|MannKind CFO Matthew Pfeffer|
MannKind ($MNKD) signed a deal on July 31, 2014, to buy €120.1 million ($155.7 million) worth of recombinant human insulin from Amphastar France Pharmaceuticals to fill its inhalers. After 11 days, it signed a global marketing agreement with Sanofi ($SNY) for the newly approved Afrezza. Now MannKind and Sanofi are thinking that if they can get Sanofi approved as an API supplier for the product, both will profit.
In-PharmaTechnologist reported that MannKind execs laid out its cost-cutting, margin-boosting idea during the Morgan Stanley Global Healthcare Conference last week. "They can certainly make it more cheaply than we can buy it anywhere else, which only helps both of us since this comes off the bottom line, which we then split," CFO Matthew Pfeffer said, according to a transcript of the discussion from Seeking Alpha.
Afrezza was approved by the FDA in June. Looking for a partner with deep pockets, Valencia, CA-based MannKind last month struck its deal, giving Sanofi rights to 65% of sales of the inhaled insulin, in exchange for an up front payment of $150 million and up to $775 million more in potential milestone payments. Sanofi has also said it would advance to MannKind its share of the collaboration's expenses as long as they didn't exceed $175 million.
While Sanofi's experience making insulin is well established, the partners would still need the French drugmaker's API to meet Afrezza specs and be approved by regulators. That can take a while. As Pfeffer explained, "each source of insulin has to be separately approved by the FDA, which is--it's not a trivial process, it is not terribly complex, but it takes some time."
MannKind has a lot going for it with Afrezza, including its tiny inhaler, but there is the specter of an earlier flop in the arena. Pfizer ($PFE) pulled its inhaled insulin, Exubera, off the market in 2007 after just a year when it couldn't get patients to accept its unwieldy inhaler device and sales were dismal. Pfizer took a $2.8 billion write-off on Exubera's failure and closed the 580,000-square-foot facility in Terre Haute, IN, where it was made, laying off more than 600 employees who worked there.