Ladies and gentlemen, thank you for standing by. All participants will be in a listen-only for the duration of this conference. Welcome to the MannKind Corporation 2018 First Quarter Conference Call. As a reminder, this call is being recorded on May 9, 2018, and will be available for playback on the MannKind corporate Web site shortly after the conclusion of this call until May 23. Joining us today from MannKind are Chief Executive Officer, Michael Castagna; Chief Financial Officer, Steven Binder; Chief Commercial Officer, Patrick McCauley; Chief Medical Officer, Dr. David Kendall; and Rose Alinaya, Senior VP, Investor Relations. I would now like to turn the call over to Rose Alinaya. Please go ahead.

Good afternoon and thank you for joining us on today's call. Please note that comments made during this call will include forward-looking statements within the meaning of Federal Security 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 of 1934. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 9, 2018. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call. A reconciliation to non-GAAP disclosures will be posted with this presentation on our Web site after this call. I will now turn the call over to our CEO, Michael Castagna. Mike?

Thank you, Rose. Thank you everyone, and good afternoon. You may notice today we did update our platform, so there should be less of a delay between slides as we go through today's presentation. I want to say thank you everyone for your patience as we get into Q1 information. We had a fantastic quarter in terms of really looking at year-over-year growth of Afrezza, and continuing to show the progress. Coming into this quarterly call, I've conducted 10 listening sessions with several key members of our team around the country, in California, Texas, New York, as well as met with about 70% of the -- payers who make up about 70% of their lives, really sharing with them where the company is going, getting insights into the data coming out of ADA, and building our level of confidence as we continue to go forward to hit this year's guidance. We continue to make progress on our prescriptions, our new writers, our new member patients coming into the brand, as well as the pipeline and international expansion. The buildup of the scientific story is something that we believe has been missing on Afrezza since day one. And I'm really proud with David Kendall here, over the last 12 weeks we've gotten several key data abstracts submitted, accepted, as well as publications that David will walk you through. And when people say when will you launch Afrezza, where you're going to make a difference, I think you're really going to start to see the scientific agenda come out for the brand starting at ADA. One of the challenges we've had since we got the product back from Sanofi is really planning for the long-term. And with the capital raised last year and the recent capital raise, we've been able to continue…

Thanks, Mike, and good afternoon. 2018 has seen solid progress in both our balance sheet restructuring and recapitalization plans, as well as advancing our selling and promotional efforts for Afrezza. Let's start by reviewing the first quarter 2018 financial results. I'll be discussing select financial highlights and urge you to read the condensed consolidated financial statements in the MD&A contained in our 10-Q, which is filed with the SEC this afternoon. For the three months ended March 31, 2018 Afrezza net revenue was $3.4 million, a 184% increase over Q1 2017. The net revenue increase was favorably impacted by volume, cartridge mix and price. Please be aware that our revenue recognition has changed between 2018 and 2017 under the adoption of ASC 606. Revenue was now recognized based on sales to direct customers like wholesalers whereas 2017 revenue was recognized when the right of return for Afrezza no longer existed which is generally at the time when a patient fills the prescription. If we continue to recognize revenue under the 2017 revenue recognition standard, we would have recognized $4 million in net sales for Q1 2018 or 234% increase over Q1 2017. The difference in the two amounts $3.4 million recognized under ASC 606 and $4 million that would have been recognized under the 2017 standard is primarily due to channel inventory levels decreasing between December 2017 and March 2018 which resulted in prescriptions being filled based on patient demand at the retail level but no corresponding increase in sales to wholesalers. Our growth to net percentage was 35% in Q1 2018 versus 27% in Q1 2017 due mainly the price increases taken in 2017 and the resulting rebates for managed care and government programs such as Medicaid. We expect our growth to net percentage to increase in the mid-single…

Thanks, Steve, and good afternoon. I'm very excited to share with you our first quarter 2018 commercial highlights as we continue our transformation at MannKind, I know the team has been working very hard to ensure we continue to make Afrezza successful and supporting patients living with diabetes. In over the past few months, we've been focused on building our core commercial capabilities and we'll talk about that today. Now, you may recall that back in February and Mike mentioned this, we transitioned from a contract sales organization and now have one full-year of selling experience and we've learned many different things along the way, we've also hired about 20 new sales representatives in the past few quarters and are excited about what they bring to MannKind. As you know sometimes, it takes as much as six to 12 months for a representative to have full impact in a new territory, so we're really excited about what this group will be doing. As we move into year two, one of the reasons that I'm really excited is that each and every day our sales team gains additional clinical selling experience and we build deeper relationships with our customers and this is really going to help us as we move forward. Also we're going to continue investing in the skills and capabilities of our sales team in our second year such as diabetes disease state knowledge and business acumen. And finally, we're developing additional promotional materials to help our sales team drive Afrezza awareness and adoption with our customers. Now, if you look at the chart, you can see the sales team has had an impact if you go from February of 2017 through the end of 2017 prescriptions has just about doubled during that time period. Also you'll see that…

