Source: MannKind.
A doubling of Americans diagnosed with diabetes over the coming decade may support demand for MannKind's (MNKD 1.20%) inhalable insulin Afrezza, but that doesn't necessarily mean that MannKind is biotech's best idea. We asked three of our top analysts to weigh in on which companies they believe could outpace Mannkind going forward. Read on to learn what they think.
Brian Orelli: MannKind and Agios (AGIO -0.38%) have market caps a little over $2 billion, and both biotechs have large partners to help sell their drugs.
But that's about where the similarities end. MannKind's Afrezza is already approved in the U.S.; Agios' drugs aren't out of phase 1 yet.
Despite the early stage, which admittedly makes it risky, I think Agios has more potential. Just look at when their drugs were partnered: Sanofi (SNY -2.03%) licensed Afrezza after it was approved, and Celgene (CELG) teamed up with Agios before its drugs were even in the clinic. The amount of money they got upfront -- $150 million for MannKind and $130 million including an equity investment for Agios -- was also fairly similar, despite the difference in development stage.
Agios' drugs are designed to attack cancer in a novel way by blocking altered metabolic activity caused by mutated proteins in cancer cells. If the drugs work, it won't be hard to convince doctors to use them, because the biology is straightforward. For MannKind's Afrezza, doctors are very comfortable with the way insulin helps diabetics, but they may not be nearly as comfortable delivering it through the lungs, especially since the FDA slapped a black box warning on the drug.
George Budwell: MannKind's Afrezza might go on to perform well commercially, but Novavax (NVAX -1.19%) looks to me like the better company. Novavax is a small-cap biopharma focusing on the development of nanoparticle-based vaccines and adjuvants for a host of common diseases in need of new therapeutic options -- such as respiratory syncytial virus (RSV), seasonal and pandemic flu types, among many others.
While vaccines tend to have razor-thin margins, the dearth of commercially available treatments for RSV suggests that this program could have more pricing power.
Perhaps the main reason I prefer Novavax over MannKind, though, is the lead role its platform should play in the future of vaccine development in general -- which to my mind gives the company more upside than a stock which is based really around one drug. MannKind, by contrast, simply isn't in the game of developing "breakthrough" therapies that could influence clinical outcomes across a wide diversity of diseases.
Source: Dexcom.
Todd Campbell: MannKind's Afrezza is an intriguing drug, but Dexcom (DXCM 2.04%) may be a better bet. Dexcom makes and sells the G4 Platinum, a continuous glucose monitor, or CGM, that provides diabetics with glucose levels every five minutes as well as displays the diabetics' glucose trend. Those sensors transmit data to a small device resembling a smartphone, allowing patients better insight into determining whether they should eat or take insulin. Since using Dexcom devices should reduce blood sugar highs and lows, Dexcom could play a big role in slowing disease progression to more life-threatening conditions, such as heart disease.
Demand for Dexcom systems is growing quickly, with second-quarter sales jumping 64% to $58 million, and that's driving sales of Dexcom's high-margin disposable sensors. Rising sensor sales helped profit the company's gross margin climb from 66% exiting 2013 to 68% in Q2 (up from 61% last year). According to analysts, margin expansion will help Dexcom turn profitable next year, and if so, investors may find Dexcom's $3 billion market cap is too small relative to its total addressable market. According to research conducted by the University of Chicago, the number of diabetics in the U.S. is expected to double to 44 million people over the next 20 years.
