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Dreamboat Data? Not Exactly.

By Brian Orelli, PhD - Aug 14, 2013 at 7:32PM

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MannKind's Afrezza data is good enough for approval, but nothing to get too excited about.

MannKind (MNKD 4.84%) ended up more than 10% on Wednesday, after the biotech announced positive results for two phase 3 trials testing its inhaled insulin Afrezza.

Apparently, I had a little more confidence that the trials would be positive than the average investor did. A 10% increase -- that's a $220 million increase in value -- surprises me. I figured, after the monster run the stock has been on, we might see a sell-the-news event, given how widely expected the results were.

Maybe if the data was unanimously positive. But it wasn't.

For instance, type 1 diabetics in the Afrezza group failed to hit the key target A1c levels, a long-term measure of blood sugar levels. Doctors like to see patients get their A1c levels below 7%, but the portion of the patients who reached the target was higher in the group taking Novo Nordisk's (NVO 3.56%) injected insulin Novolog than the Afrezza group. The proportion getting under 6.5% also favored the Novolog group.

The number of severe hypoglycemia events, extremely low blood sugar, in type 1 diabetics was lower in the Afrezza group than those taking Novolog, but it wasn't statistically significant, so MannKind won't be able to tout it as an advantage.

In type 2 diabetics, Afrezza caused more hypoglycemic events than the placebo, which isn't all that surprising, but will clearly be a factor for whether doctors are willing to prescribe it earlier in the disease progression than they would Novolog or Eli Lilly's (LLY 4.39%) injected insulin Humalog.

Patients taking placebo also lost more weight than the group taking Afrezza. Again it's a comparison to placebo, so Afrezza might be able to compete with Novolog and Humalog -- which tend to cause weight gain anyway -- but the data might not be convincing enough to justify the early use of Afrezza.

Afrezza will still be approved, though 
The main thing the Food and Drug Administration will look at is the primary endpoints. For both studies, Afrezza met the primary endpoints.

For type 1 diabetics, the second-generation Dreamboat was just as good as Novolog at reducing A1c. And when the Dreamboat was compared with the first-generation MedTone device, the devices affected patients' ability to breathe at a comparable level.

In the trial in type 2 diabetics, Afrezza lowered A1c more than placebo by a statistically significant amount. Not exactly a high bar to jump over, but it'll be good enough for approval.

Partnering first? 
MannKind is shooting for resubmitting its FDA application in the fourth quarter and, assuming the agency doesn't find something new to complain about, investors can expect an approval six months after that.

In the meantime, now that it has data, MannKind has hired investment bank Greenhill to help it find a partner to market Afrezza.

Finding a partner and the structure of the partnership will be a strong tell as how other companies are feeling about Afrezza's potential.

If one of the big diabetes players -- Novo Nordisk, Eli Lilly, SanofiAstraZeneca, Bristol-Myers Squibb, or Merck -- steps up to the plate and makes a large upfront payment, it'll be a good sign to investors that someone thinks inhaled insulin has a shot at success.

If MannKind lands some podunk partner or the deal is completely back-ended with milestones with high sales targets, we can assume that drugmakers are still highly skeptical that there's a market for inhaled insulin.

Who can blame them, after Pfizer 's (PFE 3.59%) flop with Exubera? Admittedly, Afrezza is a much better product, but MannKind and its new partner have a tough task persuading doctors to change the way they think about delivering insulin. Novo Nordisk and Eli Lilly clearly saw the writing on the wall when they dropped development after Exubera's failure.

If Novo Nordisk, Eli Lilly, or Pfizer end up partnering -- or even make a bid -- I'll be willing to change my skeptical view, but until then I think investors should be cautious taking a position in MannKind.

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Stocks Mentioned

MannKind Corporation Stock Quote
MannKind Corporation
MNKD
$3.68 (4.84%) $0.17
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$52.47 (3.59%) $1.82
Novo Nordisk A/S Stock Quote
Novo Nordisk A/S
NVO
$107.75 (3.56%) $3.70
Eli Lilly and Company Stock Quote
Eli Lilly and Company
LLY
$298.85 (4.39%) $12.58

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