Dancing with the stars

Dancing with the stars

Diabetic Investor hasn’t quite decided which the bigger scam is; the quest to develop a non-invasive glucose monitor, which has now expanded and includes continuous glucose monitoring, or the quest to develop a commercial viable inhaled form of insulin. One just might think that after the Exubera disaster which lead to a $4 billion write down by Pfizer (NYSE:PFE) or the MannKind (NASDAQ:MNKD) disaster which is leading to company founder Al Mann losing most of his considerable fortune, would give any company a moment of pause before proceeding down this path. That a company would look at the many companies besides Pfizer and MannKind who have tried and failed in this quest; a group that includes Novo Nordisk (NYSE:NVO), Lilly (NYSE:LLY) and Abbott (NYSE:ABT); and this is the short list.

Like a cat with nine lives this quest just won’t die as there is yet another company who believes they have the magic answer and will succeed where everyone has failed. Say hello to Dance Pharmaceuticals, a privately held based in the San Francisco area. Now Dance is no neophyte when it comes to inhaled insulin and is actually a reincarnation of the old Exubera team. A team that believes that they can bring back Exubera from the dead just as Dr. Frankenstein believed he could bring a dead human back to life; and we all know how that turned out.

Now to be fair Diabetic Investor did give the company a chance to explain why they will succeed when so many others have failed. In spite of our well documented skepticism on the subject there is always the possibility that Dance actually has something new and different. That they have learned from the equally well documented mistakes made in the past and would apply those lessons to what they are attempting.  History is replete with examples of companies succeeding even though everyone else before them failed miserably. The possibility also exists that given the amount of effort put into this quest that Dance found something unique that was there all along but not seen by everyone else.

Here is the Dance story.

According to a company official since the demise of Exubera the team has “regrouped” and wants to do Exubera in a “better way.” That they will “do it our way this time”; an obvious slap at Pfizer who the company seems to believe really screwed up with Exubera. So far no argument from Diabetic Investor.

When asked why they believed Exubera failed and why after spending all that money Pfizer finally pulled the plug on the product, the company noted that the big problem with Exubera was that it was too expensive to make. Here is where Diabetic Investor begins to take issue with Dance. While we agree that the cost to make Exubera was part of the reason Pfizer pulled the product, this factor alone was not the cause of Exubera’s demise. Saying Exubera had a host of issues is like saying that the Titanic had a small leak.

What will make their yet unnamed product, let’s at least give them credit for not resurrecting the Exubera name, is – you guessed it will be cheaper to make and easier to use.  The company plans to use the same ingredients used to make Exubera yet rather than deliver the product as a dry powder, their product will be a liquid which like Exubera will be absorbed in the lungs. In another attempt to break from the past the product won’t be delivered by a bong rather s device akin to an asthma inhaler.

When Diabetic Investor inquired as to how they would get this product through the FDA, an important point especially when you consider the problems MannKind is having at the agency, the company made two points why they would have an easier time than MannKind. First they noted the reason MannKind is having so much trouble is one the key ingredients used to make Afrezza has issues which is making the FDA uncomfortable. Since Diabetic Investor is not an expert on the ingredients used to make Afrezza we have no reason to doubt that Dance could be correct, although like the reasons for Exubera demise we don’t believe this is the only reason MannKind is having problems with the FDA, who at this writing has yet to approve Afrezza.

The second point made by Dance was that their product would not go through a typical NDA and would follow a 505b2 regulatory path. Again not being an expert on regulatory paths Diabetic Investor inquired why this path and whether they had already discussed this with the FDA. (Given the current regulatory environment at the FDA Diabetic Investor couldn’t see how the FDA would not require an NDA and all the clinical work that comes with an NDA. More on this in a moment.) The company stated that because they are using the exact same ingredients as Exubera just put together in a different way, the FDA is fine with a 505b2 submission, which according to the company is not just a faster path to approval but also less costly than a typical NDA.

