MannKind Corporation On the Ropes After Afrezza Failure

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Almost everyone agrees that biotech firm MannKind is in deep trouble. The key difference of opinion being whether MannKind can right the ship and stay afloat, or whether the company is almost inevitably heading to bankruptcy given the failure of its lead product.

There was more bad news earlier this week, as Sanofi announced it was pulling out of it’s exclusive licensing agreement for Afrezza, an inhalable form of insulin developed by MannKind. That was the final blow, with the firm’s shares slumping over 90% in the last 12 months. The share price was halved just in the last few days after the news that Sanofi had pulled out of the licensing deal was announced.

This disastrous situation is leading many analysts to ask whether the firm might be headed for bankruptcy, with the company having less than 18 months before running out of funds at the current burn rate. Piper Jaffray analyst Josh Schimmer published a report this week downgrading his price target for MannKind down to just five cents.

Will MannKind go bankrupt?

Matt Pfeffer, the CFO of MannKind, commented in an interview a few days ago that Sanofi’s pulling out means the firm can now seek other licensing and distribution partners for Afrezza. That said, how much can the company really expect given Sanofi pulled out completely and did not sign a revised deal.

In his note to investors on MannKind this week, Schimmer noted: “At this point, we are skeptical that MNKD can find a new commercial partner for Afrezza given the stark failure of SNY’s efforts, even if they were halfhearted.”

However, Keith Markey from Griffin Securities who is bullish on the beleaguered biotech, points out company executives have discussed individual partners for different regions such as Europe and the Middle East, and believes that the company is likely taking another good look at that strategy.

“They can go out and get new partnerships and those can often come with some upfront money,” Markey explained. “While I don’t expect the payment to be as large as Sanofi (which paid MannKind $150 million at the beginning of the deal last year), if they can partner with some smaller regional companies it could help their cash position.”

MannKind could also decide to market Afrezza itself, but that would inevitably lead to significant costs, Markey noted, unless the company brought in an outside sales team that works on a commission-only basis.

CFO Pfeffer suggested in his comments earlier this week that MannKind was also considering new marketing plans for Afrezza focusing on doctors and patients.

On a related note, Sanofi has been criticized both by its own stockholders and Wall Street analysts for dragging its feet with the marketing of Afrezza, and especially in working to set up reimbursement deals with insurance companies. Analysts highlight there has been some recent progress on insurance reimbursements, but the problem is far from resolved.

Future of MannKind employees in Danbury, Connecticut are at stake

The 170 jobs that Mannkind provides in Danbury, Connecticut are a big deal in that community, and the thought of job losses has local leaders worried. “We are very concerned about the current situation there and the potential for job losses,” Danbury Mayor Mark Boughton commented on Thursday. “We’re also disappointed that the product hasn’t taken off the way it should. I just hope they can get things straightened out.”

There have been three rounds of layoffs at MannKind in the last 12 months. Juergen Martens, MannKind’s corporate vice president of operations, declined to identify how many employees have been let go in the layoffs, but commented that the firm had no choice but to bring production in line with current sales levels.

“When the sales forecasts weren’t met, we certainly adjusted the manufacturing level,” Martens said. “What we have now is a balance between manufacturing capacity and sales.”

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