Mannkind: Overlooked Biotech With Excellent Prospects (Part V)

Part V: Mannkind’s (MNKD) pipeline potential 

This is part 5 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 (PFE) lung cancer scare with Exubera (a competing inhaled insulin) was just that – a scare. In Part 3, I highlighted some of the differences between Pfizer’s failed Exubera and Mannkind’s Technosphere Insulin. In Part 4, I discussed Mannkind’s partnership opportunities and options for Technosphere Insulin. 

I now would like to discuss Mannkind’s pipeline and its potential. Although Technosphere Insulin is the first inhaled drug of theirs to be ready for approval and commercialization, it is certainly not the full extent of the Technosphere platform. The Technosphere platform allows for safe delivery of many possible drugs. The advantages include the bypassing of injections (for drugs like proteins that can’t be given in pill form) and, more importantly, the rapid entry and peaking in the bloodstream, which is often closer to the natural processes of the healthy body which we are trying to mimic. I discussed the Technosphere platform more at length in Part 1 – be sure to read my discussion there if you missed it. 

The second drug that Mannkind is developing with the Technosphere platform is code-named MKC253, an inhaled version of GLP-1. Let me back up a bit. In a healthy person, as soon as he starts eating, the pancreas releases a spike of insulin, known as the Phase 1 spike, followed by a lower sustained level throughout the digestion period (Phase 2) until it drops back down to its pre-meal levels. (Insulin acts to lower the increased blood sugar from the meal. The Phase 1 spike also signals the liver to stop releasing sugar into the blood, and instead to absorb sugar from the blood and store it for later.) In a diabetic, the insulin levels do not rise robustly in response to a meal, especially missing the Phase 1 spike. What signals the pancreas to release more insulin for the meal? Well, the sugar from the meal itself does trigger the pancreas to produce more insulin. But that’s not the whole story. If a person would be given sugar intravenously, bypassing the digestive system, the insulin levels would not go up nearly as much. The reason for this is because when a person starts to eat, the intestine releases various hormones (known as incretins) which signal the pancreas to produce more insulin. One of these hormones is GLP-1 (glucagon-like peptide-1). One of the major advantages of GLP-1 is that it only prods the pancreas to make more insulin if there is also an elevated level of sugar in the blood. Since when the blood sugar is normal GLP-1 does not cause the pancreas to release more insulin, there is much less risk of hypoglycemia (dangerously low blood sugar) when using GLP-1, in contrast to the risk of hypoglycemia when injecting insulin or using sulfonylureas (drugs that prod the pancreas to produce more insulin indiscriminately). 

So, naturally, we would think that helping the GLP-1 signal in a diabetic would improve the post-meal insulin response. Let’s just administer GLP-1 by every meal. But it’s not that simple. GLP-1 has a very short half-life in the body, about 2 minutes (i.e. ½ of the GLP-1 produced by the intestine is deactivated in about 2 minutes). The deactivation of the GLP-1 is mostly carried out by an enzyme called DPP-IV (dipeptidyl pepitidase-4). In other words, in a healthy body, when a person starts eating there is an extremely short burst of GLP-1 which quickly dies out. This triggers a short burst in insulin – the Phase 1 spike that diabetics are missing. But if you would try to inject GLP-1, the GLP-1 by injection will only trickle slowly into the bloodstream. Combined with this that GLP-1 is so rapidly destroyed by the body, you will not get the desired effect on insulin production that we are looking for. 

So far, there have been two methods to try to solve this problem. First, companies have developed drugs that are similar to GLP-1 (with similar effects on the pancreas), but are resistant to DPP-IV. So although these drugs are given by injection and do not simulate the short burst of GLP-1 in a healthy body, they nevertheless cause extended long periods of GLP-1-like substances in the blood, causing greater insulin production post-meals and lower blood sugar levels. They do not, however, bring back the Phase 1 insulin spike missing in diabetics. The first drug in this class to be approved was the well-acclaimed exenatide, under the trade-name Byetta, co-developed by Amylin Pharmaceuticals (AMLN) and Eli Lilly (LLY). It is used as a twice-daily injection. The second drug in this class is liraglutide, developed by Novo Nordisk (NVO), and is expected to file for FDA approval this year. It is meant to be used as a once-daily injection. Amylin and Eli Lilly are currently developing a longer-lasting version of Byetta, Byetta LAR (long-acting release), which is meant to be injected once weekly. It has had very favorable trials so far and they expect to file for approval during the first half of 2009. 

