MannKind's (NASDAQ:56400P706) long and arduous path to FDA approval has finally reached a happy ending, with the company announcing late on Friday that the agency had approved Afrezza, the company's inhaled insulin product. Approval is a major event for MannKind, but the company still needs a commercial partner and the approved label for Afrezza doesn't do the product/company any particular favors.

Afrezza, in brief
For those who haven't been following the MannKind story, the company is headed by Al Mann, a well-respected serial entrepreneur who founded Spectrolab, Pacesetter Systems (acquired by St. Jude Medical), MiniMed (an insulin pump company acquired by Medtronic), and Advanced Bionics (once owned by Boston Scientific). MannKind was founded to develop inhaled insulin, a product type that has long been hoped could be a viable alternative to injected insulin, but has had numerous development difficulties over the years.

The FDA does not make it easy to get a new insulin on the market (as even market leader Novo Nordisk (NYSE:NVO) has experienced lately), and Afrezza had numerous issues in getting to market, including two prior FDA rejections. MannKind's last two major studies, Study 171 and Study 175, established non-inferiority to Novo Nordisk's NovoLog in Type 1 diabetics and superiority versus placebo in Type 2 diabetics (respectively), leading to the FDA's advisory panel to recommend approval for both indications (13-1 and 14-0).

Afrezza is a rapid-acting insulin administered with the Dreamboat inhaler device (a roughly thumb-sized device). As a rapid-acting insulin, it will compete with Novo Nordisk's NovoLog, Lilly's (NYSE:LLY) Humalog, and Sanofi's (NASDAQ:SNY) Apidra. The true benefits of Afrezza are a bit controversial (more on this in a moment), but the company has maintained that it is a faster-acting insulin with appealing weight gain and hypoglycemia profiles that also limits the need for injections (good for those with extreme needle anxiety and/or limited dexterity).

The label won't be a big help
The FDA did approve Afrezza for both Type 1 and Type 2 diabetics, and that was a minor victory as the Type 1 approval had been seen as a little riskier. More disappointing was that the FDA did not allow any efficacy benefits on the label (no advantages on hypoglycemia or weight gain). It was also disappointing for MannKind bulls that the FDA did not allow a label claim for Afrezza being a more rapid-acting insulin ("Despite the faster absorption of insulin (PK) from Afrezza, the onset of activity (PD) was comparable to insulin lispro"). By contrast, Humalog has a clear label claim with respect to being more rapid-acting.

On the negative side, there is a black box warning for patients with known lung disease. The label also requires patients to undergo pulmonary testing (spirometry) before starting Afrezza, six months after starting, and then once every year. This is not a painful test, but it does add to the burden of prescribing/using the insulin and it may discourage use to some extent. The label also mentions a somewhat vague risk of lung cancer, contraindicating for those with active lung cancer but stating "the benefits of Afrezza use should outweigh this potential risk" in patients with a history of lung cancer or elevated risks for lung cancer.

Now what?
MannKind still needs a commercial partner to get Afrezza on the market, and while a company with experience in diabetes would be most desirable, a sizable primary care operation would be the essential criteria. None of the three major insulin companies (Lilly, Sanofi, or Novo Nordisk) have shown much recent interest in inhaled insulin, but I wouldn't be shocked if Sanofi stepped up given its relatively weaker position in fast-acting insulin with Apidra. AstraZeneca could be another option, given its existing diabetes sales infrastructure and lack of any insulin product.

Whichever company takes on Afrezza, there will be work to do. No drug sells itself and retail investors tend to overestimate the significance of needle anxiety in therapies. Given the uncertainties about the real demand for inhaled insulin (and how payers will reimburse for it) and the significant upfront launch costs, MannKind may have to accept a back end-loaded deal structure.

It's also worth noting that there are post-marketing study requirements for Afrezza – the most significant of which could be the requirement for a study of the lung cancer risk (and whether the FDA will require a cheaper registry study or a more expensive clinical trial).

The bottom line
MannKind committed itself to a difficult road and at long last has seen its efforts bear fruit. A commercial partner is the next major step for the company, but the company's valuation already seems to presuppose around $3 billion in sales within five years' time. While the label was not everything the company or its shareholders might have wanted, it is now in the hands of the company and its future commercial partner to start delivering on the long-discussed commercial potential for this new inhaled insulin.