The Week That Was

The Week That Was

To say that the markets were slightly volatile this past week is like saying there’s a slight temperature difference between San Francisco and Palm Springs.  The damage spread across the indexes with the Dow, NASDAQ and S&P 500 all experiencing losses for the week. Yet these loses were nothing compared to the carnage inflicted on shares of MannKind (NASDAQ:MNKD) down nearly 15% for the week. Some may believe that now is the time to buy shares of MannKind that shares will magically rebound after such a drastic decline. Well we suppose that’s possible as it’s also possible the Chicago Cubs will win next year’s World Series.

It’s becoming clearer by the day that the decline in MannKind shares goes beyond just normal market volatility. That perhaps the company who just signed a deal with Sanofi (NYSE:SNY) might be in worse shape than everyone thought. That this deal with Sanofi maybe isn’t the cure to what alias the company. Looking at the Sanofi MannKind partnership in a realistic light the major problem is getting Afrezza commercialized and commercialized in a hurry.

Yet that won’t be simple as MannKind does not come with an established infrastructure to bring Afrezza to market, hence the deal with Sanofi. The only problem is Sanofi isn’t ready to commercialize Afrezza either, that they are still wandering the diabetes wilderness searching for a strategy. Rumors are rampant the company is about to undergo yet another restructuring. That sales reps will be shed, territories realigned, more stringent sales goals put in place, yada yada.

The fact is Afrezza won’t be an easy sale to physicians or patients. Like it or not reps selling Afrezza will not be able to escape the past history of inhaled insulin and will have to explain how Afrezza is not Exubera. Sanofi will have to find a way to manufacture Afrezza efficiently if they are to have any chance at pricing the drug competitively. This of course assumes, not always a smart thing to do in the wacky world of diabetes, they can get payors to reimburse for the drug and not place it in formulary purgatory.

But this will only be the beginning for as sure as the tides come to shore, Novo Nordisk (NYSE:NVO) and Lilly (NYSE:LLY) the two companies who own the short-acting insulin market will fight back and fight hard. These two formidable companies will not go quietly into the night, they will fight for every share point and will use whatever means necessary to protect their turf.  They will likely instruct their reps to remind physicians and patients that while Afrezza may be inhaled the drug does have issues and their offerings are tired and true. The simple fact is Lilly and Novo have experience and formulary presence on their side basically forcing Sanofi to go big or go home.

The harsh reality here is that from day one Al Mann wanted to position Afrezza as a better short-acting insulin. That he knew that if Afrezza was just as short-acting insulin that was inhaled rather than injected this would not be enough of a difference to make it a blockbuster. Mr. Mann went to great lengths to prove this point yet the data while compelling for Afrezza does not support his claim that it is a better short-acting insulin. The simple fact is everyone outside of MannKind fell into the same trap that Pfizer fell into with Exubera that the fact that the drug was inhaled rather than injected would push the drug to blockbuster status.

Sanofi desperate for a diabetes strategy, any diabetes strategy fell into this same trap. While we cannot for certain say they ignored the issues that face Afrezza more like they chose to minimize them. To be honest Sanofi is not the first, nor will be they be the last diabetes company to do a deal where they overlooked or minimized some serious hurdles and/or issues with a company they are about to acquire or partner with.

Yes it’s still early and it would be overly harsh to call this deal another in a series of failures for their diabetes unit. We cannot yet group Afrezza with Apidra, the iBGStar or Lyxumia. However it’s difficult to be encouraged by how investors are looking at this deal. That they are running away from MannKind shares with reckless abandon. To Diabetic Investor this is not just a sign they have little confidence in MannKind, rather they are not hopefully that Sanofi has what it takes to make this deal pay off. To Diabetic Investor this is the bigger story and speaks volumes to how far Sanofi has fallen in the diabetes pecking order.