The second attempted solution is a class of drugs that inhibit DPP-IV from working, keeping the GLP-1 at elevated levels for longer. The first drug in this class to be approved was sitagliptin, under the trade-name Januvia, developed by Merck (MRK). It is taken as a pill once a day. There are also other drugs in this class currently being developed. Again, these drugs do not bring back the Phase 1 insulin spike missing in diabetics. 

Mannkind’s proposed solution to the problem is to administer regular human GLP-1 by inhalation, instead of by injection. Because inhalation gives direct access to the bloodstream, the GLP-1 will immediately enter the body, quickly signal the pancreas to release more insulin, and quickly be deactivated by DPP-IV. This should closely mimic the short burst of GLP-1 released by the healthy body and bring back the Phase 1 insulin spike of a healthy body. Indeed, in their first human trial, Mannkind found that their inhaled GLP-1, code-named MKC253, had the desired effect. MKC253 produced a sharp pulse of GLP-1 in the bloodstream that peaked in less than 3 minutes. This, in turn, induced a spike of insulin from the pancreas that peaked in less than 6 minutes. 

MKC253 is still in Phase 1 trials, so it still needs much further testing and is not close to market. However, being that this is simply administering a natural hormone found in the body but missing in diabetics, GLP-1, it is extremely likely to be found to be both effective and safe. In fact, since it is mimicking the natural function of a healthy body, it is likely to be safer than the first two methods outlined above, with fewer side effects. Byetta, although very effective, was found to have major side effects of nausea, vomiting, and diarrhea. As much as maybe 25% of patients can’t take Byetta for these reasons. Recently, the FDA added a warning to Byetta’s label that Byetta may cause acute pancreatitis (due to reports of acute pancreatitis in people taking Byetta). Presumably, these side effects come from the elevated levels of GLP-1 for an unnaturally long time and/or the differences between Byetta and GLP-1 (that make it resistant to DPP-IV breakdown). Mannkind’s inhaled GLP-1 would likely not have these problems because it is mimicking the natural body.

Indeed, in their first human trial, Mannkind found that MKC253 was well tolerated by the trial participants. Even with the highest dosage of MKC253, they did not find any of the nausea and vomiting characteristically associated with such dosage levels. In fact, they reached levels of GLP-1 in the blood of more than 3 times the level which has been found to cause unacceptable side effects when injecting, and still found no side effects by inhalation! (By the way, it should be pointed out that all this talk about GLP-1 and DPP-IV is only pertinent to Type 2 Diabetics, whose bodies are still capable of making insulin. Type 2 Diabetics comprise 90% – 95% of all diabetics.) 

The second area which Mannkind is concentrating on is cancer therapies. There are many approaches currently being pursued to eradicate cancers. Mannkind is working on two methods – active immunotherapy and targeted drug therapy. Active immunotherapy involves trying to induce the patient’s own immune system to attack and destroy tumor cells, instead of tolerating them. To understand the process, you first have to know something about how the immune system works. 

The immune system has many ways of attacking foreign and diseased cells. What concerns us here is what is known as cell-mediated immunity. In cell-mediated immunity, special cells go around “sampling” the distinctive molecules on the surface of each cell (called epitopes). Molecules which are not designated as “self” molecules (i.e. belonging to the healthy body) are flagged as foreign substances to be destroyed. Such molecules are called antigens and the cells which discover them and communicate them to other parts of the immune system are called antigen-presenting cells, APC. These antigen-presenting cells present the foreign antigens that they found to other specialized cells of the immune system, known as T-cells. The T-cells thus activated then go around and destroy any cell that has that same distinctive molecule on their surface, that same epitope. In this way, the immune system attacks and destroys only those cells which don’t belong – either foreign bacteria or regular cells which have gone awry, such as in tumors. 

