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If true maybe we should have a caged death match between Liang vs Shkreli. I certainly hope Martin's input(not that I know what it was in the case of MNKD) to play a role in FDA decisions. I certainly would have a lessor opinion of the agency if true.

There are two parts to this possible scandal about Afrezza, one involving Cheng Yi Liang, a chemist at the FDA's Center for Disease Evaluation and Research and the second and most compelling has to do with Martin Shkreli, who is chief investment officer for New York-based hedge fund MSMB Capital Management LLC.

Cheng Yi Liang has been charged by the Securities and Exchange Commission in United States District Court for making 27 trades in 19 companies in advance of announcements concerning the FDA's decision on these drug applications. Liang typically began building his stock positions 2-3 weeks prior to PDUFA date using non-public details and results of FDA reviews. One thing is certain, by virtue of his position within the CDER, Liang was privy to confidential FDA information including impending decisions regarding approvals. Liang had computer access to nonpublic FDA information of the review process for each drug.

Mannkind Corporation was one of the companies in which Liang bought stock using this non-public information. He used that information when he purchased 18,000 shares of MannKind stock before the PDUFA date knowing the FDA was planning on approving Afrezza. The PDUFA date for Afrezza was Dec. 29, 2010, but at the last moment, MannKind received an action date delay of 3-4 weeks. With that being said, Liang, with his advance details of the FDA review, knew MannKind's Afrezza was on track for approval. This is consistent with MannKind's comments that the dialogue with the agency had been positive, and that there was no reason to believe that they would not get approval.

Now the second part of this scandal. It involves Martin Shkreli, chief investment officer for New York-based hedge fund, MSMB Capital Management LLC. MSMB is notorious for short-selling stocks and then creating questionable issues and making negative public comments and projections to drive down the stock price of the companies. In some cases, such as Mannkind, he went further for self gain. CREW, the Citizens for Responsibility and Ethics in Washington has requested that the Security and Exchange Commission open an investigation of Martin Shkreli who appears to be illegally manipulating the market prices of stocks in the biotechnology and pharmaceutical industries.

CREW claims Martin Shkreli has attempted to insert himself into the FDA approval process of at least four pending drugs in which he held a short position by contacting several FDA officials and working behind the scenes to affect the outcome of the FDA regulatory process. His claims to the FDA, arguably were biased and possibly fraudulent. Regardless, the FDA is supposed to rely on their own review by its medical doctors, chemists, statisticians, microbiologists, pharmacologists and their other experts and not a letter by an outsider who was trying to manipulate the FDA so that he would make millions if the FDA gives a negative response.

The FDA review process is supposed to be nonpublic information, but on December 25, 2010, Martin Shkreli emailed 12 FDA officials including Margaret Hamburg, Janet Woodcock, Mary Parks among others asking that the FDA deny MannKind's Afrezza application. Very coincidental, three days later and one day before PDUFA, Mannkind is informed by FDA on December 28, that they will need 3-4 additional weeks to complete the review. Then on January 18, 2011 MannKind received a Complete Response Letter from FDA. The principal issue raised by the FDA concerned the data to bridge the Gen2 (Dreamboat) inhaler and the MedTone used in the phase 3 trials. This in itself is very concerning given that the FDA told MannKind in a meeting that they would accept the bioequivalence trial to bridge the two devices and when MannKind submitted the trial, the FDA accepted it. There has never been a question about safety of Afrezza.

So in conclusion it seems clear based on Liang's method of operation that he purchased MannKind stock knowing from the confidential internal FDA files that Mannkind's Afrezza was on track to be approved. Then Martin Shkreli sends emails to 12 FDA officials on December 25, 2010. On December 28, MannKind is notified they need 3-4 more weeks. Three weeks later on Jan. 18, 2011, MannKind receives a CRL. So one has to ask, what unlawful undue influence Martin Shkreli had on the FDA to change their decision when outside influence should never come into play. One can only imagine when so much serious money is on the line.

No matter how you look at this scandalous sequence of events, I think Martin Shkreli and his company should be thoroughly investigated and the FDA also has some explaining to do. Other than MannKind and its shareholders, the only people that got hurt by this are the tens of millions of diabetics that would benefit by this clearly superior therapy than anything currently on the market.


1) SEC investigation against Cheng Liang:

2) CREW requesting SEC to investigate against Martin Shkreli
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