Afrezza is the first ultra-fast-acting insulin, a new class of prandial insulins. It achieves much more physiologic pharmacokinetics because MannKind (MNKD, Financial) has been able for the first time to create a stable formulation of regular human insulin monomers — the very same single molecule of insulin that is released from a healthy pancreas to metabolize glucose, the fuel of the body. Afrezza peaks in less than 15 minutes and is virtually gone in less than three hours, compared to a peak in over an hour for the best rapid-acting insulin analogs and persistence of five to seven hours. The physiologic kinetics of Afrezza far better address the clinical problems with current insulins. Moreover, rather than requiring injections, Afrezza, as a powder, is delivered by inhalation using a tiny, simple, discreet, breath-activated device — another benefit.
So if Afrezza is so great why has it not yet been approved? That is a fascinating story. It seems that it was about to be approved over a year ago. Then the decision was reversed and a Complete Response Letter (“CRL”) was issued by the FDA asking for two additional trials. After already a year since the CRL, that action is delaying approval for about another one and a half to two years, depriving patients of access to this game-changing treatment and damaging MannKind and the thousands of investors in that company. What happened to change the FDA’s decision to approve this unique therapy last January?
The answers to that question are very interesting. As said above, Afrezza was about to be approved at the end of 2010. The FDA utilizes a confidential intranet for communication to its enormous staff. In late December 2010 when the FDA was about to approve Afrezza the decision was disseminated on the agency’s confidential intranet. Chang Yi Liang, a chemist at the FDA with access to the FDA intranet, noted the imminent approval and purchased 18,000 shares of MannKind at $8.41 per share.
It has been learned that Mr. Liang had a history of improperly using confidential FDA information for personal gain. He has been arrested and is in jail awaiting trial for breaching the “Standards of Ethical Conduct for Employees of the HHS – Conduct on the Job – Use of Official Information.” He has been indicted for “unlawful insider trading in advance of 27 different announcements concerning FDA decisions on drug applications involving 19 different publicly-traded companies.” Liang profited on all those purchases except for the purchase of those 18,000 shares of MannKind that he bought for $8.41 on January 4, expecting imminent approval.
On that date the FDA was reconsidering its decision to approve Afrezza. The question that ultimately led to the change of direction had not yet been inserted into the confidential FDA intranet. What initiated that reevaluation? That is another fascinating part of the story. It turns out that at 7:02 PM on Christmas Day, Saturday, Dec. 25, 2010, Martin Shkreli, the principal of MSMB Capital Management, wrote a letter addressed to 12 senior people in the FDA asserting among other things “that approval of Afrezza without a new clinical program ... does not comply with the FDA’s mandate to secure public health interests. Specifically, the sponsor requested an inhaler for commercial approval without appropriately studying its efficacy and safety.”
MSMB is a hedge fund notorious for short selling stocks of early stage public biopharmaceutical companies. Shkreli often publishes negative reports on companies whose stocks he has shorted. MannKind is but one of a number of such companies that Shkreli has thus damaged. Such market manipulation is illegal and on Jan. 26, 2012, CREW (Citizens for Responsibility and Ethics in Washington) wrote to Roleart Khuzami, director of the SEC’s Division of Enforcement, requesting an investigation into “short-selling activities of Shkreli and possibly others to determine if there has been illegal manipulation of the market price of stocks in the biotechnology and pharmaceutical industries.”
Surely Shkreli’s Christmas day letter to the FDA had a significant impact, so there is no doubt that he succeeded in his objective to cancel approval and thereby trash MannKind’s stock. The FDA staff is under extraordinary pressure. If they do not explore every question regarding a drug and if that drug ever encounters a safety problem after approval, they must face aggressive, acrimonious questioning by Congress for many weeks. Thus there is a strong incentive for the staff not to approve a drug if there is any unanswered question.
In extensive clinical trials Afrezza has shown absolutely no safety signals and has demonstrated important improved clinical benefits. MannKind had been developing its new, superior inhalation and did resubmit its NDA with the improved device. The company relied on a carefully conducted bioequivalency trial which showed that the new device quickly delivers the same amount of the same powder through the lungs into the blood where the clinical efficacy can be easily measured. Scientifically there is no justification for requiring the extended trial demanded by Shkreli.
