BOSTON (TheStreet) -- We're in the August lull, so this week's Biotech Stock Mailbag revisits and updates some past, controversial stories.


Arena Pharmaceuticals'
(ARNA) - Get Report best (last?) hope to reverse the stock losses is the S1P1 modulator APD334. A phase II study just started enrolling ulcerative colitis patients this month, so results won't be available until the end of 2016.

I last wrote about APD334 in January. While APD334 shares similarities with Receptos' (RCPT) ozanimod (RPC1063), Arena hasn't provided enough clinical data, particularly about first-day dosing and the effect on heart rhythm, to determine how the two drugs might stack up against each other.

Arena is a drug pipeline story again because the weight-loss drug Belviq is a commercial flop. Arena's share of Belviq sales in the second quarter totaled $4.2 million, down 35% from the first quarter. Belviq prescriptions written in the
June quarter rose just 9% sequentially, while the gross-to-net discount was 53%. Orexigen Therapeutics' (OREX) Contrave overtook Belviq as the market-leading obesity pill in the second quarter. The gap between the two drugs is widening, based on current script trends.

As if the news can't get worse for Arena, efforts to expand Belviq's approved label are stalling out. New studies to explore Belviq as a smoking-cessation drug are no longer planned for this year because Arena wants to conduct more market research. A project to combine Belviq with the older weight-loss drug phentermine also appears shaky. The FDA recently provided comments to Arena about the regulatory requirements needed to move forward with the Belviq-phentermine combination but management refused to provide details on its Wednesday night call. Given all the negativity surrounding Belviq, Arena would have gladly passed along FDA comments had they been positive.

I found a reasonable MannKind(MNKD) - Get Report fan! Burjis asks:


Hey Adam, there was a quote I read from your Twitter account that read 'you can't invest in Afrezza but you can invest in MannKind.' I completely agree but my question is this, is this a short-term or long-term perspective? I'm curious because of the results Afrezza users have been getting. You have incredibly and accurately predicted the way this stock would move for quite some time now but the results of the Afrezza users have been pretty incredible, as well.

Do you feel that MannKind has a chance to withstand these financial blows and have its science win out? How do you feel about Sanofi's contribution so far? It seems like prescriptions are going to severely lag direct-to-consumer marketing due to so many hurdles (endocrinologist confidence, insurance, and spirometry) but once those hurdles are crossed, if ever, do you see a turn in the tide?

Thanks again for the informative articles. I am sure you are used to hearing this but please ignore those who turn a blind eye to facts and respond to your articles based on frustration and emotion. If you are curious, I am long MannKind with an established core position and a trading position and have fortunately been able to make money on this stock with the trade position for six years. I have not been involved with a stock like this before so your insight would be awesomely appreciated!


Most MannKind shareholders (Burjis excluded) exist in a hyper-idealized world where the miraculous science of Afrezza inhaled insulin trumps all marketing, reimbursement and financial challenges facing the company. MannKind die-hards reject the reality of the slow Afrezza launch, choosing instead to believe glowing tweets and blog posts from a handful of diabetics using the product today will translate into commercial success over time.

In a fantasy world where time and financial solvency don't matter, MannKind fans might be right about Afrezza. But MannKind and Sanofi(SNY) - Get Report operate in a world where short-term metrics can't be ignored. The companies also operate in a world where insurers are playing hardball with reimbursement and access to diabetes drugs. Afrezza isn't a game-changing inhaled insulin for diabetics, it's an expensive insulin with marginal benefits over injected insulin.

Right now, Afrezza is a money-losing product. Second-quarter sales were $2.2 million, as reported by Sanofi. We'll learn the extent of the Afrezza joint-venture loss when MannKind reports its second-quarter financials on Aug. 10.

Unless the pace of prescription growth improves dramatically in the current and fourth quarters, Afrezza will continue to lose money well into 2016. I don't know how long Sanofi is willing to be patient with Afrezza while absorbing losses, but I'm pretty sure it's not the four years MannKind bulls predict is needed for the product to show its true commercial value. Sanofi cannot afford to give MannKind and Afrezza that kind of runway. If Sanofi sticks with Afrezza, spending goes up dramatically when the large safety study required by FDA as part of the approval starts to enroll patients. If Sanofi can't see a clear path to profitability for Afrezza when spending on the safety study kicks in, it will be hard to justify the MannKind partnership.

MannKind operates on the knife's edge of financial solvency. At this point, Afrezza is actually adding to MannKind's debt because of the compounded losses of the Sanofi joint venture. MannKind resolved the $100 million convertible debt that was due this month (on less-than-optimal terms) but the company's balance sheet remains a problem. At its current rate of losses and spending, MannKind will need to raise more money next year.

MannKind and Afrezza are often compared to Pfizer(PFE) - Get Report and its failed inhaled insulin Exubera for obvious reasons. Looking ahead, the more apt comparison for MannKind is probably Dendreon and its prostate cancer immunotherapy Provenge. Provenge was a scientific breakthrough but a commercial disappointment. Dendreon was forced into bankruptcy where it was sold for pennies on the dollar. The company's equity investors were wiped out.

If Sanofi bails on MannKind next year, as I expect, the company faces painful financial decisions.

On a personal note, I appreciate your willingness to listen to an opposing point of view. Unfortunately, too few of your fellow MannKind longs are willing to do the same. Good luck.

Edward J. emails, "You were right about Keryx Biopharmaceuticals(KERX) - Get Report. I should have listened to you."

Thank you. The value of Keryx shares are down by half this year to a two-year low because the Auryxia commercial launch has been awful. Keryx reported disappointing Auryxia net sales of $1.8 million in the second quarter. Eight months into the commercial launch, Keryx is still not persuading kidney dialysis clinics to purchase Auryxia as their preferred phosphate-binding agent, as Keryx bears predicted would happen. The purported cost-saving benefit of using an iron-based phosphate binder -- less need for EPO and intravenous iron -- isn't playing out as Keryx and its supporters claimed it would.

Keryx is now hiring more sales reps to fix its Auryxia problem. The jury's out on whether more bodies will help.

I remember when Keryx bulls were as cocky as today's Rockwell Medical(RMTI) - Get Report fans. Rockwell management knows starting the official clock on Triferic's commercial launch is the beginning of the end, which explains this week's announcement of "pilot" programs to dribble out Triferic to selected dialysis providers. The FDA approved Triferic in January. Rockwell says dialysis providers are excited about using Triferic, but taking eight months to start "pilot" programs suggests otherwise

Let's now take a short break for some hate mail. Greg writes:

I see your a true trash talker, when It comes to individual investments. Personally, I think your an over rated class clown using your media attention to attempt to destroy peoples dreams for the future. If you cant stand the sight of a individual stock why don't you act responsible and let the shareholders share the burden of our downfall by ourselves. We don't need a class clown from Mass town, constantly trying to destroy what we have built. So Just shut the fuc7 up assole.

"Class clown from Mass town" is kind of catchy. Demerits for poor spelling and punctuation.

Greg B. asks, "I know you've been skeptical about Regulus Therapeutics(RGLS) - Get Report and its approach to treating hepatitis C with an injection, but did anything you heard on the recent conference call change your opinion? The phase II study results could establish this as the best hepatitis C cure."

Regulus announced the start of a phase II study in which hepatitis C patients will receive an injection of RG-101 on day one, followed by four weeks of a currently approved oral drug and then a second RG-101 injection. The company calls this a "sandwich" treatment regimen for obvious reasons. Seventy patients will be distributed across three study arms differentiated by the choice of "meat" in the sandwich: Harvoni, Olysio or Daklinza -- all currently approved oral treatments for Hep C.

The study's primary endpoint will be sustained virologic response (SVR, or Hep C cure rate) assessed 12 weeks after treatment ends. Regulus will also look at cure rates 4, 24 and 48 weeks after treatment. The SVR4 data is expected before the end of the yearl, with SVR12 data coming in the first quarter 2016.

This is clearly a very important study for Regulus with make-or-break implications for the future of RG-101. I remain skeptical mainly because the real-world bar for success is dauntingly high. Drugs like Harvoni (marketed by Gilead Sciences(GILD) - Get Report achieve Hep C cure rates in the 95-98% range when given for eight or 12 weeks. This high cure rate doesn't leave much room at all for Regulus to show an improvement by adding RG-101.

On its call this week, Regulus executives claimed real-world cure rates for oral Hep C drugs are lower than what was demonstrated in clinical trials, leaving a "reasonable opportunity" for RG-101 in the front-line setting. Interestingly, Gilead said exactly the opposite on its earnings call. An independent Cigna study supports Gilead's view.

Assuming equivalent cure rates, Regulus believes a four-week "sandwich" regimen of RG-101 and Harvoni would be more convenient and potentially less expensive than an eight-week course of Harvoni on its own. Perhaps, but don't forget Gilead and others continue to develop new oral combination therapies which could shorten treatment durations to four or six weeks. And in a previous Regulus study, RG-101 used on its own (without the boost from oral drugs) produced disappointing efficacy results.

I'm happy to re-assess my skeptical view of RG-101 when the phase II data are released, but for now, I believe Regulus still faces significant challenges. Gilead remains tough to beat in Hep C. 

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.