Liquidia Vs. MannKind: Who I Think Will Be Winning Battle

Who Will Win the Trophy?

With reference to the current Seeking Alpha contest for contributors, where they are seeking articles dealing with two stocks that have a key common denominator, I have opted to submit an article where my stocks are MannKind (NASDAQ:MNKD) and Liquidia (NASDAQ:LQDA). The common denominator for the respective company is that each has a new drug for Pulmonary Arterial Hypertension patients. The commonality between the two drugs is that both have their active ingredient being, treprostinil. The two companies will deliver a dry powder inhalation product – DPI, using their respective inhaler device. With these two key commonality factors being applied, it is my strong belief there will be a discernible winner as to who captures this market with the new Tyvaso DPI version of treprostinil. The following is my opinion of who the winner will be, and I will start with MannKind’s chances:

Things Are Not Going Well for MannKind

At first glance, MannKind is starting with a key advantage as they are partnered with United Therapeutics (UTHR). United owns the drug (Tyvaso DPI) as they merely partnered with MNKD in 2018 where they would utilize their Technosphere system for creating the clinical supply and initial supply when launching the product into the marketplace. Currently, United is a leading drug company focused on the PAH market. With various versions of their treprostinil product offering—pumps, infusion, oral, nebulizers United is a $10 billion-dollar market cap company.

The two products involved in this competition relate to Tyvaso and Remodulin, where specifically the drug impacting MannKind is Tyvaso, since the MannKind product is designed to supplant this nebulizer product with their dry powder inhaled version. United’s Remodulin is involved because this is a parenteral(intravenous) delivery method for treprostinil and Liquidia already has a competitive product that is impacting United’s revenue stream for this mode of delivery.

1st-Q-2022:

• Tyvaso Revenue–$172.0 M vs $123.0 M –$49.00+ or 40% increase ($688.0 M -Annual Projection for Revenue)
• Remodulin–$131.7 M vs $130.2 M — $1.5 M+ or 1.0% for revenue. But in fact, the US revenue for this product dropped by $8.0 M, so it appears that Liquidia is already impacting this revenue source for United.

The big slice of this market will be the battle for supplanting the Tyvaso share with the competing DPI version of treprostinil as this will be a direct battle between MannKind/United and Liquidia for dominating the revenue generated by their respective DPI version product. The Remodulin conversion will strictly be between Liquidia and United products.

To see what is at stake for Liquidia in this coming contest, I will use rudimentary numbers based on United’s 1st-Q numbers:

• $172.0 M for Tyvaso and $132.0 M for Remodulin =$304.0 M revenue at stake.

United is projecting that 60% will convert from Tyvaso into using the DPI offering. Liquidia is projecting that upwards of 80-90%% will convert. So let us use a middle ground projection of 70% for the conversion. Keep in mind, and I will explain further in the article, Liquidia’s COG will be much lower than the United offering and give Liquidia an advantage based on cost savings to the patient’s source of paying for the drug. It is my opinion that the lower cost advantage for Liquidia is going to enhance its ability to convert the current United patients and future patients needing drug options to address their condition.

• $172 M with 70% conversion rate=$120.4 M per quarter.
• $120.4 M split 50/50 between United and Liquidia =$60.2 M.
• $60.2 M revenue per quarter will generate $240.8 M in annual revenue for Liquidia. This is only for the Tyvaso conversion to the DPI version. Liquidia will also have revenue from the Remodulin conversion.

For any small biotech, like Liquidia, having the potential to quickly generate more than $240.8 million in annual revenue would be a nice achievement. However, one must consider that by October 2022, the ligation and hold by the FDA for launching the Liquidia DPI product must be resolved in Liquidia’s favor.

But how would the above scenario impact MannKind’s revenue potential, based on their 12% royalty payment on net profits:

• $60.2 M per quarter and 12% royalty=$7.224 M
• $7.224M per quarter translates to $28.896 million for MannKind on an annual basis.

The Revolving and Evolving MannKind Relationship with United!

When the original United partnership was announced on September 4, 2018, the following is the press release they issued:

Under the agreement, United Therapeutics will be responsible for global development, regulatory, and commercial activities. MannKind will manufacture clinical supplies and initial commercial supplies of the product at its manufacturing facility in Danbury, Connecticut. Long-term commercial supplies will be manufactured by United Therapeutics.

