MannKind released its latest earnings report on May 8, and Wall Street was generally disappointed. However, not everyone is so bearish on the inhaled insulin maker. RBC Capital Markets analysts say it’s no surprise how slowly the Afrezza launch is going, and they’re not worried.
Afrezza growth coming slowly
RBC analyst Adnan Butt and his team have been tracking Afrezza prescriptions week by week. The week ending May 1, marked the 15th week in which Afrezza prescriptions could be written, They reported that there were 258 total prescriptions for the inhaled insulin written that week, marking a growth rate of 18.9% from the previous week’s 217 prescriptions. There were 200 new prescriptions for Afrezza written, a 23.5% growth rate compared to the previous week’s 162 new prescriptions.
They reported that MannKind’s share of the insulin market increased slightly week over week, edging up from 0.06% to 0.07% the week ending May 1. That compares to Apidra’s 2.87% share, a slight decline from the previous week’s market share. Humalog held 40.35% of the market, a slight decline from the previous week’s 40.4%, and Novalog increased its share from 46.1% to 46.27% of the market.
Here’s a look at their estimates regarding market share for Afrezza compared to its two closes competitors ( Graphs are courtesy RBC Capital Markets.):
Analysis of MannKind’s earnings report
Marketing partner Sanofi had said the day before MannKind’s earnings reports that Afrezza sales were about $1.1 million during the first quarter. The drug maker also said MannKind’s share of the joint venture losses was $12.4 million. The insulin maker ended up posting losses of 8 cents per share on the back of lower operating expenses, which was in line with consensus estimates.
MannKind ended the first quarter with about $121 million in cash and guided for general and administrative expenses of between $10 million and $12 million per quarter. The drug maker guided for about $12 million or less in research and development spending. Investors are focused on MannKind’s cash levels because the company has about $104 million in convertible debt due this year. Management said they expect to refinance that amount with debt but have not provided guidance on cash levels.
Too early for MannKind to celebrate
The RBC Capital Markets team added that the hurdles MannKind has faced so far in launching Afrezza were expected and that some can probably be fixed. Unsurprisingly, the requirement of lung function testing in patients, many doctor appointments, requirement for 10-day samples and pushback from insurance companies were all expected.
But they think these issues will be fixed over time. They aren’t expecting much in the first six to nine months of Afrezza’s launch. Further, they say it’s a positive that prescription data has picked up and that they think patients who don’t like needles could start asking for Afrezza prescriptions starting in the third quarter of the year.
MannKind’s partnership with Sanofi could continue
They expect Sanofi to remain committed to Afrezza for the next year to year-and-a-half because of the company’s loan facility. Some signs of Sanofi’s commitment include continued support programs for patients, direct advertising and clinical studies aimed at improving the label on the insulin.
The RBC team expects MannKind shares to remain range-bound for now unless Sanofi makes specific commitments regarding its partnership on Afrezza, there’s a pick-up in demand, or the pipeline is more developed further. They think the trajectory of the inhaled insulin over the next three to four years is more important than profitability right now.
The analysts continue to rate MannKind at Outperform with a target price of $10 per share.
