DRIVING CHANGE IN
DIABETES CONTROL
MANNKIND CORPORATION
2005 ANNUAL REPORT
DIABETES AS A DISEASE
AND AS A GLOBAL PROBLEM
Approximately 20.8 million people in the United States,
or 7% of the population, suffer from diabetes.
An estimated 14.6 million cases of diabetes were diagnosed
and under treatment and 1.5 million new cases were
diagnosed in 2005.
Diabetes was the sixth leading cause of death listed on death
certifi cates in 2002, but diabetes was likely underreported
as a cause of death.
Diabetes was estimated in 2002 to cost over $132 billion
each year in the United States.
Direct costs for required drug treatment for glucose control
in diabetes in the United States were approximately $12
billion in 2002, $7 billion for insulin and delivery supplies
and $5 billion for non-insulin oral medications.
DEAR
STOCKHOLDERS,
We are pleased to say that 2005 – our fi rst full calendar year
as a public company – was an exceptional year for MannKind
Corporation. We believe our lead investigational compound,
the Technosphere® Insulin System, currently in phase 3 clinical
trials, continues to be the most promising new insulin therapy
under development, with the potential to change the way the
disease is treated.
We are excited about the potential value of the Technosphere®
Insulin System. We view last year’s $175 million private
placement – the largest such offering in the industry, which
included some of the most well-respected investment fi rms as
evidence of the investment community’s belief in the long-term
success of MannKind. We have allocated a majority of the
capital raised last year to fund the continued development of
our lead product.
Looking ahead to 2006, there are a number of clinical
developments and critical milestones that we hope to achieve.
We have already completed two phase 3 trials: Study 101 and
Study 014. We plan to release the results from these trials before
the middle of 2006. Elsewhere in this report, we describe some
of the other studies that we have or will initiate, all of which
will provide us with additional insight into the performance
characteristics and competitive advantages of the Technosphere®
Insulin System. We also expect to begin trials of a cancer vaccine
therapy by the end of the year.
In order to prepare for our ongoing and upcoming clinical trials,
we have taken steps to expand our manufacturing facilities
and their scalability. The build-out of our Danbury, Connecticut
facility is underway, with the goal of providing enough
manufacturing capacity to supply our forecasted needs
through the fi rst few years of commercialization.
As you can see, 2005 has been a successful year for us and we
are excited about the future of our Company and our products.
We would like to thank our employees for their continued
contributions and you, our shareholders, for your continued
confi dence in MannKind.
Alfred E. Mann
Chairman and
Chief Executive Offi cer
Hakan S. Edstrom
President and
Chief Operating Offi cer
DRIVING CHANGE: THE NEED FOR
NEW INSULIN THERAPY
The human body uses glucose as fuel to keep it running at all
times. During mealtimes, glucose is provided from the ingestion
of carbohydrates; between meals, the liver produces and delivers
glucose. Insulin is required to utilize the glucose, and the pancreas
produces insulin to help regulate glucose levels in a normal range.
Glucose balance is critical to health, and both high and low levels
can be dangerous. Diabetes is a chronic health condition in which
the body is unable to produce insulin. As a result, blood glucose
levels become uncontrolled.
There are primarily two types of diabetes. In type 1 diabetes, the
body stops producing insulin, while in type 2 diabetes, insulin
production is impaired, and the body grows increasingly resistant
to insulin. Patients with type 1 diabetes require insulin injections
to survive. The treatment of type 2 diabetes typically starts by
managing the patient’s diet and exercise. For most patients,
however, treatment through diet and exercise alone is not an
effective long-term solution. Treatment usually progresses next
to include various non-insulin oral medications, most of which
act by increasing the amount of insulin produced by the pancreas
or by increasing the sensitivity of insulin-dependent cells. These
drugs generally have signifi cant adverse effects and are limited
in their ability to manage the disease effectively. Most patients
with type 2 diabetes eventually require treatment with insulin.
There is increasing evidence that aggressive insulin therapy
has long-term benefi ts and that patients with type 2 diabetes
should be started on insulin early in the progression of the
disease rather than after they have failed to achieve control
with multiple oral medications. Patients, however, are often
reluctant to initiate insulin therapy because until now it has
involved administering several daily subcutaneous needle
injections of insulin and because of the fear of hypoglycemia,
a potentially dangerous acute condition characterized by
abnormally low levels of glucose. These limitations support
the need for a new insulin therapy.
To address the resistance of patients to insulin injections,
there is growing interest in the inhaled delivery of insulin.
However, with the exception of our product, all other inhaled
delivery systems appear to offer little clinical advantage over
subcutaneous insulin above and beyond the elimination of
“needle phobia”. The reason for this lies in the fact that the
other pulmonary insulin systems – like injected insulin – suffer
from the shortcoming of entering the bloodstream too slowly.
