Mannkind: Overlooked Biotech With Excellent Prospects (Part III)

Part III: Pfizer (PFE) fails with Exubera; Mannkind (MNKD) forges on with Technosphere Insulin: Why they’re different 

This is Part 3 of my six-part series covering Mannkind.

In Part 1, I explained why Technosphere Insulin, Mannkind’s upcoming inhaled insulin, is a breakthrough product with the potential to significantly improve diabetes treatment.

In Part 2, I explained why Pfizer’s lung cancer scare with Exubera (a competing inhaled insulin) was just that – a scare.

However, even before Pfizer’s lung cancer announcement, Exubera had failed miserably in the marketplace. So much so that Pfizer dropped it in October 2007. (The numbers are not fully public, but from various statements of Pfizer it appears that Exubera only sold $12 million worth in the first 9 months of 2007 – essentially the same as zero.) Due to Exubera’s commercial failure, there has been an undercurrent of skepticism of Mannkind’s future success with Technosphere Insulin. Many are saying, “Well, that proves it. There’s just no market for inhaled insulin.” 

But as conscientious investors, we have to dig beneath the surface to truly understand a company’s products. Letting ourselves be blinded by superficial similarities can be hazardous to our investing success. Someone who truly looks at the issues will find that comparing Technosphere Insulin with Exubera is like comparing papayas with watermelons (or apples with oranges, for those that prefer that tired, old metaphor). 

Exubera and Technosphere Insulin have many, many important differences. In this article, I will highlight two of them. The first major difference between them is the medical advantage. Exubera had no, I repeat, no medical advantages over conventional injected insulin. This gave Exubera real headaches. With no medical advantages, it was hard to get doctors to prescribe it. Doctors figure that there’s no reason to break with the tried and true for a new, relatively untested insulin that doesn’t even claim to offer any medical benefit. Frankly, I agree with them. 

As a corollary to this issue, the insurance companies generally refused to cover Exubera. Exubera was more expensive than conventional insulin (for reasons which I won’t get into here) and convenience was its only selling point. Insurance companies simply refused to cover a more expensive drug solely for convenience. The national insurance in England only covered it for those patients diagnosed with “needle-phobia”. And being uncovered by insurance doesn’t mean that the patient pays the difference between conventional insulin and Exubera. Being uncovered means that if a patient wanted Exubera, he had to pay for the entire cost himself. Needless to say, this was a huge obstacle to Exubera making it. Whatever your opinion on the present healthcare system, insurance companies (and national insurance agencies in those countries that have them) have a very large say in which medicines make it by their decision whether or not to include particular medicines in their formularies (lists of approved medicines). And insurance companies are looking to see a medical benefit that will translate into lower costs for the insurance down the road. 

Technosphere Insulin, on the other hand, has many medical benefits, as I explained in detail in Part 1. Its rapid entry into the bloodstream approximates the Phase 1 insulin spike of a healthy body, and it lingers in the body a shorter time, only when the meal is still being digested. Because of that, Technosphere Insulin has been shown (in the many trials that have already finished) to reduce significantly the medical problems associated with insulin use – hypoglycemia and weight gain. Because the insulin (which lowers the blood sugar) is only in the bloodstream while the meal is being digested, there is a much lower risk of hypoglycemia (dangerously low blood sugar), which conventional insulin users have to constantly guard against (often by snacking). Similarly due to its mimicking of the healthy body, Technosphere Insulin has been found to promote weight loss, something unheard of with regular insulin. (Don’t forget that most diabetics are seriously overweight and that weight makes the diabetes worse.) With Technosphere Insulin’s major medical advantages over conventional insulin, insurance companies are very likely to cover it. 

I wasn’t planning to cover the scientific nitty-gritty behind Technosphere Insulin, but an astute commenter on my last article (Scutchen, by name) forced my hand. So here goes: Injected insulin normally forms into hexamers (six insulin molecules bonded together). The body has to break this down into three dimers (two insulin molecules bonded together) and finally into six monomers (individual insulin molecules). Only monomeric insulin has the lowering effect on blood sugar that diabetics need. So regular injected insulin takes much longer to start working, with even the "rapid-acting” insulins peaking in around 45 minutes to an hour. Technosphere Insulin, on the other hand, can be delivered to the body in monomeric form (the way the pancreas does) due to the unique design of the Technosphere particle. Thus, Technosphere Insulin peaks extremely quickly -- in around 12 to 14 minutes, similar to the fast Phase 1 insulin spike of the natural body.

As I said before, and it bear repeating, this mimicking of the natural processes of the healthy body reduces significantly the problems commonly associated with insulin use. This is the crucial advantage of Technosphere Insulin. I want to stress that these aren't just “theoretical” benefits that “ought” to happen. The reduction in hypoglycemia and the weight effect has been found in all their clinical trials so far.  
 
As Scutchen pointed out, this also makes it possible to bring the diabetic's round-the-clock blood sugar levels down to a normal range without fearing that the mealtime insulin will cause hypoglycemia. As of now, this fear causes doctors to manage the blood sugar levels of their patients at abnormally high levels, which raises the risks of diabetic complications considerably. In fact, Mannkind has an ongoing study (Study 117) to show this exact issue. 

The second difference between Exubera and Technosphere Insulin that I want to highlight is the safety profile. Exubera was found in clinical trials to reduce lung function (how well patients can breathe) with usage. Although the decline was not major and it didn't continue to get worse with time, this hardly endeared the product to doctors or patients. Additionally, in clinical trials, Pfizer found a significant side effect of coughing (in about 30% of the patients), some of it persistent and bothersome.

