MannKind 4Q12 – Phase 3 Afrezza trials on schedule, data expected in August; FDA resubmission in Sept/Oct; enough cash until 3Q13 – February 11, 2013

Executive Highlights

  • The Afrezza phase 3 trials are on target to complete in May and June 2013, data will be shared in mid- August, an FDA submission is planned for Sept/Oct, and a six-month Agency review is expected.
  • MannKind has $62 million in cash, enough to last until mid-August. An additional $120 million in is available through CEO Al Mann’s credit facility. Partnership discussions are ongoing; negotiating with Al Mann is presumably not for the faint of heart.

MannKind provided its 4Q12 financial update in a call led this afternoon led by CEO Al Mann. The overall theme of the call was confidence – management’s tone assured listeners that the ongoing phase 3 Afrezza studies will complete on time, asserted that Afrezza represents a significant improvement over current rapid-acting insulins and said that the company has enough cash. Unsurprisingly, the primary focus of the call was on the timing of Afrezza’s phase 3 program and resubmission. As of last week, 297 patients had completed the treatment phase in the type 1 study (75% of the target number of completers) and 167 patients had completed the treatment phase in the type 2 study (68% of the target) – these stats were up 10% and 30%, respectively, from those provided at JP Morgan 2013 in early January (68% and 52%, respectively). Both studies are overenrolled and management expressed confidence in quite high patient retention rates (up to ~85%). The last patient visits are expected in May and June, and key trial results will be shared with the public in mid-August. MannKind has also submitted a meeting request to inform the FDA of its intention to pursue a class 2 resubmission, targeted for late September or early October. The company expects a six-month Agency review, putting potential approval around March/April 2014. All timelines were consistent with those provided in the 3Q12 call and at JP Morgan.

Management noted that the company is in “good shape financially” – MannKind had cash and equivalents of $62 million as of December 31, up from $2 million on September 30, 2012 and $2.7 million on December 31, 2011. (MannKind raised net proceeds of $86 million from a public offering of common stock and warrants last October.) Operating expenses totaled $34 million in 4Q12 and $147 million for 2012. The $62 million in current cash is expected to take the company to mid August when phase 3 results will be reported; operating expenses are expected to be $10-12 million per month. Under the line of credit from CEO Al Mann, the company has access to an additional $120 million.

The company remains in partnership and diligence discussions “with a number of interested parties.” This has been the case now for many years and there was, as usual, no additional detail. As previously stated, the growth of the type 2 diabetes market has attracted increased interest and additional potential partnerships. The company’s current factory can support up to two million patients; MannKind said it expects to launch at ~25% capacity; number are a bit specious as we assume a partner (the idea of which itself is uncertain) would take on some of the necessary manufacturing and supply-chain investments to scale up production. Management believes a two million patient market represents a $4 billion sales opportunity, implying a $5-$6 average cost/day (cheaper than Lantus for most). Management was about cardiovascular concerns on the heels of the Novo Nordisk degludec CRL. CEO Al Mann noted that the cardiovascular effect of Afrezza is “negligible” and “the FDA has not pursued this any further. The degludec numbers were much higher. That’s why they got the CRL.”


