After last month's positive news on its Phase III clinical studies, a lot of attention has been given to MannKind's (NASDAQ:MNKD) novel diabetes treatment, Afrezza, an inhalable insulin powder used to replace injectable insulin. The positive attention to Afrezza may well be justified because if MannKind or any company can develop a better treatment for battling diabetes, which has become a global epidemic, the company and investors should be well rewarded. According to the World Health Organization there are over 347 million people who suffer from diabetes, and by 2030 it is estimated to be over half a billion. Transparency Market Research expects the global insulin market to reach $32 billion by 2018.
MannKind has seen its stock rise over 150% to a high of $8.75; however, the stock has pulled back as investors digest the information and watch the progression toward FDA approval. I believe that there is a big question that needs to be addressed for the stock to experience significant gains: Once FDA approved, can MannKind successfully commercialize Afrezza?
In order to successfully commercialize Afrezza the company will need a partner that has a strong sales and marketing force, something that MannKind lacks. Therefore, MannKind must find a Big Pharma partner; and after the failure of Pfizer's (NYSE:PFE) inhaled insulin drug, Exubera, which cost Pfizer $2 billion, some question if big pharma will be so quick to partner with MannKind on another inhaled insulin product. I believe that MannKind will find a partner because, other than being an inhaled product, there is little comparison between Afrezza and Exubera. Exubera was bulky, expensive, and not well received by insurance companies thus making the product very difficult to gain any sales traction.
MannKind has worked diligently to address those issues, developing a small hand held applicator much like asthma inhalers, and it appears the company will price Afrezza competitively against injectable insulin. But MannKind will not be without future competition as a number of companies, big and small, are developing novel treatments to battle diabetes in hopes of developing the next blockbuster drug.
GOOGLE BACKS SMALL COMPANY DEVELOPING INSULIN PILL
Google's (NASDAQ:GOOG) investment, Google Ventures, announced earlier this month that it invested over $10 million in series B funding in Rani Therapeutics, a privately held company based in San Jose, CA. Rani is developing a novel oral diabetic platform to convert injectable forms of insulin and TNF inhibitors into oral capsules. According to the company, the platform showed "double-digit" bioavailability in preclinical trials when taken orally. This is a positive step considering that previous oral insulin drugs have been difficult to develop because, in order to be effective, the drugs need to retain structural integrity entering the bloodstream-- and the destructive ability of the digestive tract prevented oral drugs from getting into the bloodstream.
Mir Imran, Rani Therapeutics chairman and CEO, commented on the progress of the oral insulin platform: "We are keenly aware of the magnitude of the problem we are solving, and the potential impact this technology could have on the market. We are seeing tremendous results from our pre-clinical studies."
According to Rani the funding from Google Ventures, InCube Ventures and VentureHealth, will support further development of the platform that will deliver peptides, proteins and antibodies, therapies, and vaccines in oral forms. Having Google as a backer gives Rani access to funding giving the company the ability to compete with its Big Pharma rivals. Mir Imran commented on Google's investment: "Google Ventures' investment is a great vote of confidence in our company, and we are looking forward to the next exciting phase in our development."
ORAMED: MAKING DIABETES AN EASIER PILL TO SWALLOW
Oramed Pharmaceuticals (NASDAQ:ORMP) is a small development-stage company out of Jerusalem, Israel. The company entered Phase II trials for ORMD-0801, its proprietary orally ingestible insulin drug delivery system developed to eliminate multiple daily insulin injections for type 2 diabetes. ORMD-0801 also helps slow the progression of diabetes, and reduces the severity and onset of life threatening and debilitating conditions associated with the disease.
Oramed has addressed the issue of maintaining the structural integrity of the pill as it passes though the gut by designing the capsule with an enteric coating so the insulin protein retains its integrity and effectiveness after crossing biological membranes in the gut. Oramed has found another benefit to using its oral insulin as opposed to an injectable: the oral insulin has the added benefit of mimicking insulin's natural location and gradients in the body by first passing through the liver before entering the bloodstream.
Earlier this month Oramed announced that it had initiated patient recruitment for a new clinical trial of ORMD-0801 for patients with type 1 diabetes mellitus (T1DM) in Israel. Prior clinical studies have shown that ORMD-0801 administered to T1DM patients just prior to eating effectively kept their blood sugar levels stable. Oramed CEO, Nadav Kidron, commented on the development of the platform: "We wanted to do more than just replace injections - we wanted to provide an alternative oral medication as an earlier treatment that can extend the second phase [of disease prognosis] and prevent patients from becoming insulin dependent."
Oramed recently received approval for a key patent from the State Intellectual Property Office in China. The patent, the company's 8th, covers a core concept of the company's technology. Oramed has 27 more patents pending. This could be a big step for Oramed considering China's healthcare sector is growing at an accelerated rate, with healthcare spending projected to reach $1 trillion by 2020.
