If you invest with your heart, then MannKind (NASDAQ:MNKD) is a great story.

Propelled by the will and the bankroll of billionaire chairman and CEO Alfred Mann, this tiny company is striving to make an inhaled form of insulin. MannKind seeks to succeed where Pfizer (NYSE:PFE) failed and where other giants, Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO), gave up.

But if you invest with your head, then MannKind represents a risky proposition that the average investor should probably avoid.

Getting approval from the Food and Drug Administration, while always unpredictable, will be the least of MannKind's challenges. The biggest hurdles that MannKind must leap are getting enough doctors to prescribe the drug, enough patients to use it, and enough insurers to provide coverage equivalent to injectable insulin.

All of those "gets" require a belief that MannKind will do better with its Afresa than Pfizer's flop with Exubera. The FDA is scheduled to decide in January, but it's possible the agency will delay action. That's not necessarily a reflection on Afresa -- just the FDA.

Real and intangible obstacles
Both Afresa and Exubera are rapid-acting insulin taken by diabetics at the start of a meal, meant to mimic insulin release by nondiabetics and to control blood sugar levels.

Afresa is already ahead on one count: MannKind's palm-size inhaler that delivers powdered insulin is more convenient than the cumbersome device from Pfizer and Nektar Therapeutics (NASDAQ:NKTR), which seemed better suited as a prop in a stoner movie or psychedelic music video.

Still, MannKind must avoid falling into Pfizer's trap of misreading market research that assumed patients would flock to inhaled insulin. When Pfizer withdrew Exubera in October 2007, year-to-date sales were an embarrassing $12 million. Investors take note: Insulin injection and infusion technology has improved over the years.

If the FDA approves Afresa as equivalent in efficacy to injectable insulin, MannKind must persuade many doctors to change their prescribing habits. Exubera might have encouraged such a change, but the FDA's approval included a warning that patients should beware of respiratory problems. Patients were strongly advised to receive periodic lung function tests. Smokers and people with lung diseases were told to avoid Exubera.

In April 2008, Nektar abandoned seeking a new partner for Exubera after an ongoing Pfizer clinical trial revealed "an increase in the number of new cases of lung cancer" in Exubera patients versus a control group. The new cases occurred among former smokers.

In contrast, MannKind says a two-year clinical trial shows no change in lung function between Afresa patients and users of other diabetic treatments.

The next signature event for MannKind could be a deal with a marketing partner, a protracted process that might be completed in the third quarter. I wouldn't count on Pfizer, Lilly, or Novo Nordisk.

Would insulin specialist sanofi-aventis (NYSE:SNY) be interested? It had a piece of Exubera before Pfizer bought out its stake. Would a maker of a noninsulin diabetes drug like Merck (NYSE:MRK) take a chance? Alas, it's busy trying to inhale Schering-Plough. Japan's Takeda Pharmaceutical also has a healthy noninsulin, blood-sugar control business.

A partner will see more data than will investors, so a marketing announcement would likely raise MannKind's shares. Still, a partner's faith won't alleviate doctors' and patients' concerns -- or insurers' attitudes -- about inhaled insulin given Exubera's history and advances in injection technology.

For investors, these concerns represent a step backward from MannKind.

Related Foolishness: