Item 1. Business
Item 1. Business
Unless the context requires otherwise, the words “MannKind,” “we,” “Company,” “us” and “our” refer to MannKind Corporation and its subsidiaries.
We are a biopharmaceutical company focused on the development and commercialization of inhaled therapeutic products for patients with endocrine and orphan lung diseases. Our development team is capable of taking a compound from early formulation feasibility studies to a full commercial-scale manufacturing operation. Our commercial team includes a specialty sales force that calls on endocrinologists and selected primary care physicians as well as supporting functions that are directed to improving market access and delivering patient and physician support programs.
Endocrine diseases
Our lead product is Afrezza (insulin human) Inhalation Powder, which was approved by the U.S. Food and Drug Administration (“FDA”) in June 2014. Afrezza is an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes. According to the Centers for Disease Control and Prevention, 34.2 million people in the United States had diabetes in 2018. Globally, the International Diabetes Federation has estimated that approximately 463 million adults had diabetes in 2019 and approximately 700 million will have diabetes by 2045. Afrezza consists of a dry powder formulation of human insulin delivered from a small portable inhaler. Administered at the beginning of a meal, Afrezza dissolves rapidly upon inhalation to the lung and delivers insulin quickly to the bloodstream. The first measurable effects of Afrezza occur approximately 12 minutes after administration.
In the U.S., we are solely responsible for the commercialization of Afrezza. Outside of the U.S., our strategy has been to establish regional partnerships in foreign jurisdictions where there are commercial opportunities, subject to the receipt of necessary foreign regulatory approvals. Our partner in Brazil, Biomm S.A. (“Biomm”), commenced commercialization of Afrezza in January 2020. Our partners in India and Australia are engaged in activities to prepare for regulatory submissions and have not yet commenced commercialization in their respective territories.
As part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza . We expect to initiate one of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 8-17 year-old children and adolescents, later in 2021, subject to the easing of restrictions due to COVID-19. We are also required to conduct a five-year, randomized, controlled trial in 8,000-10,000 patients with type 2 diabetes to assess the potential risk of pulmonary malignancy with Afrezza use. We have an ongoing dialogue with the FDA regarding the endpoints and goals for this long-term trial and have not yet commenced this trial. In addition to studies sponsored and conducted by us, we expect to participate in collaborative clinical studies of Afrezza that are sponsored and conducted by independent investigators.
In December 2020, we entered into a sales and marketing collaboration agreement with an affiliate of Vertice Pharma, pursuant to which we will co-promote Thyquidity™ (levothyroxine sodium) oral solution through our sales force to adult endocrinologists, pediatric endocrinologists and other U.S. healthcare providers who treat hypothyroidism. Thyquidity is indicated as a replacement therapy in primary (thyroidal), secondary (pituitary), and tertiary (hypothalamic) congenital or acquired hypothyroidism. Under this agreement, Vertice will book all sales of Thyquidity. In consideration of our sales and marketing efforts, Vertice will make a specified quarterly payment to us and will pay us royalties on gross profit resulting from all sales of Thyquidity. We believe that this arrangement with Vertice Pharma will allow us to strengthen our relationships with our current physician customers, expand into pediatric endocrinology and leverage the capabilities of our sales force and reimbursement support systems. We expect to begin promoting Thyquidity in collaboration with Vertice Pharma in the first quarter of 2021.
Orphan Lung Diseases
Afrezza utilizes our proprietary Technosphere formulation technology, which we believe represents a versatile drug delivery platform that may allow the oral inhalation of a wide range of active pharmaceutical ingredients. We have successfully prepared Technosphere formulations of anionic and cationic drugs, hydrophobic and hydrophilic drugs, proteins, peptides and small molecules. Technosphere powders are based on our proprietary excipient, fumaryl diketopiperazine (“FDKP”), which is a pH-sensitive organic molecule that self-assembles into small particles under acidic conditions. Certain drugs can be loaded onto these particles by combining a solution of the drug with a solution or suspension of Technosphere material, which is then dried to powder form. The resulting powder has a consistent and narrow range of particle sizes with good aerodynamic properties that enable efficient delivery deep into the lungs. Technosphere powders dissolve quickly when the particles contact the moist lung surface with its neutral pH, releasing the drug molecules to diffuse across a thin layer of cells into the arterial circulation, bypassing the liver to provide excellent systemic exposure.
