March 31, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Bad things can happen to good companies. A good product isn’t enough to carry it to success—that can take timing, money, good management and a little luck. Todd Campbell and Keith Speights, writing for The Motley Fool, take a look at two biotech companies that might disappear this year.
MannKind Corporation is a perfect example of what seems like a great product and idea that for a variety of reasons didn’t take off. Back in 2014, it received approval for an inhaled form of insulin, Afrezza. Because most people with diabetes are on injections or insulin pumps, Afrezza seemed like a product that had a built-in market all primed and ready. Many analysts projected a blockbuster, especially after MannKind signed a big sales and marketing deal with Paris-based Sanofi .
By January 2016, Afrezza was fizzling and Sanofi backed out of the partnership. The big problem was insurance companies. Insurance companies typically classify drugs in four tiers, 1 through 4. Tier 1 drugs are generally low-priced generic drugs. Tier 2 is typically a preferred brand name prescription drug. Tiers 3 and 4 are usually higher-cost prescription medications, and drugs that are considered effective, but not necessarily the best choice for the majority of patients.
Despite a lot of lobbying on the party of MannKind and Sanofi, most insurers placed Afrezza as Tier 3, rather than Tier 2. For consumers, that meant they usually pay a higher co-pay in addition to other potential restrictions.
MannKind is trying to go it alone. It had problems using a contract sales team. Meanwhile, the company is running out of money. In order to avoid being delisted, it had made a reverse stock split. It recently made a settlement with Sanofi that brought in some cash. It also ended the deal with the contract sales team and hired its own internal sales team. It’s also made some progress on getting insurance coverage.
“Despite all these positive steps,” Speights writes, “MannKind still faces a tough road ahead. It could be that Afrezza simply doesn’t take off at all—or doesn’t grow sales quickly enough for MannKind to be successful. If either scenario occurs, this long-suffering biotech won’t be around to see the next decade. For now, however, I’d say MannKind has a fighting chance of survival.”
Based in Gaithersberg, Md., Novavax is focused on vaccines. It’s been struggling, though. On September 16, 2016, the company released data from its Phase III trial for its RSV F Vaccine for older adults. The trial failed to meet its goal, did not demonstrate “vaccine efficacy.” At that time, stocks plunged to $1.18 per share, more than 82 percent.
Then, in November, at its third-quarter financial report, Novavax indicated it was laying off 30 percent of its workforce. The company hoped to cut expenses by $70 to $100 million for 2017. Much of its efforts will be toward its Phase III Prepare trial of its RSV F Vaccine in infants by way of maternal immunization. The trial is supported by a grant up to $89 million from the Bill & Melinda Gates Foundation (BMGF). It also has plans to begin a Phase II trial of the RSV F Vaccine in adults 60 years of age and older, as well as a Phase I trial of a vaccine for Zika virus, ZIKV EnvD Vaccine.
Although there are ongoing questions about whether these vaccines work, that’s probably not the company’s biggest problem. It’s time and money. There’s a big demand for this type of vaccine, and if approved, the company would be in a good position. But results from the trials aren’t expected for a couple of years and the company is hemorrhaging money.
Campbell writes, “In the past, the company’s relied on stock and convertible debt offerings for funding, but management burned through $255.5 million in cash last year, and it entered 2016 with only $235.5 million on the books. Given the infant study isn’t wrapping up for a bit, Novavax may have to tap investors again for financing, but I have to wonder when that well will run dry. After all, management is already on the hook for $316 in long-term debt, and current investors aren’t going to like the idea of further dilution, especially at current prices.”
