to differentiate against a drug like pirfenidone in patients with IPF? How would you characterize the FDA feedback? How are you incorporating it into the development path moving forward? Appreciate your time, and thanks again.

Yes. Great questions. The good news is there’s been some data released on pirfenidone that shows delivering through an inhaled route could work. Our focus has been solely on nintedanib. We originally planned to develop both products but decided to move forward with this one. We believe the limiting side effect of Ofev is around GI side effects and dosing. By using the inhaled route, we aim to minimize some of the side effects that patients experience. Of course, we need to get this into human trials, but that’s part of our thesis. The FDA feedback gave us some flexibility to consider using healthy volunteers versus IPF patients in our Phase 1 to Phase 3 design. We feel pretty good about our product profile, lung-delivered dose, and ability to differentiate on tolerability. It’s important to note that we believe 30% to 40% of people drop out of Ofev due to tolerability issues. This represents a significant population not receiving adequate help, and while the product may become generic by the time we reach the market, the unmet need remains vast. So, we feel positive about the FDA feedback—nothing we encountered was a showstopper.

Great. Thanks so much. Appreciate it.

Thank you. Our next question comes from Thomas Smith of Leerink Partners. Your line is open.

Hey, guys. Good afternoon. Thanks for taking the questions, and let me add my congrats on the solid results. Just on the endocrine business unit performance, I think you’re now guiding to profitability in 2024. Previously, you talked about your expectations to reach breakeven by the end of this year. I wanted to check in to get your updated thoughts. Has anything changed in terms of timing or outlook for the rest of the year? So, as a follow-up, can you give us an update on how you’re thinking about investment in the pipeline and platform broadly? How should we think about R&D spending over the next couple of years as you consider bringing clofazimine and nintedanib, along with some other pipeline programs forward, balancing that with the desire to maintain profitability?

Thank you for the great questions. On the breakeven by Q4, that’s still our intent, and while we may be off by a couple of hundred grand, we believe we are still on track. I don’t think Steve has anything more to add regarding our overall outlook.

We’re on track, but it could be off by a little bit.

But yes, it shouldn’t be anything major in the grand scheme. We should still be profitable as we look into ‘24 overall. Regarding R&D spend, we plan to approach this in two ways. We don’t intend to launch these products ourselves outside of the U.S., so we will seek partnerships for the rest of the world. For a product like NTM with clofazimine, the Asia Pacific area has a large market that we hope to find one partner to manage the launch and help with some development costs. Within the U.S., there are a couple of upcoming trials that we will finalize next year, namely INHALE-1 and INHALE-3. These two trials will generate significant expenses each year, and as they wind down, we will transition some costs towards the clofazimine project. While we haven’t provided exact guidance yet because of the variability in timelines, we anticipate that the majority of expenses for clofazimine will hit in ’25 rather than ’24, though some initial manufacturing costs will impact our cash flow sooner. Notably, Phase 1 studies are not generally expensive, so we don’t anticipate overwhelming expenses for clofazimine and nintedanib entering into their respective phases. Overall, we expect Afrezza to continue growing, V-Go to show potential for growth, and Tyvaso to persistently perform well. We want to avoid the situation we found ourselves in 6 years ago, which is our #1 focus, and we see orphan lung as a significant growth opportunity in the future.

Got it. That makes sense. Thanks for taking the questions, guys.

Thank you.

Thank you. Our next question comes from Oren Livnat of H.C. Wainwright. Your line is open.

Hi, thanks. A couple of questions. First on Tyvaso DPI. I know you’re not giving guidance, and there’s a product to discuss, but you pointed to their call where they expressed bullishness, mentioning $30 million in stock this quarter linked to your advancements in capacity and yield for the product. Can you help us understand where you are now and in the future in terms of supply? Are you catching up to where inventory needs to be in general to keep supplying the market as expected, or do you see any pauses? I have follow-ups.

Yes. I think Oren, if you take away the $30 million in revenue, you can see it has grown quarter-to-quarter consistency. We don’t believe Tyvaso is capped out in terms of existing demand; new starts and continued conversion are still pending. As each quarter goes, we will show increased inventory and more days on hand. Ultimately, we need to keep stocking up on that and build inventory. So, we aren't set to give you an exact prediction for Q3 or Q4, but we don’t think demand is leveling off and believe continued growth is ahead.

Yes. Don’t misunderstand me; it’s clear demand has grown. I want to understand if you have caught up to your required stocking levels or do you continue to fulfill orders while also needing to build up inventories.

We’re not privy to their contractual agreements with pharmacies, but I know they want more than we could provide initially as we were closing Q1. I think we made changes in Q2 to respond to that demand. Closing out last quarter, we did a commendable job with demand increase, and so, I believe our task is to manufacture as much Tyvaso as we can, which we are doing.

