Mannkind Corporation (NASDAQ:MNKD)
- Highly positive vote that Afrezza is safe and effective
- Significant Label issues still need to be worked out
- Approval likely after 90 day PDUFA delay
Advisory Committee Re-Cap
The Endocrinologic and Metabolic Drug Advisory Committee (EMDAC) of the U.S. Food and Drug Administration (FDA) met on April 1st to hear both Mannkind Corporation and the agency present their views on the phase 3 data for Mannkind's inhaled insulin drug candidate Afrezza.
The FDA raised several potential points of concern regarding titration of the basal insulin dose and disproportionate dropouts from the Afrezza arms of trials in patients with Type I diabetes, all of whihc could potentially indicate that the drug is indeed inferior to injected rapid acting insulin analogs, Nevertheless, the doctors on the EMDAC panel felt that these statistical concerns were secondary to the fact that Afrezza offers a new treatment option for people with diabetes, and especially in the type II setting, where many patients delay initiating insulin therapy due to fear of needles.
Ironically, MNKD's story to date has been that Afrezza is a best in class insulin that just happens to be inhaled. The EMDAC did not quite buy this line either. In clinical trials Afrezza was statistically inferior to rapid acting analogs; however, the pre-specified non-inferiority margin was met. At the end of the day the ease of administration for certain narrow groups of patients registered in Afrezza's favor.
Overall Mannkind's presenting team did an excellent job of managing the flow of the conversation and keeping the focus on the perceived benefits of the drug (fewer hypoglycemic events), despite the FDA's argument that fewer hypos actually result from inferior blood glucose control.
Highly Positive Vote
All of the lengthy discussions aside, the heart of the matter for Mannkind and for investors were the voting questions. In two separate questions the EMDAC voted 13-1 in favor of approving Afrezza for Type I diabetes and 14-0 in favor of approving the drug for Type II diabetes. This is a highly positive outcome that the FDA should heed.
While there have been isolated instances in the past where the FDA has ruled against even a unanimous advisory committee vote, our view is that the issues raised by the FDA in this case do not rise to the level of overruling the EMDAC.
Significant Label Issues To Work Out
With a highly positive vote behind them, the next step for Mannkind and the FDA is to work out several issues regarding the proposed label for Afrezza. In the FDA's briefing documents for the EMDAC meeting, the FDA noted that the dose equivalence between Afrezza units and injected insulin units in the label proposed by Mannkind Corporation is different from the conversion regimen that was tested in phase 3 trials. It is unclear to us at the present time why this discrepancy arose; however, the equivalence between injected and inhaled doses is a critical point that must be worked out to FDA's satisfaction. If people with diabetes switch to inhaled insulin, the instructions in the label will be the guide they use to decide how much Afrezza to use before each meal. An incorrect dosing regimen in the label could lead to health implications for these patients.
Spirometry is a Concern
One of the suggestions at the EMDAC meeting was the potential requirement for spirometry testing (a type of lung function test) for each patient every 6 months as part fo the approved label. If such a requirement is in the final approved label, this would be a negative factor in market adoption. Primary care doctors by and large do not know how to do spirometry and do not have the equipment or time to do the tests. While these doctors can be educated regarding spirometry, doing so involves time and expense because each doctor's office or medical group would need to schedule one or more training sessions and doctors would have to be willing to undergo the training in order for Afrezza to gain traction with the patients of that medical group or doctor.
Position Relative to Basal Insulin for Type II
Another area to watch for in the label is the guidance regarding when it is appropriate to use Afrezza vs. basal insulin for type II diabetes. As some members of the EMDAC noted, when oral medications begin to fail, many doctors will initially put their type II patients on basal insulin first before moving on to prandial (mealtime) insulin. In this scenario, Afrezza would not have much advantage for adpotion. HOwever, if the approved label includes the language about Afrezza being superior to oral medications alone for type II patients, and if doctors decide to try prandial insulin first, this could work in Afrezza's favor as far as market adpotion.
PDUFA Delay Likely
Given the dose conversion and potential spirometry issues yet to be worked out, as well as the time required to factor in the general comments of the EMDAC into the approval decision, our view is that a standard 3-month PDUFA decision delay is likely for Afrezza. Should such a delay occur, it is neither positive nor negative for the approval prospects, but is merely indicative that the FDA is still processing the new drug application. We remind investors that while the EMDAC reviews the safety and efficacy data, a third major component to all new drug applications is the chemistry and manufacturing controls (CMC) section of the application. The advisory committee process gives investors a glimpse into what the FDA and its outside advisors think about a drug's risk benefit ratio, and shed light on all of the clinical trial data behind an application; however, CMC issues are almost always a black box. We have no view on the status of the CMC issues in the Afrezza NDA, although it is noteowrthy that this is the third resubmission of the Afrezza new drug application. To our knowledge, the prior two complete response letters did not raise any CMC issues of consequence; therefore, a CMC issue cropping up now is less likely.
Takeaway
With the strongly positive vote of the EMDAC, the FDA will more liekly than not approve Afrezza after a 3-month delay due to logistical considerations. At it's most recent closing price of $6.87, MNKD has a nearly $2.5 billion market capitalization Given the company's balance sheet and cash position, we see little upside to the stock with the exception of a possible short-term move to the $9.50 range immediately upon the approval news.
Critical for MNKD's future will be landing a commercialization partner who is willing to undertake the expense of marketing Afrezza as well as the expense of the required post-marketing clinical trials of which there may be several.
We are on the sidelines for the MNKD approval decision and launch but will continue to watch this story with interest as Afrezza's commercial launch rolls out.
