Mannkind Denied Again by FDA; Investors Should Consider Generex

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

Back in January, Mannkind Corporation (NASDAQ:MNKD) was denied yet again by the US FDA for its approval of the inhaled insulin spray Afrezza. The company subsequently laid off about 40% of its work force and shares were hammered after a conference call held by founder and CEO Alfred Mann - who has roughly a billion dollars of his own money invested in Mannkind and its flagship product Afrezza - failed to convince investors that he would front additional cash of his own to conduct the additional trial requested by the FDA as a prerequisite for approval.

Mr. Mann later clarified his statements and stressed that he - and the rest of the Mannkind staff - were 100% behind the continued development of Afrezza.

It has since been speculated that Mannkind will look to partner the product from here on out, minimizing any additional monetary burden for Mr. Mann while sharing the risk of bringing Afrezza to market.

The FDA's January denial for Afrezza was not the nail in the coffin, rather the regulatory agency wanted to see that the next-generation Afrezza inhaler was as effective at delivering insulin as the one used in the most recent trial.

The potential still remains that Afrezza will eventually receive approval, although the timeline has now been delayed.

In what may be considered another setback, the FDA cancelled a meeting with Mannkind that would have been held on April 15th. According to the company's press release on the subject, the meeting was cancelled due to a then-imminent government shutdown.

Speculation has it that there might be more to the cancellation of that meeting than just the shutdown, but it might not be worth trying to read into the unpredictable actions of the FDA; there's more of a chance, in my opinion, that the agency was just covering its bases as it looked like Washington was coming to a stand-still.

If the FDA were giving Mannkind the cold shoulder, I would have to assume that Afrezza would have been outright denied back in January, without waiting for an excuse like a government shutdown to pop up.

Is it possible that the FDA is using a convenient excuse to bide some additional time to let a few issues develop before fully committing to the advancement of another inhaled insulin product?

It's a possibility, but I don't see that as the reason the meeting was cancelled.

That said, the next-generation inhaler will be key for regulators.

Pfizer's (NYSE:PFE) Exubera hit the market with a dud years ago, in part due to an 'inconvenient' inhaler device. Safety concerns over insulin inhalation through the lungs also added to the taboo nature of the product, and those same concerns may also apply to Afrezza.

On top of that, a former employee of Mannkind filed suit against the company last year, alleging wrongful termination and the cover-up of data in the Phase III trial. That suit was quickly dropped, but only because the former employee was found - due to a contract clause - to be bound to settling cases of wrongful termination through arbitration.

Nothing has been heard of the subject since, but one has to wonder if there's anything related to it going on behind the scenes.

With Mannkind seemingly out of the picture, at least for now, those interested in the world of inhaled insulin will be keeping an eye on Generex Corp (OTCPK:GNBT).

Generex is developing Oral-lyn, an insulin spray that delivers insulin through the inner lining of the cheek, a perceived safer method of delivery than the lungs.

In a long-awaited update from the company regarding the ongoing Oral-lyn Phase III trial, the Generex management team stated in a conference call last month that it was waiting on word from the FDA as to whether or not the roughly 550 patients enrolled would be enough to move forward with approval.

If the FDA does not ok that number, then another trial may be needed Oral-lyn as well.

So as is Mannkind, Generex is also waiting on the FDA.

The Mannkind setback has put Generex in the driver's seat for now, but an Oral-lyn delay could put them both back on an even keel.

In fact, a recent presentation by Generex at the Nasdaq has many investors wondering if Oral-lyn even has a chance, seeing as how AE37 has been labeled as the 'centerpiece' of the company's new strategic initiatives.

As we can see, inhaled insulin spray is a risky business, but the potential rewards if one or both of these products make it to market is huge.

To realize that potential, both Mannkind and Generex have to get through the FDA.

Mannkind's press release last week stated that the cancelled meeting would be rescheduled, and since Washington is still open for business (although nothing ever gets done there), it's expected that a rescheduling will be announced soon.

If not, then it's safe to buy into the theory that there is something more to the cancellation than what's been said.

Until then, the cancellation is a non-factor.

Disclosure: I am long MNKD, OTCPK:GNBT.