A preview of coming attractions

A preview of coming attractions

As everyone knows Thursday morning Sanofi (NYSE:SNY) will report third quarter results and given what we’ve been hearing this will be a very interesting call. As we reported last week word coming out of France is Olivier Brandicourt will announce a major reduction in headcount. Additionally we should get more color as to how sales of Afrezza are progressing. We could also get a glimpse of the future for the MannKind (NASDAQ:MNKD) partnership. Given the precarious state of MannKind’s financial situation this call could well determine their future.

To understand the depth of the issues facing Sanofi with Afrezza consider the following. It’s no secret that sales of Afrezza have been disappointing, equally ominous based on available prescription data a significant number of patients on Afrezza are not refilling their scripts. To overstate the obvious this is not good news. Given that Sanofi can terminate the MannKind partnership in January with minimal financial impact the question is will Olivier shed any light as to whether the company is leaning in this direction.

According to well-placed sources within the company Afrezza must reach sales of $150 million for the drug to breakeven. These sources indicate that management believes that they can boost sales to the $30 million range next year and build towards breakeven. Although we don’t know how Afrezza is tracking this year based on available data hitting $10 million in sales this year will be a stretch. Should the company decide to remain committed to Afrezza this basically means sales would have to more than triple to hit the $30 million mark.

Another problem facing Sanofi is the cost to manufacture Afrezza. As we have noted previously based on discussions with various experts it takes 11 units of liquid insulin to manufacture 1 unit of inhaled insulin. Even if Sanofi who has a boatload of insulin manufacturing capacity did not charge MannKind for the liquid insulin, highly unlikely, the cost of goods is high.

Even worse few see payors moving Afrezza from Tier 3 formulary position, where it is today, to Tier 2.  Several of the experts we spoke with last week while in Boston for the CardioMetabolic don’t see this happening as Afrezza does not perform better than existing and much cheaper liquid short-acting insulin’s.

These experts see Afrezza in much the same light as Diabetic Investor does. Yes the drug works and yes there is a place for it in the treatment paradigm. Ionically they see this place more with Type 1 patients who are experienced insulin users than with insulin using Type 2’s which was supposed to be Afrezza’s target market. The issue they note with insulin using Type 2’s is dosing as the majority of these patients aren’t striving for tight glycemic control. They correctly point out that the majority of insulin using Type 2’s want simplicity and dosing Afrezza is not simple.

Experienced Type 1 patients strive for tighter glycemic control and can more effectively use Afrezza. Again this is not good news as there are far fewer Type 1’s then there are insulin using Type 2’s.

The experts also noted that physicians have a larger array of therapy options for their Type 2 patients failing to achieve control on existing therapy regimens. These experts believe strongly in adding insulin to the therapy regimen for  their Type 2 patients not achieving good control but note that with all the available options that can added prior to insulin therapy being initiated the future is not bright for Afrezza in this market. Even worse given the problems with dosing many believe injectable short-acting insulin besides being cheaper than Afrezza is actually a better option therapeutically.

So the question becomes will Sanofi continue to throw good money into a product which by all indications has limited appeal.

The fact is Olivier has seen this movie before as he was Pfizer’s (NYSE:PFE) general manager for their metabolic and cardiovascular division, which included Exubera. While there is no question that Afrezza is a much better product than Exubera, it is also true that Afrezza is facing the same issues Exubera did. Having lived through the Exubera disaster one has to wonder whether Olivier would want to relive this nightmare all over again.

One last housekeeping as Diabetic Investor will be wheels up when Sanofi reports. Don’t worry as we will offer a full commentary on their results when we can.