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Updated with current stock price.

VALENCIA, Calif. (


) -- In Al Mann We Trust -- No Longer.

The legendary healthcare entrepreneur made billions of dollars for himself and shareholders in the companies he founded and later sold.



was supposed to follow the same script. Mann poured $1 billion of his own money into MannKind to develop Afrezza, an inhaled insulin delivery device for diabetes. Lots of investors were more than happy to buy up shares of MannKind, too, confident that Mann would succeed again and make them all rich.

Yet U.S. regulators rejected Afrezza for the second time, telling MannKind to conduct at least two more clinical studies before resubmitting for approval. MannKind shares plunged 37% to $5.75 Thursday, wiping out almost $600 million in shareholder value and tarnishing -- perhaps forever -- Mann's reputation as a guaranteed money maker.

Mann is rich and stubborn, so he's not giving up on Afrezza. On a conference call Wednesday night, Mann tried to spin the FDA's rejection in the best possible light, insisting the company now has a "clear path" towards approval. Of course, this is pretty much what

Mann said last March when FDA rejected Afrezza the first time


The reality of the situation is that FDA has serious concerns about Afrezza and might never be assuaged enough to approve the diabetes device. The agency's latest complete response letter includes a demand for two new clinical trials of Afrezza to compare the efficacy and safety of the second-generation "Dreamboat" device to the older "MedTone" device MannKind used in previous phase III studies to deliver inhaled insulin to the lungs. The studies need to include at least 12 weeks of stable insulin dosing.

The interpretative spin of MannKind's press release tries to downplay the seriousness of FDA's request. On Wednesday night's conference call, Mann and his team, while smart enough not to offer a specific timeline, certainly suggested that these studies could be completed relatively quickly.

Don't be so sure. Has any drug or medical device company been able to design and conduct two new clinical trials in less than a year's time? Even if MannKind was capable of finishing both of the Afrezza studies by the end of the year, it could still take another few months for the data to be collected and readied for resubmission to FDA. After that, FDA would require six months to review the new data and issue a third approval decision. Best-case scenario for Afrezza's earliest approval: the second half of 2012.

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A more likely timeline is Afrezza two years away from another FDA approval decision, perhaps more. Call it 2013, and that's assuming the two new Afrezza studies yield positive results. Longer delays could be in the cards if the new Dreamboat device underperforms the older MedTone device. And what if FDA still has issues or concerns with Afrezza's safety or efficacy regardless of the device used to deliver it? Conceivably, FDA could have approved Afrezza based on the phase III data generated by the older MedTone device. The agency didn't do that, a fact MannKind hasn't adequately explained.

Mann might be rich but he can't bankroll MannKind forever. At the end of the third quarter, Mannkind had $98 million in cash and a credit line of around $100 million. An equity funding arrangement with Seaside, which the company has used recently to bring in more cash, is turned off with the stock trading below $6.50 a share. The company also carries about $460 million in debt.

At its current rate of spending, MannKind runs out of money in the third quarter. If spending ramps higher due to these two new clinical trials, MannKind could be forced into a series of highly dilutive stock offerings to keep the lights on. After all the setbacks and losses, Mann is going to need more than bravado and resume of past business successess to convince any sensible investor that Afrezza has a golden future.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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