Post by notamnkdmillionaire on Mar 30, 2014 9:43:31 GMT -5
Here's what BofA ANALyst Steve Byrne had to say about MNKd after review of the BD.
Afrezza could be approved, but commercial oppty weakens
FDA released briefing documents ahead of MNKD’s Afrezza ad com on Tuesday,
April 1, its third cycle of review following two CRLs. FDA’s summary remarks were
generally favorable and supportive of Afrezza’s approval, but detailed review
comments and questions to the committee highlighted several safety concerns and
were more critical of Afrezza’s weak efficacy relative to subQ prandial insulin (see p.
3). We believe that mixed results versus existing T1DM and T2DM therapies,
combined with expectations for a large post-marketing study, heighten the
commercialization risk and weaken partnering prospects. We lowered our estimated
royalty rate to 25% net of COGS (from 30%), which reduced our DCF-derived PO to
$4 (from $5). We maintain our Underperform rating.
Efficacy and safety concerns raised
Efficacy: FDA noted concerns in study 171 (T1DM) that the mean reduction of A1c
was statistically worse vs. subQ insulin, even though the non-inferiority-FDA
endpoint was met. This latter endpoint was not met in females or in 1 of 4 sensitivity
analyses. The FDA concluded that study 175 (T2DM) was statistically superior to
placebo in lowering A1c, but that the reduction was modest relative to existing
drugs. A clinical pharmacology review raised concerns about the nonlinear
relationship between PK and PD, uncertain dose conversion, and higher PK/PD
variability between Afrezza-treated patients than subQ insulin subjects.
Safety: FDA concluded that Afrezza’s safety profile was generally favorable with no
excess cardiovascular risk, but lung function (FEV1) remained significantly lower vs.
insulin out to two years. Cough was more common in the Afrezza arm and greater
than the level seen from asthma/COPD inhalers. The FDA discussed potential lung
cancer concerns (4 cases on Afrezza vs. 0 on placebo), and expectations for a large
post-approval study (~5k patients). Recommendations for the label include
contraindications for patients with lung disease, including smokers.
B of A now has a $4 price target.
Price objective basis & risk MannKind Corporation (MNKD)
Our DCF derived PO of $4 is based on projected risk-adjusted sales estimates for
Afrezza in treatment of type 1 and type 2 diabetes beginning in 2014. Our DCF
derived PO consists of >$4 per share from Afrezza sales offset by modest net
debt. We use a 10% WACC, commensurate with market risk, and no terminal
value.
Risks to our estimates and price objective are: 1) if Afrezza is not approved or
another trial is required by the FDA, and 2) a lower than expected royalty rate
from a commercialization partner for sales of Afrezza. Our PO could be exceeded
if: 1) a partnership with a commercialization partner is announced prior to
approval, and 2) MannKind secures a sales royalty rate for Afrezza with a
commercialization partner that is higher than what we project.
Afrezza could be approved, but commercial oppty weakens
FDA released briefing documents ahead of MNKD’s Afrezza ad com on Tuesday,
April 1, its third cycle of review following two CRLs. FDA’s summary remarks were
generally favorable and supportive of Afrezza’s approval, but detailed review
comments and questions to the committee highlighted several safety concerns and
were more critical of Afrezza’s weak efficacy relative to subQ prandial insulin (see p.
3). We believe that mixed results versus existing T1DM and T2DM therapies,
combined with expectations for a large post-marketing study, heighten the
commercialization risk and weaken partnering prospects. We lowered our estimated
royalty rate to 25% net of COGS (from 30%), which reduced our DCF-derived PO to
$4 (from $5). We maintain our Underperform rating.
Efficacy and safety concerns raised
Efficacy: FDA noted concerns in study 171 (T1DM) that the mean reduction of A1c
was statistically worse vs. subQ insulin, even though the non-inferiority-FDA
endpoint was met. This latter endpoint was not met in females or in 1 of 4 sensitivity
analyses. The FDA concluded that study 175 (T2DM) was statistically superior to
placebo in lowering A1c, but that the reduction was modest relative to existing
drugs. A clinical pharmacology review raised concerns about the nonlinear
relationship between PK and PD, uncertain dose conversion, and higher PK/PD
variability between Afrezza-treated patients than subQ insulin subjects.
Safety: FDA concluded that Afrezza’s safety profile was generally favorable with no
excess cardiovascular risk, but lung function (FEV1) remained significantly lower vs.
insulin out to two years. Cough was more common in the Afrezza arm and greater
than the level seen from asthma/COPD inhalers. The FDA discussed potential lung
cancer concerns (4 cases on Afrezza vs. 0 on placebo), and expectations for a large
post-approval study (~5k patients). Recommendations for the label include
contraindications for patients with lung disease, including smokers.
B of A now has a $4 price target.
Price objective basis & risk MannKind Corporation (MNKD)
Our DCF derived PO of $4 is based on projected risk-adjusted sales estimates for
Afrezza in treatment of type 1 and type 2 diabetes beginning in 2014. Our DCF
derived PO consists of >$4 per share from Afrezza sales offset by modest net
debt. We use a 10% WACC, commensurate with market risk, and no terminal
value.
Risks to our estimates and price objective are: 1) if Afrezza is not approved or
another trial is required by the FDA, and 2) a lower than expected royalty rate
from a commercialization partner for sales of Afrezza. Our PO could be exceeded
if: 1) a partnership with a commercialization partner is announced prior to
approval, and 2) MannKind secures a sales royalty rate for Afrezza with a
commercialization partner that is higher than what we project.