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MannKind Overcomes 1 Hurdle -- but Bigger Challenges Await

By Brian Feroldi – Dec 18, 2015 at 7:15AM

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Management lets us know that one major barrier to Afrezza adoption is no longer an issue, but odds are still long that the company can succeed.

Image source: MannKind Corp.

MannKind's (MNKD -2.08%) management team has faced a lot of challenges as it works to get its inhaled insulin Afrezza into more patients' hands, but it looks like the company has successfully addressed one of the barriers that has slowed adoption.

Afrezza's FDA approval came with a black box warning that requires all patients to have their lungs tested prior to starting the drug. That lung function test proved to be a big barrier initially, as MannKind's management team estimated that only 30% of doctors who specialize in diabetes had a lung function testing device (called a spirometer) in-house, forcing patients who wanted to use Afrezza to first book an additional appointment elsewhere. 

One hurdle overcome
As of the most recent conference call, it appears that MannKind's marketing partner, Sanofi (SNY -2.58%), has been able to successfully address that issue so that it no longer prevents patients from getting started. Here's how MannKind's former CEO, Hakan Edstrom, responded to an analyst question about the spirometer test:

In terms of pulmonary function testing, with the support of the sales reps and other people from Sanofi, doctors know where to turn in making that happen. So that was initially a delay, but they know how to address that. 

With Afrezza off to such a terrible start -- sales have only reached $5.52 million since its February launch -- this news should be music to MannKind investors' ears, as the company desperately needs Afrezza sales to grow quickly from here.

Bigger challenges still remain
While it's great to hear that the company has successfully addressed a big hurdle, there are still plenty of other obstacles preventing patients from starting treatment with Afrezza. Insurance coverage appears to be the biggest problem at the moment.

Here's CEO Edstrom again:

The prior authorization and the dealing with the insurance companies is, I would say, more cumbersome and takes more time, and there is a great risk that, either the patients or the doctor kind of loses the patience to kind of wait for it to happen. So from that point of view, we believe that to be the major -- a bigger obstacle than just pulmonary function testing.

The real challenge with this issue is that MannKind's management team doesn't have a lot of leverage to speed up the insurance coverage process because it's reliant on its marketing partner Sanofi to negotiate insurance coverage for Afrezza. Given that Sanofi is currently dealing with big challenges of its own, it's possible the company isn't giving Afrezza the time and attention it needs to be a success.

This situation creates a huge catch-22 for MannKind. Why would providers recommend Afrezza to their patients if it's a huge challenge to start the treatment? On the flip side, why would insurers provider better coverage for Afrezza when they're seeing so little demand from patients?

This challenge will be especially difficult to address, considering that insulin pens that dispense rapid-acting insulin are already widely available and enjoy great insurance coverage.

A tough road ahead
MannKind may have successfully addressed the lung function test issue, but so long as prescribing and using Afrezza remains a big hassle -- as it currently is -- sales will likely remain stuck in the mud. 

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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