Pulmonary drug delivery article

 

http://www.rtmagazine.com/issues/articles/2011-01_02.asp?mode=print

From the article

Insulin (Exubera® and Afrezza®)

Insulin is one of many pharmaceutical agents to maintain glycemic control for diabetic patients. Diabetes is considered one of the fastest-growing disease entities in the United States, encompassing 23.6 million people (17.9 million diagnosed and 5.7 million undiagnosed) who represent 7.8% of the US population.¹³ Subcutaneous insulin injections and various classes of oral antidiabetic agents have been the two primary delivery methods for treatment of hyperglycemia in type 1 and type 2 diabetes mellitus. New advances in aerosol delivery have developed inhaled formulations to assist in glycemic control and to provide another therapeutic delivery method for patients. In February 2006, Pfizer Pharmaceuticals (Collegeville, Pa) in conjunction with Nektar Therapeutics (San Carlos, Calif) received FDA approval for their inhaled insulin product Exubera.¹⁴ Exubera was considered to be a potential blockbuster drug, with projections of US sales greater than $1 billion. Unfortunately, approximately 2 years after approval and dismal sales, Pfizer withdrew Exubera from the US market. Although the drug demonstrated efficacy in assisting in glycemic control, withdrawal was based on a number of factors, including patients requiring periodic pulmonary function testing due to potential pulmonary complications of the inhaled product, cumbersome apparatus that was not designed for portable transport, concern over lung cancer associated with its use, and losing US$2.8 billion in development costs.^14-15 Although removal of Exubera was a major setback for the use of inhaled insulin, there is hope for another inhaled insulin product.

MannKind Pharmaceuticals (Valencia, Calif) completed phase 3 trials in 2009 and submitted a new drug application (NDA) to the FDA in May 2009 for the drug Afrezza (insulin human [rDNA origin]) inhalation powder.¹⁵ Insulin human (rDNA origin) is indicated for use in adult patients with type 1 and type 2 diabetes mellitus for the treatment of hyperglycemia. The drug was headed for FDA approval, when, in March 2010, the FDA asked for more information on the phase 3 trial as well as the delivery device.¹⁶ This agent has many advantages of Exubera, including a premetered, light, discreet delivery device. Further, peak insulin levels are achieved within 12 to 14 minutes after administration. Some experts estimate that insulin human (rDNA origin) will receive FDA approval in early 2011.

UPDATE

MannKind failed to win US approval for its first product, Afrezza (insulin human [rDNA origin]), an inhaled insulin for diabetes. The FDA wants the company to do two new studies of the device in patients with Type 1 and Type 2 diabetes. This action will delay the drug from coming on the market by 18 to 24 months, according to CEO Alfred Mann.

Wells Fargo update – Feb 2012

MNKD: Q4 Loss Beats Consensus--Narrowing Loss Estimate: Maintain Market Perform (Wells Fargo Securities)

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

Keypoints
* Summary: Maintain Market Perform on lack of meaningful near-term catalysts and additional financing overhang. Q4 loss per share of $0.30 narrower than consensus of -$0.32 and our -$0.36 estimate. Narrowing our 2012E loss per share to $0.95 (from loss of $1.02) and raising 2013E EPS to $0.18 (from $0.14) on lower R&D. Despite the recent public offering, additional financing will be required by Q4 2012, according to management. MKC-171/175 trials remain on track for late 2012 completion.

* Additional financing will be required by Q4 2012. Despite strengthening its balance sheet with $80.6MM from the recent public offering, MNKD expects 2012 monthly cash burn of $10-12MM and believes additional financing will be required by Q4. That said, if the completion timeline for MKC-171/175 (expected by late 2012) continues to hold and preliminary results are positive, we think the company could obtain additional financing on more favorable terms.

* Maintain Market Perform. We think securing financing through the public offering is a positive for MNKD as it allows the company to maintain operations and advance MKC-171/175, and outweighs near-term dilution. In addition, we are encouraged that patient enrollment for MKC-171/175 are well underway and should complete on time.

* We are narrowing our 2012E loss per share to $0.95 (from loss of $1.02) and raising 2013E EPS to $0.18 (from $0.14) on lower R&D. Lowering our 2012E and 2013E R&D to $108.4MM (vs. $118.6MM prior) and $90.0MM (vs. $98.4MM prior) on lower projected expenses for MKC-171/175. We are also tweaking 2012E interest expenses, included in Other Expenses, to $20.3MM (vs. $21.1MM prior) to assume drawdown of remaining borrowings under the loan facility in Q3 2012 (previously assumed Q1 2012 drawdown). In addition, our 2013E revenue assumes a $200MM upfront payment from a possible partnership agreement, which may or may not happen.

