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It seems I have been hearing a lot lately about Mannkind's (NASDAQ:MNKD) Afrezza, an inhaled form of rapid acting insulin. Afrezza completed phase 3 trials in 2009 and submitted an NDA for Afrezza to the FDA in May 2009. All was going well for MNKD and its stockholders until this March when the the FDA requested more information before agreeing to approve its experimental inhaled insulin device. The FDA asked for more information on data from the phase 3 clinical trial for Afrezza, as well as information about the insulin delivery device. The FDA expressed a need for more information to support the clinical utility of Afrezza and which patient population group Afrezza would be indicated for. In addition, the FDA also asked for a safety update, but did not ask for additional clinical trials or cite safety concerns. New fears and concerns over what seemed to be (in investors mind) a sure approval caused a 30% drop in stock price, which has yet to recover.

Investors have plenty of reason to be skittish about Afrezza, as companies attempting to market inhaled insulin products have had some serious bumps in the road. Several years ago, many companies were seeking to bring an inhaled formulation of insulin to market as an alternative to injected insulin. Pfizer's (NYSE:PFE) Exubera was the first to gain marketing approval in September 2006, but as early as October 2007 Pfizer pulled Exubera from the market due to low sales, losing $2.8 billion in development costs. Other drug makers including Eli Lilly & Co. (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO) were quick to follow Pfizer's lead, and halted development of their inhaled insulin products.

Since then, Mannkind has been the only major player in the inhaled insulin market to continue with development. Mannkind is taking the stance that the commercial failure of Exubera was due to problems with patient acceptence, and in response made the size of the Afrezza delivery device significantly smaller than Exubera, changed the dosing measures to milligrams instead of units as was with Exhubera, and hopes to market better focusing on managed care acceptance. But marketing was not the only problem with Exhubera - because of a six cases of lung cancer which occurred in Exhubera users , the FDA required Exhubera users to be monitored for signs of lung cancer as part of a mandated risk evaluation and mitigation strategy (REMS).

Investors were also nervous about data released after the original Afrezza trials , where Mankinned described "small, non-progressive differences" pulmonary function decline over time and the risk of respiratory difficulty immediately post-inhalation. In response to these observations, Mannkind ran a follow-up safety trial examining changes in pulmonary function after patients stopped use of Afrezza and resumed usual insulin treatment. MannKind said the changes disappeared three months after patients resumed usual therapy. However, the REMS imposed on Exhubera and the potential safety concerns with Afrezza has caused investors to worry that the FDA could impose arduous safety warnings or require new clinical trials. As well, MannKind has been searching for a partner for some time to help finance the launch of Afrezza; but reportedly, a big drug maker who was close to making an agreement has shyed away.

Partnership or not, Afrezza still has to jump through alot of hoops during the approval process. The original approval was delayed in January because the FDA had not yet completed its inspection of the insulin manufacturing facilities of N.V. Organon, a third-party supplier to the company. In addition, the FDA had issue with the name: The FDA requested that the trade name of the product (formerly known as Afresa) be changed in order to avoid confusion with existing drug names (with totally different indications) that could lead to prescription filling errors because they look (when written) or sound or look alike Afresa (Abreva, or Advair, or of particular interest Aprida, another kind of fast-acting insulin.

But the more worrisome questions are: Will Afrezza require a burdensome REMS because of lung cancers diagnosed among Exubera-treated patients? Will Afrezza require mandated pulmonary function tests? Even apart from these regulatory issues required for approval, a simple "black box" labeling required with approval or caution against use in certain patients could possibly diminish acceptance and use of Afrezza.

The drop in stock price of Mannkind suggests that many investors are asking these questions. Apart from these questions, while considering an investment in Mannkind, I have pondered additional questions, and you can bet the FDA is pondering them too. Given the past debaucle with inhaled insulin I am not convinced Afrezza is really any different.

With Exubera the inhaler was considered cumbersome and dosing may have been too complicated- has Afrezza overcome this? Is this enough given all the other potential issues?

Is there an unmet medical need that Afrezza meets? Mannkind states that the pharmacokinetic profile of Afrezza sets it apart from all other insulin products: The large surface area of the lung provides unique access to the circulatory system and thus allows rapid absorption and fast action. Does Afrezza help diabetics have better control of their blood glucose compared to rapid acting insulin injection? There is no data to support this claim, and Mannkind does not make it.

Do diabetics, who are well conditioned to tolerate injections, see any discomfort, convenience, or safety advantage to Afrezza? (Disclaimer: I am not diabetic and may be insensitive to this issue, my apologies if my assumptions are wrong). Is the inhalation cartridge system and apparatus is more convenient that it predecessor Exhubera? A complicated REMS would certainly affect convenience, and the (unvalidated) lung cancer risk with inhaled insulin doesn't make it safer. What outcome of diabetes treatment that Afrezza positively affect? Is there any benefit worth the risk?

Given the history of oral insulin products and the potential liabilities of Afrezza, Mannkind must convince the FDA that Afrezza is an innovative drug that satisfies unmet medical needs for a highly prevalent patient that cannot tolerate injected insulin. At best, Afrezza has demonstrated non-inferiority over fast acting injected insulin and offers no incremental benefit.

After pondering these questions my final question is: Why bother? I fear the FDA may come to the same conclusion. As such, I see MNKD as a significantly overvalued stock, whose market capitalization is inflated by hype, not substance. A deeper thought into all the issues surrounding Afreeza suggest that the risk of MNKD stock is shy of reward.

Disclosure: I have no position in MNKD

Source: Mannkind's Afrezza Seems Short of Breath