Biotech Stock Mailbag: MannKind, Mast Therapeutics, Bluebird

 

BOSTON (TheStreet) -- Welcome back to another Biotech Stock Mailbag. 

I can't answer your MannKind (MNKD) Afrezza question directly, not because I'm trying to dodge, but because I don't know if there's an Afrezza prescription number eight weeks from launch that will tell us much. [I'm assuming the extremes -- only a handful of Afrezza scripts or tens of thousands of scripts written in eight weeks -- doesn't happen.]

Afrezza will compete against other rapid-acting, mealtime insulins, so one way to assess the commercial launch will be to compare Afrezza scripts and market share against the competition.

In a recent research note, RBC Capital Markets analyst Adnan Butt compiled quarterly total scripts, growth and market share for the fast-acting insulins. The data come from IMS Health.


As a new product, Afrezza is not going to match the total scripts of its established competitors right out of the gate, but if the product's launch is successful over time, it will 1) win significant market share from competitors (diabetics switching from their current injectable mealtime insulin to Afrezza), and 2) accelerate growth in the entire rapid-acting insulin category (diabetics not using injectable insulin currently deciding to try Afrezza.)

Afrezza will be viewed as a commercial disappointment if it fails to gain significant market share or grow the mealtime insulin market over the next months and quarters. If you have the ability, watch weekly, monthly and quarterly IMS prescription data (or Symphony Health prescription-tracking data, if that's your preference.)

Afrezza will also draw invariable comparisons to the last, failed inhaled insulin -- Pfizer's (PFE) Exubera. For reference sake, Exubera was approved in January 2006 and launched in September 2006 (delayed due to manufacturing issues.) In October 2007, Pfizer pulled Exubera from the market due to poor sales. Through the first nine months of 2007, Exubera sales were only $12 million.

I'm a MannKind bear, so I'll take the under on Afrezza sales.

RBC's Butt is a quasi-MannKind bull. He has a buy rating on the stock with a $13 price target but with a "speculative" risk warning. Here's how Butt derives his $13 per share price target for MannKind:

We value MNKD at $13 per share, which includes US and EU profit/expense splits for Afrezza with Sanofi. We assume a US launch in 2015 and EU in 2017. MNKD will retain manufacturing responsibilities while Sanofi is responsible for commercial efforts. We forecast peak Afrezza sales of more than $7B WW with peak profit split ~$1.7B for sales in the US and outside the US.

Afrezza peak sales of $7 billion would make it the best-selling mealtime insulin in the world, but that only translates into a $13 per share price target for MannKind in Butt's model. That's another reminder of MannKind's ugly balance sheet.

Butt's $13 price target on MannKind is a double from where the stock trades today, but MannKind was an $11 stock right after Afrezza's approval in late June. In other words, MannKind's valuation already bakes in billions of dollars of Afrezza sales.

Josh A. asks, "Can I get your assessment of Mast Therapeutics (MSTX) as the potential for winning with a drug for sickle cell disease? I feel like this stock is very much overlooked by everyone but maybe that's for a good reason. I don't know, so your help would be great."

Sickle cell disease has been a buzz-worthy topic for biotech investors in recent months, mainly because of the potential for gene therapy to correct or cure the underlying cause of the disease. Bluebird Bio (BLUE) presented positive and really exciting data in beta-thalassemia (a disease related to sickle cell) last December. Bluebird is now testing its gene therapy in sickle cell patients with initial study results expected later this year.

Mast Therapeutics takes a different approach to treating sickle cell. Its lead drug vepoloxamer is designed to act like a hematological lubricant, preventing "sickled" or deformed red blood cells from clumping together and blocking arteries. When this happens, sickle cell patients experience an extremely painful "crisis" which damages organs, requires hospitalization and intensive pain management.

Mast is conducting a phase III study with a goal to demonstrate that sickle cell patients treated with vepoloxamer have shorter and less painful crises than patients treated with a placebo. Mast expects to have results from the study in the first quarter of 2016.

Bluebird's market cap tops $2.5 billion. Mast's market cap is less than $60 million. That's quite a large valuation rift, but then investors are more excited about Bluebird's gene therapy because it can potentially cure sickle cell. At best, Mast's vepoloxamer is only going to treat a symptom of the disease, albeit a very important symptom.

Investors have also shunned Mast because vepoloxamer has a long and troubled history. The drug's provenance dates back to the 1980s with the founding of Cytrx Corp. (CYTR) In the 1990s, Cytrx licensed an older version of vepoloxamer to Burroughs Wellcome (now GlaxoSmithKline (GSK) ) which tried to develop the drug to treat heart attacks. Burroughs/Glaxo abandoned the program because the drug caused unacceptable kidney toxicity.

CytRx then developed a purified version of the drug aimed at reducing the risk of kidney toxicity. This "new" drug became poloxamer 188. CytRx conducted a phase III study of poloxamer 188 in sickle cell patients but the results were disappointing. Treatment with poloxamer 188 shortened the duration of painful crises by 9 hours compared to a placebo, but the difference was not statistically significant. A review of the phase III study published in JAMA in November 2001 described poloxamer 188's effect as "modest."

Following the failed phase III study, CytRx divested poloxamer 188 to a small private company, SynthRx, in 2004. For the next six years, nothing happened with poloxamer 188. In 2010, SynthRx was acquired by Adventrx Pharma for about $6 million in stock. AdventRx had stumbled badly trying to develop improved version of old cancer chemotherapies, so buying SynthRx and poloxamer 188 on the cheap was a way to turn the page and start fresh.

Under AdventRx's control, poloxamer 188 became ANX-188. Later, Adventrx became Mast Therapeutics and ANX-188 became MST-188 or vepoloxamer. That's where we stand today.

Mast blames vepoloxamer's previous failures on poorly designed studies and not because the drug is ineffective. The company believes the current phase III study is designed to better demonstrate a statistically significant reduction in the duration of painful sickle cell crises.

We'll know if Mast is right in about one year. Meantime, investors don't appear to have a ton of confidence in the company at all. Mast's enterprise value is just $16 million. Maybe the best you can say about Mast is that anyone buying the stock today -- with eyes wide open -- isn't risking much.

Speaking of Bluebird...


Bluebird isn't providing much help, telling investors only that sickle cell data will be presented in 2015. If Bluebird follows previous form, the most likely venue for the sickle cell data will be the European Hematology Association meeting, June 11-14.

The EHA meeting last June was where Bluebird presented the first beta-thalassemia data. The company issued a press release on May, 14, 2014 announcing the EHA data presentation, which caused the stock to move higher. I don't know if Bluebird will do the same this year.

After EHA, I'd expect the next most likely presentation forum would be the American Society of Hematology annual meeting in early December.

Bluebird's disclosure practice to date has been to announce clinical data at medical meetings and not solely via press release.

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.

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