MannKind corporation, the developer of the inhaled insulin Afrezza, suffered a minor drop in its shares as the FDA delayed the drug’s approval. According to Schaeffer’s Investment Research, MannKind plopped 8 percent today, closing at $6.32. MannKind’s hearing with the FDA committee was originally schedule for April 15, 2014; but due to the recent information that MannKind had submitted to gain the drug’s approval, the FDA pushed the hearing date three months to July 15, 2014 to allow more time for a full review.
Just last Wednesday, the FDA’s advisory panel recommended Afrezza f0r approval, even though there were some missing data in MannKind corporation’s trials and potential risks for some patients with underlying respiratory problems. The drug garnered a 13 to 1 vote for type I diabetes and 14 to 0 votes for type 2 diabetes. Afrezza is a administered by inhaling the insulin before a meal, and the drug is absorbed into the bloodstream via the lungs’ alveoli. The bodes good news for diabetics who will no longer need to prick their skin to inject insulin. The time to reach peak insulin levels with Afrezza is between 12 to 15 minutes of administration, while injecting rapid-acting insulin analogs is between 45 to 90 minutes. The regular insulin injections reach their peaks within 90 to 150 minutes. Afrezza had been rejected a couple of times because the FDA questioned its efficacy and safety.
When MannKind corporation first presented Afrezza, the FDA committee had concerns about the drug’s effects among patients with pulmonary dysfunction, lung and renal diseases, and bronchial spasms from asthma. The dosage amount and its accuracy were also questioned in MannKind’s clinical trials. Some patients who had used Afrezza exhibited symptoms that are similar to asthma, such as hacking, coughing, and shortness of breath. MannKind corporation’s shares first dropped to $5.03 on March 28, 2014 after the FDA popped up its red flags about Afrezza, which first delayed its approval.
Even though MannKind corporation had its up and downs like in the game Snakes and Ladders, there is still a strong market potential for the company and Afrezza. According to ValueWalk today, if the FDA approves the drug, MannKind may very likely gain back financially several times from its $500 million-plus investment in testing, re-testing, and running clinical trials over the last three years. The diabetic market in the United States had ballooned from $174 billion in 2007 to more than $245 billion in 2012, according to the most recent data from the American Diabetic Association.
Approval of Afrezza would most likely be the casino jackpot for MannKind corporation as well as benefiting over 26 million diabetic adults and children. Investor Place’s James Brumley wrote that MannKind corporation could earn between $2 billion to $5 billion annually, and this is based on just 15 percent of the total insulin market. Compared to MannKind’s current $2.5 billion market cap, this potential revenue could break the glass ceiling of the stock price in the near future.
Investors should also take precautions and learn from inhaled insulin’s history before placing their stakes on Afrezza. In 2007, Pfizer had once funded and introduced Exubera to the market. By late 2007, the company abandoned the drug and the program after earning just $12 million, which was nowhere near to make up for Pfizer’s investment. Exubera’s failure included the cost of the drug relative to its efficacy, bulky size of the inhaler, and was 30 percent more expensive than the going rate for regular insulin treatments at the time. Exubera also failed to impress insurance companies enough to have them fork out a premium for the treatment. There were no apparent winners here, not for companies or diabetics. .
Afrezza, however, may have solved most of the problems that led to Exubera’s extinction. And so, MannKind corporation, its investors, and potential customers may see the temporary drop of shares and the FDA’s approval delay as minor setbacks. Optimists would see this as a potential moment for progress, like an archer who draws the arrow back before firing.
By Nick Ng