MannKind Corporation (NASDAQ:MNKD) received a key approval from one of the Federal Drug Administration’s advisory committees this week for its Afrezza drug, which is used to treat Type 1 and Type 2 diabetes. JPMorgan analysts note that this was a bit of a surprise because of a number of issues which were raised in briefing documents from Friday. However, they believe that ultimately MannKind will get FDA approval for the drug, even if that approval is delayed.

MannKind

One of the company’s biggest investors is Francis Chou, who revealed late last year that MannKind was his largest holding.

MannKind’s drug was “good enough”

In a research note dated April 1, 2014, analysts Cory Kasimov, Matthew Lowe and Whitney Ijem say they believe the final FDA approval for MannKind Corporation (NASDAQ:MNKD)’s diabetes drug will be pushed back by about three months. The current key date most are looking forward to is April 15.

The analysts say while the FDA itself expressed concerns about Afrezza, the panelists who voted on it were obviously not as worried. They basically acknowledged that it isn’t a perfect drug but stated that it is “good enough” and would be helpful as an additional treatment option, particularly for patients who can’t use insulin. Panelists voted 13 to 1 (with 1 abstention) to approve the drug to treat Type 1 diabetes and 14 to 0 (with one abstention) for it to treat Type 2.

Because of the discrepancy between the panel’s vote and the FDA’s presentations, the JPMorgan team expects the agency will push back the full approval date by about three months. This would give MannKind Corporation (NASDAQ:MNKD) and the FDA additional time to talk about more issues which are still outstanding.

What will happen to MannKind shares?

Of course it comes as no surprise that MannKind Corporation (NASDAQ:MNKD) shares skyrocketed after the panel’s vote. JPMorgan analysts note that it’s difficult to determine where the drug maker’s stock will settle. They note that there has been a “passionate retail following” and that short interest is rather high at more than 28% of the float. They believe this combination may cause MannKind shares to “overshoot to the upside.”

The analysts have reiterated their Neutral rating and $6 a share price target for MannKind Corporation (NASDAQ:MNKD).

Bigger concerns about Afrezza

The analysts said their bigger concern for some time has been whether Afrezza will be a commercial success rather than whether the FDA will approve it. They note the FDA’s concerns that the drug is less effective as current insulin treatments and that its benefits may be limited to certain patient subgroups. They believe the final label on the product will determine much of its commercial success, particularly because the FDA contested some of the differentiating features of the drug, like the lower hypoglycemia risk compared to other drugs.

They note that competing drugs Novolog brought in $3 billion in sales last year while Humalog sales amounted to $2.6 billion. They suggest that these amounts could be ceilings on how much revenue Afrezza will be able to produce.