Embattled MannKind Rumored to Be Up For Sale Or Possible Bankruptcy

Embattled MannKind Rumored to Be Up For Sale Or Possible Bankruptcy
January 27, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Rumors are spinning that Valencia, Calif.-based MannKind Corporation might be up for sale.

Best known for Afrezza, an inhalable form of insulin to treat diabetes, the company has been struggling as Afrezza failed to take off in the marketplace. On Jan. 5, the company announced that its license and collaboration deal with Sanofi-Aventis U.S. LLC for Afrezza had been terminated.

Early in 2014, the U.S. Food and Drug Administration (FDA) approved Afrezza. Many analysts projected the drug would be a blockbuster—certainly the idea of moving away from injections should appeal to many people. However, sales never took off. Some of this was related to insurance reimbursement issues.

Insurance companies typically classify drugs in four tiers, 1 through 4. Tier 1 drugs are usually low-priced generics. Tier 2 is generally preferred brand name prescription drugs, which is the tier that MannKind and Sanofi hoped for. But most insurance companies placed Afrezza in Tier 3. Tiers 3 and 4 are generally higher-cost prescription medications, and drugs that are considered effective, but not necessarily the best choice for the majority of patients.

There has also been speculation that physicians and patients just weren’t aware of Afrezza.

Soft sales of Afrezza and the loss of the Sanofi support hit the company hard, whose company stock dropped 40 percent since Jan. 5. MannKind’s chief executive officer resigned in November 2015. Temporarily, the company’s founder, Alfred Mann, who is 90 years old, stepped in. The company’s chief executive officer, Matt Pfeffer, is now also the chief executive officer.

MannKind has another source of revenue, its Technosphere platform, a drug delivery system for inhaled drugs. On Jan. 21, MannKind announced it had entered into a collaboration and license agreement with a new company, Receptor Life Sciences, Inc., to develop inhaled formulations of undisclosed compounds. Receptor will be responsible for all development costs and MannKind could receive up to $102.25 million in milestone payments, as well as mid-single to low-digit royalties on any products.

Some analysts are skeptical that MannKind is actually considering a sale. Keith Markey, with Griffin Securities, told The Los Angeles Times, “It was only two weeks ago that Matt Pfeffer laid out the company’s strategy. I can’t imagine they’d suddenly change their direction.”

Others think a sale, particularly with the company cash-strapped and facing a problematic marketing situation with Afrezza, makes sense. “It conveys a sense of urgency,” Lloyd Greif, chief executive officer of L.A. investment bank Greif & Co., said to The Los Angeles Times. “No question the company’s back is up against the wall and they’re going to look at any and all reasonable options.”

However, Alexander Maxwell, writing for Seeking Alpha, argues that it’s unlikely any company would be interesting in buying MannKind and speculates that bankruptcy is on the horizon. He’s not impressed with the deal with Receptor, saying, “This agreement looks promising for MannKind, and caused the shares to increase substantially. However, upon closer examination, it becomes clear that this deal does not meaningfully solve any of MannKind’s short- or mid-term liquidity problems and should not create much in the way of shareholder value initially.”

He also notes that as promising as the Technosphere Delivery platform appears for future partnerships, companies and regulators have often looked at inhaled drugs with skepticism. Also, any deal would likely provide money based on milestones and royalties, which doesn’t solve MannKind’s immediate need for money to keep operating.

He also points out that few companies are going to want to try to commercialize Afrezza when a powerhouse like Sanofi failed. “Any agreement would likely be very favorable to the commercialization partner because as mentioned above, MannKind really needs the money,” Maxwell wrote. “I would not expect nearly as friendly terms as the initial terms between MannKind and Sanofi. It also seems unlikely that a large pharmaceutical company would take a stab at Afrezza.”

For its part, MannKind isn’t talking publicly about a sale, at least not yet. “I can’t comment on anything like that,” Pfeffer told The Los Angeles Times. “The attorneys are quite emphatic about it.”

Although MannKind took a slight hop to its current share price of $1.11, it’s way down from its year-high of $7.23 on June 8.

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