MannKind - Q2 2023
August 7, 2023
Transcript
Operator (participant)
Good afternoon, and welcome to MannKind Corporation 2023 second quarter financial results earnings call. As a reminder, this call is being recorded on August seventh, 2023, and will be available for playback on MannKind Corporation website shortly after the conclusion of this call until August twenty-first, 2023. This call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty, 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 will now turn the call over to Mr. Castagna. Please go ahead, sir.
Michael Castagna (CEO)
Thank you, and thank you, everyone. Happy afternoon. It was a year ago in Q2 when we, 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. 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 15,000-20,000 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 highlights here in Q2.
Orphan lung disease business is off and running. United Therapeutics is doing an amazing job, strong patient demand. We received royalty revenue of $19 million, or 63% growth, just over the first quarter. We also took a step to improve manufacturing capacity through efficiencies and yield, increasing that by about 250%. Additionally, our orphan lung pipeline is starting to come into the purview. We expect to have two INDs filed and going into phase I and phase III in the next 12 months. Inhaled one zero one, 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 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 the 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. I'll share more with you that shortly.
Additionally, INHALE-1 is continuing to roll nicely. We had our best enrollment in the month of June ever. INHALE-3 just kicked off, and that's already enrolling patients. That's the first study we're doing to show you where, how, and, and, and the conversion factor for pump switching. We'd 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. Now it's been over a year that we closed the V-Go deal, and that is achieving our first-year forecast in net revenue. We gave a guidance of $18 million-$22 million, and 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, non-GAAP operating income is $8 million when adjusted for certain non-cash items that will be described later. Tyvaso DPI saw strong demand, and we were able to supply that demand with our increased manufacturing. There was 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. I wanted to give clarity for our shareholders that for every 10,000 paying patients, we expect annual revenue to MannKind between $250 million-$300 million.
Additionally, we are on track to complete our high volume capacity expansion between now and the end of next year. We have bulk spray drying scale-up happening with two new spray dryers being installed as we speak, and we have a fill finish line coming in here in August that hopefully will 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, you can see 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.
I just want to say thank you to our partner, United Therapeutics, for helping so many patients on our technology. Now, I want to bridge over to our diabetes business. This is one of the things that we control every week and every year. We're trying to do a better job this year at improving patient access and keeping patients on therapy on Afrezza, as we also turn around V-Go into a growth driver for the company. As you think about Afrezza, a couple highlights. 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 under-penetrated in this market because it was never put on a non-preferred formulary, which forced patients to have a huge cost differential.
We could not do anything to close that gap. When it was covered by $35, you can see we quickly got back to what you see as the standard of care, rapid-acting insulin. About 28% of all prescriptions are for Medicare Part D recipients. Afrezza now in Q2, has now gotten that back up to where the market is for rapid-acting. Really proud of the teamwork here. Hopefully, we continue to grow and help more people living with diabetes in the Part D space. Additionally, in order to make our access message simple, we lowered our, we adjusted our commercial copay to be $35 to be consistent with Medicare.
You can see our TRx and our NRx growth on the next slide here, has grown consistently, and we really have had an inflection if you look from last year to this year, Q1 and Q2. Hopefully, we continue this as we go into the second half, and we continue to see really good momentum, you know, year-over-year, quarter-over-quarter, and we'll kind of keep watching this on a weekly basis. I wanted to share also, I think it's important. I get a lot of questions, "Why can't we 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 while we don't have any new data to share. You can see how patients feel about our product. When you look at the right side of this picture, innovative, adventurous, smart, complex, exciting, bold, we are pushing the envelope in mealtime control. This is a completely different drug. It takes a completely different approach on how you manage your sugars day-to-day. 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. It's something we'll continue to watch as we go forward. I want to bridge over to V-Go. We achieved the high end of our forecast, as I just mentioned.
What's nice to see here is when you look at our TRx trajectory, we started telling you last quarter it was flattening out on NRxes, TRxes should follow. I'm really proud to show you now in Q1, going into Q2, we have slowed the decline, and now we're back on a growth trajectory, which we expect to continue for the foreseeable future. We have 4% growth in TRxes in Q2 over Q1, and this should continue, that we feel like we've hit bottom, that the white space has continued to decline, while the rep targeting efforts on call on doctors continues to go up. We feel like we've hit that inflection, and hopefully, we continue to see V-Go do well and help more patients as we go forward.