The available evidence indicates that these systems are no
better than injections of “rapid-acting” insulin analogs, which
produce peak insulin levels in about 30-90 minutes. By contrast,
in a person without diabetes, the pancreas secretes elevated
levels of insulin within a few minutes of glucose entering into
the bloodstream from a meal.
2
The slow entry of other insulin therapies into the bloodstream
results in high blood glucose levels early after meal onset, and
because much of the insulin remains after the meal is digested,
there is a tendency to develop hypoglycemia. These swings in
glucose levels can be very challenging for patients, who fi nd
they must snack between meals in order to “feed” their insulin,
leading to weight gain. Excessive post-meal glucose excursions
have also been linked to atherosclerosis and diabetic vascular
disease, a complication of diabetes that affects the eyes,
kidneys, heart and peripheral and autonomic nervous systems.
Our Technosphere® Insulin System is unlike other insulin therapies.
In clinical studies, we have consistently observed that the
Technosphere® Insulin System produces a profi le of insulin levels
in the bloodstream that is similar to the early insulin secretion
normally seen in healthy individuals following the beginning of a
meal. We believe that the time-action profi le of our investigational
product is more than just an interesting observation. In a person
without diabetes, the rapid increase in insulin levels that follows
meal onset acts to shut down the liver’s production of glucose
during the mealtime. In this way, the liver does not contribute to
blood glucose levels at a time when glucose is being absorbed
from the meal. We believe that delivering insulin in a more natural
manner leads to better overall glucose control.
Our clinical studies are designed to evaluate the extent to which
glucose control improves with the use of Technosphere® Insulin.
We have observed in our studies that when Technosphere® Insulin
is administered at, or shortly after, the beginning of a meal, blood
glucose levels after the meal are more tightly controlled than
if patients attempt to control their disease with subcutaneous
insulin or oral medications. Without the persistence of insulin
following meal digestion, the use of Technosphere® Insulin
appears to reduce the risk of hypoglycemia and the need for
snacks, which should help to avoid the weight gain typically
associated with insulin therapy.
Thus, the Technosphere® Insulin System may represent a new
insulin therapy that offers patients an opportunity to gain greater
control over their disease and reduce its short- and long-term
complications – all without the pain and inconvenience of multiple
daily insulin injections.
3
CLINICAL
DEVELOPMENT
MannKind Corporation’s lead investigational compound, the
Technosphere® Insulin System, is a proprietary dry powder
Technosphere® formulation of insulin that is inhaled into the deep
lung using our proprietary MedTone® inhaler. We are currently
conducting phase 3 clinical trials in the United States and Europe
to study its safety and effi cacy in the treatment of diabetes. To
date, we have conducted clinical trials that have involved more
than 800 individuals and 60,000 patient-days of home use.
In 2005, we initiated a phase 3 clinical trial of inhaled
Technosphere® Insulin, Study 030. The primary objective of
this two-year, prospective, multi-site study is to compare the
pulmonary function of type 1 and type 2 patients randomized to
either Technosphere® Insulin or standard care. Enrollment for
this study began in June 2005 and is targeted to be fully enrolled
later this year.
In 2005, we completed Study 005, a phase 2b forced dose-
escalation study where we evaluated the effect of different
mealtime doses of Technosphere® Insulin added to a single fi xed
daily injection of a long-acting basal insulin in patients with type
2 diabetes. We released initial results from this study in the
fi rst quarter of 2006 and will present more detailed fi ndings
at the American Diabetes Association annual meeting in June
2006. In Study 005, we demonstrated that the addition of
Technosphere® Insulin to insulin glargine produced a statistically
signifi cant reduction in HbA1c levels (a measure of the average
blood glucose level over the preceding 3-4 months) and a dose-
dependent reduction of post-meal glucose excursions. We also
observed that Technosphere® Insulin produced no negative
effects on pulmonary function, and did not lead to weight gain
at any dose over 12 weeks of treatment.
