MannKind - Q4 2025

Transcript

Operator (participant)

Good morning, and welcome to the MannKind Corporation Q4 and full year 2025 financial results earnings call. As a reminder, this call is being recorded on February 26, 2026, and will be available for replay on the MannKind Corporation website shortly after this call and for approximately 90 days. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from these expectations. For further information on the company's risk factors, please see the Form 10-K for the annual period ended December 31st, 2025, 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, Chris Prentiss. I'd now like to turn the conference over to Mr. Castagna. Please go ahead, sir.

Michael Castagna (CEO)

Thanks, operator. Good morning, everyone. Thank you for joining us for our Q4 and year-end 2025 earnings call. Here is today's agenda. I'll start with some opening remarks. I want to start by taking a step back and putting our relationship with United Therapeutics into context. Tyvaso DPI has transformed both United Therapeutics and MannKind's future to fund our respective innovation and growth. Tyvaso was a $450 million brand when we entered the collaboration in 2018. Tyvaso DPI quickly grew within 36 months of launch to a billion-dollar franchise by delivering a highly impactful therapy that has helped thousands of patients. This success has funded our diversification, setting us up for three important milestones. First, the opportunity to acquire and scale FUROSCIX and invest in inhaled bumetanide dry powder inhalation.

Second, it funded our growth of Afrezza over the past 6 years, as well as the investment in our pediatric indication. While simultaneously third, investing in our pipeline programs such as MNKD-201, which has blockbuster potential. When we signed the UT agreement in Q3 of 2018, MannKind was generating approximately $3.8 million in quarterly revenue and had a market cap of roughly $300 million. Today, we are a very different company. Excluding Tyvaso DPI, we have a $200 million plus annual run rate and a market cap of approximately $1 billion.

Our long-range plan is not dependent on future growth from UT-related revenues. Yesterday's announcement from United Therapeutics does not change our strategic direction or long-term plan, as the next 36 months should deliver over $350 million in royalties that have no cost against them. Our long-term supply agreement has six years left, with minimum orders that should deliver over $400 million in revenue. Just as UT did not convert the entire market to Tyvaso DPI, alternative delivery formats will continue to coexist. We've seen this dynamic play out before. Despite being the most widely adopted soft mist inhaler, Spiriva Respimat never achieved more than 50% market share versus the DPI eight years post-launch. Clinical experience with Tyvaso DPI supports this durability.

The Bridge study enrolled over 50 PH patients, less than 4% of patients dropped out, as the cough generally subsides with time, we've seen that in our Afrezza studies as well. This has enabled Tyvaso DPI to become a billion-dollar brand. Competition in the PH will continue to evolve, it's reasonable to expect a company facing loss of IP on the nebulized product to pursue replacement options, with soft mist inhalers being a likely path. I want to step back even further and highlight our revenue trajectory over the past five years. We exited 2025 with nearly $350 million in total revenue, representing a compound annual growth rate of approximately 46%.

That growth reflects exactly what we set out to accomplish, moving from a company largely dependent on a single revenue stream to a diversified commercial stage organization with four FDA-approved products. We remain grateful to United Therapeutics and fully expect Tyvaso DPI to continue benefiting patients for years to come. At the same time, we believe there will always be a meaningful market for dry powder inhalers, even as the delivery formats evolve. We see a clear path to over $450 million revenue run rate in 2026 alone and look forward to discussing our growth drivers the rest of today. As we turn our attention back to Q4, which was a transformative quarter for MannKind, we completed the acquisition of scPharmaceuticals, which strengthens our cardiometabolic franchise with the incredible team from scPharma and FUROSCIX.

