How this might play out.

How this might play out.

Now that it’s looking like Afrezza may not be the greatest thing to happen in diabetes since the discovery of insulin, MannKind (NASDAQ:MNKD) investors might be wondering how this will play out. Thankfully there is a near direct parallel investors can use as a guide which unfortunately does not paint a pretty picture. As we noted just the other day while Pfizer (NYSE:PFE) was marketing Exubera, the product was developed by Inhaled Therapeutics which later changed their name to Nektar (NASDAQ:NKTR).

Pfizer officially pulled Exubera from the market in October 2007 slightly over a year after the drug was launched.  Back in October of 2006 shares of Nektar were trading at nearly $18 per share, a year later shares fell to under $7. Yet the carnage wasn’t over as a year later shares had fallen to just over $4. Yesterday shares of Nektar closed at $12.94.

Taking an even longer term view the picture is actually much worse as shares of Nektar once traded close to $60 per share in 2000.

While MannKind stakeholders may not want to do this but taking a similar view of MannKind’s chart shares once traded near $25 back in 2006, a level that hasn’t been seen since. On August 11th, 2014 the day MannKind Sanofi (NYSE:SNY) partnership was announced shares of MannKind closed at $8.53, yesterday shares closed at slightly over $6 per share, which means that shares of MannKind are DOWN almost 28% since the partnership became public.

Given that Afrezza has only been on the market for slightly over a month it’s still too early to know whether this is an Exubera repeat. However early signs are not encouraging which makes one wonder how far shares of MannKind would fall should Sanofi pull the plug.

The wild card here is what Brandicourt the new Sanofi CEO will do once he officially takes command. As we noted in the past the biggest questions are what he learned from his stint at Pfizer when he was responsible for Exubera and what will Serge and the board allow Brandicourt to do. Just how much data does it take to determine if Afrezza is another Exubera disaster or whether it’s nothing more than a niche product? Should Diabetic Investor prove to be correct and Afrezza is nothing more than a niche product the question then becomes can Sanofi make any money with its continued existence?

Yes it’s true there have been other drugs which got off to very slow starts which later morphed into a blockbuster. However the difference between Afrezza and these late bloomers is current market dynamics which for diabetes therapies are not good. With cost containment the order of the day payors are demanding greater price concessions and/or rebates or both. Competition in the insulin market is intense with Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) perfectly willingly to use price as weapon to protect their perspective franchises. This does not bode well for a drug like Afrezza which as we have been stating is costly to manufacture making for smaller margins.

The simple fact is Afrezza cannot compete on price, for Afrezza to become the blockbuster many think it is, it must be a better option which it is not. As much as Diabetic Investor does not see a path for Afrezza to be successful that does not mean we didn’t look for one. Yet with every avenue we pursued one or more roadblocks kept coming up.

This is what MannKind supporters ignore is they truly believe Afrezza will succeed for one reason and one reason only; they believe because the drug is inhaled rather than injected that one fact alone will propel the drug to blockbuster status.

At the moment no one truly knows how this play out over time. Still one cannot ignore the many similarities between Afrezza and Exubera. No they are not one in the same however they do share a common DNA. Unfortunately we also see similarities between what happened to shares of Nektar and what is likely to happen to shares of MannKind. Not a pretty picture.