Last Updated Oct 9, 2009 2:07 PM EDT
The company burned through more than $1.4 billion before receiving welcome word in May 2009 of the FDA's acceptance of the Afresa application (as detailed by my colleague Jim Edwards in former BNET Pharma postings). Nonetheless, skeptics continued to dog Afresa's commercial prospects, always pointing to the spectacular flameout -- and potential health problems linked to -- Pfizer's erstwhile inhaled insulin device Exubera.
Approved in 2006, Exubera had been expected to deliver annual sales of $2 billion. Nearly 10 months after launch, a lackluster response from patients and providers prompted Pfizer to abandon the product in October 2007. Industry observers blame the $2.8 billion blunder on:
- The need for follow-up lung function tests;
- Bulky delivery device and complicated dosing;
- Higher tier insurance co-payments required of patients
Management also maintains its proprietary Technosphere insulin platform -- a patented, dry powder formulation of rapid acting insulin - when inhaled into the deep lung using its patented Medtone inhaler offers significant pharmacokinetic advances from previous delivery methods, including:
- Faster onset of action due to its rapid absorption;
- A lower risk of hypoglycemia, which is considered to be a major problem for patients;
- No observable weight gain (typically associated with other insulin treatments)
In terms of royalty value, common sense in deal benchmarking suggests that a company with late-stage study results in hand should be able to shape and sign a definitive marketing deal on terms more favorable (than say) if it still had only Phase 2 data in hand. Not unexpectedly, a 2008 review of royalty rate and deal terms by the Licensing Executives Society demonstrated that the average value of upfront, milestone, and royalty payments (whether fixed or tiered) in early-stage deals were significantly lower than late-stage or launched products. A Phase I deal could yield up to a 10 percent royalty; and Phase III deals up to a 25 percent to 40 percent royalty.
That MannKind -- with late-stage clinical data in hand -- has not secured a distribution deal only lends further credence to the biggest concern of skeptics, which is the dearth of long-term safety data for AFRESA. That data would help to clarify if delivering insulin through the lungs results in long-term respiratory problems. No data could sink FDA approval.
There appears to be little doubt AFRESA works. At the 45th Annual Meeting of the European Association for the Study of Diabetes, MannKind presented data showing AFRESA demonstrated no significant changes in pulmonary function and maintained glycemic control in adult patients with type 2 diabetes. Although the study was four years in duration, the patients were studied in controlled settings on average for only six months.
Industry watchers speculate negotiations with Big Pharma collapsed over suspicions that the FDA might request additional data on AFRESA: specifically, information on the safety of comparative delivery systems being developed by MannKind. In an interview with Reuters, Oppenheimer analyst John Newman said an FDA advisory panel could ask the company to conduct a four-month study comparing its old inhaler, called MedTone, with its new, smaller inhaler called Dreamboat.
CEO Mann did admit on the earnings call that the question of whether to launch AFRESA with a Dreamboat inhaler instead of the current Medtone inhaler had been discussed extensively with potential partners in recent months. That said, as Dreamboat is still only in Phase 1 clinical trials, I do not believe Medtone versus the next-generation delivery system would have been a deal-breaker, unless potential partners wanted exclusivity for distribution rights to both devices.
The FDA is expected to rule on AFRESA's drug application next Jan. 16. With cash on hand of $93 million (which includes proceeds of August stock offering), a $215 credit facility, and a reduced quarterly cash burn of $48.3 million, Mannkind anticipates being able to fund operations through at least the second quarter of 2010. In my opinion, the best-case outcome is that the FDA grants AFRESA qualified marketing approval with mandatory lung function tests. In the worst case, Alfred Mann keeps muttering to anyone who will listen: "AFRESA 'coulda' been a contender'!"