4
Study
Trial Overview
101
Phase 2
014
Phase 3
Compare mealtime use of Technosphere® Insulin
(plus basal insulin) to mealtime use of “rapid-acting”
subcutaneous insulin (plus basal insulin)
Compare effi cacy of mealtime use of Technosphere®
Insulin (plus basal insulin) to mealtime use of “rapid-
acting” subcutaneous insulin (plus basal insulin)
24 weeks
Duration
12 weeks
Number and
Type of Patients
Status
90
Type 1
240
Type 2
Completed
Results expected in Spring 2006
Completed
Results expected in Summer 2006
030
Phase 3
Evaluate pulmonary function in two groups
of 625 patients
2 years
1,250
Type 1 and Type 2
Enrollment began in June 2005
– Treatment with Technosphere® Insulin
– Treatment with existing oral or injectable therapy
Compare the latter patient group to pulmonary
function of 125 subjects without diabetes
102
Phase 3
Compare effi cacy of mealtime use of Technosphere®
Insulin to twice-daily use of premixed insulin
12 months
009
Phase 3
Compare mealtime use of Technosphere® Insulin
(plus basal insulin) to mealtime use of “rapid-acting”
subcutaneous insulin (plus basal insulin)
12 months
500
Type 2
500
Type 1
Enrollment began in March 2006
Enrollment began in March 2006
103
Phase 3
Evaluate the effi cacy of Technosphere® Insulin alone
and in combination with metformin
6 months
500
Type 2
To be initiated Summer 2006
5
UNIQUE
KINETICS
6
A 2004 review article in the British Journal of Diabetes
and Vascular Diseases surveyed the data published on
pulmonary insulin products in development and compared
their glucose-lowering activity to that of injectable “rapid-
acting” insulin analogs, which are variations of insulin
that produce peak blood levels within 30 to 90 minutes
of injection. The graph below summarizes the data from
different studies that were reviewed in this article, showing
that most pulmonary insulin formulations have time-action
profi les comparable to injectable “rapid-acting” insulin.
The one exception was the Technosphere® Insulin System,
which has been observed to have a much more rapid
onset of action than the other insulin therapies reviewed.
(cid:96)
(cid:32)
(cid:101)
(cid:100)
(cid:38)
(cid:94)
(cid:98)
(cid:38)
(cid:94)
(cid:100)
(cid:23)
(cid:31)
(cid:23)
(cid:106)
(cid:92)
(cid:107)
(cid:88)
(cid:73)
(cid:101)
(cid:102)
(cid:96)
(cid:106)
(cid:108)
(cid:93)
(cid:101)
(cid:64)
(cid:23)
(cid:92)
(cid:106)
(cid:102)
(cid:90)
(cid:108)
(cid:62)
(cid:99)
(cid:75)(cid:96)(cid:100)(cid:92)(cid:36)(cid:56)(cid:90)(cid:107)(cid:96)(cid:102)(cid:101)(cid:23)(cid:71)(cid:105)(cid:102)(cid:93)(cid:96)(cid:99)(cid:92)(cid:23)(cid:102)(cid:93)(cid:23)(cid:64)(cid:101)(cid:95)(cid:88)(cid:99)(cid:92)(cid:91)(cid:23)(cid:64)(cid:101)(cid:106)(cid:108)(cid:99)(cid:96)(cid:101)(cid:23)(cid:110)(cid:96)(cid:107)(cid:95)(cid:23)(cid:77)(cid:88)(cid:105)(cid:96)(cid:102)(cid:108)(cid:106)(cid:23)(cid:74)(cid:112)(cid:106)(cid:107)(cid:92)(cid:100)(cid:106)
(cid:31)(cid:59)(cid:88)(cid:107)(cid:88)(cid:23)(cid:93)(cid:105)(cid:102)(cid:100)(cid:23)(cid:91)(cid:96)(cid:93)(cid:93)(cid:92)(cid:105)(cid:92)(cid:101)(cid:107)(cid:23)(cid:106)(cid:107)(cid:108)(cid:91)(cid:96)(cid:92)(cid:106)(cid:32)
(cid:68)(cid:88)(cid:101)(cid:101)(cid:66)(cid:96)(cid:101)(cid:91)
(cid:70)(cid:107)(cid:95)(cid:92)(cid:105)(cid:23)(cid:64)(cid:101)(cid:95)(cid:88)(cid:99)(cid:92)(cid:91)(cid:23)(cid:64)(cid:101)(cid:106)(cid:108)(cid:99)(cid:96)(cid:101)(cid:23)(cid:74)(cid:112)(cid:106)(cid:107)(cid:92)(cid:100)(cid:106)
(cid:40)(cid:44)(cid:23)(cid:76)(cid:23)(cid:67)(cid:96)(cid:106)(cid:103)(cid:105)(cid:102)(cid:23)(cid:106)(cid:37)(cid:90)(cid:37)(cid:23)
(cid:40)(cid:41)
(cid:40)(cid:39)
(cid:47)
(cid:45)
(cid:43)
(cid:41)
(cid:39)
(cid:39)
(cid:40)
(cid:41)
(cid:42)
(cid:43)
(cid:44)
(cid:45)
(cid:46)
(cid:47)
(cid:48)
(cid:40)(cid:39)
(cid:75)(cid:96)(cid:100)(cid:92)(cid:23)(cid:31)(cid:63)(cid:102)(cid:108)(cid:105)(cid:106)(cid:32)
7
A LOOK AHEAD:
OUR CANCER PROGRAM
MannKind’s product development pipeline also includes plans to
develop therapies for the treatment of solid tumor cancers. The
lead product candidate in this program, MKC1106, is intended for
the treatment of several solid-tumor cancers, including ovarian,
colorectal, pancreatic, renal, breast, and prostate carcinomas.