Though well off its 52-week high of $10.68, this $53.8 million market cap company's stock is still up over 2200% year over year, closing Wednesday September 18th at $6.79 per share. Though the stock has moved on the positive data, it is a long way from Phase II tests to FDA approval. However, if ORMD-0801 gains FDA approval, that still doesn't guarantee a successful product. In order to compete with the giant pharmaceutical companies, just as MannKind, Oramed would need to seek out a large pharmaceutical company with the marketing and sales power needed to compete, especially now that Google has invested in a company trying to develop its own oral insulin treatment.
REGENERON PHARMA: SOMETIMES IT'S BETTER TO BE LUCKY THAN GOOD
Regeneron Pharmaceuticals (NASDAQ:REGN), known for its macular degeneration and colorectal cancer drug, aflibercept, which is marketed as Eylea or Zaltrap, may have stumbled on to another use for the drug-- treating diabetes. A new study by researchers at Stanford University School of Medicine has identified a previously unexpected link between a low-oxygen condition called hypoxia and the ability of cells in the liver to respond to insulin. These findings bring hope of possibly developing a range of fresh diabetes therapies.
For the liver to function properly, it has to have easy access to blood, which carries both glucose and oxygen. When certain liver cells have limited access to oxygen they enter a state of hypoxia, which produces certain proteins allowing the cells to function under severe conditions. And scientists have found the link between how liver cells respond to insulin and hypoxia's biochemical pathway. And that is where aflibercept comes in; the drug is capable of regulating hypoxia s biochemical pathway.
The research, which was done on mice, found that one protein in the hypoxia pathway, HIF-2alpha, causes the expression of insulin receptor substrate 2 (IRS2) that boosts cells' response to insulin. It was also found that the drug, aflibercept, a so-called VEGF inhibitor that treats cancer by starving cancerous tumors of oxygen, can increase the number of hypoxic cells in the liver of laboratory mice. And this increase in HIF-2alpha levels and IRS2 expression resulted in the mice becoming better able to handle increases in blood-glucose levels. The researchers observed that deletion of HIF-2alpha gene blocked the effect of the drug, while liver-specific initiation of HIF-2alpha expression also markedly improved the mice's glucose tolerance.
Add to that because the drug doesn't appear to affect other similar proteins in the liver, this finding could lead to possibly a diabetes treatment that would avoid undesirable or dangerous side effects. According to Amato Giaccia, study author and professor at Stanford School of Medicine: "Targeting the Phd3/HIF-2 pathway represents a new therapeutic approach for the treatment of diabetes with little toxicity. These studies indicate that Phd specific inhibitors, especially Phd3, should be more widely developed for clinical development."
Dr. Calvin Kuo, professor of medicine at Stanford University, also commented in a news release: "We were surprised to find that this drug currently used in patients for cancer treatment had beneficial effects on diabetes in laboratory mice and could, potentially, in humans. Anecdotally, there have been reports that diabetic patients who have been prescribed VEGF inhibitors to treat their cancer are better able to control their diabetes."
While this is positive news, it's a long way from mice studies to human clinical tests. However, if aflibercept does show promise in treating diabetes, Regeneron, with its partnerships, has the sales and marketing force behind it to make the drug a blockbuster. Aflibercept was developed in collaboration with the French drug maker Sanofi (NYSE:SNY), and Bayer HealthCare (OTCPK:BAYZF) licensed the exclusive marketing rights outside the United States, where the companies share equally the profits from sales under the name EYLEA, except for Japan where Regeneron receives a royalty on net sales.
Regeneron stock has almost doubled in the past year, closing on Wednesday September 18th at $309.17, as the company has a handful of possible excellent drugs in its pipeline, including a novel cholesterol treatment, alirocumab. Phase III results are expected by year's end. Alirocumab inhibits the PCSK9 protein, which is active in cholesterol synthesis, allowing for more cholesterol to be removed through the liver. Analysts at Lazard Capital initiated coverage on Regeneron and set a target price of $325 per share.
Regeneron is a long way from any clinical trials on aflibercept for diabetes. However, the stock has been surging as of late, up over 33% in the last month, in part due to aflibercept's 2012 net sales of $837.9 million and tripling its revenue when compared to 2011 to nearly $1.4 billion. And though I like the versatility of aflibercept, along with the company's new cholesterol drug, alirocumab, I am concerned that the stock has risen too high, too fast. It now has a PE of 41.29, far above the sector average. I would wait for a dip before entering the stock.
MannKind will probably receive FDA approval for Afrezza, and analysts at MLV & Co see sales reaching $3 billion by 2025. But caution must be taken as risks still abound-- MannKind is basically a one-product company. However, that one product could turn into a blockbuster if approved and handled properly. Though the stock has risen significantly this year it has also given back over 30% since its August highs, and now appears to be a good entry at this price point.
While I like that Google is investing in an oral diabetes medicine via Rani Therapeutics, the success or failure of the drug won't affect Google's stock one way or the other. Oramed, on the other hand, is further along on its insulin pill, and if its Phase II trials are successful it becomes one step closer to being the first oral insulin to hit the market. While Oramed does not have investors like Google, if the drug continues to show positive results, Oramed will likely find large pharmaceutical partners banging at its door to handle marketing and sales. And if that happens I could see the stock rising significantly. Lastly, though I think Oramed has great potential, until its oral insulin is FDA approved, the stock also has great risk.