MannKind Corporation (MNKD) Q1 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corp. First Quarter 2011 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, May 9, 2011. Joining us today from MannKind are Chairman and CEO, Alfred Mann; President and COO, Hakan Edstrom, Chief Financial Officer, Matthew Pfeffer and Chief Scientific Officer, Dr. Peter Richardson. I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corp. Please go ahead.

Good afternoon. and thank you for participating in today's call. I'll summarize our financial results for the first quarter of 2011, as reported earlier today. Next, Hakan and Peter will provide an update on our recent meeting with the FDA. Finally, I will provide further details on the meeting and our outlook going forward. We'll then 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 is 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 is accurate, only as of the date of this live broadcast, May 9, 2011. MannKind's management undertakes no obligation to revise or update any statements to reflect events and circumstances after the date of this call. Let's start with the financials. For the first quarter of 2011, total operating expenses were $38.1 million compared with $40.6 million for the first quarter of 2010, and $32.1 million for the fourth quarter of 2010. R&D expenses were $26.3 million for the first quarter of 2011 compared to $30.5 million for the first quarter of 2010, and $24.2 million for the fourth quarter of 2010. The decrease in R&D expense for the first quarter of 2011 compared to the same quarter in 2010 was primarily due to a decrease in raw material purchases, resulting from the February 2011 termination of an insulin supply agreement. As a consequence of terminating the agreement, the company did not take delivery of any insulin in the first quarter of 2011. General and administrative expenses were $11.8 million for the first quarter of 2011 compared to $10.1 million for the first quarter of 2010 and $7.9 million for the fourth quarter of 2010. The increase in the current quarter compared to the same quarter in the prior year was primarily due to employee severance and other related termination benefits associated with the February 2011 reduction in force. The net loss applicable to common stockholders for the first quarter of 2011 was $41.5 million or $0.34 per share based on a weighted average of 121.1 million shares outstanding. Compared with a net loss applicable to common stockholders of $44.7 million or $0.40 per share based on $113.1 million weighted average shares outstanding for the first quarter of 2010. Our cash, cash equivalents and marketable securities at the end of the quarter totaled $47.5 million, which compares to $70.4 million at December 31, 2010. $31.5 million at March 31, 2010. Our cash on hand in our remaining credit facility from AL amount to $144.9 million, as of March 31, 2011. Our cash burn has decreased from the prior quarter, with $32.7 million spent in Q1 compared to $42.0 million in Q4 of 2010. We do expect to accelerate our spending in 2011, as we conduct 2 additional trials in response to the FDA's complete response letter. With our cash on hand and the $98 million still available under the credit facility from AL, we believe we will have -- we will be able to fund our operations through the first quarter of 2012. I'd now like to turn the call over to Hakan Edstrom, our President and COO, who will provide an overview of our recent meeting with FDA. Hakan?

Thank you, Matt. Good afternoon. As I'm sure you know, we recently had an end of review meeting with the FDA. And I did attend this meeting in person, and I'm pleased to report that the meeting was very productive. We achieved a great deal of clarification about the design of the 2 additional required trials, one in Type 1 diabetes and one in Type 2 diabetes. Much of the discussion was centered on the details of evaluating the pulmonary safety of Dreamboat versus MedTone in a head-to-head comparison. The agency agreed that the observed changes in pulmonary function do not differ between Type 1 and Type 2 patients. They also considerably simplified the requirements of pulmonary function testing by requiring spirometry alone as compared to the previous pulmonary safety studies, in which we also collected a more complicated, less generally available measurements DLCO and DLZ. This gives us the opportunity to implement the Dreamboat versus MedTone bridge in just the Type 1 study. This trial is an efficacy study with a primary endpoint of HbA1c lowering, but we will also evaluate after we run measures at basal, at week 12 after titration period and at week 24. There will also be a four-week fold-up at the end of the treatment period. Regarding the Type 2 trial, we had a fruitful discussion about a number of elements of the proposed study. The agency indicated that they won't reconsider certain details further and that its minutes of the meeting will provide additional advice regarding the trial design. And we expect to receive these minutes in approximately 3 weeks. In the meantime, we are well underway with our preparations to implement both studies once we finalize the protocols. We are completing our contracts with the CRLs that will support us in conducting these studies in the United States, Europe, and Latin America. Our plans to investigate these meetings, IRB submissions, and other related activities are all quite advanced. As we finalize the start of these trials, we are doing so with a view towards the requirements for a European submission, collecting the appropriate data now will allow us to avoid duplicate clinical trial's and achieve some obvious cost benefits. One other area that merits some brief comments, we continue to monitor and prioritize our spending. And as Matt discussed, this continuing focus has already yielded benefits and extended our cash runway even without the benefit of financing. So with that, let me now hand the meeting over to Peter.

