Brian Orelli: MannKind's Afrezza is like that kid in school that had tons of potential, but never amounted to anything after getting a bad rap with the teachers because his older brother was a troublemaker and the principal never let the teachers forget it.
In case you haven't been following along with the metaphor, Afrezza's older brother is Pfizer's (PFE 0.55%) Exubera, and the principal is the Food and Drug Administration.
Afrezza is a good product, in theory at least. Inhaling insulin is more convenient for patients than injecting the drug. And the insulin gets into and out of the blood stream quicker than injected insulins, which mimics what happens with non-diabetics and should prevent the insulin from reducing patients' blood sugar levels below where they should be.
But as Sanofi launches the drug for MannKind next year, it's going to have a hard time convincing doctors to prescribe a drug through the lungs. The FDA wants doctors to test for lung function before prescribing, after six months and every year after, even if there are no signs of a problem, suggesting the FDA doesn't have confidence about the long-term use of Afrezza. Keep in mind that Exubera was linked to lung cancer, which will also be in the back of doctors' minds even if the link was inconclusive.
Afrezza might have been able to overcome the unknown long-term issues -- they're only potentially a problem, after all -- if it was substantially better than injected insulins. Unfortunately our mean principal, the FDA, didn't give Afrezza a chance to succeed, failing to put anything on the label about Afrezza decreasing the likelihood of a hypoglycemia (low blood sugar.) The only mention of hypoglycemia on the label is in the warnings and precautions section because taking too much -- just like with injected insulin -- could be life-threatening.
If Mannkind hadn't lined up Sanofi, I feel like it would have gone the way of Dendreon, the maker of an effective prostate cancer treatment that never signed on a partner and continues to stumble. But the Sanofi deal sidesteps a lot of the risk of going it alone.
Sanofi's feet-in-the-street have been clamoring for another product to pitch alongside the company's top selling Lantus and with 7 million Lantus patients worldwide, Sanofi knows a thing or two about winning scripts.
Not only did Sanofi hand over $150 million up front to partner on Afrezza, it also agreed to pay MannKind a royalty rate that's arguably above the industry average at 35%. Admittedly, 35% of zero is still zero, but I'm willing to bet that Sanofi can position Afrezza as an adjunct therapy to Lantus, especially in type 1 patients where Afrezza is approved only for use alongside long acting insulin such as Lantus or perhaps Sanofi's next generation drug, U300.
Clearly, the Sanofi deal doesn't solve all of MannKind's woes, but it does throw it a much needed lifeline. Even if Afrezza is a commercial disaster, Sanofi's upfront payment boosts its cash position to over $200 million, putting it in a net cash position (MannKind's debt totaled $186 million exiting the second quarter). And if Sanofi can turn Afrezza into a top seller, MannKind could find itself the beneficiary of $775 million in milestone payments, too. Sure, you need a lot of this stuff to go MannKind's way, but it may be a bet worth taking, especially given that the number of people with diabetes globally is expected to surge from 365 million people to 552 million people by 2030.
