Up 9%: What You Need to Know About MannKind Today

If at first you don't succeed, try, try, and try again.

Kudos to Alfred Mann for finally getting FDA approval for MannKind's (NASDAQ: MNKD  ) inhaled insulin Afrezza even if at least one of the two previous rejections was arguably the company's fault. The namesake CEO put a lot of skin in the game to get Afrezza over the finish line.

Source: MannKind

You could even argue -- now that Afrezza is approved -- that the delay wasn't all that detrimental. The first rejection really didn't matter because the initial application was for a larger inhaler called MedTone. The new Dreamboat device should help sales given its smaller size.

The second rejection, after the switch, was more costly, but allowed the company to run additional trials showing that the drug was as good as Novo Nordisk's (NYSE: NVO  ) injected insulin Novolog in type 1 diabetics and better than placebo in type 2 diabetics. More data is always welcome by doctors, especially the data in type 2 diabetics that was a bit lacking going into the last approval decision.

Switch vs treatment naïve
The biggest question for MannKind, at this point, is whether it can convince patients currently taking Novolog and Eli Lilly's (NYSE: LLY  ) injected insulin Humalog to switch to inhaled insulin. Both drugs are megablockbusters, so there's potentially billions in annual sales at stake.

On the surface, it's a no-brainer. Stick yourself with a needle or puff on an inhaler? Most people would pick the latter.

In reality, it's not that simple. Both Novo Nordisk's and Eli Lilly's drugs are available in pen form, making injections relatively easy. And for type 1 diabetics, switching from injecting fast-acting meal-time insulin to an inhaled version doesn't avoid the injections from the long-acting insulin that patients still have to take. And there's those annoying finger pricks to test glucose levels that can't be avoided either.

Source: Eli Lilly

While capturing patients switching from injected insulin would be a boon for MannKind, investors should be realistic and expect the initial interest in Afrezza will come from patients that are new to insulin.

Those type 2 diabetics, who haven't been injecting themselves since they were kids, are the ideal candidates for Afrezza. Having only taken oral drugs for their adult-onset diabetes, it's easy to see how they might be timid about adding injected insulin and prefer to try an inhaled version. Unfortunately that's a much smaller market, but MannKind has to start somewhere.

Valuation
Given the uncertainty with who might actually use Afrezza, it's a little difficult to properly value MannKind. Just witness its drop on approval on Friday followed by a pop above the previous close in after hours.

No doubt, MannKind is completely overvalued if Afrezza gets off to as slow a start as the last approved inhaled insulin, Pfizer and Nektar's Exubera, which managed just $12 million in sales during the first nine months of launch.

Afrezza is no doubt a better drug than Exubera. In addition to difference in size of the device -- Exubera's device was large and clunky -- Afrezza is a better insulin, leaving the system faster than Exubera or injected insulins. Insulin lowers glucose levels, potentially causing dangerously low blood sugar levels. Leaving the body quickly, mimicking natural insulin in non-diabetics, makes Afrezza safer.

But Exubera and Afrezza still have one thing in common: They're taken via the lungs even though they don't treat a lung disease. Doctors are likely to be timid about prescribing Afrezza to a large audience until they have more real-world experience.

With a market cap around $3.8 billion -- and higher if you add in outstanding options and warrants -- investors should be cautious buying shares in MannKind at this point. Consider taking a conservative stance, waiting until the details of a marketing agreement are announced and a few quarters of sales. Worst comes to worst, you miss a run up if Afrezza becomes an instant blockbuster, but you'll protect yourself from a huge post-marketing fall like we saw with the obesity drugmakers trying to go into a large untapped market where other drugs have failed.

Sometimes it really is "different this time", but this might not be one of those times.

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Read/Post Comments (6) | Recommend This Article (0)

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 June 30, 2014, at 11:35 AM, mankind wrote:

    Cant believe they are still letting you publish articles......we all know where you would stick your diabetes pen if you had one. Fool.

  • Report this Comment On June 30, 2014, at 11:45 AM, Topdoginvesting1 wrote:

    The Dumbest comment I have ever read, here it is from the writer.. Worst comes to worst, you miss a run up if Afrezza becomes an instant blockbuster, but you'll protect yourself from a huge post-marketing fall like we saw with the obesity drugmakers trying to go into a large untapped market where other drugs have failed. First this is no comparison to a Diet Drug, and second if it is a Blockbuster it will move huge. And when a Partner or Buyout is announced you'll miss that runup to. Maybe the writer is going to Compensate everybody for what they should have made on these huge runups. Just goes to show even a Fool can write an article, and a very bad one at that.

  • Report this Comment On June 30, 2014, at 11:53 AM, Topdoginvesting1 wrote:

    Nobody is this Dumb to say what the Writer says, he has a agenda..Dumbest Comment ever by Writer.. Worst comes to worst, you miss a run up if Afrezza becomes an instant blockbuster, but you'll protect yourself from a huge post-marketing fall like we saw with the obesity drugmakers trying to go into a large untapped market where other drugs have failed. First Comparing Afrezza to Diet Drugs? Really. Second what about a Partnership or Buyouit that is sure to come. Third, if a Blockbuster drug you miss the runup. Wow, were Talking big moves, maybe the Writer is going to Compensate everybody on what they could have made. Horrible reporting..

  • Report this Comment On June 30, 2014, at 12:30 PM, b4unewme2 wrote:

    The Author's assumption that people currently injecting themselves probably like it and are not interested in a non-injectable alternative is false. Ask any diabetic on insulin. The assumption that one injection a day is just as bad as four injections a day is also false. Again, just ask any diabetic on insulin.

  • Report this Comment On June 30, 2014, at 2:40 PM, larryw101 wrote:

    Motley Fool is the absolute worst site an investor can go to for sound financial advice.

    With respect to this article and author, this is a prime example of the garbage journalism that Motley puts out. This bozo author knows nothing about Mankind. For months he's been bashing the stock and saying there was little to no chance for approval.

    None of his predictions were ever correct.

    BTW, this guy needs to find a new barber. The one he's going to must be using a bowl to cut his hair.

  • Report this Comment On June 30, 2014, at 4:23 PM, WordDog wrote:

    (1) The author must not have talked to any diabetics, many of whom have expressed strong interest in Afrezza. Uptake will by no means be limited to new users. (2) Doctors already prescribe plenty of inhaled medications; they're not going to be timid about prescribing another one. The drug offers significant benefits to a wide range of diabetics, which is a large and growing population. Hard to see how it will not be very successful in the market. Also hard to see why the author bothered to post two articles that say pretty much the same thing about the same subject.

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