Griffin Mannkind research – Q2 2011

 

We reiterate our BUY recommendation and our 12-month target price of $10 per share.

• Mannkind is entering the homestretch in its efforts to win FDA approval of Afrezza®.
The Company met with the agency last week to finalize its clinical trial designs. The
outcome couldn’t have been better:

o A study of Afrezza with type 1 diabetics must show that two delivery devices are
equivalent. The pivotal trial will compare the performances of the latest inhaler and the
model used in earlier clinical studies. The goal is to demonstrate that the two devices are
equivalent and that drug is not inferior to an approved therapy.

o A type 2 diabetes study must yield evidence that Afrezza is better than placebo for
the drug to be approved for most diabetic individuals. Patients who are not
responding well to metformin and/or another oral therapy will be enrolled and provided
with either Mannkind’s inhalable insulin or a placebo. In other words, Afrezza must
provide better glucose control than an innocuous substance.

• Expenses remain under good control. Mannkind has sufficient funds to support operations
into 2012.

• The Company has numerous financing options that range from partnering Afrezza with
various pharmaceutical companies to more traditional sources of capital.

AFREZZA CLINICAL TRIALS TO COMMENCE SOON

Mannkind met with the FDA on Wednesday, August 10th to finalize the designs of two clinical trials of Afrezza. The type 1 diabetes trial is essential to win regulatory approval, while the type 2 diabetes trial will expand the market for the drug to include the vast majority of diabetes patients.

Type 1 Trial: The goal of this study, designated as the 171 trial, is to demonstrate that two inhalers, a new model and one used in earlier clinical studies, deliver Technosphere-insulin powder in an equivalent manner in a clinical setting. The Company has already conducted extensive laboratory tests of the two devices to show their bioequivalence, and the latest model has been used in a small number of patients.

This trial should enable the FDA to approve Afrezza for any patient who requires basal and prandial insulin therapies to control blood glucose levels. These are patients who have type 1 diabetes or an advanced stage of type 2 diabetes.

Type 2 Trial: This study, designated as the 174 trial, is designed to show that Afrezza is effective in helping to control blood glucose levels in patients who do not depend on basal insulin therapy. In other words, these patients are at an earlier stage of diabetes.

Rodman & Renshaw update – aug 12, 2011

Market Perform;

FDA Green Lights Mannkind’s Type 1 and Type 2 Diabetes Pivotal Trial Designs.

 

Mannkind and the FDA reach agreement on pivotal trial designs. Last night, Mannkind announced that it had met with the FDA and confirmed the protocols for the two pivotal studies of AFREZZA®, Study 171 and Study 174, in Type 1 and Type 2 diabetics, respectively. These studies will evaluate the efficacy and safety of AFREZZA® using Mannkind’s next generation inhaler, the Dreamboat device. These trials are being conducted in response to the Complete Response letter issued in January of this year and follows the ongoing dialogue between the two parties that we chronicled in our last note. The FDA had requested Mannkind to conduct a Phase 3 trial in Type 1 diabetic patients and a Phase 3 trial in Type 2 diabetics using the device the company intended to launch AFREZZA® with, the smaller “Dreamboat” device. Mannkind has previously reported that the FDA wanted to specifically evaluate the new “Dreamboat” device versus the MedTone device, which was used in the studies that supported the NDA filing.

Study 171 and 174 protocols have come into view. There are no changes to the study in Type 1 patients, which can start enrolling now. Study 171, formerly called Affinity 1, will be an open-label Type 1 diabetes study where patients will be optimized on basal insulin after a run-in period and then randomized to into one of three arms: a rapid-acting insulin control arm administered at mealtime and one of two AFREZZA® arms (one each for MedTone and Dreamboat). After a four week run-in period, there is a mealtime insulin titration period that could run up to 12 weeks, followed by the defined 12 week observation phase on stable doses of the mealtime insulin with the primary endpoint of assessing the level of HbA1c reduction over that 12 week observation period. This is the trial design we noted in our initiation note and which also includes a collection of post-study results 30 days later.

