MannKind Corporation Skeptics Still Skeptical After Afrezza Relaunch

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Things are not looking good for MannKind following the relaunch of its inhaled insulin Afrezza. The company is trying again after reacquiring the full marketing rights to the insulin from Sanofi, which dumped out of the partnership after failing to drum up enough prescriptions. On the plus side though, Afrezza’s share of the insulin market might be returning to where it was before Sanofi probably quit marketing it.

MannKind begins resumes Afrezza marketing plan

MannKind lost 7 cents per share in the second quarter, compared to the consensus of 6 cents per share in losses. Operating expenditures were $19.1 million, which was much lower than JPMorgan’s estimate of $31.2 million. The company expects research and development expenses to fall this year as it instead focuses on commercializing Afrezza. It expects those costs to be between $16 million and $18 million.

The insulin maker ended the second quarter with $63.7 million in cash and equivalents and about $222.6 million in debt, including the loan facility from Sanofi and loss-share obligations. MannKind also still has $30.1 million left on its loan from the Mann Group and $50 million left on an ATM facility, JPMorgan analyst Cory Kasimov reported after the company’s second quarter earnings report.

MannKind’s market cap still too high

He reiterated his Underweight rating and $1 per share price target for MannKind following the report. The company began some new initiatives in an attempt to boost prescriptions for Afrezza, including a patient reimbursement hub, a co-pay card program for the insulin, and a one-month sample of the titration pack.

Kasimov doesn’t believe the insulin maker’s fundamentals justify its market capitalization of more than $475 million. He also noted that its balance sheet is running thin and stated that he sees it as being in “an increasingly precarious position.”

Afrezza’s market share stabilizing?

RBC Capital Markets analyst Adnan Butt also has the equivalent of an Underweight rating (Underperform, to be precise) but a more bearish price target of 20 cents per share. He said MannKind’s focus on the re-launch of Affrezza addresses some of the problems his last survey highlighted, including a decline in prescriptions at doctors’ offices. He added though that those changes might be too early to be reflected in the IMS prescription data, which shows continued declines.

Butt reports that IMS data shows a 21% quarter over quarter decline in total prescriptions and a 30% decline in new prescriptions for the second quarter. The data indicates that sales fell in the first and fourth quarters, which he noted isn’t surprising because Sanofi dissolved the partnership and probably stopped actively selling Afrezza.

He added that on the earnings call, MannKind management implied that Afrezza prescriptions have been stabilizing since it launched the drug. The analyst suggested that market share points to a better outcome as Afrezza’s share of the insulin market was about 0.13% on January 8, 0.07% on June 17 and 0.1% on June 29.

Butt believes the next quarter’s report will be “more impactful.” He noted that MannKind expects its current cash to last into the first quarter of 2017 but added that it will need more capital to fund operations unless the company attracts “substantial non-dilutive capital via ex-US partnership.”

Does Afrezza stand a chance?

Seeking Alpha contributor Spencer Osborne pointed out that MannKind sold 276 prescriptions for Afrezza the fifth weeks after the re-launch to put the aggregate five-week total at 1,281, which is ahead of his bearish model and one below his middle model. He added that the weekly prescription number is now tracking a bit ahead of his most bullish model, but he also warns that in order for MannKind shares to appreciate, investors will need to see sales of Afrezza go much higher. They will also need to see the company’s cash situation stabilize, he added.

He doesn’t believe sales of 3,000 scripts per week bulls are expecting by the end of the year are realistic because for one thing, the company doesn’t have experience marketing drugs. Additionally, it’s strapped for cash and can’t afford a large marketing campaign, and prescription numbers for Afrezza are churning, meaning that people aren’t staying on it.

In terms of MannKind stock, Osborne warns that the company is close to falling out of compliance with NASDAQ requirements with its stock price. Any “small hiccup could take this equity low enough to make things interesting on that front.”

Shares of MannKind stayed right around $1 during regular trading hours on Monday.

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