Due to all this, Exubera's package insert information recommended to give all patients pulmonary tests prior to prescribing Exubera, six months later, and yearly thereafter. This was yet another obstacle to prescribing Exubera, especially since most doctors treating diabetics (i.e. general practitioners and internists) do not have pulmonary testing equipment in their offices. On the other hand, Mannkind found no evidence of any drop in lung function whatsoever in their clinical trials with Technosphere Insulin. There has been a slight side effect of slight coughing in some patients (but far less than by Exubera), which was generally only as the patients learned to use the inhaler and went away quickly. 

The inhaled insulin products that Novo Nordisk (NVO) and Eli Lilly (LLY) were developing (in partnership with Aradigm and Alkermes (ALKS), respectively) and then dropped were far more similar to Exubera than to Technosphere Insulin. Given Exubera’s problems and subsequent failure, it is not surprising that Novo Nordisk and Eli Lilly threw in the towel, being that they were bringing nothing new to the table. 

Mannkind, however, has a significantly different and better product on their hands with Technosphere Insulin. It works better and is safer than both other inhaled insulins and conventional injected insulin. It is almost incidental that it happens to also be inhaled. The market, in its ignorance, is punishing Mannkind’s stock indiscriminately. But if you examine the issues and study the underlying scientific data, you will soon see that the superficial similarities are just that – superficial similarities that disappear on exposure to bright light. In short, the market has handed us on a silver platter a rare opportunity to buy cheaply a company which is coming out with a significant new drug, one which may well change the shape of the diabetes treatment landscape. 

In Part 4, I will discuss Mannkind’s partnership opportunities and options. 

For my full report on Mannkind, see here.

Disclosure: Author bought MNKD at $2.95 and is considering buying more. Author has no position in any other stock mentioned.

Comments

[R.J Steffens]

"This was yet another obstacle to prescribing Exubera, especially since most doctors treating diabetics (i.e. general practitioners and internists) do not have pulmonary testing equipment in their offices. On the other hand, Mannkind found no evidence of any drop in lung function whatsoever in their clinical trials with Technosphere Insulin."

Mannkind has not reported detailed Phase III results, and did not report the additional safety data at the ADA event like they stated they planned on doing. The did have ana abstract showing absorbtion occuring 8 minutes later for smokers then for non-smokers as measured by "tmax". The FDA, in my opnion, would require a diabetic to undergo pulmonary tests for technosphere (if it is ever approved). The diabetic already is losing lung function due to the progression of the desease:

"(5) Chronic use of inhaled insulin may affect long-term pulmonary function, while preexisting pulmonary dysfunction may alter the absorption and bioavailability of inhaled insulin."

www.ncbi.nlm.nih.gov/p...

Another worth mentioning is Generex's Oral-lyn Buccal spray. Since Oral-lyn also has a very rapid onset of action, and NO deposition into the lungs, it seems as if it would be the choice amongst diabetics between these two potential products. Technosphere is said to afford low titration and Oral-lyn provides 1 U sprays as part of a fine tune regimen. Technosphere has another large obstacle that Oral-lyn does not- TI needs to be marketed as a product that does not cause decreased lung function or lung cancer. Fair or not, that is a horrible position to be in. I wish them well, and hope they all are approved to give diabetics a new choice and lifestyle freedom. This is a freedom they have in India with Oral-lyn.

Best wishes.

2008 Jun 13 04:43 AM

[Ahithophel Weissberger]

Mr 9787:
You are correct in stating that Mannkind has not reported detailed Phase III results yet, mostly because the major Phase III trials won't be over and the data in till the end of this year.

However, your implication that my statement that "Mannkind found no evidence of any drop in lung function whatsoever in their clinical trials" is not well-founded is not correct. Exubera was found to cause reduced lung function within a few WEEKS. Although Mannkind did not yet release Phase III data, they did release lots of Phase II data, with studies 3 months and 6 months long. In none of those studies was there any evidence of reduced lung function, which was specifically tested for using all the standard tests. I think that is ample evidence to show that it doesn't have Exubera's problems in that regard.

I see no reason why the FDA would arbitrarily recommend pulmonary tests for Technosphere Insulin if it shows no problems in that regard. However, they will probably (and sensibly) advise against asthma patients, etc., using it until tests are done in that subset of the population.

2008 Jun 13 11:34 AM

[amitan]

ahitofel
please comment on oral-lyn , what's your opinion ,is MNKD

2008 Jun 13 11:41 AM

[Ahithophel Weissberger]

Re Oral-lyn as per Amitan's request:
Oral-lyn is not inhaled insulin. It is actually sprayed into the mouth and absorbed by the cheek walls. None of it goes into the lungs. It is being developed by Generex (symbol: GNBT). At risk of being flamed (based on my observation of Oral-lyn comments elsewhere on the internet), let me tell you that Oral-lyn and Generex are a joke. Let me explain.

Oral-lyn is commercially available right now! Where? Ecuador (approved in August 2004) and India (approved sometime in 2007). Why do you think that they seeked approval there first? Because their regulatory system is so weak as to be laughable and they don't insist on solid data before approving drugs. No need to guess on what data they have. Read their SEC filings and you will find that the Ecuador approval was based on a number of trials -- all containing between 8 and 10 people. That's barely enough people to be considered Phase I by FDA and European standards. These tests did not test for HbA1c lowering, the standard measure of effective treatment of diabetes. They only tested for post-meal lowering of blood sugar, which the FDA specifically singled out in their guidance (released in February) as not being sufficient to get approval.

Since then they have done a trial with 200 people. Again they did not test for HbA1c lowering as the FDA requires. Now they want to start Phase III trials. They intend to enroll 750 patients and test them for 6 months, the first patient having started in June 2008. This time they intend to test for HbA1c lowering. That would keep them from filing for approval until at least the end of 2009, if not later. But this all doesn't matter. The small amount of people in their trials and the short length are an absolute joke. They have ZERO chance of getting approval, even if the trial data was positive (which we have no way of predicting). Just by way of comparison, the FDA draft guidance (released in February) calls for at least 2,500 patients in trials, with at least 1,300 to 1,500 patients exposed to the drug for a year and 300 to 500 patients exposed to the drug for 18 months. The shoddiness of their "clinical trials" is apparent. I imagine that their clinical trials are deficient in many other ways also, although obviously I can't prove that because I don't know of any peer-reviewed data available in the medical journals.

