MannKind shares rebounding on outlook for insulin inhaler.

The shares of a biotech drug developer whose first product candidate is years from market are particularly vulnerable to the latest snippet of good news or bad-mouthing, especially when the company has no steady source of revenue.

So it's been for Valencia-based MannKind Corp., which has seen its stock rollercoaster recently on Wall Street speculation.

Among the naysaying: Its lead product was taking too long to come to market; it was burning cash too fast; it had been sued by a former executive. Then the good news: The FDA approved a competitor's product that validated its own approach.

The result? The company's shares fell below $9 last summer from nearly $25 a share following a September 2004 initial public offering. But since the first of the year, the shares are up 80 percent, closing at $20.09 on April 5.

MannKind is focused on therapeutic products for diseases such as diabetes and cancer. Its lead product--a form of insulin that can be administered with a specially designed inhaler--won't be the first product of its type on the market but early indications are that it may be more effective, safer and easier to use than its first-to-market competitor.

"Technosphere Insulin is not just another inhaled insulin; it's an insulin that behaves like no other insulin before," said Chief Executive Al Mann at a New York investment conference last week.

Similar products

That competitor, Pfizer Inc.'s Exubera, received U.S. regulatory approval in January, and at least two other companies are working on similar products that could come to market before or around the same time as MannKind's Technosphere Insulin.

Analyst opinions of MannKind ranged widely from sell to outperform last year, but these days, most analysts appear in the cautiously optimistic camp, with one-year targets for shares ranging from $17 to $26.

"We believe Technosphere Insulin could be a best-in-class insulin," Thomas Wei, a PiperJaffray & Co. analyst, said in a note to investors. He has an outperform rating on MannKind shares.

WR Hambrecht & Co. analyst Andrew Forman predicts the U.S. inhaled insulin market could reach $3.6 billion in sales by the end of the decade. Ironically, the Exubera approval was considered the likely booster for MannKind's shares, since the FDA's approval for that product eases the way for later competitors such as MannKind.

Even though Forman upgraded his recommendation from sell to hold based the improved prospects for all the inhaled insulin developers, he cautions that Technosphere still faces regulatory hurdles and potential cash crunch if the company doesn't get a partner, like the developer of Exubera, San Carlos-based Nektar Therapeutics, did with Pfizer.

"MannKind's current valuation appears to have gotten ahead of itself," Forman said in a note to investors.

Aside from positive buzz on Technosphere, MannKind's shares also have going for it the impressive track record of its founder and chief executive.

Serial biomedical entrepreneur Alfred Mann, the company's largest shareholder, became a billionaire by launching successful medical device companies that eventually were acquired by companies such as Medtronic Inc. and Boston Scientific Corp. MannKind was formed in 1991 and went public in 2004.

But the billions of dollars often necessary to take a drug or device to market can make it tough for a small company to go it alone, even for an entrepreneur with big pockets. Mann, who has invested at least $200 million his own money into the company, indicated at the New York conference that it is considering partnerships with companies that have resources to help get Technosphere through the U.S. regulatory approval process and a commercial launch.

The company has launched all but one of its pivotal Phase 3 clinical trials, with results from at least one study expected to be announced at the company's April 19 investor day.

The late-stage trials, which MannKind expects will cost $200 million to complete, has accelerated the company's cash burn rate. Its burn of around $12 million a month in the fourth quarter was up from $10 million a month in the third quarter. The company, which reported a $33.3 million fourth quarter loss, finished 2005 with $146 million in cash. Hambrecht's Forman expects the company will need to raise more money by the third quarter of this year.

DEBORAH CROWE

Staff Reporter

YEAR (Dec. 31)                   2005      2004

Revenue (millions)                 0         0
Total Expenses (millions)        118        77
Operating Income (millions)     (118)      (77)
Net Income (millions)           (114)      (76)
Earnings Per Share            ($2.87)   ($3.80)

SUMMARY

Business: Biotech drug and device developer

Headquarters: Valencia

CEO: Alfred Mann

Market Cap: $973 million Dividend Yield: N/A

Total Liabilities: $21,394 million P/E Ratio: N/A

Long-Term Debt: $0