No this is NOT a joke

No this is NOT a joke

Honestly there are times when we really wish we were making stuff up, but this is not one of those times. According to a post on the Barron’s web site;

“Jefferies’ Shaunak Deepak says he is “more confident in the long-term sales potential of [MannKind’s (MNKD)] Afrezza” despite lackluster early sales. He explains why:

We spoke with 16 endocrinologists at the ENDO meeting, none of whom had prescribed Afrezza as of early March. However, feedback suggested strong interest in the drug, so we spoke to two physicians at diabetes centers who had prescribed the drug six and four times, respectively. The first physician had prescribed Afrezza in patients with Type 2 diabetes who were failing basal insulin alone. He suggested that some physicians may see the adoption of mealtime insulin as a logical step before basal insulin, but that the basal-first paradigm was “cast in stone,” suggesting there may be a long learning curve for first-line Afrezza adoption. The second physician described using Afrezza instead of injectable mealtime insulin in both Type 1 and Type 2 diabetics. He had favorable initial impressions of the drug. Collectively, the feedback suggested that Afrezza could be a desirable option as a first insulin or an alternative to injectable mealtime insulin, but that it will likely take additional time to educate physicians to use Afrezza to its full potential.

As a result, Deepak now expects an Afrezza “trajectory” of ten years, resulting in his price target coming down to $9 from $10.”

Now Diabetic Investor does not know Mr. Deepak but when anyone uses the phrase “long-term” with MannKind we do question their sanity. Even more so when they believe that Afrezza will be here ten years from today. We hate to break the news to Mr. Deepak MannKind and/or Afrezza will be lucky if they still exist a year from today let alone ten years from now.

Still it might be possible that Mr. Deepak knows something we don’t so we decided to see just how accurate he’s been with MannKind. Back on August 27th of last year Jeffries initiated coverage on MannKind with a Buy rating and $10 price target at the time Deepak wrote:

“We believe Afrezza could address a major unmet need among patients poorly controlled with oral drugs that have not advanced to injectable agents. Surveys of insulin non-adherence suggest a not insubstantial portion of patients reject insulin due to reluctance to take shots. Accounting for other factors that influence patient avoidance of insulin, we believe Afrezza could be used as a first-line insulin for almost 8% of type 2 patients failing oral drugs, worth $1.6b in peak U.S. sales. We believe Sanofi would promote Afrezza as a first-line insulin to gain and retain patients for its $8b+ insulin franchise.”

Just an FYI shares of MannKind have fallen almost 30% since Jeffries initiated coverage and haven’t come close to their $10 price target.

Now we know that Mr. Deepak unlike Ken and Gomer is not a pump and dumper. Nor do we believe, in spite of what he has written, that he is a delusional MannKind zealot. No like so many other analysts who know little about this wacky world they seek out the opinions of experts. In this case physicians who have experience treating patients with diabetes. The only problem is these physicians as experienced as they are don’t deal with issues like reimbursement or formulary placement. Nor does he understand that the complex nature of transitioning a patient to insulin therapy.

The fact is this is a trap many analysts fall into, as they believe just because physicians say they are might use a new drug that they will actually use this new drug when it arrives. Back when Exubera came to market analysts who were covering Pfizer (NYSE:PFE) fell into this same trap as back then there were physicians who noted they would use it, that it had a place in their practice. It wasn’t until they had real world experience with the drug did they realize Exubera was not the answer.

The difference between Exubera and Afrezza is that Afrezza does have a place in the treatment paradigm just not a major place. However given the many issues the drug has we’re just not sure that Sanofi (NYSE:SNY) can afford to remain committed to MannKind. Should Sanofi walk away from this partnership, and this is possible, it would be a devastating blow to MannKind. Even if Sanofi paid MannKind some sort of breakup fee this would only delay the inevitable.

We really don’t mean to pick on Mr. Deepak and we give him credit for doing his research however like so many other well-meaning analysts they just don’t understand the nature of this wacky world.  Yet we would like to thank Mr. Deepak for giving us a good laugh – MannKind and long-term in the same sentence – and yes pigs can fly.