Is MannKind Worth the Risk?

The global diabetes market is big -- very big. Current estimates place sales of diabetes treatments at $41 billion this year alone, and that number could top $100 billion as soon as 2018. The main driver of this stunning growth is the out-of-control global obesity problem. With obesity rates increasing by an average of 10% worldwide, new type 2 diabetes cases are expected to grow in lock step with the epidemic.

Not surprisingly, this large market already has multiple blockbuster drugs, with insulin products being some of the best selling of the bunch. Sales of Novo Nordisk's (NYSE: NVO  ) fast-acting insulin analogue Novolog will easily top $1 billion this year, and its delivery apparatus, known as the FlexPen, will as well. Interestingly enough, Eli Lilly's (NYSE: LLY  ) Humalog and its accompanying KwikPen should also top $2 billion in sales this year, despite being fairly similar to the Novolog/FlexPen offering. Taken together, that's close to $4 billion worth of sales in a single year!

The ghost of inhaled insulin products past 
Big pharma used to believe diabetes patients disliked sticking themselves several times a day. Inhaled insulin was thus supposed to revolutionize insulin delivery, and dominate the market.

Then came Pfizer's (NYSE: PFE  ) Exubera calamity, and everything changed.

Exubera was the first inhaled insulin device approved by the Food and Drug Administration, or FDA, and it was expected to see peak sales of $5 billion a year. Less than a year after its launch, however, Pfizer pulled the product because of poor sales.

Customers found the device burdensome due to its size, and doctors were less than enthusiastic because of potential safety concerns. To top it off, insurance companies placed Exubera in their most expensive tier, making patients pay the highest co-pay, to obtain the inhaler.

In the end, the Exubera experiment cost Pfizer a whopping $2.8 billion in losses, and its dramatic failure devastated the space. Soon afterwards, Eli Lilly and Novo Nordisk shuttered their own clinical programs for inhaled insulin products, citing a lack of commercial opportunity in light of Exubera's market woes, and the commercial launch of a host of new insulin pens that cause minimal pain.

Along comes MannKind and Afrezza
One man, Alfred Mann, CEO of MannKind (NASDAQ: MNKD  ) , kept the torch burning, however. In 2010, Alfred Mann pushed an "ultra-fast acting" inhaled insulin product called Afrezza and its palm-sized inhaler, the Dreamboat, into regulatory review. Unfortunately, the FDA promptly rejected the application, asking for two additional clinical studies.

Relying mostly on his own money, Alfred Mann saw this new inhaled insulin product through the requested clinical trials, where it reported promising results last month. Last week, the FDA accepted the New Drug Application for the Afrezza/Dreamboat combo, with an anticipated approval next April.

While the convenience of inhaling insulin versus injecting it is obvious enough, Afrezza's real competitive advantage lies in its ability to mimic the natural function of the pancreas by generating peak insulin levels within 12 to 14 minutes. The current fast-acting insulin analogues, by contrast, are closer to 30 minutes. That's a significant clinical benefit, and the reason why Afrezza's been dubbed "ultra-fast acting."

Despite Afrezza's enhanced performance, its commercial success, if approved, is far from certain. Oddly enough, Exubera's fate was sealed before it even hit the market, with patients widely panning the device months before its release. So Foolish investors might want to know what patients have to say about the Afrezza/Dreamboat combo.

Are patients excited about Afrezza?
The response hasn't been strongly positive or negative. So far, there are only a handful of patient reviews on the net, most of which are limited to a short demonstration of how Dreamboat works.

Given that hundreds of people have now tried Dreamboat in clinical trials, I find the lack of negative reviews to be a good sign, as it removes a clear risk to a commercial launch.

Exubera was strongly disliked from the word go by patients, and they made their opinion known. While the Afrezza/Dreamboat combo hasn't exactly garnered critical acclaim yet, it's also not being ridiculed by its target market.

I am cautiously optimistic Alfred Mann may in fact have the world's first commercially successful inhaled insulin product. Foolish investors should thus keep a close eye on MannKind as the regulatory process unfolds. An investment in the company is still far from a slam dunk, but Afrezza does look to be on solid footing.

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