The Biotech Stock Mailbag has returned after a short summer hiatus. Let's kick off with MannKind (MNKD).
Tim H. writes:
Inevitable Fall of Mannkind. HA HA HA HA HA HA!!!! Shares rocketed after hours on the approval. Where do you come up with your gobbledygook? Nothing but gibberish and useless words, Adam? Why do you do it? Do you have any idea what you are talking about?
MannKind won FDA approval on June 27 for its inhaled, rapid-acting insulin device Afrezza. Two weeks on, let's check the MannKind chart.
MNKD data by YCharts
I'm not seeing the rocket. MannKind is acting very much like I thought it would, post Afrezza approval:
Using Arena Pharmaceuticals ( ARNA) (a very similar, retail-driven cult stock) as a precedent, MannKind should go even higher as we get closer to July 15, but if/when Afrezza is approved, the sell off begins.
Arena had a marketing partner, Eisai, in place when its weight-loss pill was approved. MannKind still needs a marketing partner for Afrezza and has promised investors a deal. We wait for the announcement.
Shane S. asks:
Adam, what are you thoughts on the label received by MannKind for its inhaled insulin Afrezza? Do you think it was better or worse than expected? How do you see the label impacting potential partnerships for the product? Thanks.
The Afrezza label makes it tougher for Mannkind to find a partner (at advantageous terms) and to sell the product. Let's start with what FDA did not allow Mannkind to include in the Afrezza label: Any clinical advantages of inhaled insulin over injected insulin with respect to hypoglycemia (low blood sugar events) or less weight gain. Hypoglycemia is actually listed as a risk of using Afrezza. These were issues raised by FDA at the Afrezza FDA advisory panel meeting, so I'm not surprised to see the label reflect them.
Information included in the Afrezza label isn't particularly helpful to MannKind either. The black box warning barring Afrezza in diabetics with lung disease isn't a surprise, but it certainly doesn't make the product user friendly. The requirement for spirometry (lung function) testing is a time waster and a pain in the ass for harried doctors and their nurses.
The Afrezza label warns about decreased lung function (bronchospasms.) MannKind is also required to establish a risk-management plan to educate doctors about the "serious risk of acute bronchospasm associated with Afrezza."
Then's the risk of lung cancer also mentioned prominently in the Afrezza label. As a post-approval commitment, MannKind is required to conduct a study (or studies) to further evaluate the product's risk related to lung cancer, cardiovascular outcomes and decreased lung function.
The post-approval Afrezza data commitment stands out as the most significant, potential deal breaker between MannKind and a marketing partner. If FDA insists on large studies and not just a patient registry, MannKind or its partner will need to spend a lot more cash up front before Afrezza revenue rolls in. And think about this: What happens if these risk evaluation studies (or even a registry) come back showing a more definitive link between Afrezza and lung cancer or meaningful reductions in lung function? Afrezza would be dead and three, four, or five years of investment in the product's marketing would be flushed down the drain.
That's a nightmare scenario which is surely weighing on the minds of any business development executive inside Big Pharma considering getting into bed with MannKind.
MannKind has never been in a position of strength when it comes to negotiating an Afrezza marketing partnership. The company does not have the financial resources to sell Afrezza on its own, and every potential partner sniffing around the product knows this and will use it to their advantage. MannKind bulls were hoping for a strong Afrezza label to tilt leverage in the company's direction, but that didn't happen. None of this means MannKind can't find a partner, but it will likely require the company to take on more financial risk and/or reduce its share of Afrezza's economics.
The Afrezza label looks and reads very much like the label given to Pfizer's failed Exubera. The Afrezza device is smaller than the "bong" required to inhale Exubera, but that's MannKind's only selling point and not enough to turn Afrezza into a blockbuster product. MannKind's current market valuation nears $4 billion.
A follow-up to the posting last week of my calendar of tradable biotech and drug events for the remainder of 2014: