Event - MannKind holds its breath as FDA decision approaches

MannKind is scheduled to receive its second judgement on the inhalable insulin Afrezza from the FDA by December 29, and it remains one of the most difficult calls in the pharmaceutical space. The evaporation of inhalable insulin from the marketplace and the unwillingness of any company to partner with the California group are countered by insistence from MannKind and its supporters that a safe, convenient and ultrafast-acting mealtime therapy fills an unmet medical need.

If ever there was a binary event, this would be it: analyst price targets range widely, from $2 to $18, compared with a share price of $6.42 in early trade today. More than 24% of the company's shares have been sold short, indicating a significant number of investors are placing bets against approval. Thus the only sure thing that can be said is shares in MannKind will rocket or plummet on the FDA's verdict, and volatility is almost assured in the weeks ahead.

Product Afrezza
Company MannKind
Market Cap $784m
Product NPV $1.78bn
NPV as % of Market Cap 227%
Event PDUFA date
Date December 29, 2010

Given that Afrezza’s net present value of $1.78bn is more than double MannKind's current market capitalisation, according to EvaluatePharma’s NPV Analyzer, approval and successful launch should result in significant share price gains. Conversely, a second complete response letter would prompt a major sell-off, the extent to which will depend on the FDA's demands. If $2 price targets are accurate that would be a new record low for the company.

Inhaler included

MannKind has cleared at least one uncertainty out of the way – in its new submission, an answer to the FDA’s complete response letter in March, it included data on absorption rates of the dry insulin powder using the planned commercial inhaler when compared to the device used in clinical trials.

Along with the rather cryptic issue of clinical “utility,” the device was a main issue raised in the FDA document (MannKind goes on another wild ride with FDA response letter, March 16, 2010).

It is also a key commercial question, as Exubera’s initially poor market uptake, prior to its withdrawal due to lung cancer risk, was blamed in part on a large and cumbersome inhaler device; in contrast Afrezza’s so-called Dreamboat inhaler is less than two inches long (MannKind hoping for Afrezza approval early 2011, May 17, 2010).

Of course, even if the regulator deems the Afrezza clinical data acceptable, there remains the possibility that it will want to see more clinical data on the Dreamboat device, which would be sure to snarl approval, partnership and commercial launch.

Another cause for concern is a wrongful termination lawsuit, filed by the company’s former regulatory affairs director, who alleges he was sacked because he found questionable clinical data at the company’s trial sites in Russia and Bulgaria. Disclosure of the lawsuit caused Mannkind shares to fall 11% on November 4.

Of course, these hurdles to the application are background to the real issue with this product – whether it is safe. A cancer signal ultimately derailed Exubera, while concerns that inhaling insulin might significantly degrade lung function have also dogged these projects. MannKind believes its data package will allay these concerns, but with numerous injected insulins available with years, the FDA will need to feel supremely comfortable about Afrezza’s safety profile to consider approval.

Partnerships later

Then there is the question of partnerships. Chief executive Alfred Mann promised one by the end of 2009 (Expectation sky-high for MannKind to deliver blockbuster deal, September 24, 2009) but 2011 is nearly upon us and company executives have acknowledged that interested parties have declined to sign on the dotted line without regulatory approval. It also prefers not to file in Europe without a partner, so the FDA remains the fulcrum on which the entire enterprise pivots.

An Afrezza partnership certainly can be regarded as an attractive proposition. There is certainly the potential for a convenient, safe and effective inhaled version of insulin to be a blockbuster product. EvaluatePharma’s consensus forecasts $372m in worldwide sales in 2016, within an overall insulin market of $19.7bn. Those Afrezza forecasts will be heavily risk-adjusted and the product could fit in with a larger diabetes franchise of a big pharma partner.

But approval would need to come first before Mr Mann and MannKind can start considering such matters. There is strong betting either way, and no matter the conclusion the day following FDA’s response is likely to be a wild day for MannKind.

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