* Q4 loss per share of $0.30 narrower than consensus loss per share of $0.32 and our $0.36 loss estimate. Narrower loss was primarily driven by lower R&D ($20.2MM A vs. $28.6MM E).

* Key Takeaways: 1) Completed public offering with net proceeds of $80.6MM. 2) Ended 2011 with $48MM in cash and available borrowings.

MannKind Corporation (MNKD-NASDAQ)--Market Perform (2) / V

Piper Jaffray update - Feb 2012

Piper/MNKD: 4Q11 Points to Lower Burn; Afrezza Phase IIIs on Track; Partners Lining Up


MannKind Corporation [MNKD]
Price: 2.18
Rating: Overweight

 * MannKind reported 4Q11 earnings, which pointed to 2012 burn-rate below company guidance and enough cash to get to Phase III data in 1Q13. Management also confirmed that the Phase III Afrezza trials remain on track for completion of enrollment in 2Q12 and completion by YE12. Of note, the company's evaluation of Afrezza in less advanced type II diabetics has increased interest from potential pharmaceutical suitors, many with existing sales presence in diabetes and/or metabolic disorders. A competitive biding process could support deal terms that are better than our expectations for $100mn in upfront payment and a 20-25% tiered royalty on US sales (15-20% internationally). We continue to expect progress toward completion of Phase III trials and signing of a global marketing partner to reduce the perceived regulatory and commercial hurdles and enable MNKD to reflect the $1.5-2bn market opportunity for Afrezza. We reiterate our Overweight rating and $4 price target.


* Phase III trials progressing toward 4Q12 completion. Enrollment is progressing in Afrezza's two ongoing Phase III clinical trials. The studies are the negotiated outcome of MannKind's second complete response letter (CRL) from the FDA and are intended to show bioequivalence between two different generations of the inhaler while providing in vivo data from the new Dreamboat device. The trial in type I diabetes ('171) has 42 US sites activated while the study in type 2 patients ('174) has enrolled patients at 35 US sites. Both trials are on track to complete enrollment in 2Q12. We continue to expect data in 1Q13 with submission rapidly following in 1H13 and US launch in 4Q13 or 1Q14.

* Waiting for the right deal. With a path to approval negotiated with the FDA, MannKind continues to generate potential commercial partner interest from multiple large and specialty pharmas. Not surprisingly, in our opinion, potential partners are either in diabetes already or have experience in metabolic disorders more broadly. We believe a global deal is the most likely outcome of the partnering process, though a series of regional deals is possible depending on the mix of partners and economics to MannKind. We believe negotiations will continue throughout 2012, with a deal likely around the release of Phase III data. Our model assumes MannKind generates a royalty of 20-25% on US sales and 15-20% royalty on international sales.

Griffin Securities update - Feb 2012

* Patient enrollment in two key Afrezza clinical trials should be completed during the June quarter. The two studies that were begun in late 2011 are addressing important regulatory and marketing questions. The MKC-171 trial, which is comparing clinical use of two inhalers by type 1 diabetics, is enrolling patients through 42 medical centers in the United States and some sites in Russia, and additional locations are about to start up. The MKC-175 study, which is investigating Afrezza’s ability to aid type 2 diabetics who are not controlled adequately by oral medicines, is enrolling patients through 35 U.S. sites and more are expected to join in shortly at home and in Russia.


* Mannkind is targeting early 2013 to submit its data to the FDA. The two clinical trials should be completed in the December quarter, which should enable the Company to submit the results to regulators in the first half of next year. That suggests Afrezza could be approved in the second half and on the market by early 2014.

* A recent financing should support operations through 2012. The Company’s estimated cash burn for the year indicates that cash raised via the equity offering and a stock-for-debt swap with the Mann Group will provide adequate capital for the year and possibly longer. Management is seeking a minimally dilutive deal to gain extra flexibility.

We reiterate our BUY recommendation and have raised our 12-month target price to $14.

Piper Jaffray - Mannkind update

We are initiating coverage of MannKind with a Overweight rating and a
   12-month price target of $4 per share. We believe recent discussions
   with the FDA have provided a path for Afrezza's approval, which may
   help lift the regulatory overhang that has settled over MNKD shares
   following two complete response letters. We believe Afrezza's faster
   onset and inhaled delivery through a convenient device could enable it
   to take 20% share of the rapid-acting insulin market, with peak global
   sales of $1.5-2bn. We believe the recently completed financing and the
   securing of a commercial partner by the end of 2012 will provide
   necessary improvements to the company's capital structure and allow
   MNKD shares to more accurately reflect Afrezza's blockbuster
   potential.

