This week, MannKind (NASDAQ: MNKD) published a set of frequently asked questions about the recent clinical trials for its inhaled insulin Afrezza.
The idea inspired me to issue my own questions about the company, using the questions as a crutch to explain my position. Unlike MannKind, though, my questions are of the rare variety; most have never been directly asked to me:
Can you summarize MannKind's frequently asked questions?
1. The company thinks the clinical trial data is enough to get Afrezza approved. Deerfield, which MannKind has a financing deal with, also likes the data. If Deerfield and its consultants were employed by the Food and Drug Administration, MannKind would be all set. Unfortunately, while all good signs, there are no guarantees of an approval.
2. The efficacy data for the older MedTone inhaler doesn't matter (the safety comparison was what the FDA wanted), but in case you were wondering, it worked as well as it has in the past and essentially the same as the new Dreamboat inhaler.
Also, the analyst that said MedTone efficacy data is important doesn't deserve the title of analyst. I'm paraphrasing, but I think that's what MannKind was getting at with its comment that "it is disheartening that anyone who holds themselves out to be an analyst would use subjective and alarmist language with respect to such a minor result."
3. The severe hypoglycemia events trended in the right direction for Afrezza versus Novo Nordisk's (NYSE:NVO) Novolog, but wasn't statistically significant. As I pointed out after the data was presented, fewer severe hypoglycemia events would have been very helpful for marketing, but in order for MannKind to claim the difference is real, it would have had to run a larger trial to observe more events.
4. MannKind hypothesizes that the relative weight gain comparing Afrezza to placebo in type 2 diabetics has to do with the options that patients had to reduce blood sugar levels. The placebo group could only lower the level by improving their diet while the group taking Afrezza could reduce their blood sugar after a meal by taking the drug, so they didn't lose weight. The explanation seems reasonable to me, and doctors might buy it as well since, in the real-world setting, type 2 diabetics don't typically lose as much weight as the placebo group did in the study.
5. While MannKind had powered the study in type 2 diabetics to detect change in HbA1c of 0.5 percentage points to show superiority against placebo, that threshold makes some assumptions that didn't turn out exactly as expected (they rarely do). The way the data unfolded, a change of 0.4 percentage points was sufficient to show statistical significance.
6. In type 1 diabetics, the drop in HbA1c levels for patients taking Afrezza is smaller than for those taking Novolog, but MannKind argues that it's misleading because HbA1c level is a proxy for the long-term average blood sugar level. If patients are seeing more hypoglycemic events -- low blood sugar levels -- you'd expect them to have lower HbA1c levels, but that's not necessarily a good thing since extremely low blood sugar levels are dangerous. It's a reasonable argument, but it would have more weight if the severe hypoglycemia events was statistically significant (see #3).
7. Don't listen to patients who post on message boards. Of course, there's this one guy who loves us, and he was in our trial. There's nothing to be learned from individual patients. But he still loves us.
8. Officers didn't sell shares in mid-August, but instead the company withheld shares from their vested shares that are part of the officers' compensation packages.
Did you learn anything from MannKind's frequently asked questions?
No. Clearly, all these people asking these questions -- assuming that MannKind didn't just make up the questions like I have -- didn't listen to the conference call after the data was released. Questions 1 through 6 were covered there and 7 and 8 just seem obvious. But then, I don't usually frequent message boards.
Should biotechs issue frequently asked questions?
It doesn't seem like a good idea to me. MannKind is basically saying "we didn't explain our data very well," which I really don't think was the case.
More importantly, investors should wonder why it's necessary to set the record straight? Afrezza will either be approved or not, and the shares will presumably go up if the drug will be approved. Between now and then, the only reason I can think of for the company wanting a higher price is so it can sell more shares.
So, will it be approved?
I think so. Granted, we don't have all the data, and we only get MannKind's side of its conversations with the FDA, but so far I haven't seen any red flags.
To infinity and beyond?
Not so fast. Getting approved is only half the battle. Afrezza is arguably a better insulin than Novolog or Eli Lilly's (NYSE:LLY) Humalog, but competing with the fast-acting insulins won't be easy. Doctors are comfortable prescribing injected insulin, and it's going to be hard to get them to convert to a new delivery method. Novo Nordisk and Eli Lilly don't look particularly worried, especially since both companies dropped their respective inhaled insulin programs a few years ago.
I don't think MannKind can do it alone. The biotech needs a partner, and until MannKind is able to find a big diabetes expert to step up and fund the launch, no amount of frequently asked questions will give investors solace.