We have also created an innovative line of breath-powered, dry powder inhalers. Our inhalers are easy to use, cost-effective and can be produced in both a reusable (chronic treatment) and a single-use (acute treatment) format. Both the reusable and single-use inhaler formats use the same internal air-flow design. Being breath-powered, our inhalers require only the patient’s inhalation effort to deliver the powder. To administer the inhalation powder, a patient loads a cartridge into our inhaler and inhales through the mouthpiece. Upon inhalation, the dry powder is lifted out of the cartridge and broken up (or de-agglomerated) into small particles. The inhalers are engineered to produce an aggressive airstream that de-agglomerates the powder while keeping the powder moving relatively slowly. This slow-moving powder effectively navigates the patient’s airways to reach the deep lung with minimal deposition at the back of the throat. Our inhalers show very little change in performance (i.e., efficient cartridge emptying) over a wide range of inhalation efforts.
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We advanced an inhaled formulation of treprostinil Technosphere ( initially known as “ TreT ”) into clinical development, completing a Phase 1 dose-escalation trial in June 2018. In September 2018, we entered into a license and collaboration agreement with United Therapeutics Corporation (“United Therapeutics” or “UT”), pursuant to which UT became responsible for global development, regulatory and commercial activities with respect to TreT (the “UT License Agreement”) while we retained responsibility for manufacturing clinical and commercial supplies. UT subsequently branded TreT as “Tyvaso DPI” subject to FDA review. In January 2021, UT disclosed that it intends to submit a n ew d rug a pplication ( “ NDA ” ) for Tyvaso DPI to the FDA in April 2021 . This NDA will seek approval for Tyvaso DPI for the indications of pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease . UT has announced that it plans to apply a priority review voucher to the Tyvaso DPI NDA, which w ould provide for an expedited FDA review period . One of our key focuses during 2021 will be to support the NDA submission by UT and to prepare our facility for the potential commercial production of Tyvaso DPI. Under the UT License Agreement, we are entitled to receive a margin on commercial supplies that we manufacture for UT and low double-digit royalties on all net sales of Tyvaso DPI.
In December 2020, we acquired QrumPharma, Inc., a privately held pharmaceutical company developing inhalation treatments for severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease. QrumPharma is now our wholly owned subsidiary. Its lead program (QRM-003) is an inhaled, nebulized formulation of clofazimine, which could potentially provide several clinical advantages over the current solid oral dosage form of this drug, that is currently in preclinical development. The FDA has designated QRM-003 as both an orphan drug and a qualified infectious disease product for the treatment of pulmonary NTM infections. In addition to continuing the development of QRM-003, we intend to evaluate the feasibility of developing a dry-powder formulation of clofazimine using our Technosphere technology.
We have formulated other drugs and biologics for the treatment of orphan lung disease and plan to continue their development as dictated by the results achieved in preclinical studies and by resource requirements. For diseases outside of our areas of focus, our current intention is to seek partnerships to continue the development of our dry-powder formulations. As an example of one such partnership, in January 2016, we entered into a collaboration and license agreement with Receptor Life Sciences (“Receptor”), pursuant to which Receptor assumed responsibility for the development, manufacture and commercialization of inhaled formulations of certain cannabinoid compounds utilizing our technology. We have been informed that Receptor’s most advanced program, a dry-powder Technosphere formulation of cannabidiol, was reviewed with the FDA in a pre-IND meeting and that an investigational new drug (“IND”) submission is planned for 2021.
To aid in the development of our oral inhalation products, we have created a number of innovative tools, including a novel inhalation profiling apparatus, known as BluHale that uses miniature sensors to assess the drug delivery process at the level of an individual inhaler. The BluHale apparatus provides real-time data regarding patient usage and delivery system performance that is transmitted to a user interface, such as a smartphone application. During 2020, we released a BluHale Professional version of the apparatus for use as a training tool in certain physician’s offices. New versions of the apparatus, with additional features, are in development.
Manufacturing and Supply
We use our Danbury, Connecticut facility to formulate both the Afrezza and Tyvaso DPI inhalation powders, fill plastic cartridges with the powders, package the cartridges in blister packs, and place the blister packs into foil pouches. We utilize a contract packager to assemble the final kits of Afrezza foil-pouched blister packs along with inhalers and the package inserts. The final responsibility for Tyvaso DPI packaging has not yet been determined.
The quality management systems of our Connecticut facility have been certified to be in conformance with the ISO 13485:2016 standard. Our facility is inspected on a regular basis by the FDA, most recently in June 2018. We were also inspected by ANVISA (Brazil National Health Surveillance Agency) in May 2018. Neither of the regulatory inspections in 2018 gave rise to any inspectional observations (known as “483s” in the United States). ANVISA renewed its certificate in 2020 on the basis of a virtual inspection. The FDA and other foreign jurisdictions are expected to conduct additional inspections of our facility from time to time.
