On October 6, shares of pharmaceutical startup MannKind Corp. plummeted 30% to $6.30, when the company predicted it wouldn’t sign a partnership deal with a well-capitalized Big Pharma company until after its experimental drug is approved. Here’s the twist: MannKind’s experimental drug is inhaled insulin–a product that was left for dead by drug companies and investors long ago. CEO Alfred Mann says his company has plenty of cash to make it well into 2011. Nevertheless, investors are clearly worried.

With good reason. When Mann–an 83-year-old serial entrepreneur–started started working on inhaled insulin early in the decade, it seemed like a good idea. If people with diabetes could breathe in their insulin instead of injecting it, they would save themselves a lot of hassle and pain, drugmakers thought. In fact, a lot of major pharmaceutical companies were interested: Pfizer, Eli Lilly and Novo Nordisk were all developing inhaled-insulin products of their own.

But Pfizer’s product, Exubera, flopped. It brought in just $12 million in sales in its first nine months on the market, prompting Pfizer to drop the product in 2007. Patients didn’t like the clumsy inhaler, and doctors balked at the requirement that they test patients to make sure their lungs were working properly before prescribing Exubera to them. Soon Lilly and Novo Nordisk abandoned the idea, too.

Mann thinks his product, Afresa, is different. He told Reuters that patients in his clinical trials have not suffered any lung problems. And he enjoys carrying a prototype around to investment conferences to show off how much smaller and less obtrusive Afresa is compared to Exubera.

Investors know better than to count Mann out completely. In the 1980s, his company MiniMed invented an insulin pump that delivered a steady stream of the drug to diabetics through a tube implanted in their skin. Companies including Lilly and Novo Nordisk pulled out of the market for insulin pumps, but not Mann. He succeeded, and in 2001, Medtronic bought MiniMed for $4 billion.

Will Mann pull off the same feat with Afresa? The U.S. Food & Drug Administration is expected to deliver a verdict in January.

Original post here: BusinessWeek – Management IQ