We delivered record quarterly revenue of $112 million in Q4. On the regulatory front, we have two important PDUFA dates coming up with the acceptances of our files. First, the Afrezza pediatric indication, with a PDUFA date of May 29, and second, the FUROSCIX ReadyFlow Autoinjector, with a PDUFA date of July 26. These milestones represent years of work and position us to potentially deliver meaningful growth in the years ahead. Now I'm going to turn to FUROSCIX's performance. FUROSCIX had an outstanding Q4, with net sales of $23.3 million, up 91% year-over-year. For the full year, 2025, FUROSCIX generated $70.4 million in net sales. What's impressive to me is that the team shipped nearly as many units in Q4 as they did in all of 2024.

As you can see, FUROSCIX has grown consistently since launch, with clear acceleration in 2025. Q1 is typically soft as deductibles reset and patients face higher out-of-pocket costs, particularly for Medicare, but momentum continues to build throughout the year. If you focus on the last two quarters, I'm very impressed that the team remained focused during the acquisition and integration, and continued to deliver record growth, with nephrology accounting for approximately 15% of our sales. We've experienced minimal turnover within the sales force, and as we get past Q1, we expect significant year-over-year growth in the quarters ahead. Since we acquired scPharmaceuticals, we've taken a hard look where the opportunities are to accelerate growth. Let me walk you through three key areas. Number one is hospital pull-through. We've deployed a key account manager team to deepen our IDN relationships and get FUROSCIX integrated in the hospital discharge protocols.

This is critical because the post-discharge period is when readmission risk is the highest. Number two is our sales force focus. We refocused the legacy SC team on cardiology and activate our endocrine team to cover nephrology. That gives us a sharper specialty focus and increased our sales rep footprint from approximately 80 to 160 reps, doubling our share of voice. Number three is our marketing investment. We've increased our marketing spend to prepare for the potential ReadyFlow Autoinjector launch, and to build broader awareness of FUROSCIX to treat fluid overload from the convenience at home. We believe our investments in these strategic initiatives will support FUROSCIX's growth to achieve a CBR range of $110-$100 to $120 million in 2026. Now, let me talk about the FUROSCIX ReadyFlow Autoinjector.

We have consistently heard from HCPs that an auto-injector could expand the FUROSCIX market, given the ease of use and convenience of a once-daily injection. If approved, it would deliver an IV equivalent diuretic in under 10 seconds. Beyond the convenience to the patient, the ReadyFlow Autoinjector has the potential to significantly reduce our COGS and free up cash to invest in the brand. Turning to our Afrezza performance for 2025. In Q4, Afrezza generated $22.3 million in net US sales, up 22% year-over-year. For the full year, we had $74.6 million in global net sales, which included our first commercial shipment to Cipla, our commercialization partner for India. This shipment marks an important milestone as we look to expand Afrezza growth internationally.

Over the past couple of years, we've been very deliberate about managing Afrezza for profitability. We're now in a growth mindset as we prepare for the potential pediatric launch and increase our commercial investments in 2026. I want to highlight an important development for Afrezza. The new ADA guidelines that came out in December, positioning inhaled insulin as an equivalent option to injectable insulins or automated delivery systems, which are considered the standard of care. For years, Afrezza has not been on an even playing field. Now guidelines recommend HCPs should evaluate the need for a modification of administration at every visit for patients who are not at goal. That's a meaningful improvement based on the scientific data we've generated recently. We believe our shift to a growth mindset, supported by investments, guidelines, and a potential new indication, will set up Afrezza growth in the years ahead.

We are excited about the recent FDA approval of our label change, which clarifies the starting bolus dose when switching from MDI or insulin pumps. This graph from our dose trial shows that there was a 58% reduction in postprandial glucose excursions at two hours with the higher Afrezza dose compared to the original label. That's a meaningful improvement in post-mealtime glucose control, which is when the patients struggle most. We expect that this label update will help support healthcare providers by providing clearer starting dose guidance when transitioning patients to Afrezza, and will support the pediatric launch, if approved. I'm going to spend some time on the pediatric opportunity, because I think it is one of the most underappreciated catalysts in our pipeline. If approved, Afrezza will be the first needle-free mealtime insulin option for pediatric patients in more than a century.