Thank you, Hakan. As you've heard, we believe that the path to approval of AFREZZA has been greatly clarified by the FDA with several more details to come in next few weeks. The research and development team has been working in a very focused manner to be able to initiate the required studies as soon as we are fully aligned with the FDA. In order to minimize recruitment time, we are incorporating additional centers in countries and are using well-respected global CROs, as well as partners with whom we've worked well in the past. In addition, the use of a fully electronic diary for recording data direct from patients and from investigators, will allow us to follow carefully the progress of the studies, and expedite the eventual analysis of the data as it is completed. We are preparing for investigative meetings, at which we will give detailed training to the sites to ensure a thorough standing of the state of the art titration to target algorithms that we have developed. These algorithms are based upon the pilot data with the new inhaler from our completed handing study, 159 and the ongoing pilot to study 162 that we put on hold following the CRL. The algorithms were also discussed with the FDA during the meeting last week. The abilities to take advantage of the very convenient dosing available with the Dreamboat inhaler has allowed us to introduce the new key concepts in dosing based upon observed blood glucose readings, while still keeping a simple titration that does not require complex carbohydrate counting. We should be presenting the first stages from the pilot within study 159 at this year's ADA. And I'm very encouraged by what has been achieved in terms of A1C reductions in this patient population. With the clinical plans well in place and an aggressive, but realistic schedule underway, it's time to meet a focus on an area of the business about which we have said relatively little, but have developed an excellent early program. Over the past years, we've been diligently following exploratory projects in cancer and have 2 programs underway. MKC1106 is a novel immunotherapy program focusing on the delivery of a variety of DNA fragments and small peptides directly into the patient's lymph nodes to stimulate an immune response targeted at a patient's own tumor. Initial data from our first 2 studies has shown a clear immunological effect and some tantalizing biological responses. We are hoping to confirm in an ongoing Phase IIa study for patients with malignant melanoma. We plan to carefully review options to continue and modifying our approach here, either alone or in a partnership. The other program results from our methods in molecular biology, and is focused on the novel biological mechanism with importance in a variety of disease states including cancer, new regeneration, and inflammation is only beginning to be understood. This area of biology, known as the unfolded protein response, has received a great deal of interest recently in the scientific field. We've made tremendous program in understanding this pathway. A key modulator, this response is an enzyme known as IRE-1. And we focused for the last 3 years on developing a novel series of inhibitors of this enzyme. The results to date have been very encouraging, and with compounds now ready to enter the very last phases of testing before we can administer them to man. Several major players have expressed interest in our approach, and indeed we are in an area that is clearly going to become highly competitive in the next 3 to 5 years if the preclinical data we have generated in Q1 models are confirmed. At present, although we seem to have a leading position in this area, the resources that we can apply to this program must compete with ongoing needs of the AFREZZA program. We started a concerted approach to explore partnering opportunities and financing options that allow us to vastly progress one or more of these compounds into the clinic, and potentially significantly increase the value of this asset. As such, Al, Hakan, and I have decided that in order to allow me to focus on the unique science in this area this critical time, I will devote more of my energy to these programs, while Hakan as Chief Operating Officer, oversees the operational aspects of completing the AFREZZA studies. This change will allow us to explore appropriate business models where we can potentially enhance the oncology program within the new organizational structure, whilst ensuring that appropriate resources are applied to AFREZZA, as we continue towards registration and commercial partnership. I will continue to be involved in the scientific and clinical aspects of the insulin and other Technosphere based programs and work with Al, as we explore several other potential approaches in this area, as well as maintaining the partnership communications regarding AFREZZA. In the meanwhile, under my personal leadership, the oncology team will focus on efficient and rapid further development in the pipeline, and the creation of a sustainable business model that will allow exciting science to enter one of the most important phases with the development of an endo-prohibitive [ph] pharmaceutical agent. The importance of our science has already been demonstrated by the generous funding we have receive from the Multiple Myeloma Foundation and the American Leukemia Society (sic) [Leukemia & Lymphoma Society]. In collaboration with some of the world's leading authorities in this area, I'm determined to realize the potential for addressing several devastating diseases, and keep anteing [ph] the legacy of outstanding science that Al has consistently championed as the foundation for building a great business. And now I'd like to turn the call over to Al.

