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 innovative therapeutic products and devices to address serious unmet medical needs for those living with endocrine and orphan lung diseases. Our signature technologies – Technosphere dry-powder formulations and Dreamboat inhalation devices – offer rapid and convenient delivery of medicines to the deep lung where they can exert an effect locally or enter the systemic circulation.
In our endocrine business unit, we currently commercialize two products: Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, and the V-Go wearable insulin delivery device, which provides continuous subcutaneous infusion of insulin in adults that require insulin. Afrezza was developed by us and received approval from the U.S. Food and Drug Administration (“FDA”) in June 2014. 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. V-Go received 510(k) clearance by the FDA in 2010 and has been available commercially since 2012. In May 2022, we acquired V-Go from Zealand Pharma A/S and Zealand Pharma US, Inc. (together “Zealand”) and began integrating the product into our endocrine business unit. V-Go is a mechanical basal-bolus insulin delivery system that is worn like a patch and can eliminate the need for taking multiple daily shots. V-Go administers a continuous preset basal rate of insulin over 24 hours and provides discreet on-demand bolus dosing at mealtimes.
We are solely responsible for the commercialization of Afrezza and V-Go in the United States. 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 partner in India, Cipla Ltd. (“Cipla”), is currently conducting a clinical study of Afrezza in order to meet the requirements for a regulatory submission to the Drug Controller General of India.
The proprietary formulation and inhaler technologies used in Afrezza have also been deployed in our efforts to develop products to treat orphan lung diseases. The first product to come out of our orphan lung disease pipeline, Tyvaso DPI (treprostinil) inhalation powder, received FDA approval in May 2022 for the treatment of pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). Tyvaso DPI is the first and only approved dry powder inhaled treatment for PAH and PH-ILD. Our collaboration partner, United Therapeutics Corporation (“United Therapeutics” or “UT”) began commercializing Tyvaso DPI in June 2022. UT pays us a royalty on net sales of Tyvaso DPI as well as a margin on supplies of Tyvaso DPI that we manufacture for UT.
The next most advanced program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease. We believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form of this drug. The FDA has designated MNKD-101 as both an orphan drug and a qualified infectious disease product for the treatment of pulmonary NTM infections. We recently completed an initial clinical study of MNKD 101 in Australia and we plan to initiate a Phase 2/3 clinical study in the United States in 2023. In connection with the development of MNKD-101, we are also evaluating the feasibility of developing a dry-powder formulation of clofazimine using our Technosphere formulation 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. We have also partnered with several third parties that have proprietary rights to certain compounds in order to evaluate the feasibility of developing dry-powder formulations of such compounds. We may seek to convert certain of these exploratory programs into full development programs funded by the external parties.
To aid in the development of 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 medical device 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. A consumer version of the apparatus, with additional features, is planned for release in 2023.
Manufacturing and Supply
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. In our Danbury, Connecticut facility, we can develop novel Technosphere formulations of different pharmaceutical ingredients and manufacture clinical and commercial supplies of
6
these powders. In this facility, we currently formulate both the Afrezza and T yvaso DPI inhalation powders at commercial scale , fill plastic cartridges with the powders and package the cartridges in to blister packs. We utilize a contract packager to assemble the blister packs of Afrezza and Tyvaso DPI cartridges along with inhalers and the applicable package inserts , into final kits for sale .
Our Technosphere powders are intended to be administered with our innovative, 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. Afrezza and Tyvaso DPI both use the reusable format (also known as Dreamboat). Being breath-powered, our inhalers require only the patient’s inhalation effort to deliver the powder. To administer a dose of 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. 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 then assemble the inhalers from the individual components at our Connecticut facility.
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 July 2021 when the FDA conducted a pre-approval inspection related to Tyvaso DPI and a GMP inspection related to Afrezza. The FDA made one observation during its most recent inspection, which we corrected and addressed with the FDA following the site visit. We were also inspected by the Agência Nacional de Vigilância Sanitária (“ANVISA”) (Brazil National Health Surveillance Agency) in May 2018. 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, we are currently expanding production capacity with additional filling lines and other equipment in order to meet the demand for Tyvaso DPI projected by UT over the next several years. The costs of this expansion project are being borne by UT.
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, 2027. As of December 31, 2022, there was $72.3 million remaining in aggregate purchase commitments under this agreement. See additional information in Note 16 – 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 at no cost by 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.
