MannKind Corp. fell the most in about eight months after a former executive alleged in a lawsuit that the company suppressed potential fraud in clinical trials of a diabetes treatment now pending before U.S. regulators.
The lawsuit, filed in New Jersey state court by John Arditi, MannKind’s former senior director for regulatory affairs, said the company withheld from regulators information about potential “scientific misconduct” at clinical trial sites in Russia and Bulgaria. Arditi’s allegations are “without merit” and MannKind intends to “defend against them vigorously,” the company said in an Oct. 29 regulatory filing.
The allegations may further delay action by the U.S. Food and Drug Administration on Valencia, California-based MannKind’s application to clear the drug, Afrezza, said Simos Simeonidis, an analyst for Rodman & Renshaw in New York. The agency is scheduled to rule on the application by Dec. 29.
“I assume the FDA will now dig through the data with a fine-tooth comb and it could lead to a delay if they request additional information about this specific data,” he said today in a telephone interview. Simeonidis, who has a buy rating on the stock, said the share price may get punished further, presenting a “buy opportunity.”
John Newman, an analyst for Oppenheimer & Co. in New York, said in a note today to investors that he expects the FDA won’t approve the drug and will request large new studies. Newman rates the shares “underperform.”
Seven analysts surveyed by Bloomberg have buy ratings on the stock and five recommend selling.
MannKind, the biotechnology company founded by billionaire Alfred Mann, fell 68 cents, or 11 percent, to $5.51 at 4 p.m. New York time in Nasdaq Stock Market trading, for the biggest single-day decline since March 15 when the FDA delayed approval of Afrezza, an inhaled treatment for diabetes. The medicine is the company’s most advanced product and would be its first to reach the market.
In the lawsuit filed Sept. 16, Arditi said he uncovered evidence of potential scientific misconduct at the Russian and Bulgarian sites and brought them to the attention of MannKind senior executives.
At a Russian site, patients enrolled in the study had the same blood pressure readings at each visit for several months, according to Arditi’s lawsuit. This is unlikely to be an accurate finding and raised the chance of “fraudulent study results, including the possibility of fictitious patients,” he said.
Arditi said he was fired by MannKind after he presented his concerns and asked that the information be reported to the FDA, according to the lawsuit. The company’s “commercial interests trumped integrity and transparency,” he said in the lawsuit. Arditi said he was responsible for overseeing clinical trials conducted overseas.
MannKind conducted an independent investigation of Arditi’s allegations and concluded there was no substance to them, Matthew Pfeffer, the company’s chief financial officer, said today in a telephone interview. He said MannKind’s termination of Arditi wasn’t related to his allegations.