While I do think it's possible that MannKind's (NASDAQ:MNKD) inhaled insulin device, Afrezza, will be approved by the Food and Drug Administration, I do have serious questions as to whether it will be a marketing success. As the controversy builds and analysts doubt the company's phase 3 trial, there is another biotech with even more outstanding stock gains that could face a similar series of questions regarding its phase 2 data.
Why not present all data?
In data presented earlier this month, Afrezza proved to be more effective than insulin and oral diabetic therapies in two phase 3 studies. However, questions about trial design, undisclosed data, and its likelihood of success has caused the stock to crash by more than 20% since announcing this data.
MannKind's disclosed data looks good. But then, there is the third arm of the study. MannKind only released details on two arms, which is something that I originally missed when assessing the trial results.
Research firm Summer Street makes note of MannKind's failure to disclose "certain data," and says, "If the results on the Medtone C-arm aren't worthy of presenting and inhalers aren't equivalent, then there's not enough safety information to approve Dreamboat." It seems like Summer Street is accusing MannKind of hiding data, and rumors are starting to spread that regulators may not have the patience to deal with any shenanigans on behalf of the company, following two previous FDA rejections for Afrezza.
After a 165% return in 2013, MannKind has a market capitalization of $1.85 billion. For an investigational stage company, a near $2 billion market cap suggests a terrific deal of promise and confidence on behalf of investors. If Summer Street is right, shares of MannKind could take a turn for the worse as investors likely expect the release of all data prior to the FDA decision date.
Is it happening again?
Just a week after MannKind's data, another promising biotech, Incyte (NASDAQ:INCY), is trading higher by more than 30% following its data. The company presented phase 2 data on its drug Jakafi for the treatment of pancreatic cancer. Jakafi is already FDA approved to treat a type of blood cancer, but robust data in the pancreatic cancer study suggests it may have more potential in other indications as well.
Incyte presented compelling data for a subgroup of patients. There was one subgroup deemed "most likely to benefit from treatment" where Jakofi with chemotherapy produced a 42% survival rate at six months. When treated with chemotherapy alone, survival was just 11% at six months.
Clearly, this subgroup of patients did show an effect to treatment. According to analysts, the pancreatic cancer being tested in the company's "overall" Phase 2 trial could create additional revenue of $500 million for Incyte. However, this leads us to the problems.
Like with MannKind, initial data for Incyte looks good. But as a biotech investor, it is essential that we look outside the box, and ask a lot of questions when assessing such data. For example, why wasn't all data presented by MannKind? With questions being raised, why hasn't the company addressed these concerns and released the details for that third group?
In regards to Incyte, how many subgroups were tested? How many subgroups failed in reaching statistically significant overall survival? More importantly, why wasn't progression-free survival disclosed (tracks the growth or development of the disease/tumor)? Progression-free survival was one of the secondary endpoints to the study, and often times the FDA wants to ensure that a drug/vaccine is stopping the growth of a tumor before approving it.
Preparing for analyst backlash?
My problem is that Incyte added nearly $1.4 billion to its market capitalization with news of this subgroup data. Now, I am not trying to downplay the importance of the noted data, as it was remarkably good. However, MannKind's data looked solid as well, and then stock-moving questions arose in the days that followed its trial results. With that said, I am suggesting that Incyte's stock may have gotten ahead of the news, and it's possible that analysts will raise questions that I have mentioned, much like with MannKind.
With MannKind, the post-data questions have pushed its stock to below its pre-data announcement price of $6.80, causing it to lose all of its gains plus more. MannKind simply did not disclose details for one of its three treated groups. In the case of Incyte, its stock jumped despite their being no prior knowledge of a subgroup and with pertinent details including patient size being kept confidential. Therefore, this scenario has the makings of being problematic for Incyte investors, and I would monitor the rumors, whispers, and potential criticism of analysts over the next week. Lastly, I wouldn't be surprised to see Incyte's stock drop when these questions are raised.