We also have an agreement with the contractor that performs the final packaging of Afrezza and Tyvaso DPI 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.
V-Go is manufactured for us by a contract manufacturer (“CMO”) in Southern China using MannKind-owned, custom-designed, semi-automated manufacturing equipment and production lines that can be brought online and/or staffed up as demand increases. We believe these production lines will have the ability to meet our current and expected near-term demand for V-Go. Additional CMOs in China perform release testing, sterilization, inspection and packaging functions.
V-Go is assembled from components that are manufactured to our specifications. Each completed device is tested to ensure compliance with our engineering and quality assurance specifications. A series of automated inspection checks, including x-ray assessments and lot-released testing, are also conducted throughout the manufacturing process to verify proper assembly and functionality. When mechanical components are sourced from outside vendors, those vendors must meet our detailed qualification and process control requirements. We maintain a team of product and process engineers, supply chain and quality personnel who provide product and production line support for V-Go. We also employ a full-time dedicated contractor based in China.
Some of the parts and components of V-Go are purchased from sole-source vendors, and we manage any single-source components and suppliers through our global supply chain operation. We believe that, if necessary, alternative sources of supply would, in most cases, be available in a relatively short period of time and on commercially reasonable terms.
The BluHale device is assembled for us by a CMO using components that are sourced from multiple vendors. Similarly, the clofazimine inhalation solution being evaluated in the MNKD-101 program is manufactured for us by a CMO.
In general, our suppliers and contract manufacturers are sophisticated and mature organizations, often with multinational operations, that have significant experience with pharmaceutical and medical device manufacturing. Our quality and manufacturing personnel conduct
7
extensive inspections to qualify new vendors and periodic GMP audits of their operations on an ongoing basis. O ur CMO facilities and the facilities of our critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign agencies. With the expansion of our supply chain into the electronic components that are required for BluHale devices, we have begun to require our vendors to confirm that conflict minerals are not knowingly or intentionally added during the manufacturing process for, or are unnecessary to the functionality or production of, the components that we source from such vendors.
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 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 670 issued patents and 55 pending patent applications in the United States and selected jurisdictions around the world, the longest-lived of which will expire in 2032. Similarly, Tyvaso DPI is protected by approximately 450 issued patents in the United States and elsewhere and an additional 40 pending patent applications. The longest-lived patent protection for Tyvaso DPI will expire in 2035. Various features of the commercial V-Go device are protected by a portfolio of approximately 200 issued patents and another 25 pending patent applications, the longest-lived of which will expire in 2033. Additional patents and patent applications are expected to provide protection for MNKD-101, our BluHale inhalation-profiling apparatus and various development tools. Our entire worldwide portfolio consists of approximately 1,350 issued patents and approximately 215 pending patent applications We expect to file further patent applications as our research and development efforts continue.
Drug delivery is a crowded field and a substantial number of patents have been issued to innovators in this space. 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, V-Go, our Technosphere formulation technology, our device platform and the product support programs that we have developed. Our current portfolio consists of approximately 240 registered trademarks and 55 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.
Afrezza is administered at the beginning of a meal, so its principal competitors are rapid-acting” insulin analogs that are used for mealtime insulin injections. The products in this category are marketed by Eli Lilly and Company, Sanofi S.A. and Novo Nordisk A/S. V-Go is typically used by patients as part of a basal-bolus insulin regimen. Like Afrezza, it competes with injectable mealtime insulin products but also with long-acting, or basal, injectable insulins. The principal products in this category are marketed by Novo Nordisk and Sanofi.
Both Afrezza and V-Go also face some competition from glucagon-like peptide-1, or GLP-1, analog injection products. These products are often used in combination with oral medications or basal insulin injection before a patient progresses to a basal-bolus insulin regimen. As a result, we also compete with the manufacturers of GLP-1 analog injection products, such as AstraZeneca PLC, Novo Nordisk A/S and Eli Lilly and Company.
Government Regulation
The FDA and comparable regulatory agencies in state and local jurisdictions impose substantial requirements upon the research, clinical development, testing, manufacture, labeling, storage, shipping, approval, recordkeeping, advertising, promotion, sale and distribution of medical devices and new drug and biologic 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.
8
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.