We believe that our Connecticut facility has enough capacity to satisfy the current demand for Afrezza and Tyvaso DPI. In addition, the facility includes expansion space to accommodate additional filling lines and other equipment, allowing production capacity to be increased based on the reasonably foreseeable demand for Afrezza, Tyvaso DPI and other potential products over the next several years.
Currently, the only source of insulin that we have qualified for Afrezza is manufactured by Amphastar France Pharmaceuticals S.A.S. (“Amphastar”). In April 2014, we entered into a supply agreement with Amphastar (as amended, the “Insulin Supply Agreement”) to purchase certain annual minimum quantities with an aggregate purchase commitment of €120.1 million over a term that currently extends through December 31, 2026. As of December 31, 2020, there was €77.9 million remaining in aggregate purchase commitments under this agreement. See additional information in Note 13 – Commitments and Contingencies to the consolidated financial statements for further information related to the Insulin Supply Agreement.
The treprostinil used to produce Tyvaso DPI is supplied to us by our partner, United Therapeutics.
Currently, we purchase FDKP, the primary component of our Technosphere powders, from a major chemical manufacturer with facilities in Europe and North America.
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We have a supply agreement with the contract manufacturer that produces the plastic-molded parts for our inhaler and the corresponding cartridges. We expect to be able to qualify an additional vendor of plastic-molding contract manufacturing services, if warranted by demand. We assemble the inhalers at our Connecticut facility.
We also have an agreement with the contractor that performs the final packaging of Afrezza overwraps, inhalers and printed material into patient kits. We expect to be able to qualify an additional vendor of packaging services, if warranted by demand.
Intellectual Property
Our success will depend in large measure on our ability to continue enforcing our intellectual property rights, effectively maintain our trade secrets and avoid infringing the proprietary rights of third parties. Our policy is to file patent applications on what we deem to be important technological developments that might relate to our product candidates or methods of using our product candidates and to seek intellectual property protection for all inventions in the United States, Europe, Japan and, depending on the nature of the invention, selected other jurisdictions. We have obtained, are seeking, and will continue to seek patent protection on the compositions of matter, methods of treatment and manufacturing processes flowing from our research and development efforts.
Our Technosphere drug delivery platform, including Afrezza, enjoys patent protection relating to the powder, its manufacture, its use for pulmonary delivery of drugs as well as protection related to our inhalers and associated cartridges. We have additional patent coverage relating to methods for the treatment of diabetes using Afrezza. Overall, Afrezza is protected by approximately 630 issued patents in the United States and selected jurisdictions around the world, the longest-lived of which will expire in 2032. We also have over 110 applications pending that may provide additional protection for Afrezza if and when they are allowed. Similarly, Tyvaso DPI is protected by approximately 330 issued patents in the United States and elsewhere and an additional 60 pending applications. The longest-lived patent protection for Tyvaso DPI will expire in 2035. Our entire portfolio consists of approximately 1,050 issued patents and approximately 215 patent applications that provide protection for our drug delivery platform, Technosphere-based products, our BluHale inhalation-profiling apparatus and various development tools. We expect to file further patent applications as our research and development efforts continue.
The field of pulmonary drug delivery is crowded and a substantial number of patents have been issued in these fields. In addition, because patent positions can be highly uncertain and frequently involve complex legal and factual questions, the breadth of claims obtained in any application or the enforceability of issued patents cannot be confidently predicted. Further, there can be substantial delays in commercializing pharmaceutical products, which can partially consume the statutory period of exclusivity through patents. For some of our inventions, particularly manufacturing processes and improvements, we have chosen to rely on trade secrets and know-how, which are not protected by patents, to maintain our competitive position.
We use trademarks and service marks to protect our corporate brand as well as the branding associated with Afrezza, our Technosphere formulation technology, our device platform and the product support programs that we have developed. Our current portfolio consists of 136 registered trademarks and 65 applications in the U.S. and selected foreign jurisdictions. We routinely monitor competing trademarks and, when necessary, oppose marks that we believe would be confusing to consumers. We also enforce against the unauthorized use or misappropriation of our marks.
Competition
The pharmaceutical and biotechnology industries are highly competitive and characterized by rapidly evolving technology and intense research and development efforts. We compete with companies, including major global pharmaceutical companies, and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products. We face competition based on, among other things, product efficacy and safety, the timing and scope of regulatory approvals, product ease of use and price.