Thank you, Peter and good afternoon, ladies and gentlemen. The delay in approval of AFREZZA as a result of the January TRL presents issues for MannKind. Yet, we view the recent exchanges with the FDA and the agency's response to our pre-meeting briefing book to be especially significant, helping us to better understand the potential labeling for the product, and as implications for promotions and potentially positioning us to expand the market opportunity for AFREZZA. The May 4 meeting itself was positive and collaborative, resulting in a redirection of the Type 2 trial that should enable us to support use of AFREZZA as an alternative to oral therapies in early Type 2 diabetics. If the trial data is supportive, I view this as a substantially increased opportunity for MannKind and for patients. Hakan and Peter already described 2 areas of the discussion with the agency, pulmonary function and insulin titration. I will now provide some details about the third area of discussion, the design of the study to be conducted with the new inhalation device. At the meeting, the FDA indicated agreement with a proposed Type 1 study, a basal bullet design in which AFREZZA is compared to a rapid acting analogue as a meal time insulin, in both cases with daily administration of Lantus. However, we will not actually start the trial until we receive the minutes with the agency's written confirmation. Our proposal for the Type 2 study, as submitted in the briefing book, was also a basal/bolus design, substantially similar to that in Type 1 patients. However, in early stage disease, Type 2 patients have many more treatment options, which led us into a discussion of the various potential trial designs for the use of AFREZZA in patients with Type 2 diabetes, including Marmot therapy as an add-on to inphormin [ph] as an oral failure, and so forth. The FDA was careful not to opine in the meeting as to the best trial design, but nonetheless, they provided some very useful comments about how we would be able to promote AFREZZA if success -- if approved on the basis of the study, that we will now run in the population of earlier Type 2 diabetes patients. They also indicated that their minutes of the meeting would contain certain additional thoughts on what was discussed. We left the meeting with a clear sense that our Type 1 study is on the right path and the marketing considerations can and should play a greater role in our plans for the Type 2 study. We expect to receive the minutes in the next 3 weeks or so, and at which time we will finalize our protocol and implement the trial. At this point, we expect that the Type 1 study will get off to a faster start than the Type 2 study but by no means do we intend to waste time and finalize that protocol and getting it underway. Based on the science and prior clinical experience, we believe that we will be able to effectively manage the execution risk of these studies. However, to enroll the number of patients that are projected to be needed to establish a clear, statistical significance will take a considerable amount of time. From our prior Phase III experience, as well as input from our CRO, we currently project the latter half of the next year for a completion of the study. Once we have finalize the protocols, we will be in a better position to provide a more definitive estimate. While the primary regular issue in the CRL related to the impact on safety and efficacy resulting from substitution of the Dreamboat inhaler, the CRL also cited the need for several additional human factor studies with the new device. We have moved forward quickly regarding the CMC, human factor matters raised in the CRL, and those studies are now mostly completed. We are planning to meet further with the FDA this year to close out all these matters so that the only known remaining requirements going forward will be the requested clinical trials. Of course as we get the clinical development of AFREZZA on track, we still must deal with the reality that the delay due to the CRL will require additional funding for the company. I remain committed to MannKind and I'm exploring ways to make moneys available. We are also studying several non-dilutive as well as dilutive financing opportunities. We will keep you all informed as these plans progress. I want to thank you all for joining us today, and we'd now like to open up the call for your questions. Operator?

[Operator Instructions] The first question is from Steve Byrne of Bank of America.

Peter, I was wondering if you're anticipating any challenges with the providers on the forced titration aspect of the Affinity 1 trial? I recall that was a challenge previously, and is that something that you think you'll have to be very actively involved in providing that guidance to the physicians?