Although they have been "approved" in Ecuador and India, they have yet to show significant revenue -- only $67,000 in the last nine months (as of April 31, 2008), much of which is from licensing other patents of theirs. I guess the drug market in Ecuador is not as lucrative as they thought. I would add that they were partners on Oral-lyn with Eli Lilly until Eli Lilly dropped them in 2003. They are losing money hand over fist with no revenue in sight and they are quickly destroying their equity. They may well be headed into bankruptcy (not tomorrow, but within the next 2 years) if they can't raise more money, and I don't know that they can. Did I mention that their stock is holding at $0.95? A penny stock -- well deserved.

In short: Stay away from Generex and ignore the people hyping Oral-lyn.

2008 Jun 13 12:54 PM

[ballhawker]

You make many good points, however I think that the comparison to oral-lyn needs to be addressed more directly. Is oral-lyn as effective as TI? Is it as safe? When is it likely to be available in the US market as compared to TI? I keep seeing comments from those favoring oral-lyn and I think a healthy debate and comparison would be helpful. I am long on Mannkind.

2008 Jun 13 01:01 PM

[Ahithophel Weissberger]

Ballhawker:
I think that my last comment (the one right before yours) addressed those issues quite directly. I don't believe that it will EVER be available in the U.S. market, certainly not the way their clinical trials have been conducted up till now. If we would hypothesize someone buying Generex and starting the clinical trials from scratch, they would basically have to start from the beginning of Phase II, which would put them at at least 5 years away from market, assuming that all the trial results showed effectiveness and safety. I wish I could give you more data on the results from Oral-lyn's clinical trials, but I can't know more than Generex will release. It really is immaterial because as things stand now, Oral-lyn will never be approved, neither in the U.S. nor in Europe. If Generex raised more money or if someone would buy it from them and conduct fresh clinical trials of proper size and length, they would still be at least 5 years away from market, as I said before. Read my last comment for more details.

2008 Jun 13 01:30 PM

[R.J Steffens]

Hi Ahithophel- Perhaps I was unclear. I am talking about how a Type 2 diabetic is already experiencing decreased lung function and how that could be further effected by ANY inhalable insulin:

Reduced Lung Capacity Accelerates with Diabetes
March 26, 2008
March 26, 2008 (Newswise) — People who have diabetes encounter a faster loss of lung capacity than those who do not have diabetes, a finding that may have implications for the potential use of inhaled insulin, according to a study appearing in the April issue of Diabetes Care.

Reduced Lung Capacity in People with Diabetes

The lung research, part of a larger investigation known as the Atherosclerosis Risk in Communities (ARIC) study, confirmed previous suggestions that the lung is a target organ for diabetic injury and that lung abnormalities accelerate once diabetes takes hold. Previous research by the same authors established that decreased lung capacity precedes and may predict a diagnosis of diabetes. The new study is accompanied by an editorial that concludes that diminished lung function may contribute to diabetes morbidity and mortality.

Specifically, the study found that people with type 2 diabetes experienced a more rapid decline in forced vital capacity, the measure of how well the lungs fill with air, than people who did not have diabetes. Though all people experience a decline in forced vital capacity as they age, people with diabetes appear to undergo a more rapid loss that appears before the diabetes diagnosis and accelerates after the disease sets in.

This could be because high blood sugar levels stiffen the lung tissue, or because the fat tissue in the chest and abdomen may confine the lungs more in people with diabetes, explained the researchers. They concluded the study with advice to clinicians to “pay heightened attention to pulmonary function in their patients with type 2 diabetes.”

“Think of the lung as a crime victim who unwittingly abets the perpetrator to hasten the demise of the host,” wrote Dr. Connie Hsia, of the University of Texas Southwestern Medical Center’s Department of Internal Medicine, in an editorial accompanying the study. She suggested that the loss of pulmonary function could add
to diabetic morbidity and mortality, and raised concerns about the potential use of inhaled insulin, since it may “trigger or exacerbate pulmonary dysfunction.” www.dlife.com/diabetes...

There is not sufficient data to state that Technosphere would not trigger pulmonary dysfunction after prolonged usage and investors should be aware of the issue. The decreased lung function condition has been confirmed to be found in more Type 2 patients, so the FDA would be wise in asking for further studies and perhaps this could be accomplished in larger sized Phase IV's.

You also made a lot of incorrect statements regarding Generex. When did Generex conduct a study on 200 patients and what revenue did it earn licensing patents? The awnser would be never and none. The only revenue Generex reported has been for Glucose Rapidspray, which is a new OTC item. Revenue has not been declared yet in tiny Ecuador and sales have not commenced in India. India is not as rich as the USA, but has a growing middle class and is home to 1/3rd of the world's diabetics. Approval in India illustrates both the unique safety profile of Oral-lyn and the clarity of the efficacy within the dossier. Also, Oral-lyn HAS been measured by final A1c levels in many of the smaller tests (totaling over 1,500 diabetcs) and has also acheived superior results in this area vs standard injection. Here is one example: professional.diabetes....