In layman’s terms the company believes they are backing a cheesecake with the same ingredients used by another company but are cooking the cake in a conventional oven rather than a microwave. According to the company since they are using the exact same ingredients the FDA really does not care how they bake the cake. Therefore they can use all the data gathered by Pfizer for Exubera as at the end of the day they will have the same cheesecake as Pfizer did. Their belief is the Pfizer has already proved the safety and efficacy of their product so there is no need to cover this ground with additional, costly and time consuming clinical trials.

When Diabetic Investor inquired with our FDA experts as to whether the company was correct in their belief they could follow a 505b2 submission we were told it’s “feasible”.  One of experts stated; “If they actually are using the same excipients without the addition of anything new other that water, they can cross-reference the Exubera safety and efficacy data.  They will need a limited amount of de novo animal data; but, most importantly, they will need to do demonstrate equivalent pK profiles.”

Now again not being an expert on FDA regulatory paths or how the FDA decides which path is appropriate we remain skeptical that the FDA will allow a 505b2 submission. Dance may be using the exact same ingredients however it’s a liquid formulation versus dry powder, which seems to be material. The same can be said regarding its delivery system which may be as simple as an asthma inhaler; however given the issues MannKind is having with the FDA about their delivery system, here too we’re not sure this is easy as Dance seems to believe it is. A 505b2 submission may be theoretically plausible and it is quite possible the FDA told the company this possibility exists, yet something tells Diabetic Investor this is no slam dunk.

Wanting to give Dance every possible opportunity to turn Diabetic Investor from a skeptic to a believer we inquired how the company planned on dealing with the Exubera baggage and competing therapy options if by some miracle this product actually makes its way onto the market. As we have noted previously getting inhaled to market is just one part of the process, marketing the product poses an equally daunting task. A task not helped any that when you hear inhaled insulin everyone immediately thinks of Exubera, not exactly a ringing endorsement for any product no matter how good it may be; just ask Al Mann. Keep in mind that the Dance product like every other inhaled insulin is targeted at patients with Type 2 diabetes. Also keep in mind that even with a 505b2 submission the Dance product will come to market after Bydureon, which just so happens is also targeted at patients with Type 2 diabetes. (A product which Diabetic Investor believed was well known by everyone in the diabetes world but apparently not to the folks at Dance.)

While the company acknowledge there are some marketing hurdles and gave the standard there is no therapy right for all patient’s speech; they dropped a bomb on Diabetic Investor. Besides all the obvious hurdles they noted that like Exubera their product will also carry lower margins, although not as bad as Exubera margins. Even so they believe that this fact will be more than offset by “enormous volume.” Given that enormous is a pretty powerful adjective, Diabetic Investor asked if they could quantify just what enormous means in sales dollars. According to the company, even if the capture a very small percentage of the market this will be – wait for it – a $4 billion product. Seems like Diabetic Investor has heard that number somewhere before.

If all this isn’t enough guess what? Dance has already raised $3 million dollars and you guessed it, is looking to raise more. According to the company their looking for a few million more; again we asked them to quantify what a few millions is; they said another $2 to $5 million. After bilking more angel investors out of their money, they will then go to the venture community seeking additional debt financing. Of course before they hit the venture market they will have data that shows just how outstanding their product is and why it will be a major blockbuster.

Now Diabetic Investor isn’t quite sure which is worse here; companies who continue to pursue these improbable, if not impossible, quests. Or the investors who continue to buy into this crap and invest in these companies.  These quests, whether it is developing a non-invasive glucose monitor or inhaled insulin, have become an addiction with the only difference being there are proven programs for helping people deal with their addictions to drugs or alcohol. Why no one has developed a 12 step program for these addicts remains a mystery to Diabetic Investor.

Anyone familiar with support groups like NA or AA knows they end each meeting by stating; “G-d grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” For non-invasive and inhaled insulin addicts it would be; “G-d grant me the power to perform due diligence, the courage to understand the diabetes market and the wisdom to recognize a losing proposition when I see one.”

It’s time these people learn to “dance” to different music.