Positive Panel, but 3 Risks Remain for MannKind Corporation

I was on the right side of the coin, but missed by a wide margin the magnitude that the Food and Drug Administration advisory committee would approve MannKind's (NASDAQ: MNKD  ) inhaled insulin Afrezza.

After the documents from the FDA came out on Friday, I suggested Afrezza might "squeak by with a positive recommendation from the panel." The vote was 13-1 in favor of approval for type 1 diabetes and 14-0 for type 2 diabetes.

That's far from a squeak.

Investors shouldn't forget that the FDA has the final say. It's hard to see the agency going against such a strong vote of confidence, but there is some precedence. The FDA rejected Merck's sugammadex -- back when it was owned by Schering-Plough -- after an advisory committee unanimously approved the drug. Over five years later, Merck still hasn't been able to get the drug approved.

At this point, there are three things that could keep MannKind from getting approved on April 15, the FDA's goal for making a decision.

1. It's only two weeks away
That may not be long enough time for the FDA to incorporate the committee members' comments into the label and work out post-marketing requirements with MannKind. The FDA has a couple of options. It could just ignore the goal since it's not an official deadline and take a couple of weeks to make its decision or it could issue a three-month extension.

Either way, it's a minor issue for MannKind. It was running low on cash, but has shares that it can sell in the open market if it hasn't done so already. Worse comes to worst, its billionaire namesake, CEO Al Mann, can cut the company a loan.

Source: MannKind.

2. There's still the conversion issue
MannKind made a change to the injected-inhaled insulin conversion between the clinical trials and the recommendation for the label. The conversion is important for type 1 diabetics switching from Eli Lilly's (NYSE: LLY  ) Humalog or Novo Nordisk's (NYSE: NVO  ) Novolog to Afrezza. The change obviously wasn't a big enough deal to affect committee members' votes -- or the difference between pharmacokinetic and pharmacodynamics went over their heads -- but the FDA was clear in its briefing documents and during its presentation to the committee that the new conversion was unacceptable.

It seems to me that MannKind is going to have to change back to the conversion used in the clinical trials or run a pharmacodynamics study to get the new conversion approved. In theory this shouldn't affect type 2 diabetics that are new to insulin, so the FDA could approve Afrezza for type 2 diabetics while MannKind ran a pharmacodynamics study on type 1 diabetics.

3. Risk-benefit analysis
There were no major safety issues revealed by the FDA, which was the biggest risk going into the advisory committee meeting since investors had only seen top-line data. But the FDA highlighted multiple times that the effects of Afrezza were "modest" compared to other diabetes treatments. Drugs with modest effects can still get approved, but they need squeaky-clean safety profiles.

For Afrezza, the concern is with putting a drug in the lungs that doesn't treat lung disease. The FDA is worried about lung cancer and potentially decreasing lung function over time. Both are hard to definitively rule out in a clinical trial designed to get a drug approved.

While all except one committee member ultimately believed the benefits outweighed the risk, many still expressed concerns about safety in their comments during the committee meeting. The FDA considers the comments as much, if not more, than it does the final vote. If MannKind had squeaked by with a positive vote, I'd argue the FDA might go against the committee like we saw with Orexigen's obesity drug Contrave. The committee voted 11-8 recommending approval, but the FDA rejected Contrave anyway.

With a near-unanimous recommendation for approval, it seems less likely -- though not impossible -- the agency will go against the committee's risk-benefit evaluation. More likely, the FDA will ask MannKind to run post-marketing studies to look at lung safety.

So will it get approved?
I think an approval on or before April 15 is unlikely because it takes time to cross the t's and dot the i's. The conversion issue has to be worked out. It's a fixable problem, but might result in a delay, at least for type 1 diabetes.

The big unknown is how the FDA will treat the lung safety issues. I certainly hope the FDA approves Afrezza. What's the point in holding advisory committee meetings if the agency is just going to ignore its outside advisors? But the FDA marches to the beat of its own drum and investors should factor in the potential for a surprise rejection especially given the FDA's tempered view of the efficacy data.

