MannKind (NASDAQ:56400P706) bulls and bears won't have to wait too much longer to see how well the company's inhaled insulin drug, Afrezza, will perform on the market. During MannKind's presentation at the JP Morgan Healthcare Conference last week, new CEO Hakan Edstrom made it very clear that the launch is coming in the next few months:

We just earned two of the manufacturing milestones, which is a good signal for you that -- we told you we will launch in the first quarter -- and I'm telling you we will launch in the first quarter.

The biotech had a goal to produce launch inventory for its marketing partner, Sanofi (NASDAQ:SNY), by Jan. 23, but the manufacturing was completed ahead of schedule. According to Alfred Mann, the company's former CEO and now executive chairman, training of Sanofi's dedicated sales organization is "about to be conducted over several days, and shortly after, the product will be launched."

Sounds like a good time to review the bull and bear arguments for the drug.

Bull case: a better product doctors will use
MannKind laid out the case for Afrezza in a couple of succinct slides at JP Morgan. The first one shows how insulin is produced in the pancreas in non-diabetics, in patients injecting the current rapid-acting analogue (RAA) insulins, and in patients taking Afrezza.

Source: MannKind.

Afrezza acts almost identically to normal insulin, coming on early, and, more importantly, exiting the bloodstream quickly. The latter is key, because insulin that sticks around will happily lower blood sugar even if it's well after a meal and the patient no longer needs the insulin. The residual insulin can cause hypoglycemia events that can be dangerous if they're severe.

But will doctors use it? A survey of physicians by MannKind suggests that a majority of doctors are willing to use it for both new-to-insulin patients and those who are taking long-acting bolus insulin that isn't sufficient to control blood sugar levels.


Bear case: Afrezza offers little extra and comes with safety concerns
It's hard to argue with the data in the first slide, but bears can dismiss it as being clinically irrelevant. What matters isn't whether the insulin measured in a laboratory test shows there's a difference between Afrezza and injected insulins, but rather whether that translates to a clinical benefit.

In a phase 3 clinical trial comparing Afrezza to Novo Nordisk's Novolog, patients taking Afrezza had fewer hypoglycemia events compared with Novolog, which was statistically significant. There were also numerically fewer severe hypoglycemia events -- an arguably more important category -- in the Afrezza group, but it wasn't statistically significant.

Unfortunately for MannKind, the FDA didn't put the hypoglycemia data on the label. The data is complicated by the fact that Afrezza didn't control the blood sugar levels of the patients as well as Novolog. While the difference was within the margin of error for saying the two drugs have similar efficacy, it's not clear that the improved safety of Afrezza isn't just due to the decreased efficacy. In other words, if patients had taken higher doses of Afrezza, their blood sugar would have been lower, but the difference in hypoglycemia events may have gone away.

The biggest safety concern for Afrezza comes from its inhaled delivery mechanism. Injecting insulin is fairly straightforward, but it's not clear what long-term effect insulin might have on patients' lungs. The FDA wants patients to take a lung test before starting Afrezza, after six months, and every year after that. Some of that concern might come from Exubera, a previous inhaled insulin product marketed by Pfizer, which was linked to lung cancer, albeit weakly.

How do bears explain the doctors' survey that says they're interested in using inhaled insulin? Keep in mind who paid for the survey. Don't ask a barber whether you need a haircut.

Bottom line
MannKind could be a very volatile stock in 2015. Once Afrezza launches, expect every weekly prescription report to be scrutinized by both sides of the buy/sell button.

I fall on the short-term bear side. I see the argument that Afrezza is better than injected insulins -- both for convenience as well as efficacy -- but I think doctors are going to be tentative about adopting a new delivery mechanism for insulin, especially without any benefit listed on the label.

Longer term, assuming the side effects turn out to be more of a worry than a reality, Afrezza could capture its fair share of the diabetes market, especially for type 2 diabetics escalating treatment from oral medications where the convenience factor could be the greatest marketing advantage.

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