Which tale is it?

Looking over the results and reading through the earnings call transcript we can’t decide which fairy tale is MannKind (NASDAQ: MNKD) telling. Is MannKind the little engine that could or is it Humpty Dumpty? In many respects the MannKind tale is the tale of how our wacky world works. This is a company which at one time was the darling of the street full of promise and hope. Only to see these hopes crushed which pushed the company to verge of bankruptcy.

The reality is MannKind has never been a drug story as Afrezza does work and there is a place for the drug in the treatment paradigm. No, the MannKind story is about the dedication of one man, the founder and main company benefactor the late Al Mann and Al’s quest to help patients with diabetes. Using a billion dollars of his own money Al truly believed Afrezza would revolutionize the treatment of diabetes.

Unfortunately, unlike MiniMed which created much of Al’s wealth, MannKind never achieved commercial success during his lifetime. The question now is can the company achieve the commercial success Al always envisioned. If it can then this is the tale of the little engine that could, if not this is Humpty Dumpty where all the king’s horses and all the king’s men could not put it back together again.

Recently the company has shown signs of life strengthening its team with the addition of Dr. David Kendall who has assembled the company’s new scientific advisory board. Which we must say is rather impressive. However, David and his new advisors can only do so much for as we noted the problem with Afrezza is not whether the drug works or not, or whether there is a place for Afrezza in the treatment regimen. No, the problem for Afrezza is rather simple getting into the hands of patients, getting it reimbursed and doing so while still making a profit.

A problem which just got tougher to solve now that the company’s former partner Sanofi (NYSE: SNY) is launching Amedlog. While Afrezza is a good short-acting insulin with quick time to action and a short duration of action it is not a BETTER short-acting insulin. MannKind’s own studies concluded this. Sadly, for MannKind even if Afrezza was better than Humalog, Novolog or Amedlog we’re not sure it would matter as payors are in no mood to pay a premium for a short-acting insulin which is basically a commodity.

So, the question becomes can MannKind sell enough Afrezza in this ultra-competitive environment competing against three huge and well capitalized competitors, Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO) and Sanofi. Can they garner enough prescriptions to become an attractive takeover target? As frankly we do not see MannKind surviving by itself, they just don’t have enough money to compete. Yes, they are no longer in desperate straights but like Tandem (NASDAQ: TNDM) they are not out of the woods yet either.

What Afrezza proves is something we have stated since Pfizer launched Exubera, just because an insulin is inhaled rather than injected doesn’t take away the business aspects of insulin nor does it take away the fact that patients aren’t afraid of the needle they view transitioning to insulin therapy as a personal failure. Yes, the Exubera bong was perhaps the worst insulin delivery device ever invented but if patients were truly needle phobic then it wouldn’t have mattered. Exubera did not fail because of the bong, it failed because Pfizer, not a small or undercapitalized company, could not get favorable formulary position.

Crappy delivery device or not what payors care about most is money and believe us when we say that had Pfizer been aggressive with Exubera’ s price and rebates they would not have taken a $4 billion loss. Yet Pfizer couldn’t be aggressive because Exubera was too expensive to make. Thankfully Afrezza is cheaper to make than Exubera but it is still more expensive than any of the liquid insulin’s it competes against. Which wouldn’t a major issue IF MannKind had the resources which would allow them to build an installed user base. The problem is MannKind does not have that kind of money.

So, which is it which tale will play out here?