Long-term and Afrezza – Things that don’t go together

Long-term and Afrezza – Things that don’t go together

There are certain things that just don’t go well together. Chicago Cubs World Series Champions is one example. Let’s face facts as much as it would be great if the Cubs won a World Series it just doesn’t seem natural putting these two elements together. The same can said for using the phrase long-term and Afrezza in the same sentence. It just doesn’t seem natural, crazy maybe, but certainly not natural. Frankly the Cubs stand a much better chance of winning a World Series than Afrezza has being around for the long term.

We mention this not because the Cubs have actually put together a pretty good team this year with a great new manager rather we find it amusing how so many analysts are now back tracking on their previous unrealistic sales estimates for Afrezza. Yet they continue to justify their support for MannKind (NASDAQ:MNKD) on the basis that although sales won’t be as good as they thought over the “long-term” Afrezza will do quite well.

The most recent of these came from RBC Capital Markets analyst Adnan Butt, who in a research note published today stated that Afrezza is off to a slower than anticipated start and that his previous sales estimates were too high. Just how off the mark was Mr. Butt (boy the jokes we could insert but we digress) original 2015 sales estimate $46 million revised down to … hold onto your hats… $5 million, and no that is not a misprint. But wait he also lowered 2016 estimates from $150 million to $118 million, 2019 from $845 million to $539 million. We’re not sure what happens in 2017 or 2018 but again we digress.

Now it appears Mr. Butt remains optimistic over Afrezza’s long-term future as he now sees peak sales falling into the 2 to 3 billion range albeit not the 4 billion he had previously.

Not surprisingly Mr. Butt (boy it is so tempting to add a joke here, but again we digress) maintains his outperform rating for MannKind albeit he lowered his price target from $13 to $10. Given that MannKind is currently trading well below that level if you believe Mr. Butt, an investment in MannKind is a no-brainer.

Quite frankly Diabetic Investor thinks sales estimates are about as reliable as pre-season baseball predictions. Back in 2005 the Chicago White Sox, yes there are two baseball teams in the Windy City, were projected to finish no better than fourth or fifth in their division. Hardly anyone, even die hard South Siders, thought they would make the playoffs and no one was crazy enough to predict they would win the World Series which is exactly what they did.

Yet looking at how Afrezza is actually performing and with everyone lowering sales estimates one has to wonder just how long our wine drinking friends in France will stick with Afrezza. The question is that soap opera that has turned into a three ring circus who churns out executives who just love to insert their feet in their mouths every time they speak, just how long will they stick with Afrezza. Just how much data do they need to see to realize this dog don’t hunt. That better to concentrate on another dog, albeit one that does stand a small chance, Toujeo. Just how much pain must be inflicted, how much money wasted before they realize that Afrezza is nothing more than a niche drug.

Now at this point we would advise sitting down as we are about to say something nice about our chardonnay guzzling friends, in particular the newest sommelier, Olivier Brandicourt. Yes we know Olivier has only been on the job a few weeks but we must admit we have been impressed by his silence. Unlike our good buddy Serge and our new best friend Pierre, he has yet to be infected by the open mouth insert foot virus. Now we have no idea if the virus takes time to germinate before rearing its ugly head or whether Olivier was vaccinated prior to his arrival in Paris. We should learn something at the end of the month when earnings are reported but until then, barring any interviews before then, it’s nice that someone in a position of authority is still sober.

The fact is with each day it’s becoming just a little bit clearer that Afrezza isn’t the drug everyone thought it was. That this is a me-too insulin that happens to be inhaled rather than injected. That in terms of glycemic control, what we think counts, it is no better than Humalog or Novolog. This does not mean it is a bad product or that there is not a place for it in the therapy regimen. Nor does this mean that there won’t be patients who absolutely love it. The problem is there just won’t be enough of them.

From the moment Afrezza hit the market it came in as damage goods. Poor formulary position, black box warning, pulmonary function tests required, being compared to Exubera, dosing issues and the fact that other than Lantus Sanofi (NYSE:SNY) has never had a successful diabetes product.

The reality is the Cubbies have a more realistic chance of winning the World Series than Afrezza does at becoming a blockbuster. We’d even go a step further and say the Cubs will actually win a World Series before Afrezza hits $500 million in sales. Although we never think Afrezza will even hit that number.

Now to fully understand just how deeply we believe this consider we are die-hard White Sox fans and anyone who knows anything about baseball in Chicago knows that Sox and Cubs fans rarely agree on anything not to mention say anything nice about each other. About the only time this happens is either the fans are drunk or in love, barring that ….