MannKind: If You Buy, When?

| About: MannKind Corporation (MNKD)

Mannkind's (NASDAQ:MNKD) lead product is Afrezza, which is an inhalable rapid acting insulin. It has been before the FDA once, in January 2011, and was not approved. Afrezza is used at meal time to control post-prandial blood glucose levels. It can be used in addition to a long acting basal insulin.

Is there a need for inhalable insulin? One would think inhalable insulin would be well accepted by patients, but the first entry into this market, Pfizer's (NYSE:PFE) Exubera, was a market failure. This was, in part, because the delivery device was difficult to use by patients. After being withdrawn from the market, there were some safety concerns raised also. One of the nice things about insulin, inhalable or injected, it is easier to precisely correlate dosage with blood sugar levels because insulin is easily titrated. This is not true of oral hypoglycemic drugs. However, Mannkind's product is easier to use than Exubera, so it may be better accepted if it is approved.

Is there a need for and ultra rapid-acting insulin, i.e., will it improve post-prandial glycemic and fasting blood glucose levels in patients? Mannkind's CEO, Alfred Mann, speculates that in the ongoing trials Afrezza may demonstrate superior glycemic control; "I expect in this trial that compliant-AFREZZA patients will reach HbA1cs below the age American Diabetes Association's target of 7% and even the Endocrinology Society's goal of 6.5% and without increased risk of hypos. Indeed, my belief is that many patients are likely to reach A1Cs below 6%.". One of the trials, from, is "Comparison of Technosphere Insulin Versus Technosphere Powder (Placebo) in Insulin-Naive Subjects With Type 2 Diabetes Mellitus". The Primary Outcome Measure is Efficacy as measured by change in glycated hemoglobin (HbA1c) and the time frame is 24 weeks. The other key trial, also from, is "Clinical Trial Evaluating Technosphere® Insulin Versus Insulin Aspart in Subjects With Type 1 Diabetes Mellitus Over a 24-week Treatment Period". The Primary Outcome Measure is similar, effect of treatment as measured by change in glycated hemoglobin (HbA1c) and the time frame, again, is 24 weeks.

These clinical trials, with recruiting difficulties, are now scheduled to be completed in early 2013. (Many patients did not meet entry criteria, causing a recruiting delay.) Although evidence showing that afrezza may actually improve HbA1c levels is not available yet, Alfred Mann's logic seems sound and certainly the rapid acting insulins on the market have been beneficial.

Another investment risk, the company will need to raise more capital, which will continue to dilute share value. Matthew Pfeffer, Chief Financial Officer of MannKind Corporation stated in the May 2012 earnings call "With our cash in hand and amount remaining available under the credit facility from Al, we believe we will be able to fund our operations into the fourth quarter of 2012. We continue to pursue additional funding opportunities to extend our cash runway, but I cannot comment further until we have something definitive to announce." It seems well established that Alfred Mann is committed to approval of Afrezza, so that may mitigate some of the risk as to whether Mannkind can raise additional funding.

Afrezza likely provides some additional clinical benefit and convenience of use, compared to current rapid-acting insulins, but this really won't be known until more data is released. Buying Mannkind, at the right price, may be a good long term speculative play. Obviously, the type 2 diabetes market is large and growing. There are a lot of drug development efforts targeting this type 2 diabetes epidemic. Human Genome Science, Inc. (HGSI) in collaboration with GlaxoSmithKline (NYSE:GSK) are developing Albiglutide, another glucagon-like peptide 1 agonist, for treatment of type 2 diabetes. Increases in obesity is one of the drivers of this type 2 diabetes epidemic. Arena (NASDAQ:ARNA) and Vivus (NASDAQ:VVUS) are developing obesity drugs, Lorcaserin and Qnexa, that face key approval decisions in June and July this year, respectively. Orexigen's (NASDAQ:OREX) drug, Contrave, will likely be submitted for approval in 2014, pending the outcome of a cardiovascular outcomes trial. Given that Mannkind will need to raise money, and consequential dilution of share value, the question then becomes at what share price are these risks balanced? Mannkind share price deserves a watchful eye between now and the end of 2012 to see if it can be acquired at a low enough price to justify the multitude of risk factors. Alternatively, a good time to buy shares may be immediately after Mannkind secures enough funding to complete the next submission to the FDA. Either way, the best descriptive word of this buying opportunity remains "speculation".

Disclosure: I am long ARNA.