This is another slide just showing you NRx and TRx year-over-year. Obviously, NRx is our leading indicator of what's going to happen in the future, and you can see from Q2 of last year, -8% on NRxes up to a +4% of the 12% difference year-over-year, and that's contributing to that positive TRx growth that we're seeing. On the scientific front, our medical team is working really hard to start to articulate the benefits of this product with the new dosing arrangements that we've been studying. As we look here, we want to expand the eligible population for Afrezza as we go forward. 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. This is a life-threatening disease.
Hypoglycemia is a life-threatening condition. We believe we'll be able to demonstrate in this trial, hopefully, positive benefits when it comes to the safety of hypoglycemia as well as the efficacy. This is a non-inferiority trial. We do know from a lot of our analysis that hypoglycemia is lower with Afrezza. We'll have to see how the data pans out. This is more than halfway enrolled at this point, and we will, we will have some insight here in Q4 of this year with a primary endpoint wrapping up mid-next year. SimpliFi-2, I got a lot of questions on when the data was coming out. We did receive the data. The data analysis is being finalized. We don't expect the data to become public till sometime in 2024, once Simpli is done finalizing their plans here for India.
On INHALE-3, we call this our, our type 1 AKA pump-sparing study, because this is the first study we're doing head-to-head, showing you how to rotate off an insulin pump or how to rotate off injectable insulin to really just Afrezza, Tresiba, Dexcom, and that's where the 3 comes from. We only think you need 3 things to manage your diabetes, and it's really these 3 secret ingredients, hopefully, give you really tight control and give you the ability to live your life. There'll be quality measures run in this trial, 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. 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.
Steve Binder (CFO)
Thanks, Mike, and good afternoon. 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 six months ended June 30 versus the same period in 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 is made up of royalties of $19 million and collaboration and services revenue of $11 million.
Royalties earned on the net sales of Tyvaso DPI of $19 million was the result of strong patient demand for innovative product 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 manufacturing Tyvaso DPI, which we started to manufacture commercially for UT in the second quarter of 2022. Total revenues from our collaboration with UT were $53 million for the first half of 2023. Again, representing strong patient demand for Tyvaso DPI, as compared to $8 million for the first six 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 UT towards the end of the second quarter. Moving down the table to our endocrine business. Total endocrine revenues were $18 million, which is made up of Afrezza net revenue of $14 million and V-Go net revenue of $5 million. Afrezza 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 31st of 2022, the increase over 2022 is mainly from a one-month versus three-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 forecasted 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 like to show this graph because it really highlights how dramatically our business has changed in the last two years. We started 2022 recognizing revenues primarily from Afrezza, now we have two revenue streams from Tyvaso DPI, plus two endocrine products delivering commercial revenue.
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, in particular 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, in the amount of $2 million. This has been a long time coming, the growth in revenues associated with the UT collaboration has 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 P&L. Looking at the table, we had positive GAAP income from operations of $2 million in the second quarter of 2023, as 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 on 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, loss on foreign currency, and a gain on available-for-sale securities, we had non-GAAP EPS of zero 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 tightly 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, and now we'll turn it back over to Mike.
Michael Castagna (CEO)
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 two months as he's 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 helped us 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 thought it was now time to bring in someone like Dr.
Burkhard to help us put the governance structure in place and manage these assets as we have four or five 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, going to Acorda, and ending at a company recently in France. He's experienced multiple disease areas, eight early preclinical and successful NDA submissions, and he's got small molecules, drug device combo, as well as inhaled therapeutics. It's very difficult to find somebody with such breadth and depth of experience, and we're very fortunate to have someone like Dr. Blank join us and help us lead our efforts here over the next several years. As you can see, the next slide, the pipeline that we're working on, we have all the work with Afrezza pediatrics and the filing that'll come with that.
We have the international work coming to get us back into Brazil and India. We have 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, 201 nintedanib, are both going into IND phase I and phase III. You have dornase alfa, which we're continuing to work to get that into patients as quickly as possible. On the other end, TGF-beta, which continues to work through its animal models until we get it into a preclinical formulation ready for testing. We've got a lot of work in front of them. We've been moving these along, and that's the question I always get is, why isn't Afrezza growing faster?