Thank you, Pat, and pleasure to join my second of these calls. And as Michael referred to earlier, it has been an incredibly exciting first three months for me and my medical team here at MannKind. And I would like to highlight several of the activities that have occurred in the first quarter and that are planned for the rest of the year. And I would like begin by introducing a group that we have convened now as the scientific advisors for MannKind and Afrezza. The scientific advisory board was item number one on the list that Mike and I talked about when we were discussing the needs for supporting both Afrezza and the effective use of meal-time insulin. And you can see from this list of individuals many of whom you may know group that is expert not only in clinical diabetes, expert end-users such as Jeremy Patterson, Sathis Garg, but an extensive array of experience in diabetes drug safety including John Buse, Derek LeRoith, and Elizabeth Seaquist. And we've represented both primary care and pediatrics very important components of the diabetes care system and in particular as diabetes care using meal-time therapies. We are pleased to convene this board and will be working with them not only looking at the existing data from the 65 trials that have been completed, but looking very carefully and judiciously at any future trials that may be necessary, and most useful in assuring the safe, effective, timely, and appropriate use of Afrezza. An example of some of the outcomes of the work that was started, both before my arrival here at MannKind and our understanding of Afrezza, as a clinical aspect as Mike referred to earlier, is the scientific chatter. Scientific information forms the core of both the medical communications that we…

Thank you, David, and Steve. So we are focused on continuing to make Afrezza a standard of care. We had it come a long way on rounding out the data package that supports the brand. And as you can see, for the first time in two years, we'll have a nice continue to congress plan of new data coming out, and analysis of data which starts to allow us to have thought leaders get behind us and teach and train others on how to use the drug. We've continued to see positive progress in new prescribers and total writers quarter-over-quarter and year-over-year. And in fact, if we were to show you the new member Rx data, we've already achieved 1% market share in the new members coming into treatment that are available for meal time insulin. And several of our territories either have exceeded 1% share or are on track to exceed that in this quarter. So we know it takes a long time to get to where we are. We're very happy with the continued progress, the understanding of the drug, and the listening sessions that I just completed around the country. When we think about financing we're planning for '18 and '19, we've already laid out our strategic plans for '18. And I think about where we can go, a partner for Treprostinil, a co-promote opportunity, additional international deals, as well as new debt in the company. Those are all non-dilutive ways to finance the company. The reason you haven't seen much that we have is because we're in a really…

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Can you still hear me? I hope you're still here. So, sorry about that, you can't make this up. So those are the sources of non-diluted financing. We wanted to really see where Afrezza's trends continue to progress as we rolled out the new strategy in Q2, and how doctors will respond to the data coming out of ADA. We continue to get more and more comfortable as those things read out. And we'll continue to finish off the recapitalization process that we landed on back in June of last year and July. Steve and I have been on the road show meeting many new investors who have a lot of interest in the company, and are very amazed at the progress we've made on the balance sheet and continued progress with Afrezza. And the number one question we all have is where viscous move and when will the company get to breakeven. And we're sticking to our guidance and we hope that gives people some perspective on how we think about the progress for the rest of the year. And as we see the trends move we'll give continued updates on where we go in terms of the cash flow breakeven. We've completed the skew transition in Q1, which took us 18 months to get the new packaging out there. And in fairness that was extremely critical in order to think about onboarding and going from 500 prescriptions a week to 5,000 prescriptions a week. When you have a doctor login to their EMR system seeing eight skews for a drug they've never used it's intimidating. And we had to make it very easy on how to initiate the product. When you ask doctors why they've never used Afrezza you get one of three responses. They're not aware of…

We apologize, Mike. Without an operator assistance we're not able to open up the lines for your questions. So please feel free to email or contact us directly at MannKind and we will take your questions that way.

I guess, Rose, they do have a couple of questions that were emailed that I can go through.

Okay, great.

So, apologize for the operator, but I do -- several of you have emailed me questions, so I'll try to touch those. One of them is around managed care access, and how do we think about that, and what's the progress we've made. I have been personally in contact with about 70% of the payers who cover people living in the U.S., which range from Medicare to commercial. They are constantly in discussions with us. We look to remove prior authorizations completely or minimize them significantly. I think the progress you see that MannKind cares that Pat shared, shows you managed care is not our number one hurdle. It will become a bigger resistance as you go into adoption. And right now we're in the awareness and trial period of our launch. And so as doctors start going from one patient to two patients to 20 patients, that's where the payer conflict starts to increase. So today you've seen MannKind care it's significantly increased. We are getting eight out of 10 patients approved. And as that volume increases payers will work with us to continue to remove those hurdles. We don't anticipate this continuing to be a major restriction. And as we progress we'll continue to remove some of those barriers. Another question I often get is what's holding doctors back, why have they not used it. The reality is we've had 65 trials done in the history of the company to get to the point of approval in subsequent last couple of years. The majority of those trials were never published. And so when payers and database searches people look for PubMed to say what is the clinical data behind the product, they don't find a lot of our information. And what we've discovered is when we share our…