Wells Fargo–May 2013

MNKD: Q1 In Line Afrezza On Track--Widening Loss Estimates: Maintain Market Perform

Keypoints

• Summary: MKC-171/175 on track for completion by June and data readout around mid-August 2013, but MNKD faces a financing overhang and will likely require additional financing in Q4 2013. Q1 loss per share of $0.15 in line with consensus. Widening 2013 and 2014 loss per share estimates to $0.56 (from loss of $0.48) and $0.20 (from $0.13), respectively, primarily on higher operating expense (opex). Maintain Market Perform. Valuation range: $3.00-4.00 (10-11x 2016E EPS of $0.52, r=20%, 3 years) from $2.50-3.50.

• Maintain Market Perform. The near-term focus remains on MKC-171/175, which are both on track for completion by June and data readout around mid-August 2013. MNKD is targeting Afrezza NDA submission around late September/early October 2013, which implies a potential FDA decision as early as late Q1 2014. By our model, MNKD faces a financing overhang as additional cash resources will be required by Q4 2013. With MKC-171/175 data readout not expected until mid-August and the financing overhang, we prefer to remain on the sidelines for now.

• We are widening 2013 and 2014 loss per share estimates to $0.56 (from loss of $0.48) and $0.20 (from $0.13), respectively. 2013 and 2014 estimate revisions are primarily driven by higher opex, and 2014E interest expenses are higher on our assumption of incremental debt of $200MM (from $120MM). See page 2 for key assumptions.

• Key Takeaways: 1) MKC-171/175 data readout by mid-August and Afrezza NDA submission by late September/early October 2013. 2) Cash on hand and available borrowing capacity ($153MM in total as of end of Q1) can take MNKD into Q4 2013. 3) Afrezza partnership discussions ongoing and MNKD could be interested in retaining co-promotion rights. 4) MNKD to shift focus to EU filing for Afrezza after US NDA submission.

• Q1 2013 loss per share of $0.15 was in line with consensus, but wider than our $0.13 loss estimate. Both R&D ($26MM A vs. $25MM E) and SG&A ($10MM A vs. $8MM E) were higher than our estimate.

BofA–Merrill Lynch May 2013

MannKind Corporation - BUY

Afrezza data expected in mid-August

---

Afrezza data is next key catalyst

On its 1Q call, MNKD reiterated the expected completion of the Affinity trials in May/June, with data by mid-August. All patients in the type 1 diabetes AFFINITY 1 trial and most of the patients in the type 2 diabetes AFFINITY 2 trial have completed the treatment phase. We expect both trials will report positive data, achieving non-inferiority in AFFINITY-1 and statistically significant A1c improvement in AFFINITY 2. We expect MNKD to re-submit its NDA in Sept/Oct, as mgmt indicated an agreement was reached with FDA on the filing package. It is unlikely in our view that FDA would require a pre-approval cardiovascular outcomes study, as a meta analysis of previous studies indicated a MACE hazard ratio near unity. While these data will need to be updated with CV events from the AFFINITY studies, it does not appear that Afrezza has a CV signal. AFFINITY 1 will provide lung function data for the new and old inhalers to bridge to previous 2-yr safety data. We reiterate our Buy rating and $5 PO on MNKD.

Large market opportunity with partner

We model a 2014 launch with peak penetration of 4% in both the prandial insulin market and in combo use with oral drugs (T1D and T2D, respectively). MNKD is currently in dialogue with potential regional and global partners, but a conclusion is unlikely until after phase 3 data are available. Our peak US risk-adjusted sales estimate of $2.3bn in 2019 assumes MNKD launches with a partner (royalties of 25% net of COGS). We believe a company with global reach and experience in the diabetes market would provide the best resources to market Afrezza.

Cash to take company to 4Q

MNKD had $28mn in cash at the end of 1Q. This along with the available credit facility from the Mann Group is expected to be sufficient through filing. Exercising of warrants by YE13 could add an additional $90mn in cash, which may be used to pay down a $115mn convert that matures in Dec.

Cowen & co: MannKind–final countdown

 

The final countdown? Al (l) set for mid-August
Phase III data read-outs.

Conclusion: MannKind reported 1Q13 results and provided a corporate
update. In AFFINITY1, 7-8 of the 518 T1D patients randomized remain in the
trial, but the treatment phase for all patients is now complete. In AFFINITY2, 91
of the 353 T2D patients randomized remain in the trial, and the treatment phase
of the trial is scheduled to be completed next Monday. Both trials are expected
to conclude within a month. The database will be locked in 1H of July and data
are expected in mid-August, with NDA resubmission aimed for "late
September/early October." After conclusion of its pre-NDA meeting with FDA,
MannKind is on track for the resubmission, pending the Phase III data. If
timelines are met, this would set up an April 2014 PDUFA for AFREZZA.

