MNKD 2017 Annual Report

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. From August 2014 until April 2016 Sanofi-Aventis Deutschland GmbH (which subsequently assigned its rights and obligations under the agreement to Sanofi-Aventis U.S. LLC (“Sanofi”)), was responsible for commercial, regulatory and development activities associated with Afrezza pursuant to a license and collaboration agreement (the “Sanofi License Agreement”). After a transition period during which Sanofi continued to fulfill orders for Afrezza, we assumed responsibility for worldwide development and commercialization of Afrezza and we began distributing MannKind-branded Afrezza to wholesalers in July 2016. During the second half of 2016, we utilized a contract sales organization to promote Afrezza while we focused our internal resources on establishing a channel strategy, entering into distribution agreements and developing co-pay assistance programs, a voucher program, data agreements and payor relationships. In early 2017, we recruited our own specialty sales force to promote Afrezza to endocrinologists and certain high- prescribing primary care physicians. In the future, we may seek to supplement our sales force through a co-promotion arrangement with a third party that has an underutilized primary care sales force, which can be used to promote Afrezza to greater number of primary care physicians. Our current strategy for future commercialization of Afrezza outside of the United States, subject to receipt of the necessary foreign regulatory approvals, is to seek and establish regional partnerships in foreign jurisdictions where there are appropriate commercial opportunities. Our first such regional partnership was formed in May 2017, when we entered into a supply and distribution agreement with Biomm S.A. to pursue regulatory approval and commercialization of Afrezza in Brazil. As part of the approval of Afrezza, the FDA required us to conduct the following post-marketing studies: • An open-label PK and multiple-dose safety and tolerability dose-titration trial of AFREZZA in pediatric patients ages 4 to 17 years with type 1 diabetes, followed by a prospective, open-label, randomized, controlled trial comparing the efficacy and safety of prandial AFREZZA to prandial subcutaneous insulin as part used in combination with subcutaneous basal insulin in pediatric patients 4 to 17 years old with type 1 or type 2 diabetes; and • A five-year, randomized, controlled trial in 8,000-10,000 patients with type 2 diabetes to assess the potential serious risk of pulmonary malignancy with AFREZZA use. In addition, we plan to conduct other clinical studies of Afrezza, including dose optimization studies in type 1 and type 2 patients and a study of the time that Afrezza patients remain within a desirable glycemic range as determined by continuous glucose monitoring. Manufacturing and Supply We manufacture Afrezza in our Danbury, Connecticut facility, where we formulate the Afrezza inhalation powder, fill it into plastic cartridges and then blister package the cartridges and seal the blister cards inside a foil overwrap. These overwraps are then packaged into cartons along with inhalers and printed material by a third- party packager. The quality management systems of our Connecticut facility have been certified to be in conformance with the ISO 13485 and ISO 9001 standards. Our facility has been inspected twice by the FDA, once for a pre-approval inspection in the fall of 2009 and once for a regular inspection in May 2013. The FDA and potentially 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 commercial demand for Afrezza. In addition, the facility includes expansion space to accommodate additional filling lines and other 2