We recently completed new market research, and I'd like to share what we're hearing from healthcare providers. The daily burden of diabetes management remains high for children and their families. Carb counting, rigid school schedules, and social dynamics create real friction with current mealtime options, especially for adolescents who are constantly snacking and are highly active and don't always want to be attached to things. In fact, our research shows that 93% of families request a change in their child's diabetes management. This tells us there's a significant dissatisfaction with current options and a real desire for innovation. Afrezza has the potential to address these challenges by removing the need for mealtime injections, reducing reliance on carb counting, and offering greater flexibility around meals.

For children and their families, that flexibility can reduce daily stress and improve the quality of life, while giving providers a tool that better aligns with how kids and their families actually live. Four important data points stood out to us that signal meaningful opportunity in pediatric diabetes. Please remember, this is an entirely new segment that has never been marketed to or prescribed Afrezza historically. First, approximately 50% of HCPs cite eliminating mealtime injections as their primary driver of adoption. Second, two out of three pediatric endocrinologists indicate they'd be likely to prescribe Afrezza. That's a strong signal of potential underlying demand. We're also encouraged by how early Afrezza could be used in the treatment journey. Nearly one in four HCPs indicate they would consider using Afrezza in newly diagnosed Type 1 patients.

This has helped support our decision to launch the INHALE-1 pediatric study, which is now currently enrolling. Finally, based on this research, we see share potential in the range of 23%-37%, and importantly, every 10% share historically represented approximately $150 million in net revenue opportunity. When you put all four of these signals together, the opportunity in pediatric is both substantial and well supported. I will now turn it over to Chris to review our Q4 and full year financial results.

Chris Prentiss (CFO)

Thanks, Mike. Good morning, everyone. For a summary of our financials, please review our press release issued before this call and our Form 10-K, which is now on file with the SEC. Let me walk through our Q4 2025 revenues by category, based on total revenues of $112 million, up 46% from the prior year quarter. As our acquisition of scPharmaceuticals closed on October 7th, FUROSCIX is now included in our cardiometabolic revenues and contributed $23 million of product sales. We recorded sales of $23 million for Afrezza, an increase of 25% over the prior year quarter, which includes $600,000 of products sold to Cipla to support their initial launch of Afrezza in India.

We are excited that the Cipla team is now able to bring a differentiated treatment option to people with diabetes in India and look forward to supporting their execution on the launch. Lastly, V-Go was $4 million for the quarter, a slight decline from the prior year period and in line with expectations as we are not actively promoting the product. Collaboration and services revenue increased 5% over the prior year quarter to $28 million. Within collaboration and services revenue, $26 million of revenue was UT related. This was primarily for the production of Tyvaso DPI and the recognition of deferred revenue, as well as recognition of a portion of the upfront milestone we received related to the second investigational molecule as part of our collaboration with UT. Recently, we amended our supply agreement with UT to add minimum annual quantities and volume-based pricing.

This provides us better predictability as we prepare our Danbury facility to scale our development programs over the next few years. To give this context, our 2025 Tyvaso DPI manufacturing revenues were approximately $100 million. Based on our revised supply agreement, we expect the next two years to be generally in line with 2025, and for the balance of the committed contract term through 2031 to provide a revenue floor of approximately $50 million per year. Lastly, Q4 royalty revenue was $34 million, up 24% from the prior year period, which reflects continued strong performance of Tyvaso DPI in the market. I wanted to provide some color about the sensitivity of our financials to potential changes in Tyvaso DPI sales by UT.

It's important to remember that our economics are driven by a royalty structure where we earn a net 9% following the royalty sale transaction we completed two years ago. What that means in practical terms is that even if United Therapeutics were to see variability or a decline in Tyvaso DPI sales, the impact to MannKind is significantly dampened relative to the products we commercialize ourselves. We're exposed to a fraction of the Tyvaso DPI top line change. We expect Tyvaso DPI to continue to provide meaningful cash flows, even in the event of evolving competitive dynamics in future years. While we obviously care about the success of Tyvaso DPI, our overall business today is far less dependent on United Therapeutics than it has been historically.