Diabetes Treatments
We believe that Afrezza has important competitive advantages in the delivery of insulin when compared with currently known alternatives. However, new drugs or further developments in alternative drug delivery methods may provide greater therapeutic benefits, or comparable benefits at a lower cost, than Afrezza. There can be no assurance that existing or new competitors will not introduce products or processes competitive with or superior to our product candidates.
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Currently, we believe that Afrezza has a unique “ultra rapid-acting” pharmacokinetic profile, i.e., entering the bloodstream in less than one minute, with the first measurable effects occurring approximately 12 minutes after administration, and peak glucose-lowering effects within 35 or 45 minutes after administration of a 4 or 12 unit dose, respectively. There are several formulations of “rapid-acting” insulin analogs that reach their maximum glucose-lowering effect within one to three hours after injection. The principal products in this category are insulin lispro, which is marketed by Eli Lilly & Company as Humalog® and by Sanofi S.A. as Admelog®; insulin aspart, which is marketed by Novo Nordisk A/S as Novolog® ; and insulin glulisine, which is marketed by Sanofi S.A. as Apidra®. New formulations of two of these products – Fiasp®, a version of insulin aspart from Novo Nordisk, and Lyumjev™, a version of insulin lispro from Eli Lilly & Company – have been positioned by their manufacturers as fast(er) insulins. According to prescribing information, these products have their first measurable effects within 17-30 minutes after administration and reach peak glucose-lowering effects after 90-120 minutes.
Inhaled Drug Delivery Systems
Our drug delivery platform competes with other inhaled delivery systems, including AER-901 being developed by Aerami Therapeutics. AER-901 is a formulation of imatinib, administered with a small handheld electronic inhaler that is being developed for the treatment of pulmonary arterial hypertension.
Government Regulation
The FDA and comparable regulatory agencies in state and local jurisdictions impose substantial requirements upon the clinical development, manufacture and marketing of medical devices and new drug and biologic products. These agencies, through regulations that implement the Federal Food, Drug and Cosmetic Act, as amended (“FDCA”), and other regulations, regulate research and development activities and the development, testing, manufacture, labeling, storage, shipping, approval, recordkeeping, advertising, promotion, sale and distribution of such products. In addition, to the extent that our products are marketed abroad, they are also subject to export requirements and to regulation by foreign governments. The regulatory approval process is generally lengthy, expensive and uncertain. Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on us, including warning letters, hold letters on clinical research, product recalls or seizures, total or partial suspension of production or injunctions, refusals to permit products to be imported into or exported out of the United States, refusals of the FDA to grant approval of drugs or to allow us to enter into government supply contracts, withdrawals of previously approved marketing applications, civil or criminal fines or other penalties.
With an approved product such as Afrezza, we are subject to continuing regulation by the FDA, including post marketing study commitments or requirements, record-keeping requirements, reporting of adverse experiences with the product, submitting periodic reports, drug sampling and distribution requirements, notifying the FDA and gaining its approval of certain manufacturing or labeling changes, and complying with certain electronic records and signature requirements. All manufacturing sites are subject to inspection by the FDA and other national regulatory bodies and must comply with current good manufacturing practices (“cGMPs”), quality system regulations for medical devices (“QSR”) and other requirements enforced by these regulatory bodies. As a result, our drug-manufacturing facility in Connecticut is subject to federal registration and listing requirements and, if applicable, to state licensing requirements and so too are the facilities of our insulin supplier and the supplier(s) of FDKP. Likewise, the supplier of our inhaler and cartridges is subject to QSR, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process of medical devices, among other requirements. A failure, including those of our suppliers, to obtain and maintain applicable federal registrations or state licenses, or to meet the inspection criteria of the FDA or the other national regulatory bodies, would disrupt our manufacturing processes and would harm our business. In complying with standards set forth in these regulations, manufacturers must continue to expend time, money and effort in the area of production and quality control to ensure full compliance. In addition, the FDA imposes a number of complex regulations on entities that advertise and promote drugs, which include, among other requirements, standards for and regulation of direct-to-consumer advertising, industry sponsored scientific and educational activities, and promotional activities involving the Internet, and restrictions on off-label promotion. The FDA has very broad enforcement authority under the FDCA, and failure to comply with these regulations can result in penalties, including the issuance of a warning letter requirements for corrective advertising to healthcare providers, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.
Products manufactured in the United States and marketed outside the United States are subject to certain FDA regulations, as well as regulation by the country in which the products are to be sold. We are also subject to foreign regulatory requirements governing clinical trials and drug product sales if products are studied or marketed abroad. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries usually must be obtained prior to the marketing of the product in those countries. The approval process varies from jurisdiction to jurisdiction and the time required may be longer or shorter than that required for FDA approval.
