MannKind rewarded for positive Afrezza data with $40M financing

MannKind's positive take on interim Phase III data for its inhaled insulin Afrezza has a big sweetener tied to it. The Valencia, CA-based MannKind ($MNKD) has picked up a much-needed $40 million financing from Deerfield as a result of the data readout, the second of four tranches slated to provide MannKind with $160 million total.

"The second tranche of convertible notes was subject to the achievement of Phase III data from studies 171 and 175 that met the primary efficacy endpoints of these studies and did not show any adverse safety issue that would reasonably be expected to prevent approval of Afrezza," MannKind says in a release.

Up until MannKind received its second rejection for Afrezza from the FDA back in early 2011, the company's biggest financial backer was founder Al Mann. But facing a monumentally expensive Phase III to push this therapy through another late-stage effort, MannKind turned to outside sources to fund the work, building up considerable debt along the way as the company bet more than $2 billion on Afrezza's ultimate success.

About two years ago, MannKind raised $370 million in debt to fund the Phase III, then followed up last July with the $160 million deal with Deerfield to wrap the regulatory work and get started on the marketing. MannKind was running through the last of a $350 million line of credit Mann had created when it was handed the FDA rejection. And for several years the company had trumpeted plans to line up a major pharma partner to help finance the endeavor. But after Eli Lilly ($LLY), Pfizer ($PFE) and Novo Nordisk ($NVO) bailed on inhaled insulin, no partner ever materialized. And now they're trying again, scouring the industry for a collaborator who can step in.

That's not going to be easy. Analysts have been pondering the market for inhaled insulin for some time, wondering if physicians would be quick to shift patients from the injections they've been using for years to an inhaled formulation. And there were troubling indications in the data that MannKind will have to explain.

At the top of the charts you'll find some problems with how Afrezza compared to Novo Nordisk's NovoLog in reducing A1c, a key efficacy measure when you're proposing a new standard of care for a mass market, as well as a weak claim on hypoglycemia that could disrupt a marketing campaign. There was also a weight gain that could be hard to explain to payers.

At the end of the first half MannKind had $38 million in cash and equivalents against $364 million in liabilities, according to the latest 10Q filed with the SEC. More than $2 billion has been invested in the company, making this one of the biggest drug development gambles on record.

- here's the release

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