For the full year 2025, total revenue was up 22% to $349 million, fueled by our two commercial growth drivers of Afrezza and FUROSCIX. Afrezza grew 16% over the prior year to $75 million, and now with the addition of FUROSCIX in Q4, we have added a high growth revenue stream. As a brand, FUROSCIX grew 93% year-over-year based on total annual revenues. When we look out at our commercial product portfolio, it is now more diversified and represents a significant portion of our expected growth going forward. Lastly, royalty revenue was up 25% year-over-year to $128 million, driven by the performance of Tyvaso DPI.

On the expense side, R&D increased year-over-year as we progressed enrollment in our clinical programs and prepared to initiate clinical trials for our MannKind 201 program in IPF. SG&A increased primarily due to acquisition-related expenses and commercial investments ahead of the potential pediatric launch and the ReadyFlow Autoinjector launch. For Q4 2025, we reported a GAAP net loss of $15.9 million and non-GAAP adjusted net income of $1.5 million. For the full year 2025, we reported GAAP net income of $5.9 million and a non-GAAP adjusted net income of $59.5 million.

The adjustments for the Q4 and the year were primarily related to professional services costs incurred as part of our acquisition of scPharma, as well as amortization of intangible assets acquired, which is non-cash and will continue to be amortized over the life of the FUROSCIX IP. I'd like to make a couple of comments about our outlook for 2026. United Therapeutics noted on their earnings call yesterday that they expect durable double-digit growth of Tyvaso DPI in 2026. This will directly correspond to growth of our royalty revenue. As we compare the pre-acquisition expense run rate for Afrezza and FUROSCIX to our commercial spend expectations for 2026, we anticipate investing up to an additional $40 million to support these brands' potential launches.

This is based on making the significant investments in resources we highlighted earlier on the call today, including key account managers, patient navigators, and expanded field force, as well as increasing marketing spend. We expect both of these brands to be important contributors to our future growth over the next several years. We will have the ability to modulate these investments and adjust timing during the year as we evaluate how our tactics are impacting performance. Regarding research and development, our efforts will be focused on advancing our MannKind 201 program, as well as progressing our other development and lifecycle management programs. Additionally, manufacturing-related costs to get ReadyFlow Autoinjector available for distribution upon its potential approval will be recorded to R&D this year. Before I turn it back to Mike, I want to mention that we'll be presenting virtually at the Oppenheimer Emerging Growth Conference later today.

Next month, we will be attending the Leerink Partners and the Barclays Global Healthcare Conferences. We look forward to engaging with many of you at those meetings. With that, I will turn the call back over to Mike.

Michael Castagna (CEO)

Thank you, Chris. Now let me bridge to the major catalyst driving this year. As we've discussed earlier, there are several exciting commercial catalysts between now and July for Afrezza and FUROSCIX. We continue working on early programs like inhaled bumetanide and other undisclosed programs. Today, I want to focus on our clinical stage program, MannKind 201, which has blockbuster potential. On the clinical side, we anticipate enrolling the first patient in our nintedanib DPI global phase 2 study next quarter. The U.S. phase 1b study in IPF is enrolling nicely, with top-line data expected in the second half of 2026. IPF is a progressive and fatal disease with problematic therapies available today. Only a minority of patients with IPF are on approved therapy. Why is that?