I don't think what people appreciate is it takes a lot of money and time and people to run four development programs. That's the choices we've made, fund pediatrics and fund 101, 201, 301, and 501, in order to ensure we have one launch per year, starting in roughly 2025, either a new indication or a new product launch. We continue to be focused on that effort, and we believe this is going to be really critical to our future success. The next slide shows you some of the milestones associated with these pipeline investments that we're making. These should ultimately give us new product revenue or expanded product revenue with existing products. As you look at the endocrine business, INHALE-3 is kicked off here.
We expect to have that data in the first half of next year. The India trial readout, that data will be finalized here in the second half and 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 2023 for INHALE-1, where we'll have an interim analysis telling us either the trial is properly sized, it needs more patients, it'll take a little longer, or it's a futile exercise to keep going. Obviously, we believe the primary endpoint is sufficiently and statistically will be sufficient.
Until we get to that interim analysis in October, which will be late October, so we'll have that information by the next quarterly earnings call, that'll be important to share with shareholders that we think that we'll be on track in order to drive to that readout there in the first half of 2024. On the orphan lung, things that we're in control of, it's the MNKD-201, pre-IND, it's now the filing of that IND, it's the IND submission for clofazimine. One of the things we're evaluating based on the FDA thoughts, post the fire, which is, can we use some of the data that was generated in Germany in order to bridge for the U.S. to keep the IND on track and ultimately get this trial off the ground in early 2024.
Then finally, you also have United Therapeutics working on the TETON study, and we know that's critical for continued expansion there for Tyvaso. As we look at the key value drivers, these are real and they're significant. The pipeline, as we think about one oh one going forward, every 1,000 patients that we capture in that disease will roughly bring in $100 million in revenue at the time of launch. For two oh one, this is a $multi-billion opportunity littered with failure. We've taken the market leader, have made it into an inhaled version, hopefully minimizing the systemic toxicities and being able to enable patients to have a well, well-controlled therapeutic dose in IPF for two oh one. As it comes to DPI, you can see the strong start there.
You know, at the end of the day, there are multiple ways that you can see this growing to over 10,000 patients. We wanted to give you clarity on is how we think about that from a shareholder of MannKind. Obviously, we're not in control of the launch, but we feel very good about United Therapeutics' investments and opportunities to continue to help as many patients as possible suffering from PAH, ILD, as well as IPF, hopefully in the future. The pediatrics is the thing we hotly anticipate next year, every 10% in kids fundamentally change the long-term trajectory for Afrezza and let that compound for the next 20 years. Right now, I want you to understand, for every 10% share in kids is roughly $150 million in revenue.
We're investing in the INHALE-3 study because we believe if we get great data on INHALE-1, that's versus rapid-acting insulin. The next question we're going to get is: What happens if you switch off an insulin pump? How does the data look? We hope to show you that we're as good, or better, depending on the data, but hopefully not worse. In our pilot study, we show that we were as good as using an insulin pump versus not. The reason that's important is we expect a once-weekly basal to be on the market in the not-too-distant future. We literally could get people living with diabetes down to 52 injections a year, plus inhaling their mealtime insulin plus a CGM. That's game-changing for patients and providers. V-Go, we are focused on stabilization. As you can see, growth is now in front of us.
We want to continue to make that a more profitable product as we go forward into 2024 and beyond. I'll turn it over and answer questions. Thank you.
Operator (participant)
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one one on your telephone. Again, to ask a question, please press star one one. One moment for our first question. Our first question comes from the line of Steven Lichtman of Oppenheimer & Co. Please begin.
Steven Lichtman (Managing Director and Senior Equity Research Analyst)
Thank you. Evening, everyone. Mike, you, you mentioned the, the real benefit that you've seen in insulin reimbursement this year in Medicare. How are you guys balancing, you wanting to drive profitability in the business versus investing in getting the word out now? Because it does seem like this is a big change for the Afrezza business, as you showed into the second quarter here. Talk a little bit about how, how you're getting that word out versus I know you want to really start driving some leverage in, in the business as well.
