Has Al Mann pulled another rabbit out of his hat?

Judging from the swings in the stock price of his MannKind Inc. drug development company, Wall Street still isn't quite sure.

Valencia-based MannKind, once given up for dead by investors, has seen its stock price rise 35 percent in the last two weeks on renewed hopes that its inhaled insulin might one day become a billion-dollar blockbuster but it's questionable if the shares will stay where they are.

Investors were scared away from the company after New York drug giant pulled its own Exubera inhaled insulin system off the market last year over slow sales and concerns it could damage lung tissue and cause lung cancer.

But over the last few weeks, MannKind has released data that has calmed fears. The data show its Technosphere inhaled insulin did not have similar safety problems. Mann also made a presentation to investors last week that highlighted the data.

MannKind's share price hit a nadir of $1.83 in April after other inhaled insulin developers followed Pfizer's example and abandoned their programs. By last Thursday, Sept. 25, it had closed at $4.28.

Still, MannKind's share price is nowhere near the $21 the company was trading at around two years ago, when hopes were high that inhaled insulin would be the Next Big Thing.

However, the latest safety data is starting to change some minds on Wall Street. Some analysts now believe MannKind will find a partner able to help bring its inhaled insulin to market. The drug will go by the trade name Afresa.

"We believe a sophisticated pharmaceutical company will recognize the value of Afresa," said Wachovia Capital Markets analysts Michael Tong in an investor's note.

Other analysts are a bit more leery.

Jon LeCroy at Natixis Bleichroeder, who has maintained his $1 target price, believes the Exubera disaster has killed the inhaled insulin market, regardless of MannKind's merits.

"Al doesn't have much choice but to push ahead because he's already sunk so much of his own money into this," said LeCroy in an interview. "We're worried that no one in Big Pharma is going to want to partner with him."

Mann, who made his fortune developing high-tech and medical devices, has sunk more than $1 billion of his own money into company loans and stock purchases to keep clinical trials afloat when investor interest dwindled. He now owns more than half the company.

But if the palm-sized Afresa inhaler can prove to diabetics, doctors and insurers that its benefits outweigh its premium price and any lingering safety issues, the billionaire philanthropist could get well more than his investment back.

The data MannKind has released so far indicate that its product does an acceptable job of regulating a diabetic's long-term blood sugar. But where the drug really outshines current injected and oral insulin is in preventing blood sugar spikes right after a meal, a problem that's behind many of the long-term health problems that afflict diabetics.

"I believe this could be one of the most valuable drug products in history," said Mann, in a telephone interview last week with the Business Journal. "I believe in this product, and I'm not worried."

Despite Mann's optimism, Thomas Russo at Robert W. Baird & Co. is measured about MannKind's prospects.

"Among investors you've got the optimists who look to Al Mann's history of success, and then you have the pessimists who see Exubera as having created very strong headwind for any other product to overcome," Russo said in an interview. "Right now, there are still more pessimists out there."

The company is scheduled to release a few more late-stage studies later this year before submitting Afresa for approval by the U.S. Food & Drug Administration.

Hospital Sale Closes

Tenet Healthcare Corp. announced Sept. 19 that a subsidiary purchased the 245-bed Tarzana campus of Encino-Tarzana Regional Medical Center from HCP Inc. and simultaneously sold it to Providence Health & Services-California.

The estimated $89 million deal was first announced in July. Dallas-based Tenet had been trying to divest the hospital for three years, but was hampered by an ongoing dispute with HCP, a Long Beach real estate investment trust that owned the building and land of the hospital Tenet managed.

The related sale of the Encino campus to Victorville-based Prime Healthcare Services Inc. closed in June.

Staff reporter Deborah Crowe can be reached at dcrowe@labusinessjournal.com or at (323) 549-5225, ext. 232.

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