Generex's partner in India, Shreya, did recently place an initial purchase order for 210,000 cannisters of Oral-lyn and sales are hoped to BEGIN by August. Also, Is Generex losing money "hand over first?" Their burn rate was approx $9 mm last quarter and averaged $7 mm the few periods before. So Mannkind loses as much in 1 quarter as Generex does in 9. The numbers are striking. Mannkind has 600 employees and Generex has close to 25. Mannkind has two products in Phase I one in Phase III. Generex has Metcontrol Gum slated to begin the next study (the first Phase I was in 2006) this summer to help complete the Abbreviated Drug Submission, a prostate cancer in Phase 1 with Phase II to start in 2008, an avian flu vaccine in Phase I with the next study with Dr John Treanor set to start in 2008, a collaboration with the United States Military Cancer Institute for a peptide breast cancer vaccine that is in a large Phase II, and Oral-lyn now in Phase III. Their HIV vaccine is set to begin Phase I in 2008 with Dr Bruce Walker, a combo peptide vaccine Phase I for 2008 is to be entirely funded by a cancer clinic and an rnai vaccine is set to begin in the Fall. That's not too shabby for the little penny stock. ;)

The FDA's new draft guidance you mention is specifically for diabetes drugs that have certain safety issues- such as some oral pills and "inhalable" insulin. They have a whole section for inhalable insulin. Oral-lyn is a simple buccal spray and is not effected by, nor mentioned within, this draft guidance. So while Technosphere will not be approved (as you state) for asthma patients, I would also say it will not be approved for smokers, children or anyone with a weakened pulmonary condition. They could all use Oral-lyn. This year Health Canada granted Oral-lyn Special Access Authorization for Type 1's under a certain condition. That sure doesn't sound like a joke.

You state: "I see no reason why the FDA would arbitrarily recommend pulmonary tests for Technosphere Insulin if it shows no problems in that regard."

If TI is approved, I believe the FDA will certainly recommend pulmonary testing for "diabetics" (not for "TI") to see if TI usage exhibits problems in that regard. If they don't, they are not doing their job.

2008 Jun 13 08:54 PM

[Ahithophel Weissberger]

Mr 9787:
You bring up several issues. Let me address them one at a time. About reduced lung function in Type 2 diabetics. It has been well known for some time that diabetics have reduced lung function compared to the average person (in the area of 70% - 80% of an average person's lung capacity). That is definitely one of the reasons that inhaled insulins are being especially scrutinized over how thery further affect lung function. But my point was that Technosphere Insulin was tested for that in particular. It was found to cause no FURTHER reduction in lung function than that already found in diabetics and no difference was found between Technosphere Insulin and the conrol groups using regular insulin, unlike Exubera. If you mean to say that maybe 5 years down the road of using TI will cause lung damage, I obviously can't refute that. But the 2-year long lung safety trials that TI is presently undergoing will certainly be enough to satisfy the FDA. Don't forget that these trials were designed with the the approval of the FDA as to the design and sufficiency of the trials. I agree with you that it is likely that the FDA will want Mannkind to continue longer studies after it reaches the market, but that is a far cry from the FDA suggesting that ALL patients prescribed TI should undergo pulmonary tests.

Of course, you are correct that TI will not be approved for children or smokers, simply because virtually no testing was done in either group. This, of course, lowers their initial addressable market, but there is still a large field left. I presume that it wouldn't take long for them to do trials in children and recieve approval for them also. As for smokers, I can't prophesize if trials in them would go well (because smokers' lungs absorb differently than regular lungs), but their preliminary trials in smokers (admittedly quite small) have not found any difference in absorption of TI between smokers and non-smokers, unlike Exubera.

As for Generex: My information about them was taken straight out of their 10-Ks for 2005, 2006, and 2007. It speaks there clearly about the 200-patient trial and about their licensing revenue (although I believe that the licensing revenue was not recent). I admit that there have been some tests in regards to HbA1c also, but look at the details of the test that you link to. It has 25 people, split between the Oral-lyn group and the control group. That is simply nowhere near enough to show efficacy by the stricter standards of the developed countries. It is futile to try to claim that India's standards match that of the FDA and European regulators, when they certainly do not. That is certainly why they have not seeked approval in the U.S. and Europe yet, although they are wealthier countries and spend the lion's share of worldwide expenditures on medicines in general and diabetic medicines in particular. (The U.S. alone purchases about 1/2 of all diabetic medicines sold in the world.) The Special Access Authorization that Canada gave it aimply means that patients can buy it while it is still in middle of trials, a common thing, and nowhere close to an approval.

The amount that Generex is losing per quarter has to be taken in context of how much cash they have, which is around $25 million, much less than Mannkind. They are going to have liquidity problems far sooner than Mannkind at their respective burn rates.

Finally, the FDA guidance that I referenced is NOT just for "diabetes drugs that have certain issues -- such as some oral pills and inhaled insulin". It covers all diabetes drugs and has a number of pages about any new insulin (with a special subsection on inhaled insulin). But the parts that I quoted (about the necessary size and length of trials) were from the general part about ALL diabetes medications. I suggest that you reread it to ascertain that for yourself. It can be found at www.fda.gov/cder/guida.... The part that I quoted is at the end of the first paragraph on page 24 (beginning of Section E). I stand by my statement that Oral-lyn has ZERO chance of being approved in the U.S. or Europe until there is a major redoing of their Phase II and Phase III trials, which would take many years.

2008 Jun 14 11:32 PM

[R.J Steffens]

You say: "I agree with you that it is likely that the FDA will want Mannkind to continue longer studies after it reaches the market, but that is a far cry from the FDA suggesting that ALL patients prescribed TI should undergo pulmonary tests."

I FIRMLY disagree, and I believe you will find any inhalable insulin product that the FDA approves will come with the condition that patients undergo pulmonary testing before and during treatment. This is costly and inconvienant. The FDA now has further and newer confirmatory evidence that lung function decreases in diabetes through the progression of the desease and hightened concern as a result of the Exubera's follies. They will be careful and safety comes before your $2.95 investment.

You say: "As for Generex: My information about them was taken straight out of their 10-Ks for 2005, 2006, and 2007. It speaks there clearly about the 200-patient trial and about their licensing revenue (although I believe that the licensing revenue was not recent)."