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Pricing and Reimbursement
Government coverage and reimbursement policies both directly and indirectly affect our ability to successfully commercialize our approved products, and such coverage and reimbursement policies will be affected by future healthcare reform measures. Third-party payers, like government health administration authorities, private health insurers and other organizations that provide healthcare coverage, generally decide which drugs they will pay for and establish reimbursement levels for covered drugs. In particular, in the United States, private third-party payers often provide reimbursement for products and services based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such products and services. In the United States, the European Union and other potentially significant markets for our product candidates, government authorities and other third-party payers are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Further, the increased emphasis on managed healthcare in the United States will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. Recently, in the United States there has been heightened governmental scrutiny of the manner in which drug manufacturers set prices for their marketed products. Pricing pressures can arise from rules and practices of managed care organizations, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, healthcare reform, pharmaceutical reimbursement policies and pricing in general.
The United States and some foreign jurisdictions have enacted or are considering a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payers in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives, including, most recently, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, “PPACA”), enacted in March 2010.
The PPACA substantially changed the way healthcare is financed by both governmental and private insurers. Among other cost containment measures, PPACA established: an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents; a new Medicare Part D coverage gap discount program; and a new formula that increased the rebates a manufacturer must pay under the Medicaid Drug Rebate Program. There have been judicial and congressional challenges to certain aspects of PPACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. President Trump signed Executive Orders and other directives designed to eliminate the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. Congress has considered legislation that would repeal portions or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act of 2017 (“Tax Act”), includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the PPACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, CMS published a new final rule permitting further collections and payments to and from certain PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. In December 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, in December 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. The U.S. Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the U.S. Supreme Court has not yet ruled on the constitutionality of the PPACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the PPACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA. It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the PPACA and our business.
Other legislative changes have been proposed and adopted in the United States since PPACA. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, following passage of the BBA, remained in effect through 2020 unless additional Congressional action is taken. However, COVID-19 relief support legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2021. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers. In the future, there are likely to be additional proposals relating to the reform of the U.S. health care system, some of which could further limit the prices we are able to charge for our products, or the amounts of reimbursement available for our products. If drug products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.
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Moreover, in the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, at the federal level, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contain ed proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. In addition, the Trump administration’s budget proposal for fiscal year 2021 included a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Further, on March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. On July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of this rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation . The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. However, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Further, it is possible that additional government action will be taken in response to the COVID-19 pandemic.
Health Care Fraud and Abuse and Transparency Laws
If a drug product is reimbursed by Medicare, Medicaid or other federal or state healthcare programs, we must comply with, among others, the federal civil and criminal false claims laws, including the civil False Claims Act, as amended, the federal Anti-Kickback Statute, as amended, and similar state laws. Similarly, if a drug product is reimbursed by Medicare or Medicaid, pricing and rebate programs must comply with, as applicable, the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, and the Medicare Prescription Drug Improvement and Modernization Act of 2003.
The federal healthcare Anti-Kickback Statute prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid.
In addition, federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalty laws impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services.
The Physician Payments Sunshine Act within PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to (i) report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and (ii) report annually certain ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year.
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M any states have similar healthcare statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, that apply regardless of the payer. Additional state laws require pharmaceutical companies to implement a comprehensive compliance program, comply with industry’s compliance guidelines and relevant compliance guidance promulgated by the federal government and register pharmaceutical sales representatives and limit expenditure for, or payments to, individual medical or health professionals. In addition, certain state and local laws require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual physicians in the states; register pharmaceutical sales representatives, and report pricing with respect to certain drug products.
Privacy
We are subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology and Clinical Health Act (“HITECH”), and their respective implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates” — independent contractors or agents of covered entities, which include certain healthcare providers, health plans, and healthcare clearinghouses, that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions. State laws also govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. The recently adopted European General Data Protection Regulation, or GDPR, contains new provisions specifically directed at the processing of health information, higher sanctions and extra-territoriality measures that are intended to bring non-EU companies under the data security and privacy legal framework specified in the regulation. We anticipate that over time we may expand our business operations to include operations in the EU, including potentially conducting preclinical and clinical trials. With such expansion, we would be subject to increased governmental regulation in the EU countries in which we might operate, including the GDPR.
Effective January 1, 2020, the California Consumer Privacy Act (“CCPA”) created individual privacy rights for California consumers (as that word is broadly defined in the law) and placed increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for a new cause of action for data breaches. The CCPA will likely impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information.
