Article preview from The RPM Report November 3, 2009
MannKind no longer expects to land a partner for its inhaled insulin Afresa until FDA approval is in hand. Its not surprising that potential partners are skeptical given the regulatory and commercial challenges--but investors were disappointed nevertheless. Does MannKind know something other diabetes companies don't? Read on...
Article preview from The RPM Report November 3, 2009
MannKind's plans to partner inhaled insulin are on hold until the Food & Drug Administration completes its review of the pending application for Afresa. And Wall Street analysts have some advice for investors who still seem to be counting on a deal: Don't hold your breath.
MannKind Corp. acknowledged in a Securities & Exchange Commission filing that it is unlikely to secure a partner for its rapid-acting inhaled insulin Afresa prior to FDA approval, prompting a 30% drop in the Valencia, Calif.-based company's share price.
"We made substantial progress toward a definitive agreement with a lead potential partner," the company said in its filing. "However, as the discussions progressed, we came to believe that it would be more productive to complete a partnership after we have received a response from the [FDA] regarding our new drug application."
That means no deal before January 2010 at the earliest, when the review deadline for the pending NDA comes due.
The news clearly disappointed investors, but the fact that MannKind faces a challenge in finding a partner should come as no surprise. Despite backing from founder and CEO Alfred Mann, who has invested $1 billion of his own money in the company, Afresa's future has been overshadowed by the failure of Pfizer Inc./Nektar Therapeutics Inc.'s inhaled insulin Exubera ('The Pink Sheet' DAILY, Nov. 13, 2007). That product was saddled with an inconvenient, oversized delivery device and a worrisome lung cancer risk that could apply to other drugs in the same class. After Pfizer backed out of Exubera development with Nektar, Eli Lilly & Co. and Novo Nordisk AS also retreated from their inhaled insulin programs.
Analysts Say: "I told You So"
Though the Afresa risks had been fully appreciated by a number of industry observers, Baird analyst Thomas Russo said in an interview, many investors, nevertheless, were swayed by the company's optimism about partnership prospects. Based on management's confidence that a partner would be secured in the third quarter of 2009 or at least by the end of the year, the company's share price soared from about $3.80 in January, hitting double digits in September, and slipping to $9.60 in early October.
Naturally, Russo said, the stock price is now making a round trip because the crucial partnership deal has not materialized after all. Russo had previously noted that potential pharma partners probably had a different view than the company on the prospects for peak sales and risk, and he pointed out this disparity made a pre-approval deal less likely.
The SEC filing prompted Diabetic Investor publisher David Kliff, to write his readers an 'I told you so' note on Oct. 6:
"Investors in MannKind drank the kool-aid believing that Afresa would be different. That Afresa would succeed when so many others have failed. That somehow Afresa had some sort of magical power that would overcome the realities of the market," Kliff wrote. "Well the facts are Afresa will never amount to anything more than a niche product with sales in the millions not billions."
Despite many months of rumors of partnership, it is now beginning to look like "MannKind may have to embark on the difficult road of commercializing Afresa alone," noted Donny Wong, London-based analyst at the biopharma research firm Decision Resources.
But for a pharma the size of MannKind, going it alone would mean targeting a much smaller market of specialists - endocrinologists - and forgoing the vast primary care playing field, Russo said.
Lung Function Testing, Cancer Warning Could be Deal Breakers
The diabetes market, in general, is fraught with regulatory risk, but Afresa carries some specific and serious concerns. For example, many analysts believe there is a good chance that FDA approval will be conditional upon pulmonary function testing. The FDA's comfort with the chronic administration of insulin through the lungs remains a major question, wrote J.P. Morgan analyst Cory Kasimov in an Oct. 6 note.
"We expect the FDA - if it approves the product - will require regular pulmonary function testing," the analyst wrote. "Notably, while much was made of Exubera's bulky device and inconvenient dosing, we believe many physicians and patients were even more turned off by the PFT requirements."
Furthermore, Kasimov added, any potential mention of the risk of cancer (proven or not) in the label could be a "commercial deal breaker."
Last year, Nektar ceased hunting for a new partner and cut off spending for Exubera after Pfizer released alarming clinical trial results. In one study, six out of 4,740 patients who took Exubera inhalation were newly diagnosed with lung cancer, compared to just one malignancy in the control arm. All of the cases occurred in people with a smoking history.
FDA responded to the new data by imposing a Risk Evaluation & Mitigation Strategy on Exubera—even though the product was already discontinued for commercial reasons.
So it is understandable if perceived regulatory risks for Afresa are outweighing appreciation for its clinical attributes—but analysts do see that there may be attractive clinical features.
Kasimov noted that the company ran a robust Phase III program for Afresa, demonstrating non-inferiority to current meal-time insulin with less risk of hypoglycemia and weight gain.
Similarly, Wong commented that "new data for Afresa shows that the drug offers considerable advantages over Exubera in efficacy, side effects, and convenience. MannKind appears to be doing everything right in their development efforts for Afresa, and the drug appears to be everything that Exubera was not."
The Wrong Target Population?
But on top of the lung cancer concerns, Afresa faces the same important commercial obstacles as Exubera.
The type 2 diabetes population is roughly ten times larger than the type 1 diabetes population. However, most type 2 diabetics who need insulin must start with a long-acting basal insulin like Sanofi Aventis' Lantus , rather than a mealtime insulin. And as payers well know, most patients who start administering insulin via injection grow rapidly accustomed to doing so, Wong observed.
Because type 2 diabetics start with a once-daily injection of a basal insulin, by the time they need a mealtime insulin, they are already used to injections. Also, changing insulins means that patients need to learn a new system for measuring effects of food intake, which could be confusing and create more risk for hypoglycemia. Patient survey data indicated that only insulin-nave patients are interested in switching treatment to inhaled insulin.
Kliff noted that investors continue to "buy into the fantasy" that the reason more patients don't use insulin is because insulin must be injected or pumped into the patient's body.
By Emily Hayes
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