MannKind stock falls after news of Afrezza lawsuit
Valencia biotech firm MannKind Corp.’s stock fell 11% Thursday after reports that a former senior manager said he had uncovered potentially serious problems with clinical trials of the company’s experimental insulin inhaler.
The Food and Drug Administration is reviewing the Afrezza inhaler and is expected to make a decision Dec. 29 on whether to approve it.
The former MannKind manager, John Arditi, filed a lawsuit against the company in New Jersey Superior Court, saying he was wrongfully fired after internal audits he conducted in November 2009 uncovered “potential fraud and scientific misconduct” involving Afrezza clinical trial data. The lawsuit, which was filed in September, was first reported on TheStreet.com.
Arditi, who worked in a MannKind facility in New Jersey, said in the lawsuit that he urged his superiors at the firm to report his findings to the FDA but that the company refused because “if the FDA was notified of these concerns, it might delay approval” of the inhaler.
MannKind addressed the lawsuit in its most recent quarterly earnings report, stating that the company had completed an internal investigation into Arditi’s claims and had hired an outside firm to conduct an independent investigation.
“Neither investigation found any basis for his claims,” MannKind said. “The company believes that the allegations in the complaint are without merit and intends to defend against them vigorously.”
Matthew J. Pfeffer, MannKind’s corporate vice president, said the company was working on a legal response to the lawsuit. MannKind has until Dec. 3 to file its response in court, Pfeffer said.
MannKind has yet to share with the FDA the findings of its internal investigation or of the independent investigation, he said.
“We view this as an employment matter,” Pfeffer said. “Someone we terminated is retaliating. And for this issue, there isn’t really a mechanism to share that type of information with the FDA until they ask for it, if they ask for it. And if they ask about it, we have plenty to put their mind at ease.”
FDA officials declined to comment on whether the lawsuit would affect the drug’s approval process. MannKind is seeking FDA approval for Afrezza’s use by adults with Type 1 and Type 2 diabetes.
Shares of MannKind closed Thursday at $5.51, down 68 cents, or 11%, after being down as much as 15%.
The stock’s decline reflected shareholders’ reaction to news about the suit, said Simos Simeonidis, a biotech analyst with Rodman & Renshaw, a New York investment firm.
“What’s really at stake here is how the genuineness of the data will impact how the FDA looks at the data in the approval process,” he said. “The issue is going to be: Will the FDA get involved and ask them for more information about this or not, and will that delay the approval process or not?”
If the FDA approves Afrezza in December, investor confidence is likely to return, but a delay in the approval process or an FDA rejection of the inhaler would probably cause further stock declines, said Jason Butler, an analyst at JMP Securities in New York.
“This kind of news always increases uncertainty and risk, and the reason is there’s no quick resolution,” Butler said. “It’s very much going to be a ‘he said, she said’ situation for a while.”