As the holder of marketing approvals for Afrezza and V-Go, we are subject to continuing regulation by the FDA, including post marketing study commitments or requirements, record-keeping requirements, reporting of adverse experiences with our products, 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. For example, as part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza in pediatric patients . In 2021, we initiated a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in combination with basal insulin versus multiple daily injections of insulin in children and adolescents aged 4-17 who are living with type 1 or type 2 diabetes. This study, known as the INHALE-1 study, is expected to complete enrollment by the end of 2023. When Afrezza was approved, the FDA also required us to conduct an additional long-term safety study that was originally intended to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group. We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design to address any concerns.
As a manufacturer of multiple therapeutic products, including Tyvaso DPI, our Connecticut facility is subject to federal registration and listing requirements and, if applicable, to state licensing requirements. It is also 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. So too are the facilities of our insulin supplier and the supplier(s) of FDKP. Likewise, the supplier of our inhaler and cartridges and the CMOs for V-Go are 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 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, promotional activities involving the Internet, and restrictions on off-label promotion. The FDA has very broad enforcement authority, 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.
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, such as 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.
9
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 the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, “PPACA”), which was enacted in March 2010. In the years since the PPACA was enacted, t here have been a number of executive, judicial and congressional challenges to certain aspects of PPACA . While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain provisions of the PPACA have been signed into law. For example, l egislation 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”. Subsequently , a Texas U.S. District Court Judge ruled in December 2018 that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Ultimately, in June 2021 the Supreme Court dismissed this challenge to the constitutionality of the PPACA, so it remains in effect in its current form. However, i n 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.
Moreover, in the United States, there have been several presidential executive orders, 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, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. More recently, the Inflation Reduction Act (the “IRA”), which was signed into law in August 2022, limits insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023 and extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. In addition, the IRA, among other things, (1) directs the U.S. Department of Health and Human Services (“HHS”) to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. 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.
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, among other things, 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), certain other healthcare professionals (such as physician assistants and
10
nurse practitioners), 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.
Many 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. 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 personal data, including 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. For example, the California Consumer Privacy Act of 2018 (“CCPA”) imposes obligations on covered businesses. These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation). Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data we maintain about California residents. In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became effective January 1, 2023, expands the CCPA. The CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which become effective in 2023. U.S. federal and state consumer protection laws require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
Foreign data privacy and security laws impose significant and complex compliance obligations on entities that are subject to those laws. As one example, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”) contains 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 EU GDPR.
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.
11
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 requires that our employees promote our products fairly, truthfully, accurately and on-label. Off-label promotion of our products is explicitly prohibited, as are sales activities that would interfere with a healthcare provider’s independent medical judgment or the doctor-patient relationship. All sales staff receive compliance training upon hire and on an annual basis. We also routinely monitor sales calls. 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 avoid the incidence of unethical marketing practices.
As part of our commitment to patient support and education, our employees and consultants may attend and participate in certain patient events, such as health fairs or local disease awareness and advocacy events. In all cases, interactions with patients and patient groups may only be conducted in settings that are suitable for patient education and separate from the usual place(s) of clinical business of healthcare providers or institutions. In addition, our sponsorship of such events, if any, must be clearly disclosed through prominent signage.
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 manufacture our approved and investigational products in accordance with the applicable cGMPs, QSR and other requirements enforced by the FDA and other regulatory bodies that have oversight over our products.
In addition, all sales packs of our drugs 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.
All of our employees are required to adhere to a standard operating procedure for capturing and reporting adverse events, safety information, and product complaints/adverse incidents involving any drug products marketed by us. These reports, as well as those that are collected by our third-party call center, are evaluated, processed and reported to regulatory authorities in accordance with FDA regulations and guidance on the post-marketing reporting of adverse experiences involving drugs, medical devices and combination products.
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 Council for Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use Guidelines and following the ethical principles that have their origin in the Declaration of Helsinki.
We require that informed consent be obtained 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 clinical research organizations (CROs) that we engage. We also inspect our CROs prior to, and during, an engagement. 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.
Our policy is to disclose the basic results of all clinical trials that we conduct to test the effectiveness of investigational drugs intended to treat serious or life-threatening diseases or conditions (i.e., phase 2-4 clinical studies). Additionally, we may voluntarily disclose the results of
12
initial safety studies (i.e., phase 1 clinical studies). In our disclosure of clinical trial results, our policy is to include all serious adverse events and those non-serious adverse events that have a frequency of at least five percent.