Nowhere in Generex's 10K's do they mention a 200 patient trial. You had earlier stated that "they have yet to show significant revenue -- only $67,000 in the last nine months (as of April 31, 2008), much of which is from licensing other patents of theirs." So if this licensing of patent revenue was "not recent", why would you have stated it was contained in the 9 month period ending April 31st? I will also inform you that Generex has never licensed a patent (?) and has never earned revenue in that way. Your due diligence appears to be make believe, and if you can show me this 200 person trial or revenue from licensing patents I will take my medicine. ;) Generex does have a very extensive patent portfolio for buccal delivery of insulin, peptides, and pain relief drugs such as morophine. They also have solid IP for Antigen Express's therapuetic vaccine candidates. They do not license patents but should soon license Antigen's Ii-Key technolgy. But not yet.

You say: "The amount that Generex is losing per quarter has to be taken in context of how much cash they have, which is around $25 million, much less than Mannkind. They are going to have liquidity problems far sooner than Mannkind at their respective burn rates." In your earlier response you had stated: "They may well be headed into bankruptcy (not tomorrow, but within the next 2 years) if they can't raise more money, and I don't know that they can."

The amount of cash Generex has one hand as of the quartley report issued last week is $38,450,627. That is approx 4 quarters worth of capital and their recent financing arrangement contains warrants that when exercised brings the company an additional $50+ mm plus. Generex also has a $150,000 million shelf approved by shareholders in May 2006 that is fully intact. So why would you state they may go "bankrupt" within two years? They have never had problems raising cash, and unlike Mannkind, have a manageable and respectable BURN RATE.

Mannkind'se burn rate was $99.2 million in the first quarter of '08. In the quarterly CC, CFO Pfeffer stated this burn rate will GROW in the next couple of qrtrs before falling again. He believes they have enough cash, $269.1 million, coupled with the availabiltyof a $350 line of credit from Mr Mann, to last until the end of 2009. But with a burn rate of $99.2 million in the first quarter of '08 and an anticipated increase over the next one to two quarters would leave under $100 mm by the end of the third quarter 2008. Even with the availabilty of the $350 line of credit he mentioned that is available from Mr Mann, how does he state the company is able to fund operations through the end of 2009?

There is a greater cause for concern for Mannkind's high spending ways and not for tiny Generex's modest $7 to $9 burn per quarter. Revenue from India or another country may also help augment their cash needs. Shreya already placed an order for $2.1 mm, so next quarter Generex has 25% of the quarter paid for. And as I illustrated, they do NOT have a current cash crises. Mannkind does presently have this grave concern associated with it's cash position as noted by Grant Zeng a senior analyst covering the biotechnology industry for Zacks Equity Research in a recent report:

We have a Sell rating on Mannkind based on our general negative view on the inhaled insulin segment. MNKD relies heavily on inhaled insulin program with a very weak pipeline. Also, the company is burning cash at a too high rate and cash position is a matter of great concern. www.istockanalyst.com/...~zoneid_Home.html

You state regarding the FDA's Draft Guidance: "But the parts that I quoted (about the necessary size and length of trials) were from the general part about ALL diabetes medications. I suggest that you reread it to ascertain that for yourself... I stand by my statement that Oral-lyn has ZERO chance of being approved in the U.S. or Europe until there is a major redoing of their Phase II and Phase III trials, which would take many years."

I am very familar with the guidance and you should read it closer. The part talking about the larger sized studies deals with Type "2" diabetes and Generex does not have ANY need to redesign their Phase III study protocol which is specifically for Type "1".

I understand you want your investment to increase in value and with a strong CEO you have reason for optimism, but TI will have one heck of a marketing disadvantage with diabetics weary of inhalable insulin and Mannkind is a company burning cash at an alarming rate. Blockbuster status would be needed to ever gain profitability and that is not the case for Oral-lyn. In one year Mannkind burned more cash then Generex has since it was founded. Mr Mann would need massive sales to recoup the losses and is this addressed in the research report you are trying to sell for $35?

Perhaps that is why you dismiss a smaller competitor with erroneous statements and gloss over Mannkinds own obstacles. PS. I never stated that India's standards matched the USA's. The FDA has been under hightened scrutiny for approving drugs that later exhibit safety problems (Avandia comes to mind.) I said that the other countries approving Oral-lyn speak well of it's safety and efficacy results in over 1,500 patients to date. MANY of their trials all had A1C levels as a protocol endpoint. Oral-lyn ALWAYS does well and also has a rapid (hence the name Rapidmist) onset and an even more natural "offset" compared to TI. Generex's CEO simply didn't have a CEO willing to BURN $1 B of his (her) own money. Themn again, Generex's CEO doesn't have to, since their are NO pulmonary tests needed for Oral-lyn.

Good luck with your investment and I hope you can carefully check assertions you make if you wish to present yourself as a credible source of information.

2008 Jun 15 03:30 AM

[Saturnator]

Dear Ahithophel,
thanks for Your article, gave me some new insights. I am long in mnkd since November 2007 and nearly doubled my position at 2,20$.
Do You have any information about Legg Mason and Fidelity reacted in April this Year? 30-40.000.000 shares were sold within 2 or 3 days.
Who sold them?
Did Mr. Mann took this chance to buy more cheap shares?
Thank You and go on like this.
Greetings from Germany,
S.

2008 Jun 15 05:57 AM

[Mr BSG]

Ahithophel, it was an interesting debate until you turned your sites on Generex and stated information, that any investor could easily confirm, as being not true or accurate, as Mr 9787 pointed out.

Therefore, if your rebuttal is full of inaccuracies, how reliable is your MNKD report for $35.

