MannKind Corporation (MNKD), Novo Nordisk A/S (ADR) (NVO), Eli Lilly & Co. (LLY): A Good Drug That’s Too Risky to Buy

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In a companion article a few days ago, I predicted that MannKind Corporation (NASDAQ:MNKD)‘s extended phase 3 program for its inhaled insulin, Afrezza, is likely to produce positive results when it reads out later this month.

Despite the high likelihood of clinical success, MannKind Corporation (NASDAQ:MNKD) won’t be out of the woods after the results are presented. There’s still quite a bit of risk involved in buying the biotech.

Getting approved
Assuming a clinical trial success, I think the chance that the Food and Drug Administration approves Afrezza is extremely high, but you can’t discount the possibility the FDA might not see it the same way.

MannKind Corporation (NASDAQ:MNKD) worked closely with the FDA to design the new studies, so efficacy and clinical endpoints shouldn’t be a problem. The biggest risk is probably that regulators find some side effect they’re worried about. The agency tends to heavily scrutinize drugs delivered via the lungs if they don’t treat diseases that affect the lung.

And let’s not forget, the regulatory agency has already rejected Afrezza twice. At least for the second rejection, there seems to have been a miscommunication between MannKind Corporation (NASDAQ:MNKD) and the agency over what would be required for approval (or the FDA changed its view after MannKind resubmitted its application). Either way, it could technically happen again although hopefully going through the process for three years has helped work out any kinks.

Finding a partner
I think finding a partner is going to be harder than most investors think. After Pfizer Inc. (NYSE:PFE) pulled Exubera from the market, Novo Nordisk A/S (ADR) (NYSE:NVO) and Eli Lilly & Co. (NYSE:LLY) both stopped development of their inhaled insulin products. And none of the other big pharmas decided to step up and fill the void. The interest seems pretty low.

Afrezza is arguably a much better product than Exubera. It seems to work better than injected insulins sold by Novo Nordisk A/S (ADR) (NYSE:NVO) and Eli Lilly & Co. (NYSE:LLY), and the delivery device, dubbed Dreamboat, is much smaller than Exubera, which quite frankly looked a bong used to smoke marijuana.

Source: MannKind.

I doubt Pfizer Inc. (NYSE:PFE) would be interested in jumping back into the market, especially since it doesn’t sell any major branded diabetes products. Although I guess it could use Afrezza as a stepping stone, Pfizer does have quite a few diabetes drugs in its pipeline including ertugliflozin, which it partnered up with Merck & Co., Inc. (NYSE:MRK).

If MannKind Corporation (NASDAQ:MNKD) is able to find a partner, it might come in the form of a joint venture between two companies that can share the risk of going into an uncharted area. I guess Pfizer and Merck & Co., Inc. (NYSE:MRK) could be a possibility, but their partnership isn’t as formal as AstraZeneca plc (ADR) (NYSE:AZN) and Bristol Myers Squibb Co. (NYSE:BMY), which have an established joint venture with at least four different diabetes drugs. The Eli Lilly-Boehringer Ingelheim partnership also has multiple diabetes drugs, but I see that as less of a possibility given Eli Lilly’s previous experience.

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