Michael Castagna (CEO)
Yeah. Steve, thank you for the question. I think first, as, 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, you know, the Medicare patients, the approval ratings are very high. They're in the 90%+ range. That makes us feel confident that we can continue to help more patients. Now that we can see the market share in 2 quarters get up to where, you know, injectable insulin is as a percent of their business, that gives us some confidence to push even harder in this segment. In terms of profitability, you know, we have submitted rebates for Medicare Part D over the years, and they've mostly been rejected because of the, the rebate game of the competition and the PBMs. There wasn't a lot we could do. Maybe going into next year, that could change.
Meaning most of our patients, just the doctors need to do a prior auth, and we're seeing very high approval rates. Maybe as we go into 2024, we'll start to see either PAs be removed completely in Medicare Part D, or, you know, continue the success that we're seeing this year, and we can help even more patients next year beyond what we're doing. It's nice to see in 6 months we can get back to, to, to market share of injectable insulin. We've always felt that patients were not getting the product properly because of the differences in Medicare Part D reimbursement, copays to a patient. We worked pretty closely with CMS to explain this, and they understood it, and fortunately, they helped patients.
I think that's really what you can see is that, you know, cost is hurting people at the end of the day. We did everything we could, but there's only so much you can do on Part D.
Steven Lichtman (Managing Director and Senior Equity Research Analyst)
Got it. Great. I guess as we think about the back half, Steve, based on your visibility, how should we think about the DPI royalties sequentially here in the third and fourth quarter? You know, 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 directionally into the third and fourth quarter? Also on gross margin, first half strong on Afrezza, V-Go, I think around 70%. Is that pretty good level for the back half?
Steve Binder (CFO)
Steve, as you know, we don't provide forward-looking guidance or forecasts. If you listen to UT's 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 any guidance for the second half of the year, we just believe there will continue to be strong patient demand and we'll report those revenues in the third and fourth quarter as they come in. As for the margin, 72% is right for a combined Afrezza and V-Go. Afrezza's got a better margin than V-Go does. We, we don't provide those separately anymore, just combined. You know, that is a pretty good margin for there.
There, there's variability quarter to quarter with the amount of manufacturing we do on Afrezza, that impacts the Afrezza margin from quarter to quarter. We feel that it's, it's in the right ballpark for the margins for our commercial products at this point.
Steven Lichtman (Managing Director and Senior Equity Research Analyst)
Okay, great. Thanks, Steve. Thanks, Mike.
Steve Binder (CFO)
You're welcome.
Michael Castagna (CEO)
Thank you, Steve.
Operator (participant)
Thank you. One moment, please. Our next question comes from the line of Olivia Brayer of Cantor. Your line is open.
Olivia Brayer (Director and Senior Biotech Analyst)
Hey, good afternoon. Thank you for the question. Can you guys talk about the decision to take an interim look at an INHALE-1, whether that was built into the trial design initially? Then just what's the clinical bar for success in order for that study to continue as planned? Then I got a follow-up question on DPI.
Michael Castagna (CEO)
Sure. This interim look was always planned in the original statistical plan analysis, so that's not changed. The only thing we didn't know was when we would hit 50% enrollment in the trial. That was the driver of that, that date. Now that we know that we 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. Fortunately, unfortunately, it's confidential to the DSMB. At least we'll know at that point, you know, is the trial futile? We'll keep going. We'll need more patients. We obviously powered it, so hopefully hit the endpoints we need to hit and wrap up in six months after that.
As a primary endpoint and the secondary endpoint will be the second cohort, and the control arm switching over to Afrezza for an additional six months. We expect the primary endpoint of that trial will be wrapped up hopefully six months after that early November date, and we'll go from there.
Olivia Brayer (Director and Senior Biotech Analyst)
Okay, got it. Then second question is, it looks like you guys increased DPI revenue assumptions per every 10K patients to $250 million-$300 million. Can you give any color on what's driving that increase?
Michael Castagna (CEO)
Yeah, I, I think as we continue to fine-tune Tyvaso through each quarter, we get a little bit more clarity on, you know, what does it look like in terms of pricing, packaging, dose, all those things go into, go into account. I, I'd really we don't break out the details of the forecast, but we wanted to give people some guidance because, you know, I think the one thing as you hear about the different indications and the different factories being built between our expansion and UT's plan, we want you to at least have a range of number there. Some of that changes over time because of discounts or manufacturing revenue assumptions. That's why we gave a range as opposed to more anything else with the number of patients.
