What does it mean?

What does it mean?

After taking a pretty bad beating shares of MannKind (NASDAQ:MNKD) have recovered over the past few trading sessions, up some 13% over the past 5 days. Many have asked does this single a turnaround. Have sales of Afrezza accelerated? Has insurance coverage improved? Has Sanofi (NYSE:SNY) decided to add TV ads to the print DTC campaign?

First we don’t view this recent upswing as a turnaround as anyone who has followed MannKind knows this trading pattern is par for the course. As we have noted many times following MannKind is like riding a rollercoaster with just as many thrills. Shares of MannKind have seen more ups and downs than France has wine.

Nor do we believe that sales of Afrezza have accelerated to a point that are material. Again as we noted previously sales continue to disappoint and lack of insurance coverage is just one of many factors for these less than impressive results.

As far as whether TV ads will be added to the DTC campaign all we know is that this option has been discussed. Yet even if implemented we doubt they would make much of a difference. Frankly it’s a fallacy to believe that physicians are unaware of Afrezza. This myth is being perpetuated by MannKind supporters that as soon as patients and physicians know that Afrezza is available that sales will all of a sudden improve. Increased awareness won’t hurt but it won’t help with poor formulary position, the need for additional tests or the fact that Afrezza while a good drug is not a wonder drug, it’s a short acting insulin which is inhaled rather than injected.

We find it interesting that the MannKind/Afrezza zealots ignore the fact that the physicians who are aware of Afrezza aren’t prescribing it in to a boarder percentage of their patients. Yes they see an application for Afrezza but for the reasons we have outlined many times they are only using it on a limited basis. Something we don’t see changing even if formulary position improves. Yes Afrezza works but so does Humalog and Novolog, both of whom happen to be cheaper than Afrezza and have much better formulary position.

Our hunch here is that the shorts have used the recent slide in MannKind shares to cover their positions. We further suspect there are some who see this recent slide as buying opportunity. This interest isn’t so much that they believe in Afrezza more so that they believe Sanofi will do something very stupid and be forced to buy MannKind. Listen everyone is aware of MannKind’s precarious financial situation and knows that unless they find additional resources their long term viability is questionable. These buyers believe that Sanofi rather than admit they made a mistake by partnering with MannKind, won’t let MannKind fail and will bail them out.

Frankly it’s hard to argue with this position as Sanofi has done some pretty stupid things when it comes to diabetes.

A week from Thursday we should get a clearer picture as this is when Sanofi reports third quarter results. A picture that will likely be enhanced a few weeks later when Olivier speaks to the investment community on November 6th revealing his long term strategic vision for the company. Frankly these two events are more impact to MannKind then sales of Afrezza.

As much as we believe that Olivier should end this partnership and move on, Sanofi is not known for admitting mistakes. Beheadings are another story but admitting mistakes isn’t part of their DNA.