We plan to commence clinical trials for MKC1106 late in the fourth
quarter of 2006.
of a pathogenic organism or it can be a by-product of diseased
cells. Certain specialized cells of the immune system sample
antigens in the body and present the foreign antigens to other
cells of the immune system whose function is to destroy any cell
that expresses the same molecule. This is known as cell-mediated
immunity. In this way, the immune system can launch a very
specifi c response to infection or disease.
Our cancer therapy program utilizes the body’s immune system
to help eradicate tumor cells. The immune system is a network
of cells and organs that defends the body against infection
and abnormal cells, such as cancer and transplanted cells. A
key element of the immune system is its ability to distinguish
between healthy cells and foreign or diseased cells that do
not belong in the body. The immune system accomplishes this
task by identifying distinctive molecules on the surface of each
cell as either normal or abnormal, and responding to them
appropriately. Any substance capable of triggering an immune
response is known as an antigen. An antigen can be all or part
Our therapy program uses DNA- and peptide-based compounds
that correspond to tumor-associated antigens that are expressed
in a range of solid-tumor cancers. A patient is fi rst “primed” by
DNA-based compounds, or plasmids, that are injected directly
into the patient’s lymph nodes. This has the effect of sensitizing
the immune system to the tumor-associated antigens encoded by
the plasmids. After a period of time, the patient’s lymph nodes
are then injected with synthetic peptides that are designed to
“boost” or greatly amplify the immune response to the target
antigens. This prime-boost regimen is designed to provoke a
potent cell-mediated immune response that destroys cancer cells.
8
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Alfred E. Mann
Chairman
& Chief Executive Offi cer
Alfred E. Mann
Chairman
& Chief Executive Offi cer
Hakan S. Edstrom
President, Chief Operating Offi cer
& Director
Hakan S. Edstrom
President, Chief Operating Offi cer
& Director
Kathleen Connell, Ph.D.
President, Connell Group, Inc.
Ronald Consiglio
Managing Director
Synergy Trading
Michael A. Friedman, M.D.
President
Chief Executive Offi cer
City of Hope National
Medical Center
Llew Keltner, M.D., Ph.D.
Founder & Chief Executive Offi cer
EPISTAT
Kent Kresa
Chairman Emeritus
Northrop Grumman Corporation
David H. MacCallum
Managing Partner
Outer Islands Capital, L.P.
Henry L. Nordhoff
President
Chief Executive Offi cer
Gen-Probe Incorporated
Richard L. Anderson
Corporate Vice President
& Chief Financial Offi cer
Dan R. Burns
Corporate Vice President
& President of Commercial
Operations & Business
Development
Juergen A. Martens, Ph.D.
Corporate Vice President
Operations
Diane M. Palumbo
Corporate Vice President
Human Resources
Dr. Peter C. Richardson
Corporate Vice President
& Chief Scientifi c Offi cer
David Thomson, Ph.D., J.D.
Corporate Vice President
& General Counsel
ANNUAL MEETING
CORPORATE HEADQUARTERS
The Company’s annual meeting
of stockholders will be held:
Thursday, May 25, 2006
10:00 a.m. (Eastern)
The Ethan Allen Hotel
21 Lake Avenue Extension
Danbury, CT 06811
Tel +1.203.744.1776
TRANSFER AGENT
Mellon Investor Services, LLC
400 South Hope Street
Fourth Floor
Los Angeles, CA 90071
LEGAL COUNSEL
Cooley Godward LLP
4401 Eastgate Mall
San Diego, CA 92121
INDEPENDENT AUDITORS
Deloitte & Touche LLP
350 South Grand Avenue
Suite 200
Los Angeles, CA 90071
STOCK INFORMATION
MannKind Corporation stock is
publicly traded on the NASDAQ
National Market under the symbol
“MNKD.”
MannKind Corporation
28903 North Avenue Paine
Valencia, CA 91355
Tel +1.661.775.5300
Fax +1.661.775.2080
www.mannkindcorp.com
Regional Offi ces:
1 Casper Street
Danbury, CT 06810
Tel +1.203.798.8000
Fax +1.203.798.7740
61 South Paramus Road
Mack-Cali Centre IV
Paramus, NJ 07652
Tel +1.201.983.5000
Fax +1.201.450.9982
INVESTOR RELATIONS
Reports regarding the Company
are fi led electronically with the
SEC. You may access these reports
and additional information without
charge from our website at
www.mannkindcorp.com and
from the SEC’s website at
www.sec.gov. In addition, you may
contact the Company’s investor
relations department through
“Information Request” on the
Company’s website or by
sending an email to:
IR@mannkindcorp.com.
MannKind Corporation
28903 North Avenue Paine
Valencia, CA 91355
Tel +1.661.775.5300
www.mannkindcorp.com