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Will FDA Labelling Be MannKind's Downfall?

MannKind Corporation  (NASDAQ: MNKD  )  investors were finally successful, after multiple attempts, at obtaining FDA approval for Afrezza. There have recently been many different articles about the potential for partnerships for MannKind. However, I believe that these authors are missing an important point -- the hinderances to a partnership. The FDA labeling of Afrezza may have restricted a partnership, and may hobble the launch of Afrezza before it even started.

Post-approval requirements are troubling
One of the most notable parts about the FDA label was that it explicitly told doctors to not prescribe Afrezza to patients with respiratory issues. The FDA even went further requiring doctors to have spirometry tests before prescribing Afrezza, and every six months thereafter. Looking to long term effects, as a post approval commitment MannKind is required to educate doctors about this risk and to conduct additional post approval studies evaluating the long term effect of Afrezza on lung function and cardiovascular risk, as well as safety and efficacy in children. These post approval studies will likely cost any partner millions of dollars, and years in terms of the time needed to monitor all of the patients in the trial. And if data comes back negative in the cardiovascular and lung function study, it could give the FDA reason to withdraw marketing approval for Afrezza or slap it with stronger warnings.

Other warnings
The FDA was also concerned about the increased risk of lung cancer. This could be a hidden dagger for MannKind should Afrezza be shown to increase the risk of lung cancer in post-approval studies. This would be a substantial risk to any partner, as it would mean huge marketing efforts down the toilet. Even more importantly, it is a red flag for doctors. Even though the label notes that "in patients with a history of lung cancer or at risk for lung cancer, the benefit of Afrezza use should outweigh this potential risk," why take the risk? With a myriad of other treatment options available, I would expect doctors to turn to what they know works. Exubera encountered similar problems with its label, which helped to contribute to its downfall.

The FDA even required MannKind to include a risk of hypoglycemia in their labeling. All insulins carry this warning, however, the issue for MannKind is that, without labeling reflecting enhanced control of hypoglycemia, the risk/reward proposition for doctors may be further complicated. And again, there is the overhang of those post-marketing trials.

How partnerships are affected
MannKind is planning on bringing in a partner to market Afrezza. However, the less than favorable label and the fact that MannKind likely lacks the financial resources to launch the drug itself will likely weaken MannKind's hand in partnership negotiations. I also wonder if a partner will have some difficulty getting insurers to go along with recommending Afrezza. Regardless, the fact that a partner would likely have to pay millions of dollars to fund these trials upfront and also accept what appears to be a potentially risky launch will hurt the partnership discussions, potentially leaving MannKind in a weak position.

Bottom line
The labeling of Afrezza could make it tough to convince doctors to prescribe the product, and will make it hard for MannKind to attract a partner. Even though the FDA's approval was welcome news for MannKind investors, I wonder if they'll find the label to be a serious block for uptake and, by extension, partnership discussions.

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Read/Post Comments (14) | Recommend This Article (11)

Comments from our Foolish Readers

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  • Report this Comment On July 24, 2014, at 8:22 AM, Jammnott wrote:

    The fool has already tried to say the label will make it difficult. This tactic is to scare new investors away. Mannkind did not want to market to patients with lung problems. The label actually protects the company from liability. Seeking Alpha ran a similar article late yesterday. I'm starting to think these articles are coordinated. Look at the label on Tylenol and compare. How is that market affected. Poor analysis.

  • Report this Comment On July 24, 2014, at 9:10 AM, jenksbob wrote:

    There is nothing in the label that wasn't expected. And this is just another attempt by Motley Fool to hold down the price and give the short-sellers a chance to escape their potential losses. Motley fool has lost all credibiility because it publishes so many of these kinds of articles with an ulterior motive.

  • Report this Comment On July 24, 2014, at 9:35 AM, theeseer wrote:

    Lets see the "Motely Fool" was wrong about MNKD FDA's ADCOM decision, then was wrong about FDA approval and now once again is wrong about the label and partnering. Far be it for me to suggest that he hedge funds that are currently in big trouble with short positions and desperate to cover at a good price are behind all these negative articles, I'm "sure" they are written in "good faith". However considering the labels on every new drug contains warnings that are serious and extensive and yet are widely prescribed one must look at the bigger picture and realize that the simple truth is that Afrezza is approved for type 1 and 2 diabetes and is the first portable discreet fast acting insulin to hit the huge and growing diabetes market. The label requirements are nothing new and the actual Doctors patients and diabetes organizations that testified at the public hearing are anxiously awaiting this alternative to needle injections. I'm long this stock and sure that when the smoke and mirrors clear out its a game changer for the industry and a good partner will be announced within weeks leaving the many with their "shorts" around their knees.

  • Report this Comment On July 24, 2014, at 11:07 AM, erich69 wrote:

    I think a research poll should be taken among diabetics as to whether they would like to use Afrezza or keep injecting themself with Humalog or Novolog. I have not done a statistically significant poll, but based upon asking my diabetic patients they say they want Afrezza without skipping a beat. Then I tell them about the black box warnings; they aren't phased. In the studies the cases of lung cancer that were discovered later were by patients who were smokers. There is not a conclusive connection proven to lung cancer with this product.

  • Report this Comment On July 24, 2014, at 11:09 AM, retiredgent wrote:

    I haven't been very happy with the quality of the Fool's articles. The quality of this article doesn't make me any happier. A fair analysis is missing as the author seems to be merely repeating other suspect, negative and discredited articles have said about MNKD. To date, following the Fool's advice on other stocks would have cost me hundreds of thousands of dollars. I will not be renewing.

