MannKind’s newly launched inhaled insulin Afrezza continues to show signs of growth but is still lagging far behind the competition. Of course it’s still early, and analysts expect demand to grow gradually over time.

MannKind

MannKind’s Afrezza growing slowly

RBC Capital Markets analyst Adnan Butt has been tracking the growth of Afrezza from week to week. Last week he reported that MannKind had 134 total prescriptions for the insulin the week of March 6, compared to 98 the previous week, representing a 36.7% growth rate. The drug maker had 128 new prescriptions, compared to 93 the previous week, representing a growth rate of 37.6%.

Afrezza’s share of the insulin market remains miniscule at 0.04%, compared to 0.03% the previous week. Meanwhile Novalog and Humalog continue to control the largest portions, with 45.98% and 40.03% of the market, respectively, while Apidra is in a distant third place with 2.81% of the insulin market.

How big of a market can MannKind tap into?

Investopedia reports that within the next 20 years the number of diabetics in the world is expected to explode to 592 million, an increase of 205 million from the number of diabetics currently. Of course where there is a rapidly rising number of diabetics there is also a growing demand for diabetes medications, making the market a potentially very lucrative one for MannKind.

Pharmacy insurance provider Express Scripts said the average patient covered by its plans spent $97.68 on diabetes medication. According to Investopedia, that’s over double the amount the average patent spent on the next highest drug category.

In addition to rising demand, the market is also seeing the cost of treatment for diabetics rise. The website reports that last year, spending on medication for the health problem surged 18%. Part of the reason for that climb is because utilization of medication for diabetes increased 1.7%. That may not sound like much, but when you compare it to the average utilization across all traditional classes of diseases, you discover that overall utilization declined 0.1% last year.

Can MannKind take some market share?

So the question for MannKind isn’t whether there is a need for its inhaled insulin. Instead, the real question should be whether Afrezza has any hope of stealing a significant portion of the market from the more commonly prescribed brands Novalog and Humalog.

Investopedia explains that patients whose diabetes is not kept under control by oral medications add short-acting or meal-time insulin to their treatment regime. That’s in addition to a daily long-acting insulin. MannKind’s insulin is different from traditional insulin because it is inhaled rather than injected.

Afrezza must differentiate itself

For many diabetics, this may make Afrezza an attractive treatment option because many just don’t like injecting themselves all the time. However, it’s still too early whether this will catch on, and the last company that attempted to sell an inhaled form of insulin found it to be a flop.

Another cause for concern in terms of stealing market share is the fact that patients with lung problems or who smoke can’t take Afrezza. This limits the addressable market for MannKind. Also the drug requires regular lung function tests, which may keep it from catching on. Insurance companies may not be willing to cover a drug that requires extra testing which basically raises the cost of using the drug.

A bit of good news for MannKind though is that Afrezza works a bit faster than injected insulin and offers an easier dosing regimen. Also apparently 39% of diabetics do not take their diabetes medication as it is prescribed. If the thought of constant injections is the reason for this, then Afrezza could indeed offer a solution, not only because it is more convenient but also because patients may be more willing to inhale their insulin rather than inject it.

The question is whether there are enough advantages to using Afrezza to keep it from being nothing but a niche drug, and it’s simply too early to know for sure.

MannKind has a cash problem

But Afrezza aside, MannKind itself could be in a world of trouble, which may mean that Afrezza sales are over before they really get started. The Street reported this week that the drug maker faces a cash shortfall unless its debt holders come to some sort of agreement with it by August.

MannKind has $100 million worth of convertible debt that is currently due Aug. 15. Delays in bringing Afrezza to market has left the company in dire straits with few options for dealing with creditors. Regulatory filings indicate that $100 million in debt amounts to $6.80 per share in MannKind stock, which is lower than where the stock is trading now. If the debt was converted to MannKind shares now, it would cause share dilution of 18.3 million shares.

Will debt holders even want MannKind stock?

At the current stock price, debt holders may not even want to accept MannKind stock, so the drug maker may have to offer even more shares at a discount to appease them. Another possibility is a stock lending agreement to enable creditors to sell its shares short to hedge against the risk of owning MannKind stock.

Of course it would be easier if MannKind would just pay off the $100 million, but it seems unlikely the company can do this. The company may then have to raise more funds just to keep the manufacturing of Afrezza going and keep its doors open.

MannKind’s financial statements indicate that it has approximately $170 million in cash and a credit line of up to $30 million from founder Al Mann. There’s also a $50 million at-the-money equity sales agreement. In all, MannKind has $250 million in cash available to it, meaning it could be in serious trouble if it has to fork over $100 million in August.

As of this writing, shares of MannKind were up 1.28% to $5.54 per share.