Inhalable Insulin – A Breathtaking Development

 

An excellent article on Afrezza

http://insulinnation.com/inhalable-insulin-a-breathtaking-development/

Development of dry powder formulations of proteins for inhalation

 

A 500+ page book that provides a scientific background. Jump to page 7 for contents.

Pg 90 on other potential applications

Pg 149 covers safety issues.

http://theses.ulb.ac.be/ETD-db/collection/available/ULBetd-05022012-170401/unrestricted/these_definitive_F_Depreter.pdf

Waiting to inhale

 

A good article featuring Dr. Andy Clark, chief technology officer at Novartis. Earlier he was CTO at Nektar Therapeutics. Dr Clark should know the potential of inhaled insulin as Nektar worked with Pfizer on Exubera.

http://www.worldpharmaceuticals.net/editorials/22/Waiting-to-inhale.pdf

Insulin adherence behaviours and barriers

 

Interesting survey that strengthens the Afrezza case from both physicians and patients angle.

Link to abstract, full article

Abstract

Aims

To examine patient and physician beliefs regarding insulin therapy and the degree to which patients adhere to their insulin regimens.

Methods

Internet survey of 1250 physicians (600 specialists, 650 primary care physicians) who treat patients with diabetes and telephone survey of 1530 insulin-treated patients (180 with Type 1 diabetes, 1350 with Type 2 diabetes) in China, France, Japan, Germany, Spain, Turkey, the UK or the USA.

Results

One third (33.2%) of patients reported insulin omission/non-adherence at least 1 day in the last month, with an average of 3.3 days. Three quarters (72.5%) of physicians report that their typical patient does not take their insulin as prescribed, with a mean of 4.3 days per month of basal insulin omission/non-adherence and 5.7 days per month of prandial insulin omission/non-adherence. Patients and providers indicated the same five most common reasons for insulin omission/non-adherence: too busy; travelling; skipped meals; stress/emotional problems; public embarrassment. Physicians reported low patient success at initiating insulin in a timely fashion and adjusting insulin doses. Most physicians report that many insulin-treated patients do not have adequate glucose control (87.6%) and that they would treat more aggressively if not for concern about hypoglycaemia (75.5%). Although a majority of patients (and physicians) regard insulin treatment as restrictive, more patients see insulin treatment as having positive than negative impacts on their lives.

Conclusions

Glucose control is inadequate among insulin-treated patients, in part attributable to insulin omission/non-adherence and lack of dose adjustment. There is a need for insulin regimens that are less restrictive and burdensome with lower risk of hypoglycaemia.

Big Sugar's Sweet Little Lies

 

Great article from Mother Jones

http://www.motherjones.com/print/197151

Griffin update – Aug 2012

 

- Enrollment in Mannkind’s clinical trials should be completed soon. The Company has
screened about 85% of the patients needed for enrollment in its type 1 diabetes trial that is
required for FDA approval and a separate type 2 diabetes study that is being conducted to
expand the drug’s label. The challenge has been to enroll sufficient poorly controlled patients
to ensure the average starting HbA1c levels are close to the 8.5% defined in the trails’
protocols. Mannkind expects to complete enrollment in the two trials in September.

- The cash burn rate will likely peak in the current quarter, after operations used $24.2
million in the June quarter. The burn rate should increase with the trials fully enrolled in
September and then decline through the second quarter of 2013 when the studies will end.

- Mannkind is preparing for Afrezza’s launch. True, the Company will need to raise
additional capital before this year closes. But the trials’ completion is now better defined, and
management has created teams to analyze the data from each, thereby expediting preparation
of the final submission. The Company has also settled legal disputes that might otherwise
have been a distraction, and it is prepared to take delivery of two more fill/finish lines in
2013. Meanwhile, potential marketing partners are being kept abreast of developments to
facilitate completion of negotiations soon after the clinical trials’ data are analyzed.

Share Price (8/8/2012) $2.08
52-Week Price Low / High $1.57 - $3.95
Mkt. Capitalization (issued) $415 million
Shares Outstanding (issued) 199.3 million
12-month Target Price $14.00
Average Daily Volume (3 mos.) 2,197,860
Website www.mannkindcorp.com
Est’d 2012 Profit (Loss)/shr ($0.92)
Est’d 2013 Profit (Loss)/shr ($0.59)

Diabetes Prevention

An interesting article

http://www.thecenterforoptimalhealth.org/services/endocrinology/diabetes.pdf

this picture sums it all

On a serious note, slide 15 talks about “B-cell rest = B-cell protection”. This plays into the strength of Afrezza, as it reduces the load on pancreas.