MannKind and Tandem Report

MannKind and Tandem Report

As expected the MannKind (NASDAQ:MNKD) earnings call revealed little as to how the launch of Afrezza is going. Yet as has become the custom at MannKind Hakan Edstrom CEO, has learned much from his predecessor Al Mann, as like Al, Hakan is an expert at hyperbole.  In what best could be called a tease Hakan tried to both dampen and heighten expectations for Afrezza. We’re not sure if Hakan has read Fifty Shades of Grey or seen the movie but one thing is certain he has the art of the tease down cold.

Noticeable absent from the call was founder and former CEO Al Mann. Although Al was available for questions in a shocking development he didn’t say a word. No over the top statements that Afrezza is the greatest thing to hit diabetes since the invention of insulin. No over the top claims that Afrezza will reach billions in sales. Nothing about how he was happy and proud to spend almost a billion bucks of his own money on Afrezza. Honestly this silence saddens Diabetic Investor as like our buddy Serge, Al is a super quote machine.

Now as to what happens next the MannKind zealots will find any reason to promote the stock and say how earnings exceeded expectations. They will play up what they see as the positive comments made by Hakan and play down or just completely ignore anything that might be seen as negative. The fact is the future of Afrezza is really not in the hands of MannKind, the future of Afrezza rests with Sanofi (NYSE:SNY) and the Afrezza sales team. Not exactly a promising thought given that the soap opera has transformed itself into a three ring circus with some very interesting clowns under the big top.

Lost in all this speculation over how Afrezza is doing is what exactly is the definition of a successful launch or how will Sanofi, MannKind and the zealots define success. As we noted previously during the meetings ahead of the launch Sanofi didn’t have high expectations for Afrezza. Today there is the added wild card as to what the new Sanofi CEO will do with the MannKind partnership. Will Brandicourt whose seen first-hand that inhaled insulin could be a huge capital drain stick with Afrezza or will he learn from the Exubera disaster, end the partnership before a billion dollar mistake turns into a multi-billion dollar mistake. No matter what the outcome the Afrezza saga should provide some of the best copy in Diabetic Investor history.

Switching gears to the insulin pump market Tandem Diabetes (NASDAQ:TNDM) also reported earnings yesterday. An earnings calls where they announced they will once again be going back to the capital markets to raise even more money. According to press release concurrent with the earnings release the company stated; “Tandem Diabetes Care®, Inc. (NASDAQ: TNDM), a medical device company and manufacturer of the t:slim® and t:flex™ Insulin Pumps, today announced that it intends to commence an underwritten public offering of shares of its common stock to raise aggregate proceeds of approximately $60 million.”

Given that Asante has had to delay their IPO due to lack of investor interest it will interesting to see how the Tandem offering will be received by investors. On the positive side Tandem unlike Asante has established a toe-hold in the market and is slowly building share. Still the fact that they must again go to the capital markets points to the difficulty of the insulin pump market. Like Insulet (NASDAQ:PODD) Tandem could be caught in the vortex of having to actually run the company, as like Insulet their ultimate goal of being acquired is proving to be more difficult than anticipated.

The fact is conditions in the insulin pump market are worsening and not getting better. As we have noted before market leader Medtronic (NYSE:MDT) is now reengaged in the business and is taking steps to shore up its franchise. Animas, a unit of Johnson and Johnson (NYSE:JNJ), remains somewhat engaged as the new Animas Vibe is doing better than anticipated. This leaves Insulet and Tandem to battle of the lower third of the market and while Asante has issues their presence in the market cannot be ignored.

Looking ahead we see additional pricing pressure and there remains the looming threat of competitive bidding. As all pumps become integrated with continuous monitors the market like BGM before it is moving ever closer to commodization. As we have noted consistently this market is not about advanced technology as every pump company has whiz bang technology. This market is all about scale as scale drives profitability.

The fact that Tandem must again visit the capital market should send a strong signal that things aren’t all that rosy. Not that Tandem does not have solid products nor that they aren’t growing share, the company has solid products and is slowly gaining share. The warning sign here is that any investor who believes that the company will acquired anytime soon has another thing coming. Like Insulet they just might be forced to actually run the company and as we have said many times anyone can build an insulin pump but it takes real talent to run an insulin pump company. The question is can Tandem navigate the difficult and treacherous waters ahead.