A drug approval for a developmental biotech can be a transformative event, especially when the drug in question has blockbuster potential. So, it's no wonder that risk-tolerant investors flock to drug stocks with pending New Drug Applications, or NDAs, with the U.S. Food and Drug Administration, or FDA. Even so, these types of stocks are inherently risky given that most of their value is tied to the FDA's decision, and their finances are often on shaky ground following a long, expensive clinical testing process. With that in mind, let's take a look at two biotechs, MannKind (NASDAQ:MNKD) and Orexigen Therapeutics (NASDAQ: OREX), with pending NDA's at the FDA to see which one offers a more attractive risk to reward profile.

MannKind targeting lucrative diabetes market
MannKind's drug candidate is an inhalable insulin product called Afrezza, set to be reviewed by the FDA's Endocrinologic and Metabolic Drugs Advisory Committee on April 1. The regulatory review is currently scheduled to be completed two weeks later on April 15.

As most investors following this story know by now, Afrezza is targeting one of today's biggest drug markets that has already produced mega-blockbusters for Novo Nordisk and Eli Lilly. Afrezza would be a direct competitor to Novo Nordisk and Eli Lilly's injectable insulins, leading some to believe the drug has megablockbuster potential as well. With MannKind shares presently trading at around a $2 billion market cap, the bull investing thesis is that there is still substantial upside potential if Afrezza is approved come April, despite the stock's 140% gain over the past twelve months.

MannKind isn't without risk, however. Some analysts are concerned that the FDA calling an Advisory Committee in the first place is a bad sign—given that Afrezza's past regulatory reviews lacked this element. Furthermore, MannKind isn't in the strongest of financial positions after its long road to get Afrezza ready for another regulatory review. A delay in Afrezza's review, or an outright rejection, are therefore risks investors should consider going forward.

Because the regulatory review of any drug is chock-full of risk, I like to look at what insiders are doing with their shares in these cases. Put simply, insiders know the sentiment and type of feedback they are getting from the FDA leading up to a review. So, if they start selling or buying, this could be a telling sign.

Looking at MannKind's insider transactions, you get the impression that the company is confident in Afrezza's application. There haven't been any major unplanned sales in the past 12 months, and many insiders have chosen to hold onto their options as well.

Orexigen looks to break into the obesity drug market
Orexigen recently resubmitted a NDA for its obesity medication Contrave to the FDA, and a Marketing Authorization Application to the European Medicines Agency. After a positive interim analysis of the drug's long-term safety study called LIGHT, Orexigen now believes Contrave will gain approval in both the U.S. and EU later this year. And Takeda Pharmaceuticals, Orexigen's marketing partner for Contrave, is reportedly deep into the planning phase for the drug's commercial launch later this year.

Orexigen's optimism appears warranted, however, given that the FDA hasn't called an Advisory Committee this time around, allowing the drug to escape the intense public scrutiny that Arena Pharmaceuticals and VIVUS's obesity drugs were subjected to on their way to approval. Put simply, Contrave's chances of approval look good at this point, and an early approval is likely in the U.S., in my opinion.

So, what are Orexigen's insiders doing? Over the past 24 months, Orexigen insider sales greatly outweigh buys, driven mostly by insiders exercising their options. Although CEO Michael Narachi receives a fairly substantial options award as part of his overall compensation package, it is interesting that he has is presently only holding 3,980 shares of Orexigen.

And the winner is...
Today's biotech showdown comes down to insider sentiment in my opinion. Both companies are facing regulatory reviews with uncertain outcomes, and even then, the commercial success of their respective drugs are far from certain. That said, MannKind's insiders have held onto their shares and option awards, for the most part, heading into Afrezza's regulatory review, whereas Orexigen's executives have chosen to exercise their options ahead of Contrave's review. So, while both of these are speculative plays that depend on binary events, I have to give the nod on this biotech shown to MannKind.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.