Afrezza wasn't expected to be the spinach that would give Sanofi's ($SNY) diabetes business instant, superhuman strength. But the inhaled insulin, launched in February under a marketing deal with MannKind ($MNKD), was supposed to help fuel sales growth.
So far, the results are disappointing. First-quarter sales amounted to just €1 million. That's "terribly disappointing considering the size of the market," Edison Investment analyst Maxim Jacobs wrote in a recent investor note. And other analysts are saying that the launch could be tough to turn around.
The obstacles are well known: As an inhaled product, Afrezza has a perception problem. Doctors and patients aren't familiar--some are downright skeptical--and the FDA is requiring lung testing before patients start therapy. The latter is "a major hurdle," JPMorgan analyst Cory Kasimov said in a Monday investor note downgrading MannKind shares.
Plus, as MannKind admitted during its first-quarter earnings call, some managed care plans are raising the prior authorization bar. Some insurers are outright denying prescriptions. "Other current impediments management cited include sampling issues and delay in getting doctor's appointments," Kasimov wrote. "The bottom line is that we are increasingly skeptical that Rx will gain material traction anytime soon[.]"
MannKind is bearing the brunt of investor displeasure, with shares down 7% midday Monday. Understandably, because Afrezza is MannKind's be-all and end-all, whereas it's just one of Sanofi's new diabetes launches.
Direct-to-consumer advertising is supposed to launch later this year, and that could help goose sales upward. It will definitely push costs up, however, and the loss on the launch for the first quarter was already $35.4 million, as The Street calculates. MannKind's share of that loss is 35%, which puts the remaining 65% on Sanofi's plate.
And that means, as The Street points out, that Sanofi is losing money on every Afrezza prescription--not good news for the drug when the French pharma can potentially make more money on its newly launched basal insulin Toujeo.
Afrezza and Toujeo each have their own market niches, Sanofi has argued, so there's room for both in the company's overall diabetes strategy. Sanofi has also warned that Afrezza's launch wasn't likely to be quick or easy. "The initial rollout of Afrezza is targeted and focused on building awareness behind the product and appropriate usage," the company told the Los Angeles Times. "Because of requirements imposed by the FDA for starting patients on this therapy and the necessary time to gain market access, it will take time for Afrezza to demonstrate its potential."
And not every analyst rushed to downgrade MannKind based on Afrezza's early showing. Jefferies and Piper Jaffray kept their ratings intact, at "buy" and "neutral," respectively. As MannKind's CFO reminded the LA Times, the product just launched in February, so second- and even third-quarter sales will be more telling.
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