  • CEO Al Mann discussed patient’s anecdotal reports of very positive clinical experiences using Afrezza (see the first Q&A exchange below). We were struck by Mr. Mann’s comment that several physicians have compassionate use applications in front of the FDA to obtain Afrezza for their patients. While we found a few posts about Afrezza experiences online, we emphasize, of course, that we cannot verify with certainty that these were real trial participants – still, they are very similar to very positive comments we have heard from real participants (see final bullet below for examples).
  • As may have been expected, a key part of the Q&A focused on CV outcomes trials. Given the data to date and the fact that FDA has not focused on CVD safety with MannKind, we assume there will be no surprises related to this although the FDA is very hard to forecast.
  • Notably, MannKind has almost finalized the protocol to study Afrezza in children as young as four years old; the phase 4 study would be initiated up FDA approval. This is a very important, high-risk population; as a reminder, the FDA specifically asked MannKind to develop a phase 4 study protocol for testing Afrezza in this younger population. Mr. Mann specifically highlighted the January 28, 2013 article in the Wall Street Journal discussing the explosion of type 2 diabetes in children (the article related to the new American Academy of Pediatrics guidelines for type 2 diabetes; see our report at He emphasized that Afrezza is better for children since it is discreet, which is “important for compliance.” We agree, though we believe the FDA will be very cautious on this front. (We also prefer “adherence”.)
  • Afrezza’s type 1 study ( Identifier: NCT01445951) compares the safety and efficacy of Afrezza plus basal insulin to aspart plus basal insulin. Patients using Afrezza were further randomized to use the older MedTone C inhaler or the newer Dreamboat Gen 2 inhaler – this permits a head-to-head comparison of the two devices and bridge the two-year pulmonary safety study conducted with the MedTone device. The three-arm trial lasts 24 weeks and is similar in design to a previous phase 3 trial. The primary outcome measure is change in A1c at 24 weeks compared to baseline (a non-inferiority design with a margin of 0.4%). According to, the estimated enrollment is 471 patients with an estimated primary completion date of May 2013 (on par with the call’s commentary). Management has previously noted that the FDA is only requiring simple spirometry data (a test measuring how much air someone can inhale/exhale and at what speed) rather than the extensive measures of pulmonary function that were collected in earlier studies. In these previous studies, Afrezza caused a “small clinically insignificant drop in pulmonary function that resolved upon therapy discontinuation.” This worries us given the current FDA and its risk/benefit perspective.
  • Afrezza’s type 2 study ( Identifier: NCT01451398) will compare the efficacy and safety of Afrezza to a placebo powder in insulin naïve type 2 patients. The study uses the Dreamboat Gen 2 inhaler (that looks very easy to use), and patients must be inadequately controlled on metformin with or without a second or third oral medication. The multicenter, open-label, randomized trial lasts 24 weeks, featuring a 12-week titration period followed by a 12-week observation period. The primary outcome measure is change in A1c (superiority) at 24 weeks compared to baseline; we hope CGM is also used, since change in A1c is only part of the picture in our view. According to, the estimated enrollment is 328 patients and the estimated primary completion date is June 2013. Management has repeatedly emphasized that this study consists of mostly early-stage type 2s, which should permit the company to target a broader patient population once the product is commercialized.
  • We believe patient comments can provide an important window into perspectives in Afrezza. Although impossible to prove, we believe comments below found online ring “true” and they are similar to those heard from actual trial participants (who were likely asked not to share any real-time experiences of Afrezza).
    • “Afrezza An Ultra Rapid-Acting Insulin / Inhaled Insulin Onset 12 minutes!”, November 5, 2012. “I have been on Afrezza now for months. It is an ultra rapid insulin that is inhaled. I been on it now for 4 months and it has changed my life as I have no more worries of nighttime lows or lows throughout the day… Last year I almost went into coma 2 times and barely got revived the 2nd time. I also have had numerous lows rushing to the fridge on Novolog and Humalog. This all changed 4 months ago. I have been needle free for 4 months other than taking my daily Lantus. I have had 0 severe lows and only a few lows under 70 in 4 months. I have no daily swings over 250 readings anymore. Why is this? It is because my management with Afrezza is so easy when I can adjust my blood sugar in minutes. Afrezza is about 90% out of my system in 30-40 minutes after taking it. So let’s say I eat a late meal at 10 pm. I can take my insulin and at 11pm before going to bed if my sugar is good I know it’s impossible for me to have a low at night. This has freed from all the stress and scares of lows… If my blood sugar is 300 and I can adjust to 100 in 25 minutes. It is truly amazing and if anyone is reading this and has experienced lows please free to ask questions.” Full post available at ultra-rapid-acting-insulin-inhaled-insulin-onset-12
    • “Q&A with an Afrezza Trial Participant.”, September 28, 2010. “I love the fact that Afresa (sic) is so easy to learn and use. It's also pretty discreet, and most people think it's just an asthma inhaler. I don't really like that the inhaled insulin has to be refrigerated… I'll definitely use Afresa once it's FDA approved- I can't wait!!...I only experienced cough[ing] for the first week or so, just trying to get used to the inhaler. I haven't really had any problems with it since then… I definitely had hypos when I used the higher dosage-I only try to use it when I eat more than usual or have high blood sugars…My A1c has always been in a pretty good range (in the 6's...sometimes in the 7's) up until recently. My endo discovered that the inhaled insulin was working fine, it was my injectable insulin (Lantus) that my body was not responding to. I'm working on trying to get my blood sugars back in range so my A1c's will be normal again!” Full post available at with-afrezza-trial-participant.html
    • “Thoughts and experience on Afrezza.”, November 2, 2012. “As I mentioned on my posts unless you are using this product it is hard to believe it. It so off the norm why would you believe 100 years of rule that your body will no way start taking up an insulin from outside the body in 12 minutes....I have seen it kick as quick as 8 minutes when I run my tests I have ran with various foods…For me I don’t recall one reading under 50 and maybe just a few over 250 in 4 months...That is 120 days...I have probably measured my blood 1000 times in these 4 months and not one reading under 50...and maybe 5-10 over 250...This is crazy!!!!!!!!!” We note that this user has been banned from the forums on Full post available at available/?message_id=1738032#message_1738032

