After reading the MannKind (NASDAQ:MNKD) Earnings Call Transcript, it felt like MannKind is moving ahead without any fear or expectations of rejection. They don't sound like a company that's waiting on a decision, but more like a business waiting for the "go-ahead" signal.
MannKind did not show any signs of expecting another Complete Response Letter (CRL) from the Food & Drug Administration (FDA). The company made minimal attempt to get financing in case of prolonged delay or another CRL. The only additional funds they borrowed were $20M from Deerfield. This is another sign of confidence from Deerfield, as they have converted their debt into shares before. If they are willing to loan out more money to MannKind, that shows an extraordinary level of confidence in Afrezza's approval.
The only reason for the $20M loan was to give them breathing room, since July 15th PDUFA is very close to the end of the quarter. With only $35.8M in cash and equivalents, that would put them at nearly broke by that date.
Signs Of Approval Confidence And Partnerships
One of the first comments were "...we are preparing our Danbury site for commercial production by executing qualifications and validations rounds using operational infrastructure." This tells me they are so confident in approval that there's no point in waiting around. MannKind management made the decision to be prepared for production as soon as they get the approval.
Without breaking any NDA or false expectation before approval, MannKind did let us know a few things.
...please understand that the primary task of the agency at this point in addition to making their final decision is the preparation of the license. I'm sorry, the label, the [Paramus] project which is what you are sort of referring to and also probably the phase IV study for children. And there has been interaction in between our people and the agency on events program. So it is progressing, it's still under certainly the consideration by the FDA.
This sounds like they are in discussion with the FDA about possible usage and demographics for Afrezza. Normally, you don't waste time discussing Phase IV if the FDA wants to reject approval. Phase IV study is for post-marketing study for something that cannot be adequately addressed during the previous clinical studies. Post-marketing study is usually for long-term possibilities and broad demographics problems that experts don't see a problem with current data. However, they would like a study to be safe, since there's not enough data to foretell long-term effects.
In my opinion, the FDA is trying to figure out what to include in the license, because they are actually discussing Phase IV. In fact, Phase IV post-marketing studies were suggested in the ADCOM briefing documents. That should be an encouraging sign that the FDA is looking forward towards approval, since Afrezza met all its primary and secondary endpoints.
...I can answer as the partnership discussions, there are conversation going on now and those that necessarily have to wait for the NDA to be finalized. I believe that there is enough expectation of approval now which is really a question of the detail of the label and the [Paramus] program that are the only issues really outstanding at this point but one never knows what's going to happen with the regulatory process.
Basically, he is saying their potential partners are confident approval is coming. What they don't know is the terms of approval. In other words, they don't know the details of the potential license for Afrezza yet. The terms of their contracts can greatly differ if the FDA approves Afrezza for a broader demographics or usage. Since contracts must be specific and legally binding, there's not going to be a partnership signed before Afrezza is licensed. The fact that the FDA, MannKind, and potential partners are actively in discussions are some very positive signs. The NDA in place assures that it is probably a serious bid that potential partners don't want competitors to know until finalized.
Chairman of the Board and CEO, Alfred Mann, later stated the following.
...we do have sharing sessions in between our regulatory people and the regulatory people of those people as we believe to be say, top potential for partnerships. So yes we are trying to address that inappropriate say collaborative manner.
He's saying they have multiple potential partnerships. This is great news for shareholders. I prefer MannKind to have partnerships, rather than being bought out through acquisitions. Afrezza needs a few years to reach market saturation. Having an acquisition now is giving the potential buyer a discount.
The Bear Case Of Cancer Concerns
There's been plenty of drugs that have been approved by the FDA with cancer warnings. It's pretty common for the FDA to require post-marketing study of "malignancies" or "cancer". Remember that malignancy is what the FDA refers to when they are talking about cancer. In Afrezza's case, they will be talking about pulmonary malignancies, or lung cancer.
In 2012, Aegerion Pharmaceuticals was approved for its drug, lomitapide capsules. The FDA approved them and required the following.
Hologic Inc. was approved for its device, Selenia Dimensions 3D System with C-View Software Module. The FDA approved this device knowing it will increase chances of cancer.
NPS Pharmaceuticals was approved for Gattex with similar cancer concerns.
I think we get the point by now. The FDA weighs the risks and benefits. That's the whole point of having both safety and efficacy data.
I don't see much of a concern going forward. The cancer concern brought up is overblown. There were no significant sign of cancer compared to normal rates. The worst I can see is the FDA asking for a post marketing study like many other approved drugs and devices. What I see most promising is that MannKind is not waiting for approval, but anticipating approval. They are preparing for sales and expected to be under 6 months after approval. Everything Alfred Mann is disclosing points to a multiple partners in a possible bidding war.
If you still are wary of MannKind receiving another CRL, then maybe this article will boost your confidence. I think Alfred Mann's strategy of working intimately with the FDA has finally paid off. No longer do we see the old arrogant MannKind that seems to be on their own program. I believe that arrogance was gone when they were slapped with reality by the FDA. After they lost several hundred million dollars and years of potential sales, they got their act together and did what the FDA required them to do. The fact that the FDA was willing to work with them through the process after 2 CRLs means they are committed to approving this promising drug when all requirements are met. Regardless of how positive everything may seem, I caution investors that this is still a binary event.
Disclosure: I am long MNKD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.