Dreamboat Data? Not Exactly.

MannKind  (NASDAQ: MNKD  )  ended up more than 10% on Wednesday, after the biotech announced positive results for two phase 3 trials testing its inhaled insulin Afrezza.

Apparently, I had a little more confidence that the trials would be positive than the average investor did. A 10% increase -- that's a $220 million increase in value -- surprises me. I figured, after the monster run the stock has been on, we might see a sell-the-news event, given how widely expected the results were.

Maybe if the data was unanimously positive. But it wasn't.

For instance, type 1 diabetics in the Afrezza group failed to hit the key target A1c levels, a long-term measure of blood sugar levels. Doctors like to see patients get their A1c levels below 7%, but the portion of the patients who reached the target was higher in the group taking Novo Nordisk's  (NYSE: NVO  )  injected insulin Novolog than the Afrezza group. The proportion getting under 6.5% also favored the Novolog group.

The number of severe hypoglycemia events, extremely low blood sugar, in type 1 diabetics was lower in the Afrezza group than those taking Novolog, but it wasn't statistically significant, so MannKind won't be able to tout it as an advantage.

In type 2 diabetics, Afrezza caused more hypoglycemic events than the placebo, which isn't all that surprising, but will clearly be a factor for whether doctors are willing to prescribe it earlier in the disease progression than they would Novolog or Eli Lilly's  (NYSE: LLY  )  injected insulin Humalog.

Patients taking placebo also lost more weight than the group taking Afrezza. Again it's a comparison to placebo, so Afrezza might be able to compete with Novolog and Humalog -- which tend to cause weight gain anyway -- but the data might not be convincing enough to justify the early use of Afrezza.

Afrezza will still be approved, though 
The main thing the Food and Drug Administration will look at is the primary endpoints. For both studies, Afrezza met the primary endpoints.

For type 1 diabetics, the second-generation Dreamboat was just as good as Novolog at reducing A1c. And when the Dreamboat was compared with the first-generation MedTone device, the devices affected patients' ability to breathe at a comparable level.

In the trial in type 2 diabetics, Afrezza lowered A1c more than placebo by a statistically significant amount. Not exactly a high bar to jump over, but it'll be good enough for approval.

Partnering first? 
MannKind is shooting for resubmitting its FDA application in the fourth quarter and, assuming the agency doesn't find something new to complain about, investors can expect an approval six months after that.

In the meantime, now that it has data, MannKind has hired investment bank Greenhill to help it find a partner to market Afrezza.

Finding a partner and the structure of the partnership will be a strong tell as how other companies are feeling about Afrezza's potential.

If one of the big diabetes players -- Novo Nordisk, Eli Lilly, SanofiAstraZeneca, Bristol-Myers Squibb, or Merck -- steps up to the plate and makes a large upfront payment, it'll be a good sign to investors that someone thinks inhaled insulin has a shot at success.

If MannKind lands some podunk partner or the deal is completely back-ended with milestones with high sales targets, we can assume that drugmakers are still highly skeptical that there's a market for inhaled insulin.

Who can blame them, after Pfizer 's  (NYSE: PFE  )  flop with Exubera? Admittedly, Afrezza is a much better product, but MannKind and its new partner have a tough task persuading doctors to change the way they think about delivering insulin. Novo Nordisk and Eli Lilly clearly saw the writing on the wall when they dropped development after Exubera's failure.

If Novo Nordisk, Eli Lilly, or Pfizer end up partnering -- or even make a bid -- I'll be willing to change my skeptical view, but until then I think investors should be cautious taking a position in MannKind.

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Read/Post Comments (12) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 14, 2013, at 8:25 PM, mbracket123 wrote:

    Wow, you moron they hit the end-point - there was non-inferiority.

    And Exubera is not even comparable so stop rehashing old meaningless crap.

    And the latest doctor surveys show there is great interest in the product, so you are just making up data.

    Do some real journalism.

  • Report this Comment On August 14, 2013, at 9:21 PM, geomedf wrote:

    As an internist for leading my peers in Aic quality measures, I struggle to balance side effects (esp hypoglycemic episodes) and convenience while achieving optimal bs control with currently available forms or insulin and oral agents. I welcome adding Afrezza, with it's uniquely efficacious pharmacodynamics, for more flexibility in achieving symptom free glycemic control. The reported weight gain may actually be a positive if improved glycemic control results in improved strength/stamina and less cataboliism. However, weight gain from deteriorating renal fxn, cardiac fxn, and proteinuria would be a negative, and hopefully this data will be culled out and reported in the following weeks.