Nevertheless, the FDA staff was faced with the demand from Shkreli. The agency pondered over the situation for several days. On December 28 they apparently contacted MannKind saying that they would need several additional weeks to complete the review of Afrezza. Then, on January 18 they issued a CRL primarily requiring a small clinical study bridging the new device to the long-term pivotal study that was conducted with the earlier inhalation device.
Reversal of the approval decision and the intention to issue a CRL was then added to the FDA’s intranet record that was seen on January 19 by the chemist, Chang Yi Liang. That was the day when the FDA was preparing to make a public announcement of the CRL. At 3:34 p.m. on January 18, just before the market close, Liang sold his 18,000 shares at about $5.07 per share, limiting his loss to $60,047. The next morning, MannKind issued a press release announcing the CRL. The stock subsequently dropped to as low as $2.20.
The regulatory effect of the CRL is to delay the approval of Afrezza probably until the second half of 2013. From what has been published, the two trials being conducted seem simple and almost without risk. The company has announced that before starting those trials it wanted complete agreement with the FDA. The trials were therefore not initiated until there was agreement on the protocols. The trial in type 1 includes three cohorts, two with the two devices and one with standard injection therapy. In the many completed trials Afrezza has been shown to be superior in many measures, but in HbA1c only non-inferiority. The company has said that the agreed protocol includes tools to ensure compliance, and they say that this will enable this trial to show advantages in that last measure as well. This time MannKind hints it may even be able to show superiority in this measure.
The FDA has also guided MannKind to do a second study to show superiority in early-stage type 2 patients. This is amazing — it should enable Afrezza to be launched initially with a label allowing it to be promoted to almost the entire diabetic population.
In closing, it is clear that a better prandial insulin is needed. In an extensive survey of diabetologists by Close Concerns, 94% said a faster-acting insulin is needed and only 4% said it is not. To another question 95% of the clinicians said they would use Afrezza in their practices after approval. Afrezza is a game-changing product and surely will be approved. No safety signals have been reported and this product has already been shown to fill a poorly met and significant need.
The delay in approval for almost three years will cost a great deal of money. Nevertheless, in a couple of years most early type 2 diabetics will be able just to take a simple puff at mealtimes. How simple, how discreet and how much better. Type 1s and late-stage type 2s will still need a basal insulin. Hopefully some company will develop a simple basal pump that will be easy to use and will not add significantly to the cost.
The legal challenges against Liang and Shkreli will proceed. Although their actions have damaged MannKind, its stockholders and the diabetic community, perhaps this experience will lead to a more sensible regulatory process in which the FDA staff is given the freedom to use their judgment in approval of medical products without the fear of abuse by the press and the Congress.
So if Afrezza is so great why has it not yet been approved? That is a fascinating story. It seems that it was about to be approved over a year ago. Then the decision was reversed and a Complete Response Letter (“CRL”) was issued by the FDA asking for two additional trials. After already a year since the CRL, that action is delaying approval for about another one and a half to two years, depriving patients of access to this game-changing treatment and damaging MannKind and the thousands of investors in that company. What happened to change the FDA’s decision to approve this unique therapy last January?
The answers to that question are very interesting. As said above, Afrezza was about to be approved at the end of 2010. The FDA utilizes a confidential intranet for communication to its enormous staff. In late December 2010 when the FDA was about to approve Afrezza the decision was disseminated on the agency’s confidential intranet. Chang Yi Liang, a chemist at the FDA with access to the FDA intranet, noted the imminent approval and purchased 18,000 shares of MannKind at $8.41 per share.
It has been learned that Mr. Liang had a history of improperly using confidential FDA information for personal gain. He has been arrested and is in jail awaiting trial for breaching the “Standards of Ethical Conduct for Employees of the HHS – Conduct on the Job – Use of Official Information.” He has been indicted for “unlawful insider trading in advance of 27 different announcements concerning FDA decisions on drug applications involving 19 different publicly-traded companies.” Liang profited on all those purchases except for the purchase of those 18,000 shares of MannKind that he bought for $8.41 on January 4, expecting imminent approval.
On that date the FDA was reconsidering its decision to approve Afrezza. The question that ultimately led to the change of direction had not yet been inserted into the confidential FDA intranet. What initiated that reevaluation? That is another fascinating part of the story. It turns out that at 7:02 PM on Christmas Day, Saturday, Dec. 25, 2010, Martin Shkreli, the principal of MSMB Capital Management, wrote a letter addressed to 12 senior people in the FDA asserting among other things “that approval of Afrezza without a new clinical program ... does not comply with the FDA’s mandate to secure public health interests. Specifically, the sponsor requested an inhaler for commercial approval without appropriately studying its efficacy and safety.”
