MannKind is scheduled to release its next earnings report on Monday after closing bell, and the insulin maker’s stock has gotten pummeled this week following the release of a survey of physicians conducted by RBC Capital. Today the stock began to rally, however, climbing by as much as 2.15% to $2.85 per share on news from marketing partner Sanofi’s business update today. It still has a way to go before recovering the ~$3 per share it was at before the release of that survey.
Sanofi highlights week Afrezza performance
When Sanofi released its third quarter earnings report on Oct. 29, it said part of the reason that the growth of its diabetes business is now weaker is because the penetration rate of MannKind’s Afrezza inhaled insulin was weaker than expected. Sanofi reported about €2 million in Afrezza sales.
The French company provided an update on its business strategy in a webcast today. According to Bloomberg, Sanofi’s new CEO, Olivier Brandicourt, said he aims to slim down the company and return to an acquisition and partnership strategy. He also told investors not to expect any “meaningful” profit growth over the next two years.
Sanofi turns from diabetes drugs
Further, sales of Sanofi’s diabetes drugs, including MannKind’s Afrezza, which it entered into an agreement to market along with its other diabetes drugs, are expected to continue slowing. In order to battle the slowing sales, Brandicourt plans to trim €1.5 billion off Sanofi’s costs and then reinvest those savings in future growth. Further, Sanofi’s focus will turn from its slowing diabetes business to other areas where growth is more likely.
However, the company also announced collaborations with Lexicon Pharmaceuticals for a new experimental oral diabetes treatment and with Hanmi Pharmaceutical in South Korea for another diabetes drug-related licensing agreement. Both deals signal Sanofi’s dedication to diabetes treatments and demonstrate the new strategy of partnering on new diabetes drugs rather than developing them in-house—a strategy that fits in well with the marketing partnership with MannKind.
Can MannKind deliver results?
Goldman Sachs analyst Jay Olson said sales of Afrezza are currently at around 40% of where sales of competing insulin product Exubera were at the same time following its launch.
He tweaked his model for MannKind based on the latest news. He thinks that Monday’s earnings report will provide much-needed information to build upon today’s good news about Sanofi’s continued commitment to diabetes therapies through partnerships rather than in-house research and development.
At the end of June, MannKind had $107 million in cash and cash equivalents. Olson believes that amount has declined by about $30 million, which would be significant. He also thinks investors will focus on the Afrezza maker’s cash balance in Monday’s earnings report.
The Goldman Sachs analyst maintains his Sell rating and $2 per share price target on MannKind. Consensus estimates suggest the company will post losses of 7 cents per share on $180,000 in revenue for the third quarter.
Graph is courtesy Goldman Sachs.