Under the terms of the agreement, MannKind Corporation will receive an upfront payment of $45 million and potential milestone payments of up to $50 million, dependent upon the achievement of specific development targets. MannKind will also be entitled to receive low double-digit royalties on net sales of the product. In addition, MannKind granted United Therapeutics an option to expand the license to include other active ingredients for the treatment of pulmonary hypertension. Each optioned product would be subject to the payment to MannKind of up to $40 million in additional option exercise and development milestone payments as well as a low double-digit royalty on net sales of any such product.”

This is a straightforward contract for small biotechs dealing with a major drug company. MannKind would merely manufacture the drug pre-approval clinical and initial commercial supplies. Upon launching the product, United would take over the manufacturing process, with MannKind getting a royalty on net sales of the PAH drug. The rate of the royalty would be low double digits which could be interpreted to be no higher than 12%. However, in the interim period United has announced they had amended their initial partnership contract with MannKind, several times:

United Therapeutics License Agreement — In September 2018, the Company and UT entered into an exclusive global license and collaboration agreement (the “UT License Agreement”), pursuant to which UT is responsible for global development, regulatory and commercial activities with respect to Tyvaso DPI. The Company is responsible for manufacturing clinical supplies and commercial supplies of Tyvaso DPI.

Under the terms of the UT License Agreement, the Company received an upfront payment of $45.0 million in October 2018 and four $12.5 million milestone payments between April 2019 and November 2020. The Company will also be entitled to receive low double-digit royalties on net sales of Tyvaso DPI as well as a manufacturing margin on commercial supplies of the product. UT, at its option, may expand the scope of the products covered by the UT License Agreement to include products with certain other active ingredients for the treatment of pulmonary arterial hypertension. Each such optioned product would be subject to UT’s payment to the Company of up to $40.0 million in additional option exercise and development milestone payments, as well as a low double-digit royalty on net sales of any such product.

In August 2021, the Company and United Therapeutics entered a CSA, pursuant to which the Company is responsible for manufacturing and supplying to United Therapeutics, and United Therapeutics is responsible for purchasing from the Company on a cost-plus basis, Tyvaso DPI and BluHale inhalation profiling devices, as required for commercial distribution and sale by United Therapeutics. In addition, United Therapeutics is responsible for supplying Treprostinil at its expense in quantities necessary to enable the Company to manufacture Tyvaso DPI as required by the CSA.

The activities and deliverables under the CSA and the current development plan resulted in three distinct performance obligations which include: (1) the license, supply of product to be used in clinical development, and continued development and approval support for Tyvaso DPI (“R&D Services and License”); (2) development activities for the next generation of Next-Gen R&D Services; and (3) a material right associated with future commercial manufacturing and supply of product (“Manufacturing Services”).

As amended in October 2021, the term of the CSA continues until December 31, 2031(unless earlier terminated) and is thereafter renewed automatically for additional, successive two-year terms unless (i) United Therapeutics provides notice to the Company at least 24 months in advance of such renewal that United Therapeutics does not wish to renew the CSA or (ii) the Company provides notice to United Therapeutics at least 48 months in advance of such renewal that the Company does not wish to renew the CSA. The Company and United Therapeutics each have normal and customary termination rights, including termination for material breach that is not cured within a specific timeframe or in the event of liquidation, bankruptcy, or insolvency of the other party.”

The original United/MannKind contract was signed in 2018, and things moved along incrementally with no apparent glitches in the partnership. In 2018, Liquidia was plodding along working out the kinks in their new PRINT technology system. They did a 4.5 million share IPO in July 2018 where they issued stock at $11.00 a share.

In August 2021, something sparked United into wanting to modify the terms of their contract with MannKind, as shown in the previous link to the contract’s features. The major change being United wanted to turn all manufacturing of the product over to MannKind. The original contract was that MannKind would only manufacture the product for the clinical trials and the initial launch supply of the DPI product.

After the August 2021 change in the contract, two months later, in October 2021, United comes back with a new CSA where in the first sentence they stipulate the contract would continue until December 31, 2031(unless earlier terminated). Then in the last sentence of this new CSA we see for the first time — “each has normal and customary termination rights, including termination for material breach that is not cured within a specific timeframe or in the event of liquidation, bankruptcy, or insolvency of the other party.”

I think it safe to assume that the “other party” stipulation isn’t something that United is personally concerned with happening to them in the near future. Merely look at their financial balances sheet as compared with MannKind’s financial situation.

Bad Blood or Nothing to Worry About?

