Mannkind

TLSR: Let's go to another company. Do you have a favorite?

KM: My favorite is MannKind Corp. (MNKD:NASDAQ), which has an inhalable insulin under development. The product is called Afrezza (human insulin of recombinant DNA [rDNA] origin for inhalation). It has had its problems getting the drug through the U.S. Food and Drug Administration (FDA), partly because it developed a new version of an inhaler that it wanted to commercialize. The company thought that all it needed to do was a bioequivalence study comparing the new inhaler against the old one. But, as it turned out, the FDA wanted more than a small clinical trial as the determinant of equivalence. The FDA sent MannKind back to the drawing board, and the company is now conducting what it hopes is a final pivotal trial. That study, called Affinity 1, is measuring the efficacy of Afrezza delivered with the new inhaler versus the old one, with a third arm comparing Afrezza's efficacy against a short-term insulin analog, in this case, Novo Nordisk's (NVO:NYSE) NovoLog (insulin aspart [rDNA origin] for injection). Patients involved in this study have type 1 diabetes.

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Because MannKind was given orders to do another clinical trial, it decided to do two instead of one. With the FDA's guidance, it designed a clinical trial called Affinity 2 that involves type 2 diabetics. The purpose of the Affinity 2 is to expand the utility of Afrezza to include type 2 diabetics who are not well controlled by oral medication. The trial compares Afrezza to a placebo. The patients remain on their oral medications, and all the FDA would like to see is an improvement in glycemic control with the addition of Afrezza.

I don't see how this trial could go wrong. We are talking about adding the hormone insulin to something that has not been controlling patients very well. The only way it could possibly go wrong is if patients suddenly start responding well to drugs that haven't been working for them. In the company's last conference call, Al Mann, the founder, chairman and CEO, talked about how the estimated price for Afrezza will be about $2,000 ($2K) per patient per year, slightly above what the oral insulins are going for at this time.

TLSR: $2K per patient per year is significant. How big is the market?

KM: There are about 19M diagnosed diabetics in the U.S. today; 84% of them take either insulin or oral diabetes medication. At $2K per patient, that is equivalent to $31.9 billion ($31.9B) per year in potential sales. You must adjust the 19M total for the 16% not taking insulin or an oral medicine.

There aren't too many drugs with that type of market potential. I don't think many diabetic patients will prefer injecting themselves multiple times a day to taking an inhalable drug that actually does more for them than the injectable drugs anyway. Afrezza's unique delivery system, and the actual structure of the delivery molecule, which MannKind calls Technosphere, enables the drug to exhibit the same type of pharmacokinetic profile seen with the pancreas' response to food consumption.

TLSR: When will we know something about the trials?

KM: The Affinity 1 trial should be completed in May, and Affinity 2 should be finished in June. We'll hear the results in August, and the new drug application (NDA) should be submitted by early October. If the trials work, MannKind will not only get FDA approval, but it may have a marketing advantage. The Affinity 1 trial is designed to test whether Afrezza is superior to short-acting insulin analogs in terms of better glycemic control and fewer incidents of hypoglycemia. It could also be used to treat the type 2 diabetic population. These two trials are crucial.

TLSR: Why did the company switch inhalers?

KM: Simply to have a more efficient delivery system.

TLSR: You said this was your favorite stock. Nektar Therapeutics (NKTR:NASDAQ) developed Exubera (insulin rDNA origin for inhalation), and it was approved. Pfizer Inc. (PFE:NYSE) marketed Exubera for less than a year and then gave up on the product, giving it back to Nektar with no strings attached. I have no idea if Nektar tried to get someone else to pick up Exubera, but the product was never heard from again. Why is Afrezza going to be successful?

KM: The difference between Exubera and Afrezza is that Exubera had starch as an excipient (an inert material serving as a medium or carrier for a drug). Starch needs to be enzymatically degraded and removed from the lungs to allow the lungs to absorb additional insulin. A patient might need two puffs of Exubera to get an appropriate dose of the drug, but because of the starch, the second puff does not necessarily deliver the same amount as the first. That is not true with Afrezza. There is a linear relationship between the number of times a patient inhales Afrezza and the amount of insulin delivered into the blood.

There's another thing. MannKind's inhaler is about the size of—and looks a great deal like—a police whistle. The Exubera delivery system was about 12 inches long and 1–2 inches in diameter. It was not something patients could carry around easily. But a patient can put the Afrezza inhaler in a pocket, take it out at dinner, do an inhalation right in the middle of a restaurant and nobody would even know it.

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