Mannkind (MNKD): 'positive' data showing kindness to investors

Summary

• MNKD climbed 8.5% in AH after press release
• Press release contained irrelevant data from past trial
• Two clinical trials requested by FDA (target completion end of 2012)
• Great trading opportunity (short MNKD)

Brief recap

• Last minute change in insulin inhaler device by Mannkind from Gen1 (Medtone) to Gen2 (Dreamboat)
• Bioequivalence data (conducted in vitro) dismissed by the FDA
• FDA has NEVER expressed that Gen1 was approvable based on safety and efficacy
• Second CRL clearly requested TWO additional clinical trials to be conducted (i.e. harsh CRL)
• Requested clinical trials will NOT be completed until end of next year (2012)

What's the fuss about Mannkind?

The Valentia, California-based biotech, which has been trading in the $3.8 - $4 range, jumped 8.5% to $4.33 in after hours trading on Friday, as investors regained confidence in Mannkind's insulin device after the company presented 'new data' at the 71st Annual Scientific Session of the American Diabetes Association, one of the largest gatherings in the diabetes field.  This is a perfect trading opportunity because MNKD's share price is known to be highly volatile and there appears to be a predictable pattern in which MNKD moves.  The recent example of volatility can bee seen back in late April and early May.  On April 26, words circulated that the insulin device-developing biotech was going to announce regulatory updates on May 9 during 1Q earnings report and the stock jumped 16% in the next 2 days.  Remember, this was not usually a significant catalyst (no new data, no FDA decision) that would prompt  any major stock movement, and yet MNKD was up 16%!  Before long, MNKD dropped back down to its previous trading range, erasing almost all of the gain resulted from the hype (down 13%) when Alfred Mann, CEO of Mannkind, revealed the highly anticipated regulatory update, which simply stated that Mannkind was working on finalizing the protocols for the upcoming clinical trials.     

Relevancy (or lack it it) of the new data on patients' perception of insulin therapy

First of all, Mannkind was not completely forthcoming in its press release about the study results.  The company made it sound as if a new trial was conducted and new data were collected when the results were merely an analysis of a trial already completed last year.  This 16-week trial was designed to have primary and secondary endpoints.  Results of the primary endpoints, which show that Afrezza is clearly non-inferior to standard therapy insulin lispro combined with basal insulin in reducing HbA1c levels in patients with inadequately controlled type 1 diabetes (7% < HbA1c less-than or equal to 9%) were already presented last year prior to FDA's issuance of the CRL.  This meant that the agency had already reviewed and taken into account these results when ruling against Afrezza's approval earlier this year.  My first reaction when seeing Mannkind presenting results of the secondary endpoints was 'why is this even relevant?!'.  If the FDA did not like the results of the primary endpoints, it certainly won't change its mind based on secondary endpoints analysis, which itself also presented weak conclusions.  

Take a look at the results of the secondary endpoint analysis included in MNKD's PR on Friday: 

In the 16-week, randomized, multicenter study, adults with type 1 diabetes used Afrezza plus insulin glargine [Afrezza group] (n=61), or insulin lispro plus insulin glargine [standard insulin therapy group] (n=65).

Treatment satisfaction improved from baseline to Week 16 in both treatment groups (p<0.05), with no significant between-group differences in change. Perceptions of insulin therapy, (overall and three subscales: convenience, comfort, and ease of regimen adherence) improved from baseline to Week 16 in the [Afrezza group] (all p<0.01), and comfort improved in the insulin lispro group (p<0.05).  Overall perceptions of insulin therapy, convenience, comfort, and ease of regimen adherence improved more in the [Afrezza group] than in the [standard insulin therapy group] (all p<0.05).

To me, the first part of the result (highlighted in green) contradicts the end of the paragraph (highlighted in red).  What is the relevancy in differentiating 'treatment satisfaction' from 'overall perceptions' anyways?  If patients were satisfied with the treatment, how could they have perceived the therapy negatively?  Similarly, if one did not perceive the treatment positively, could he/she have been satisfied with the treatment?  If one really wanted to look at treatment satisfaction and overall perception separately, does it matter then how one perceives the treatment, if one is already satisfy with it?  This is a total last effort by Mannkind to 'convince' the misinformed investors that the company still has a shot at gaining FDA's favor after two failures.  Putting this irrelevant piece of data aside, the fact of the matter is that the FDA, in its second CRL to Mannkind, clearly requested TWO additional clinical trials to demonstrate successful bridging of Mannkind's Gen1 (Medtone) and Gen2 (Dreamboat) device in humans.  Based on a Reuters report, Mannkind does not expect to complete these trials until the end of next year (2012).  So, are you still excited about Mannkind's Friday PR?  I'm not!

Trading roadmap

Above is my long way of saying, I am SHORT MNKD.  Briefly, I will be purchasing puts against MNKD - likely July $4.5 puts (trading at $.52 at Friday's close).  I expect a tiny uptick in MNKD on Monday morning before selling takes place.  My target is for MNKD to fall to $3.8 or even $3.6 in the next 2 weeks.  I will be posting my trades - feel free to follow me on Twitter (@michaeljuan01).  Good luck!