Mannkind investors skittish after CEO, CFO update on Afrezza launch

Mannkind CEO Hakan Edstrom

One thing's obvious about the launch of Sanofi ($SNY) and Mannkind's ($MNKD) new inhaled insulin: Mannkind investors are sensitive to every little bit of intel.

That's why Mannkind shares slid Wednesday, after its CEO and CFO gave out some details about the Afrezza rollout. The words, "[W]e're clearly not there yet," from CFO Matthew Pfeffer--perhaps coupled with quoted script numbers of a more-or-less steady 300 per week over the past several--apparently caused a selloff.

This after a quick surge last month, when Jefferies analysts put out the results of a doctor survey--results more positive than expected, the firm said. Doctors who knew about the med were more willing to prescribe Afrezza than the analysts had thought, and though 35% of those surveyed didn't know about the drug, Jefferies seemed to consider that ignorance a future marketing opportunity.

The fact is, Afrezza's Q1 sales came in at less than half analysts had expected. Not good. But one quarter doesn't make a launch--just look at Bristol-Myers Squibb ($BMY) and Pfizer's ($PFE) Eliquis, which fell far short of expectations at first, but after a beefed-up marketing effort, gained its feet. That initial lag did give rival med Xarelto, from Johnson & Johnson ($JNJ) and Bayer, time to rake up market share, admittedly.

The real test for Afrezza will be later this year, after Sanofi extends its rep reach beyond its first target pool of high-prescribing endocrinologists and into primary care, after the direct-to-consumer advertising begins, after payers finish their reviews of the new med and (Sanofi and Mannkind hope) give it permanent placement at Tier 2, or Tier 3 without a requirement for prior authorization.

Meanwhile, the drug appears to be gaining an audience among patients, particularly in Type 1. Patients have taken to social media to talk up the drug, and according to media reports, some have doggedly pursued their prescriptions through the required lung testing and payer prior authorization hurdles.

Patients have also reported barriers at the doctors' office, too, which is a problem that the companies hope to address with a broader rep push and some DTC advertising that can also reach physicians, such as in diabetes-focused publications, Mannkind CEO Hakan Edstrom said at the Goldman Sachs conference.

Of course, all of this costs money, and Mannkind's losses are a big issue among investors; one of the red flags at the Goldman Sachs meeting was Pfeffer's admission that the company hadn't yet hit a break-even point on the drug. "These low volumes make it painful because the margins aren't there," Pfeffer said. The question is whether bigger costs will deliver the higher volumes that can finally put Mannkind and Afrezza in the black.

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