When all else fails dilute the sucker
This morning MannKind (NASDAQ:MNKD) announced a restructuring of the $100 debt that was coming due on August 15th. Details of the restructuring can be found on the MannKind web site www.mannkindcorp.com or for a more entertaining explanation you can read Adam Feuerstein piece at http://www.thestreet.com/story/13236205/1/mannkind-relies-on-death-spiral-financing-to-help-settle-looming-debt.html?kval=dontmiss.
It should come as no surprise that shares of MannKind are down over 7% in early trading as investors are beginning to realize sales of Afrezza aren’t accelerating and with no improvement in site the strong possibility exists that Sanofi (NYSE:SNY) will terminate their partnership with the company. A move that seems more likely now that new CEO Olivier Brandicourt has begun restructuring the company.
What’s truly laughable here is how the MannKind zealots continue to support the company in spite of overwhelming evidence that sales of Afrezza just aren’t cutting the mustard. These people just cannot separate the therapeutic aspects of Afrezza from the business aspects of Afrezza. Afrezza has never been a story about whether the drug works, it clearly has therapeutic benefits. However these therapeutic benefits will not overcome the many structural hurdles associated with the drug. Hurdles which we don’t see going away.
The harsh reality is Afrezza continues to prove what we have been saying all along this is nothing more than a niche product not a blockbuster as the MannKind zealots believe.
A common theme among the zealots is that payors actually care or pay attention to the therapeutic benefits of Afrezza. That payors will provide more favorable formulary access and better reimbursement because of these therapeutic benefits. Hate to break the news to these people but what payors care about is money. But let’s for a moment assume that payors really did care about outcomes; is Afrezza the only short-acting insulin that produces better outcomes. Are there not other cheaper more well established short-acting insulin’s which when used as intended achieve comparable outcomes?
This is the fantasy land MannKind zealots live in as they continue to believe that every insulin using patient should be using Afrezza and that insulin using patients who don’t use Afrezza cannot achieve solid outcomes. They ignore the fact that no one therapy option is right for every patient. They ignore the fact that patients using either Novolog or Humalog can achieve solid outcomes. A fact well known to payors who just don’t see the high cost of Afrezza being justified, sure they will cover the drug but there is no way they will provide it the same reimbursement or formulary placement as either Novolog or Humalog which work just fine and are cheaper to boot.
Things should get more interesting when Sanofi reports their second quarter earnings tomorrow morning and Olivier reveals more details on the changes he’s instituting. Details we suspect will include a restructuring i.e. downsizing of the US diabetes unit.
We’d say it’s time for the MannKind zealots to get with the program and smell the coffee but honestly this is being unrealistic. The fact is these people have never understood the whole story and cannot come to grips with the possibility that they just might be wrong. That Afrezza isn’t a blockbuster and Sanofi just might beheaded the partnership as they do their executives.
The way we see it MannKind has hit the iceberg and is taking on water. The crew cannot bail fast enough to prevent the ship from sinking. This most recent move is just delaying the inevitable but it won’t stop the ship from sinking.
