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Recently, MannKind Corp. (MNKD - Analyst Report) announced encouraging data on its inhaled insulin candidate, Afrezza, from a two-year study in patients suffering from type II diabetes. The efficacy data was presented at the 70th Annual Scientific Sessions of the American Diabetes Association held in Orlando.
 
Results from the long-term study revealed that treatment with Afrezza resulted in long-term glucose control that was comparable to the prevalent insulin therapy. On the positive side, patients treated with Afrezza displayed a much lower incidence of hypoglycemia - a state arising out of lower than normal levels of glucose (sugar) in the blood. Furthermore, the patients treated with Afrezza gained less weight compared to those treated with the standard of care. The data regarding the safety of the candidate was presented last year.
 
Afrezza utilizes MannKind’s proprietary dry powder Technosphere formulation of insulin. It is inhaled deep into the lungs using the company’s MedTone inhaler. Once inside the lungs, the insulin is rapidly absorbed into the bloodstream.
 
The diabetes market is perhaps one of the largest opportunities in pharmaceuticals. In the US alone, the disease affects 23.6 million people.  The market has a huge unmet need with the incidence of diabetes being on the rise. A study published by Diabetes Care in 2006 projected that about 48.3 million people would be diagnosed with diabetes in the United States by 2050.
 
MannKind filed a New Drug Application (NDA) with the US Food and Drug Administration (FDA) in March 2009. However, the decision has been delayed with the FDA issuing a complete response letter (CRL). The agency has asked the company for additional information and clinical data that has since been submitted.
 
Our Take
 
We believe that Afrezza offers some advantages over traditional needle-based insulin therapy, which currently dominates the market. The key advantage is provided by the convenient inhaled delivery. Diabetes patients using Afrezza will no longer have to worry about a needle injection. However, we are skeptical about the approval of Afrezza because many companies in the past have failed in their efforts to introduce inhaled insulin.
 
We are concerned about the delay regarding the FDA approval of the candidate. We are apprehensive that additional trials might be required if the FDA is not satisfied with MannKind’s response. This will not only delay the approval process, but operating expenses will also increase considerably. Besides, with no product on the market and no revenues, we are very concerned about the company’s financial position. The company believes that its funds and the available credit facility will enable it to conduct operations through the first quarter of 2011.
 
Our Recommendation
 
MannKind is a Zacks #3 Rank ('hold') company, which indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1-3 months. Our long-term Neutral stance on the company indicates that the stock is expected to replicate its short-term performance, but over 6-12 months. Consequently, we advise the investors to retain the stock over the time-period.
 

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