Study 174, formerly called Affinity 2, will assess AFREZZA® using the next-generation inhaler, Dreamboat, in patients with type 2 diabetics who are inadequately controlled on metformin with or without a second or third oral medication. The option to include a third drug is new to us and suggests a “real world” setting at launch. The inclusion of a third drug could make it more difficult to demonstrate superiority, but since this is a non-inferiority trial, AFREZZA® won’t need to show superiority. Also, we would expect the company to break out this data by treatment course to physicians. Specifically, this trial could result in a page in the marketing brochure from the arm of patients on metformin and/or the addition of second oral medication. We believe investors have overlooked the fact that in the breadth of data, there is some superiority data to leverage in a marketing piece. With the “whistle-like” size, portability and no-pain inhalation of their device, the marketing advantage over injectable rapid-acting insulin’s should build as a result of Study 174. As expected, patients enrolled in Study 174 will be randomized to treatment with AFREZZA® or placebo and this study will have a titration period, followed by a 12-week observation period in order to assess HbA1c levels.

JMP Securities upgrade - 12-Aug-2011

 

MannKind upgraded to market outperform from market perform at JMP Securities

• Target is $7

MannKind confirms with the FDA the design of two clinical studies to evaluate Afrezza 

• MNKD announces that it has confirmed with the U.S. Food and Drug Administration the design of two clinical studies that evaluate the efficacy and safety of Afrezza
  
• The FDA had previously requested that MannKind conduct two clinical trials with the next-generation inhaler (one in patients with type 1 diabetes and one in patients with type 2 diabetes), with at least one trial including a treatment group using the previously studied MedTone inhaler in order to obtain a head-to-head comparison of the pulmonary safety data for the two devices.
  
• Hakan Edstrom, President and Chief Operating Officer, reported that, “We held a successful meeting with the FDA yesterday, confirming the protocols for the type 1 and type 2 studies. We were also encouraged to proceed promptly with the initiation of both clinical trials.”
  
• Study 171 is an open-label study in patients with type 1 diabetes. After a run-in period, during which all patients will be optimized on their basal insulin regimen, subjects will be randomized to one of three arms: a control arm, in which patients utilize injected rapid-acting insulin at mealtimes, or one of two Afrezza arms, one each for the MedTone and next-generation device. After the mealtime insulin is titrated, there will be a 12-week observation period on stable doses of the mealtime insulin to assess HbA1c levels, which is the primary outcome parameter.
  
• Study 174 will assess Afrezza using the next-generation inhaler in patients with type 2 diabetes who are inadequately controlled on metformin with or without a second or third oral medication. Patients will be randomized to treatment with Afrezza or placebo in a randomized fashion. The study will have a titration period, followed by a 12-week observation period to assess HbA1c levels.

Rodman & Renshaw Q2-2011 update

MNKD: Price: $2.71; Market Cap (MM): $354.9
Market Perform;

 

Mannkind reports Q2 results before providing an overview on their discussions with the FDA.

Mannkind Corporation reported a larger than expected loss in Q211 driven by a one-time, $8 million R&D expense. Otherwise, overall expenses were lower than expected. R&D expenses came in at $30.3 million versus our $25.6 million estimate and $25.7 million for consensus. SG&A was $8.9 million while we projected $7.9 million and consensus was at $7.6 million. With no revenues, these expenses resulted in a Net Loss of $44.5 million against consensus and Rodman estimates of $38.6 million. We hadn’t expected a one-time cash payment to be expensed. So, our cash estimate would have been in-line, but management drew $17 million under their loan arrangement with The Mann Group during Q211. We continue to expect the remaining credit line will be used up during Q3, approximately $80 million. According to our cash burn projections and management’s guidance, cash will run till early 2012.

