Golden Goose or Dead Duck?

Golden Goose or Dead Duck?

Well it seems that our new friend Robbie is at again. Yes this non-professional investor who claims to be all knowing about MannKind (NASDAQ:MNKD) has penned another piece. Entitled, “Afrezza Could Be Sanofi And MannKind’s Goose That Laid The Golden Egg” Robbie seems to believe that Afrezza will be a certain blockbuster. Here are just few tidbits from Robbie;

“Afrezza could prove to be highly profitable for Sanofi and MannKind if what early adopters are discovering for themselves is indeed true for the majority of other diabetics. If diabetics believe that Afrezza greatly reduces your risk of having a hypoglycemic event, it may not matter if that wording actually appears on the label, not in this age of social media and instantaneous communication. What may matter is what works best and what is discovered through word of mouth, especially for those who live with this issue every day.”

He concludes by stating;

“So, while the market is focused on Lantus and what will become of Toujeo, MannKind’s Afrezza inhaled insulin may turn out to be the goose that lays the golden egg for both Sanofi and MannKind Corporation.”

Now for a guy who says he’s well informed Robbie makes some very stupid statements. First off using the phrase “highly profitable” Sanofi (NYSE:SNY) MannKind and Afrezza in the same sentence is like saying the law Indiana just passed is friendly to the gay and lesbian community. Nothing could be further from the truth, a point missed by almost every MannKind zealot. The simple fact is Afrezza is very expensive to manufacture plus with the increased marketing costs it’s ludicrous to believe the drug is “highly profitable”. As we have pointed out Sanofi from the very start has been using co-payment cards to offset the poor formulary position which eats into the already thin margins for Afrezza.

Next this claim that Afrezza will do well because of lower incidence of hypoglycemia has no basis in fact.

What Robbie and many Afrezza supporters miss is that these early adopters are not representative of Afrezza’s target market, insulin using Type 2’s. In the real world physicians, primary care in particular, are very thoughtful about which patients they prescribe any new therapy option. Typically they will select patients who are engaged with their diabetes management, patients who they trust to use the drug and then report back the results. Diabetic Investor has read many of the reviews from the early adaptors and as we expected and have said many times Afrezza works. We have never claimed that Afrezza is a bad drug.

The simple fact is the majority of insulin using Type 2’s aren’t as engaged with their diabetes management as these early adopters. More than anything they want to live their lives WITH their diabetes and NOT FOR their diabetes. They care about such mundane things like formulary position as out of pocket costs matter to these people. They want simplicity and while Afrezza may have the advantage of being inhaled rather than injected it is not simple to use. These reports from early adopters make this very clear.

While we know that people like Robbie just hate when we bring up Exubera, the fact is many of the early adopters of Exubera also wrote glowing reviews. It wasn’t until physicians moved beyond these engaged patients that the many issues with Exubera came into clearer focus.

Let’s be clear here Afrezza does have a place in the treatment paradigm. However it is not for everyone and will end up being what we’ve said all along a niche product.

Now if people would take some time and actually think this through they just might realize that at some point Sanofi is going to be faced with a tough call. Given the cost to manufacture and market Afrezza it must achieve massive scale to generate a high enough profit margin to justify Sanofi sticking with the product. Afrezza also has another issue as even with massive scale manufacturing costs don’t decrease in lock step. The fact is it requires a boatload of liquid insulin to make Afrezza and this won’t change no matter how many people use it.

Sanofi has the additional burden of supporting Toujeo at the same time they are supporting Afrezza. Although no one is that impressed with Toujeo it’s cheaper to make than Afrezza and is target at a huge patient population, existing Lantus users. Should Sanofi price Toujeo on par with Lantus and be able to get favorable formulary position as unimpressive as this drug is it stands a much better chance than Afrezza at being profitable.

The fact is Sanofi HAD the golden goose and it was called Lantus. However this golden goose is now a dead duck. Levemir from Novo Nordisk (NYSE:NVO) has been eating away at Lantus’s once huge user base. Lilly (NYSE:LLY) has a generic Lantus which will put even more pressure on Sanofi to lower Lantus’s price. Toujeo really isn’t that much better than Lantus offering no compelling reason for physicians to switch patients from Lantus to Toujeo. Nor does it help matters any that other than Lantus Sanofi has a less than impressive track record in diabetes. Finally as we noted just this morning the dynamics of the diabetes drug market are not favorable.

Perhaps in the hands of another company Afrezza could be a nice little product. However it’s difficult to imagine a scenario in which it achieves the massive scale it needs to be profitable for Sanofi. As we have noted before this has nothing at all to do with Afrezza works or not, this has everything to do with money. Looking at all the factors one has to wonder how long Sanofi can justify the expense of maintaining their partnership with MannKind. Yes we know that Serge isn’t the brightest blub on the tree but one thing everyone understands is it makes no sense selling any product that isn’t profitable.

Anyone know what type of wine goes with duck? We don’t but our guess is the folks at Sanofi will find out soon enough.