Mannkind’s treatment method involves injecting molecules carefully crafted to mimic the distinctive epitopes on a tumor into a patient’s lymph nodes to induce an immune system reaction against all such epitopes, thereby destroying the tumor. (Lymph nodes are specific areas, located all over the body, and are part of the immune system. They are especially rich in antigen-presenting cells and T-cells. By injecting into the lymph nodes, they expect to induce a greater number of T-cells concentrating on eradicating that epitope. In their preclinical studies, Mannkind found that injecting directly into the lymph nodes was the best place to achieve this.) In their preclinical studies, Mannkind found that the most potent response was elicited by keeping up the exposure to the antigen in the lymph nodes and by varying the exposure through a “prime-boost” regimen. In line with this, Mannkind’s treatment method is to first “prime” the immune system with DNA-based compounds, plasmids, resembling the target antigens and injected into the lymph nodes. They then follow that with synthetic peptides (small bits of protein) resembling the target antigen and injected into the lymph nodes to “boost” the immune system response. This “prime-boost” cycle is repeated a few times to maintain the immune system response. 

Mannkind has two product candidates in this program, both in the beginning of Phase 1 trials. The first, MKC1106-PP, is slightly further along in development and targets two antigens specifically associated with tumors, PRAME and PSMA. PRAME is found in lung cancer, breast cancer, ovarian cancer, renal cancer (kidney), pancreatic cancer, and colorectal cancer (colon and rectum) cells. PSMA was originally found in prostate cancer cells and later found also in the blood vessels which supply lung cancer, breast cancer, ovarian cancer, renal cancer, pancreatic cancer, colorectal cancer, and melanoma (skin cancer). MKC1106-PP is composed of a plasmid that encodes PRAME and PSMA, and two synthetic peptides, one to mimic PRAME and one to mimic PSMA. 

The second product candidate, MKC1106-MT, targets Melan-A and tyrosinase, two antigens found in melanoma cells. MKC1106-MT just received clearance from the FDA in January 20008 to begin a Phase 1 trial in patients with advanced melanoma. MKC1106-PP, on the other hand, is already in middle of its first Phase 1 trial and is continuing to recruit patients. 

The principal advantages of this treatment method are threefold. Firstly, it mobilizes the natural forces of the human body to attack the cancer. Doing it this way should potentially reduce or eliminate unwanted side effects. (Conventional chemotherapy, on the other hand, attacks all rapidly-growing cells indiscriminately, whether they are cancerous or healthy. Radiation, also, is toxic to healthy cells in addition to cancerous cells.) Secondly, by injecting directly into the lymph nodes, this method should pump up the immune system more, making the treatment more effective. And thirdly, since this method uses stable, non-infective, non-self-replicating compounds, it should be able to trigger the immune system to respond without undue risk as could exist if it were a biologically active compound (such as regular vaccinations). Of course, although these treatment methods remain promising, we will have to wait for Phase 1 trials to be completed to see if it is truly effective in humans. 

Neither product candidate has yet finished any human trials. However, in their latest quarterly conference call (held on May 5, 2008), Mannkind provided some updates on their first human trial with MKC1106-PP, which is still underway. They said, and I quote: 

“The first of our active immunotherapy treatments, MKC1106-PP, currently in Phase I clinical trial, has now recruited all of the low dose cohort with encouraging results to-date. Our intranodal administration of biomolecules aimed to elicit immunity against cancer cells appears to be very well tolerated. We have observed sustained immune responses against both targets pursued in this trial, in multiple subjects with various tumor types, and a number of patients are now proceeding on to multiple repeat cycles.” 

In other words, they have already recruited all the patients to which they planned to give the lowest dose and they are now starting to recruit patients for the higher doses. In the patients that they have already treated, they did not find bad side effects and they found that it did, indeed, induce an immune response (i.e. they observed an increase in T-cells activated to attack those antigens that they targeted, PRAME and PSMA), in various different cancers. The patients are now going through repeat cycles of the treatment. These are encouraging reports, but obviously we will have to reserve judgment until the full results of the trial are reported and we can at least find out by how much the tumors decreased, if at all. 

(Note: Although Seeking Alpha provides this extremely nice service of transcripts for free and they have indeed transcribed Mannkind’s most recent conference call, there are parts of this conference call, including this part, which get somewhat technical and have transcribing errors. I listened to the conference call myself. For a more accurate transcription, you can find one here from AccessMyLibrary, which is free, although you will need to register unless the library that you patronize is on the list.) 