Olivia Brayer (Director and Senior Biotech Analyst)
Okay. Got it. That's helpful. Thanks, Michael. Appreciate it.
Operator (participant)
Thank you. One moment, please. Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is open.
Speaker 8
Hi, Mike and team. 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 received FDA feedback, and how are you incorporating it into the development path going forward? Appreciate the time, and thanks again.
Michael Castagna (CEO)
Yeah, great questions. I think the good news is there, there's been some data out there on inhaled pirfenidone. That tells you delivering an inhaled route via these products could, could work. I think our particular product and our focus has been on nintedanib. We originally had both in development. We actually picked this one to go forward versus trying to develop both. The reason is, we believe the limiting side effect of Ofev is around the GI side effects and the dosing. By putting in the inhaled route, it's got very low bioavailability via the oral route, and that allows us some flexibility here in our design and our thinking around inhaled. We believe we should be able to minimize some of the side effects that patients see.
Obviously, we have to get this into human trials, but that's going into our thesis. The FDA feedback, you know, gave us some flexibility to think about healthy volunteers versus IPF patients and how we think about a phase one to phase three design. That, that work will be finalized. I was waiting for Burkhard to start before I really put my, my, my, my fingerprint down on which way we should go, and that'll be aligned, and that'll go into the IND filing here, very shortly. We, we feel pretty good about the product profile, the lung-delivered dose, and the ability to differentiate, hopefully, on the tolerability side.
As, as you may or may not realize, we believe 30%-40% of people drop out of Ofev because they just cannot tolerate the product, and that's a pretty significant population that's not getting help. Again, the product may or may not go generic by the time we get to market, but the fact that people cannot tolerate and get the efficacy when they got a 80% probability of dying in five years is a significant unmet need. We feel pretty good about the FDA feedback. There's always things to work through, nothing that was a showstopper for us.
Speaker 8
Great. Thanks so much. Appreciate it.
Operator (participant)
Thank you. One moment, please. Our next question comes from the line of Thomas Smith of Leerink Partners. Your line is open.
Thomas Smith (Managing Director)
Hey, guys. Good afternoon. Thanks for taking the questions, and let me add my congrats on the solid results. Just on, on the endocrine business unit performance, I think you're now guiding the profitability in 2024. I think previously you talked about your expectations being to get to break even by the end of this year. Just wanted to check in and get your updated thoughts. Has anything changed in terms of timing or outlook for the rest of the year? Then maybe as a follow-up, if you could just give us an update on how you're thinking about investment here in the pipeline and platform broadly.
How should we think about the R&D spend over the next couple of years as you guys think about bringing clofazimine and inhaled nintedanib and some of these other pipeline programs forward, balancing that versus desire to maintain profitability? Thanks.
Michael Castagna (CEO)
Thank you. Great, great questions. I, I think on the break even in Q4, that's still our intent, to get there. You know, will we be exactly there ±$200,000, you know, the year we'll wrap up? I, I think we're still on track. I don't think Steve has anything to add, but I'm looking at him.
Steve Binder (CFO)
No. Yes, we're on track, but could be off by a little bit.
Michael Castagna (CEO)
Yeah, shouldn't be anything major, I think, in the grand scheme, so that should be profitable as we look into 2024 overall. The R&D spend, I'd answer that in 2, 2, 2 ways. One, we, we don't intend to launch these products ourselves outside the US, so we, we will be seeking partnerships for rest of world. When you think about product like NTM with clofazimine, you know, the Asia Pacific area is, is a large market that we would hopefully find 1 partner to launch and, and take over some of the, the costs associated with the development there. Within the US, you, you know, there's a couple things wrapping up next year. The first will be INHALE-1, and the second will be INHALE-3.
Those two trials do cost us, you know, quite a bit of money each year, and we would expect some of those costs, as they wind down, to shift towards clofazimine. We haven't given quite exact guidance yet because some of this is the timing and the upstart of the patients on the clofazimine trial, which, you know, as you look at the timeline, a large majority of those expenses will hit in 2025 as opposed to 2024. There will be some expenses, for example, some of the manufacturing expense, but that'll hit cash flow versus, I think, Steve can comment on the amortization on a quarterly basis.
