No Relief in Sight for MannKind

MannKind Corp’s (MNKD - Analyst Report) lead drug, Technosphere Insulin (TI), is an inhaled insulin product and is in large phase III trials for the treatment of diabetes. The beginning of the end for the inhaled insulin market started after Pfizer (PFE - Analyst Report) pulled out its Exubera from the market due to occurrence of lung cancer in diabetic patients treated with the drug.
 
While we view the carcinogenicity profile of TI as being safer and better than the rest of the compounds in this class of drugs, we believe the Food and Drug Administration (FDA) will decide to err on the side of caution and request MannKind for additional clinical information in a larger sub-group of diabetics.

Additionally, the FDA may require the company to conduct a long-term study to measure the impact of TI on the risk of heart problems in patients as recommended by the advisory panel in July. This will make the regulatory process longer and costlier for the company.

Even if TI gets approved, we do not expect the drug to reach the market before 2011. The company’s cash burn is a matter of grave concern. Moreover, with the high selling, gross and administrative costs required for distinguishing the drug from other therapies, we do not expect MannKind to achieve profitability without TI becoming a blockbuster, which seems unlikely in the current market scenario.

The lack of any late-stage or approved product adds to MannKind’s woes. The company’s hope of bringing a revolutionary technology to the market has been dealt a major blow and unless some damage limiting and confidence boosting efforts are not undertaken immediately, the shares of the company may sink without a trace. Hence, we maintain our Sell rating on the stock with a target price of $1.50.

Varun Parwal contributed to this report.

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