MannKind Corporation (NASDAQ:MNKD) is a biotechnology company with a market capitalisation of ~$430 million and current share price of $2.57. MannKind's lead product in development is Afrezza, an inhalable insulin used in the treatment of Type 1 and Type 2 Diabetes. MannKind has had some significant setbacks over the last couple of years. The company's share price was $10.48 in March 2010 when it received its first Complete Response Letter from the FDA for Afrezza. Consequently the share price plunged to $4.95 before climbing back to a peak of $9.64 in January 2011 when it then received a second Complete Response Letter. Following this MannKind cut 47% of its staff and put a hold on development of its other pipeline products to focus on Afrezza.
In the first instance the problem was primarily related to an updated version of the Medtone inhaler device (Model D) that the company was planning to use commercially. Unfortunately, this was different to the actual device that was used in clinical trials (Model C). In the second instance, MannKind submitted new data on another version of the inhaler dubbed Dreamboat that they felt was superior to the Medtone inhaler devices, and showed comparability of the new device using in vitro and bioequivalence data. The FDA deemed that this data was not sufficient and that 2 more clinical trials were necessary, one for Type 1 Diabetes, and one for Type 2 Diabetes. They also wanted at least one trial that included the first-generation Medtone inhaler device (Model C) so that a head-to-head comparison of the pulmonary (lung) safety of both devices could be assessed. These trials are expected to near completion by early 2013.
Although it may appear that this part of the approval process was poorly planned, the reality is that if the company had stuck purely with the first-generation Medtone inhaler device (Model C) in their New Drug Application (NDA), it was still no guarantee of patient or physician acceptance of the product even if approved by the FDA. In the Dreamboat device the company have something that is smaller, easier to use, more effective, and cheaper to manufacture, so it has done the right thing in trying to get this newer generation device accepted. Having said that, I think the FDA has also rightly requested more clinical evidence to support the use of the newer device. Unfortunately, the market has not looked upon this too kindly! However, at present there is no other product like this available anywhere in the world. Although it is not the first time we have seen inhalable insulin. Between 2006 and 2007, Pfizer (NYSE:PFE) in collaboration with Nektar Therapeutics (NASDAQ:NKTR) had an inhalable insulin called Exubera on the market. In fact in 2005 Pfizer reportedly paid $1.3 billion to Sanofi-Aventis (NYSE:SNY) to acquire worldwide rights to Exubera. Pfizer and Sanofi-Aventis at the time had joint rights to Exubera. Exubera was discontinued the following year due to poor sales. Interestingly at the time there were other inhalable insulin products in development, including one with Novo Nordisk (NYSE:NVO) in collaboration with Aradigm (NASDAQ:ARDM), one with Eli Lilly (NYSE:LLY) in collaboration with Alkermes (NASDAQ:ALKS), and of course MannKind's Afrezza. Both Novo Nordisk and Eli Lilly discontinued development of their products in 2008, stating poor commercial prospects, and presumably influenced by the failure of Exubera.
Exubera was a large cylinder shaped device that was cumbersome to use and not practical to carry around on a day-to-day basis. Regular users of Exubera also required regular lung function tests, and more importantly Exubera was expensive to use without offering any medical advantage over existing injectable insulin treatments. Some areas where Afrezza differs include it being a much smaller device that is reportedly easier to use, and according to MannKind will be at a price that is only a small premium to standard treatments. Afrezza is a rapid acting insulin. It is loaded into the Dreamboat device as a dry powder and inhaled into the lungs. Once it reaches the small airways of the lungs it gets absorbed directly into the bloodstream. It becomes effective within 12-14 minutes of inhalation, and lasts 2-3 hours. Standard injectable rapid acting insulin can take 30-60 minutes to become effective and can last for much longer. Afrezza more closely mimics the natural release of insulin in the body, and its shorter duration of action results in less risk of hypoglycemia (very low sugar levels). This form of insulin will have a different place in clinical practice for Type 1 and Type 2 diabetics. To understand where it fits, I will first get back to some bare basics about diabetes that I have skipped over thus far.