Okay. Moving on to the pipeline, for 201, you mentioned that some of the FDA feedback deals with clinical work in either healthy or IPF patients. I want to clarify if you are discussing this just for Phase 1, whether it’s healthy patients or in theory, are we looking deeper into the development timeline, potentially leading to a streamlined registration trial.

I wish it were the second part of your question. If you look at the FDA, they typically require a clinical trial whenever you change the route of administration. That is our expectation when it comes to these treatments for patients. How we design that trial and what the endpoints will be are still things we won’t go public with just yet. However, the FDA has provided us some flexibility on whether to complete trials in healthy patients or some with IPF patients. The challenge is always finding patients with IPF since they are tougher to find and can be harder to regulate within a clinical site. We’re still managing those insights to see what the right approach is. We expect the Phase 3 trial to be in patients who have IPF.

Okay. Lastly, regarding the contracting and profitability trade-offs you mentioned, where are you at now? I know you have a high margin product with a small market share. What opportunities have you explored for coverage improvements?

You’re correct that we weigh offering discounts for faster growth against maintaining profitability. Based on prior programs, we’ve not seen that relieving administrative burdens have resulted in faster growth for Afrezza. I believe the conviction around efficacy and safety speaks volumes. With positive outcomes, we can safely switch from MDIs and maintain comparable results. These datasets will be available next year. As for potential changes next year—if the rebates drop, I suspect we will have a chance to improve volume. Most payers have chosen to emphasize their reimbursement packages, favoring higher rebates over better product access. Not every PBM has that contract; some do. However, we are currently not informed of any changes for next year. I do plan to meet with several major players to capitalize on this success we have seen in Medicare Part D and facilitate broader access. We are not looking to alter the economic value proposition with Afrezza—indeed, maintaining that remains our focal point.

So if I understand you correctly, the data will offer you a significant leverage point when discussing access with payers next year?

Yes, that’s crucial to our strategy. We expect improvements in discussions with payers moving forward into 2025.

Alright. Thank you.

Thank you, Oren.

Thank you. One moment, please. Our next question comes from the line of Anthony Petrone from Mizuho. Your line is open.

Thanks and congrats on a good quarter here. A couple on Tyvaso and then I’ll follow up with a couple on diabetes. Just on the renewed outlook for 10,000 patients, $250 million to $300 million, I am assuming, again, that doesn’t include idiopathic pulmonary fibrosis—the new IPF label expansion? Do you have early views as to what IPF could add to the $250 million to $300 million?

As you evaluate the statistic, it encompasses all sources of revenue, irrespective of IPF or other indications. If IPF drives incremental volume in a new market for us, it represents revenue we can expect for every 10,000 patients. The same logic applies when considering manufacturing—our facilities were designed primarily to meet the needs of PH and ILD. As those demands expand, United Therapeutics is investing in new spray drying capacity and fill/finish options to adequately prepare us for IPF and any further growth potentials. They also announced plans to establish a duplicate facility in North Carolina, which may contribute to risk mitigation and expand our supply capabilities significantly. This is critical for a life-saving drug like Tyvaso.

No, that’s helpful. And then on diabetes, is this the full quarter of V-Go? I know you guys mentioned it was straddling Q1 and Q2. Essentially, is this the run rate for V-Go for a full quarter? Additionally, could you provide any update on the BluHale VIS launch integrated with Dexcom? Is that going to be launched with G6 and G7, or just one version? And do you have any statistics on current inhaler patients that are active Dexcom users?

For V-Go, we acquired the product on May 31, 2022. So, our revenues for 2022 in Q2 were about $2 million, and they were about $5 million in Q2 of 2023. Therefore, the comparison isn’t very fair due to the one-month versus three-month evaluation. Going forward, we expect more comparability. As for V-Go, it underwent a turnaround period where it had been in decline for an extended reason; we have finally stabilized the product leading to these recent improvements in TRxs this past quarter. The BluHale VIS will be used in INHALE-3. We’re currently activating our sites and plan to perform a beta test. Assuming that goes well, we will work on getting it into the general population. Currently, we’re preparing that for use with Dexcom G6 and G7; from my knowledge, both will be incorporated. We are not limited to Dexcom either; we’re open to collaborating with Libre or Senseonics and other devices. This crosses our mind as we consider integrated solutions for our customers.

Thank you. I’m showing no further questions at this time. I would like to turn the call back over to Michael Castagna for any closing remarks.

Thank you, and thank you, everyone, for your patience as we continue to turn around the company. We do feel we are on the right growth track. We have great growth drivers between our in-line assets and our pipeline assets. It’s been a long journey to get here, but we are really proud of the team, the work, the energy involved, and all the patients who are benefiting from our investments. I want to express gratitude to our analysts who cover us, our shareholders, employees, and all our stakeholders. I look forward to speaking to you again. I will be at a conference tomorrow in New York, meeting some new investors, and in September we will be in New York for several conferences. As updates happen, we will provide them at these upcoming opportunities. Thank you.

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.