The top execs at MannKind ($MKND) sat down yesterday afternoon to review the latest developments on their troubled Afrezza development program and watched as their share price took another hit as analysts reacted to fresh indications that the inhaled-insulin treatment might veer off schedule again.
The company reported that in an end-of-review meeting with regulators the FDA made it clear that MannKind should revise its next Phase III study, which the agency demanded ahead of an approval. Regulators want to see more data on how the drug works for early-stage patients on oral medications. And when execs get the written minutes back in the next few weeks they say they'll get a better idea of how the Phase III should be designed.
"Until we actually have the written report back from the FDA it is hard to give you a specific timeline," noted MannKind. "We hope to have the opportunity to complete the trial by the end of 2012."
Avik Roy, an analyst at Monness, Crespi, Hardt, listened to the company review and concluded that the FDA has deep doubts about the efficacy of Afrezza in later-stage patients. He also revised his own estimate on trial completion to between 24 and 27 months, which could add six months on top of his original projection.
"The company now claims that it has enough capital to fund its operations through 1q12 (previously 4q11)," noted Roy. "By our calculations, MannKind will need to raise $250 million in additional capital to operate through the end of 2013, diluting existing shareholders by 44 percent. Applying that figure to MannKind's current balance sheet yields an implied enterprise value of $1.2 billion: an astounding figure for a company with MannKind's problems. Al Mann stated on the call that he is "exploring ways to make additional monies available."
Baird analyst Thomas J. Russo also forecast more trouble ahead. "We see too many moving parts that have to go flawlessly and see more potential downside than upside." MannKind shares, already badly beaten up, dropped more than 10 percent after the investor call.