MannKind Corporation (NASDAQ: MNKD)
Unbelievably, the once highly acclaimed Mannkind and its once promising insulin delivery treatment, Afrezza, is tanking to relative all time lows.
MNKD has seen shareholders exit the stock, many forced out of positions due to its penny stock status, with even more exiting because the company is seeing its opportunity to benefit from Afrezza slipping away.
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Afrezza Had Opportunity, Perhaps It Still Does
MNKD certainly had an opportunity to benefit greatly from Afrezza, but, like many other drugs that have failed to gain the market penetration anticipated, much of the blame can be attributed to poor management and a poor strategy for post-approval execution.
Regardless of the benefit of a specific treatment or product, a company must thoroughly analyze the marketing potential and likelihood of acceptance in the marketplace. Did Mannkind truly take the time to thoroughly study the post-market approval probabilities for an approved Afrezza? Well, if they did, the marketing team at MNKD should be counseled.
MNKD (and Sanofi, for that matter) has failed on its primary initiative of getting Afrezza approved for favorable insurance reimbursements, a key metric in determining whether a company should invest the capital to bring a drug to market. This should have been a preliminary study.
The drug has also lacked expected prescription orders, regardless of the fact that many patients are responding quite well to the product. But, with a dwindling cash balance and with the stock trading at the fifty cent level, the time is fast approaching for management to make a move to salvage their survival.
Mannkind Management: Don’t Listen To The Music, Dance To It
It’s a painful pill for a management team to swallow. They were effective in navigating through all of the regulator hurdles, they developed a novel treatment that was meant to become a mainstream treatment for insulin-dependent patients, and the analyst expectations all favored the notion that the product would be successful.
I have witnessed many entrepreneurial ventures fail simply for the fact that an investor see’s more value in a company than a buyer is willing to pay. Many die with the blueprints still in their pocket, crumpled from the years of showing the work to interested parties still unwilling to pony up the capital that the entrepreneur is asking in value.
The same is true of Mannkind. They brought a product to market, it did not gain traction, and now the company wants to continue to be bold and prove itself right by hanging on to a product that has proven to be of little value to the company. In fact, it may very well destroy them.
To date, the company stock price is down over 80% and the bottom might not be in sight. What now?
Can Mannkind Salvage Some Value From Afrezza And Live To Fight Another Day?
The one known variable here is that Afrezza is a known product and does have marketing potential if it becomes part of a focused and developed marketing plan designed to retrain the market to use the product.
Afrezza is well tolerated and convenient for patients that currently use insulin. But, its not an exaggeration to admit that both Sanofi and Mannkind over-exaggerated its potential.
Sadly, only a small percentage of the patients that started using the Afrezza alternative remained on the product, with estimates indicating that only about 35% of those that began using Afrezza remained on the product. And, if an inhaled product cannot replace an injectable alternative, the company should pay close attention to that metric.
The difficult part for MNKD at this point in time, is to assign a present value for Afrezza, find a buyer, and sell it. Even though the product has potential, the market is telling everyone – Sanofi, Pfizer, and now Mannkind – that an inhalable delivery system for insulin is just not that pressing of a need for patients.
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Will Mannkind Listen To The Music Or Dance To It?
At this point in time, it appears that CEO Matthew Pfeffer seems content in proving the market wrong and reengaging an audience to show why his Afrezza product is better than anything else on the market. In doing so, he will pull out his crumpled piece of paper and show all of the development highlights, the FDA approval, and the initial sales projections in his effort to find a partner for the product.
But, as each day passes, the value of Afrezza actually declines and the opportunity for Pfeffer to make a deal becomes far less likely. Even though Pfeffer is defiant in his claims that the Sanofi breakup is not the end of Afrezza or Mannkind, my opinion is that he better take some dance lessons – and learn the steps quickly.
For Pfeffer, there is no need to save face, but there is a need to save MNKD.
Follow Analysis By Kenny Soulstring
Kenny Soulstrong is the Chief Strategic Analyst at CNA Finance. For a limited time, his analysis is absolutely free. Subscribe below for free while you still can!
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