Mannkind: Denied Yet Again

Includes: GNBT, MNKD
by: VFC's Stock House

Just a couple of days after highlighting Mannkind (NASDAQ:MNKD) as a 'Stock to Watch' for the coming weeks, the company announced that it had received a 'complete response' letter from the FDA announcing that more trials would be needed before the FDA would once again consider approving Afrezza, Mannkind's developmental inhaled insulin product that has once before turned back by the regulatory authorities.

MKND plunged by nearly 50% in after-hour trading once the news hit the wires.

In addition to the request for two more trials, the FDA also requested a more detailed synopsis of Mannkind's next-generation device. CEO Alfred Mann, who himself has nearly a billion dollars invested in his company and has expressed optimism about the chances of ultimately seeing Afrezza approved, spun a positive light by emphasizing that the request for additional information by the FDA indicates that the administration is willing to approve the product, once its questions and concerns are satisfied.

Another factor that may now come into play is the status of the lawsuit filed last year by a former Mannkind employee who alleged fraud in the Phase III Afrezza trial. This employee, John Arditi, subsequently pulled the suit since it conflicted with his contract that dictated he settle any 'wrongful termination' charges via arbitration. An FDA approval would have allowed Mannkind to move past the immediate threat of Mr. Arditi, but if his charges resurface in any public forum, then that's bad publicity that the company doesn't need as it concentrates on the new trials and fulfilling the FDA's immediate concerns.

This most recent delay may also be an indicator that the FDA still has a ways to go before being convinced that an insulin spray is truly the wave of the future for diabetic treatment, and this fact not only effects Mannkind, but also Generex, as that company advances Oral-lyn through Phase III trials.

In respect, investors of Generex (OTCPK:GNBT) can take the MNKD setback as a positive development to give Oral-lyn time to make up some ground, but an Afrezza approval would not have been an entirely negative event as it would have signalled acceptance by the FDA of the 'insulin spray' delivery method. That said, the two insulin sprays are inherently different in that Afrezza uses the lungs to absorb the insulin whereas Oral-lyn uses the inner lining of the cheek. Some in the medical profession have indicated that using the cheek lining is a safer method of delivering the spray insulin than the lungs.

Although investors of GNBT will be delighted with the MNKD news, since the two sides are essentially in competition with one another, the bigger picture has us still looking at the FDA as resistant to shifting course from the established standare of diabetic care - which is the needle.

Additionally, diabetics themselves who are anxiously awaiting an alternative to needles are left to wonder if there is any relief in sight.

The drama continues, and unfolds one step at a time. It's my opinion that the next phase of this story worth watching will be the Oral-lyn Phase III updates, or results, that could give us a hint as to whether Generex will be able to capitalize on the Mannkind setback.

Generex has been quiet of late, but any breaking news on the Oral-lyn front could ignite new life into the company, if not the GNBT stock, which has traded with no life thus far in 2011.

Investors confident that Afrezza will see an approval at some point may jump at the opportunity to purchase shares during any dips caused by the delay news, but we may have a little bit of time for that before a rebound is in place, in my opinion.

For now, at least in the world of 'insulin without needles,' the attention turns to Generex.

Disclosure: Author long GNBT