Yet another company has fallen into the purgatory that is the FDA Complete Response Letter (CRL) cycle. While it was not altogether unexpected that MannKind (Nasdaq:MNKD) would get another CRL from the FDA (which is tantamount to a rejection), this nitpicky rejection from the agency will likely set the company back at least another year in its attempt to get inhaled insulin to the market and in the hands of diabetics.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

The Latest Developments
On Wednesday afternoon, MannKind announced that the FDA had sent the company a CRL for its most recent re-application for its Afrezza inhaled insulin. This time the FDA's concerns were about potential differences between the MedTone inhaler used in past pivotal studies and the next-generation device that the company intends to actually launch with approval.

The FDA has now determined that the company needs to run at least two additional new studies (one in Type 1 diabetics and one in Type 2 diabetics) to determine if all of the relevant data is equivalent between the two devices. The FDA also wants at least one arm of one of the studies to include patients using the older MedTone device so that there can be head-to-head comparisons. (For related reading, check out The Curious And Complicated Case Of MannKind.)

To some extent, this is a legitimate request from the FDA. It is fair for the agency to want to confirm that the two devices work in basically the same fashion and produce the same outcomes in patients. Moreover, the FDA's request that the study include at least 12 weeks of consistent use (after a titration period) is not terribly onerous either - after all, diabetes drug studies often run at least a year, and the FDA increasingly seems to be demanding a minimum of two years of data.

In addition to the head-to-head comparison, the FDA wants more mundane data like information on the new device, updated safety information and so forth. (For more, see Dark Days In Diabetes.)

Will The FDA Be Reasonable?
Whether or not MannKind management foresaw the need for this data to deal with the FDA or launch the device commercially, the company had already begun two studies (Affinity 1 and 2) to test the next-gen device. The company stated that it intends to go to the FDA and see if they can modify these existing studies to include a MedTone arm and therefore meet the FDA's new requirements.

In a reasonable and rational world, the FDA would go along with this, even though the FDA is loathe to approve any "midstream" changes to a trial's protocol. But does anybody want to bet on the FDA being rational and reasonable?

The Future For MannKind
Even if the FDA is willing to cut the company a small break and modify the Affinity studies, it is likely going to take at least six months to run the study, and then additional time to collect the data and submit a new NDA to the FDA. At that point, the clock starts all over again and it could take upwards of a year for the FDA to render another verdict. If MannKind is very, very lucky, this might delay Afrezza by a year (assuming the data is to the FDA's liking), but 18 months up to two years may be more likely.

In the meantime, this is clearly not going to help the company's partnering efforts. Assuming that there was Big Pharma interest in Afrezza (and that may be more of an "if" than MNKD bulls want to believe), why wouldn't they either wait or press MannKind for more favorable terms? After all, Merck (NYSE:MRK), Sanofi (NYSE:SNY) and Novartis (NYSE:NVS) didn't get to be large companies by being pushovers at the negotiating table.

As MannKind stews, this is incrementally positive news for high-flying NovoNordisk (NYSE:NVO) and its NovoRapid insulin - a product that would be at some considerable risk given the very promising pharmokinetics of Afrezza insulin. While the same is true for other rapid-acting insulin-makers like Sanofi and Lilly (NYSE:LLY), the incremental impact is a bit less. Likewise, this could give investors in Biodel (Nasdaq:BIOD) a bit more hope as the company won't be as far behind MannKind in dealing with its own FDA rejection and new trials.

The Bottom Line
MannKind was always a risky stock, and Wednesday's events are just par for the course. While it may well be true that the FDA is being finicky and demanding past a point of reasonable diligence, the fact is that MannKind has to deal with the FDA that is, not the FDA that should be. Though I do not see how there is much argument left about whether Afrezza is an advance in the care of diabetes (it is), getting through the FDA minefield is just one step, and the even bigger minefield of the commercial market (and the true demand for inhaled insulin) still awaits. (For related reading, check out Icahn's Largest Positions.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  7. Stock Analysis

    Analyzing Porter's Five Forces on Under Armour (UA)

    Learn about Under Armour and how it differentiates itself in the competitive athletic apparel industry in light of the Porter's Five Forces Model.
  8. Stock Analysis

    The Biggest Risks of Investing in Qualcomm Stock (QCOM, BRCM)

    Understand the long-term fundamental risks related to investing in Qualcomm stock, and how financial ratios also play into the investment consideration.
  9. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  10. Stock Analysis

    The Top 5 Micro Cap Biotechnology Stocks for 2016 (BSTC, OSIR)

    Discover some of the most promising micro-cap biotechnology stocks that investors can consider for their 2016 investment portfolio.
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
Trading Center