The failure of MNKD will be ultimately determined by family Dr.s and their patients. With exubera, Dr.'s refused to prescribe exubera to their patients due to all of the heath concerns related to inhaling insulin into the lungs and patients refused to push their Dr.'s for a prescription for the same reasons. Now throw in the lung cancer scare and NO ONE will prescribe or want this product. That is simply human nature, a major factor you and Mr Mann are overlooking.

T1 is a product of convenience, that eliminates needles at meal time. It is not critical to a diabetics survival, therefore they will not overlook ALL of the risks to use that product. Why would they?

Generex's Oral Lyn on the other hand, never enters the lungs so there is absolutely NO RISK using this Product.

www.generex.com/

PFE threw everything they had at their product exubera ($3 Billion or more) and came up with $12 million in sales.

The lesson learned; you can not force anyone to use your product if they see any risks associated with it. NOVO and Lilly know this and cut their losses and this was BEFORE the lung cancer scare. Mr Mann is to stubborn to admit defeat and unfortunately for his heirs, he will continue to throw $100's of millions of his own wealth, into a losing battle and take all of his shareholders down with him.

I'm not telling anyone to buy GNBT vs MNKD but I am saying to the small investor, be very careful putting your hard earned dollars into MNKD, as it is extremely risky.

The author states ; Disclosure: Author bought MNKD at $2.95 and is considering buying more. Author has no position in any other stock mentioned

52 week - $14.49 - $1.86


Institutions are slowly pulling out of this stock and cutting their losses. They are at least 3 years away from approval, $100 Mil a Q in expenses....do the math...it's scary.

2008 Jun 15 09:22 AM

[R.J Steffens]

Ahit- As a supportor of Mannkind, I must say your comments regarding a competitor appear out of line. Keep in mind that this small Generex firm has it's oral insulin research led by a former ADA President. So never underestimate the rest of the field. The debators were actually informative and presented a seemingly factual and educated alternate view. Your own analysis needs to stand on a foundation of factual DD, and nothing short. Anyway, thanks for the articles and please keep it positive. The overall writings on TI have been an interesting read.

2008 Jun 15 03:29 PM

[DigitalTradz]

Regardless of investing strategy or believing in the company, you must admit that Generex does have an outstanding pipeline with not only Oral-lyn, but many other developing products as well.

To quell many debates after reading the article and also the comments, let's put this in the simplest form. Generex has a product that almost any diabetic would love to have. Insulin without injections? Let's get real. How many out there poke themselves 4-6 times daily with a sewing needle sized, well, needle?

As for beginning distribution in Ecuador and India, yes it is true that the regulatory agencies are not as stringent as in the US and Canada, but WHY hold the US and Canada as holy grails? Isn't that a silly assumption to make that if it doesn't get approved in these 2 countries it has no validity or more to the point, effectiveness? It is proven to be effective.

Now as for hitting the US and Canada last, may I suggest that one looks to Generex's business plans that were announced in about 2005. All their news releases for 2005 can be found here: investor.generex.com/r... You will see that the plan was and always has been to target the rest of our glorious planet, leaving the US and Canada for last. Are all aware that Generex has been keeping files up to date with the US and Canada ever since the research with Oral-lyn began? Don't believe me, call the FDA and Health Canada.

This ongoing nonsense that Generex has nothing comes from those that have not had their lives dramatically and extensibly effected by the effects of diabetes and the catastrophic task of compliance.

I say again, stick yourself with a needle 4-6 times a day and see how you feel.

I invite all to join our ongoing discussion concerning Generex and their products at the link provided. It's just a bunch of good people trying to make sense of the alternatives to injected insulin and the other products that Generex has to offer.

Just so you all know, I didn't know the company name, but saw it on CNBC 5- years ago that a company out of Canada was working with Walter Reed to develop a breast cancer vaccine. Unknowing, that was my first introduction to Generex. Now 5 or so years later, through online presence, I am one of the most adamant supporters of Generex and do believe that in the end, they will come out on top.

Not ignoring the opinions of others, because we all have a right to the, but within our small community, there has been gathered more information, both public, but more important clinically, than any other site on the internet, including Generex.

Inhaled!!!! Bah, Humbug. Go smoke 2 packs a day or stand in a dust storm. Same difference. Through the cheek? Hmmmm? It works, just try their glucose based products. What a way to educate people about the simplicity of Oral-lyn.

www.digitaltradz.com/i...

Does MNKD have what it takes? Naaaah! And that's all I have to say about that.

2008 Jun 15 05:06 PM

[Ahithophel Weissberger]

Bfsc (formerly Mr. 9787):
You say that I have misstated a number of things in my dismissal of Generex as regards to a serious competitor for Mannkind. Let me take the issues one by one.

"Nowhere in Generex's 10K's do they mention a 200 patient trial." -- Bfsc

I was coming from the following quotes in their 2007 10-K -- "Between January 1999 and September 2000, we conducted clinical trials of our insulin formulation involving approximately 200 Type 1 and Type 2 diabetic patients and healthy volunteers." Rereading it, I admit that they may be combining all their trials together and between all of them there were 200 people. That just makes my point stronger. They did not test in nearly enough people to be ready for Phase III trials.

"I said that the other countries approving Oral-lyn speak well of it's safety and efficacy results in over 1,500 patients to date." -- Bfsc

Well, in their 2007 10-K, Generez states that "We conducted the first clinical trials of our buccal insulin formulation with human subjects in Ecuador in January 1998. We ultimately conducted a total of approximately 13 studies in Ecuador and an additional 26 trials in other countries over the period from 1998 to 2007. Each of these trials involved a selection of between 8 and 20 patients." With a total of 39 studies of a maximum of 20 people each, that gives the UPPER limit of how many people were tested in their trials as 780. I'm not sure where your 1,500 number is coming from. (Maybe you're counting the control groups also, while they're not? Or perhaps you are including people who used it not as part of trials?)

