New life or more of the same old thing?
Listening to MannKind (NASDAQ:MNKD) report earnings this morning Diabetic Investor was hoping we would hear something new, rather than the usual hype. In the past MannKind had a habit of making Afrezza™, their inhaled insulin awaiting approval at the FDA, the greatest product ever. Those unfamiliar with the realities of the diabetes market and very short memories, could well come away from these calls believing Afrezza would not only be a billion dollar product but would revolutionize the treatment of type 2 diabetes.
Now that we know that December 29, 2010 is the new PUDFA date for Afrezza, let’s for a moment assume that all goes well and the product does receive approval with no adverse label restrictions; just what will the market for type 2 drugs look like when Afrezza gets here. Let’s also assume that Afrezza is priced competitively, finds formulary acceptance and has a partner willing to do the heavy lifting of selling and promoting Afrezza. Let’s further assume that physicians don’t associate Afrezza with Exubera and believe that Afrezza truly is better than the insulin’s already on the market that just happens to be inhaled rather than injected. Granted these are many assumptions but let’s give MannKind the benefit of assuming everything goes their way.
Two immediate questions come to mind- Will physicians prescribe Afrezza and second which drugs will be Afrezza’s primary competition. It’s important to keep in mind that while Afrezza can be used by a type 1 patient, the market for Afrezza is type 2 patients who are not adequately controlled under their existing therapy regimen.
The answer to the first question is easy as there will be physicians who will prescribe Afrezza. From the beginning Diabetic Investor has never doubted that Afrezza is safe and effective. This has never been the problem with Afrezza. Therefore we can see a scenario were physicians will test Afrezza with a subset of their existing insulin using patient population as well as some patients new to insulin therapy.
The bigger question is what the competitive landscape will look like when Afrezza gets here. While we cannot guarantee that Bydureon from Amylin (NASDAQ:AMLN), Lilly (NYSE:LLY) and Alkermes (NASDAQ:ALKS) will be approved by its new PUDFA date in October, all signs point to an approval. The real question for Bydureon isn’t whether or not the drug will be approved, rather what will the label look like.
So when Afrezza hits the market it will not only face Januvia from Merck (NYSE:MRK), which continues to gain share, its likely Bydureon will be here along with Victoza from Novo Nordisk (NYSE:NVO). Let’s also keep in mind that Actos will be going off-patent in 2011 and we have a host of well established, albeit injectable, short-acting insulin’s already on the market.
Taking this a step further besides having to compete on safety and efficacy with other drugs, MannKind must also deal with the realities of selling against well established companies who have greater resources. Lilly, Novo, Sanofi-Aventis (NYSE:SNY) and Merck have an army of sales representatives and millions to spend on marketing. This is hardly a level playing field and current market forces favor established well resourced players.
For the sake of MannKind let’s stick with our assumptions that everything goes their way and they get a chance to pitch Afrezza to physicians, just how will they try and sell the drug. Other than being a non-injectable form of insulin does the drug have other compelling benefits that would make a physician choose the drug over the competition? While it may not need to be injected Afrezza is still insulin and many physicians, primary care providers in particular, don’t like prescribing insulin and this has little to do with, until Afrezza comes along, insulin must be injected.
Insulin therapy, as effective as it is, also carries with it several notable obstacles. Patients on insulin therapy should measure their glucose levels on a regular basis, have a basic understanding of the role food intake plays, be mindful of weight gain and pay careful attention to avoiding hypoglycemia. These are well known obstacles but an even larger obstacle is that in the mind of patients moving to insulin therapy means they failed in their attempt to control their diabetes. This is one reason physicians view insulin therapy for their type 2 patients as the therapy option of last resort, after all other options have failed.
MannKind can point out that during clinical trials Afrezza was weight neutral and hypoglycemia was not a major factor. They can also point out that the data indicated that Afrezza was equal to existing insulin’s when it comes to performance.
Yet this still may not be enough when you compare Afrezza to Victoza or Bydureon. While both drugs must be injected, both have superior performance profiles when compared to Afrezza. They also have the advantage of fewer administrations, Victoza once a day, Bydureon just one a week. Add in the facts that patients using Victoza or Bydureon do not need to worry about monitoring their glucose levels, these drugs promote weight lose and hypoglycemia is almost non-existent, the playing field tilts further away from Afrezza.
The reality for Afrezza is that not one or two factors have to go its way but several factors have to fall for Afrezza just to stand a chance. The fact that Afrezza is inhaled rather than injected just isn’t enough to get the drug over the other hurdles it faces. This would be like saying a football team can win more games than they lose by having a great placekicker. Without an offense that can score touchdowns and a defense that can stop the other team from scoring, it’s unlikely the team will win many games. While it may win an occasional game 9-3, they will also lose more games due to the fact they don’t play well in all facets of the game.
This really has been the bottom line for MannKind from day one. No one disputes that Afrezza is a good drug; the data clearly says that it is. The problem is it does not have the complete package to compete against the competition. The company can and has tried to hide this incompleteness by playing up their one and only advantage. Take away this one advantage and Afrezza is nothing more than insulin that is inhaled rather than injected. This may be good enough for investors who are unfamiliar with the diabetes drug marketplace but for experienced players who understand the game they see Afrezza for what it truly is, nothing more than a niche product, if that.