Management provided an update on the trial design discussions with the FDA.

Unfortunately, we believe investors came away from the call with fewer insights into the upcoming trials than they hoped for. Following the second Complete Response letter for the Afrezza program in January, the company has been in discussions with the FDA before initiating the “dramatically” pivotal trials in Type 1 and Type 2 patients using the Dreamboat device. However, the company expects to start enrolling Type 1 diabetes patients right after meeting with the FDA next week (August 10^th) to discuss both trials. While fewer details were provided about the trial design with the Type 2 patients, we look forward to gaining greater clarity on this program after that meeting, rather than during a required quarterly conference call.

We continue with our Market Perform rating on Mannkind shares.

With the clinical picture coming into view and the funding to support the two Phase 3 trials unspecified, we reiterate our Market Perform rating on Mannkind. We believe the clinical trial data that the company has presented has been impressive and the market opportunity for this Afrezza and the Dreamboat inhaler is much larger than the current valuation suggests.

Wells fargo update – Aug 2011

MannKind Corporation (MNKD-NASDAQ)--Market Perform (2) / V
Sector Rating: Specialty Drugs, Market Weight

Keypoints

* Summary: Q2 loss per share of $0.27 narrower than consensus of ($0.31) but slightly wider than our ($0.26) estimate. Widening 2011E loss per share to $1.30 (from loss of $1.25) on higher SG&A. MNKD to meet with FDA regarding MKC-171 (aka Affinity I) and MKC-174 (aka Affinity II) protocols on August 10, 2011. Maintain Market Perform rating on lack of meaningful near-term catalysts. Valuation range: $3-5 (8-10x 2016E EPS of $1.28, r=25%, 5 yrs) from $4-6. Risks: Further Afrezza delays or failure to obtain additional financing.

* MNKD to meet with FDA regarding MKC-171 (aka Affinity I) and MKC-174 (aka Affinity II) protocols on 8/10/2011. While MKC-171 study protocol is nearly finalized, MNKD expects to discuss three versions of MKC-174 study protocol with the FDA. Pending a successful meeting, MNKD could initiate MKC-171 study recruitment shortly after 8/10. MNKD plans to resubmit the NDA for both Type I and Type II diabetes indications at the same time.

* Maintain Market Perform. We are encouraged that MNKD is progressing toward finalization of MKC-171 and MKC-174 protocols and may even begin patient recruitment for MKC-171 shortly after 8/10 FDA meeting. However, assuming 18 months from trial initiation to resubmission and six-month review, we believe approval is two years away. Our near-term outlook remains neutral.

* Widening 2011E loss per share to $1.30 (from loss of $1.25) and narrowing 2012E loss per share to $1.00 (from loss of $1.09). Widening 2011E loss on higher SG&A of $38.9MM (from $32.5MM). Narrowing 2012E loss on assumption of $140MM equity financing at $3/share (previously assumed $5/share). The equity financing is for our modeling purposes and we acknowledge management may be unwilling to raise $140MM at this price.

* Q2 loss per share of $0.27 narrower than consensus of ($0.31) but slightly wider than our ($0.26) estimate. Greater-than-expected loss was driven by higher SG&A ($8.9MM A vs. $$6.7MM E). R&D expense of $18.8MM excludes $11.5MM ($7.6MM contract cancellation fee and $3.9MM loss contingency) associated with termination of the Organon insulin agreement.

* Key Takeaways: 1) $105.3MM cash available at end of Q2: $25.3MM cash on hand and $80MM from remaining cash facility. 2) Settled insulin supply agreement with Organon for $16MM. 3) In discussions for additional financing, but is still early in this process.
MannKind Corporation (MNKD-NASDAQ)--Market Perform (2) / V
Price as of 8/4/2011: $2.71
FY 11 EPS: $-1.30
FY 12 EPS: $-1.00
Shares Out.: 121.0 MM
Market Cap.: $327.91 MM