Turn out the lights

Turn out the lights

Well it looks like we won’t have to wait until next week at JPM to find out if Sanofi (NYSE: SNY) would be terminating their partnership with MannKind (NASDAQ: MNKD) we found out this morning. According to a press release issued by MannKind;

“MannKind Corporation (Nasdaq:MNKD) (TASE:MNKD) today announced the termination of its license and collaboration agreement with sanofi-aventis U.S. LLC for the development and commercialization of Afrezza® (insulin human) Inhalation Powder.  The parties will promptly commence transition discussions in order to effect a smooth and orderly transition in the development and commercialization of Afrezza from Sanofi to MannKind over the next 90 — 180 days.  In any event, termination of the license agreement in its entirety will be effective no later than six months from the effective date of Sanofi’s notice of termination, or July 4, 2016.

MannKind is reviewing its strategic options for Afrezza as a result of the termination of the collaboration with Sanofi.”

Now we could say we told you so, that we predicted this a long time ago in a galaxy far, far away. Yet we take no joy in this news as there are patients who are using Afrezza effectively. Yet as we consistently stated the Afrezza story was never about whether the drug worked or not, the Afrezza story was always about whether it could become commercially successful.

Frankly this news was not unexpected and we see this a positive step forward for Sanofi who can now concentrate their efforts on Toujeo and LixiLan. So Kudos to Olivier Brandicourt for making this decision even if it was the obvious one to make. Sanofi is not known for admitting mistakes so perhaps this is a signal that the company and its management team will actually be held accountable. To be honest we aren’t so sure given that this partnership was put together by the now beheaded CEO Chris Viehbacher. Yet let’s give Olivier the benefit of the doubt for now.

The future is less bright for MannKind. As everyone knows the company is facing major financial issues and without the Sanofi partnership it’s an open question whether the company can continue as a going concern. As we have stated all along certain things just won’t change for Afrezza. The drug is very expensive to make and its unlikely that payors will improve its poor formulary position. So the question becomes why would anyone partner with MannKind.

Now many would say that Sanofi bears as much if not more responsibility for the failure of Afrezza and they would be 100% correct. However, the harsh reality is that no matter who’s at fault here the damage cannot be undone. Afrezza has just become the second version of inhaled insulin to fail, to be a commercial disaster. Yes, we know this is the wacky world of diabetes where anything can and usually does happen but it’s difficult to envision any company doubling down and betting on a horse that has already run the race and lost.

One has to wonder how Duane DeSisto the recently appointed CEO of MannKind, who just took the job and who’s first day was yesterday. We certainly hope that Duane has a healthy severance package as this could well go down as one of the shortest stints as a CEO ever. Yes, we know there will be speculation about possible new partners or even a buyer for the company and who knows after the stock gets crushed today this just might happen. Yet as Duane used to say when he was CEO at Insulet (NASDAQ: PODD) at the end of the day the party is over.