MannKind shares surged today after one firm released the results from its physician survey of the company’s inhaled insulin, Afrezza. The stock climbed as much as 11.57% to $4.05 per share during regular trading hours.
Prescription growth for Afrezza has been going slowly, as most analysts have expected, but the big question mark now is whether growth will pick up or if Afrezza will turn out to be a dud.
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Physicians respond favorably to Afrezza
Jefferies analyst Shaunak Deepak said they surveyed 120 doctors regarding Afrezza, how often they prescribe it and how often they intend to prescribe it going forward. The survey covered both primary care doctors and endocrinologists.
According to Deepak, more than one-third (35%) of the doctors they spoke to didn’t even know about Afrezza. However, the doctors that did about the inhaled insulin, said they expected to prescribe it more often than the analyst had previously expected, particularly in treating Type 1 diabetes.
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Analysts at RBC Capital Markets have been keeping close tabs on weekly prescription numbers for MannKind’s only drug on the market. Progress has been very slow, although the firm has remained bullish on the insulin maker.
Jefferies’ Deepak has now provided some reasons for the slowness, thanks to the survey. The analyst said the biggest problem MannKind faces in terms of getting Afrezza in the hands of patients is physician ignorance. According to Deepak, 8% of the doctors they surveyed don’t expect to prescribe the inhaled insulin.
That, when combined with the 35% who didn’t know about it, indicates that nearly half of doctors who treat diabetes aren’t writing scripts for Afrezza. Just 12 of the doctors (or 10%) who were surveyed had actually written a prescription for Afrezza.
Barriers to entry
In addition to simply not knowing that Afrezza exists, the other big problem is the requirement for lung function testing before the inhaled insulin can be prescribed. Analysts knew from the start that this would be a problem for MannKind. According to Deepak, the doctors who didn’t own a spirometer (the tool used for lung function testing) rated the test a five out of five burden. On the other hand, doctors who did own a spirometer rated the issue a 2.5 out of five burden.
Like RBC, Jefferies remains bullish on MannKind, with Deepak reiterating the firm’s Buy rating and $9 per share price target on the drug maker. The analyst said MannKind is aiming to “expand access to spirometers” and plans to begin advertising Afrezza in the third quarter. He sees these two plans as being positive catalysts.
When MannKind does start advertising, the analyst expects the “eventual rate” of doctors who won’t prescribe Afrezza to fall to around 12%. Deepak added that the use numbers for this year through 2017 that are implied from their survey suggest that the penetration rate of the drug will be almost four times higher than what they previously estimated. The result would be a $37 per share price target, the analyst said.
In the first quarter of this year, MannKind and marketing partner Sanofi sold about $1.1 million worth of Afrezza.