Despite all the noise, analyst expecting MNKD approval in 2010 Print
By Staff and Wire Reports   
Wednesday, 06 January 2010 12:48

Yatin Suneja, the Associate Biotechnology Analyst of Rodman Renshaw Capital Group, Inc. says MannKind Corporation's (NASDAQ:MNKD) Afresa PDUFA approaching in about a week, he continues to believe that Afresa and MNKD will pull the upset of 2010 and receive an approval.

Writes Suneja:

We reiterate our positive thesis on MNKD and make the following 4 points which address what we see as the possible outcomes and their individual impact on the shares both short and long-term.

Point #1: We believe that Afresa will be approved in 2010. Despite all the noise and speculation on the Street, including the very significant short position, our view on MNKD remains completely unchanged: we believe that on the strength and completeness of the dataset contained in its NDA, Afresa will be approved at some point within 2010. Our view in a nutshell is that: A) we see approval as the most likely outcome, B) we assign a probability of an approval within 2010 of ~75%, and C) we believe that the shares could jump to the $15-$17 range on approval, i.e. we see $7-$9 of upside from current levels.

Point #2: We believe that the only really bad outcome for MNKD is a Complete Response Letter (CRL) that would require the company to do trials of significant length in time and size in number of patients. We would view this as a catastrophic event for the company near- and medium-term, because if it materialized, it could be another 2-4 years before Afresa would be in front of the FDA again, and we believe that investors would ignore MNKD shares for a number of years and until data from these new trials would emerge. We estimate that the probability of this scenario occurring is ~25%, and if it happens, we expect the shares to fall in the $1-$2 range, i.e. we see $6-$7 of downside from current levels.

Point # 3: We believe that a CRL that requires the company to do minimal amount of work (for instance, do some work on/change its proposed REMS program, or perform a bioequivalency study, or any other study that could take 3-6 months to complete), is actually a positive outcome, since it is, in essence, tantamount to an (eventual) approval. Thus, we would see any overreaction and dip in the stock due to this news as a great buying opportunity.

Point #4: Is a delay possible? Of course it is! Since when has the FDA met every PDUFA date?…..But, there are delays, and then there are delays: A) We believe that a delay due simply to the fact that the FDA wasn't able to complete its process on time, with a decision to follow in a matter of weeks, says absolutely nothing about Afresa’s probability of approval, and has only to do with the agency’s ability to meet its deadlines. If the agency does not give an opinion by 1/16 (which we see as a real possibility, especially since it seems that labeling discussions are still ongoing), but only because it just needs some more time to complete the process, we don't see this outcome as a reason to sell MNKD , and if the market reacts negatively on such a delay, we would see any dip as a buying opportunity. B) If the agency doesn't respond by the PDUFA date and instead requires Afresa to come in front of an advisory panel, we believe that this type of delay would be interpreted as a very negative outcome, since it would signal the agency’s reluctance to approve the Afresa outright. However, even if this were to occur, we believe that possibility of a positive vote on an Afresa panel is more likely than a negative one, and again, we would be buying on the dip that would occur on the announcement of the need of a panel.

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