Good News for MannKind - Analyst Blog

MannKind Corp. (MNKD) received a boost when the US Food and Drug Administration (FDA) accepted MannKind’s response to the complete response letter (CRL) issued by the agency on its inhaled insulin candidate, Afrezza. The candidate is being developed for treating type I and type II diabetes.

The agency informed the company that the resubmission will be treated as a class II review. Consequently, a decision from the FDA should be out within 6 months (target date: Dec 29, 2010).

The resubmission included safety and efficacy data from recently completed studies on the candidate. We remind investors that the FDA had issued a CRL earlier in the year to MannKind in response to the New Drug Application (NDA) submitted in 2009 for Afrezza. The FDA asked MannKind for information about the commercial version of the company’s MedTone inhaler, which is different from the one used during clinical trials. Furthermore, the FDA also requested for updated safety data.

Afrezza utilizes MannKind’s proprietary dry powder Technosphere formulation of insulin. It is inhaled deep into the lungs using the company’s MedTone inhaler. Once inside the lungs, the insulin is rapidly absorbed into the bloodstream.


Lucrative Diabetes Market

The diabetes market provides one of the largest opportunities in pharmaceuticals. In the US alone, the disease affects 23.6 million people. The market has a huge unmet need with the incidence of diabetes being on the rise. A study published by Diabetes Care in 2006 projected that about 48.3 million people would be diagnosed with diabetes in the United States by 2050.

Our Take and Recommendation

We believe that the approval of Afrezza is crucial for MannKind. However, although Afrezza offers distinct advantages over the traditional needle-based insulin therapy that currently dominates the market, the path to approval is not easy.

Furthermore, with no product on the market and no revenues, we are very concerned about the company’s financial position. The company believes that its funds and the available credit facility will enable it to conduct operations through the first quarter of 2011.

MannKind is a Zacks #4 Rank (Sell) company, which indicates that the stock is expected to underperform the overall US equity market for the next 1-3 months. The near term pressure arises from the uncertainty regarding the approvability of Afrezza. Many large pharmaceutical companies in the past have made unsuccessful attempts to launch such a product.

The lack of earnings estimates revisions over the past month by analysts covering the stock reflects the absence of directional pressure on MannKind. This supports our long-term Neutral recommendation on the stock, which indicates that the stock is expected to perform in line with the US equity market over 6+ months.
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