Los Angeles Business Journal

MannKind Resolves Claims with Former Employee

By Deborah Crowe Wednesday, December 14, 2011

MannKind Corp. has cleared one of the shadows hanging over its experimental inhalable insulin product, announcing that it had reached an arbitration resolution with an employee who had accused the company of firing him after he alleged improprieties.

The Valencia biotech, which has faced several roadblocks to gaining U.S. regulatory approval of its Afrezza inhaler, said late Tuesday that both it and John Arditi, a former senior director for regulatory affairs, had agreed to drop complaints against each other.

Arditi in November 2010 filed a wrongful termination lawsuit against the company, claiming he was fired after his internal audits uncovered "potential fraud and scientific misconduct" involving Afrezza clinical trial data, according to the lawsuit. He claimed that the company did not inform the FDA about his findings for fear it would delay the drug’s approval.

Arditi has withdrawn his claims against MannKind. “I do not believe there was fraud or scientific misconduct on the part of investigators nor do I believe there is any question regarding the reliability and integrity of the data collected in MannKind’s clinical trials while I was employed,” Arditi said in a statement.

MannKind said it also has withdrawn its claims against Arditi, and noted that neither party gave money to the other in connection with the resolution.

“The entire team set extremely high standards for quality in our earlier clinical program, and then exceeded those standards in a professional and diligent manner,” said Chief Executive Alfred Mann in a statement.

MannKind still faces delays in obtaining FDA approval of Afrezza after regulators demanded the company conduct additional clinical trials on the safety of a redesigned inhaler. Those studies are likely to delay any FDA approval by one to two years.

The company also must defend itself in a class action lawsuit filed by angry investors who claim the company misled them about the FDA’s concerns.

Shares in midday Wednesday trading were up 4 cents, or more than 1 percent, to $2.77 on the Nasdaq.