MNKD Investors

Technosphere®

One of the largest organs in your body are the lungs. Picture the size of a full tennis court and that is roughly the surface area of both lungs in a typical adult.

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NTM Lung Disease on the Rise

“I cough every morning upon waking, so I don’t feel rested.” “Imagine not being able to breathe.” “Anxiety ruins everything about you – it’s not a normal life.” “You just exist from day to day and week to week.”

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What exactly is the Technosphere® Platform?

One of the largest organs in your body are the lungs. Picture the size of a full tennis court and that is roughly the surface area of both lungs in a typical adult. Running through those lungs are airways whose total length measures 1,500 miles – that’s the distance between Chicago and Las Vegas, New York to Albuquerque, and Los Angeles to Nashville.

Simply put, the lungs create a wonderful platform for effective drug delivery. MannKind’s Technosphere technology recognizes this and provides the distinct advantage of rapid, deep lung drug delivery. The effect is similar to intravenous delivery (I.V.; within a vein) and has the added benefit of bypassing the liver which can be especially helpful in reducing systemic side effects.

Examining it closer, it helps to look at inhalation, air flow travel, and the exhale. When you breathe in, air is drawn into the lung and flows down curving, narrowing airways that end in the air sacs or alveoli. When air is exhaled, the flow is reversed. Between the end of an inhalation and the start of exhalation, the air in the lung is stationary. To reach the deep lung, inhaled particles must be carried by the air stream and have enough momentum to continue through the stationary air to collide with the lung surface.

Particles that can reach the lung have aerodynamic diameters between 0.5 µm and 5-6 µm (1 µm is 1 micro-meter or about 0.00004 inches). Particles that are larger than 6 µm will leave the air stream and hit the back of your mouth and throat; smaller than 0.5 µm wouldn’t have the ability to reach the lungs and would simply get exhaled.

“The average Technosphere particle is about 2-2.5 µm which is in the middle of the respirable range,” explains Marshall Grant, PhD, MSc, Executive Director, Clinical Pharmacology & Research for MannKind Corporation. “The particle size distribution is a major reason Technosphere powders are highly efficient in delivering drug to the lungs than other dry powder inhalers (DPIs).”

The Technosphere particles in FDA-approved Afrezza® (insulin human) Inhalation Powder and Tyvaso DPI™ (treprostinil) Inhalation Powder are manufactured by different processes and possess different characteristics. But both are made up of small crystals of FDKP (fumaryl diketopiperazine), MannKind’s proprietary molecule. FDKP provides high solubility and fast dissolution at physiologic pH – and more importantly – can crystallize and form particles in the range appropriate for optimum delivery to the lungs.

When Technosphere powder reaches the lung surface, the FDKP and drug dissolve. The FDKP is then rapidly cleared from the lung into systemic circulation. The FDKP is not metabolized, but rather excreted primarily in the urine. Another value of Technosphere powders has been their versatility – they are compatible with a wide range of doses with different types of drugs.

MannKind’s Technosphere powders are delivered into the lung’s airstream via an inhalation device or DPI (dry powder inhaler). The breath-powered inhalers (Dreamboat® being the most common version) provide excellent delivery efficiency and are proven to deliver up to 70% of the dry-powder dose deep into the lungs. Our DPI are designed to be simple, easy to use and discreet. For patients, imagine having a drug in the convenient form of an inhaler that fits in the palm of your hand. This approach allows patients to not only take control of their health but do it while going about their day and enjoying life more humann.

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NTM Lung Disease on the Rise

“I cough every morning upon waking, so I don’t feel rested.” “Imagine not being able to breathe.” “Anxiety ruins everything about you – it’s not a normal life.” “You just exist from day to day and week to week.” These are a sampling of comments about the most bothersome symptoms from living with Nontuberculous Mycobacteria (NTM) shared in a study from NTM Info & Research, Inc. The statements are unfortunately typical and those with NTM often have unpredictable day-to-day health functioning and reduced quality of life.

NTM lung disease is a serious infection that is caused by bacteria that are common in the environment and can cause lung damage. The reality is that we are all exposed to these bacteria in our day-to-day lives – more than 120 species of mycobacteria have been identified. These common bacteria exist in water and soil particles that are in the air, wet places like hot tubs, steamy bathrooms, dishwashers, and even the dewy ground we walk on at the park. But not everyone is at risk of getting NTM lung disease just because they are exposed.

Those predisposed often have underlying conditions such as asthma, COPD, and bronchiectasis, which makes them prone to NTM infection. NTM is not considered to be contagious. Women over the age of 65 make up the majority of those impacted, with a predominance in those of Caucasian and Asian descent.