It appears there is a degree of acrimony between the Liquidia CEO and the United CEO. In 2016, Dr. Roger Jeffs retired from United Therapeutics where he had served as the Co-CEO. He had worked with United for 18 years, the period when United had great success in drug development and generating a large revenue stream for the company. On June 29, 2020, Liquidia announced they had agreed to purchase RareGen, LLC. Dr. Jeffs was part owner of this small private company. As part of the deal, Dr. Rogers Jeffs would join Liquidia’s board of directors. On January 3, 2022, Dr. Jeffs became the CEO of Liquidia.

It should be noted that RareGen, LLC, under Dr. Jeffs’ leadership, had been created to develop a generic version of Remodulin. In 2019, RareGen formed a partnership with Sandoz for subcutaneous delivery of their generic form of treprostinil. In May 2021, Sandoz announced the FDA’s approval for the intravenous version of the tresprostinil product. The hold-up had been obtaining the use of the special pump for delivering the intravenous version. With this approval now the Sandoz/Liquidia drug could be marketed for subcutaneous and intravenous delivery—and priced much cheaper than United’s branded—Remodulin.

The product was a generic version of United’s Remodulin drug. The following article summarizes why the RareGen product would capture a sizeable share of this market:

Currently, Liquidia’s pipeline features a PAH drug candidate, namely LIQ-861 (Treprostinil), a dry powder inhaler, now under FDA regulatory review. The acquisition will give Liquidia the rights to promote RareGen and Sandoz’s first injectable generic version of Remodulin (Treprostinil) for treating PAH. Due to its generic status, Liquidia can price generic Remodulin significantly cheaper than all the available alternatives in price-conscious markets and emerging markets. Key opinion leaders interviewed by GlobalData have emphasized that for patients with severe PAH, they would favor Remodulin rather than the available oral therapies.”

It should be noted that Sandoz is a division of Novartis (NVS), a $51.0 billion revenue-generating corporation. As mentioned earlier, for the 1^st-Q, of 2022, United reported that their Remodulin revenue declined by $8.0 million dollars. This indicates that the generic version being offered by Liquidia is beginning to impact United’s revenue stream. After the FDA approved the new generic version in May 2021, Liquidia earned $12.0 M over the rest of 2021. Now in 2022, the capture rate appears to be accelerating for the Sandoz/Liquidia partnership.

On June 29, 2020, Roger Jeffs sells RareGen to Liquidia and he becomes a Liquidia board member, bringing his extensive work history knowledge related to treprostinil and the PAH market. And most of all Liquidia now has a product that will compete against United’s PAH product—Remodulin. What would be the next move in this corporate world intrigue between two major players in the PAH marketplace?

On October 19, 2020, stockholders got the answer—another company made an unsolicited offer to enter into a license agreement for LIQ861. Liquidia gave its answer on November 2, 2020:

As previously announced, on October 16, 2020, the Company received an unsolicited offer to enter into a License Agreement for the Company’s LIQ861 product candidate (the “Alternative Proposal”). The Alternative Proposal was conditioned upon the Company terminating the Agreement and Plan of Merger, dated as of June 29, 2020, by and among the Company, RareGen, LLC, Liquidia Corporation, Gemini Merger Sub I, Inc., Gemini Merger Sub II, LLC, and PBM RG Holdings, LLC (the “Merger Agreement”). On November 1, 2020, the Company’s board of directors (the “Board of Directors”) has determined that the Alternative Proposal does not constitute a Superior Proposal and the Company subsequently informed the counterparty that it is terminating discussions with respect to such Alternative Proposal.

Accordingly, the Board of Directors has unanimously reaffirmed its recommendations that the Company’s stockholders vote “FOR” each proposal being submitted to a vote of the Company’s stockholders at the Special Meeting.”

In full disclosure on my part, I have no idea, and to the best of my knowledge, Liquidia has never disclosed who made the October 16, 2020, proposal seeking to form a license agreement for their LIQ-861 drug. A product that would be a DPI version of treprostinil. However, I find it intriguing that the unknown company didn’t want Liquidia to finalize the merger agreement with RareGen, where Dr. Jeffs was part owner. But what other company upon getting this license agreement could move forward expeditiously in getting final FDA approval—where there were no ligation issues or impediments to getting the FDA approval. In fact, getting the FDA approval before the MannKind manufactured product actually got its FDA approval.