Yes, Steve, I think that's a really good question. The earlier studies were not forced titration designs. And I think that we learned a great deal in terms of our development of an algorithm where forced titration is a key component of it in terms of achieving really clear A1C reductions and optimizing therapy. If you remember in 117 where we started towards the first titration regiment we were able to get patients down to levels of 6.5 and less in A1C and I think we're targeting aggressively in the Type I study to do that in order to really demonstrate the efficacy in an optimized way. As far as the state-of-the-art in terms of diabetes studies, this is really now the methodology that would be expected of others by the agency and by opinion leaders in the area.

And then regarding the Phase II or the Type 2 diabetes trial, what are you anticipating as being your -- the competitor arm?

I think that there the discussion with the agency has really opened up several possibilities, in terms of looking at what the most appropriate comparator is. That's something that we need to fix with the agency and agree on that, and I think we are not in a position to say that we are certainly looking at a normal agent, and one which will be meaningful, in terms of further demonstrating the clinical utility of AFREZZA in a very important patient population, and we see this is a significant opportunity.

And last one I have is regarding the immunotherapy program. You talked about attracting partners as a source of funding for the program. Is it also a consideration to divest the intellectual property as a source of funding for the AFREZZA program?

I don't know whether it's a source of planning for the AFREZZA program specifically, but certainly looking at options, really to the lease of the value for the oncology program is what the structural change we're putting in place is about and giving me an opportunity to look at various business models that will make sense, that we can, not only show the optimization of the AFREZZA program, but make sure that the oncology program does not slow and lose opportunity just by our inability to move that forward as effectively as it deserves.

Your next question is from James Butler (sic) [Jason Butler]of JPM (sic) [JMP] Securities.

It's Jason Butler. Could you give us a little insight into what you've learned from the FDA, in terms of how they reviewed differences in pulmonary safety between MedTone and Dreamboat, both in terms of Dreamboat. If Dreamboat showed superior safety profile or a new area of safety profile.

Clearly, the discussion on pulmonary safety has been one that we really wanted to go through in detail with the agency. And I think it was a very productive discussion that was had in terms of understanding that first of all, as we said in the script, the agency is looking for us to confirm the similar profile that we've seen with Dreamboat -- with MedTone of a better one based on FVB1 and not looking at any of the other more complex parameters for pulmonary safety, which are logistically more difficult. So that's actually very good news for us. The specifics of the numbers of patients, and the design we discussed with the agency and we're looking for confirmation in terms of agreement of the numbers we're suggesting for that, that are very much in line with the numbers that we've had and put forward in the studies to date. So we've got a very good indication that in the one study, by putting in a Dreamboat on versus MedTone, versus subcutaneous comparator, we'll be able to address the questions that the agency has. And they will be looking for non-inferiority or a margin that we're comfortable with in that way.

Let me simply add. The agency has raised no questions, no safety signals or anything in any of our past trials. What they're looking for is simply a bridge to the past trials with the new inhaler compared to the MedTone.

Okay, great. And then in the Type 2 trial, is it fair to say that you're not focusing on later stage patients at all? Or you're just broadening the population you enrolled in the previous trials to include earlier stage patients?

I think the thinking here is that actually with basal/bolus in effect a late stage Type 2 is very similar to a Type 1 and they're insulin dependent and that we will have a robust basal/bolus study in Type 1 patients. And we also have a very strong basal/bolus study with MedTone in Study 102 which I think is also historically important for us. So looking at ways that we can explore a broader Type 2 population, looking at patients who would perhaps be more normally treated with an oral therapy is a significant opportunity, and we want to look at the study designs that we can do for that. We have been looking at the possibilities of that in a Phase IIIB program. But I think to be able to use that as basis of registration is something that's a very interesting and exciting opportunity.

Really I expected that we would have to do this basal/bolus trial in Type 2, as well. And the agency said that, that's not necessary that they are -- with the study with the new inhaler in Type 1 that would give them sufficient information to be able to apply basal/bolus therapy in both Type 1 and Type 2.

Okay, great. and then just finally, can you give us an idea of what proportion of your R&D spend is currently dedicated to the non-insulin programs? And if possible, what that may change during this year, as you dedicate more resources to that or more personnel to that, those programs?