Corruption and Bribery
Our Code of Business Conduct and Ethics reflects the business practices and principles of behavior that we expect of every employee, officer and director. All new employees are trained on the Code of Business Conduct and Ethics and existing employees are required to acknowledge annually that they have refreshed their familiarity with the policies contained within it. Our Code of Business Conduct and Ethics includes clear guidelines on anti-bribery and anti-corruption practices. In addition, we have adopted a separate 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 China and totaled $53.0 million and $38.9 million as of December 31, 2022 and 2021, respectively.
Employees and Human Capital
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. Specifically, our policy is that no aspect of employment, including hiring and promotional opportunities, will be subject to unlawful discrimination or harassment (including sexual harassment) based on race, creed, color, religion, national origin, ancestry, gender (including pregnancy, breastfeeding or medical conditions related to pregnancy or breastfeeding), age, physical or intellectual disability, sexual orientation, gender identity, gender expression, gender stereotyping, marital status, military or veteran status, citizenship, genetic characteristic or information, or any other characteristic protected by applicable federal, state or local law.
As of December 31, 2022, we had 395 total at-will employees, of which 391 were full-time. Of our full-time employees, 210 were engaged in manufacturing, 25 in research and development, 55 in general and administrative and 101 in selling and marketing. Sixteen 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. As of December 31, 2022, our workforce was distributed along genders and ethnic minorities as follows:
Grade Levels
Number
Female (%)
Ethnic minority (%)
Vice President and above
17
18%
24%
Executive Director, Director and Senior Manager
115
48%
25%
Managers and below
263
41%
44%
All employees
395
42%
37%
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:
•
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.
•
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.
•
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 strive to conduct employee surveys approximately every six months.
13
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 components :
•
Base salary – We offer a market-competitive base salary.
•
Annual bonus program – We offer quarterly sales incentive bonuses to our sales force and annual bonuses to the remainder of our employees.
•
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.
•
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.
•
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.
•
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.
•
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.
•
Employee Recognition Program – We provide a company-wide Spot and Peer to Peer Recognition Program to more directly reward performance and behaviors and drive cultural improvement.
The majority of our employees are essential workers involved in the production of medicine for chronic diseases. As such, they cannot work remotely and must perform their job duties in our Connecticut facility according to a 24/7 shift schedule. Other employees have work responsibilities that can be performed somewhat asynchronously and in different locations. For such employees, our general preference is that in-office employees be in the office during core business hours at least four days per week in order to maximize the productivity gains that come from having a collaborative culture and a common workplace; however, we also recognize that such employees can be equally productive working from home some of the time or with a flexible workday that they can structure around significant events outside of the workplace, such as commute times or childcare responsibilities.
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 2022, our total illness and injury incidence rate was 0.3 per 100 employees compared to the 2021 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 0.3 per 100 employees compared to the 2021 industry average of 1.2. 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 1 Casper Street, Danbury, Connecticut 06810, and our general telephone number is (818) 661-5000. 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:
•
our research and development programs;
•
the design and implementation of our clinical programs;
•
our patent and publication strategies;
•
market opportunities from a clinical perspective;
14
•
new technologies relevant to our research and development programs; and
•
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.
46
Chief Executive Officer
Steven B. Binder
60
Chief Financial Officer
Sanjay Singh, M Pharm, MBA
56
Executive Vice President, Technical Operations
Stuart A. Tross, Ph.D.
56
Chief People and Workplace Officer
David B. Thomson, Ph.D., J.D.
56
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 PharmD. 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.
Sanjay Singh has been our Executive Vice President, Technical Operations since October 2022. Before joining us, since 2011 Mr. Singh served as Sr. Vice President and Associate President Technical Operations in India and USA at Aurobindo Pharma , a leading generic pharmaceutical manufacturing company, headquartered in Hyderabad, India. Prior to Aurobindo, Mr. Singh worked in various leadership roles at Cipla Ltd (2000 – 2007, 2008-2011), Glenmark Pharma (2007-2008), Nicholas Piramal India Ltd (1992-2000) and Cadila Laboratories (1990-1991). Mr. Singh has been associated with the Parenteral Drug Association (PDA) and was the founding president of the PDA, India chapter before moving to the US in 2015. Mr. Singh received an M. Pharma. degree in Pharmaceutical Chemistry from LM College of Pharmacy, Ahmedabad, India and an MBA degree from Institute of Management Studies, Indore, India.
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., M Sc. and Ph.D. degrees from Queens University and obtained his J.D. degree from the University of Toronto.
15