What do you think? Vote in the poll below and elaborate in the comments section.

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Read/Post Comments (23) | Recommend This Article (9)

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 April 02, 2014, at 7:11 PM, larryw101 wrote:

    You're credibility ia zero with me. Your article two days ago was far from being accurate in relationship to really transpired in the Adcom meeting. And today you're back at it with a new article trying to defend your comments.

    Motley is garbage journalism and this is a perfect example as to why.

  • Report this Comment On April 02, 2014, at 7:15 PM, growthinvesting wrote:

    Brian,

    You have been wrong time and time again. At this point your articles lack the legitimacy required for publication. We understand that MNKD is the current hot topic that likely generates more penny clicks than your other works; however, you have shown a clear lack of understanding pertaining to the science, efficacy and safety behind Afrezza. Our kindest encouragement is to simply go away.

  • Report this Comment On April 02, 2014, at 7:16 PM, sammievee wrote:

    "after an advisory committee unanimously approved the drug"

    An advisory committee can not approve a drug.

  • Report this Comment On April 02, 2014, at 7:29 PM, theeseer wrote:

    I understand your concerns but dredging up a refusal from 5 years ago, label issues (as if thats not on every medicine bottle including asprin) and is the typical quasi negativity that the medical and investor community has been putting up with for months if not years. Its smells of someone trying to have it both ways who has not done his homework and does not realize how vital this approval is and your tone is demeaning to the unanimous medical professionals on the panel and who testified. Enough already! How about a piece about the lives that will be saved with this game changing advance in diabetes treatment.

  • Report this Comment On April 02, 2014, at 7:33 PM, kthor wrote:

    LOL sounds like you're still short here lol

  • Report this Comment On April 02, 2014, at 8:55 PM, whoami123 wrote:

    Two weeks is enough time for FDA to make decision. Recent example is CHTP and they were approved 2 days after the decision date. The late was due to office shutdown by bad weather in DC.

    The other issues you mentioned were deeply discussed in the meeting yesterday. Their answer is "benefit of Afrezza is very much out weighted the risk". Didn't you hear that ?

    The experts in this meeting are very intelligent expert. It wasted my time to read this article. You did not say anything new.

  • Report this Comment On April 02, 2014, at 8:56 PM, Falcon208 wrote:

    In general this article is more balanced than previous MF coverage on MNKD -- thanks. Weirdly, it still seems as if the response from diabetic patients is overlooked by most analysts, and not just those at MF. Patients are strongly positive about Afrezza's quick in/quick out insulin and the comparative ease of keeping their blood sugar in a normal range. And, although many who are not diabetic downplay the needles, an inhaler is going to trump 4-5 shots a day EVERY TIME.

  • Report this Comment On April 02, 2014, at 9:02 PM, whoami123 wrote:

    Comparing 13-1 and 14-0 to 13-8 ? Humm, I think your logic is different than most people.

  • Report this Comment On April 02, 2014, at 9:26 PM, foolgabby wrote:

    Dr. Orelli?.. Oh really!.. Get real!..

  • Report this Comment On April 02, 2014, at 9:34 PM, cvs9yt wrote:

    give up will ya

    you are giving motley a bad name

  • Report this Comment On April 02, 2014, at 10:32 PM, Alyssans11 wrote:

    Dude, stop cutting your own hair! Take the money you earned from this article and go to Supercuts. Then have a picture retake. Maybe then we'll take you a tad more serious, not much, but..

  • Report this Comment On April 02, 2014, at 11:27 PM, mpg54 wrote:

    That is one awful looking Haircut ...

  • Report this Comment On April 02, 2014, at 11:59 PM, plcfischer wrote:

    The FDA fell into the HbA1c trap. What is the HbA1c (A1c) trap? It is the trap that is created when a proxy measure (A1c) is treated as more important than the direct measurement (plasma glucose). This is very easy to do with diabetes treatment. A1c is a measure of average plasma glucose over three months. A direct plasma glucose measurement shows a point in time. Because plasma glucose changes rapidly, point in time measurements are not very useful in the clinic. Because in a clinical environment A1c is the better measurement the American Diabetes Association (ADA) and other professional societies use A1c in their treatment guide lines.

