MannKind Flying High

MannKind Flying High

As MannKind (NASDAQ:MNKD) awaits FDA approval for Afrezza, shares in the company hit a new 52 week high yesterday. It seems that everyone is not just anticipating Afrezza will receive full FDA approval but this approval will quickly be followed by a deal or partnership announcement. That finally at long last something MannKind said would actually turn out to be true. Now before everyone gets too excited keep in mind that this is the wacky world of diabetes where anything can and usually does happen.

Although Diabetic Investor views it as highly unlikely the possibility still exists that the FDA won’t approve Afrezza. Listen this is the FDA an agency which is a wacky as the diabetes world.

Yet FDA approval is just the first step in what’s going to be a long and very difficult process for MannKind. Everyone just assumes that since Afrezza is inhaled rather than injected it will be an immediate hit. That physicians will begin prescribing Afrezza the moment it becomes available. That payors will reimburse for Afrezza and that the drug will receive preferential formulary status.

It is also widely believed that shortly after approval someone will come along and either partner or buy MannKind. The rumor mill is in full force as Novo Nordisk (NYSE:NVO) and Sanofi (NYSE:SNY) are just two of the companies being mentioned as potential partners or suitors. With a market cap of just under $4 billion both Novo and Sanofi could easily afford MannKind. Yet one has to wonder why either company would want Afrezza as part of their product portfolio, especially Novo who already has a very successful short-acting insulin franchise.

As we have noted on numerous occasions buying MannKind is actually the easy part, successfully commercializing Afrezza is another story. We’ve said it before and we’ll say it again Afrezza will not sell itself and the mere fact that the drug is inhaled rather than injected won’t catapult the drug to blockbuster status. Even though Afrezza has a patient friendly deliver system unlike the Exubera bong, comparisons to Exubera are inevitable. Like it or not when physicians hear inhaled insulin they think Exubera, an obstacle which must be overcome.

Diabetic Investor sees an even larger obstacle when it comes to reimbursement. On several occasions MannKind management has stated that they expect to receive premium reimbursement. Statements which made Diabetic Investor believe management was inhaling something other than insulin. It’s hard to imagine with cost control the order of the day that payors would willingly reimburse for Afrezza at a higher rate than conventional short-acting insulin’s. It’s also foolish to believe that Novo or Lilly (NYSE:LLY) both of whom have larger short-acting insulin franchises won’t use price as a weapon to maintain share. Finally it’s just a matter of time before a generic short-acting insulin hits the market which further complicates matters.

The harsh reality is the entire MannKind story is wrapped around the fact that Afrezza is inhaled rather than injected. The company has consistently claimed that Afrezza is actually a better short-acting insulin and the fact the drug is inhaled rather than injected is just an added bonus. Looking over the public data on the drug to Diabetic Investor it’s a stretch to claim that Afrezza is better than either Novolog or Humalog, on par maybe but not necessarily better. The reality is take away the fact that Afrezza is inhaled and what you have is a drug with an interesting profile. A drug which has a place in the treatment paradigm but not a blockbuster.

There is no question upon approval Afrezza will receive a ton of free publicity. Everyone will hail this as a major step forward in the treatment of diabetes. That patients will no longer “suffer” the pain of injecting insulin. That patients will be more compliant with their therapy regimen because they don’t have to inject. None of this free publicity will mention that with today’s needle technology injections aren’t as painful as everyone thinks. Diabetic Investor would not say that injections are pleasant but they aren’t really that painful either.

At the end of the day Diabetic Investor sees this coming down to what it always comes down too; money. As we have mentioned previously payors are in no mood to increase costs and are doing whatever they can to rein in costs. Payors are no longer offering premium reimbursement just because a drug comes with a more patient friendly delivery system. This is especially true when the existing options are not just proven but less costly. The fact is payors really could care less whether insulin is injected or inhaled. What they care about is cost.

Still this likely won’t stop some company from coming along to partner with or buy MannKind. If there’s on constant in this wacky world of diabetes it’s that the greater fool theory is alive and well.