MannKind: No Partnership Likely for Inhalable Insulin

There's a plethora of stuff to blog about: the Takeda-Millennium (MLNM) deal, more commentary about Merck (MRK) and Schering-Plough (SGP) and the extent of the Vytorin/Zetia fallout, Genentech's (DNA) biotech bellweather earnings after the closing bell today, just to name a few.

But, I've decided to follow up on the Pfizer (PFE) Exubera lung cancer warning and what it means to MannKind (MNKD).

MNKD is the only company still developing an inhalable form of diabetic insulin. After PFE pulled Exubera off the market last fall, NovoNordisk (NVO) and Eli Lilly (LLY)/Alkermes (ALKS) gave up on their similar experimental products, but MNKD is not throwing in the towel.

The California company put out a press release Thursday morning saying that in mice, animals and people it has seen no evidence yet of carcinogenicity with its device. Nonetheless, in the wake of the Pfizer announcement Wednesday morning, MannKind called a meeting Wednesday of its data safety monitoring board (a committee of outside experts picked to keep an eye on danger signals with experimental drugs in human testing) and it concluded "that on the basis of the current information our trials could continue."

But MNKD, which gets its name from the billionaire Alfred Mann who has staked a good deal of his personal fortune on inhalable insulin, is giving up hope of finding a big pharma partner for the product. "Given the current market sentiment," the release says, "we have decided to suspend partnership discussions." And in the understatement of the moment the company acknowledges that it "will be unable to achieve an appropriate valuation for Technosphere Insulin until Phase 3 (late-stage) data are available that confirm our belief in the safety and efficacy of TI."

Separately, Nektar Therapeutics, which was Pfizer's partner on Exubera, is also abandoning its search for a new buddy.

Leerink Swann analyst Bill Tanner titled a MannKind research note to clients, "TI's challenges potentially insurmountable." He quoted a "regulatory consultant" who believes "the bar has been substantially raised for TI's approvability as this safety concern will likely be treated as a class effect." That means the Food and Drug Administration will look at all inhalable insulin products as having the same potential problems.

Tanner expects MNKD to trade below cash because it's so dependent on TI. Still, he expects it to possibly win FDA approval in 2011 but its peak sales potential will be more modest. Leerink makes a market in MNKD and has co-managed a public offering for the company within the past year.

I haven't seen a note to subscribers from him about this latest development, but I bet David Kliff who writes "The Diabetic Investor" is saying, "I told you so." From the get-go Kliff, a type 2 insulin-dependent diabetic, has been kind of a voice in the wilderness, poo-pooing the idea of inhalable insulin and trying to tell anyone who would listen that diabetics don't fear or dislike needles as much as some people might think.

Comments

[paul collins:]

ATTENTION: MIKE HUCKMAN & WALL STREET WAKE UP!

Safe Oral Insulin called ORAL-LYN by Generex in PHASE3 6 Month Trial in North America Already approved in INDIA sales starting Expecting to be approved world wide PHASE3 Trails across the Globe

The street.com writes Aprill 9 2008
Meanwhile, small-cap Generex Biotechnology (GNBT - Cramer's Take - Stockpickr), which has an oral insulin product -- absorbed through the mouth and designed not to enter the lungs -- in late-stage development, saw its shares edge up 12.2% to $1.20 on more than double normal volume.

June 2007 ANALYST NOTES:

GENEREX’ ORAL-LYN OFFERS SIGNIFICANT ADVANTAGES OVER
EXISTING INSULINS Many Type II diabetic patients who would benefit from
insulin therapy are not started on insulin because of the inconvenience and
dis comfort of insulin injections. This situation has led several companies to
develop alternate technologies for insulin delivery. We believe that Generex’
Oral-lyn has advantages over other non-injectable insulin solutions. While many
of these systems deliver insulin to the lungs and bronchial tree, Oral-lyn delivers
insulin to the oral mucosa, avoiding the potential risks of chronic lung tissue
exposure to insulin. Additionally, pharmacokinetic studies have shown that Orallyn
reaches peak circulating levels in 30 minutes compared to 60 minutes with
injected insulin. This more rapid onset will offer patients a better quality of life by
providing more flexibility at meal times, and better glycemic control.
INSULIN – A FAST GROWING MARKET The diabetic patient population is large
and growing rapidly, from 21 MM patients in the US alone in 2007 to an
estimated 48 MM in 2050. This growth will not be limited to the US and EU, but
will also be in the emerging markets of India and China. Among the leading
companies, we believe that Generex’ insulin delivery technology offers great
potential to both patients and investors. Currently, the insulin market is
dominated by only three companies - Eli Lilly (LLY, Not Rated), Novo Nordisk
(NVO, Not Rated) and Sanofi Aventis (SNY, Not Rated), recording blockbuster
insulin sales of >$7 BN in 2005. By 2010 the global market for insulin is projected
to be worth around $12 BN. Given such a large number of diabetic patients , we
believe Generex has a large and rapidly expanding potential market opportunity.

