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MNKD Confirms Afrezza Study Design

MNKD MRK

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MannKind Corporatin (MNKD - Analyst Report) recently announced that it has confirmed with the US Food and Drug Administration (FDA) the design of the clinical trials for its diabetes candidate, Afrezza. In the complete response letter (CRL) issued in January 2011, the regulatory body had asked MannKind to conduct two trials of Afrezza, one in patients with type I diabetes and one in patients with type II diabetes.

In Study 171, which will be conducted on patients with type I diabetes, patients will be randomized to one of three arms: a control arm, in which patients utilize injected rapid-acting insulin at mealtimes, or one of two Afrezza arms, one each for the MedTone and next-generation device.

The study 174, involving patients with type II diabetes, will assess Afrezza using the next-generation inhaler in patients who are inadequately controlled on metformin with or without a second or third oral medication. Further, patients will be randomized to either Afrezza or placebo.

We believe that the approval of Afrezza is of prime importance for MannKind, which currently does not market any drug and recorded revenues of a mere $0.09 million in the second quarter of 2011.

The company’s second quarter adjusted loss of 33 cents per share was wider than the Zacks Consensus Estimate of a loss of 29 cents. The wider-than-expected loss was attributable to the higher research and development (R&D) expenses incurred during the reported quarter.

Following the receipt of the second CRL for Afrezza from the FDA in January 2011, MannKind terminated its deal with Merck and Co. Inc.’s (MRK - Analyst Report) subsidiary Organon in February. MannKind had an insulin supply deal with Merck’s subsidiary.

R&D spend in the second quarter increased 16% to $30.3 million, due to the expenses incurred toward the settlement of the dispute with Organon. According to the agreement, reached in June 2011, MannKind agreed to pay Organon $16 million in two installments after receiving certain quantities of the recombinant human insulin. The first installment was paid in the second quarter of 2011.

Our View

We currently have a Neutral recommendation on MannKind. The uncertainty regarding Afrezza’s approval is the main reason behind the near-term pressure reflected by the Zacks #4 Rank (Sell rating) carried by MannKind in the short-run.

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