Will MannKind Bounce Back?

Will inhaled insulin be a reality, this time for MannKind?

MannKind Pharma (MNKD - Analyst Report) witnessed its share price rise by a whopping 141% since the beginning of the year with positive outlook for its inhalable insulin Afresa.

MNKD has already invested about $1 billion into developing Afresa, which if approved will be much more convenient to use than the frequent injections diabetic patients have to take. In May, the FDA accepted the NDA [new drug application] for Afresa, though its approval is not expected before early 2010.

The inhaled insulin market has witnessed major changes during last year with Pfizer (PFE - Analyst Report, marketed product Exubera), Lilly (LLY - Analyst Report) and Novo Nordisk (NVO - Snapshot Report) withdrawing their late-stage candidates. While Pfizer blamed the pullout on poor sales of the drug (only $12 million in the first three quarters of 2007), others cited the lack of confidence in the regulatory environment and market prospect for an inhaled insulin product.

Time will prove whether MNKD will succeed in its venture, when so many big players failed.

The diabetes market is perhaps one of the largest opportunities in pharmaceuticals. This is a $174 billion market, with nearly 210 million people affected worldwide.

The elimination of competition in the inhaled insulin market seems favorable for Afresa. If MannKind can convince doctors about Afresa’s advantages over Exubera or traditional insulin therapy, the initial sales ramp of Afresa may be better than that for Exubera.

In the 1Q09 conference call, MannKind confirmed that it is holding serious discussions with many companies for potential partnership talks related to Afresa, and expects to finalize a deal by September 2009. However, with many big players like Pfizer and Lilly out of the market, we doubt the possibility of a potential partner in MannKind’s favor.

We upgraded the stock recently to Hold from Sell based on the positive developments and expectation of near-term FDA approval.