This is Matt. Those are the numbers I don't have off in my fingertips. I can tell you that the cancer programs are a pretty modest amount of the spend, and the changes you might see making, you won't even -- they'll be lost in the noise of the studies. So it's going to be fairly trivial, frankly.

The next question is from [indiscernible] of Cowen and Company.

Will the Type 1 trial still be about 435 patients, about 180 per arm for AFREZZA versus injectable, and 75 for MedTone?

Yes, it will. The numbers of MedTone are for the final confirmation with agency in terms of the numbers of patients that we'll put in there. So we'll update you when we reach final agreement with that. 75 will be a minimum. I think it's likely to be upwards as we're not going to put patients into the Type 2 studies.

And then for Affinity 1 and 2, are they going to be non-inferiority studies?

Yes.

They are. So in the Affinity 2 trial, given this shift to an earlier stage Type 2 diabetes patient, has the agency told you that these studies will be sufficient for approval if successful, given that you're looking at a new patient population?

I'm sorry, I thought you might cancer [ph] around Affinity 2, we will not be doing the basal/bolus immediately in the Type 2 patients. So whether that will be a non-inferiority design or superiority is something that we have to discuss and finalize with the agency. The Type 1 study certainly will be on non-inferiority, and yes the indication from the agency is that these will be adequate for approval of the -- of AFREZZA as an insulin measurement.

Yes. I would say that was very clear at the meeting. They would be sufficient for approval.

To basically the thinking is that you're not doing -- you're doing only one trial in Type 2s but the data from the Type 1 -- because the patients are kind of similar to the early Type 2 patients will help to support such an application.

What they're saying really is that, one basal/bolus study, be it in Type 1 will be sufficient for both Type 1 and Type 2 in basal/bolus therapy and the suggestion is that we can go to earlier stage Type 2s and show the use of -- the utility of using AFREZZA in early stage disease. And purpose of course is that will enable us to promote it in the earlier stages rather than just off-label use. That was very significant we thought.

The next question is from Cory Kasimov of JPMorgan. Matthew Lowe - JP Morgan Chase & Co: It's actually Matt Lowe in for Cory today. I was just wondering if there's any change to the thinking around the 15-month timeline from when you start the trials to when you'll be able to resubmit. And then just secondly if you could share any more details around the trial designs, specifically kind of around the margin of error between the 2 devices?

In regard to the timeline until we actually have the written response back from the FDA, it is hard to give you a specific timeline. As we have said before, we hope to we have the opportunity to complete the trial by the end of 2012. And your second question was? Matthew Lowe - JP Morgan Chase & Co: Just around the trial designs, if you can give us any more detail around the margin of errors between those 2 devices?

The primary point will be efficacy. We'll be looking at the -- probably the new function and there will be really a descriptive statistic, in terms of the margin of difference that's acceptable, but will be putting sufficient power into the studies to be given meaningful assessment in order to spot that bridge but we've not specified the margin that we're putting there.

Some of those margins we'll discuss with the agency, but until we get their minutes, we don't want to make any comments about that. Matthew Lowe - JP Morgan Chase & Co: Okay, that's great. Any update on any partnering talks? Or is it too soon after the meetings to have any real progress there?

I would say that's too soon. What we wanted to do and we certainly maintained the contact with potential partners, but until we have a good understanding of the outcome from the meeting with the FDA, we have not aggressively pursued that. So I would say that will follow, following the minutes of the meeting with the FDA.

Next question is from Avik Roy of Monness Crespi Hart. Avik Roy - Monness, Crespi, Hardt & Co.: Two questions for you. One, you did do the TI-1O3 study, which compared AFREZZA to Secretagogue plus Metformin, to AFREZZA plus Metformin. I'm curious to know if that study, the result of that study, helped inform your discussion with the FDA about studying the drug -- studying AFREZZA more thoroughly in patients who were taking oral anti-diabetic agents. And then secondly, given the back-and-forth around the clinical utility of AFREZZA and the fact that the second complete response letter made no reference to clinical utility. There were some thought that maybe the clinical utility concerns of the FDA have been satisfied. Do you feel that maybe this discussion around the Type 2 study helps illustrate what they meant by clinical utility? Or did that not come up in the discussion?