Other regulation
In addition to the foregoing, we are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and disposal of hazardous or potentially hazardous substances, controlled drug substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control.
We may incur significant costs to comply with these laws and regulations now or in the future. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including significant criminal, civil and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion from government healthcare programs, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Ethical Business Practices and Sustainability
Ethical Marketing
We require that our employees abide by our Code of Business Conduct and Ethics, our policy on interactions with healthcare professionals and patients, U.S. federal and state laws and applicable foreign laws. We are committed to protecting the health and well-being of patients by ensuring that medically sound knowledge of the benefits and risks of our products is understood and communicated thoroughly and accurately to patients, physicians and global health authorities.
Our policy on interactions with healthcare professionals and patients prohibits off-label promotion of our products. All sales staff received compliance training upon hire and on an annual basis. We also routinely monitor sales calls. Any case where we promote off-label use of our products has the potential to have a material adverse effect on our reputation, sales and liabilities. We expect that consistent enforcement of, and training on, our Code of Business Conduct and Ethics and our policy on interactions with healthcare professionals and patients will help us to limit the incidence of off-label promotion.
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Drug Safety
The safety of our products at all stages – from clinical trials to the administration and use and through to safe disposal – is a key area of attention for us. We acknowledge, however, that there are inherent risks associated with the use of drug products. We attempt to minimize these through stringent adherence to quality control procedures and proactive recall processes whenever a safety concern is identified. To date, we have not issued a recall for any product.
In addition, all sales packs of Afrezza that are placed in the distribution chain are serialized in accordance with the requirements of the Drug Quality and Security Act, which requires drug manufacturers to assign a unique identifier to each sales pack (and each aggregate of such sales pack, such as a case or pallet). These identifiers remain on such pack or aggregate through the whole supply chain until its consumption or destruction. This system is intended to improve detection and removal of drugs that may be counterfeit, stolen, contaminated, or otherwise harmful from the drug supply chain.
Safety of Clinical Trial Participants
When we are actively conducting clinical trials, the safety of our clinical trials plays a crucial role in the development of new products and our continuing prosperity. We take numerous steps to maximize the safety of our clinical trial participants.
The health of subjects in clinical trials is a priority for us and we are committed to conducting clinical trials according to uniformly high ethical standards. We apply those standards to trials that we sponsor and conduct directly as well as those conducted on our behalf by clinical research organizations. We conduct trials in accordance with all applicable laws, the standards of International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) Guidelines and following the ethical principles that have their origin in the Declaration of Helsinki.
We require that a three-stage informed consent process be implemented in all trials to ensure that participants understand the risks and benefits of the procedures, how personal medical data is collected and used, and that participation in the trial is voluntary, among other information. We retain documentation that all participants in our trials have provided informed consent.
We monitor clinical trials through audits and inspections conducted by us and by third parties. These inspections verify that our policies, good clinical practices and applicable laws are being adhered to.
Our ability to ensure the safety of clinical trial participants is critical to securing regulatory approval and continued product development success. Moreover, our inability to conduct safe and effective clinical trials could increase our development costs over time. We will continue to hold ourselves to high standards in our oversight and management of clinical trials.
Corruption and Bribery
Our Code of Business Conduct and Ethics includes clear guidelines on anti-bribery and anti-corruption practices. In addition, we have adopted an anti-corruption policy. Currently, we have very limited operations outside the United States; however, as we expand our global reach through collaborations or through our own growth, we acknowledge that certain regions may pose a higher risk for corrupt practices. We intend to continue our internal training programs and oversight over collaborators on anti-bribery, anti-corruption and other unethical practices in order to reduce these risks.
Bribing healthcare professionals to use or recommend our products can create adverse publicity and damage our ability to use a critical channel of influence. We have adopted and implemented PhRMA’s Code on Interactions with Healthcare Professionals as part of our policy on interactions with healthcare professionals and patients. We believe that training on, and enforcement of, these codes will limit the incidence of unethical interactions between our personnel and healthcare professionals.
Long-Lived Assets
Our long-lived assets are located in the United States and totaled $25.9 million and $26.8 million as of December 31, 2020 and 2019, respectively.
Employees
Our human capital helps us develop and commercialize new products, conduct clinical trials and navigate government regulations. Our ability to recruit, develop and retain highly skilled talent is a significant determinant of our success. Our Code of Business Conduct and Ethics codifies our commitment to diversity and to providing equal opportunity and a positive working environment in all aspects of employment. We also have policies setting forth our expectations for nondiscrimination and a harassment-free work environment.