Questions and Answers

Q: There are blogs posted by different patients who have participated in one trial or the other. Do you have thoughts on the results with these patients? They have posted that they have never had such great control. Are these patients eligible for use of Afrezza on a compassionate use basis?

A: We get lots of those inputs. People send us information – I get letters and emails from patients. All talk about how their experiences have gone – how successful they are and how pleased they are. One physician involved in the 171 study [type 1s] called me and pleaded to get all his patients to remain on Afrezza, simply because they had never seen such significant results. I said, “Ask the FDA; don’t tell us.” A few weeks ago, a physician involved in the type 2 trial, remarked that he has never seen such incredible results, and without any hypos. He intends to put all his patients with type 2 on Afrezza. These are just anecdotal stories, and we cannot draw conclusions from them. We will get data in July, and after analyzing it, we will make a definitive statement. Until then, we must treat these as anecdotal reports. The most significant fact to me is that I’ve heard dozens of very positive comments and opinions about Afrezza, and I have yet to hear one that’s negative. That to me is significant. There are compassionate use applications with the FDA from physicians to address patients. These are evaluated on a patient-by- patient basis.

Q: On the enrollment in the 175 trial [type 2s], you said 167 have completed the trial and 360 were randomized. Can you at this point estimate how many will complete it?

A: We only need 246 to complete the trial. We have 124 subjects that have completed the trial in its entirety. There are 173 subjects still in the study. So that gives us up to 297 subjects to get 246 completers. We are well on our way on this study, and we have more than enough to complete this trial.

Q: Based on the discontinuation rate, how many of the 173 will complete the trial?

A: Of that total, we’ll only lose 15% of them. In fact, most of the drops, occur early on when patients are still getting used to the inhaler. Relatively few drop out at the end of the trial. I do not expect to see a 15% dropout rate.

Q: Will the $62 million in cash take you through results in August?

A: Well, the $62 million by itself will get us right to about the time of results. Remember, we do still have a large line of credit available from Al. Not only the stuff that was available previous to the last financing, but also some monies that were reinstated. So that should be enough to bridge the gap if we decide to use it. That said, we have been trying to make that line go away, so we might be looking at other alternatives in the meantime. Really, what we need to bridge to is just the data, which is in August, as we said. So that should take us right to about that point.

Remember in late October, we also expect a large inflow of money on a semi-automatic basis from the warrants we issued with the last financing. These will otherwise expire late in October. With any kind of data at all, and we obviously expect very positive data from these studies, we would expect those warrants to be in the money, and that should bring in almost $19 million. But I think we're going to be, generally, in pretty good shape financially this year.

Q: Can you talk about the merits of FDA’s decision to require Novo Nordisk’s insulin degludec to have a cardiovascular outcomes study. What data do you have to show a lack of a cardiovascular signal with Afrezza?

