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Manoj Madhavan
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Manoj Madhavan, CFA, is a Principal at Oxford Chase Advisors LLC, a Dunwoody, Georgia based Registered Investment Advisory (RIA) firm. His investment philosophy is loosely based on Warren Buffet’s principles of value investing. Manoj was born in Tiruchirapalli (Trichy), India. He has a... More
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  • Is Afrezza Destined To Be One Of The Top Ten Medications Of All Time?

    According to a poster on the Yahoo Message Board (YMB) for $MNKD named "doctor.stockpicker", Afrezza is destined to be one of the top ten medications of all time!!

    Why should we care what a YMB poster says? He says "I am a physician in Oklahoma who has been treating diabetics for 26 years."

    Is he a real doctor? (I am assuming the doctor is a male for the sake of convenience). Anybody can claim anything in an anonymous message board such as YMB. But I believe he is for real.

    Of course, I am long $MNKD (and by definition I am biased) and he is only "one data point". But I have collected a sample of his posts here (with his permission). You can decide for yourself.

    ____________________________________________

    Feb 11, 2015:

    I was questioned earlier tonight abut what I thought the Trx numbers would be and how fast they would rise. I do not know how fast that data is collected, but the rep told me that I prescribed Afrezza first in this state and that prescription was written January 29th. I do not know how long after that date that he actually went to the pharmacy. I prescribed it for the second time today as I finally got the discount cards. The first patient didn't want to wait until I got the cards.

    Feb 11, 2015:

    The Sanofi rep made it to my office today. Some highlights.

    1. The coupons allow the patient to obtain the first month of Afrezza free of charge and then $30/month for a year if they have insurance. Surprisingly, it is already on all of the major insurance companies in my area. Of course, Part D plans have not yet included it on their formulary. They are always nortoriously slow in adopting new medications. The other surprise is that there is no limit in the amount of insulin supplied in a month. He told me to write the script as how I want to prescribe each dose and just dispense a 30 day supply. They pharmacist will the dispense the correct number of the 4 unit and 8 unit cartridges to last the month.
    I believe that the rapidity in insurance coverage is an important fact in that it signifies that they either want it to be adopted in belief that it will cut down on ER visits for iatrogenic hypoglycemia . Remember the NIH reported 100,000 ER visit for hypoglycemia in 2013 with 1/3 of them requiring admission

    The rep stated that he will be my Afrezza rep and another rep will eventually detail Toujeo. That seems to me that they are putting equal efforts in each product. He did state that Sanofi was nervous at losing the 7 billion dollars that Lantus brings to the company. Personally, I think they should be nervous as the performance of current basal insulins is pretty good and I don't think payors will expend the funds when the bioequivalent basal insulins come available. If I was a rep that received some of my pay from commissions, I would choose Afrezza to detail as opposed to Toujeo.
    Also, he said that they would quit detailing Lantus in the near future. He did mention the exact date, but I can't recall it

    The rep stated that he had called on an endocrinologist who had some concern that Afrezza would interfere with DLCO (google it) . He listened to the concerns and was able to get a Sanofi scientist to come to the physician's office who presented him with the data that appeased his concerns. Overall, he stated that most physicians were quite open to the product. The lack of the tail effect makes any physician raise his eyebrows as we have all grappled that tail. The tail has made us delay prandial insulin for as long as possible

    ___________________________________________________________________________

    Feb 10, 2015:

    Well that is two interesting questions. I first bought Mannkind years ago when I saw the Afrezza pharmacodynamics. It was the answer that Monnier stated was needed in JAMA April 2006. I've never wavered in my convictions. I do not know what percentage meet this criteria, but I will replace all prandial insulins that I currently prescribe with Afrezza unless they have lung disease or are unable to perform the inhalation. That percentage is unknown.

    As for prediabetes, it will be on a case by case basis. An 84 year old with fasting blood sugar of 125, the answer is no. But a couple of weeks ago, a friend of mine since my childhood was in the office and he had a fasting glucose of 121 and an A1C of 5.9%. I told him of Afrezza's availability and that I would personally take it if those were my numbers. He was very hesitant. He wanted to improve his diet and recheck it in three months I don't think his numbers will change much as he is very close to ideal body weight, but he wants to eliminate the "junk" in his diet and return.