As of December 31, 2020, we had 241 total employees, of which 240 were full-time. Of our full-time employees, 76 were engaged in manufacturing, 16 in research and development, 38 in general and administrative and 110 in selling and marketing. Thirteen of these employees had a Ph.D. degree and/or M.D. degree and were engaged in activities relating to research and development, manufacturing, quality assurance or business development.
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None of our employees are subject to a collective bargaining agreement. We believe relations with our employees are good. In managing our business, we monitor several human capital measures, including:
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performance against a set of specified corporate objectives for each calendar year, some of which are milestone-based, such as achieving deliverables under our collaboration agreements, and some of which are quantitative, such as achieving target net sales of Afrezza. These objectives are intended to stretch employees and serve as development opportunities but also form the basis for our incentive compensation programs.
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churn rate – the number of new hires and terminations each month as a percentage of the employee base – as well as the number of regrettable losses. These metrics help us to identify areas within the company where there may be a need for greater management attention and intervention.
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responses to periodic employee surveys, which are designed to give us insight into employees’ perception of company culture and areas where management’s efforts are perceived positively or negatively as well as open-ended feedback in the form of anonymous comments and questions.
We offer our employees a portfolio of rewards (our “Total Rewards Program”) to recruit and retain a high level of talent across the Company. Our Total Rewards program is offered to each employee and currently consists of the seven offerings:
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Base salary – We offer a market-competitive base salary.
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Annual bonus program – We offer quarterly sales incentive bonuses to our sales force and annual bonuses to the remainder of our employees.
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Annual equity program – we offer a new hire and annual equity awards that consist of time- and, in some cases, performance-based restricted stock units and non-qualified stock options.
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Health and wellness program – A variety of insurance plans that allow employees to select among different options, including a health maintenance organization, a preferred provider organization and a high-deductible health plan, as well as flexible spending and health savings accounts.
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Paid time off program – In addition to the paid time off that is accrued throughout the year, we offer paid holidays, including two week-long company shutdowns in July and December.
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Retirement savings program – A 401(k) retirement plan pursuant to which we match 50% of employee contributions up to a specified limit on their annual eligible earnings.
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Employee stock purchase plan (“ESPP”) program – The ESPP provides the opportunity to purchase shares of our common stock through payroll deductions every six months at a 15% discount to the market price at the beginning or end of each offering period, whichever is lower.
Occupational Health and Safety
Hazardous materials are inherent in our operations, and it is not possible to eliminate completely the risk of accidental exposure from our operations. We have established procedures to comply with governmental regulations regarding workplace safety, including training employees to enable them to recognize risks and empower them to learn, discover, work safely, and to minimize injuries, illnesses, environmental impact and regulatory risks. In 2020, our total illness and injury incidence rate was 2.9 per 100 employees compared to the 2019 industry average of 1.6, as reported by the U.S. Department of Labor, and our DART (days away/restricted or job transfer) incident rate was 0.0 per 100 employees compared to the 2019 industry average of 1.0. We will continue our efforts to ensure a high level of workplace safety.
Corporate Information
We were incorporated in the State of Delaware on February 14, 1991. Our principal executive offices are located at 30930 Russell Ranch Road, Suite 300, Westlake Village, California 91362, and our telephone number at that address is (818) 661-5000. MannKind Corporation and the MannKind Corporation logo are our service marks and trademarks. Our website address is http://www.mannkindcorp.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The contents of our websites are not incorporated into this Annual Report. Further, our references to the URLs for these websites are intended to be inactive textual reference only.
Scientific Advisors
We seek advice from a number of leading scientists and physicians on scientific, technical and medical matters. These advisors are leading scientists in endocrinology, pulmonology and other areas of scientific or clinical interest. Our scientific advisors are consulted regularly to assess, among other things:
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our research and development programs;
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the design and implementation of our clinical programs;
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our patent and publication strategies;
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market opportunities from a clinical perspective;
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new technologies relevant to our research and development programs; and
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specific scientific and technical issues relevant to our business.
A partial listing of our current scientific advisors is maintained on our corporate website at www.mannkindcorp.com .
Information about our Executive Officers
The following table sets forth our current executive officers and their ages:
Name
Age
Position(s)
Michael E. Castagna, Pharm.D.
44
Chief Executive Officer
Steven B. Binder
58
Chief Financial Officer
Alejandro Galindo
49
Chief Commercial Officer
Joseph Kocinsky
57
Chief Technology Officer
Stuart A. Tross, Ph.D.