A rare disease, NTM can often be difficult to diagnose. Many will experience coughing, fatigue, weight loss and shortness of breath – all of which are common with other lung disease symptoms and other conditions like tuberculosis. With NTM, symptoms often worsen, and that is a marker not to be ignored.

It is estimated that some 86,000 individuals are living with NTM lung diseases, and it is on the rise growing 8% each year. Coastal regions including Gulf States have higher rates of infection accounting for 70% of annual NTM cases.

While no cure is available, treatments to manage NTM are available. Treatment for NTM involves antibiotic and multidrug regimens with duration lasting from months to years with tolerability and adverse reactions to treatment which often leads to a lack of adherence to therapy.

There is a valuable need to develop medicines that are well tolerated and effective that lends to consistent patient use and alleviates symptoms of NTM lung disease. MannKind continues to progress MNKD-101 (Clofazimine) for the treatment of NTM.

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Release Details

MannKind Reports Third Quarter Financial Results

11/03/04
MannKind Reports Third Quarter Financial Results

VALENCIA, Calif., Nov. 3 /PRNewswire-FirstCall/ -- MannKind Corporation (Nasdaq: MNKD) today reported financial results for the third quarter and nine months ended September 30, 2004.

For the third quarter of 2004, total operating expenses were $20.5 million, compared with $14.0 million in the third quarter of 2003. Research and development (R&D) expenses increased by $0.9 million to $11.7 million, primarily due to increased expenses associated with expanded clinical trials and related support for the Company's Technosphere® Insulin program, offset by a $5.5 million R&D credit exchange recognized under a R&D credit exchange program in the State of Connecticut for qualified research and development expenses. Of this amount, approximately $1.5 million consisted of cash received during the third quarter of 2004. Without this offsetting credit, R&D expenses for the quarter would have been $17.2 million. General and administrative (G&A) expenses increased by $5.5 million to $8.8 million. Included in R&D and G&A expenses for the third quarter of 2004 are non-cash stock-based compensation expenses aggregating $7.0 million, compared with $0.2 million in the third quarter of 2003.

The net loss for the third quarter of 2004 was $20.2 million, versus a net loss of $13.9 million in the third quarter of 2003. Net loss per share was $1.40 in the third quarter of 2004 compared with a net loss per share of $0.72 for the comparable 2003 period. Net loss per share in the third quarter of 2004 includes a deemed dividend to Series B and C preferred stockholders of approximately $19.2 million, or $0.68 per share, which occurred as a consequence of the automatic conversion of the preferred stock into common stock at the close of the Company's recent initial public offering. Although the non-cash dividend had no effect on stockholders' equity, it increased the net loss applicable to the common stockholders and the net loss per share. Since all of the preferred stock automatically converted into common stock at the close of the initial public offering in the third quarter of 2004, no further dividends on the preferred stock will be reflected in future periods. For the third quarter of 2003, the deemed dividend was $0.1 million.

"During the third quarter of 2004 we continued to make clinical and regulatory progress toward our goal of commercializing a differentiated pulmonary insulin system. By approximating the body's natural first-phase insulin release spike, our Technosphere® Insulin System has the potential to offer important clinical advantages over all other diabetes therapies, including those currently on the market or under development," said Hakan Edstrom, President and Chief Operating Officer of MannKind Corporation. "The active treatment portion of a Phase 2b study in the U.S. involving 123 patients with early- to mid-stage type 2 diabetes was recently completed. Top-line results from that study are expected to be released by the end of the year. A 200-patient Phase 2b study underway in Europe continues, with expected completion during the first half of 2005."

Dr. Wendell Cheatham, Corporate Vice President of MannKind Corporation, said that the Company was pleased with the response to the scientific information presented on the Technosphere® Insulin System at the meeting of the European Association for the Study of Diabetes in Munich, Germany and at the SMi Annual Conference on Diabetes in London, UK. "At both meetings, the Company presented data from a Phase 2 study in type 2 diabetes. These patients were treated with either Technosphere® Insulin or subcutaneous insulin for one week before crossing over to the alternate treatment modality, thereby serving as their own control. Even though patients were exposed to virtually identical amounts of insulin in each of the two treatment modalities, the total glucose excursion during the post-meal period was 48% lower when Technosphere® Insulin was used as compared to subcutaneous insulin. These results added further support that the use of Technosphere® Insulin achieves significantly better post-prandial glucose control than subcutaneous insulin," commented Dr. Cheatham.

