MannKind and marketing partner Sanofi have been struggling to spur demand for Afrezza, and even bulls may be starting to wonder when it will pick up. The two companies did manage to double sales quarter over quarter, but they’re still coming up short of what MannKind bulls would like to see.

MannKind Corporation Price Target Trimmed By RBC

MannKind’s sales still not strong

RBC Capital Markets analyst Adnan Butt continues to rate the company at Outperform, although he cut his price target slightly from $10 to $9 per share following the sales update from Sanofi. The company reported about $2.2 million in sales of Afrezza during the second quarter, compared to the first quarter’s $1.1 million in sales.

Butt still believes Afrezza will end up being a “blockbuster” product, but he also doesn’t think sales are where they should be yet. He continues to hold out hope for Afrezza, however, saying that the third and fourth quarters of this year and the first half of next year should offer more of an indication of how well the inhaled insulin will do in the long run.

Afrezza prescription growth stalls

Over the last month or so, data suggests that Afrezza prescription numbers appear to have flattened out. According to Butt though, the IMS numbers haven’t been good at predicting the actual amount of Afrezza sales. He notes that the actual reported sales amount is three times higher than the numbers provided by IMS.

In addition to trimming his price target, he also raised his estimate for Afrezza sales for this year from $5 million to $9 million. Beyond this year, however, he has cut his estimates. He cut his price target for MannKind to reflect the slower than expected ramp of Afrezza sales and also a “slightly higher” discount rate.

Will Afrezza catch on?

MannKind has been dealing with significant hurdles to success, like the requirement of lung function testing in order for a patient to be prescribed Afrezza. Other barriers include perception of the inhaled insulin product, training of doctors and patients, and prior authorization for an Afrezza prescription and the approval rate for it.

Butt points out that MannKind recently tripled its capacity for producing Afrezza to 300 million cartridges per year. That includes the new 12U dose the company will start offering during the third quarter. He thinks the higher capacity is a bullish indicator even though second quarter sales were lower than expected.

MannKind’s cash crunch resolved

Another overhang on MannKind stock was the $100 million in convertible debt that was due by Aug. 15. Because the insulin maker’s share price was lower than the conversion price of about $6.80 per share, it was expected that it would face a “large cash flow and liquidity crunch.”

The analyst notes, however, that MannKind has taken care of that by retiring $85 in debt with about $28 million in a new note that’s not due until August 2018 and another $57 million in shares. The move enables the company to conserve cash, which is extremely important at the current stage. He thinks the company will continue leveraging its credit line with Sanofi.

He continues to see Sanofi as a key partner for MannKind as he thinks it will remain committed through the end of next year. The partnership should drive growth in Afrezza prescriptions, and Sanofi has started some of its own clinical studies, which should provide more data on the safety of MannKind’s inhaled insulin.

Shares of MannKind closed down 0.36% at $4.14 per share on Tuesday.