  • Report this Comment On August 14, 2013, at 9:51 PM, marketisrigged wrote:

    wow- you must be short. Why do you fail to mention that afrezza significantly lowered blood glucose compared to aspart

    There was a significant difference in fasting blood glucose (FBG) levels in the AFREZZA-Gen2 group compared to the insulin aspart group. In the AFREZZA-Gen2 group, mean FBG levels decreased by 25.3 mg/dL by the end of the treatment period whereas the insulin aspart group experienced an increase of 10.2 mg/dL in FBG levels over the same period (p=0.0027). After the four-week follow-up period, during which all patients received insulin aspart and a basal insulin, there was no longer any difference in FBG levels between the treatment groups, demonstrating that this effect on FBG levels was attributable to AFREZZA therapy.

  • Report this Comment On August 14, 2013, at 10:06 PM, TheStockDoctor wrote:

    It is amazing to see such a slanted article that reveals the bias. While it may appear at first to be an attempt at providing a balanced view, the negativity comes through.

    You seem to be an unconventional reporter, but I'm sure your Mom likes you.

  • Report this Comment On August 14, 2013, at 11:31 PM, yazzbro wrote:

    What a dirtbag article this is. Totally spun facts, bad and very biased opinions based on nothing. Did you ever stop to think the the results were probably already baked into the pps. I mean it has had a monster run up already. Did you not listen to the conference call? Al Mann said he had multiple BP's Intersted in partnering. Do us a favor cover your short position and go away. Or come back with a real article after you actually do some better DD. Garbage.

  • Report this Comment On August 15, 2013, at 7:31 AM, andrewmozz wrote:

    A fool writes this article. get it?

  • Report this Comment On August 15, 2013, at 8:29 AM, cheman211 wrote:

    You totally neglect to comparison to the oral medications which is a pretty large market. I don't anybody expected that Afrezza would be superior to the injectable product. So what is your point?

  • Report this Comment On August 15, 2013, at 8:34 AM, horticultor wrote:

    I'm always disappointed when any self-proclaimed "expert" attempts to put a roadblock in the development and marketing of something that has the potential to improve our lives the way Afrezza does. And all for the sake of making a $.

    It's both foolishness and soullessness to do so.

  • Report this Comment On August 15, 2013, at 9:37 AM, dj1087 wrote:

    As a type 1 diabetic, I can tell you that I'm extremely interested in this drug and have been following it very closely. I don't think it will be as effective as pump therapy, but I can tell you that if I could get away from injections, or even just reduce injections, I would be on that drug like white on rice.

  • Report this Comment On August 15, 2013, at 10:46 AM, optionsmaster wrote:

    I like the recent data.

    The other untold benefit with Inhaled insulin is patient compliance!

    No needles =

    1. No pain

    2. Convenience mean better conpliance

    3. No bleeding especially those patient who are also taking blood thinners

    4. No risk for infections

    5. Portability. I can take an inhaler almost anywhere

    In addition, no light is needed. Patients can inhale insulin in the dark or low light areas; however, patients can't inject in the dark, especially if they are trying to inject the correct dose.

    If the downside risk is $5 and the upside benefit is $20, then I'm going long!

    Disclaimer: I may add to my current MNKD call positions within the next 48 hours.

  • Report this Comment On August 15, 2013, at 1:25 PM, vrdjs wrote:

    The moment you see the word Exubera in one of these articles you know it's garbage.

  • Report this Comment On August 15, 2013, at 6:56 PM, EllenBrandtPhD wrote:

    Brian,

    Off-topic on this particular story, but have you noticed the stealth decline in PFE's P/E the past several days?

    That may mean what we hope it means: A lower and lower share count. PFE does this, as observers know. It literally relishes bearish days in the general market, gleefully buying back shares with its sinfully large cash hoards.

    Sooner or later, traders all of a sudden begin to notice it.

    I also think we may once again be entering a period when Big Pharma outperforms the rest of the Dow and/or S&P. If you're generally not too enthusiastic, but not a maven for Gold or Oil - I am, but many are not - Big Pharma often is your first choice.

    (Like one of the smarter Fast Ninnies today, I do not buy the fact that many traders will simply go all to cash or all to Shorts, which has been a recipe for disaster.

    (And unlike the generally least accurate of the Fast Ninnies - an amiable fella, but lacking in accuracy - I not only don't think the September Taper is a lock, I think those on the other side - October better, December best - start screaming it from the rooftops, as Dr. Bullard has done several times already.

    (In terms of the very near term, I am personally rooting for a really bad Nikkei swoon tonight, followed by the Europeans acting responsible and turning things around tomorrow morning - which they can do on currency alone, via stronger Euro, NOK, CAD, and Aussie, as well as a slew of EM currencies.

    (The remaining Yen Short of the Ages folks have to have their ranks thinned out, so that certain Cronies - like in Canada - will once and forever change their algorithms and stop synchronizing Yen Shorts with Euro Shorts, Commodity Currency Shorts, Gold Shorts, and deleterious Pairs traded Shorts in dual-listed stocks whose home country is a "Commodity Country," like Canada or Norway.

    This has gone far afield.

    Back to the top, I am warming again to Pfizer, after selling higher after earnings. If the Dow gets a dead cat bounce, let alone a live cat bounce, this could once again claim leadership.

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