    The FDA, using well established methods used A1c as a measure of how well Afrezza worked to treat diabetes. The problem is they took it to far, way to far. Looking on page 50 of the briefing document you will see where the FDA is stating that the superior reduction in Fasting Plasma Glucose (FPG) in the Afrezza arm is due to the increase in basal insulin used in that arm. I have no argument with that statement, but it is incomplete. I will argue that the increase in basal insulin is made possible because Afrezza is better for glucose control than the current prandial (meal time) insulins. If you look on page 55 you will find more evidence that Afrezza is not an effective basal insulin, nor is it intended to be. Afrezza did not have a significant effect on FPG when not taken with treatments that cause a decrease in FPG. This should have been expected. Looking on pages 90 and 91, you will find evidence of Afrezza's superior glucose control in preventing hypoglycemia. Afrezza patients had less than half of the hypoglycemic events where blood glucose dropped below 37 mg/dL compared to current prandial insulin patients. As would be expected your Afrezza patients did have more hypoglycemic events than placebo patients.

    For my theory to work, Afrezza patients must have no more hyperglycemia than current treatments. Looking on page 67 you will find that the rate is the same. On page 72 you will find that Afrezza is superior versus placebo (as expected).

    In conclusion, I find that the FDA's assertion that Afrezza's patients took more basal insulin or other treatments to lower A1c to be true. But unlike the FDA, I consider this to be a positive. The evidence is strong that the ultra fast action of Afrezza lowers the excursion of blood glucose levels better than current prandial treatments. This lowering of excursions allows for more aggressive treatments for lowering A1c without an increased risk for hypoglycemia. The FDA got it wrong, but the panel got it right. Lets hope for the sake of diabetes patients and for our retirement accounts that the FDA sees the light and follows the panel's advice.

  • Report this Comment On April 03, 2014, at 12:18 AM, whoami123 wrote:

    How come so many people want Afrezza to fail ??? These short sellers have no soul !

    Millions of Diabetics are suffering and these short sellers want the better medicine to fail so they can make a few more pennies !! These people have NO SOUL !!

  • Report this Comment On April 03, 2014, at 5:07 AM, Angelstar wrote:

    These all so called analyst are extremely stupide, they think that investors will act as per there comments. In reality they all comments in the articles for their personal gain only(working for hedge funds).

    In fact Afrezza is a revolutionary unique inhale insulin system which is now overwhelmingly approved by FDA(it just matter of time only). Afrezza will change the way of treatment of diabetic patients (Type 1 & Type 2 both) and will make diabetic patient's lives safe and easy.

    After approval of FDA, Mannkind corporation will be the perfect prime takeover target for pharma giants.

    This is just beginning of share price of Mannkind to rise to around $40 in near future.

  • Report this Comment On April 03, 2014, at 2:04 PM, david94134 wrote:

    Brian,

    with all due respect, you sound like a quack. FDA could just ignore the goal since it's not an official deadline? Then why set a goal? So what you're saying is the FDA has no accountability? Your credibilty went right out the window... Please don't quit your job Dr.

  • Report this Comment On April 03, 2014, at 2:52 PM, robsacher wrote:

    I watched the entire ADCOM conference and was very surprised to see that the FDA reviewers present were unable to understand that Afreza's short tail as it exited the body is much better than standard insulin's lingering within the body for many hours.

    One of the endocrinologists on the independent advisory board had to explain that that fact makes Afreza better, at least in that respect, to the present insulin.

    It made me suspect that the FDA reviewer fully understands how to interpret the data.

    Furthermore, I find it interesting that this point has not been raised in any of the post ADCOM blogs I have been reading.

  • Report this Comment On April 03, 2014, at 2:53 PM, robsacher wrote:

    For what its worth:

    For what its worth:

    This reminds me of the Battle Of Richmond at the end of the Civil War. Lee, had dug in and had built trenches running from east to west south of the city supported by a railroad junction in a town called Petersburg. He had a reasonably decent fortification.