Because patients can't tolerate these drugs, so they stop taking them or they never even start. This is a disease where we believe patients are desperate for better options, and we believe nintedanib DPI can fill this unmet medical need by delivering the nintedanib deep into the lungs. As we look at the competitive landscape, lung target delivery is emerging as a winning strategy in IPF. Systemic oral delivery has not translated into meaningful antibiotic impact because it's difficult to achieve high lung exposure without compromising tolerability. Inhaled delivery changes this equation, and our Technosphere-based DPIs have demonstrated safety and tolerability in numerous patients with underlying lung disease. Nintedanib DPI pairs a proven molecule with direct lung targeting and gives us high confidence in its potential to reduce the GI-related adverse events seen with oral nintedanib while maintaining or even enhancing efficacy.

It also opens the door to combination use alongside current and future IPF therapies, which is increasingly how we see the market evolving. We believe nintedanib will be the backbone of IPF therapy for years to come, and we look forward to hopefully bringing this opportunity to patients in the future. Before we close, I want to highlight some upcoming scientific conferences next month. We'll be at the THT conference in Boston, and we're also excited about our participation in the HCTP conference in Barcelona. These are important forums for us to share our clinical data and engage with the medical community as we prepare for upcoming potential launches later this year. As we look ahead, our key pillars are clear. Afrezza is at an inflection point and positioned for growth with the potential for the 2026 pediatric approval.

FUROSCIX is a high-growth revenue stream addressing a significant unmet need in heart failure and chronic kidney disease. If the ReadyFlow Autoinjector is approved, it would expand the market opportunity and improve the cost structure. Tyvaso DPI remains the backbone of PH and PH-ILD. We expect a solid 2026 performance. nintedanib DPI is progressing into phase 2 in IPF, and we believe this program has blockbuster potential to improve treatment options for a disease with these pillars give us multiple shots a diverse growth profile over the years ahead.

As I reflect on 2025, I'm incredibly proud of what we accomplished. We completed the transformative acquisition investment and the integration is going extremely smoothly. The record revenue advanced our pipeline and built the commercial infrastructure needed to support multiple product launches in 2026. I want to thank you for everyone's attention today, and I'll now open it up for Q&A.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host, allowing you to unmute yourself and ask.

Speaker 5

Yeah? Perfect. Hey, thank you. Downside risk here is, how are you thinking about that $350 million number over the next 36 months? Chris, I know you mentioned a minimum floor of $50 million through 2031. Is that the annual minimum supply agreement that UT is contractually obligated to?

Chris Prentiss (CFO)

Yeah, thanks, Olivia.

Speaker 5

On 2.

Chris Prentiss (CFO)

Sorry about that. Maybe just to kick it off about the minimum supply agreement. You know, this is a schedule that was just attached to our 10-K that was issued this morning. It is redacted, so you can't see the quantities or dollar amounts, but it is a volume-based agreement, and so we were just trying to put that in dollar terms. If you think about 2025, it was approximately $100 million. That will be in line for the next two years, and then after that, when we get to minimum quantities, you're looking at about half that amount, so approximately $50 million for the out years.

Michael Castagna (CEO)

Those are minimum, Olivia, and I think on the royalty, you heard yesterday, UT talk about the robustness and double-digit growth of Tyvaso's DPI. If you were to just take a conservative approach and look at that number for this year and bridge the next year, which we don't expect any major competition, I think you get two years there, and you'll at least get to the 3rd year and get a decent number as well. We wanted to give some context around what this means and how much cash flow it still is going to bring in, not just in the near term, but the longer term, and that, you know, it's our job to deploy that capital in an appropriate way. Okay.

Speaker 5

Okay. Very helpful. Thank you, guys. Then on MNKD-201, how big of a strategic priority is that program at this point? When will we actually see those phase 1B data? I know it's later this year, but maybe beyond these timelines. Like, what will we actually see from that data set that could help drive confidence in the profile of a DPI in IPF patients?