Steve Binder (CFO)
It's going to be a mix of things that are put on the balance sheet and amortized over the clinical trial period and others that are expensed as incurred.
Michael Castagna (CEO)
Yep. I think the phase one studies aren't that expensive in the grand scheme of things, so I don't. Even if we got clofazimine in phase three and the nintedanib going into phase one, I don't think that's an unbearable expense, we should be okay as we look at 2024 to 2025 timeframe. Keep in mind, Afrezza should continue to grow. V-Go looks like it's starting to grow, and Tyvaso should continue to do well. I think as a company, we want to make sure we're not in a position that we started in six years ago, and that's our number one focus.
We think when we look at or for lung, this is a big growth area for the company and future revenue that we want to make sure we're able to capitalize on for our shareholders and patients.
Thomas Smith (Managing Director)
Got it. That makes sense. Thanks for taking the questions, guys.
Michael Castagna (CEO)
Thank you.
Steve Binder (CFO)
Thanks.
Operator (participant)
Thank you. Thank you. One moment, please. Our next question comes from the line of Oren Livnat of H.C. Wainwright. Your line is open.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
Hi, thanks. A couple questions. First on Tyvaso DPI. I know you're not giving guidance, and it's probably easier as a product to talk about, but you did point to their call, where they certainly are quite bullish, but they did call out $30 million in stocking this quarter, and sort of linked it to your advancements and improvements in capacity and yield for the product.
I guess, can you just help us understand where are you at now, and going forward in terms of supplying that, you know, whether it's hand to mouth, or if you've actually now well ahead of demand, and do you expect, I guess, to keep having to fulfill, you know, orders, so we should keep seeing that grow if demand is growing going forward, versus, you know, we've really filled the channel up a lot now, and we could take a breather. I have follow-ups.
Michael Castagna (CEO)
Yeah. I think, Lauren, if you were to take away the $30 million in revenue, you know, you could see with the world easy, you know, range, you can, you can see it's grown quarter-over-quarter. I don't think Tyvaso is anywhere near capped out in terms of, you know, if you listen to United around new starts and to continue conversion and, you know, ILD is not fully penetrated, obviously. You know, as each quarter goes on, you know, that'll chew up more inventory, more days on hand, and, you know, ultimately, we got to keep stocking and keep building that, that inventory. We're not giving exact guidance on how much we have on hand, but, but I would say we, we don't think it's flat, and, and therefore, we expect continued growth as we look out.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
Yeah, and I don't misunderstand me. I think it's pretty clear demand has grown as well. I guess I'm just trying to understand, were you just basically catching up to where inventory sort of needed to be in general, to keep supplying the market, as expected, or such that you expect it, or do you think there'll be pauses as they now work through that inventory on the wholesaler side?
Michael Castagna (CEO)
Yeah. I, I mean, we're not privy to their contractual obligations with the pharmacies and days on hand. I, I know they wanted more than we, we could give each pharmacy at the time as we closed Q1. I think we made some changes here in Q2 to enhance that, and I think as we close out the quarter, you can see we did a good job with the increased demand. Again, I, I don't want to comment for UT in terms of what inventory we'll project to be in Q3 or not. I think our job is to make as much Tyvaso as we can, and we're, we're doing that.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
Okay, I'll move on to the pipeline. On 201, I just want to clarify your earlier comments. You mentioned some of the FDA feedback relates to clinical work, either in healthies or IPF patients, and I'm just trying to understand, are we talking about theoretically, is this just a discussion for Phase 1, whether that needs to be in healthies versus patients, or in theory, are we actually talking about deeper into the development timeframe, given what we already know about these molecules, is it possible, I just speculating, is it possible that you could do, I guess, a streamlined or abbreviated full registration quality development program, potentially, that would just be, I guess, PK or bioavailability based and not necessarily even have to do a full clinical trial on patients?
