How will they spin this?
One of the best parts of our job isn’t just the great material we get from all the wackiness that goes on in this wacky world. As delightful as that is we take particular delight in anticipating how companies or zealots rationalize bad decisions. Over the past 20 years we’ve seen some truly wacky explanations for truly bad decisions. Way back in the day we enjoyed how Roche tried to explain why they spent over a billion dollars to acquire Disetronic when shortly after the deal was done the FDA banned sales of Disetronic insulin pumps.
We also enjoyed listening to Abbott (NYSE:ABT) explain how after spending over a billion bucks to acquire Therasense how things just weren’t going as anticipated. The same can be said for Johnson and Johnson (NYSE:JNJ) after they spent a billion to acquire Animas. In the wacky world of diabetes there is just something special about companies spending billions to acquire a once promising company only to realize after this money is spent the company they acquired isn’t what they thought it was.
The diabetes landscape is littered with such deals, so much so that any deal which actually works as anticipated is the exception not the norm.
Although it’s still early Diabetic Investor is relishing the day when Sanofi (NYSE:SNY) fesses up and admits they made a mistake with the MannKind (NASDAQ:MNKD) partnership. Although Sanofi did not acquire MannKind they are on the hook for almost a billion bucks due to this partnership. And quite frankly we don’t expect Sanofi to fess up to anything rather they will likely let Afrezza die a slow and quite death. That with each earnings call we will hear less and less about Afrezza.
This is what diabetes companies do when they make a mistake. Back in the day Abbott followed this exact strategy with the Navigator, once considered the best continuous glucose monitoring system. In the beginning the company was very vocal about the Navigator never missing the opportunity to tell everyone how great this product was, how it would change diabetes management forever. Yet as it became obvious that Navigator wasn’t going to do anything but create a headache this once very vocal support switched to deafening silence.
The same happened with Medtronic (NYSE:MDT) who at one time was very vocal about their patch pump project. Yes like Abbott, Medtronic rarely missed an opportunity to talk up this project. And like Abbott all this talk disappeared when they realized they couldn’t make the damn thing work.
The Sanofi – MannKind situation is made more interesting as incoming CEO Olivier Brandicourt witnessed firsthand the demise of Exubera when he was at Pfizer (NYSE:PFE). Just as Sanofi is publicly supportive of Afrezza today so was Pfizer in the early days after the Exubera launch. Rarely did a day go by when Pfizer was coming up with one or another explanation as to why Exubera wasn’t doing as well as anticipated. Yet after time all of a sudden Exubera became an afterthought rarely mentioned at all. A silence which ended when Pfizer finally pulled Exubera from the market and admitted to a $4 billion mistake.
Knowing Sanofi as we do, we wouldn’t expect a public admission of any kind. Like others before them their once vocal support of Afrezza will slowly disappear. Yes this once for sure blockbuster will become the ugly duckling of the diabetes franchise. A silence which will only end when they realize they just can’t continue throwing good money into a very bad deal.
Now some may say that Diabetic Investor will take some pride for once again proving everyone wrong. That we just might say that we told you so, that Afrezza is nothing more than a niche product. That with all the issues this product has it will never be the blockbuster everyone thought it would become. Sorry but not this time although we would take some particular delight if people like Ken and Gomer publicly admitted they were wrong.
Honestly companies like Sanofi making billion dollar mistakes is nothing new, it’s happened before and will happen again. The simple fact is a company like Sanofi can afford to blow a billion bucks. The same cannot be said for the people Ken and Gomer duped into buying shares of MannKind. Now some may say that these investors should have known better, that they should have not made an investment in MannKind just because Ken and Gomer said it was a good investment. That they should done their own research and to some extent this is true.
Perhaps Diabetic Investor is just getting a little fed up with people like Ken and Gomer, people who know nothing about diabetes or the diabetes market shooting their mouths off. We’re not surprised they did and more than likely they or someone else will do it again for another diabetes company. This is the nature of the beast. We’d like to believe that with all the failures in this area, with all the publicly available information investors would make smarter decisions, that they wouldn’t let their dreams of riches interfere with solid due diligence.
Yet who are we kidding here if a multi-billion dollar company like Sanofi is dumb enough to make decisions like these why should we expect anything different from the average investor.