Mannkind is also working on targeted drug therapy, drugs that specifically and narrowly interfere with cellular processes found only in cancerous cells. In this area, they have identified two novel classes of compounds that selectively inhibit two different cancerous cellular processes. The first attacks the malfunctioning of the unfolded protein response, UPR, in myeloma (cancer of plasma cells, a specialized immune system cell). The unfolded protein response is a process whereby a protein which “folds” incorrectly, due to cellular stress or other reasons, is removed from the cell. When such cellular stress continues for an extended period of time, the unfolded protein response triggers programmed cell death, known as apoptosis. In myeloma cells, an enzyme known as IRE-1 activates a gene, XBP-1, which improves the escorting of improper proteins, thereby letting the cancerous cells escape apoptosis. Mannkind has found a class of compounds that interfere with IRE-1 and have been found to inhibit XBP-1 activity in laboratory cancer cells and in animals. 

The second novel class of molecules inhibits a protein known as ITK. ITK is found only in T-cells and certain other immune cells, but nowhere else. ITK, when activated, triggers a number of intracellular events that lead to the migration and proliferation of T-cells. This makes ITK a potential target in treating T-cell leukemias (cancer of white blood cells) and lymphomas (tumors in lymph nodes, also of white blood cells). Both of these classes of drugs that Mannkind is working on are still in preclinical stages, although they have already shown effectiveness in animals. 

In summary, Mannkind’s cancer program, although it has promising possibilities, have yet to show effectiveness in even one completed human trial yet (because there haven’t been any). Two of them are still in preclinical stages, one has received FDA clearance to begin Phase 1 trials, and one has started its first human trial, which has yet to finish (although it has had somewhat encouraging interim results announced so far). Obviously, it is difficult for us to judge the potential until at least some more data comes in. Even if they prove in the long run to be effective and safe, there is much time and money that will yet be needed to be spent on these treatments. They are, at best, long-term possibilities. 

Mannkind’s inhaled GLP-1 has a firmer footing. It has already passed its first Phase 1 trial in healthy subjects and shown that it induces insulin response from the pancreas and lowers blood sugar, with no observed side effects. More importantly, since GLP-1 is a hormone naturally found in a healthy body at mealtime, it is extremely likely that their inhaled GLP-1 will prove to be effective and safe. This is all the more so because Mannkind’s proposed method – inhalation with the Technosphere platform – closely mimics the natural process of the body with its extremely rapid peak, without lingering in the bloodstream for hours and days like Byetta. As I mentioned before, even at high dosage levels, their inhaled GLP-1 did not cause the nausea and vomiting common with Byetta. Presumably, the recent warning about acute pancreatitis with Byetta is also due to the major differences between Byetta and the natural processes of the body. 

However, Mannkind’s inhaled GLP-1 has yet to enter Phase 2 and is still far from the market. Perhaps the greatest risk facing it is that Amylin and Eli Lilly might develop an improved version of Byetta without the severe side effects. Byetta works well and Byetta LAR (the once-a-week version that Amylin and Eli Lilly are close to filing for) is said to work even better. Byetta LAR is also said to have less severe side effects. If Amylin and Eli Lilly succeed in ridding Byetta of its side effects, there may well be no need for inhaled GLP-1. 

A few words on the relative importance of drug pipelines. Generally, investors give great weight to the robustness of a pharmaceutical’s drug pipeline. The reason for this is simple. Take, for example, a company like Pfizer (PFE). It has a market cap of about $120 billion, meaning that this is what the market is valuing the company as a whole. This is mostly based on Pfizer’s approximately $7.5 billion in annual earnings (coming from around $48 billion in annual sales), giving Pfizer’s stock a P/E of around 16. Now this is all well and fine if Pfizer could be expected to earn this amount for the foreseeable future. But such is not the case for pharmaceuticals. They aren’t like Coca-Cola (KO) or even Intel (INTC), which have their stable or growing businesses which they can be expected to stay on top of and grow in. Pfizer, like all pharmaceuticals, is making its money from patented drugs. As soon as a drug goes off patent (or even if a similar drug from a competitor goes off patent), the pharmaceuticals immediately come under pricing pressure from generics. So to justify valuing the company based on an assumption of ongoing earnings of $7.5 billion, investors have to be convinced that Pfizer will replace the drugs that are going off patent in the upcoming years with equally successful and profitable drugs from their pipeline. Their uncertainty about this is precisely what has been hurting Pfizer’s stock recently, what with Lipitor and other blockbusters going off-patent soon and nothing really promising in late stage trials. Hence, the uber-importance of a pharmaceutical’s drug pipeline. Ideally, they should have promising drugs spaced throughout the various stages of development (preclinical, Phase 1, Phase 2, Phase 3, and filing) so as to bring the revenues on line smoothly as the years go on. (At least, that’s what investors like.) 

