Sometimes it is not always best to be first, sometimes it is better to let others go first and play the role on unwitting minesweeper. That is certainly what investors in MannKind (Nasdaq:MNKD) are hoping as this company approaches a critical FDA decision date (December 29) for its inhaled insulin product. While prior attempts at inhaled insulin have gone down in flames, MannKind may be in a position to learn from these mistakes and prosper where others have failed.

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A Different Inhaled Insulin
There seems to be almost a knee-jerk need to compare MannKind's Afrezza (also spelled AFREZZA) to the failed inhaled insulin product developed and marketed by Pfizer (NYSE:PFE) and Nektar (Nasdaq:NKTR) known as Exubera. Exubera was a high-profile $2 billion failure for Pfizer, and this failure was followed quickly by the abandonment of inhaled insulin programs at Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO).

Afrezza is a different product, though. Exubera was in most respects just an inhalable alternative to injected rapid-acting insulins like Sanofi-aventis' (NYSE:SNY) Apidra, Lilly's Humalog or Novo's NovoRapid. While these insulins have a peak of activity around 60 minutes after administration, Exubera peaked around 49 minutes. By comparison, Afrezza peaks in just 12-14 minutes, much more closely mimicking natural post-meal insulin secretion from a healthy pancreas.

Ultimately, Exubera was a pain for all involved. Insurance companies did not see why they should pay for it, doctors did not want the headache of training patients for something that offered no clinical benefit and diabetics themselves did not see any compelling reason to bother with the system. (For more, see Investing For The Diabetes Epidemic)

Can Afrezza Solve These Problems?
In its favor, MannKind's system is easier to use - it is smaller and more intuitive than Exubera's system. Moreover, inhaled insulin may be easier to administer than injections for some patients. MannKind has also wisely chosen not to pursue premium pricing for the product, suggesting it will be basically on par with rapid-acting analogs.

Afrezza also seems to be safer and to have a better side-effect profile than Exubera. There have not been the indications of lung cancer that spooked some people with Exubera, nor the same level of respiratory problems. In fact, Afrezza trials have shown a slight reduction in hypoglycemia incidents (a very serious side-effect in many diabetes treatments).

Not All Good News, Though
Unfortunately, Afrezza is not the slam-dunk its supporters want it to be. None of the clinical trials done to date have shown any superiority in efficacy (as measured by HbA1c) for inhaled insulin. In fact, every trial I have seen has shown a slight underperformance for Afrezza - not enough to be statistically significant or technically inferior, but enough to suggest that Afrezza is not demonstrably better at maintaining long-term glucose control.

Moreover, I fear that some investors may overstate the benefits of an inhaled insulin delivery system. It is true that there is substantial needle-fear in patients who are starting insulin therapy, but that fear disappears. As part of my consulting work, I have seen several surveys of diabetics (covering thousands of respondents) and there is a remarkable and consistent curve - those who have never injected are very bothered by the idea, but that fear and anxiety declines rapidly once they begin therapy and become accustomed to it. Consequently, there may not be as much commercial demand for the product as people think - particularly if doctors spend time with patients to ease their anxieties about injections. (For more, see Stocks On Drugs: What It Takes To Get High.)

The Bottom Line
It is interesting that the FDA elected not to have a panel meeting for this product. Bulls suggest that the prior approval of Exubera means one is not needed; bears say it is a sign that the FDA will reject this drug again. It is also worth noting that there is a long and inglorious history with the FDA and diabetes drugs. Novartis (NYSE:NVS) abandoned Galvus after FDA rejection, Takeda abandoned alogliptin, Biodel (Nasdaq:BIOD) saw the FDA reject Linjeta and NovoNordisk saw significant delays before getting approval for Victoza and NovoLog. With the FDA in the midst of a safety obsession and an accusation that there may have been fraud in MannKind's trials, the FDA may decide to go conservative and ask for still more data. (For more, see Dark Days In Diabetes)

It is hard to bet against Al Mann, the CEO of MannKind and founder of MiniMed (now part of Medtronic (NYSE:MDT)), and Afrezza does seem to work. With an absence of clinical superiority, though, it is equally hard to see the FDA happily signing off on a product that does not seem to address a clear need. This is a high-risk, high-potential biotech story and a severely risk-averse FDA would seem to place more of the weight on "high-risk". (For related reading, see FDA's Bizarro World - Orexigen Gets Approval!)

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