Does it matter?

Does it matter?

These past few days we’ve seen some interesting developments in the world of short-acting insulin. On Friday Novo Nordisk (NYSE: NVO) per a press release announced;

“Novo Nordisk today announced that the US Food and Drug Administration (FDA) has approved Fiasp® (fast-acting insulin aspart), a new fast-acting mealtime insulin, for the treatment of adults with diabetes. The FDA’s decision comes after Fiasp® in clinical trials demonstrated benefits for people in need of improved overall glucose control.”

And just this morning MannKind (NASDAQ: MNKD) announced;

“MannKind Corporation (Nasdaq and TASE: MNKD) today announced that the U.S. Food & Drug Administration (FDA) has approved an update to the Afrezza prescribing information to include new clinical data that was presented at the American Diabetes Association’s 76th Scientific Sessions in June 2016. Afrezza (insulin human) inhalation powder is approved by the FDA to improve glycemic control in adult patients with type 1 and type 2 diabetes mellitus. It is the only inhaled rapid-acting mealtime insulin available in the United States. Afrezza is dosed at the beginning of a meal and begins to appear in the blood in approximately one minute¹.

Key highlights of the label update:

1) Inclusion of study data that describe the time-action profile by dosage strength, showing first measurable effect starts in approximately 12 minutes, peak effects occur approximately 35 to 45 minutes after dosing and return to baseline after approximately 1.5 to 3 hours for the 4 and 12 unit cartridges respectively.

2) Clarity on “Starting” and “Adjusting” mealtime dose.

3) Updated pregnancy and lactation section to conform to current FDA label guidance”

Also on Friday the company per an SEC filing;

“On September 29, 2017, MannKind Corporation (the “Company”) and the four holders of all outstanding Series A Common Stock Purchase Warrants and Series B Common Stock Purchase Warrants of the Company (collectively, the “Warrants”) entered into separate, privately-negotiated exchange agreements (the “Exchange Agreements”), pursuant to which the Company agreed to issue to such holders an aggregate of 1,292,508 shares of the Company’s common stock (the “Exchange Shares”) in exchange for the Warrants. The closings of the exchanges contemplated by the Exchange Agreements are expected to occur on October 3, 2017, subject to the satisfaction of certain closing conditions.”

Before we examine the insulin, impact let’s look at the financial impact of the Warrant exchange, which per the company allows them to borrow more from their recently established ATM. Even with the recent improvements in Afrezza scripts and this positive label change the company is still not yet on solid financial footing.

Now let’s get to the impact of both events in the insulin world. Even with the positive label change MannKind is facing an uphill fight when it comes to payors and reimbursement. Frankly we are not surprised by the recent uptick in Afrezza scripts as they have put more feet on the street and it would be very disappointing had these additional reps not brought in more business.

Although it’s not exactly similar Novo will face the same problem with Fiasp, can the garner favorable formulary position without giving away the store? Both Fiasp and Afrezza are improvements in the short-acting insulin category from a therapeutic perspective. However, looming on the horizon are biosimilar versions of Humalog and NovoLog the two most popular short-acting insulins. Now I know this getting old but this isn’t about which insulin works best, this is all about which insulin is cheapest.

The biggest obstacle facing Afrezza and Fiasp isn’t whether they work or whether there is place for them in the treatment paradigm. No, the biggest issue is can either drug establish a large enough base of patients so that Novo or MannKind can make money. MannKind has a bigger problem as unlike liquid injectable insulin which is much cheaper to manufacture and gets cheaper with greater scale this does not apply to Afrezza. Unfortunately, Afrezza has a built-in disadvantage because of how it is made and scale does not change this.

The reality is when the biosimilar short-acting insulins get here it will devastate the short-acting segment just as Basaglar crushed the long-acting market. Which means that Novo and MannKind have another problem as they must establish the patient bases quickly before the biosimilars get here and pray that payors don’t knock them off formulary when they do arrive. This by the way is exactly what happened when Basaglar arrived and there is no reason to believe it will be any different in the short-acting market.

The harsh reality here is that neither Afrezza or Fiasp stands much of a chance to be commercially successful. The difference is Novo is in a much stronger financial position than MannKind to support Fiasp with discounts and rebates. MannKind is doing what they can to keep their financial issues from catching up to them but we wonder how long this can last. The more feet on the street, the more marketing, the higher their costs which are not being offset with more favorable reimbursement. The way we see it it’s just a matter of time before this all catches up with the company.

One last item as MannKind management during this morning’s call mentioned the approval of the FreeStyle Libre as a positive for Afrezza noting that Libre will be popular with insulin using Type 2 patients. Others we have spoken with seem to have a similar view that Libre is for insulin using Type 2’s while the Dexcom (NASDAQ: DXCM) system is for Type 1’s. While we disagree with this view it is interesting to see how the battle lines are being drawn.

Contrary to what many seem to believe Dexcom is not a sinking ship and the negative reaction to their share price was way overdone. This fight is just beginning.