    However, Grant new that time was on his side. Grant's army could easily be reinforced while Lee was trapped behind his barricades with almost no chance of reinforcement. All Grant had to do was continue to extend the Union line to the west day after day, week after week.

    Eventually, Lee's defense line was so long that he could only put one man every twenty paces. He had fortifications but he was stretched way beyond his ability to respond to an attack.

    Then the fateful night came when Grant, sensing that now was the right time to attack, launched a full scale assault along Lee's entire east/west line. Lee's defense crumpled like a house of cards and the battle was over in less than two hours.

    The shorts are covering their thinly stretched line. But, the longs know that time is on their side. The shorts pray for a miracle as Lee's men must have also done behind their fortifications. Maybe, the FDA will save them after all. Maybe, the longs will give up the battle in this eleventh hour, maybe, maybe, maybe…

    The shorts still launch their attacks but they grow more feeble with every passing hour just as Lee's attacks grew more feeble when he tried probing Grant's line just days before Grant launched his final blow.

    Former generals are looking for a way of escape, General Cramer now says he is "neutral" when formerly he was a revered leader of the shorts, Col, Feuerstein now concedes that defeat is likely, but the shorts still battle on seemingly safe in their belief that their short walls are secure.

    General Mann surveys the scene. He has waited a very long time for sunrise on this momentous day. His loyal officers stand by in support. His loyal long army is poised to annihilate what is left of the short defense force that still remain behind their short walls.

    Then, in one monumental move, the whole damn defense collapsed as will happen when the FDA approves Mannkind's Afreza. In one immortal moment, history was written and will be written again.

    Perhaps we should call this short last stand the Battle Of April 15th!

  • Report this Comment On April 03, 2014, at 8:30 PM, lwbaum wrote:

    Reading the article and these comments, I think that many people commenting here are too critical of the author. He analyzed the drug and gave his opinions, which seem reasonable, but commentors here called him a quack, said he had a bad haircut, termed him "extremely stupide" [sic], implied he was a short seller with no soul, suggested he was not really a doctor, laughed out loud at his article, claimed he had zero credibility, and said that Motley is garbage. The issue of approving this drug seems to raise tremendous emotion. I wonder why.

    I'm a professor in pharmacy, and my colleagues and I spend our careers working to help develop drugs to improve health and prolong lives, so I certainly have a strong desire to get useful and safe drugs and diagnostics approved (and prevent those that are useless or dangerous from being approved). We work long hours in this pursuit. But I've never seen my colleagues criticize each other in the above ways.

  • Report this Comment On April 03, 2014, at 9:15 PM, larryw101 wrote:

    You look like Jeff Daniels from Dumb and Dumber.

    Get a haircut. But more so, find a new job. Writing articles as inaccurate as this for the few pennies-a-click you get is not gonna cut it for you.

    Worst article yet I've read on Mankind. What a joke !

  • Report this Comment On April 03, 2014, at 10:52 PM, mankind wrote:

    Brian,

    Your a true blue a-hole giving Mannkind a bad reputation twice in the last three days. You've drove the stock down both days with your bullsh*t articles. It wouldn't surprise me if your part of a market fraud scandal and getting paid by an inside guy who wants to grab a few million shares of MNKD at a lower price before it skyrockets over 20$ a share. The only FOOL here is YOU, get a haircut ya jackass.

  • Report this Comment On April 05, 2014, at 5:05 PM, sanjac20 wrote:

    Nothing like going straight to the horse's mouth for an answer. I did and a Type 2 diabetic that has been injecting herself daily for at least 10 years said, "that inhalant device cannot get here soon enough"

    The efficacy has been established; the numerous trials have been completed and the Dreamboat device perfected. Sounds like a dream come true to those 380 million souls afflicted with this terrible life-altering disease.

    MNKD is a giant step in the right direction for humanity.

  • Report this Comment On June 28, 2014, at 9:31 AM, Jim1865 wrote:

    Well now that Afrezza is approved maybe this joker will go away. I doubt it though. Now it will be no partner, doubtful market, financials, etc. Listen to this guy and lose money.

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