Time is running out for MannKind
After listening to MannKind’s (NASDAQ:MNKD) first quarter call this past Friday one can’t help but think that time is not on the company’s side. While they have received a complete response letter from the FDA for their inhaled insulin Afrezza™ the company continues to have difficulty finding a partner who will have the resources necessary to commercialize Afrezza should it receive full FDA approval. Although the company insists they have the resources available to get Afrezza all the way through the FDA, they did find it necessary to file a shelf registration with the SEC on the possibility of raising another $200 million.
The oddest aspect of Friday’s call came when company founder Al Mann, attempted to draw a parallel between MiniMed, the insulin pump company he founded and eventually sold to Medtronic (NYSE:MDT) and MannKind. The implication was that history would repeat itself and MannKind would prove their many doubters wrong. The only thing is that when it comes to inhaled insulin history is not on MannKind’s side and it’s highly unlikely that someone will come along and buy MannKind as Medtronic did with MiniMed.
Taking a realistic view of the Medtronic – MiniMed transaction the deal was consummated because MiniMed was the clear market leader in the insulin pump market and would have an immediate positive impact on Medtronic’s bottom line. The reality was that MiniMed had gone as far they could as an independent company and cracks we’re already beginning to emerge in MiniMed’s armor. Medtronic already had invested $50 million in MiniMed and Mr. Mann knew more than one company was interested in acquiring MiniMed. It was only after this deal was completed that we learned that both Johnson and Johnson (NYSE:JNJ) and Abbott (NYSE:ABT) were among the companies bidding for MiniMed.
It’s also true that at the time the insulin pump market was still growing at double digit rates and while there were competitors to MiniMed none appeared ready to chip away at MiniMed’s huge market share. What Medtronic seemed to ignore was MiniMed had already captured the low hanging fruit in the market and that it would be more difficult expanding MiniMed’s market share in the future. This is one reason Diabetic Investor believes Medtronic would sell this unit as it’s more likely that they will lose further share in the future rather than gain share. Simply put the insulin pump market is a completely different market today than it was when Medtronic acquired MiniMed.
To somehow imply that MannKind will follow the same path as MiniMed is a long shot at best. Today there is no market for inhaled insulin and given the Exubera disaster developing such a market is overly problematic. The facts of the matter are even if Afrezza was approved tomorrow with no restrictions or adverse label requirements it would take years and millions of dollars for MannKind to develop the market. The reality is that even with millions invested there is no guarantee that Afrezza will ever develop into something other than a niche product.
This is exactly the problem the company is facing finding a partner. Anyone who has done more than a simple analysis of the insulin market knows that inhaled insulin, no matter how you look at it, has a host of issues. A comprehensive analysis of the market would tell potential partners that just getting over the Exubera hurdle is just the beginning. Given that Afrezza is targeted at patients with diabetes, the company must also look at existing and new therapies targeted at type 2 patients. Most problematic is the emergence of GLP-1 therapies like Byetta, Victoza® and Bydureon. Although injected GLP-1 therapy is far more patient friendly, offers superior glucose control and has the additional benefit of promoting weight loss.
The reality here is about the only parallel between MannKind and MiniMed is both were founded by Al Mann. Other than that, MannKind stands about as much chance of duplicating MiniMed’s path as the Washington Capitals have winning this year’s Stanley Cup. For those subscribers who haven’t been following the Stanley Cup playoffs the Capitals, the number one seed were eliminated by the number eight seed Montreal Canadians, in the first round. So unless you’re a believer in revisionist history it’s time to accept the fact that no matter how hard MannKind may try their time has come and gone. The clock is ticking and time is running out.