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A Deep Dive Into MannKind's Big Bet On Afrezza

PFE | October 11, 2017

It’s been a long road for MannKind Corporation (NASDAQ: MNKD) and its Afrezza inhalable insulin product. However, a generous new FDA label this week may be the light at the end of the tunnel. Here’s a look at inhalable insulin’s long journey and what the new FDA ruling means for MannKind.

If At First You Don't Succeed ...

The concept of inhalable insulin is certainly nothing new. In fact, the FDA approved Exubera, a form of inhalable insulin developed by Pfizer Inc. (NYSE: PFE), way back in 2006. However, Exubera sales never took off the way Pfizer had hoped. Subsequent reviews of the drug’s effectiveness were mixed, and Pfizer stopped producing Exubera in 2007.

At the time, MannKind was already working on Afrezza and submitted an NDA to the FDA on March 16, 2009. At the time, MannKind’s stock was trading at around $15.50 per share. The FDA denied approval of Afrezza in 2011 and requested more trial data after MannKind altered the design of the Afrezza device. MannKind’s stock finished 2011 at only $12.50 per share.

After MannKind completed additional trials and submitted a new application, the FDA finally approved Afrezza in June 2014 for adults with Type I and Type II diabetes, with restrictions for patients with lung conditions such as asthma or cancer. The approval revived MannKind’s stock, which had traded below $10 per share in late 2012. The stock peaked as high as $57.40 on investor hopes for Afrezza.

Stumbling Out Of The Gate

Unfortunately, the market enthusiasm didn’t last. MannKind struck a deal with Sanofi SA (ADR) (NYSE: SNY) that would turn over Afrezza manufacturing and marketing to Sanofi. The product ran into the same adoption issues Exubera had, delivering only $7.5 million in total 2015 sales. By the end of 2015, MannKind stock had dropped to just $7.25.

In January 2016, Sanofi announced it was dropping Afrezza, leaving MannKind to push forward alone. MannKind’s stock fell to as low as $2.05 by November 2016.

The negative momentum continued into 2017, with MannKind stock dropping below $1 per share to an all-time low of 67 cents in May of this year.

The New Label

The Afrezza story got a shot in the arm on Oct. 2 when the FDA approved changes to the Afrezza label that would include new study data indicating time-action profiles.

“These data articulate the rapid-acting nature of Afrezza to address post-prandial hyperglycemia, setting it apart from other mealtime options available to help patients maintain greater control over their blood glucose levels,” said Satish Garg, MD, MBBS, DM — Barbara Davis Center for Diabetes (BDC) – University of Colorado, in the company’s press release.

The news sent MannKind’s stock, which Wall Street had seemingly abandoned, soaring more than 200 percent in less than two weeks to as high as $6.71, a new 52-week high.

Related Link: What A Week For MannKin d

What Does It All Mean?

Even after the big move, H.C. Wainwright analyst Oren Livnat said Monday that the new label has created a major value opportunity in MannKind shares.

“We believe Afrezza inhaled insulin is a clearly differentiated meal-time insulin therapy vs. injectable market leaders Novolog and Humalog, which combine for $3.5B in the U.S.," Livnat wrote (see Livnat's track record here).

H.C. Wainwright is modeling for peak U.S. Afrezza sales of more than $725 million, a huge number for a company with a market cap of under $700 million.

On Wednesday, MannKind announced that H.C. Wainwright is the exclusive placement agent in a new 10,166,600-share stock offering priced at $6.00 per share that will raise about $58 million as part of management's efforts to "recapitalize the company."

Not everyone is optimistic about Afrezza's prospects, including TheStreet biotech reporter Adam Feuerstein, who took to Twitter to voice his opinion. Feuerstein blasted MannKind bulls for rejoicing over a stock that, even after a 200-percent gain, remains down 74 percent over the past three years. He also took a jab at H.C. Wainwright for its bullish commentary on the stock ahead of a major offering.

"3 yrs after approval, Afrezza is on $8M annual run rate. Y'day, HCW analyst forecast peak sales $700M+, then helped co. raise $," he tweeted late Wednesday morning. "His Afrezza forecast is nonsense. It's fantasy. We all know this, yet the system allows it. Be skeptical, always. $MNKD"

$MNKD — Reality check. Afrezza label change is a tiny band-aid on gaping wound. Maxim and HCW are pumping stock to facilitate a financing.

— Adam Feuerstein (@adamfeuerstein) October 10, 2017

$MNKD I get it. Traders love to trade. Momo. Short squeeze. Enjoy yourself. But please, no one is “investing” in this failing business.

— Adam Feuerstein (@adamfeuerstein) October 10, 2017