MannKind (NASDAQ: MNKD ) -- which has been trying for years to make inhalable insulin a reality -- is a polarizing company among investors. Some wholeheartedly believe that its main product, Afrezza, will be revolutionary. I t could turn the entire market for diabetes treatments upside down, rendering injectable insulin from Novo Nordisk (NYSE: NVO ) , Eli Lilly (NYSE: LLY ) , and Sanofi (NYSE: SNY ) obsolete.
Others believe that MannKind is foolish for sticking with its guns for so long, when similar products from Pfizer (NYSE: PFE ) , Alkermes/Eli Lilly, and Aradigm/Novo Nordisk have long since been abandoned.
Yet, it's tough not to admire MannKind for its persistence. On Tuesday, MannKind resubmitted its new drug application, or NDA, to the Food and Drug Administration in an effort to get Afrezza approved with an indication to improve blood sugar control in adult patients with type 1 and type 2 diabetes. MannKind submitted this NDA on the basis that two phase 3 studies showed positive results. MannKind was asked to conduct these phase 3 studies after receiving a complete response letter from the FDA in January 2012. To date, Afrezza has been rejected twice by the FDA.
Let's take a look back at inhalable insulin through the years to see if MannKind actually has a chance at disrupting the market.
Learning from Pfizer's past mistakes
The concept of inhalable insulin isn't new. Pfizer's inhalable insulin, Exubera, was approved in 2006 but only lasted a year before it was discontinued. The drug failed for five primary reasons.
It used a bulky delivery device that was roughly the size of a can of tennis balls.
It cost $5 per day compared to $3 for traditional insulin, with the only added benefit being its inhalable form.
Diabetes needles shrank so drastically over the years that many users had grown accustomed to self-injections.
There were patient concerns about dosing mistakes due to a confusing system of non-linear dosage.
The inhalable nature of the drug resulted in a warning label for smokers and patients with respiratory problems. In 2008, the FDA added a warning label for lung cancer.
Pfizer's myopic focus on the fact that Exubera was an inhalable insulin blinded it to these weaknesses, and the drug never lived up to its potential as a disruptive blockbuster drug. In the end, Exubera caused a $2.8 billion writedown for Pfizer.
Sanofi-Aventis (now known as Sanofi), which co-developed the drug with Pfizer, narrowly dodged a bullet when Pfizer bought out its share of Exubera for $1.3 billion days before its FDA approval.
After Exubera's disastrous failure, other inhalable insulin products from Alkermes/Eli Lilly and Aradigm/Novo Nordisk were terminated during clinical trials.
Can the last man standing deliver?
MannKind's Afrezza, by comparison, has several notable advantages over Exubera.
Its delivery device (the Dreamboat) is much smaller, approximately the size of an asthma inhaler.
It uses an analog insulin, which is considered superior to the human insulin used in Exubera.
It has a faster peak absorption time (12-14 minutes) compared to injected human insulin (60-240 minutes) and Exubera (30-90 minutes).
It uses easier to understand, linear dosages, compared to Exubera's non-linear dosages.
Despite these considerable advantages, Afrezza faces some of the same challenges as Exubera. Afrezza does not account for the use of smaller needles in self-injection. It could also cause the same respiratory problems in patients with pre-existing conditions. In addition, Afrezza's daily price is still unknown, and might not be considered a cost-effective alternative, which would impact its standing with insurers.
Last but not least, MannKind, a $1.5 billion company with only $28.5 million in cash and equivalents, desperately needs a larger marketing partner to help its product reach a higher number of patients. That's not a step many large companies are willing to take, considering MannKind's previous two rejections and Pfizer's painful flop.
For now, it looks like Afrezza will have to be approved by the FDA first before it can inspire any confidence from the industry.
The Foolish takeaway
It's interesting to imagine what would happen to the diabetes market if MannKind were to succeed. Novo Nordisk, the world's largest manufacturer of injectable insulin, would probably scramble to either acquire or partner up with MannKind. Other competitors in injectable insulin, such as Sanofi and Eli Lilly, would likely line up to collaborate as well.
MannKind's investors hope to keep this dream alive, but at this point, the success of Afrezza is still no more certain than a coin toss. If this last man standing can deliver, however, analysts expect Afrezza to achieve annual peak sales of more than $2 billion -- not bad for a company that currently has no other sources of growth.
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