For the first nine months of 2004, operating expenses totaled $55.5 million, compared with $47.6 million for the first nine months of 2003. R&D expenses were $38.8 million, up $7.2 million, from the prior-year period, again related primarily to the expansion of clinical trials of MannKind's Technosphere® Insulin program. R&D expenses for the nine months of 2004 are offset by a $5.5 million R&D credit exchange recognized under a R&D credit exchange program in the State of Connecticut for qualified research and development expenses. Of this amount, approximately $1.5 million consisted of cash received during the third quarter of 2004. Without this offsetting credit, R&D expenses for the first nine months of 2004 would have been $44.3 million. Year-to-date 2004 G&A expenses were $16.6 million, an increase of $0.7 million from the comparable 2003 period. Included in R&D and G&A expenses for the first nine months of 2004 are non-cash stock-based compensation expenses aggregating $9.4 million, compared with $3.3 million for the first nine months of 2003. For the first nine months of 2004, the net loss was $54.8 million, versus a net loss of $47.3 million for the comparable 2003 period.

Cash, cash equivalents and marketable securities at September 30, 2004 were $108.9 million, which includes net proceeds of approximately $83.6 million upon completion of the Company's initial public offering including approximately $4.0 million from the exercise of the underwriter's over- allotment option. Cash, cash equivalents and marketable securities at December 31, 2003 were $55.9 million.

About MannKind Corporation

MannKind focuses on the discovery, development and commercialization of therapeutic products for diseases including diabetes, cancer, inflammatory and autoimmune diseases. The Company's lead product, the Technosphere® Insulin System, currently is in late Phase II clinical trials for the treatment of diabetes. This therapy consists of a proprietary dry powder Technosphere® formulation of insulin that is inhaled into the deep lung using MannKind's MedTone™ inhaler. Clinical indications show MannKind's proprietary Technosphere® Insulin System's performance characteristics, unique kinetics, convenience and ease of use may have the potential to change the current diabetes treatment paradigm. For more information on MannKind Corporation and its technology, visit www.mannkindcorp.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to our clinical trials and product candidates. Words such as "believes," "anticipates," "plans," "expects," "intend," "will," "goal," "potential" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to the progress, timing and results of clinical trials, intellectual property matters, difficulties or delays in obtaining regulatory approval, manufacturing our lead product candidate, competition from other pharmaceutical or biotechnology companies, our ability to enter into any collaborations or strategic partnerships or obtain additional financing to support our operations and other risks detailed in our filings with the SEC, including our Registration Statement on Form S-1 and our quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and MannKind undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.


                               MannKind Corporation
                      Consolidated Statements of Operations
                                   (Unaudited)

    (In thousands, except
     per share data)         Three Months Ended       Nine Months Ended
                      September 30, September 30, September 30, September 30,
                          2004          2003         2004           2003

    Revenue                  $--           $--          $--           $--

    OPERATING EXPENSES:
    Research and
     development          11,695        10,764       38,805        31,648
    General and
     administrative        8,808         3,261       16,648        15,971
    Total operating
     expenses             20,503        14,025       55,453        47,619
    Loss from
     operations          (20,503)      (14,025)     (55,453)      (47,619)
    Interest income          275           104          496           307
    Other income
     (expense)                40            29          115            (2)
    Loss before
     provision for
     income taxes        (20,188)      (13,892)     (54,842)      (47,314)
    Income taxes               0             0            0             0
    Net loss             (20,188)      (13,892)     (54,842)      (47,314)
    Deemed dividend
     related to
     beneficial
     conversion
     feature of
     convertible
     preferred stock     (19,210)         (143)     (19,822)       (1,017)
    Accretion on
     redeemable
     preferred stock           0           (65)         (60)         (188)
    Net loss applicable
     to common
     stockholders       $(39,398)     $(14,100)    $(74,724)     $(48,519)
    Net loss per share:
    Basic and diluted     $(1.40)       $(0.72)      $(3.29)       $(2.70)
    Shares used to
     compute basic
     and diluted
     net loss per
     share:
    Basic and diluted     28,051        19,697       22,687        17,986


    Condensed balance sheet data
     (in thousands):                 September 30, 2004   December 31, 2003

     Cash, cash equivalents and
      marketable securities               $108,871             $55,945
     Working capital                       105,759              49,097
     Total assets                          181,753             125,876
     Deferred compensation and
      other liabilities                         58                 404
     Series A redeemable convertible
      preferred stock                           --               5,188
     Deficit accumulated during
      the development stage               (421,813)           (366,971)
     Total stockholders' equity            172,555             111,577

SOURCE MannKind Corporation
11/03/2004
CONTACT: Dick Anderson, Chief Financial Officer of MannKind Corporation, +1-661-775-5302, danderson@mannkindcorp.com; or Investor Relations, Ina McGuinness, imcguinness@lhai.com, or Bruce Voss, both of Lippert/Heilshorn & Associates, +1-310-691-7100, for MannKind Corporation
Web site: http://www.mannkindcorp.com