Michael Castagna (CEO)
I would say I wish, in the second part of the question, I think if you look at the FDA, typically, as you're changing route of administration, they'll always require a clinical trial. That, that would be our expectation in, in treatment disease experience, disease patients. How we design that trial and the endpoints of that trial, I think are still things we won't, we won't go public with. The fact that the phase I, we're going back and forth in terms of do we do healthies or do we do some in IPF. It does appear we have flexibility to make that call on our side. Like I said, with Burkhard here now, we'll, we'll talk about the pros and cons of...
Obviously, if you do healthies, it can go a lot faster than if you do people with IPF. They're harder to find and get them in the trial, and it just takes a little bit longer. They don't want to spend days in a clinical research site, so that's always something we're trying to manage around what insights are we trying to get and what are we trying to prove and what's the right thing to do. But no, we would fully expect the phase 3 trial to at least be in patients who have IPF.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
Okay. Just lastly, I guess building on Steve's question up front, where you talked about sort of the trade-offs between contracting profitability. In general, where are you guys at in terms of contracting? I mean, you know, clearly, you have a high margin, higher margin product, a higher price product, you know, with small market share. I'm just wondering, given the high positive feedback you get, you know, relative to all these other therapies, what opportunities have you explored in terms of being able to?
I mean, of course, you're never going to match injectables on price, but is there a possibility that you could get substantially better coverage and get a real step function and access, you know, next year or maybe year, you know, be 2025, depending on the bidding cycle, such that you're willing to give up some economics for a chunk of volume?
Michael Castagna (CEO)
I was going to see, was that a question for Steve or Steven Lichtman's question? I think you're, you're spot on in terms of we always weigh giving discounts for faster growth versus being profitable. I think based on all the programs we've done historically, we've not seen that, you know, relieving some of the administrative burden has actually caused any faster growth for Afrezza. I think it's really about conviction that efficacy and safety-wise, you're as good as an insulin pump. You could safely switch from MDI and get equal or better outcomes. That's the data sets we'll come out with next year.
If, if the rebates are going away, as I suspect they are, with all the price and scrutiny around injectable insulin, and the contracting, which really did prevent us from gaining open access to Afrezza in a preferred way. If, if, if what I suspect happens in 2024, there could be an opportunity to move up our, our discount range a little bit, and that would hopefully result in greater volume. The way our the way contracts are structured in general in the payer space is, they could choose to put the product on formulary and collect a little bit higher rebates. They just have not made that choice over the years. Not every PBM has that contract, but a couple do. We're not made aware right now that that's gonna change for next year.
I do plan to go out and meet with some of the big players to talk about this, because we, we see the Medicare Part D success, and we'd like to continue to help patients gain access to our product. We're not looking to... You know, part of the value proposition with Afrezza is you don't need to pay hundreds of dollars a month in insulin pump supplies. You don't need to pay for the pump. You don't need to pay for the maintenance and everything else, but you still need to pay for the insulin even when you get a pump.
The whole economic value prop, whether it's an Omnipod or Medtronic or Tandem pump, plus the cost of insulin, plus better efficacy, is really what we focus on with payers, and that's, that's some of the work and data sets I'll read out next year. To your point, maybe we get some plans next year, but hopefully we'll push for 25, as we think we really have a differentiated product, and the results hopefully will bear that out in the clinical trials. I wouldn't expect-
Oren Livnat (Managing Director and Senior Equity Research Analyst)
All right.
Michael Castagna (CEO)
markets.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
If I'm hearing you, that data is gonna give us something really new to talk to the payers about next year for the 2025 cycle.
Michael Castagna (CEO)
I, I think that's gonna be important. You know, do some payers-
Oren Livnat (Managing Director and Senior Equity Research Analyst)
Yeah.
Michael Castagna (CEO)
-stay with the price changes, they move us up? They might, but I would expect better discussions as we get new data readouts.
Oren Livnat (Managing Director and Senior Equity Research Analyst)
All right. Thank you.
Michael Castagna (CEO)
Thanks, Oren.
Operator (participant)
Thank you. One moment, please. Our next question comes from the line of Anthony Petrone, Mizuho. Your line is open.
