Will This Large Biotech Pop Experience Analyst Backlash?

While I do think it's possible that MannKind's (NASDAQ: MNKD  ) inhaled insulin device, Afrezza, will be approved by the Food and Drug Administration, I do have serious questions as to whether it will be a marketing success. As the controversy builds and analysts doubt the company's phase 3 trial, there is another biotech with even more outstanding stock gains that could face a similar series of questions regarding its phase 2 data.

Why not present all data?
In data presented earlier this month, Afrezza proved to be more effective than insulin and oral diabetic therapies in two phase 3 studies. However, questions about trial design, undisclosed data, and its likelihood of success has caused the stock to crash by more than 20% since announcing this data.

MannKind's disclosed data looks good. But then, there is the third arm of the study. MannKind only released details on two arms, which is something that I originally missed when assessing the trial results.

Research firm Summer Street makes note of MannKind's failure to disclose "certain data," and says, "If the results on the Medtone C-arm aren't worthy of presenting and inhalers aren't equivalent, then there's not enough safety information to approve Dreamboat." It seems like Summer Street is accusing MannKind of hiding data, and rumors are starting to spread that regulators may not have the patience to deal with any shenanigans on behalf of the company, following two previous FDA rejections for Afrezza.

After a 165% return in 2013, MannKind has a market capitalization of $1.85 billion. For an investigational stage company, a near $2 billion market cap suggests a terrific deal of promise and confidence on behalf of investors. If Summer Street is right, shares of MannKind could take a turn for the worse as investors likely expect the release of all data prior to the FDA decision date.

Is it happening again?
Just a week after MannKind's data, another promising biotech, Incyte (NASDAQ: INCY  ) , is trading higher by more than 30% following its data. The company presented phase 2 data on its drug Jakafi for the treatment of pancreatic cancer. Jakafi is already FDA approved to treat a type of blood cancer, but robust data in the pancreatic cancer study suggests it may have more potential in other indications as well.

Incyte presented compelling data for a subgroup of patients. There was one subgroup deemed "most likely to benefit from treatment" where Jakofi with chemotherapy produced a 42% survival rate at six months. When treated with chemotherapy alone, survival was just 11% at six months.

Clearly, this subgroup of patients did show an effect to treatment. According to analysts, the pancreatic cancer being tested in the company's "overall" Phase 2 trial could create additional revenue of $500 million for Incyte. However, this leads us to the problems.

Like with MannKind, initial data for Incyte looks good. But as a biotech investor, it is essential that we look outside the box, and ask a lot of questions when assessing such data. For example, why wasn't all data presented by MannKind? With questions being raised, why hasn't the company addressed these concerns and released the details for that third group?

In regards to Incyte, how many subgroups were tested? How many subgroups failed in reaching statistically significant overall survival? More importantly, why wasn't progression-free survival disclosed (tracks the growth or development of the disease/tumor)? Progression-free survival was one of the secondary endpoints to the study, and often times the FDA wants to ensure that a drug/vaccine is stopping the growth of a tumor before approving it.

Preparing for analyst backlash?
My problem is that Incyte added nearly $1.4 billion to its market capitalization with news of this subgroup data. Now, I am not trying to downplay the importance of the noted data, as it was remarkably good. However, MannKind's data looked solid as well, and then stock-moving questions arose in the days that followed its trial results. With that said, I am suggesting that Incyte's stock may have gotten ahead of the news, and it's possible that analysts will raise questions that I have mentioned, much like with MannKind.

With MannKind, the post-data questions have pushed its stock to below its pre-data announcement price of $6.80, causing it to lose all of its gains plus more. MannKind simply did not disclose details for one of its three treated groups. In the case of Incyte, its stock jumped despite their being no prior knowledge of a subgroup and with pertinent details including patient size being kept confidential. Therefore, this scenario has the makings of being problematic for Incyte investors, and I would monitor the rumors, whispers, and potential criticism of analysts over the next week. Lastly, I wouldn't be surprised to see Incyte's stock drop when these questions are raised.

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  • Report this Comment On August 22, 2013, at 12:47 PM, wantanabe wrote:

    Neutraceuticals are going to be the wave of the future.