This is the issue that I have with the United/MannKind partnership for marketing a dry powder inhaled drug – DPI product created with MannKind’s technology. We know that United’s basic motive for wanting to offer a DPI version is to preserve its market share of the Treprostinil PAH market. United has been very aggressive in litigation and other means to prevent further erosion in its market share. The fact being is that Liquidia has already broken into the market with a subcutaneously injected product based on Treprostinil. And we know that due to litigation by United they have prevented Liquidia from launching their DPI version of Treprostinil. The fact of the matter, the FDA approved Liquidia’s DPI long before they approved United’s version. However, the FDA has prevented the launch of the Liquidia product until which time the legal case between United and Liquidia can be resolved. As it stands now, the legal case is on schedule to be resolved in August 2022. At most, it will be October 27, before the stay ends if the two companies can’t resolve their differences in the interim period.

It should be noted that Sandoz is a division of Novartis (NVS), a $51.0 billion revenue-generating corporation. As mentioned earlier, for the 1^st-Q, of 2022, United reported that their Remodulin revenue declined by $8.0 million dollars. This indicates that the generic version being offered by Liquidia is beginning to impact United’s revenue stream. In 2021, while splitting revenue with Sandoz, Liquidia still earned nearly $13.0 million in revenue.

In Liquidia’s 1^st-Q, 2022 they reported the following:

Liquidia’s revenue increased slightly to $3.5 million in the first quarter 2022 as compared to $3.1 million in the first-quarter 2021 despite a decrease in the profit split percentage from 80% to 50% per the terms of the promotion agreement with Sandoz. The increase in the number of units sold was driven largely by the implementation of payer mandates at national and regional levels to use generic Treprostinil formulations over branded Remodulin® (treprostinil). Additional payers are expected to implement generic mandates in the second half of 2022 and into 2023.”

At this point, we know that Dr. Jeffs had become a member of the Liquidia board of directors on June 29, 2020, where now Liquidia had a PAH product that could impact United Therapeutics’ revenues. A generic product brings a new dimension to the marketplace—a lower-priced drug! Staring at this intrusion into the marketplace from a generic drug and then the same company could have an FDA-approved drug that would be a DPI PAH product competing in the dry powder inhaled version of Treprostinil, what would be the next event in this corporate intrigue?

Repeat After Me—Cost! Cost! Cost!

On March 21, 2018, more than four years ago, I shared a SA article titled— “MannKind –Stone Age Technology is Not Rolling Off the Shelves” I tried to explain the limitations and shortcomings that MannKind’s Technosphere System was suffering from when it comes to creating a viable drug product that can compete in the marketplace. The fact that MannKind has existed for 30 years, trying to expand the use of their Technosphere System to other drug development companies we know that except for United Therapeutics, this has not been a successful endeavor for MannKind. We can now add to the realm of known facts, Afrezza has been the only product internally developed and has been FDA approved, and now eight calendar years after being on the market, it has never come close to generating one cent of profit for MannKind.

What investors need to know is that in the development of drugs there are certain properties of the drug that must be considered in making that drug. Two critical considerations needed in producing a drug are the ability to dose the drug in the needed amount for efficacy and the long-term stability of the drug. When it comes to an inhaled drug there are other factors that come into play such as the size of the molecule and the ability to properly deliver the drug into the lungs in consistent dosages. The two major options that allow drug manufacturers to address this critical area are by using a wetting process or a non-wetting process. And in the case of MannKind and Liquidia that is certainly the case. MannKind uses a wetting process and Liquidia uses a non-wetting approach to this stage of drug development. MannKind’s process involves the use of an excipient being added, and in the case of MannKind, they are the only drug company that has opted to use this excipient. Liquidia does not require any excipient for its manufacturing process. For a scholarly explanation of what the wetting process in drug manufacturing is, this article might help— Wettability by John Bauer provides an excellent overview.

What one should note up front, this article was written in 2010—12 years ago. The reason this is important is that there is now a viable option in this wetting process being the only option. Now there is the option of a non-wetting process in creating new drugs. By starting with the understanding of what issues the old standard of wetting involved in the needed process then it will make what the non-wetting process brings to drug making more relevant when look at cost incurred. If the aforementioned article does not give my readers a clear understanding of the issues, then I would suggest you read the following article — Future of the Replication in Nonwetting Templates (PRINT) Technology– Please note that this project was funded by Liquidia and the principles were associated with the Universities where the PRINT technology was developed. I could not find a comparable article presenting the MannKind technology. The author/scientists behind this article have outstanding credentials in PRINT technology.