    If I were a type one diabetic, I would go on Afrezza. If I were a early type 2 I would go on metformin and Afrezza. My hope is that this combination, would keep the type 2 from progressing as it always has with previously available treatment. As for the current type 2 patients that are on metformin and any other medication, I will probably stop that medication whatever it is and switch to Afrezza. What most nonphysicians do not understand is that our current drugs do not allow tight control to occur without great risks. There was a study in England as few years ago that looked at mortality over 2 years and Aic with people on metformin and a sulfonylurea. Here is the disturbing conclusion, the lowest mortality occurred in patients that had an average a1c of 7.4%. The further that a1c was in either direction from 7.4%, the higher the mortality. And this is a common prescribed combination.

    Feb 8, 2015:

    I want to put the Afrezza and cancer issue to rest once and for all. As we all know smoking cigarettes causes cancer. It has been statistically determined that a man of 68 who has smoked two packs of cigarettes a day for 50 years will have a 15% chance of cancer. A type 1 diabetic with current insulins has a nearly 100% percent chance of end stage kidney disease, blindness, and amputations if not outright death far quicker than 50 years. Now, I doubt there is any way that Afrezza is oncogenic at all, but if it is as oncogenic as smoking two packs a day, it is still a positive on the risk versus benefit curve. Enough said. This is a non issue.

    People need to understand that current treatment for diabetes lacking miserably. Afrezza solves the "prandial problem". There is no chance that it will not be one of them top ten selling medications of all time.

    Feb 7, 2015:

    You are so wrong. Current treatment lets diabetics die prematurely. If you do not believe me, ask a diabetic who tries to buy life insurance. I can assure you that the demand for this medication will be staggering.

    Jan 30, 2015:

    The study was the Action to Control Cardiovascular Risk in Diabetes (ACCORD) and the outcome was more than hypoglycemia. The problem was excessive DEATHS . This is something that everyone needs to understand. Before Afrezza, attempts to obtain tight control lead to excessive deaths. Our choice has to be let the disease kill them slowly over time or let the treatment kill them quickly.

    Jan 29, 2015:

    1. EFFICACY OF GLUCOSE CONTROL. Current treatment is insufficient. Many people suffer from the consequences of both types of diabetes. Even today, they have a lower life expectancy, a higher rate of blindness, and require amputations. Please Google: Monnier, JAMA, 2006. Read the conclusion where he states "Glucose fluctuations during post prandial periods, and more generally, and during glucose swings exhibited a more specific triggering effect on oxidative stress than chronic sustained hyperglycemia. The present data suggest that interventional trials in type 2 diabetes should target not only a1c and mean glucose concentrations but also on glucose swings." THIS IS EXACTLY WHY I OWN MANNKIND STOCK as the pharmacodynamics of Afrezza will allow it to be the first drug that will dampen these glucose swings. Look at afrezzauser's tweets the first day he was on Afrezza, the swings were gone. So I believe that under the category of Efficacy the benefits of Afrezza outweigh the risks.

    OK shorts, attack this, post number 2 later

    2. BLACK BOX WARNING. The unknowing on this board sometime post that the FDA boxed warning means that Afrezza is a high risk drug when compared to other diabetes medications and therefore physicians will not prescribe it. Obviously, they have not seen the boxed warnings that is the PDR for metformin which is the drug of choice for type 2 diabetes. Januvia, Byetta, Bydureon, Victoza, had boxed warnings added to their package insert a considerable time after their approval. So as far as the black box warning the risk versus benefit ratio is a "push" when compared to current available medications.

    3. FDA POST APPROVAL SURVEILLANCE. It has been mentioned on this board that physicians will not prescribe Afrezza because the very fact that the FDA requires FEV1 monitoring means that FDA is concerned about the long term lung effects. In actuality, the FDA is a very conservative organization and only approves drugs that they have deemed safe, but they might require post approval surveillance when, in theory, there may have consequences with long term use. I have been around long enough to remember when Mevacor (the first statin) required that yearly ophthalmological exams be performed and frequent serum transaminases monitoring. I even was paid by Bristol Myers to do post approval surveillance to determine if it had the same toxic side effects as phenformin, another biguanide, a long ago drug pulled off of the market due to toxicity . The reason that the FDA wanted this surveillance was that even though metformin did not have significant toxicity , it was in the same biguanide class, so they required the follow up surveillance. I personally believe that the the benefits of Afrezza far out weight the risk or nuisance of monitoring FEV1.

