MannKind Corporation (NASDAQ:MNKD)’s inhaled insulin drug Afrezza won the USFDA approval on Friday, June 27 for type 1 and type 2 diabetes. Though it’s a positive for the biopharma company that doesn’t yet generate a revenue, there are some big concerns around potential commercialization of Afrezza. That’s the key reason JPMorgan’s biotechnology analyst Cory Kasimov still has a Neutral rating on the stock with $6 price target, reflecting about 40% downside potential.

MannKind Afrezza

MannKind can’t mention Afrezza’s advantages in the label

FDA requires MannKind Corporation (NASDAQ:MNKD) to put a black box warning that patients with lung diseases shouldn’t use it. Regulators also require patients to go through lung function testing. These things could be early deterrent to use. Lung function testing was a big issue for Pfizer Inc. (NYSE:PFE)’s inhaled insulin drug Exubera, which was pulled out of the market in 2007 due to poor sales. Another big issue with Exubera was the risk of lung cancer. JPMorgan says issues that plagued Exubera could also hurt Afrezza.

Afrezza is far better than Exubera, but the company can’t mention the efficacy benefits in the label. In fact, the label doesn’t indicate in any way that Afrezza has any advantages over rapid action analogs (RAAs) in terms of less weight gain or hypoglycemia. Moreover, FDA has also asked MannKind for four post-marketing trials, which could be a big deal in the eyes of a potential partner.

MannKind’s Afrezza sales unlikely to match leading RAAs

Going forward, the focus will be on a partner and MannKind’s initial real-world experience. A big partner with extensive reach and commitment to the drug is critical for the proper launch of Afrezza. JPMorgan says that a large pharmaceutical company may jump in, but its willingness to put necessary resources behind the product launch will be the key.

Even if MannKind secures a partner, Cory Kasimov says concerns still persist around the commercial potential of the drug relative to MannKind’s current valuation. Pricing of Afrezza is likely to be decided by the partner, but the drug is expected to be priced in line with the current rapid action analogs (RAAs). Market leading RAAs Humalog and Novolog generated $2.6 billion and $3 billion in sales last year. Afrezza is unlikely to match these well-established drugs. That’s because of pulmonary safety concerns and logistically limiting lung function testing requirements.

MannKind shares plunged 3.97% to $9.91 at 10:27 AM EDT on Wednesday.