  • Report this Comment On July 24, 2014, at 11:14 AM, WordDog wrote:

    Mannkind requested the warning not to prescribe to smokers or patients with respiratory problems such as asthma and COPD. And the FDA has not expressed any noteworthy concern about lung cancer. They would want follow-up studies for any inhaled drug, but so far there is no evidence of lung-cancer risk from Afrezza. And if pediatric follow-up studies are positive, as one would expect, a new market will open up. Spirometry is cheap, common, fast, and easy -- totally not an issue. Exubera failed because it had a huge, bong-like inhaler and cost twice as much as alternatives (over which, unlike Afrezza, it had no advantages). Doctors will learn about Afrezza's particular clinical advantages in training. In short, this article is, at best, poorly researched.

  • Report this Comment On July 24, 2014, at 11:34 AM, erich69 wrote:

    I see the author is all about researching biotechs. I am a primary care provider; I also review the plethora of biotechs out there. I pass on most all of them because they are usually working on drugs for very rare medical problems. If they succeed in their pursuit, the majority of them won't have a large enough market share to sell to for large profit potential. I was excited when I found MNKD because DM is a huge problem worldwide that is only becoming bigger. MNKD built a better mousetrap as they say in business. I believe with the right sales team to make this product known, a pricing strategy comparable to Novolog and Humalog, they will be taking billions of dollars of sales away from Novo Nordisk and Eli Lilly because they patients will be demanding Afrezza

  • Report this Comment On July 24, 2014, at 12:20 PM, zpoet wrote:

    MF never ceases to amaze me. I'll just make my post in bullet points:

    1. This writer is actually just a college student (check his profile)

    2. According to his profile, he "sometimes invests in banks and patent litigation" How does one invest in patent litigation? Curious.

    3. Anyone who actually has done their DD knows that Al Mann and the rest of Exec asked the FDA to include warnings for COPD and patients with other lung issues.

    4. People seem to ignore that those labeling concerns are the ONLY labeling concerns present!! Does the author know the side effects present on Viagra's label? On Embrel's label? Jesus christ give me a break!

    5. This author's research, DD, and lack of sufficient experience and background really make me sick that MF publishes these articles.

  • Report this Comment On July 24, 2014, at 2:22 PM, dontknowmarkets wrote:

    Good news is this. Whatever Mr. Maxwell says, it is best to invest contrarian. His investing (trader as he labels himself) success speaks for itself. Here is his history:

    as you can see, he is at best a 50-50 picker. His thumbs up and thumbs down don't prove out at all. So if he says MNKD is a mess, at best that could be 50% right or 50% wrong. I have an idea Mr. Maxwell, using an unbiased viewpoint, go ahead and now write an article why you think MNKD could be a good investment over the next 5 years!! that way you can look back, and being a 50-50 successful picker, you can then at least reflect back and say I am consistent!!!

  • Report this Comment On July 24, 2014, at 2:34 PM, retiredgent wrote:

    You almost feel sorry for this author. Almost. He is a Jr. at GW University. He's also been investing his own money since 6th grade. Laudable. However, he claims that he's still working for Seeking Alpha. Unfortunately, Seeking Alpha doesn't list any articles he's written (he has commented on a few other people's articles). That poses a real ethical problem if he has misrepresented his employment. I might expect that MF would have sought a bit more experienced writer. Evidently not. By not vetting their author, MF exposes him to some pretty harsh criticism. I think that is extremely unprofessional on their part and calls into question MF as reliable source of investment guidance.

  • Report this Comment On July 24, 2014, at 4:14 PM, larryw101 wrote:

    This is another perfect example of Motley's inability to to author quality articles for investors.

    Motley Fool = Garbage Journalism

  • Report this Comment On July 24, 2014, at 9:31 PM, kingkalm wrote:

    Two weak hit pieces today on MNKD, neither knowledgeable. I really enjoyed other comments here from knowledgeable people. I think the FOOL needs to do a better job of reviewing what they put out as garbage like this discredits the sponsor.

    I was a member a few years ago and just resubscribed but I think I will have to cancel my membership if this is the quality of work that the FOOL supports.

  • Report this Comment On July 27, 2014, at 8:05 AM, AMax101 wrote:

    retiredgent: I am not sure how much research you did, but evidently it was not sufficient. Here is my author profile for Seeking Alpha:

    Also my CAPS picks are not reflective of my previous Seeking Alpha picks, I am not sure of anyway to integrate them...

  • Report this Comment On July 27, 2014, at 8:23 AM, AMax101 wrote:

    erich69: thanks for the comment. Afrezza is an interesting case and while I am bearish, wishing you all the best with your investment. Also, thanks for the amazing work that I am sure you do as a primary care provider.

    zpoet: I probably should have made that clearer: I invest in companies that are focused on patent litigation. Some examples of these companies (I am not invested in any of these) would be Vringo Inc (VRNG), or VirnetX (VHC).

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Alexander Maxwell

I am currently a student at the George Washington University majoring in Finance and Business Economics and Public Policy. My investing philosophy: Biotechs, Biotechs, and more biotechs. Biotech is my favorite sector to write about and my favorite sector to invest in.

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9/2/2015 4:00 PM
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MannKind Corp CAPS Rating: **