Anthony Petrone (Managing Director)
Thanks, congrats on a good quarter here. Couple on Tyvaso, then I'll follow up with a couple on, on diabetes. Just on the renewed outlook there for 10,000 patients, $250 million-$300 million. Mike, I'm assuming, again, that doesn't include idiopathic pulmonary fibrosis, the new, the IPF label expansion. Are there any early kind of views as to what IPF could add to that $250 million-$300 million? Then for Steve, on, on that question as well, just from a manufacturing capacity standpoint, can the Danbury facility at the current capacity handle that, that label expansion, or will you need to have a little bit of an acceleration in growth CapEx if that, that label is secured? Then I'll have a couple follow-ups.
Michael Castagna (CEO)
I think the way you got to look at that statistic is, regardless of where the 10,000 patients come from, being IPF, ILD, PAH, obviously, they don't have the approval for IPF right now. But if that was to drive incremental volume in a new market for them, that's roughly the revenue we would expect for every 10,000 patients. It's not just, there's really not a, when you think about the price of the product, it's more of an annual cost as opposed to an indication cost. The same thing is true as we built out the manufacturing. The original facility that we launched with was meant to handle really PAH and ILD.
Then as it expanded, UT invested in additional capital improvements in new spray drying and capacity, as well as fill finish. That is really setting us up for IPF and continued upside forecast. If Tyvaso keeps doing well in ILD and PAH, they want to make sure we have enough safety manufacturing capacity beyond whatever we could expect, so we don't ever stock out. This is a life-saving drug. UT has announced they're building a duplicate facility down in North Carolina, and that'll be important. When you got a drug that's doing this great, you don't want to have a single source of failure, so we're helping them with that as well. Hopefully that answers your question on the IPF as well as manufacturing.
Anthony Petrone (Managing Director)
No, helpful. On, on diabetes, just, is this a full quarter of, of V-Go? I know you guys, I think it was straddling the 1Q, 2Q full launch. Is this sort of the quarterly run rate, a full quarter for V-Go? On... just any update on, on the BluHale VIS launch integrated with Dexcom, just maybe a little bit there. Is that gonna be launched with, with G6 and G7, or is it one version of Dexcom? I guess maybe even more important to that is when you think about the inhaler and the overlap with Dexcom, I mean, is there any statistics that you have on the current inhaler patients that are active Dexcom users at, at this point in time? Thanks.
Steve Binder (CFO)
Anthony, let me answer the first question on, on V-Go. We acquired the product on May 31, 2022, so our revenues for 2022 in the second quarter were about $2 million, and they were about $5 million in Q2 2023. It's not a, a great comparison because you only had 1 month last year, but going forward, you should have comparability.
Anthony Petrone (Managing Director)
That's helpful.
Michael Castagna (CEO)
I think on, on, on V-Go, as you may or may not realize, it was a turnaround that was on a decline for a long period of time. We had to stabilize before we get the growth, and we started seeing that stabilization on NRx back in Q4, Q1. You can finally see that translate to TRx this last quarter. Hopefully, as we go forward quarter-over-quarter, we can start to see year-over-year comparisons. We're proud that we hit the first milestone, which was our, our high end of our $18 million-$22 million guidance. BluHale VIS, we are planning to use that in INHALE-3. INHALE-3 just kicked off this month. We're almost got all the sites activated, and that'll be the beta test in that phase 4 trial.
Assuming that goes well, then we'll evaluate continued improvements to get that into the general population. It is currently with Dexcom G6 or G7, from my knowledge. I know it was because I tested it on G7. It does import it and does work well on both. We're not planning to limit it to just Dexcom. We're happy to partner with Libre or Senseonics or other parties. That is the current integration is with the API at Dexcom G6 and G7. Thanks again. Okay. Hello?
Operator (participant)
Thank you. I'm showing no further questions at this time. I'll just turn the call back over to Michael Castagna for any closing remarks.
Michael Castagna (CEO)
Thank you, everyone, for your patience as we continue to turn around the company. We do feel like we're 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're really proud of the team, the work, and the energy going into it, and all the patients we're helping who benefit from, from your investment. I just want to say thank you to our analysts for covering us and our shareholders and our, and our employees, and all of our stakeholders. I look forward to talking to you again. I'll be at a conference tomorrow in New York, meeting some new investors, as well as September, I'll be in New York for several conferences. Hopefully, as updates happen, we'll provide them at those opportunities. Thank you.
Operator (participant)
Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.