January 5, 2016
By Mark Terry, BioSpace.com Breaking News Staff
The other shoe dropped today when Valencia, Calif.-based MannKind Corporation announced after months of rumors that its license and collaboration deal with Sanofi-Aventis U.S. LLC for Afrezza has been terminated.
Early in 2014, the U.S. Food and Drug Administration approved Afrezza, an inhaled form of insulin. Right from the start, the drug did not meet sales expectations. Sanofi had a commercialization agreement with MannKind. However, at least part of the problems with Afrezza sales were related to insurance reimbursement issues.
Typically insurance companies 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 generally higher-cost prescription medications, and drugs that are considered effective, but not necessarily the best choice for the majority of patients.
Most insurance companies placed Afrezza as Tier 3, even though MannKind and Sanofi have worked to get it placed in Tier 2. For consumers, that means that they usually pay a higher co-pay to get the drug, as well as there being possible restrictions on it.
In October 2015, there were rumors that Sanofi (SNY) had frozen hiring for its Afrezza sales team. At that time, although Sanofi didn’t confirm the rumors, MannKind’s chief financial officer, Matt Pfeffer, told in-Pharma that Sanofi’s marketing approach was solid. “We have seen no indication that they are faltering in their commitment to the product—quite the contrary, in fact. The only changes [in sales force numbers] I am aware of have been increases. There are certainly people out there with a vested interest in our not succeeding. This would not be the first time misinformation has been circulated about us or about Afrezza.”
Today’s announcement indicates that MannKind and Sanofi will immediately start transition discussions to shift Afrezza’s development and commercialization activities to MannKind over the next 90 to 180 days. The termination will be effective no later than July 4, 2016.
Sanofi’s diabetes market appears to be faltering. It recently reported that its diabetes sales worldwide decreased 6.6 percent in the third quarter to $1.975 million. This was mostly caused by lackluster sales of Lantus basal insulin sales in the U.S.
Adam Feuerstein, writing for The Street in October, said, “The nascent commercial launch of Afrezza continues to resemble a train wreck. MannKind’s signature product contributed only €2 million to Sanofi’s sales in the third quarter. That’s flat with second quarter sales despite Sanofi’s upgraded efforts to convince U.S. doctors to prescribe the inhaled insulin to their diabetes patients. Through nine months of 2014, Afrezza sales have totaled €5 million, well below Sanofi’s expectations.”
Not surprisingly, MannKind didn’t respond well to the news, although it’s been on a downhill slide for some time. Shares traded for $7.23 on June 8, 2015, dropped to $3.31 on Aug. 15, 2015, popped up slightly on Oct. 28, 2015 to $3.78, but are currently trading for $1.05 per share.
Yesterday Zacks Investment Research shifted its rating for MannKind from “hold” to “buy,” indicating it had a $1.50 price target. Piper Jaffray continued with an “underweight” rating and a $1.50 price target back in a report on Nov. 12, 2015, and Griffin Securities on Dec. 8, 2015, shifted from a “buy” rating to a “neutral” rating. The stock as of yesterday had a concensus “hold” rating and a consensus price target of $3.05. Those may change, however, in light of the deal termination.