"I will also inform you that Generex has never licensed a patent (?) and has never earned revenue in that way." -- Bfsc

I conced that I did not write my point well originally. Being only a comment I did not edit it for clarity so much, which perhaps I should have. I was referring to the following line from their most recent 10-Q discussing the source of their revenue -- "The Company is a development stage company, which has a limited history of operations and whose revenues is primarily comprised of $1 million received in conjunction with the execution of a development agreement, grant revenue from government agencies related to Antigen’s operations and $50,000 in conjunction with the execution of a licensing agreement. The Company has realized minimal revenues to date from the sale of its commercial products". My point was that they are not getting much money from their commercially available products, and that they can't be expected to fund the continuing development needs of the company, which I am sure you agree with.

As a side point, counting just the things which Generex is working on mentioned in this thread, I counted a total of 8 things that they are in middle of developing. It beggars the imagination that they can really simultaneously pursue 8 very different drugs with only $9 million spent per quarter and 25 employees. From their most recent 10-K -- "At September 30, 2007, we had twenty-five full-time employees, including our executive officers and other individuals who work for us full-time but are employed by management companies that provide their services, and ten employees of our subsidiary Antigen. Eleven of our employees are executive and administrative, eleven are scientific and technical personnel who engage primarily in development activities and in preparing formulations for testing and clinical trials, and three are engaged in corporate and product promotion and product sales." So that's 11 employees involved in development activities pursuing 8 drugs (a breast cancer vaccine, HIV vaccine, a combo peptide vaccine, MAI vaccine, aviav flu vaccine, MetControl Gum, a prostste cancer drug, and Oral-lyn). I don't know. It just seems hard to swallow.

"their recent financing arrangement contains warrants that when exercised brings the company an additional $50+ mm plus. Generex also has a $150,000 million shelf approved by shareholders in May 2006 that is fully intact." -- Bfsc

Those warrants have a strike price that is presently 20% above the stock price, so I don't see it as anywhere near a sure thing that they will ever be exercised. As for the $150 million shelf registration, I'm sure you know that that just means that they already have permission from their shareholders to go raise that $150 million as equity, but they would still need to find investors willing to put up that money. I don't mean to imply that they are surely going bankrupt. I simply mean that their financial condition is more precarious. It doesn't bother me that Al Mann dedicated $1 billion of his own money to Mannkind and it doesn't concern me whether he makes back his money or not. I am simply looking at Mannkind's prospects here and now and judging whether they deserve to be selling for less than $3 a share like they are now, which I have decided they don't.

"I am very familar with the guidance and you should read it closer. The part talking about the larger sized studies deals with Type "2" diabetes and Generex does not have ANY need to redesign their Phase III study protocol which is specifically for Type "1". --Bfsc

I was simply refuting your statement that the guidance was only for "diabetes drugs that have certain issues -- such as some oral pills and inhaled insulin". I presume that you agree with me that it discusses all diabetes drugs. I agree with you that the section necessitating 2,500 patients, etc., in trials is referring to Type 2 Diabetes. But then again, Type 2 Diabetes is by far the more prevalent type, accounting for 90% to 95% of all diabetes. Limiting themselves to only Type 1 Diabetes further neutralizes any competition from them to Technosphere Insulin, which remains the main point of my thrust. I don't actually believe that the size of their studies as it stands now will suffice for FDA approval for Type 1 Diabetes either, but that is mostly immaterial and even if I conceded that point, Technosphere Insulin is mostly safe from competition from them.

Look, maybe I spoke too harshly about Generex in general. My point was not about Generex, but rather about Generex in relation to Mannkind and Technosphere Insulin. I believe that even you will agree that Generex is certainly far away from FDA approval, significantly further than Technosphere Insulin. They have at best just started (as of June 2008) their Phase III trial and have so far only designed a Phase III trial for Type 1 Diabetes. Even if, for argument's sake, the FDA will ultimately approve them for Type 1 Diabetes with this trial, that's a long way off and doesn't even harm Technosphere Insulin's position so much being that it's confined to Type 1 Diabetes.

I am not claiming that Technosphere Insulin is a slam dunk and that there are no risks involved. Far from it. I am claiming, however, that their stock has fallen so far that the risk-reward ratio is quite attractive. Obviously, this is a risky stock and you wouldn't want to put too much of your portfoli in it. Certainly not more than you could handle losing, both financially and emotionally. However, I don't think that there is much risk of not receiving FDA approval. There is definitely more risk of it not doing well in the marketplace, certainly something that is far harder to predict. However, between you and me, I think that it has a decent chance of doing well in the market. I also think that on FDA approval the stock would jump and you would be able to make a nice profit then and there even if you didn't wait to see how the market actually takes it.

2008 Jun 15 11:23 PM

[Ahithophel Weissberger]

"Anyway, thanks for the articles and please keep it positive. The overall writings on TI have been an interesting read." -- Bfsc

Thank you for the kind words. I appreciate the give-and-take that we have been able to share in the comments.

2008 Jun 15 11:26 PM

[retiredpharma]

Dear AW,

I hope you do not mind me using your initials? I just started reading your blog and I must say I am intrigued by MNKD. The science looks fine to me. My DD on the 10-Q or some other SEC doc I was reading showed a (-$100M) difference in Assets from Dec 2007 to March 2008. Could you explain where that money went? Also would they Monetize this asset and sell to a Large Pharma willing to go where others have failed or would they try to Market themselves w/ No Marketing Dept./Saleforce, etc.? These are my first couple of questions other than their accumulated debt is $1.2B and someone will need deep pockets to buy up this asset? Could you share your thoughts w/ me on these Finance/Marketing issues?