    4. ADVERSE DRUG REACTIONS. Adverse drug reactions are somewhat different from drug toxicities. In Afrezza's case, and with any other glucose lowering agent, the main one would be hypoglycemia. Because Afrezza's tail is much shorter than with any other available prandial insulin, there will be markedly less symptomatic hypoglycemia,. The NIH recently sent a report to physicians illustrating that in 2013, there were 100,000 emergency room visits for iatrogenic hypoglycemia. One third of these required hospital admission. The vase majority of these were due to prandial insulin, Risk verses benefit in this category is a big benefit for Afrezza

    Jan 29, 2015:

    Little man, you are out of your league. The FDA quite frequently asks for post approval monitoring, I was in my residency training when Mevacor was approved. Initially yearly ophthalmological exams were required and serum transaminases had to be surveyed frequently. Bristol Myers even paid me to obtain data on Glucophage after its approval. This was required of them at the time of FDA approval. They subsequently found nothing to cause great concern and today metformin (the Glucophage generic if you did not know that ) is the drug of choice for type 2 diabetes. It is going to be replaced by Afrezza in future years, If the requirements for a FEV1 in patients is your basis for a short position, then you need to be very scared, very, very, scared.

    Jan 29, 2015:

    Sanofi will not make grand announcements or something like a Super Bowl ad for a while. They will want their sales reps to have had a chance to call on the physicians in their territory. My Sanofi rep has not been to my office yet (and I'm the leading prescriber of diabetes medications in his territory) He was here the week prior to leaving for Vegas. He has a rural territory and will make his rounds to get to me once every few weeks or so. They do not want a DTC ad to prompt a patient to ask his/her physician about Afrezza until they physician has been educated about the product. A visit like that would not yield a prescription. Be patient. This is destined to be one of the top ten medications of all time!

    Jan 27, 2015:

    Agreed. The Sanofi rep has not been to my office since his training, but before he left I told him that "surely Sanofi was smart enough to know what they had" . The reason that I own Mannkind is that I think the above post perfectly sums it up. I believe Sanofi knows all of this as Al has told them. Only Al did hot predict a top five drug. He predicted the number one selling drug of all time. He was scoffed by people who have not accomplished 1/1000th of what of has accomplished

    Jan 6, 2015:

    My Sanofi rep was in the office today. He stated that he will be trained in Afrezza this month and that it will be available in February. He has read extensively about it from sources other than Sanofi and was well aware of the pharmacokinetic profile as well as that it may become a very early treatment for type 2 along with metformin. He went on to state that Sanofi did not promote Apidra properly (he said they were arrogant) and would not make the same mistake with Afrezza, He seemed excited about the prospects

    That is what the Sanofi rep told me today. Titration issues was one on of my early concerns, but studies have proven that with Afrezza a unit by unit titration is not that critical due to the lack of the tail effect.

    Tags: MNKD, Biotech
    Feb 12 5:13 PM | Link | 9 Comments
  • It Is Not Advisable For Retail Investors To Short Mannkind

    This is not an article about AFREZZA. As Mannkind's website states "AFREZZA® (pronounced uh-FREZZ-uh) is a first-in-class, ultra rapid-acting mealtime insulin therapy being developed to improve glycemic control in adults with Type 1 and Type 2 diabetes mellitus. It is a drug-device combination product, consisting of AFREZZA Inhalation Powder single use dose cartridges, and the small, discreet and easy-to-use AFREZZA inhaler."

    Many of the medical aspects of AFREZZA have been covered in excellent articles by George Rho, Maredin Capital Advisors, Jeff Eiseman, and at afresa.blogspot.com among other places.

    This article is simply an attempt to warn retail investors about the risks of shorting a biotech stock such as Mannkind. Whether you are long or short, we can all agree on a few things:

    1) Nobody knows whether the Adcom panel will vote for or against approval of AFREZZA on April 1, 2014

    2) Nobody can say with 100% certainty that a majority Yes vote by the Adcom panel means that FDA will approve AFREZZA on April 15, 2014 (yes I am making an assumption that the PDUFA date will be April 15, 2014 because at this time we do not have any information otherwise.)