Michael Castagna (CEO)

Yeah. I think a couple of things. Number one, from a priority, 201 is critical. In terms of, you know, we are spending a lot of energy and money and people on this one, you know, it is a big priority focus from that perspective. The team is actively kicking off and enrolling a phase 1 trial here in the U.S. and activating a phase 2 trial globally as we speak. That's a tremendous amount of resources being put against it to go as quickly as humanly possible. In terms of enrollment in the phase 1, it's a two-part study, and it's 12 patients in each part, we already have, I think, four enrolled in the first part, and 10 in screening.

We hope to wrap up part one, hopefully in the next month, and then there'll be a second part, which is the next dosing after you complete the 1st part, and that'll hopefully be in Q2. How fast that goes is why I put it in the 2nd half, to give the team time to analyze the data. What we're really gonna get out of that study is hopefully tolerability, followed by looking at the FEV1, you know, any changes there. It's a 7-day study. We don't expect much, but the tolerability, the cough and all that is what we are most focused on here for IPF patients. The same dose in office will be given in the phase 2 study, so we'll collect that same data in the phase 2.

This is really to satisfy the FDA request from our meeting last year, so that we can hopefully, maybe even think about moving the phase 2 to the U.S. Right now, the phase 2 is completely ex-U.S. Once this is done, we've submitted this protocol to the FDA. We're awaiting feedback for the phase 2, that maybe we can do this if they agree to some of the parameters. They may not, we don't control that. We tried to make it so that everything the FDA was looking for, we at least have in the phase 2 as much as we are having that phase 1. So that data should come out in earlier in the first half of this, earlier in the second half, I'll say, of this year.

The second part of your question was really around conviction, the phase 2 is really meant to show some initial impact on FEV1. When you look at whether it's nintedanib or Tyvaso TETON-2, you start to see those curves separate after 6-12 weeks. We think in TETON-2, when we get those results, I'm sorry, in INFLO-2, when we get those results, you'll start to see that separation. It's not being powered for statistical significance, because we'll do that in the phase 3, but at least shows us that there's some conviction. This has blockbuster potential in IPF, as nintedanib today is the backbone, and we see that continuing to be the backbone of treatment.

Speaker 5

Okay, great. Thank you, guys. Appreciate it.

Operator (participant)

Our next question comes from Roanna Ruiz with Leerink Partners. Please unmute and ask your question.

Roanna Ruiz (Senior Managing Director)

Hey, everyone. Morning. Another question about the UT supply contracts for DPI. I just wanted to check, could they be updated again in future years, depending on DPI's ramp? As a positive counterbalance to that, I also wanted to ask what tailwinds could be driving future revenue growth, both from Afrezza and FUROSCIX this year and into later years, especially how you're thinking about the new guideline updates and the auto injector launch for FUROSCIX?

Michael Castagna (CEO)

I think on the supply agreement, for us, it was important. We never had minimums because we, if you recall, maybe if I don't recall, Louise, Roana, you weren't there in the beginning of the launch, but the launch took off a lot faster, which put a lot of capacity constraints on us in the beginning. We had to build that up pretty quickly, and we weren't in a position on either side to predict the outer years.

I think as this became mature and we saw the uptake and we saw the additional work that was happening, we needed to put some minimums in there so that we could operate Danbury for the long run, not just the short run, as we were in pretty much manufacturing hell for a couple of years when I look back. So that agreement is there. I wouldn't say anything can be modified if you have mutual parties agree to that. We do think there's a minimum production, and any brand you look at in the long term, you know, is always going to have some supply coming, and we believe that we'll be the sole supplier there for Tyvaso for a while.

On Afrezza and FUROSCIX, I think what you've seen really over the last two, three years for Afrezza, you know, we were reducing expenses and running it for profitability, so it wasn't being run for growth. I think that's an important context for everybody, is, you know, people say: Why didn't Afrezza grow faster? The reality is, until we had Peds safety and efficacy, it wasn't going to be something we could invest in because we always believed Peds was the inflection point for the brand. We tried various things over the years in the adult segment, and then with the advent of GLP-1s taking off, we felt arguing over Type 2s and arguing over insulin needs wasn't the best productive use.

