MannKind (NASDAQ:MNKD) bulls have tremendous hopes that its potential blockbuster product Afrezza, an inhalable form of insulin, has what it takes to shake up the current insulin landscape claimed confidently by injectable products marketed by Novo Nordisk and Eli Lilly including long-standing meal-time insulin workhorses like Humalog and Novolog.
This is no surprise, as an inhalable insulin would likely collect a great deal of interest in a market that is already responsible for nearly one in five health care dollars spent in the United States. Furthermore, estimates put the global insulin market opportunity at $32 billion by 2018.
Afrezza seems to address many of the issues that plagued the ill-fated Exubera that was developed and abandoned by Pfizer (NYSE:PFE) in previous years. There have been debates as to whether recent phase 3 trial results support the bullish case to the degree hoped for, but the general consensus still remains that Afrezza will finally cross the regulatory finish line and find Food and Drug Administration approval.
Questions remain as to how well Afrezza will fare on the market. This may be where MannKind will want take a more tempered approach as adoption is likely be slow for a number of reasons.
Sins of the father
It's important for investors to know that the medical establishment can be very stubborn. Physicians as a whole are slow to adopt new therapies before they are accepted by guidelines and health standard publishing organizations. This is especially true when similar therapies have struggled to find acceptance in the past.
Let's get one thing clear: Afrezza is not Exubera. The inhaler is different. The delivery chemistry is different. A long list of considerations and data, when stacked side-by-side against Exubera, set Afrezza apart from its failed predecessor. Unfortunately, that doesn't mean that the medical establishment has dropped the bad taste left behind by Exubera's demise.
Generally speaking, physicians are skittish about using inhalable medications for non-respiratory uses. Exubera is an unfortunate Exhibit A for why; a large part of its failure was due to the not-all-that-surprising increase in serious respiratory disorders, including infection, which likely resulted from patients deeply inhaling an externally introduced protein.
Afrezza has not shown this risk in any comparable severity, but trial data indicates that cough following inhalations is a common side effect and a not-insignificant portion of trial dropouts were due to cough. This may be enough to cause many physicians to wait for post-marketing data to prove or disprove Afrezza's safety.
No big hurry
The truth is there are plenty of insulin therapies on the market already supported by years and years of data attesting to their efficacy. That being said, MannKind has produced a product that can address the very real problem of insulin misuse and poor medication compliance which plagues insulin-using diabetics who hold a distaste for conventional needle and pen administration.
This is a big deal. Medication compliance and adherence is quickly becoming a focus of health care cost savings as payers and policymakers begin to to realize preventing expensive inpatient care procedures could be accomplished by addressing compliance difficulties among patients.
However, diabetes is not an immediately life-threatening disease. There is no hurry to switch most insulin patients to a novel delivery system if they're doing well. What will likely happen: Physicians will prescribe Afrezza to their problem patients first (those who won't take their injected insulin) and slowly adopt it for other patients as well as more data and experience with the drug emerges.
Over time, Afrezza is likely to find a much wider audience than estimated by MannKind bears, especially among diabetics who are young, elderly, or well-controlled, in addition to the non-compliant. However, given the prevailing attitudes among practitioners, this is likely going to be later than sooner.
What to expect
It is a safe bet to say that Afrezza is on its way to approval. A tremendous amount of effort and patience on the part of MannKind seems to have produced some reasonable responses to FDA concerns about the drug.
MannKind share prices are likely to recover some ground toward their recent highs as investors price in the expected FDA approval. Afterwards, investors can reasonably expect a measure of profit-taking right after the approval announcement.
It's then that we could see another major drop in share price a few months after Afrezza becomes available on the market as initial sales estimates are missed due to a lack of accounting for physician pushback.
We have already seen similar tension between excited sales estimates and prescribing trepidation in a related market among weight loss drugs like Arena Pharmaceuticals' (NASDAQ:ARNA) Belviq and VIVUS' Qsymia (NASDAQ:VVUS). Both oral medications entered the obesity space with fanfare and high hopes, but today Belviq prescription growth remains flat after more than 17 weeks of marketing, and sales projections sit at about half the initial expectations. Similarly, Qsymia has only generated $9.6 million in total revenue in the first two quarters of 2013 contributing significantly to VIVUS' $55.5 million net loss in the same period of time.
Long-term prospects will likely be much better for a long while afterwards as positive postmarketing data and patient experiences come to the rescue. Make no mistake: Afrezza is a potential blockbuster, but it may take a little longer than its cheerleaders may expect to produce the desired returns.