    3) Nobody can say with 100% certainty that a majority No vote by the Adcom panel means that FDA will reject AFREZZA on April 15, 2014

    Given the above, it would be unwise to invest a large portion of your portfolio in MNKD stock or calls. That said, going long by buying shares or calls of Mannkind means that the maximum you stand to lose is your investment. This is not the case when you short shares of MNKD. When you short shares of a stock your risk of loss is greater than 100%. Many brokerage firms out there today will let retail investors sell shares of a security that they do not own. This is, in my opinion, a tragedy. Many retail investors lose a lot of their hard earned money this way. I believe that shorting should be permitted only for accredited investors. But that is the topic of another discussion.

    In the case of Mannkind, if you are a hedge fund or big institutional investor you may have many reasons to short shares of Mannkind. Some of these could be

    1) You have a convertible bond position in Mannkind and you wish to offset (hedge) some or all of the underlying long position in Mannkind shares by shorting shares of Mannkind stock

    2) You have entered into a long position in another biotech stock or in a biotech ETF such as IBB and the Mannkind short position is one part of a complicated long-short strategy

    3) You have arranged short position trades for one or more clients of your firm and you stand to benefit in fees and commissions from arranging this transaction

    The list goes on and on. But as a retail investor, you are not able to participate in, or directly profit from, any of the above transactions. So in other words, as a retail investor, you should not be shorting shares of Mannkind.

    Here are some other very good reasons why you should not short shares of Mannkind:

    1) Rumors, if any, of a partnership deal could send the stock price up quickly before you have a chance to cover. It is no secret that Mannkind has engaged the services of advisory firm Greenhill & Co to identify and secure a partnership to market AFREZZA after FDA approval.

    2) Actual news, if any, of a partnership deal could send the stock price up quickly before you have a chance to cover.

    3) Rumors, if any, of Mannkind's plans to apply to other markets (outside US) for approval could send the stock price up quickly before you have a chance to cover. This is nothing new or unusual. Many medical devices and drugs have been approved in other countries even though the FDA has rejected them. Sanofi's Lemtrada (NASDAQ:GCVRZ) is an excellent example. The FDA has rejected Lemtrada but it has been approved in over 30 developed nations including Canada, Australia and Germany.

    4) Actual news, if any, of Mannkind's plans to apply to other markets (outside US) for approval could send the stock price up quickly before you have a chance to cover.

    5) A run-up to Adcom, and the PDUFA soon after, could send the stock price up quickly before you have a chance to cover. Many biotech stocks have been known to rise as a significant FDA event approaches such as an Adcom date or a PDUFA date. In this particular case, Mannkind has faced two "rejections" in the form of Complete Response Letters (NYSE:CRL). There is literature that indicates that this actually increases the odds of a company's chance for approval a third time. This make sense because, with each CRL, the company spends millions of dollars to further test the device or the drug and makes sure that all the I's are dotted and the T's crossed before the next submission. Mannkind's Adcom date is expected to be April 1, 2014. This means that the stock could go up quickly in price as April 1 approaches, before you have a chance to cover.

    6) Any number of other news, rumors or just random short covering could send the stock price up quickly before you have a chance to cover. As of 1/15/2014, 51.45 million shares of stock have been sold short according to NASDAQ.

    I look at it another way. If I am long Mannkind and the FDA does not approve a third time, Mannkind has the option to apply for approval in the rest of the world. Mannkind's Chairman, CEO and primary investor, Dr Alfred E Mann has many different ventures that he is involved with. He is not out of money as some people have been saying. Dr. Mann is Chairman of Second Sight which recently got approval for its Argus II Retinal Prosthesis System (bionic eye). The Alfred E. Mann Foundation for Scientific Research recently won a patent infringement lawsuit against Cochlear Ltd that awarded it $131.2 million. Suffice it to say that Dr. Mann does not have all his eggs in one basket or all his net worth tied up in Mannkind and he has the resources and the connections needed to put more money in this company if he has to. So as a long, I can sleep at night.

    Maybe it is just me, but if I were short, I would be unable to sleep tight. I would be terrified of incurring unlimited losses due to one or more of the possible events outlined above. I am biased towards Mannkind and AFREZZA but I am even more biased towards Dr. Mann. I really believe that Dr. Mann is an amazing human being, successful entrepreneur and investor and genuine philanthropist. Due your own due diligence and I hope you do well with your investments.

    Disclosure: I am long MNKD.

    Feb 14 11:07 AM | Link | 6 Comments
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