Diabetic Investor Is Game

Diabetic Investor Is Game

Earlier this week we posted an article on the pump and dump tactics related to MannKind (NASDAQ:MNKD). It appears that these people have no shame are at it again. Just today Ken Kam, a contributor to Forbes and apparently a very good friend of Nate Pile, is at again posting a piece entitled “Diabetics: Use Your Firsthand Experience To Beat Wall Street”. Yes it seems that Ken and Gomer really believe that Afrezza will be a huge hit and that shares of MannKind will skyrocket as a result. Today Ken wrote:

“After all the facts have been laid out, it still takes good judgement to interpret what the facts mean and what to do about it. If you make these judgement calls correctly, more often than not, it begins to show itself in your track record after about 5 years. I do not know the track records of the people who are short the stock. But, I do know Nate Pile’s track record and I would not want to see him on the other side of the trade from me, any more than I would like to see Warren Buffett himself. By sharing your firsthand experiences, we can provide Nate, a Marketocracy Master with one of the best track records, an important set of facts that Wall Street does not have access to. That’s how we can all gain a competitive advantage on Wall Street.

Is anyone game?”

Well Ken Diabetic Investor is game and we’re more than happy to stack our track record in the diabetes space with anyone. What you, Nate and almost everyone else who seems to believe that Afrezza is the greatest thing to hit the diabetes market since the invention of insulin ignore or lack the knowledge of, is how this market actually works in the real world. Now we will not repeat the many issues we have with Afrezza or their partner our wine drinking friends in France, Sanofi (NYSE:SNY) as they are well documented. Today we’ll look at this from a slightly different perspective that shows the depths of the issues facing Afrezza.

As one can imagine there are many who disagree with our assessment of Afrezza and not just the folks at Sanofi and MannKind. This is nothing new. Yet unlike the proponents of Afrezza who are blinded by their unbridled optimism and can’t support this blind faith when faced with a competing view, Diabetic Investor has actually sought out some of the more reasonable and knowledgeable Afrezza advocates with the simple proposition – share with Diabetic Investor where you see Afrezza fitting in the treatment paradigm, which patient groups will use this product and give us your best scenario for how you see Afrezza doing commercially.

What we learned was very interesting. While almost everyone agreed the most obvious market for Afrezza are patients with Type 2 diabetes who are failing on their current therapy regimen. A more surprising revelation was many felt experienced insulin users are better target. This may seem counter intuitive to conventional wisdom but as these experts point out, experienced insulin users understand how insulin works and the value of a faster acting insulin, an insulin that goes in does its job and then leaves the system. Which in a nutshell is what Afrezza does.

It was also interesting that these experts didn’t make a big deal out of the fact that Afrezza is inhaled rather than injected, at least not for experienced users. As they noted experienced insulin users are all about tight glycemic control and while inhaled is nice for this group of patients performance trumps delivery systems. Yes insulin naïve Type 2’s would likely prefer inhaled over injected but this group doesn’t fully grasp how insulin works nor are they educated properly on how to use insulin. With insulin naive Type 2’s delivery systems trump performance.

It was striking however the lengths to which these experts went to find patient populations which would use Afrezza. Or put another way the patient populations where not large and as these experts readily admitted adding Afrezza to their regimen was a luxury and not a necessity. A nice thing to have but certainly not a must have.

When it came to the commercial prospects for Afrezza these experts weren’t overly optimistic and became less so when we asked how they felt the product would do if it is regulated to trier 3 formulary status. The general consensus was at trier 3 Afrezza would be dead on arrival, that insulin naïve Type 2 patients would be unlikely to pay more just because Afrezza is inhaled rather than injected. They also felt primary care physicians, who treat nearly 80% of all patients, would be reluctant to even recommend Afrezza knowing that their patients hate paying out of pocket for their diabetes treatments.

All along, even before Sanofi switched from being a pharmaceutical company into a soap opera, we have felt that Afrezza is nothing more than a niche product, if that. That sales would reach millions but not the billions many of the Afrezza zealots see. Frankly the fact that Sanofi is involved in our opinion actually makes matters worse not better. Something that should be obvious as what company with a new drug that has a supposed advantage doesn’t fight for better formulary status and settles for trier 3?

The difference here between the Afrezza true believers, people like Ken and Gomer, is that Diabetic Investor does not own 200,000 shares of MannKind as Nate Pile does, nor is it the single largest position held as it for Nate and finally our cost basis in MannKind is not $6.28 per share as it is for Nate. In the interest of full disclosure Diabetic Investor owns exactly zero shares of MannKind and has never held a position in the stock. We have no financial incentive and other than providing good copy could care less whether MannKind shares go up or down.

What we have on our side is more than 20 years of experience covering the diabetes space. As we noted earlier this week we have seen this show before and while there are differences between Exubera and Afrezza, the two shows will have similar endings. So investors have a choice they can listen to reason, consider all the facts (as Ken notes in his post today) and make their own decisions. Or they can blindly follow the advice of someone who clearly has a vested interest in the outcome and when it comes down to it could care less how investors do as long as he makes money.

Don’t say we didn’t do our best to warn everyone.