     * A path to approval. FDA has asked MannKind to complete two
       additional Phase III studies, one in each of types 1 and 2
       diabetes. In addition, one arm of one study must utilize the
       original MedTone inhaler used in prior Phase III trials. We
       believe this is a fair outcome which will support claims of
       bioequivalence between the two devices while providing in vivo
       data from the new Dreamboat device. We expect these studies to
       complete by 4Q12 with filing in 1H13 and US launch in late 2013.

     * Demand exists for the right inhaled insulin. We recall the
       excitement surrounding the launch of Pfizer's Exubera as well as
       its well documented shortcomings. However, our recent
       conversations with endocrinologists/ diabetologists confirmed
       excitement still exists for inhaled insulin. We expect Afrezza to
       be well received given its rapid onset of action, weight-neutral
       profile and lower risk of hypoglycemia. The Dreamboat device is
       also an improvement given its ease of use and discreet size. The
       biggest obstacle could be reimbursement, which we expect the
       company to address with pricing.

     * Long term safety looks good, so far. In a two year pulmonary
       function safety study, Afrezza was non-inferior to diabetes "usual
       care," which provides us comfort regarding its long-term use.
       Increasing evidence of carcinogenicity with Exubera was the
       principal reason the product was not relaunched following Pfizer's
       decision to pull it from the market and return rights to its
       partner Nektar. Our review of the Afrezza carcinogenicity data
       supports a clean profile.

     * Improving capital structure key to unlocking Afrezza's value. We
       believe the recently completed equity financing and the signing of
       a global marketing agreement would likely remove the overhang and
       enable MNKD shares to reflect Afrezza's blockbuster potential. We
       expect these deals to increase MNKD's cash position by $230mn,
       providing ample runway to Afrezza's 2014 launch.

Wells Fargo update - Feb 2012

MNKD:  Closed Public Stock Offering--Narrowing Loss Estimate: Maintain Market Perform Rating (Wells Fargo Securities)

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

Keypoints

* Summary: Securing additional financing through a public offering helps MNKD maintain operations and advance MKC-171/175, and outweighs near-term dilution, in our view. However, we believe additional financing before year-end 2012 is likely still necessary. Narrowing 2012E adjusted loss per share to $1.02 (from loss of $1.34) on higher share count. Maintain Market Perform on lack of meaningful N-T catalysts and potential additional financing overhang. Valuation: $3-$4 (7.5-8.5x 2016E adj EPS of $1.02, r=25%, 4 yrs) from $4-$5. Risks: Poor MKC-171/175 results or further delays to Afrezza approval.

* MNKD issued 35.94MM units of stocks and warrants in a public offering and sold 31.25MM restricted shares to The Mann Group. Each unit (one common share and a warrant to purchase 0.6 common share) was sold at $2.40/unit (~$81.1MM net). MNKD also sold restricted shares to The Mann Group (at $2.47/share or $77.2MM total) in exchange for debt cancellation. MNKD will no longer pursue a planned convertible notes offering.

* We believe the importance of securing additional funding to maintain operations and advance MKC-171/175 (aka Affinity I and II, respectively, required for Afrezza resubmission) trials outweighs near-term dilution. Pre-offering, our estimates suggested MNKD only had cash available ($48MM as of year-end 2011) to operate until Q2 2012. While non-dilutive financing would have been desirable, MNKD is at least able to secure the funding necessary to maintain operations and advance the studies.

* Additional financing could be necessary by Q4 2012, in our view. Following the public offering, we estimate MNKD will have enough cash resource to operate until Q4 2012. If the completion timeline for MKC-171/175 (expected by late 2012) holds and preliminary results are positive, we think MNKD could obtain additional funding on more favorable terms.

* We are narrowing our 2012E adjusted loss per share to $1.02 (from loss of $1.34) on higher share count. Our 2012E share count increases to 181.7MM (from 122.3MM) on the public offering and share sale. Higher share count is partially offset by higher R&D of $118.6MM (from $95.7MM) on greater expenses associated with the MKC-171/175 studies. Other assumptions include 1) drawdown of remaining $45MM borrowing capacity in Q1 2012, and 2) debt issuance in late 2012 ($100MM at 4.0% interest rate).

MannKind Corporation (MNKD-NASDAQ)--Market Perform (2) / V

Price as of 2/9/2012: $2.40
FY 11 EPS: $-1.32
FY 12 EPS: $-1.02
Shares Out.: 194.2 MM
Market Cap.: $466.08 MM