MSMB is a hedge fund notorious for short selling stocks of early stage public biopharmaceutical companies. Shkreli often publishes negative reports on companies whose stocks he has shorted. MannKind is but one of a number of such companies that Shkreli has thus damaged. Such market manipulation is illegal and on Jan. 26, 2012, CREW (Citizens for Responsibility and Ethics in Washington) wrote to Roleart Khuzami, director of the SEC’s Division of Enforcement, requesting an investigation into “short-selling activities of Shkreli and possibly others to determine if there has been illegal manipulation of the market price of stocks in the biotechnology and pharmaceutical industries.”
Surely Shkreli’s Christmas day letter to the FDA had a significant impact, so there is no doubt that he succeeded in his objective to cancel approval and thereby trash MannKind’s stock. The FDA staff is under extraordinary pressure. If they do not explore every question regarding a drug and if that drug ever encounters a safety problem after approval, they must face aggressive, acrimonious questioning by Congress for many weeks. Thus there is a strong incentive for the staff not to approve a drug if there is any unanswered question.
In extensive clinical trials Afrezza has shown absolutely no safety signals and has demonstrated important improved clinical benefits. MannKind had been developing its new, superior inhalation and did resubmit its NDA with the improved device. The company relied on a carefully conducted bioequivalency trial which showed that the new device quickly delivers the same amount of the same powder through the lungs into the blood where the clinical efficacy can be easily measured. Scientifically there is no justification for requiring the extended trial demanded by Shkreli.
Nevertheless, the FDA staff was faced with the demand from Shkreli. The agency pondered over the situation for several days. On December 28 they apparently contacted MannKind saying that they would need several additional weeks to complete the review of Afrezza. Then, on January 18 they issued a CRL primarily requiring a small clinical study bridging the new device to the long-term pivotal study that was conducted with the earlier inhalation device.
Reversal of the approval decision and the intention to issue a CRL was then added to the FDA’s intranet record that was seen on January 19 by the chemist, Chang Yi Liang. That was the day when the FDA was preparing to make a public announcement of the CRL. At 3:34 p.m. on January 18, just before the market close, Liang sold his 18,000 shares at about $5.07 per share, limiting his loss to $60,047. The next morning, MannKind issued a press release announcing the CRL. The stock subsequently dropped to as low as $2.20.
The regulatory effect of the CRL is to delay the approval of Afrezza probably until the second half of 2013. From what has been published, the two trials being conducted seem simple and almost without risk. The company has announced that before starting those trials it wanted complete agreement with the FDA. The trials were therefore not initiated until there was agreement on the protocols. The trial in type 1 includes three cohorts, two with the two devices and one with standard injection therapy. In the many completed trials Afrezza has been shown to be superior in many measures, but in HbA1c only non-inferiority. The company has said that the agreed protocol includes tools to ensure compliance, and they say that this will enable this trial to show advantages in that last measure as well. This time MannKind hints it may even be able to show superiority in this measure.
The FDA has also guided MannKind to do a second study to show superiority in early-stage type 2 patients. This is amazing — it should enable Afrezza to be launched initially with a label allowing it to be promoted to almost the entire diabetic population.
In closing, it is clear that a better prandial insulin is needed. In an extensive survey of diabetologists by Close Concerns, 94% said a faster-acting insulin is needed and only 4% said it is not. To another question 95% of the clinicians said they would use Afrezza in their practices after approval. Afrezza is a game-changing product and surely will be approved. No safety signals have been reported and this product has already been shown to fill a poorly met and significant need.
The delay in approval for almost three years will cost a great deal of money. Nevertheless, in a couple of years most early type 2 diabetics will be able just to take a simple puff at mealtimes. How simple, how discreet and how much better. Type 1s and late-stage type 2s will still need a basal insulin. Hopefully some company will develop a simple basal pump that will be easy to use and will not add significantly to the cost.
The legal challenges against Liang and Shkreli will proceed. Although their actions have damaged MannKind, its stockholders and the diabetic community, perhaps this experience will lead to a more sensible regulatory process in which the FDA staff is given the freedom to use their judgment in approval of medical products without the fear of abuse by the press and the Congress.
