Pin the tail on MannKind

Pin the tail on MannKind

It’s been over a week since the FDA approved Afrezza and now everyone is speculating over who will buy and/or partner with MannKind (NASDAQ:MNKD). Reading through the various analyst reports it’s pretty obvious these people have no clue what they are talking about. It’s also pretty clear that most have some sort of vested interest in the outcome. So let’s sort through all the clutter and play a little game of pin the tail on MannKind.

About the only thing Diabetic Investor agrees with based on the reports we’ve read so far is that a partner/suitor does not have to have diabetes experience.  Diabetes experience would be nice however given the major hurdles facing Afrezza. Everyone seems to assume that the drug will sell itself just because it’s inhaled rather than injected. Everyone also assumes that physicians and patients are anxious to use Afrezza just because it’s inhaled and not injected. This where diabetes experience would be a major help because most of these assumptions are dead wrong.

Afrezza is a rapid acting meal time insulin not unlike Apidra®, Novolog® or Humalog®. Other than being inhaled rather than injected studies have shown that Afrezza time to action is faster than its injectable competition. Put in simple terms Afrezza goes to work sooner and stops working faster. Some researchers have even speculated that Afrezza doesn’t work long enough.

Another key difference will be dosing. Unlike its injectable competition Afrezza will come in fixed doses. Basically what this means is rather than injecting the exact amount of insulin needed a patient using Afrezza will inhale a fixed dose which may or may not be exactly what they need. Diabetic Investor isn’t overly concerned with this fact as Afrezza is targeted at Type 2 patients who are failing with their existing therapy regimen. Afrezza will basically be an add-on drug. As an add-on therapy many physicians like to dumb down insulin dosing and basically tell patients to take X amount of insulin with each meal. No this isn’t how it’s supposed to be but it is how it works in the real world.

Yet the biggest difference has nothing at all to do with product performance or drug delivery, the biggest difference will be cost. This is where diabetes experience will be critical as more than likely Afrezza will NOT receive preferred formulary status. This makes selling the drug more difficult for as much as someone may want to inhale rather than inject, most won’t want to pay for this privilege. Yes there will be some who do but if Afrezza is ever to hit the lofty sales goals projected by so many improving formulary status is mission critical.

Another reason diabetes experience would be a plus is that although the FDA approved Afrezza the company still must conduct post-market studies that will cost somewhere around $600 million to complete.

Ideally MannKind would be a solid strategic fit for a company like AstraZeneca (NYSE:AZN) who desperately needs insulin to round out their diabetes portfolio. Diabetic Investor isn’t sure Astra has the appetite for this deal as they are still in the midst of getting their act together when it comes to diabetes. Now that the company has fended off Pfizer (NYSE:PFE) and has been very public about what they expect from diabetes Afrezza at first glance looks good but on a second looks comes with too much baggage.

We also doubt that Novo Nordisk (NYSE:NVO) or Lilly (NYSE:LLY) would do a deal as Afrezza would be in direct conflict with an existing and profitable franchise. Both companies have the diabetes and more specifically insulin experience needed yet the conflict rules both out.

One company that could well make a run at MannKind would be Sanofi (NYSE:SNY). With the Lantus juggernaut coming to an end and Apidra sales going nowhere in a hurry the company is in desperate need of something to reinvigorate their diabetes unit.  A unit which has been unable to do anything well expect Lantus. Now given Sanofi’s history when it comes to deal in diabetes look for the company to take their sweet time. Likely they will be very interested, then back off, become reengaged and maybe just maybe do a deal. If there is one consistent pattern with Sanofi and diabetes is nothing comes easy.

Other names thrown around include GlaxoSmithKline (NYSE:GSK), Pfizer and Merck (NYSE:MRK). Diabetic Investor would rule out Pfizer just because they have been there done that. GSK and Merck we don’t think so for no other reason than Afrezza even if it hits the upper range of sales estimates is a big enough product to have a material impact. This is another reason Diabetic Investor believes Afrezza belongs within a company that has a serious diabetes portfolio. As we have noted all along Afrezza will amount to nothing more than a niche product. A product which fits nicely into a portfolio of products but not driving the portfolio.

Diabetic Investor would also caution everyone not to read too much into the early sales numbers for Afrezza. This is going to be a product which needs time to develop. Although physicians are familiar with meal time insulin they’ll want to see how users adapt to the new delivery method. They’ll want to see if what everyone believes to be true will come true. Simply put will patients be more compliant with their insulin therapy because they don’t have to inject. This in essence is the bottom line for Afrezza, patient compliance.

Given this is the wacky world of diabetes combined with Al Mann’s chutzpah expect more than the normal amount of ups and downs. One day it will be a deal is imminent, the next it will be the company is deciding between multiple offers and the next it will be something different. Anyone who has followed this company knows that when it comes to bravado MannKind is number one. When it comes to actually facts well that’s another story.

So round and round we go where it all ends no one knows. So just who will pin the tail on MannKind is anyone’s guess. All we know is that a donkey is also a jackass, do we need to say more?