Thanks,

Frank

2008 Jun 16 07:22 AM

[Mr BSG]

AW, for a person writing an article and trying to sell it on the internet for $35, you seem awfully misinformed regarding your subject matter.
Your unprofessional responses and inaccurate statements, confirm you are a novice at best, trying to make a quick buck on unsuspecting small investors.

This comment confirms it;

" It doesn't bother me that Al Mann dedicated $1 billion of his own money to Mannkind and it doesn't concern me whether he makes back his money or not. I am simply looking at Mannkind's prospects here and now and judging whether they deserve to be selling for less than $3 a share like they are now, which I have decided they don't. "

HUH?

So your argument is that since its dropped from $14 to under $3 that it won't drop any further, yet you haven't presented a logical argument to support that rationale.

Bizarre.

You prefer to focus on slagging a small biotech as your defense of MNKD?

" I believe that even you will agree that Generex is certainly far away from FDA approval, significantly further than Technosphere Insulin. "

Far from it actually.

Oral Lyn does not EVER enter the lungs. T1 does.

The FDA is well aware of the lung cancer results from PFE and will not allow another inhaled insulin product onto the market without a far larger and longer study than MNKD is currently conducting. They are also well aware of PFE, NOVO and Lilly, 3 very large Pharmas, pulled all of their products off the market, after spending $Billions on them.
The last thing the FDA needs is another failure on their behalf, in protecting the people of the US. The list seems to grow monthly and they will not allow another product onto the market, which is almost identical to one - exubera- that just failed and had many health risks associated with it.

Oral Lyn enters the mouth and is absorbed in the cheeks basically. Nothing ever enters the lungs. The FDA will approve this process far sooner that MNKD's.

" I am claiming, however, that their stock has fallen so far that the risk-reward ratio is quite attractive"

You would never make a statement like that, if you truly understood why it has fallen so sharply.

You criticize GNBT for having so many products in their pipeline and managing all of this with only 25 employees on a $9 Mil Q'ly budget.

That's a compliment if you actually thought it through but it appears you are desperate to slag GNBT and are grasping at straws.

Maybe your focus should be; why does MNKD need 600 Employees with 1 product in PIII and 2 weak products in PI.

Why are they chewing through $100 Mil a Q and rising.

" Author bought MNKD at $2.95 and is considering buying more"


So did you buy more?

It's down 10% since your story hit the net.

Good luck

2008 Jun 16 09:26 AM

[Ahithophel Weissberger]

Retired pharma:
Assets did not go down by $100 million between December 2007 and March 2008. Assets only went down around $78 million. CASH went down around $100 million ($99.2 million to be more exact). Most of that cash was spent on general expenses, their last Phase III trials for Technosphere Insulin which are currently coming to a close (ending September 1), and their regualtory activities as they put together their filing for Technosphere Insulin. Around $25 million was spent on the expansion of their factory which is also coming to a close (hence the greater decline in cash than assets). Mannkind has stated that they project similar cash flow for the next few quarters, after which they expect the cash burn rate to drop.

They do not have debt of $1.2 billion. Their total debt as of March 31, 2008 is only about $167 million. The $1.2 billion figure is their accumulated deficit, which means how much money they have lost over the lifetime of the company. In other words, from all the various financings that they have done in the past 25 or so years of their existence, they have spent $1.2 billion of that money, with no profit to show from that (considering that they are still in development stage and have never sold any products yet).

As for their ability to market it themselves, you are quite correct that that would be very difficult. Mannkind has stated that they plan to find a partner to co-market it with them, but they are not looking to sell the company. As I said at the end of this article, I am planning to discuss Mannkind's partnership opportunities and options in Part 4, the next part in this series.

2008 Jun 16 03:06 PM

[Mr BSG]

AW,

" various financings that they have done in the past 25 or so years of their existence, "

From the latest 10Q;

We are a development stage enterprise and have incurred significant losses since our inception in 1991. As of March 31, 2008, we have incurred a cumulative net loss of $1.2 billion.


That's 17 years, not 25 as you stated, that MNKD's been around and it's a net loss of $1.2 Billion.


You also said,

" Mannkind has stated that they project similar cash flow for the next few quarters, after which they expect the cash burn rate to drop. "


From the latest 10Q;


" We expect to make substantial and increasing expenditures and to incur additional operating losses for at least the next several years as we......; "

AT LEAST THE NEXT SEVERAL YEARS vs a few quarters, is quite different from your interpretation vs the facts, now isn't it.

A few quarters implies a year at most, yet MNKD clearly states, AT LEAST sereral years.

Hmmm....

I also couldn't find their statement in the 10Q that you apparently quoted;

" after which they expect the cash burn rate to drop. "

Where exactly did you get that? Please provide a link.

You can choose to ignore me but that only puts your credibility further at risk. You twist and exaggerate facts to fit your argument and have been called on them.

It does beg the question though, with this many inaccuracies posted here, just how many are in that little $35 report?


biz.yahoo.com/e/080509...

2008 Jun 16 05:14 PM

[Mr BSG]

AW,

You stated;

" Mannkind has stated that they plan to find a partner to co-market it with them, ..."


Hmmmm....

MannKind Suspends Insulin Talks
Thursday April 10, 9:56 am ET
MannKind Suspends Partnership Talks for Inhalable Insulin After Pfizer Reports Possible Risk


VALENCIA, Calif. (AP) -- Biotechnology company MannKind Corp. said Thursday that it is suspending partnership discussions for its inhalable insulin drug candidate following Pfizer Inc.'s warning of a potential lung cancer risk for its own inhaled insulin drug


Unless your statement refers to MNKD before April 10th. But then you stated your report was based on current information.

I'm confused.

You also stated;

"a company which is coming out with a significant new drug, "

Insulin is not a new drug, regardless of the fact that it may be injected, inhaled, buccal delivery, pills, etc.

Please post some facts...

2008 Jun 16 05:43 PM