MannKind Slides on News

Yesterday, shares of MannKind Corporation (MNKD - Analyst Report) lost more than 30% following the disappointing news about the company’s proposed partnership deal for Afresa, its inhaled insulin product. MannKind stated, in a filing with the SEC, that the company will not be able to enter into a deal by year end, as was earlier expected.

Although the company announced that it has made some progress in the partnership deal, we believe that any potential partner would wait for US Food and Drug Administration (FDA) approval to come before entering into any agreement.

MannKind is seeking FDA approval of Afresa for the treatment of type I and type II diabetes. With a Prescription Drug User Fee Act (PDUFA) date of January 16, 2010 for Afresa, we believe a partnership deal is not likely before that.

The approval of Afresa is significant not only from the company’s perspective but the medical community as a whole. While there were many late-stage drugs under development in the inhaled insulin field a few years back, competition is virtually absent now.

The change in the competitive landscape began with Pfizer’s (PFE - Analyst Report) withdrawal of Exubera from the market in October 2007. Additionally, Pfizer stated that a few diabetic patients on Exubera developed lung cancer. Following the disappointing performance of Exubera, other big players including Novo Nordisk (NVO - Snapshot Report) and Eli Lilly (LLY - Analyst Report) discontinued their inhaled insulin programs, citing the lack of confidence in the regulatory environment and market prospects for an inhaled insulin product.

While the number of lung cancer cases was too few to conclusively link Exubera to the disease, the results still cast a looming shadow on the future of Afresa. Moreover, we believe regulatory hurdle will become a steep climb for MannKind with the FDA likely to ask for more stringent and extensive study data. We have a Neutral recommendation on the stock.

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