Ford Motors Said They “Designed” the Edsel to Be Future of Car Manufacturing:

As a bypass from reading the detailed scientific paper, the following pictures can give one a quick understanding of the issues as they relate to MannKind and Liquidia. The first two pictures give you a view of what MannKind’s manufacturing facility looks like. Let me help you understand what you are viewing other than a massive amount of equipment in MannKind’s facility. This equipment includes huge blenders, quick freezing units, and kilns for heating the drugs being blended into the mixture. It should be noted from this first picture, that it requires the drug to be constantly moved to the next stage of creating the end drugs. And those kilns are needed because at the end of this wetting process the wetting agent must be dried out of the drug to make the DRY powder inhalation drug. The major criterion for the drug is that each molecule must have a uniform shape and size to make the journey into the patient’s lungs where it can be transferred into the patient’s circulatory system. Now pause and think—where in this circuitous route in this wetting process was there any allowance for making sure the end drug molecules are of a consistent shape and size?

MannKind tells investors that its product is “ designed” to fly deep into the patient’s lungs. Ford Motor Company also told the customer they had “ designed” the Edsel to be the car of the future. The semantics involved in understanding the English language can be troubling for some individuals. For those of you my age, you know how the Edsel design turned out in the marketplace! With the Ford analogy in mind and considering MannKind telling you they designed Afrezza so upon inhaling the drug, it would fly deep into the patient’s lungs. With this image in your mind, read what Afrezza admits in their official, self-admitted data, and is approved by the FDA, is their prescribing insert that is provided with each prescription that is issued for Afrezza. This is found in Section 12.3—

Carrier Particles: “ Carrier Particles Clinical pharmacology studies showed that carrier particles [see Description (11)] are not metabolized and are eliminated unchanged in the urine following the lung absorption. Following oral inhalation of AFREZZA, a mean of 39% of the inhaled dose of carrier particles was distributed to the lungs and a mean of 7% of the dose was swallowed. The swallowed fraction was not absorbed from the GI tract and was eliminated unchanged in the feces.”

This simply means that MannKind’s self-generated clinical data shows that each time a patient inhales their Afrezza dose, the mean delivery reflects that only 39% of the dose was distributed into their lungs. At least 61% of each dose is wasted! Even Al Mann, admitted that it takes four (4) times the dose of regular injectable insulin where even then the efficacy does not beat the Standard of Care results seen with the injectable insulin. Therefore—insurance companies are refusing to provide needed coverage simply because of the cost incurred for a product that offers no additional benefit for the regular insulin user.

The first question that might arise is why MannKind suffers from this inability to deliver its dosage where 61% is wasted, and this doesn’t occur in the same 61% being wasted with Liquidia’s dosage—since they are both inhaled dry powder drugs.

With MannKind’s inhaler device you get one inhaling effort per cartridge. Even then, should the patient not always keep the device level during the inhaling efforts, the dose could fall out of the inhaler — wasting 100% of the most expensive insulin product on the market. With Liquidia’s inhaler, the patient can use several inhaling efforts to transfer the drug into the patient’s body. Plus, the Liquidia system, they have unique PRINT technology that molds each molecule into the same size and shape, thus increasing the precision and flowability of the transfer from the inhaler to the patient’s lungs.

This next picture reflects the Liquidia manufacturing facility using their proprietary PRINT system- (Particle Replication in Non-Wetting Templates.) To help you understand how this consistent template process gives consistency to size and shape, Liquidia has created a detailed demonstration of what makes their manufacturing process so unique. For my readers to grasp the significance of what the PRINT system offers in comparison to MannKind’s Technosphere system the following are things that can occur in the wetting process in trying to make viable and efficacious new drugs.

Limitations of wet granulation

1. Wet granulation often requires several processing steps.
2. The cost of wet granulation is higher because of the time, labor, energy, equipment, and space required for the process.
3. The process is not suitable for thermolabile and moisture-sensitive materials.
4. Migration of soluble dyes may occur during the drying process.
5. Incompatibilities between formulation ingredients will be aggravated by the granulating solvent which tends to bring them into close contact.
6. There is a possibility of material loss during processing due to the transfer of material from one unit operation to the other.
7. The dissolution rate of tablets manufactured by wet granulation may decrease with aging.

