The Mannkind Corporation (NASDAQ and TASE: MKND), a biopharmaceutical company, came onto my radar this year after watching its stock climb over 130% in just a few months. The surge is fueled by recent buzz about the company’s drug Afrezza, an inhaled mealtime insulin indicated for glycemic control (HbA1C) in Type 1 and Type 2 diabetic patients. Afrezza has been trudging along on the market since 2014, but despite a now-defunct partnership with Sanofi to market the drug, and small bursts of new prescriptions written, Afrezza hasn’t really caught on. Consequently, the company’s stock plunged from $50 in 2014 to $4 in 2017. Despite this, newly-appointed CEO Michael Castagna remains optimistic and believes recently approved label changes by the U.S. Food & Drug Administration (FDA) will revive sales. Analysts share his enthusiasm, calling Afrezza a “stellar molecule” that produces results “second to none.” And in August, the Maxim Group gave Mannkind a “buy” rating due to Afrezza’s potential to “transform the diabetes market” and Mannkind’s new management structure. Formulating an oral insulin has been the goal of pharmaceutical companies for decades, so it is somewhat surprising that Afrezza hasn’t caused much of a stir in the medical world. There is no doubt that Afrezza is a scientific advancement that has the potential to capture a portion of the $40 billion insulin market, but many challenges lie ahead.
Background and Pipeline
Mannkind Corporation formed in 2001 following the merger of three companies. Founder and namesake Alfred Mann is an inventor and pioneer in the medical device industry, having founded over 15 companies during his lifetime. Mannkind’s baby is its Technosphere™ technology which allows the inhalation of drugs previously only administered by injection. Afrezza is the company’s first and only FDA-approved drug. A pediatric version is in Phase I of development, and three other drugs are in the Pre-IND phase. All pipeline drugs utilize Technosphere™- a notable one being an inhaled epinephrine. Inhaling epinephrine should result in a more rapid onset of action compared to the traditional intramuscular injection. This is highly advantageous during an allergic reaction and represents an opportunity to capture market share from EpiPen competitors in the future.
Investing in the biotech sector can be a risky endeavor. Biotech companies are cash burners often teetering on the brink of major cash flow problems, and Mannkind is no exception. In the third quarter of 2017, it suffered a net loss of $32.9 million, up from a $23 million net loss the previous quarter. However, net revenue was up 246% year over year and 28% compared to the second quarter of 2017. Net revenue through September 2017 is $7.2 million- $4.7 million from Afrezza net sales, and $1.7 million from net sales of bulk insulin. Mannkind burned through almost 50% of its cash in the third quarter and ended the quarter with $20.1 million in cash and cash equivalents. A recent common stock offering generated $57.7 million which together with remaining reserves should sustain the company for two to three quarters. However, if Afrezza does not catch on soon Mannkind could face cash flow problems around mid-2018.
The Diabetes Market
An estimated 30 million Americans suffer from diabetes- a number expected to increase to 41 million by 2030. The 5.5 million diabetics using a mealtime insulin comprise Afrezza’s target population. There are over 80 registered insulin products in the U.S. alone, making this a very crowded market. Unfortunately, more choice does not seem to equate to better control, as roughly 70% of diabetic patients may have inadequate glycemic control (HbA1C > 7%). Considering Afrezza is the only non-injected insulin available, it seems it would be easy to differentiate itself from other insulin products. But history tells us that the road for an inhaled insulin can be a bumpy one.
A Walk Down History Lane
Since the discovery of insulin in the 1920’s, injected insulin for glycemic control has been a way of life for diabetic patients. Since then, many attempts have been made to create an oral insulin product. Novo Nordisk has come close but has yet to create an insulin tablet that is safe, effective and financially viable. Pfizer attempted to change this in 2006 when the FDA approved its highly anticipated drug Exubera, the first-ever inhaled insulin.
At the same time, Eli Lilly and Novo Nordisk were also developing their own inhaled insulin and watched anxiously to see how Exubera would be received. Pfizer expected Exubera to be the next blockbuster and predicted almost $2 billion in sales. The exuberance was short-lived, however, when in 2007 the drug was pulled off the market due to disappointing sales. Eli Lilly and Novo Nordisk both subsequently scrapped plans for the development of their inhaled insulin. Pfizer and other critics attributed low sales to the complicated inhaler, as well as a general lack of patient interest and awareness of the product. Additionally, it was no more effective than injected short-acting insulin but was more expensive. These combined with the cases of lung cancer and decreased pulmonary function were the nails in the coffin for Exubera. To see if Afrezza can avoid the same fate as Exubera, we need to take a closer look.
A Closer Look at Afrezza
Afrezza offers several advantages over its Exubera predecessor and injected insulin. Compared to Exubera, the Afrezza inhaler is much more compact and easier to use. Afrezza has a more rapid onset of action, implying that it may also be more effective than Exubera for glycemic control. Compared to injected insulin, there is the obvious advantage of avoiding injections at mealtime. Not only does this avoid pain, it can also help patients avoid infection, as some re-use their needles and syringes to save money. Environmentally, less needle and syringe use overall can reduce hazardous waste. Afrezza appears to have a better side effect profile compared to injected insulin, with a cough being the most common side effect. And according to GoodRx, the price of Afrezza is comparable to rapid-acting insulin pens. Unfortunately, most insurance plans don’t cover it, but Mannkind offers a savings card.