We did want to maintain and grow it a little, but we didn't feel the productivity would be there from an increased investment relative to other shots on goal we had. So from that perspective, that's where Afrezza was being managed. We last year brought in a whole new team. We got the data readout. We met with the FDA. Our conviction around Peds grew tremendously, and that's, to us, the focus of the future. Our president, Nick, has done a good job building out the team, getting the infrastructure ready. We had a series of ad boards to confirm some of the research and really get this ready for launch, including the kickoff of the INHALE-1.

I'd say, you know, you're going to see that investment go up as we progress through the second half. I would expect that approval in May, if all goes well with the FDA, that you'll start to see some additional growth on Afrezza as we get to Q3 and Q4 next of the year. On FUROSCIX, the auto injector is something obviously we put a lot of value on in the deal, we felt the underlying growth trends on the On-body Infusor were great. When we talk to physicians and you think about the patient experience and the caregiver experience, having an auto injector just makes it so much easier, just from a mental burden, let alone a training for the patient or the caregiver.

We feel that will be a meaningful transformation that again, is coming up in the next 5 months here in July. 4 months from now, we should be hopefully getting ready for launch and hearing from FDA with label discussions. Both of those are on track. We've heard or seen nothing from the FDA other than we've gotten some IRs, obviously, but nothing that's a showstopper at this point. We feel pretty good about these assets hopefully getting their PDUFA dates.

Roanna Ruiz (Senior Managing Director)

Sounds good. Thanks.

Operator (participant)

Our next question comes from Gregory Renza with Truist Securities. Your line is open. Please unmute and ask your question.

Speaker 6

Hi, Michael Castagna and team. It's Anish on for Gregory Renza. Thanks for the updates and for taking our questions. First, just for Chris Prentiss, how should we be thinking about the evolution of gross margins and operating margins over 2026 as you take the reins with FUROSCIX and have Afrezza potentially going into Peds this year? Second, for Michael Castagna, maybe if you could just give us more color and remind us on how MannKind leverages FDKP to enhance the delivery, efficacy, and tolerability of dry powders, and how doc and patient fees have evolved over the years in PAH and PH-ILD, and how this might translate to IPF. Thanks so much.

Chris Prentiss (CFO)

Thanks, Anish. To talk about gross margin dynamics, the On-body Infusor has a slightly lower gross margin than Afrezza historically has. You could say, before the auto injector is approved and launched, there'll be a slight decline in gross margin, that will then improve significantly as the auto injector is launched later this year. I think you'll see a little bit of a hit in 2026 and then significant improvement in 2027 and beyond. Maybe the other thing to note is just as a ramification of the purchase accounting, we now have this intangible asset, which is the On-body Infusor, and when approved, the auto injector, that those are intangible assets that are amortized. You see, that's $4 million in Q4. That'll obviously play out over the year.That is technically part of COGS, and so if you, if you look at our COGS and our margin disclosures in the 10-K, you'll see a more significant impact to margin. That's a non-cash item, but that will be included in margin going forward.

Michael Castagna (CEO)

Okay. Your question on FDKP, if I heard it correctly, is just, you know, how is that critical? Why is that important? You know, FDKP is really what founded, you know, the formulation behind Afrezza and the scalability and the company and the moat that we have around our technology. It really is used to deliver drug deep into the lungs by either protecting the molecule, make sure it gets there, or making sure the molecule can fly there. As you may or may not know, many dry powders and nebulizers have wide variability in their delivery, so it's not just the FDKP and the powder, it's also the device platform we have. Those two things go hand in hand to deliver deep lung penetration and consistent lung penetration.