To provide my reader a better perspective for understanding the above issues — “time, labor, energy, equipment, and space” — required for manufacturing a wetting process drug where they must add also the extra cost for an excipient in making such a drug. The recently sold Danbury, Connecticut manufacturing plant that MannKind uses in manufacturing Afrezza and the new DPI PAH drug, this facility has 260,000 sq. ft. of space to accommodate all the needed equipment—mixers, kilns, freezing units, and staffing requirements.

Now consider that Liquidia runs their total corporation, including manufacturing their product, from a facility that covers 45,000 sq. ft. of space. MannKind needs nearly six times as much space—this alone is going to cut the COG for Liquidia, thus giving them a pricing advantage. I think it would be a fair assumption that United Therapeutics had no interest in buying the MannKind facility, and they now understand the cost disparity they face with their partnership with MannKind.

Again—Repeat after me—Cost! Cost! Cost! And Having a Consistency in Size and Shape of the Drug Often Enhances its Bioavailability of the Drug!

If Liquidia’s PRINT System can provide the elimination of the extra costly manufacturing expenses that MannKind incurs in their manufacturing expense what better confirmation that this is the case comes directly from MannKind.

MannKind is promoting to investors they have a new compound they are taking into clinical trials. The drug is clofazimine which was discovered about 70 years ago and was FDA approved here in the USA in 1986—36 years ago. Novartis had an oral dosage of the drug; however, they have stopped marketing the drug—seems the side effects were quite extensive from these oral doses. Considering the following patient’s picture issues where they swallowed a pill version and what MannKind is proposing is the drug be dosed by inhalation with a nebulizer directly into the patient’s lungs. After thirty years of touting the Technosphere system, MannKind is reverting to a nebulizer, the system that their DPI PAH drug is supposed to supplant the Tyvaso product route of delivery. Not exactly a rousing way to promote your bread-and-butter drug delivery system and then admit you are developing a drug where you are not using what you claim is the best delivery system ever invented.

Vectura Group is a part of Phillip Morris (PMI.SW), and they are a leader in developing products for delivering drugs through inhalation. They have developed inhalation delivery systems for the likes of Glaxo, Novartis, Bayer, and Sandoz. In their 2020 Annual Report (Page 13) they cite that currently there were 300 molecules in clinical development using inhalation as the route of administrating the drug.

MannKind has been in existence for three decades and they have formed meaningful partnerships with two major pharmaceutical companies. The first was Sanofi (SFY) and in the first year of marketing the MannKind FDA-approved drug—Afrezza—Sanofi walked away from the deal and stopped its marketing efforts. Sanofi could not get initial users to adopt the drug and for those that did, approximately 75% of these initial users refused to get their prescriptions refilled. The MannKind financial situation has been encapsulated into one paragraph for their most recent quarterly report:

“As of March 31, 2022, we had an accumulated deficit of $3.2 billion and a stockholders’ deficit of $231.4 million. Our net loss was $26.0 million for the three months ending March 31, 2022. To date, we have funded our operations through the sale of convertible debt securities and equity, from the receipt of upfront and milestone payments from certain collaborations, from borrowings, from sales of Afrezza, and from the proceeds of the Sale-Leaseback Transaction.”

After three decades of operation as a biotech corporation, it appears they held only one asset that had any concrete valuation from ownership—that being their real estate in California and the manufacturing plant in Danbury, Connecticut. With the recent sale of their Danbury facility, they have only a small building that the purchaser of the Danbury plant opted not to purchase as part of their deal with MannKind. Basically, the only asset they hold is the ownership of their insulin product—Afrezza.

Keep in mind, MannKind is depending on the revenue of the United-owned PAH DPI product to bring in the needed revenue to maintain their operations. With that being the case, United reported in their last quarter the revenue from Tyvaso was $172.0 million and they projected they would be able to convert 60% of their Tyvaso patient to the DPI version. Now assume that this conversion has taken place and that the revenue is the same $172 million as the last quarter. This simply means:

MannKind will be getting its revenue based on 60% of $172.0 million =$103.2 million. When applying for the 12% net revenue royalty payment, we see that the revenue coming to MannKind is a mere $12.4 million. This will cover less than 50% of the current net loss per quarter of $26.0 million dollars. And this is assuming that 60% of the current Tyvaso patients have converted to MannKind’s version.