There are several disadvantages to using Afrezza. Although more simple than Exubera, it still requires substantial education for proper use. The inhaler must be held in a specific way, and the insulin cartridges are color-coded according to a 4, 8 or 12 unit dose, which could be confusing for patients and lead to dosing errors. Patients using over 12 units per dose will have to use multiple cartridges, increasing the risk of error even more. Afrezza does have an unfortunate contraindication- it shouldn’t be used in patients with breathing problems such as asthma or COPD. Many diabetic patients suffer from such breathing issues, and will not be able to use Afrezza for glycemic control. For those who can use it, most will experience a small decrease in lung function (FEV1) over time, which persists as long as Afrezza is used. Whether this reverses upon discontinuation is unknown. Compared to insulin pens, Afrezza may be more time-consuming and labor-intensive to use, lessening its appeal. The advent of insulin pens has made taking insulin a quick and painless process. Traveling may be more difficult when taking Afrezza. The insulin cartridges have a shorter shelf life than injected insulin outside of the refrigerator-not ideal for a diabetic patient who travels often.
The Science of Insulin Therapy
In a healthy individual, insulin is released in two phases at mealtime. In Phase one, insulin is released within 1 to 2 minutes of eating, with levels peaking around 3 to 5 minutes. In phase two, insulin is continually released until normal blood sugar levels are restored. The goal of mealtime insulin therapy is to mimic the time-action profile of physiologic insulin as closely as possible. Insulin’s rapid onset of effect better controls postprandial blood sugar (and overall blood sugar), while a more rapid return to baseline levels reduces the risk of hypoglycemia. Rapid-acting insulin such as Aspart and Lispro have come close to achieving this, but still have some limitations.
Until recently, no data existed to indicate Afrezza worked faster than injected rapid-acting insulin. Previous research had shown that although Afrezza had faster absorption than Lispro, the onset of action was similar. But at the American Diabetes Association’s Scientific Sessions in June 2016, Mannkind presented new clinical data suggesting that Afrezza does, in fact, have a different pharmacokinetic/pharmacodynamic (PK/PD) profile compared to Lispro. An open-label, randomized, crossover dose-response study compared Afezza to Lispro in thirty Type I diabetic patients. In this study, Afrezza showed an initial onset of effect at 12 minutes, and a return to baseline levels at 180 minutes, both faster than Lispro. This indicates two things: Because Afrezza works faster than Lispro, it may be more effective at controlling postprandial blood sugar, and improve overall glycemic control. Two, because Afrezza’s effects return to baseline more quickly, there may be a lower risk of hypoglycemia, a common problem with injected insulin. The downside of this is that the effects of Afrezza may wear off TOO fast, necessitating the need for a second mealtime dose. Regardless, these results were the impetus for the approved label changes, which are as follows:
- Onset of effect and return to baseline (Clinical Pharmacology): Based on the results of the aforementioned study, Afrezza will now have the designation of “ultra-rapid-acting insulin.” This will better differentiate it from rapid-acting insulin.
- Dose conversion from injected mealtime insulin (Dosage and Administration): The new label changes will provide more accurate dosing information for the conversion from injected insulin to Afrezza. This will be helpful because it is not a simple 1:1 conversion. There will also be a recommendation that additional adjustments may be needed based on individual metabolic needs and glycemic control goals. Both of these changes should help patients get achieve better glycemic control with Afrezza.
With data indicating Afrezza works faster than Lispro, the question really is whether this faster action translates to better effectiveness compared to other treatment options. As of now, the answer to that is unknown. In patients with Type II diabetes, Afrezza has only been compared to placebo. In Type I diabetes patients, a 24 week, open-label study compared the combination of Afrezza and basal insulin to insulin Aspart and basal insulin. The results did show Afrezza to be non-inferior to Aspart. However, more subjects in the Aspart group achieved a HbA1c target of < 7% than the Afrezza group. And Afrezza subjects experienced a significantly smaller reduction in HbA1c compared to Aspart subjects. More clinical trials are needed, specifically a trial comparing the effectiveness of Afrezza to Lispro in a larger population.
The Bottom Line
From a scientific standpoint, the fact that insulin can be taken using an inhaler is remarkable. Finding a way to administer a protein molecule orally or via inhalation is extremely challenging, but Mannkind persevered and accomplished it. In theory, Afrezza should be more popular than it is. There is room in the market for it, and for the time being there will be no competition from other oral insulin products. The main challenges Afrezza faces are affordability, safety concerns, patient education and awareness. Patients definitely want an oral insulin pill, but an inhaler with multiple steps for use may not be enough to convert injected insulin users. Especially one that hasn’t proven to be more effective. For those who dislike their mealtime insulin injections and avoid using insulin because of it, Afrezza might be worth a try. For investors, I believe investing in Mannkind comes with minimal upside potential. The outlook may be better for Afrezza once more data comes out regarding its effectiveness, which may help it find a place on insurance drug formularies. Approval of the inhaled epinephrine in the pipeline could improve the way allergic reactions are treated. Unfortunately both of these are still years away, and whether Mannkind can hold on that long financially is questionable. For now, Mannkind’s biggest enemy is time.