Actually, the expression of clinical utility did not come up in the discussion with the FDA during this time. I think the explanation that we've given before is that how does this drug fit in to the armamentarium of choices that doctors have is still valid. But no, it was not referenced in regards to either of the trials.

I think what was important is that we were going down the direction of doing trials basically in late stage Type 2, as well as Type 1 in basal/bolus therapies looking for a label that would talk about treating hyperglycemia. But at the same time what happened, what evolved during the meeting is that an opportunity is opening up for us to treat early-stage Type 2s with this AFREZZA. Avik Roy - Monness, Crespi, Hardt & Co.: Do you plan to present, or have the results of the TI-103 study have been presented anywhere, or do you plan to present them anytime soon at ADA or anywhere else?

I'm trying to remember whether those have been presented in abstract form? It's quite a while since we did 103 so I don't have that information at hand. Just to give you information that yes, the results from 103 are helpful, in terms of designing and understanding the group of patients that we're targeting in this. But we also learned a lot from that study, in terms of things that we need to get right in any comparison with an old.

But that study was not discussed at the meeting.

Your next question is from Kevin Tang of Tang Capital.

I'm just trying to firstly get this, the timeline approximation right. So you're saying you're not going to start either study until after you review the minutes, is that correct?

That is correct.

That's expected in about 3 weeks.

So call it June, you start the studies. And you're saying you hope to complete enrollment in the second half of 2012 or actually have top line data?

We hope to finish it, but it's too early to talk about the precise timeline, Kevin.

But I'm just repeating what you said in your prepared remarks, which is you hope to complete the studies in the second half of 2012.

Yes, but we aren't going to pick a date any more clearer than that until we get...

I'm not asking for a more clear date. I'm just trying to define complete studies. So complete studies, you mean topline results or you mean complete enrollment?

Complete top line results.

So if I just take the outside of that, that's 18 months and I'm just wondering that the last 2 Phase III studies you ran, study 102 and 009 took 15 to 18 months just to enroll, not to complete the actual studies. So is it fair to say you're assuming that the enrollment period will be half of what it was in those studies?

Do you remember what they where?

I can't remember the exact enrollment time, but these are based on the assessments that have been done with our CRO and with some really careful diligence, in terms of how we can optimize the set up of this and these are the best estimates we have at the present time.

And if I remember it correctly, those studies also contained a much bigger patient number.

I don't think they actually -- how many are you going to include in these studies?

150 completes per round.

I think that's the same as the size of the prior 2, right? My second question is, in terms of the change in the Type 2 study, just the way to think about this, if you're going to compare now to an oral agent, is it not, wouldn't it be sort of meaningless to do not inferiority? Wouldn't you need to show, if you're going to compare an inhale therapy, you have to take several times a day to a pill that's once or twice a day. Wouldn't it need to be superior to be clinically relevant?

Kevin, as I said, I think with looking at what the appropriate design and then point that to -- and then we'll come back on that one. Your point there is well taken. The also important thing is to ensure approval of the product and that's the very first go.

But as a clinician, you would intend to agree with me, that to show if you have to inhale something, with every meal, if you're only equal to a once a day pill, that wouldn't be a very compelling clinical argument to use it, right?

What I can indicate to you, Kevin is that in the discussions with the FDA, a specific question was asked and their inferiority designs were discussed and maybe a different margin in regards to [indiscernible] 0.4 in a basal/bolus but it was not necessarily a superiority design that was been looked for. But those are critical items that even the FDA wanted to have discussions around. And that's why we are eagerly awaiting the minutes.

And then lastly, and I appreciate you taking my questions. Did you -- were you successful for the Type 1 study in persuading the FDA to use Lantus twice a day as opposed to once a day?

I think actually a very good compromise we've reached with the agency because what we don't want to do is use Lantus in an off label way, so the approach that's taken is to approach it in once a day. But if patients require twice a day for the reasons of hypoglycemia or other problems with dosing in that way, or if they're already on twice a day with Lantus, that will be acceptable to the agency.

But they'll start on -- it'll largely be once a day, not twice a day.

If they are not already on twice a day.

A lot of patients are already on twice a day, Kevin.

Next question is from Doug Dieter of Imperial Capital.