Diabetes is a chronic condition that results in high levels of glucose (sugar) in the blood. Glucose levels are regulated by the hormone insulin which is produced by cells in the pancreas. Insulin enables uptake of glucose by cells in the body, glucose is like an energy source for the cells. With diabetes there is either an absence of insulin due to non-functioning insulin-secreting cells in the pancreas (e.g. Type 1 diabetes), and/or reduced sensitivity to insulin by the body's cells (e.g. in Type 2 diabetes). Type 1 diabetes tends to be commonly first seen in younger people, whereas Type 2 diabetes is more commonly seen in adults and related to factors such as obesity. The consequences of uncontrolled diabetes include heart disease, kidney disease, eye disease, as well as nerve damage to the extremities, sexual dysfunction, foot ulcers and infections. Type 1 diabetes requires treatment with insulin. Standard treatments include a basal-bolus regime of insulin where a patient gets a long-acting basal insulin injection, e.g. once or twice daily, plus rapid acting prandial (with or pre-meals) insulin injections throughout the day. Note that some patients will instead have a 24 hour infusion of a rapid acting insulin. With Type 2 diabetes, the first-line of management is usually lifestyle change, i.e. diet and exercise. Patients then usually move onto oral medications which can either increase insulin production from the pancreas, increase the insulin sensitivity of the body's cells, or affect gastrointestinal hormones that regulate insulin production. Most people are tried on a combination of oral medications before moving onto injectable treatments, which include those that affect gastrointestinal hormones as well as basal or basal-bolus insulin regimes.
MannKind's latest Phase 3 clinical trials will aim to prove the efficacy of Afrezza as an alternative to the standard injectable rapid acting prandial insulin that is used for Type 1 diabetes and late or advanced Type 2 diabetes. They will also aim to prove the efficacy of Afrezza in Type 2 diabetes where patients have failed single or combination oral therapy. In current clinical practice, I believe Afrezza would be a fantastic alternative to rapid acting injectable insulin used prandially, particularly in young Type 1 diabetics already on basal insulin injections. Interestingly the use of Afrezza if approved would only be initially indicated for patients over the age of 18. However, MannKind had proposed conducting Phase 4 post-marketing trials on children aged 12-18. The FDA responded to this by suggesting to run potential trials with children as young as 4! Talk of this is jumping a little too far ahead, but the outcome of such a trial would be significant. Furthermore, in their dealings with the FDA in 2011, MannKind had initially proposed to run the Type 2 diabetes trial in a similar way to the Type 1 by enrolling patients already on basal-bolus insulin regimes. But the FDA have guided them towards running the trial on patients who have failed oral therapy. If MannKind can achieve superiority with Afrezza in this trial it could potentially bring about a paradigm shift in diabetes management, and it significantly widens the market for the drug.
The primary risk to MannKind at this stage would obviously be poor results in the Afrezza Phase 3 trials or another Complete Response Letter after NDA filing in 2013. Other risks to Afrezza include potential competition from other inhaled insulin products. MannKind notes in its 2011 Annual Report that Dance Pharmaceuticals, founded by John S. Patton who was the former co-founder of Inhale Therapeutics (now Nektar Therapeutics) and helped lead the development and FDA approval of Exubera, is in the early stages of developing another inhaled insulin product. The cash flow situation is also of concern. At the end of Q1 2012 MannKind had $56.7 million in cash/cash equivalents/marketable securities, with a cash burn of $33.1 million in the quarter. The company is confident that it will have enough funds until Q4 2012, but that is not far away so I expect that we will hear more news on this front very soon. From reading previous earnings call transcripts it appears that the company has been in discussions with potential partners, but nothing has eventuated from this as yet. Certainly the history of Exubera will make Big Pharma very cautious about re-entering the inhaled insulin market again, but with the diabetes market evolving rapidly a deal will hopefully not be too far away for the company. The key I believe is to find a partner that has experience in the diabetes / insulin market, as this is one area where Pfizer lacked experience and it cost it dearly. The billionaire founder of MannKind, Alfred E. Mann, has invested a lot of his own money into this company over the years, but more importantly he has a proven track record of success with his previous ventures, and to me this makes the Afrezza story a very compelling one.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.