Filed Under:
Tickers in this Article: MNKD, PFE, LLY, NVO, STJ, BSX, MDT
Do you remember the "Underpants Gnomes" episode of SouthPark? More to the point, do you remember their three-step business plan? It went a little something like this:

  • Phase 1: Collect Underpants.
  • Phase 2: ???
  • Phase 3: Profit!
That, in a nutshell, is the skeptic's take on MannKind (Nasdaq:MNKD) - a biotech company focused for now on developing its unique Afresa inhaled insulin product.

Data is Good, But Only Phase One
With a rather vague press release this morning, MannKind confirmed what has been more or less known for some time now - its drug Afresa appears to be safe and efficacious. Top-line data from two pivotal trials seems to indicate that the drug is safe (at least over a relatively brief treatment time) and just as efficacious as standard injection therapy.

What Afresa (formerly known as Technosphere Insulin) has going for it, though, is a different and better pharmacodynamic profile than the ill-fated inhaled insulins from Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), and Novo Nordisk (NYSE:NVO), and perhaps some advantages over standard injection therapy (comfort, convenience and less weight gain).

The Sticky Wicket Of Phase Two
For almost all the many years that I've been doing healthcare consulting and/or medical technology research, I've been hearing about the enormous potential of inhaled insulin. Frankly, I've never really bought it - and the stumbles of the aforementioned Big Pharma have supported my skepticism.

The troubles have included cost-benefit analysis, long-term safety and user convenience. Preceding devices have been a pain to use, there have been legitimate worries about the long-term safety of some formulations (like a potentially elevated cancer risk with Exubera), and nobody had much success in convincing customers that they should pay for the premium-priced inhaled insulin when it didn't seem to offer any real benefits over tried-and-true injection therapy.

So, now we've mapped out the challenge that MannKind has to surmount if they are going to move from Phase 1 (a good idea and good data) to Phase 3 (profit!).

Maybe, Just Maybe Phase 3
I'm not your typical analyst-turned-fanboy when it comes to company managements. I think congratulating executives for good earnings on conference calls is stupid, and I've generally come to believe that most executives are over-paid and under-brained.

MannKind is different. The CEO of this company (Al Mann) has shown an uncanny ability to make money for shareholders (founding companies ultimately acquired by St. Jude (NYSE:STJ), Boston Scientific (NYSE:BSX), and Medtronic (NYSE:MDT)), and I've found him to be an unusual mix of visionary and straight-shooter. If anybody can make the inhaled insulin idea work, it's Al Mann and his team.

It's not going to be easy. The company needs a large pharmaceutical company as a marketing partner. I don't think the company has the resources to effectively market this product on its own, but many of them have already been burned (or at least lightly singed) in this area.

What's more, there's going to be an uphill battle in securing advantageous reimbursement for the drug, and in convincing doctors and patients to change their prescribing and treatment patterns, respectively. (For the traders take on biotech, read The Ups And Downs Of Biotechnology.)

Sometimes You Just Gotta Believe
At today's prices, the market says MannKind's technology is worth about $350 million (the company also has an oncology drug and an early stage non-insulin diabetes drug in development). Capturing just 1% of the U.S. insulin market should be worth more than $45 million a year in revenue. For all of the difficulties MannKind (and its presumptive partner) will face in getting Afresa approved (remember, the FDA is none too friendly these days), launched, and accepted by the market, it's hard to see today's price as anything less than a bargain if you believe in the potential of inhaled insulin.

I'm hardly a devoted disciple of the inhaled insulin concept, but given Al Mann's track record, the clinical data on Afresa, and virtues of rock-bottom expectations, this just might be a gamble worth taking.

To learn more about biotech companies, be sure to check out our Biotechnology Industry Handbook.

comments powered by Disqus

Trading Center