MannKind Corporation (MNKD): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
MannKind reported a loss of $0.09 per share in the third quarter of 2014, narrower than the year-ago loss of $0.17 per share. The Zacks Consensus Estimate for the quarter was earnings of $0.09 per share. Afrezza's approval in the U.S. was a huge boost to the company. Moreover, MannKind's decision to choose a large company like Sanofi as a partner for Afrezza is highly encouraging. Sanofi's experience in the diabetes market should help in Afrezza launch, expected in the first quarter of 2015. The deal resulted in a substantial inflow of cash for MannKind. Although, Afrezza has some advantages over traditional needle-based insulin therapy, several limitations in Afrezza's label keep us concerned. We remain Neutral on the stock.

Overview:

Valencia, CA-based MannKind is a biopharmaceutical company focused on the discovery, development, and commercialization of drugs for diseases such as diabetes. In Jun 2014, the company's first product, Afrezza was approved for the improvement of glycemic control in adults suffering from diabetes mellitus. The FDA has approved the drug for administration in diabetes patients before each meal or within 20 minutes after its commencement.

Afrezza's approval comes with several limitations. For type I diabetes patients, Afrezza must be used in combination with long-acting insulin. Also, the drug is not recommended for the treatment of diabetic ketoacidosis and for patients who smoke. Afrezza even carries a boxed warning stating that there is a risk of acute bronchospasm in patients suffering from chronic lung disease. Afrezza's approval also comes with a Risk Evaluation and Mitigation Strategy to ensure that the benefits of Afrezza overshadow the risks of acute bronchospasm in patients suffering from chronic lung disease. The FDA has also asked for several post-marketing studies for the drug.

The pathway to approval was not smooth as the FDA had earlier issued two complete response letters (CRL) for Afrezza. While issuing the second CRL, the FDA asked the company to conduct two phase III trials (Affinity 1 and Affinity 2) with the next-generation inhaler.

Results from the first study (Affinity 1) revealed that non-inferior decreases in A1c levels were observed in Afrezza treated patients compared to the insulin aspart group. Afrezza was found to be well tolerated during the study. Results from the second study (Affinity 2) revealed that the primary objective of superior reductions in A1c levels from baseline was observed in the Afrezza group compared to the comparator oral-therapy group. Also, more patients under the Afrezza group reached specified A1c target levels compared to those in the comparator oral-therapy group. The candidate was generally well tolerated in this study as well.

Afrezza utilizes MannKind's proprietary dry powder Technosphere formulation of insulin. It is inhaled deep into the lungs using the company's MedTone inhaler, a small, easy-to-use pulmonary delivery system. Once inside the lungs, the insulin is rapidly absorbed into the bloodstream. MannKind has developed Afrezza to produce a profile of insulin level in the bloodstream that approximates the insulin level normally seen in healthy individuals following the beginning of a meal, but absent in diabetic patients.

In Sep 2014, MannKind completed the worldwide agreement with Sanofi for Afrezza which was inked in Aug 2014. Per the deal, Sanofi is responsible for commercial, regulatory and development activities pertaining to Afrezza across the globe. MannKind received an upfront payment of $150 million related to the agreement from Sanofi. The companies have also inked a supply agreement according to which MannKind will manufacture Afrezza at its manufacturing facility in Danbury, CT.

MannKind is eligible to receive milestone payments of up to $775 million. MannKind is also eligible to receive 35% of the global profit/loss emanating from Afrezza sales. Sanofi will get the balance. Under the terms of the deal, Sanofi will advance to MannKind its share of the partnership's expenses of up to $175 million.

Apart from Afrezza the company does not have any significant candidate in its pipeline. In 2012, the company out-licensed two of its developing oncology programs.

In Jun 2009, MannKind acquired Pfizer's insulin factory at Frankfurt, Germany for $30 million. The deal involved the purchase of assets related to the production of bulk insulin, including the relevant property rights, production equipment, a quantity of bulk insulin and a license to manufacture bulk insulin for use in pulmonary delivery.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CRL , MNKD

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