INITIATING COVERAGE WITH A MARKET OUTPERFORM RATING Our
analysis therefore derives a fair value of $6 (P/E multiple of 25x our 2012 EPS
estimate of $1.62 discounted at an annual rate of 45%) for Generex shares and a
rating of Market Outperform. Our analysis indicates that Generex’ oral insulin,
Oral-lyn, could be a significant player in the non-injectable insulin market. We
believe that Oral-lyn’s product profile, combined with strong clinical data and
expected rapid growth in the global diabetic population, could result in >$600 MM
in revenues by 2013. Generex also has two other smaller products in diabetes
and an early-stage cancer vaccine pipeline.

Generex Biotechnology "market outperform"

Wednesday, January 16, 2008 9:22:33 AM ET
Rodman & Renshaw

NEW YORK, January 16 (newratings.com) - Analysts at Rodman & Renshaw reiterate their "market outperform" rating on Generex Biotechnology Corp (ticker: GNBT). The target price is set to $6.

In a research note published this morning, the analysts mention that the execution of the company?s low-risk Oral-lyn pre-commercialization activities and the preparations for the late-stage Phase III clinical trial are on track. Generex Biotechnology is a leading player in the alternative drug delivery market, the analysts add.

2008 Apr 11 06:41 PM

[V.P.:]

What happened to Kos Pharmaceutical's Inhaled Insulin product, KI02212? I have not heard any news on the development of this product post the acquisiton of Kos by Abbott Labs.

2008 Apr 14 05:21 AM

[paul collins:]

If the street had listened to Dr. Bernstein, the former head of the American Diabetes Association, they would have predicted the sudden drop in Mankind's (MNKD) stock last week. Back in December, 2007, Dr. Bernstein predicted that MNKD would fail.

www.ft.com/cms/s/2/94f...

Dr. Bernstein now serves for Generex and has committed his life to developing and obtaining approval for its flagship product, Oral-Lyn. He strongly believes in the safety and efficacy of the product. And, thus I highly doubt that the product will fail. GNBT should see $5/share within the coming year (remember it was $22 just because they had a partnership with Eli Lilly). Now they are in Phase 3 in the USA, and they have regulatory approval in India, one of the largest Diabetes markets in the world. For reference, Dr. Bernstein's bio is below.

Dr. Bernstein, M.D., F.A.C.P. graduated from Dartmouth College and Tufts University School of Medicine. He is board certified in internal medicine (1966) and endocrinology and metabolism (1973). Dr. Bernstein is an associate clinical professor at the Albert Einstein College of Medicine in New York. He is an attending physician at Beth Israel Medical Center, and physician emeritus at Lenox Hill Hospital and Montefiore Medical Center, all in New York. He was formerly Director of the Beth Israel Health Care Systems Diabetes Management Program. Dr. Bernstein was president of the American Diabetes Association in 1998-99 and was for many years a member of the ADA's Board of Directors and its Executive Committee. He received the ADA's Banting Medal for Service in 1999. Dr. Bernstein presently serves on several ADA committees and on the Board of Directors of the American Diabetes Association Research Foundation.

2008 Apr 14 09:14 AM

[paul collins:]

Navdeep S. Jaikaria, Ph.D., a Senior Biotechnology Analyst at Rodman & Renshaw, he reiterated his Market Outperform Rating on Generex and $6 price target. Some of the highlights of the report, titled, "NO IMPACT ON ORAL-LYN FROM LILLY TERMINATION OF ALKERMES INHALED INSULIN" were:

Alternative Insulin Competitors Continue to Fall and Enhance the Oral-ly Opportunity Last Friday, Alkermes Inc. (ALKS, Not Rated) announced that it received a letter from Eli Lilly (LLY, Not Rated) terminating their license agreement for the development of AIR Inhaled Insulin. This news, as well as the announcement in October 2007 by Pfizer Inc. (PFE, Not Rated) of the termination of its development of Exubera, an in-market inhalable insulin by Nektar Therapeutics Inc. (NKTR, Not Rated), have continued to place unwarranted pressure on the shares of Generex, which is in the final stages of preparation for a Phase III trial with Oral-lyn, the company's proprietary oral insulin product candidate. We believe disappointing sales with Exubera inhaled insulin made uncertain the prospects for further commercialization of Alkermes' AIR and AERx, an inhaled insulin system by Novo Nordisk A-S (NVO, Not Rated) whose Phase III development was discontinued in January 2008. We believe this news is positive for Generex as they enhance Oral-lyn's opportunity as a safe, more tolerable, non-injectable insulin for the treatment of patients with diabetes.

We Reiterate that the High Hurdles with the Inhaled Route of Insulin Delivery are Not Likely to be Observed with Buccal Cavity (Oral) Delivery of Insulin Concerns continue to grow that inhaled insulins, such as Exubera, may all be plagued by the observation of an early, non-progressive decline in lung function that does not improve over long-term use of Exubera, as well as problems associated with formulation of insulin into inhalable powder form. Further, the advancement of more convenient injectable devices, such as pens filled with pre-mixed insulin analogs, obviated the value of convenient mealtime titratable insulin delivery. We believe the significant hurdles seen with the inhalation route of delivery bode negative for inhaled insulin products, and open the door for Oral-lyn as the insulin potentially with the best non-injectable alternative route of mealtime insulin delivery.

2008 Apr 15 12:42 AM