We see that in Afrezza, in the 3D imaging studies we did, that's important. You know, we believe, as you look at the various molecules we've already worked on and got approved, as well as what's in the pipeline, 80%-99% of that powder is FDKP. It's a critical ingredient in everything that we do and the formulations that we make. You continue to see that help, whether it's in the bumetanide work that we're doing, the IPF for 201 and the nintedanib, as well as Afrezza and that FUROSCIX, treprostinil. You know, we think it's important. We think it helps shape the particle size, and it is a barrier to access this molecule.

We think there's more innovation as we look out, that we start to think about with FDKP and continuing to take that to the next level as well. Thanks so much.

Operator (participant)

Our last question comes from Brandon Folkes with H.C. Wainwright. Your line is open. Please unmute and ask your question.

Brandon Folkes (Managing Director)

Hi, good morning. Thanks for taking my questions. Maybe just two from me. Firstly, on your Afrezza pediatric opportunity, can you just talk about, you know, the market research you did? You know, what did this sort of return, and where the opportunity lies initially versus new patient starts versus switch patients? You know, should we think about any bolus of switch patients up front, looking to go needle-free or pump-free? Maybe secondly, for me, just a quick one. You know, coming back to UT, but just taking a different approach, in your press release, you continued to include the second molecule, 1505, that collaboration. Is there anything molecule-specific on 1501, that give you confidence that they would move forward on a dry powder on that molecule? Thank you.

Michael Castagna (CEO)

Yeah, I think on the Afrezza Peds market research, you know, this was new research that just came in over the last few weeks, and I think we were looking to update the research we did previously that gave us some conviction. We feel that that was important to share. This is recent data, and it was really done amongst a group of physicians in a quantitative way that wasn't in an interactive or I'll say, trying to sell them. It was just displaying what the data says and the product profile. We were encouraged to see those results, 'cause that's before medical education or rep detail, et cetera. I think it just shows you that there's a large opportunity.

The one that did surprise us is the percent of naive patients that may potentially come into the product, as it wasn't in our original framework. I think as we were looking to do INHALE-1, it just re-convinced us that that was the right study to do and scale, and that study's enrolled nicely, and we're just kicking off the first 10 patients, and then we'll evaluate that and then open up for the other 90. That study is well on its way, and I think it'll be an important study to just understand the dynamics in endo practice and children's hospitals around how they create teaching protocols, What do they have to change for onboarding patients? How do they train patients on basal versus mealtime control? When do they give doses?

The school nurses program. There's a lot in that trial that actually we're learning from daily that I think will apply to the launch. That, that's really good there. Is there gonna be a bolus of switch patients? I think the answer is: The majority of the patients in the initial launch will come from switching, and over time, as people get experience, I think will come from naive. I don't expect, you know, we're not turning on a large DTC campaign day one of launch, so we shouldn't expect this really fast patient influx because all the consumer advertising we're doing.

I think we're taking a methodical approach, getting the key account team across the 50-70 centers out there we're targeting, which will treat the majority of the kids, and then we have the community sales force targeting the rest. We feel pretty good about the strategy, that we want to walk before we run and spend a ton of money, but then we have this opportunity on upside, and when we get to consumer research, that's just coming back, we'll look and see how fast that activation should start and when should that start. Because we do believe there's a consumer component here, obviously, with families and kids there. On the UT second molecule, you know, look. The teams are working very well together day to day on that program. It's progressing nicely. You know, what UT decides is what UT decides, but the way the agreement is structured is, you know, we're just getting the first part done, and that should be wrapping up shortly. We hope that then moves forward. We think it'll help a lot of patients, and it could be a blockbuster potential, but that's gonna be in UT's direction. Okay. Does that answer your questions, Brandon?

Operator (participant)

That concludes the questions.

Michael Castagna (CEO)

Yep. Thank you, operator. I see no other questions here in the queue, so I want to thank our employees for their dedication and hard work. I want to thank the patients and families who are participating and continue to participate in our trials and use our products every day. Everything we focus on is about helping people live life more human. We remain committed to our mission, and we look forward to moving our company forward in 2026. Thank you.