However, in a company like Mannkind, the drug pipeline takes on much lesser significance. They have no revenues to replace. Most importantly, crucially, their stock price has been so beaten down that it doesn’t make a whit of a difference if any of the drugs in their far-off pipeline pan out. It all boils down to one question, one valuation. Will Technosphere Insulin succeed? If yes, then the stock is crazy cheap. If no, there is no reason in the world to buy it and it probably isn’t worth the paper that it’s printed on. Don’t even think about it as if you’re buying a share in a company. Think of it as if you’re buying a share in the rights to the drug. (Of course, you need to have confidence in the management to perform and pull through, but I don’t think anybody will claim that that is an issue over here.)

One simple question, although by no means a simple question to analyze. My point basically is that if you decide (like I have, as I discussed in the previous 4 parts of this series) that Technosphere Insulin is much more likely to succeed than to fail, then you can look at anything in their pipeline as just so much more icing on the cake. And in Mannkind’s case, the icing ain’t that bad. 

In Part 6, I will conclude this series on Mannkind, summarizing the key points and discussing valuation. 

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

[Mr BSG:]

Now that was a well written, logical article. Thanks.

No pie in the sky stuff, like the SP will move 5x's todays price, etc ,etc.



" It all boils down to one question, one valuation. Will Technosphere Insulin succeed? If yes, then the stock is crazy cheap. If no, there is no reason in the world to buy it and it probably isn’t worth the paper that it’s printed on"

Actually the stock isn't cheap. It's sitting with a MC of around $300 Mil, with approval of their only product - T1 - years away.

Good luck

2008 Jun 19 06:41 AM

[hoopdreamer...:]

Your diligence and effort are extraordinary. But the fact remains this is inhaling a growth factor and experts are going to worry, no matter what the data shows. If its 2 years of clean data, they'll say fine, but how do you know what will happen 5, 10, 20 years out for a therapy taken for life? How do they go about changing perceptions? Am I missing the forest for the trees or are you?

2008 Jun 19 09:15 AM

[capgain:]

AW: As you know, I have been following your series on MNKD with interest. This section is particularly impressive; your obvious intelligence and the depth of the technical research you've brought to the surface for us is a welcome change from the more common lip-flapping that often passes for "research" or advice. Thank you.

My investment in MNKD has lost 75% of its value, but I have not sold out as I normally would in weeding out the "losers". Perhaps I should have, but there is something over-arching about Dr. Mann's absolute commitment to this dream that is contagious. You have focused so well on the nuts and bolts; I am yielding to a rare gut feeling that again and again stops me from selling out. We may have taken different paths to get where we are, and your route is certainly more defensible, but the few times I've trusted my gut have been rewarding!

2008 Jun 19 11:07 AM

[Nocturne0:]

Has anyone considered BIOD's VIAject which seems to act almost as fast as TI?

2008 Jun 19 01:06 PM

[User 213006:]

I'm not familiar with the cancer data, but in relation to the inhaled insulin, it seems like you have an agenda because of your ownership position in MNKD stock. Your claims about Byetta are patently false. Here's on example: take a look at the label. RESTORING first phase insulin response is in the label. It's the only product that has it. Research helps credibility. Why don't you try to spot the other falsehoods in your article?