And let me admit, I have not applied the nebulous manufacturing cost-plus arrangement because of all the variables. But keep in mind one thing—every penny of the money that United spends on the COG and marketing effort will be applied to arrive at the net profit of this product. In a way, MannKind will be impacted because the net profit will be reduced by MannKind’s manufacturing expenses incurred by MannKind. The only net revenue they will receive for the manufacturing expenses will be the small percentage rate United will pay above the incurred expense that MannKind is obligated to incur for making the product. That is a one-to-one ratio—MannKind incurs $1.00 of expense, and United reimburses that $1.00. In the vernacular of business exchanges—this is a wash! Dollar for Dollar! There is no profit going to the company that initially incurs these expenses.

After digesting the points covered in the previous paragraph, “IF”. Liquidia launches their DPI drug, and they get a mere 25% of the PAH market that United currently has, this will reduce the current $172.0 million in revenue going to United.

• $172.0 M less 25%=$43 M=$129.0M revenue.
• Now we are down to $129 M for calculating the conversion number from Tyvaso into the DPI product.
• Now the 60% conversion is based on $129.0 @60%=$77.4 million.
• 12% royalty on $77.4 M =$9.28 M being paid to MannKind.

Based on this scenario, without a massive increase, after trying for 8 years, the Afrezza revenue and United revenue will not generate enough net revenue to cover the current $26 million net loss they are currently losing per quarter. $26.0 current quarterly cash burn reduced by $9.28 M =$16.72. But now for the real reality of the situation that MannKind and United face—what – “IF”- Liquidia secures 50% of the conversion to their DPI drug.

Keep in mind two things:

MannKind has one drug in their pipeline that has been available from Novartis since 1986—36 years. Novartis can’t give the drug away as there are no takers due to adverse events. MannKind recently announced they had started a Phase 1 clinical trial seeking a small group of patients in Australia—they are not conducting the trial under the US FDA approval process. But the most unusual aspect of this potential blockbuster drug being developed in Australia, after promoting their Technosphere system for creating drugs using an inhaler device, they are using a nebulizer while they and United are trying to get PAH patients to convert to a DPI formulation for dosing.

MannKind is losing money on every Afrezza prescription they fill. The growth and retainment of initial patients have stagnated at levels that are not conducive to them ever turning a profit. For example — Based on weekly Symphony data for the week of October 23, 2015 (7 years ago) Afrezza had 421 new prescriptions written and 206 refills=627 prescriptions. For the week of June 26, 2022, the new prescriptions ran 296 and refills were 463=759. Refills for 7 years of effort should now be running weekly numbers in the multi-thousands. Afrezza has become a $3 billion dollar flop!

And one final thought on this situation that is unfolding! In their latest quarterly report for the 1^st-Q, of 2022, United reported they currently have 4,400 patients using Tyvaso. Based on this number and the $172 M net revenue that Tyvaso is generating for United, this means the cost per patient is approaching $40,000.00 per patient for a three-month supply of Tyvaso. And once again, the big “IF.” If Liquidia with their PRINT system, should they undercut MannKind’s manufacturing cost by 20%, and with their lower overhead expenses, should Liquidia charge 10% less for their PAH product, would a managed care company opt to spend 10% more when they could opt for the 10% savings for the same drug?

Based on the scenario I have outlined; it is my opinion that Liquidia will outperform MannKind in the marketplace going forward.

Final Thoughts on MannKind:

I have serious doubts about them being able to secure a viable revenue source where they can afford to maintain a viable operating corporation. My evaluation is that the United partnership is not that source!

Caveats and Recent Events for Liquidia:

• Everything is dependent on them getting FDA approval to launch their Tyvaso replacement drug by October 2022.
• At the end of the 1^st-Q, of 2022, Liquidia held a cash position of $57.8 M.
• In April they did a secondary offering that netted $53.7 million. Having currently approximately $110.0 in cash, plus having several million dollars in monthly revenue from their Sandoz partnership, it is my opinion that they have enough cash to get them well into next year—assuming they get to launch their new drug in the 4^th-Q, 2022.
• Bank of America recently upgraded the stock with a price target of $12.00–nearly 3 times the current price.
• On June 27th, Liquidia was added to the Russell 2000-3000 Indexes.
• On June 20th Liquidia hires a Chief Medical Officer who brings extensive medical practice and research experience in pulmonary diseases.

Good luck with your future investing decisions! Use my article as merely a starting point for doing your own due diligence where you apply your personal criteria for investing your money. Currently, I hold a small position in Liquidia’s stock, thankfully at price levels below the current price.