MannKind's CEO Discusses Q2 2012 Results - Earnings Call Transcript

MannKind Corporation (MNKD)

Q2 2012 Earnings Call

August 7, 2012 9:00 am ET

Executives

Matthew J. Pfeffer – Chief Financial Officer and Corporate Vice President

Hakan S. Edstrom – President, Chief Operating Officer and Director

Alfred E. Mann – Chairman and Chief Executive Officer

Analysts

Seamus Fernandez – Leerink Swann LLC

Matthew J. Lowe – JPMorgan Securities LLC

Keith A. Markey – Griffin Securities, Inc.

Tazeen Ahmad – Merrill Lynch, Pierce, Fenner & Smith, Inc.

Tom J. Russo – Robert W. Baird & Co.

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MannKind Corporation’s Second Quarter 2012 Conference Call. My name is John and I'll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded today August 7, 2012.

Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom; and Chief Financial Officer, Matthew Pfeffer.

I’d now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead.

Matthew J. Pfeffer

Good morning and thank you for participating in today’s call. I will summarize our financial results for the second quarter of 2012 as reported earlier today, Hakan will then discuss our current operations and Al will conclude with an overview, before we open up the call to your questions.

Before we proceed further, please note that comments made during this call will include forward-looking statements within the meaning of Federal Securities laws. It’s possible that the actual results could differ from these stated expectations. For factors which could cause actual results to differ from expectations, please refer to the reports filed by the Company with the Securities and Exchange Commission under the Securities and Exchange Act of 1934.

This conference call contains time-sensitive information that’s accurate only as of the date of this live broadcast, August 7, 2012. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

For the second quarter of 2012, total operating expenses were $44.1 million compared to $33.9 million in the first quarter of 2012, and $39.2 million in the second quarter of 2011. R&D expenses were $26.6 million for the second quarter of 2012 compared to $24.2 million for the first quarter of 2012 and $30.3 million for the second quarter of 2011.

The decrease in R&D expenses for the second quarter of 2012 compared to the same quarter in 2011 was primarily due to the settlement of the terminated insulin supply agreement in the second quarter of 2011, partially offset by an increased clinical trial related activities in 2012, which also resulted in increased R&D expenses this quarter compared to last quarter.

General and administrative expenses were $17.1 million for the second quarter of 2012 compared to $9.8 million for the first quarter of 2012 and $8.9 million for the second quarter of the previous year. General and administrative expenses increased this quarter primarily due to $7.7 million litigation settlement accrual related to securities and derivative actions, which I will describe shortly.

The net loss applicable to common stockholders for the second quarter of 2012 was $36.6 million or $0.23 per share based on a weighted average of 159.9 million shares outstanding, compared to a net loss applicable to common stockholders of $44.5 million or $0.37 per share on 121.7 million in weighted average shares outstanding for the second quarter of 2011.

Our cash, cash equivalents and marketable securities at the end of the second quarter of 2012 totaled $32 million. Natural resources including the remaining credit facility from Al amounted to $58.9 million as of June 30, 2012.

Our cash burn decreased from $33.3 million spent in Q1 2012 to $24.7 million in the second quarter of 2012. We expect though that our spending will accelerate through the end of 2012 as we complete the trials and approach commercialization.

With our cash on hand and the amount available under the credit facility from Al, we believe we'll be able to fund our operations comfortably into the fourth quarter of 2012. We continue to pursue additional funding opportunities to extend our cash runway, but I cannot comment further until we have something definitive to announce.

It’s also worth noting that the company recently settled the securities class action and derivative litigation pending against it in Federal and State Court. Specifically, on July 26, 2012, we announced that the company and other named defendants had entered into a stipulation of settlement to resolve the Federal Securities class action in the Central District of California. Pursuant to that stipulation in an exchange for release of all claims and dismissal of the action with prejudice, the company's insurers agreed to pay $16 million and MannKind agreed to issue approximately 2.8 million shares to the class members.

On August 6, 2012, we announced that the company had entered into a stipulation of settlement to also resolve the derivative lawsuits pending in Federal Court in the Central District of California and in State Court, Los Angeles.

Pursuant to the stipulation in an exchange for release of all claims and dismissal of the derivative actions with prejudice, the company agreed to adopt certain corporate governance measures as insurers agreed to pay $800,000 to plaintiffs’ attorney and MannKind agreed to issue 225,000 shares to plaintiffs’ attorneys. Both settlements are subject to court approval in notice to MannKind stockholders.

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