Jewish billionaire Alfred Mann, 85, is currently focused on one thing: helping his company MannKind Corporation, in which he serves as chairman and CEO and has a 40 percent controlling interest. To date, he has invested $575 million and provided a $350m. owner’s loan – possibly the largest ever investment by a private individual in a medicaldevices company. MannKind, which has a market cap of $515m., is at a crossroads and needs more cash.
In an exclusive interview with Globes while attending the ILSI Biomed 2011 Conference, Mann said he was considering various options to continue funding the company’s operations. It turns out that even Mann, one of the world’s wealthiest medicaldevices entrepreneurs, has limits beyond which he would rather not make personal investments in the company at this time.
“I’m somewhat limited now because of MannKind,” he says. “But as soon as I find financing for it, which would be better not to dilute its shareholders, I’ll go back to my original plan for supporting universities.”
Mann, whose fortune is estimated at $1.5 billion, is involved in Israeli industry. He has invested $100m. in the Alfred Mann Institute at the Technion (AMIT), which commercializes medical technologies developed at the Technion Israel Institute of Technology. Mann’s fourth wife, Claude, is very active in AMIT and its programs.
“My original plan was to donate $100 million to 12 universities around the word; in other words, $1.2 billion altogether,” Mann told Globes. “But I now think that I should invest more in fewer institutions and invest more in each company.
“A $100 million principal generates an annual return on investment of $5 million. The Technion could also have drawn on the principal, assuming that the investments would succeed and make back their money, but they prefer a conservative approach. That’s why I’m now considering donating an additional $100 million.”
Mann also owns 25% of Teuza – A Fairchild Technology Venture Ltd. Teuza CEO Avi Kerbs, a close friend of Mann, told Globes: “AMIT and the Technion really don’t need to worry about money. If they need financing for a project that looks promising, Al gives them another one to two million [dollars]. Right, Al? See, he doesn’t even remember.”
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Mann praises AMIT’s activity, where researchers and entrepreneurs work together on earlystage life-sciences projects. Founded four years ago, AMIT is already conducting human clinical trials.
“We’re constantly enthusiastic about our work,” he says. “The people there are talented and skilled.”
Mann has also set up a joint venture in Israel, Bioness Inc. with NESS – Neuromuscular Electrical Stimulation Systems Ltd. Mann controls Bioness directly and through an 8% stake held by Teuza.Globes:
After you secure the financing package for MannKind, will you make more investments in Israel? Mann:
“I met seven to eight companies during this visit, so an investment in this direction is possible. I own shares in Teuza, which has a fair amount of cash for making investments. I don’t run the fund, and I don’t make decisions in it, but I’m always available for advice and assistance.”What do you think about its $65 million market cap?
“I don’t understand it, especially since it has $23 million in cash after its numerous excellent investments.”
Mann’s main current interests are diabetes, which he calls “the number one medical problem in the world,” neurological diseases, cancer and electrical-stimulation implants.
Mann believes that MannKind’s flagship product, Afrezza, a new kind of insulin, will change the lives of diabetics worldwide. But the US Food and Drug Administration (FDA) is less enthusiastic. It asked MannKind to conduct more studies after the company submitted a file for approval pursuant to FDA protocols, which it had hoped would be the final submission before approval.
MannKind assumes that this is simply bureaucratic caution, but the additional tests cost money, take time and create uncertainty.
“Investors claim that they thought Afrezza was inhalable insulin, although that is one of its components,” Mann says. “But it’s not possible to build a market on such a change in delivery.”
It’s possible to understand why Mann does not want Afrezza to be classified as just another inhalable insulin: The star product in this category, Exubera, made by Pfizer Inc., was pulled from the shelves, mainly because of marketing problems.
“That wasn’t a convenient product suitable for needle-phobes,” he says. “Other people were worried that injections were faster and easier to use than continuous inhaling. We knew from the beginning that they couldn’t capture the market.”So why bring to market another inhalable insulin at an investment of over $1 billion? What are the grounds for you expectations of more than $5 billion in peak sales?
“Afrezza is a new insulin formulation, which is closer to natural insulin that the body produces. Inhalable delivery enables the insulin to quickly reach high hormone levels, as well as expediting the insulin’s removal, which takes up to nine hours for regular insulin. In this way, the insulin does not remain in the body after the food has been digested and provides much better control of blood-sugar levels, reduces weight gain and slows tolerance to insulin. The product also prevents hyperglycemia and slows the progression of diabetes.”It sounds like there won’t be any more need for insulin needles, pumps and frequent finger pricking to test blood-sugar levels, or the continuous monitoring of glucose, which are considered the golden fleece of diabetes.
“Correct. Injections won’t be needed any more, and measurements will only be necessary every few days. After the 56 trials we conducted, mostly at our own initiative, I can say that I know my product well. We were very cautious. Although the product does not cause weight gain, we told the FDA that it ‘reduces weight gain.’ Although it doesn’t create tolerance to insulin, we said that it ‘creates less tolerance to insulin.’ “Nonetheless, despite all the compromises we made, the FDA is not satisfied. It’s not only about us; there have been a lot of companies this year that couldn’t get their products approved by the FDA on the first attempt and were forced to conduct supplementary studies.
“That is the regulatory environment that we operate in, which together with other factors that are burdening the US economy and health system, are simply killing innovation. Fortunately, Israel is still fun. I feel that a new wave of innovation is about to arrive, like in the US 30 years ago.”
Bioness, founded in 2007, has undergone several incarnations. It acquired NESS in 2008 and planned a reverse merger with Israeli blank-check company AMEX-listed Advanced Technology Acquisition Corporation, whose founders included former chief scientist Shuki Gleitman. The merger was canceled in mid- 2009, and ATAC was liquidated and returned its money to its investors.
“Bioness has $20 million in annual sales,” Mann says. “It has extensive operations in Israel, and its manufacturing is also carried out here. It currently has 90 employees in Israel and 150 in the US.”Why didn’t it merge with ATAC?
“Because they had to meet a deadline, and we couldn’t arrange the merger in time.
That’s why we’re financing Bioness on our own. I strongly believe in Bioness and predict that it can become a billion-dollar company.”
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