MannKind shares plunged 11.60% to $5.87 in early trading Tuesday after Goldman Sachs downgraded the stock from Neutral to Sell rating. Goldman Sachs analyst Jay Olson said in a research note that the downgrade was triggered by a growing downward pricing pressure for diabetes products and slow commercial launch of Afrezza.
MannKind to experience more difficult pricing
Olson noted that the risk/reward ratio is 55% to the downside but only 5% to the upside. Goldman Sachs also slashed its price objective to $3, reflecting a 55% downside to Monday’s closing price of $6.64. The research firm said MannKind’s Afrezza launch will be slower than expected. The Valencia-based company is expected to experience “more difficult pricing” going forward.
Goldman’s 2019-2021 price target is 30% below the consensus estimate, which is reflected in the price target. The research firm said Afrezza has fallen short of its expectations. Goldman Sachs slashed its Afrezza sales target by 50% to $1 billion in 2025. Sanofi and MannKind launched Afrezza in the U.S. market on February 3.
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MannKind, Sanofi may have to offer up to 40% discount on Afrezza
The downward pricing pressure is likely to force Sanofi to offer up to 40% discount on Afrezza’s list price, almost double what Goldman Sachs was expecting. Sanofi’s rivals such as Novo Nordisk and Eli Lilly offer low-cost diabetes treatments. Further, a recent report from The Medial Letter shows that Afrezza is only modestly effective in reducing HBA1c. Cough is one of its most common side effects.
Afrezza was approved by the USFDA in June 2014. In August last year, MannKind signed a $925 million deal with Sanofi to market Afrezza worldwide. Sanofi claims that demand for the inhaled insulin product has been higher than expected, and has asked MannKind to increase the volume of samples. It is the only inhaled insulin formulation available in the U.S. market.
Last month, MannKind reported fourth-quarter loss of $36.4 million or 9 cents a share, down from $53.6 million net loss in the same quarter a year ago.