    The issue is not just type 1 diabetes (even though they're probably the most fluent on Americas' metabolic issues).

    But the root of the problem is a low thyroid, low leptin, HYPERINSULINEMIA (which can be exercised induced due to increased pyruvate/lactate levels with MCT1 not shutting off in pancreatic beta cells).

    These pharmaceuticals are making a HUGE mistake by trying to drive up demand at the expense of health instead of creating quality by meeting the health needs of Americans for a good value.

    Then they're all going to bribe congress to rob taxpayers for a bailout.

    The boomers made a HUGE mistake by tossing chemicals at their problems since the summer of love, telling Big pharma that it's okay to give them poison instead of cures because they dont' enforce any quality control.

    You can feed these "remidies" ie. insulin, statins, etc. to the Americans until we all die off of metabolic issues. Then run to China with the same money making idea. Except that China may already have their Sino-Pharmaceutical lethal gimmicks to make money as they kill off that population as well.

    To sum it up, Big Pharma is natural selection for the boomers. Sure there's 76 million of them, but when they die off- who else can you rob for lethal gimmicks?

    I know! Maybe the vets can get on the gravy train.

  • Report this Comment On August 22, 2013, at 12:54 PM, richalready2 wrote:

    So, Ms. Stone cannot come out with an original article of her own? She has essentially stated, verbatim, everything that was written by a Forbes article that came out first today.

    And she gets paid for this lousy research? I wouldn't even call it research, actually.

    Hope the article helps her pay her grocery bills. She obviously needs the money.

  • Report this Comment On August 22, 2013, at 12:57 PM, Retaility wrote:

    YAWN!!!!! Another regurgitated FUD piece. Nothing to see here. Wait until Elmer FUDstein puts out his post vacation hit piece and buy on the dips

  • Report this Comment On August 22, 2013, at 4:06 PM, Fredlee009 wrote:

    There is no "third arm" to the data. There were two studies. The data used in BOTH studies was compared to ALREADY EXISTANT data on the old inhaler. There was no difference in the 2 inhalers. In fact, only 3% coughed more than when given a placebo powder, proving the insulin part does not cause the cough. These were similar results from last study. Nice bash. Please produce this study they "missed".....All end points were met, because if they weren't, then Deerfield wouldn't have purchased 40 million in bonds from them contingent on good data and no safety concerns on approval from FDA...

    Repeating a possible criminal lie, and using into ur own article doesn't get you off the hook here...Possible only in intent is impossible to determine.... Lie for sure.... Or hes so ignorant he shouldn't be writing articles... O you missed it... Then your a bad researcher, cause what you claim would be UMISSABLE TO ANYONE. Including the 10 analysts that day talking to the company, but they seemed to miss it too, lol


  • Report this Comment On August 22, 2013, at 4:08 PM, Fredlee009 wrote:

    Motley Fool, out of respect to your website, you should remove this article immediately, or edit it with an apology....

  • Report this Comment On August 22, 2013, at 4:10 PM, Fredlee009 wrote:

    There is absolutely no questions by ANYONE about "trial design". In fact, the FDA practically wrote these trials for them... With constant communication from company and the FDA.. In fact the FDA ASKED MNKD to add a study for type 2.....Which of course they complied.... So there is not one person on this earth who has questions about the trial design. You just invented that, or give a quote from an educated investor, regulator, or even a reputable analyst.

  • Report this Comment On August 22, 2013, at 4:13 PM, Fredlee009 wrote:

    There are no design questions. In fact, the FDA helped them create the trials with the company...

  • Report this Comment On August 22, 2013, at 4:19 PM, andrewmozz wrote:

    i don't get why the motley fool doesn't like MNKD? oh well. i wonder what they will think of PLPL

  • Report this Comment On August 22, 2013, at 8:53 PM, Falcon208 wrote:

    Seems like a painfully obvious hatchet job to me...Surprised MF let this one run.

  • Report this Comment On August 23, 2013, at 10:07 AM, Retaility wrote:

    The hatchet king just posted his $hit piece this morning.. No real facts within, as usual. Harping on the issue regarding novo log not being blown out of the water. It was a NON INFERIORITY study. Guess they dont teach about this type of study to political science majors. Every basher is grasping at the same straw, pretty comical.

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