This Stock Is No Dreamboat

MannKind (Nasdaq: MNKD  ) is trading down 40% today after announcing the Food and Drug Administration again turned down its application to market Afrezza, its inhaled insulin product.

Even at the knocked-down price, I wouldn't touch it with a 10-foot poll.

It's not because I don't think Afrezza should be on the market; I think it's a great product that could help diabetics. But the combination of a schizophrenic FDA and a cocky management has me still worried about the approvability of Afrezza.

This is the second time the FDA has turned down Afrezza. The first time, the FDA wanted an explanation about its "clinical utility." This time, the issue seems to be a problem with a switch from the MedTone device that was used in the clinical trials to a new device called the Dreamboat, which MannKind thinks is better.

Instead of laboratory experiments to prove the two devices are equivalent, the agency wants MannKind to run two clinical trials -- one in type 1 and one in type 2 diabetics -- to prove that the new device works as well as or better than the previous one. Amylin Pharmaceuticals (Nasdaq: AMLN  ) , Eli Lilly (NYSE: LLY  ) and Alkermes (Nasdaq: ALKS  ) ran into a similar problem when they switched the manufacturing of Bydureon between the clinical trial and the commercial stages. Unlike MannKind, the companies got the information from the FDA before they submitted their first marketing application and were able to submit the appropriate clinical trial data.

It's not entirely clear whether MannKind just ignored the FDA's advice that a clinical trial would be needed to compare the two devices or whether the agency changed its requirements midstream.

What is clear is that management is confident -- perhaps overly so -- in the device. Perhaps it should come as no surprise from a man who names a company after himself, but CEO Alfred Mann is a little too cocky for my taste. In response to an analyst's question during last night's conference call about what the company planned to do if MedTone ended up being superior to Dreamboat in the clinical trials, Mann responded, "First of all, the answer is it won't be superior. The Dreamboat device is clearly superior in many ways." There was no part two.

Now don't get me wrong, Mann -- and all his money -- are certainly an asset to the company. I listed him as one of the strengths in my SWOT analysis of the company. But being cocky and not having a backup plan, even if the likelihood of needing one is slim, is not the kind of trait I dream about in a CEO.

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Fool contributor Brian Orelli, Ph.D., dreams of a day when complete response letters from the FDA are released to investors. He doesn't own shares of any company mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy dreams of apple butter.


Read/Post Comments (4) | Recommend This Article (3)

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 January 20, 2011, at 7:27 PM, kcoupland wrote:

    Everyone has a right to their opinion; I won't deny you this, however, as I see it, Mr. Mann has an IQ of over 170. Making a comment like this leaves me to believe he has a knowing about the two products that results in knowing Dreamboat is superior than MedTone.

    It makes me feel good that a CEO has such knowledge and confidence. Stating 'what is so' is appealing to me.

    Respectfully yours,

    KCoupland

  • Report this Comment On January 20, 2011, at 9:37 PM, CustardPies wrote:

    Okay, this article is asinine. And I'm a kind person, believe it or not.

    After reading the second sentence , I knew I was in for a treat... "I wouldn't touch it with a 10-foot poll." Poll? Are you taking a survey of 5 people's feet about MNKD? 10 pirates?

    You then make an unwarranted assumption about reasons for the FDA requesting two clinical trials on the different devices... "This time, the issue seems to be a problem with a switch from the MedTone device that was used in the clinical trials to a new device called the Dreamboat..." Problem? What "problem" did the FDA have? There was no mention of a problem. Lack of adequate information satisfying FDA standards does not imply there is any "problem" with the Dreamboat. Where is this problem you speak of? Please inform the Fool community where you learned of this "problem" with the switch between the devices.

    Finally, it is absurd, and highly inappropriate, to call Al Mann "cocky." It's embarrassing to read that. Look at his lifelong body of work and accomplishments. It's stellar, across the board. With Mannkind, he is a CEO that has confidence in his company's product. What's wrong with that! Do you expect him to say, "Well, uh, we think it does some stuff for blood sugar, uh, it kinda, um, NEXT QUESTION!" Maybe this is the kind of trait Brian Orelli "dreams about in a CEO."

    I fully respect the Fool and its writers. But, I could not help but throw a stone at this article. Think twice about what you decide to publish next time around, Mr. Orelli.

  • Report this Comment On January 20, 2011, at 10:59 PM, uropa1 wrote:

    Lets bring up some possible reasons the fda once again deprived the diabetic community a wonder drug that reduces hypoglycemia events without subjecting each diabetic to a lifelong need to inject and check their blood sugar with a finger stick upto 5 times a day and have to count carbs; the fdachief's husband works for a fund that has $400 million of a competing diabetes drug maker. Three hours prior to the announcement, the stock drops from $9.81 to $6.01 in three minutes wiping out all stop loss orders in that range. Conspiracy theory, not even close! Corruption and stock manipulation including unsubstatiated articles such as this one, absolutely.

    This drug, like dendrion, which went through exactly the same kind of manipulation and corruption, will be approved and will be the gold standard in diabetes care within five years of approval.

    Stop your propaganda against a novel drug that can halt the progression of diabetes. Your article does a dis-service to mannkind as it causes a sell off in the stock price( I'm sure you like that as you are evidently short this stock), and make it difficult to raise money to continue it operations and research. I must then conclude you are a scum bag and a true menace to society helping to deprive humanity of a life changing and saving drug.

  • Report this Comment On January 21, 2011, at 9:57 AM, sratan wrote:

    Well, Mann has a reason to be confident. FDA, for sure playing games. The two devices only transport the drug through breathing. The second one seems simple and must be easy to modify. So, all the FDA needed was to see if the drug amount is what it is claimed. There must be corruption and politics in play in FDA's CRL.

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