MannKind Corporation (NASDAQ:MNKD)’s future hangs on whether Afrezza, its inhaled insulin, will ever catch on. If the company’s stock price movement is any indication, Wall Street doesn’t seem to think so. However, Jeffries analysts think the drug will fill a big gap that currently exists in diabetes treatment. As a result, they have initiated coverage of the company with a Buy rating and $10 per share price target, which represents an upside of about 34%.

MannKind Afrezza

Why Wall Street’s bearish on MannKind

MannKind stock may have edged higher this week, but since the company’s inhaled insulin received approval, shares are down by 33%. With a 34% upside expected to the insulin maker’s stock, Jefferies analyst Shaunak Deepak is assuming that the company’s stock will return to about the same place it was at the time of regulatory approval.

The analyst notes that Wall Street does have some valid concerns, but he thinks the positives outweigh the negatives. Many investors are worried that doctors will not adopt Afrezza as a first-line insulin for diabetes treatment. Also, there are concerns that Eli Lilly and Co (NYSE:LLY) and Novo Nordisk A/S (ADR) (NYSE:NVO) will aggressively work to keep MannKind from successfully taking share from them in the mealtime insulin market. Currently that market is a $6 billion market.

Another worry is that the last approved inhaled insulin, Exubera, essentially bombed, so investors could be holding back to see how well Afrezza will do.

How MannKind’s insulin could change things

However, Deepak believes that MannKind’s insulin “could radically grow mealtime insulin use.” He said there’s a big unmet need among patients who currently take oral drugs but whose diabetes is poorly controlled. He believes there are several reasons patients choose not to take injectable drugs.

For example, he pointed to surveys which show that a substantial number of diabetes patients won’t take insulin because they are hesitant to take shots. If accounting for “other factors” that patients may avoid taking insulin, the analyst estimates that Afrezza will be a first-line insulin for nearly 8% of type 2 diabetes patients whose disease isn’t controlled with oral drugs. That would mean $1.6 billion in U.S. sales at its highest.

The main reason Deepak believes MannKind’s inhaled insulin will do so well is because of the company’s partnership with Sanofi SA (ADR) (NYSE:SNY). Sanofi already has a strong diabetes drug portfolio, and he thinks the company will promote Afrezza as a first-line insulin in order to add to and keep patients in its more than $8 billion insulin franchise.