2008 Jun 19 07:19 PM

[Ahithophel ...:]

Jose Mcintrye:
"But the fact remains this is inhaling a growth factor and experts are going to worry, no matter what the data shows. ... How do they go about changing perceptions? Am I missing the forest for the trees or are you?" -- Jose Mcintrye

I understand you to mean that even with FDA approval, they will have trouble getting doctors on their side to prescribe it. You are absolutely right that this will be an uphill battle for Mannkind, no doubt about it. If their only selling point for Technosphere Insulin was convenience, I would call it a lost cause. But it DOES have major medical advantages, as I covered in Part 1 and Part 3. There will be early adopters and there will be those who take a wait-and-see approach. There most likely will be some patients who will persuade their doctors to prescribe it for them. It will surely start off more slowly than it would have otherwise, but I think it will build up.

Mannkind definitely has to spend time, energy, and money educating the doctors, explaining the science, and diffrentiating themselves from the other products. Mannkind is quite aware of that -- they have said as much and that's what they're planning to do. They're not neophytes. If I could just point out one more thing. When Pfizer's cancer announcement came out, none of the medical sites that were part of the clinical trials for Technosphere Insulin chose to drop out. These are the doctors who have the most intimate knowledge of the product. They were presented with the safety information and issues and made the reasoned choice to continue. With sufficient education, I think that Mannkind CAN win over the opinion leaders and front-line doctors.

2008 Jun 19 07:36 PM

[Ahithophel ...:]

Mr. BSG
"Now that was a well written, logical article. Thanks."

Thanks for the compliment.

2008 Jun 19 07:36 PM

[Ahithophel ...:]

User 213006:
"Your claims about Byetta are patently false. Here's on example: take a look at the label. RESTORING first phase insulin response is in the label." -- User 213006

You are correct that on page 2 of the Byetta prescribing information, it states that Byetta restores the Phase 1 insulin spike, with an accompanying chart from a study as a source. (For all those who want to read it themselves, Byetta's prescribing information can be found at pi.lilly.com/us/byetta...)

However, if you look at it carefully, you will see that the chart and caption describe giving Byetta at a constant level through an IV tube and then adding glucose through an IV tube. This is not the way Byetta is actually taken by patients. Patients inject themselves twice a day, within 60 minutes before their morning and evening meal. On page 3 of the prescribing information, it says that the average time for Byetta to peak in the blood is 2.1 hours after injecting. That makes the information on page 2 about Byetta through IV irrelevant to the use of Byetta in real life. We have to see what the sudies from the actual clinical trials, where the patients were taking Byetta normally, show about the Phase 1 insulin spike.

I have located one such study for you. It can be found at care.diabetesjournals.... The part that interests us now is on Page 4 Chart C. This chart shows the insulin levels on the last week of the trial. The patients took Byetta at 0 minutes, ate the standardized meal at about 15 minutes, and had their insulin levels monitored for around 3 hours. As you can see by eyeballing the chart, there is nothing resembling the Phase 1 insulin spike. Instead, insulin levels rise steadily until it peaks around 1 hour after injection, which is just about the same as the peak for conventional injected insulin. The healthy body which DOES have a Phase 1 insulin spike, peaks its insulin levels within 10 minutes.

I've been sifting through more medical journals to see if I can find more information on the topic and have come up blank so far. But as of now, I don't think that I made a mistake.

If you have any more questions on my article, please feel free to ask them.

2008 Jun 19 09:17 PM

[AMitchle MD...:]

One of the most important and well-documented facts about the pharmacology of exenatide (Byetta) is that the drug restores first-phase insulin response. The author of this article flatly states that Byetta does NOT have this effect. Publishing an error of this magnitude calls into question the credibility of the entire piece.

2008 Jun 19 09:17 PM

[Ahithophel ...:]

AMitchle MD PhD:
"One of the most important and well-documented facts about the pharmacology of exenatide (Byetta) is that the drug restores first-phase insulin response. The author of this article flatly states that Byetta does NOT have this effect. Publishing an error of this magnitude calls into question the credibility of the entire piece." -- AMithchle MD PhD

Judging from the times of the posts, you must have missed my comment (the one right before yours) addressing this very point. I explained where I'm coming from to make the statement that I did. If I'm incorrect with what I said in that comment, please do respond and show me where I went wrong.

If you have any more questions on my article, please feel free to ask them.

2008 Jun 19 09:22 PM

[scutchen:]

AW: "If I'm incorrect with what I said in that comment, please do respond and show me where I went wrong. "

<cricket, cricket...>

2008 Jun 23 11:09 AM