54
Chief People and Workplace Officer
David B. Thomson, Ph.D., J.D.
54
General Counsel and Secretary
Michael E. Castagna, Pharm.D. has been our Chief Executive Officer since May 2017 and was our Chief Commercial Officer from March 2016 until May 2017. From November 2012 until he joined us, Dr. Castagna was at Amgen, Inc., where he initially served as Vice President, Global Lifecycle Management and was most recently Vice President, Global Commercial Lead for Amgen’s Biosimilar Business Unit. From 2010 to 2012, he was Executive Director, Immunology, at Bristol-Myers Squibb Company (“BMS”), an innovative global biopharmaceutical company. Before BMS, Dr. Castagna served as Vice President & Head, Biopharmaceuticals, North America, at Sandoz, a division of Novartis. He has also held positions with commercial responsibilities at EMD (Merck) Serono, Pharmasset and DuPont Pharmaceuticals. He received his pharmacy degree from the University of the Sciences-Philadelphia College of Pharmacy, a Pharma D. from Massachusetts College of Pharmacy & Sciences and an MBA from The Wharton School of Business at the University of Pennsylvania.
Steven B. Binder has been our Chief Financial Officer since July 2017. Before joining us, since 2013 Mr. Binder served as Vice President and Chief Financial Officer of the International Group of Stryker Corporation, a leading global medical technology company, based in Singapore. Prior to Stryker, Mr. Binder served in a series of senior leadership roles at BMS. His last four positions at BMS were Vice President, Finance roles over different geographic operating units: United States (2012-2013), Europe (2008-2011), AsiaPacific (2005-2007), and Japan (2003-2005). Prior to his international experience, Mr. Binder served in three senior leadership roles for Oncology Therapeutics Network, a U.S. based independent subsidiary of BMS: Vice President, Strategic Development (2001-2003), Vice President, Customer Operations (2000-2001), and Chief Financial Officer (1997-2000). Before Oncology Therapeutics Network, Mr. Binder progressed through three finance and accounting roles for BMS Worldwide Medicines Group after joining the company in 1992. Before BMS, he worked for Deloitte & Touche LLP in a series of auditing roles with increasing responsibility over an eight year period beginning in 1984. Mr. Binder received a B.S. degree in Accounting and Business Administration from Muhlenberg College and is a Certified Public Accountant.
Alejandro Galindo has been our Chief Commercial Officer since August 2020. Before joining us, he served as Vice President and President of the Advanced Insulin Management Business Unit at Medtronic from 2014 to 2020. Prior to Medtronic, Mr. Galindo spent nine years at General Electric (GE) Healthcare in a variety of leadership roles, leading emerging markets, strategic corporate development and global supply chain operations. Prior to joining GE’s Healthcare division, he spent eleven years in various global leadership positions for the company’s energy and appliance sectors, overseeing advanced manufacturing engineering and product development. Mr. Galindo received a B.Sc. in Industrial & Systems Engineering from Monterrey Institute of Technology, Mexico and M.B.A. and M.S. degrees from Indiana University.
Joseph Kocinsky has been our Chief Technology Officer since October 2015. Mr. Kocinsky has over 30 years of experience in the pharmaceutical industry in technical operations and product development. Prior to joining us in 2003, he held a variety of technical and management positions with increased responsibility at Schering-Plough Corp. Mr. Kocinsky holds a bachelor’s degree in chemical engineering and a master’s degree in Biomedical Engineering from New Jersey Institute of Technology and a master’s degree in Business Administration from Seton Hall University.
Stuart A. Tross, Ph.D. has been our Chief People and Workplace Officer since December 2016, with responsibilities for human resources, information technology, corporate communications and west coast facilities. From 2006 to 2016 he served in various roles of increasing responsibility at Amgen, Inc., most recently as Senior Vice President and Chief Human Resources Officer responsible for human resources and security on a global basis. From 1998 to 2006 he served in a series of leadership roles at BMS, most recently as Vice President and Global Head of Human Resources for Mead Johnson Company. Mr. Tross received a B.S. degree from Cornell University and M.Sc. and Ph.D. degrees in Industrial-Organizational Psychology from the Georgia Institute of Technology.
David B. Thomson, Ph.D., J.D. has been our General Counsel and Corporate Secretary since January 2002. Prior to joining us, he practiced corporate/commercial and securities law at a major Toronto law firm. Earlier in his career, Dr. Thomson was a post-doctoral fellow at the Rockefeller University. Dr. Thomson obtained his B.S degree, M Sc. degree and Ph.D. from Queens University and obtained his J.D. from the University of Toronto.
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