A: Our cardiovascular signal showed a 1.01 cardiovascular effect, which was negligible. The FDA has not pursued this any further. The degludec numbers were enormously higher. That’s why they got the complete response letter (CRL).

Q: Where are you in terms of partnerships?

A: We are in discussions and diligence discussions with a number of interested parties. As we have indicated earlier, the addition of the type 2 diabetes market – a significantly increased opportunity – has attracted additional potential partnerships. Those discussions are underway.

Q: Is there a certain type of partnership deal you’re seeking? What matters most? Do you want a company that’s already in diabetes, perhaps one with a primary care sales force? And for a European filing, would you do that yourself or have a partner do it?

A: In terms of a company, a primary care sales force is certainly an advantage. In our market research, if primary care physicians can retain their patients over a longer period of time and not have them go to specialists, that is a revenue opportunity for them. The company does not necessarily have to be in insulin and/or in diabetes. Even so, some of the people we’re talking to certainly are in diabetes care.

Regarding the European submission, we have conducted the US trials. They will very easily fit into the requirements we would expect in a European application. The timing of a potential partnership deal will determine whether we go alone in Europe in terms of a submission. That would be subsequent to the FDA’s acceptance of our filing in the US. I would say that’s a decision pending until the appropriate time.

Q: What is your operating expense run rate expected to be in 2013, particularly once the trials complete?

A: I've been saying we’re going to burn somewhere in the $10-12 million range for a long-time. Yet, we consistently seem to under-spend that, so I'm getting a little reluctant. That is what our projections are showing, so I do still think it’s going to pick up into that range as we hit the kind of crescendo period with the clinical trials in the first couple of quarters here. After that, we should start winding down. There’ll be a slight offset as we gear up a little bit for Afrezza’s commercialization post-filing. Certainly, the clinical trial expenses, which have been the major driver for the increases on that side, will start coming down a little bit in the latter part of the year. Beyond that, I can't be too terribly much more specific.

Q: On manufacturing, can you comment on your expectations for timing? Would you handle it yourselves, or would a partner take care of that?

A: Initially, we will handle it ourselves. As Al mentioned, on a commercial basis, we can service up to two million patients. Beyond that, we would have discussions with partners on whether they would have an infrastructure to help build that out. We have a couple years of opportunity once we have a deal in place to determine the most efficient way of doing so.

And when we say two million patients, that’s in a fully built up state. We expect to launch with about a quarter of that capacity. We haven’t put all the equipment in – a we have room for 12 full finished lines, and expect to launch with three lines. We can build it out as we need. Still, the two-million patient capacity falls somewhere in the $4 billion of sales range.

Q: On the trials, you talked about the titration requirements. The FDA gave you the power to enforce them. What are you seeing in the clinic in terms of adherence to the protocols? Are the measures working as well as you had hoped?

A: We’re blinded to the data, so we cannot comment on the data. We have an independent titration management committee, and they make recommendations to investigators. We’ll only see the outcome of that when we evaluate the data. We have gotten the comment back that the investigators are being adherent to the recommendations.

Q: You’re blinded to the data, but has the data monitoring committee expressed any concerns about hypoglycemia?

A: I can say that the data is being reviewed, and we have not been alerted to any concern with hypos in the studies.

Q: How much is available under the line of credit from Al?

A: Approximately $120 million. We have not drawn anything from that, so the full amount remains. We hope we won’t need it.

Q: On the warrants, can you talk about the cash and cashless provisions for those warrants?

Mr. Matthew Pfeffer (CFO): For all intents and purposes, you should think of them as only cash exercise warrants in the normal course. The same would be true of Al’s warrants, although that doesn't preclude him from using his debt or debt cancellation to exercise those warrants. But they do have the same terms. The warrants have the same terms for everybody.

Mr. Al Mann (CEO): Except I had to pay a lot more for them.

Mr. Pfeffer: Al paid more for his, but once he has them in his hands, they're the same terms of the warrants.

Mr. Mann: I still think they're cheap though.

Q: Should we expect your Q4 G&A run rate as we go into 2013?

A: Yes, it should be more or less the same.

-- by Adam Brown and Kelly Close