All my questions have been answered except for one, which is what's new here is that you are waiting for the minutes to start the clinical studies. And I just wanted to know in the past, the FDA has taken much longer than anticipated. Do you have any contingencies for that potential delay from the FDA? We've had a couple of rounds now of minutes where there's been a huge delay?

Well, they certainly did state that we should expect the minutes within 4 weeks. However, in terms of preparing for the studies' investigative meetings, i.e. context, we are building mitigation strategies and tactics around that so that we could start as soon as possible upon having the minutes in our hand.

The next question is from Tom Russo of Baird. Thomas Russo - Robert W. Baird & Co. Incorporated: You were careful to comment when discussing the Type 2 study that a number of different options were discussed and FDA didn't opine on the best design. And since this is critical to approval, I'm just wondering if you're planning in any way to disclose the meeting minutes?

We haven't really have that discussion internally, so the dates are damning [ph] very clear, that the design of our Type 2 trial will become public knowledge. Beyond that, I would not expect that the meeting minutes as such would be a public document. Thomas Russo - Robert W. Baird & Co. Incorporated: Maybe to ask a little differently then. When you decided to change device at a stage of responding to a Complete Response letter. At least from the outside looking in, it seemed like an approach that could have financial or timing benefits if successful, but maybe with a higher risk approach, if FDA opines on various designs for the Phase III trial in Type 2, will you choose the most conservative approach? The one that's got the least uncertainty around the provability from an FDA standpoint?

Your question is very academic. It's very hard to, I would say, use the word opine on that as well until we actually have the minutes. Of course if information would be forthcoming, that will be significantly change the approach that we are taking as a company. I think we would feel compelled to share that with the market. But beyond that, it really is speculation at this point in time. Thomas Russo - Robert W. Baird & Co. Incorporated: Last question maybe for Matt. Can you give us a sense of what the underlying levels were for R&D and SG&A, excluding anything related to restructuring or kind of what the go forward levels look like on those 2 lines for the rest of this year and into the first quarter of next year?

Yes, you can do the math and get the most of those numbers. The problem is it's going to vary a lot from month-to-month and quarter-to-quarter, as we start trials and so forth. But if you kind of do the math, you can see we're going to be spending for the next year or so roughly $11 million or $12 million a month. We're not spending that right this second, but that's anticipating some ramp up with the trials starting up. So that's how we kind of get there. The kind of ongoing burn rates have been closer to in the 9 to 10 range right at the very moment, if you leave out the restructuring charges and that sort of thing.

Your next question is from Jon LeCroy. [Hapoalim Securities]

I wanted to circle back on the Type 2 trial 1 last time here. Are you envisioning a monotherapy of AFREZZA arm versus maybe a monotherapy oral or you're thinking all patients will be on Lantus? How are you thinking about the combinations in the arms?

You are right, it will be monotherapy and not using background Lantus. I think that's one of the key take-aways from the meeting and discussion with the agency. That would be an exceptional and interesting design.

So then is your intention to do mostly new to treatment patients so patients who failed diet and exercise?

We haven't said that we're going to do monotherapy. The question is do we want to do monotherapy or those may be failing as an add-on to Metformin something like that or whether we want to go further in the areas. Those are the areas we're trying to evaluate right now.

But you're not envisioning using Lantus as...

Lantus will not be used in that trial at all.

Next question is from Jason Butler of JPM Securities.

I was just wondering, given that the FDA now views the new Type 1 trial as applicable to later stage Type 2 patients, do you still think you need 2 new trials for approval? And I guess following from that is if the Type 2 trial you run in earlier stage patient isn't successful, will you still be able to file on the back of just the Type -- a successful Type 1 trial?

What I would say, it was very clear, in terms of our basal/bolus trials in Type 1 patients that the FDA did see as really with other insulin products that you're approved for Type 1 and Type 2 patients. So we certainly see that applicability with our tracks as well. And I would agree with you that yes, there is an opportunity to make a filing based on the Type 1 trial alone, which would have applicability for both Type 1 and Type 2 patients. However, we sort of don't expect that to happen.

There are no further questions at this time.

Ladies and gentlemen, I want to thank you all for joining us today. We look forward to updating you on our next quarterly call. Thank you.

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