Dexcom and MannKind Report – Two very different outlooks

Dexcom and MannKind Report – Two very different outlooks

This afternoon Dexcom (NASDAQ:DXCM) reported second quarter results which reflected how the continuous glucose monitoring business is transitioning into a more traditional medical device market. As many will recall one of the bigger issues faced by Dexcom was the fact that when CGM first came to market there was virtually no insurance reimbursement. This lack of reimbursement combined with technological issues made the early days of CGM very difficult.

While reimbursement is not universal the environment has change dramatically. Add in the improvements in system performance plus greater acceptance of CGM technology and it should surprise no one that Dexcom’s results and future prospects have improved as well.

Looking at where the company and CGM market stands Diabetic Investor expects Dexcom to follow a path similar to what happened in the insulin pump market after the results of the DCCT study became public. The DCCT validated intensive glucose management and resulted in an increase sale of insulin pumps. The same is happening with CGM as more studies validate CGM technology and when you add in the improving reimbursement environment the future looks very bright for Dexcom.

The company is also making solid progress with their hospital based system which only brightens an already sunny picture for the company’s future.

All in all Diabetic Investor isn’t all that surprised by the progress Dexcom has made since Terry Gregg took control of the company. Using his vast experience and knowledge of the diabetes device market he has corrected the problems that had previously plagued the company and has put Dexcom on the right track. A track that will eventually lead Dexcom into the arms of a larger medical device company most likely also located in California.

Reporting almost at the same time as Dexcom was MannKind (NASDAQ:MNKD) and while these companies reported on the same day Diabetic Investor isn’t as optimistic about MannKind’s future as we are about Dexcom’s.

While the company has submitted Afersa® to the FDA for approval and is working on an even better more patient friendly deliver device Diabetic Investor believes the market for inhaled insulin will never reach the lofty expectations set by MannKind founder Al Mann. While Afersa is a vastly better product than Exubera, it appears MannKind is making the same mistake Pfizer (NYSE:PFE) did when they kept touting Exubera as a multi-billion dollar product.

The fact is when approved Afersa will come to market within months of two more promising drugs also targeted at patients with Type 2 diabetes, Victoza™ from Novo Nordisk (NYSE:NVO) and Byetta LAR from Amylin (NASDAQ:AMLN). It’s important to note that Afersa is a short-acting insulin taken with every meal or snake just as injectable short acting insulin’s. This means that an Afersa patient would be subjected to three or more Afersa administrations per day. Additionally Afersa is insulin which means patients must be careful of hypoglycemia and weight gain, two common insulin side effects.

Even though Victoza and LAR are both taken via injection the patient will likely prefer either drug to Afersa as neither drug promotes weight gain (both actually promote weight loss) nor is hypoglycemia a concern.  It’s also true that both Victoza and LAR offer less frequent dosing options, Victoza just once a day and LAR just once-a-week.

Back on March 2nd of this year shares of MannKind closed at $2, this afternoon shares closed at $8.23 an incredible increase given the company has no approved products or any announced partnership agreements. Listening to the call today Diabetic Investor couldn’t help but feel the company was over-selling itself and over-explaining any move they make.

As for the much anticipated partnership it sure better be a good one given all the hints dropped by the company. Given that Pfizer, Lilly (NYSE:LLY), Sanofi-Aventis (NYSE:SNY), Abbott (NYSE:ABT) and Novo Nordisk have all dropped their inhaled insulin projects it’s will be interesting to see who will take on the herculean task of marketing and selling Afersa.

Diabetic Investor finds it incredible that anyone would believe that the inhaled insulin market, even with a product as good as Afersa, will ever be more than just a niche market. Even without the Exubera disaster, Afersa must overcome newer more effective therapy options that will come to market within months of Afersa and be targeted at the same market as Afersa.

Al Mann has proven his metal in the diabetes industry especially when he got Medtronic (NYSE:MDT) to overpay to acquire MiniMed. Yet even his vast wealth and diabetes knowledge cannot change the dynamics of the inhaled insulin market. The fact that with each successive conference call the company continues to make ever more grandiose statements leads Diabetic Investor to believe something that Brooks Atkinson once said; “People everywhere enjoy believing things that they know are not true. It spares them the ordeal of thinking for themselves and taking responsibility for what they know.”