Source: Mannkind.

For a drug that many hoped would reach blockbuster status, MannKind Corporation's (NASDAQ:MNKD) inhaled insulin Afrezza is off to an awful start. The promise and potential of this medication continues to look huge, and the product certainly looked like it would address many of the reasons that Pfizer failed so spectacularly years ago when it tried to launch its own inhaled insulin -- but early results look bad.

The ugly numbers
Afrezza was officially launched for sale in the first quarter of this year, and investors got a glimpse of how things were going when marketing partner Sanofi reported first-quarter results in April. Unfortunately, MannKind investors didn't exactly like what they saw, as sales for the quarter came in at 1 million euros (roughly $1.1 million). 

Management offered plenty of excuses as to why they expected sales to be slow out of the gate, but recently reported results from the second quarter did nothing to calm investors fears as sales for the quarter jumped to a still-meager 2 million euros (about $2.2 million).

That doubling of sales quarter over quarter is actually worse than it sounds, as Afrezza didn't even officially hit retail shelves until February, which means it was only really available for sale for a few weeks during the first quarter. Sales should have more than simply doubled in the second quarter if for no other reason than it was available for sale for all 13 weeks, so seeing the actual results was certainly quite deflating to long-term bulls.

Management had a lot to say about the slow start on its conference call with investors. Here are three reasons they believe sales are so slow out of the gate.

1. Insurance coverage
It's awfully hard to sell a medical product when patients can't get it covered by their insurance plan. That's doubly true when you are trying to compete against pharma giants like Novo Nordisk and Eli Lilly that offer patients and physicians easy access to reimbursement for medications treating the same indication.

Management stated that many patients who want to use Afrezza require prior-authorization from their insurance plan before they will be covered. I know firsthand just how long and painful a prior-authorization process can be for patients and physicians to go through, as I spent nearly a decade dealing with coverage issues for a product that helps treat diabetes. Given that physician offices are always up to their eyeballs in paperwork, extra steps discourage use, and this process appears to be really slowing things down.

MannKind's management team stated that insurance companies tend to make formulary decisions around 6 to 12 months after a product launches, so the process of securing formulary access should be starting very soon. If successful, this could go a long way to helping sales pick up.

2. Consumer awareness
Up until recently, Sanofi and MannKind have not actively been promoting Afrezza to consumers, as they wanted initial marketing activities to be focused on making providers aware of the benefits of Afrezza. However, it looks like that is about to change, as the company is now launching several direct-to-consumer campaigns that include widespread magazine coverage and new consumer-focused websites. They hope that these efforts will increase patient awareness and, hopefully, patient demand.

Sanofi is also increasing its promotional spending by hiring more sales people to promote Afrezza to physicians and adding additional resources to help patients and providers better navigate the complex reimbursement process.

3. Spirometer access
In its first-quarter conference call, management let investors know that the FDA is requiring patients to take a lung function test from a device called a spirometer before starting on Afrezza. This was called out as a major reason for slow adoption in the first quarter -- at the time, management believed that only around 30% of doctors that specialize in diabetes had a device to perform the test in-house. 

The company believes Sanofi has made great strides to ease this burden on physician offices during the second quarter, as it no longer believes that this is a barrier to adoption, but it does still think the spirometer test is still slowing the process down.

Bears on parade
MannKind bears have been adding heavily to their position since the start of the year, which is causing huge selling pressure on the stock, and shares now trade near their low for the year.

MNKD Short Interest Chart

MannKind's management team actually spent time during its most recent investor conference call to let investors know they were powerless to "do something" about the short position in the stock, and actually went so far as to suggest that investors who were worried about the share price should not offer their shares up for shorting. 

I've personally listened to hundreds of investor conference calls over the years, and I can't ever remember a management team discussing the short position in its stock during the prepared remarks. That's not exactly an encouraging sign.

What now?
I really thought Afrezza had a good chance of making it big, but the numbers are the numbers, and MannKind has really dug itself into an early hole. The story isn't over yet, and there is still a very real chance that as the barriers to using Afrezza start to disappear, sales will shoot higher. However, the early results really don't look good, and the company's financial position continues to deteriorate with each passing quarter.

Don't let the single-digit share price lull you into believing that MannKind's price can't go any lower, either -- even down here, the company still boasts a rather large $2 billion market valuation. MannKind's stock remains way too risky for my taste, and unless we see a significant pickup in Afrezza sales the near future, the stock's future prospects are starting to look bleak. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.