What's next for Mannkind?

Path to FDA approval
The FDA, in the second CRL seems to have no objections to Afrezza, but have questions about the Gen2 inhaler (Dreamboat).  Thus, we should now have a clear path to approval assuming that the management team can align with the FDA on the requirements.

While it is unclear, how long the two clinical trials will take to complete...it is a safe bet that between the trails and the FDA review cycle,  it will be between 18-24 months until Afrezza can reach the marketplace.



Seaside 88 Transactions

Date	VWAP	Seaside Price	Total $
9/20/10	6.72	6.18	4,326,000
12/15/10	7.42	6.83	4,781,000
12/29/10	8.21	7.55	5,285,000
1/12/11	8.40	7.72	5,404,000
1/26/11	7.12	6.55	4,585,000

(Thanks to Derek for the Seaside pricing info)

These transactions are approximations based on the daily closing price / daily volume and not the price per transaction / transaction size...based on data provided by the MannGroup.  Seaside does not disclose their purchases as their percent of ownership in Mannkind is very small.

Financial Position
Total amount raised through Seaside 88: $24,381,000.  At this point, they are unlikely to raise any additional funds through Seaside unless a partnership agreement is reached (and the stock once again crosses $6.5). 

Between the BoA deal and Seaside, Mannkind raised $139m through the end of January.  This should ensure funding till end of Q3. Considering that Mannkind was preparing for launch, they may have a round of lay-offs and reduce their operating expenses...which can making this funding last a bit longer.  
 
Al Mann's perspective
Al has a few options to keep the company afloat:

1. Raise additional capital by issueing equity (either through the open market or through another private placement)
2. Invest more of his own money
3. Sell the company
4. Partner with big pharama

I don't believe he will let the company go under since Mannkind is the only one of his companies that bears his name.  Mannkind is Al Mann's legacy.


I don't know what Al Mann's financial position is and thus don't know how much additional capital he can personally inject into the company.  I am also not certain whether the line-of-credit he has extended to Mannkind has been exhausted or not.  If it has not, than that provides some cussion to Mannkind, but not sufficient to finance the company through approval. 


Given that he does not want to get diluted (illustrated by the debt to equity swap aligned with the Seaside investments which prevents his dilution), and has limited additional funds to invest himself, it is likely that he will not go to another round of equity investment (either public or private placement). 


It is also unlikely that he will sell the company.  The market value of the company is sub-$1b.  He has invested almost $1b into the company.  The return he would get would be (at best) $5b which is sub what he wants for the company--between 10x-100x.


Thus, it is likely that he will partner and in the near future.  The longer he waits, the weaker his negiotiating position will become with big-pharma and the increasing likelihood that they will want to wait until the FDA announcement.  Right now, they will be more ameanable to do a deal--but Al will have to give them better terms than he originally wanted to.  But given that he doesn't have any other options that are more paletable to him, this is probably the likely outcome.


The partner will also have better connections at the FDA and will increase the likelihood of Mannkind getting approval during the 3rd round submission.

Why did the FDA give a CRL to Mannkind?

The FDA is responsible for approving drugs that can improve the health and quality of life of the American public (safety & efficacy).  When they approve drugs that go on to do exactly that, no one things about them at all.  On the other hand, if they approve a drug that ends up doing more harm than good, than they get beat up by the public & the media.

With this background, think about Mannkind's case.  They submitted one of the most detailed NDA applications in the history of the FDA to the FDA for a drug that targets one of the most prevalent diseases in the US (diabetes).  Drugs which target small groups of patients or patients for which other drugs do not work will receive less scrutiny simply because the possibility of harm in the sense of number of people harmed by the drug will be fewer and the likelihood of discovering this harm is also smaller since the sample size of patients is smaller.  In the case of diabetes, the patient sample size will be huge especially since Afrezza stands to revolutionize the treatment of this disease.  If something were to go wrong, it would be quicker in surfacing  and the number of people impacted would be large (due to the large patient population). 

Al Mann and the management team probably recognized this which is why they had such a large and detailed filing the first time around.  However, in the hopes of getting the new Gen2 inhaler to market quicker, they forgot this aspect when they submitted their response to the CRL to the FDA.

The FDA response during the meeting (for which no minutes were ever published) was probably that of outrage.  Mannkind had submitted responses using a different inhaler than the one used to generate all the data that they had studied for over a year. Mannkind executives probably tried to explain that the new inhaler was bio-equivalent (ie the same amount of drug went into the body with both inhalers), the risk-averse FDA officials didn't buy the story.  Hence, we got the CRL a few weeks ago asking for clinical trials of the new inhaler.

That being said, they did buy into the Afrezza story...there are no more doubts about that in the CRL...just the delivery device.