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Post by seanismorris on Aug 11, 2014 5:08:53 GMT -5
MannKind has finally nailed down the major league pharma player it always wanted to roll out its inhaled insulin product Afrezza. But after going it alone to nail down an FDA approval on a new therapy that continues to generate heavy skepticism about its marketing potential, the numbers involved so far are still strictly minor league. Sanofi, a company which has extensive experience in successfully marketing diabetes therapies, is putting down an upfront payment of $150 million to take charge of the treatment in a profit-sharing arrangement, with $775 million up for grabs in sales and development milestones while the pharma giant "advances" MannKind ($MNKD) its $175 million share of the collaboration's expense. Larger numbers than that are common in late-stage deals, and Afrezza has its approval in place--with regulatory restrictions on its use. That $150 million upfront indicates a lack of interest among the big players that dominate the diabetes market and compete ferociously for every slice of market share. The real potential payoff, if there is one, will come through MannKind's 35% share of the business as both companies split up the losses and profits. If any company can make a go of it, Sanofi stands as a clear favorite. Its diabetes franchise is built around Lantus, which generates $8 billion in annual sales. Sanofi has submitted U300 - to be marketed as Toujeo - as a new-and-improved upgrade on Lantus while Lilly and others have been positioning biosimilars to swoop in after Lantus loses patent protection early next year. That patent loss should help provide plenty of motivation to Sanofi to make the best of Afrezza, which MannKind believes can succeed where Exubera failed so badly. Peak sales estimates for Afrezza tend to cluster around the $600 million mark, with some analysts projecting more than twice that amount and others expecting far less. "Afrezza is an innovative drug-device combination product consisting of a dry formulation of human insulin delivered through a small, discreet inhaler," said Pierre Chancel, Sanofi senior vice president diabetes division. "Afrezza is a further addition to our growing portfolio of integrated diabetes solutions. It is uniquely positioned to provide patients with another insulin therapy option to manage their diabetes but does not require multiple daily injections." MannKind's share price had been falling steadily as speculation over a diabetes partner grew in recent weeks. Sanofi fits the profile that MannKind needed in a business partner. Now it will have to wait and see just how effective the treatment is in grabbing market share. www.fiercebiotech.com/story/sanofi-fills-some-big-shoes-925m-afrezza-pact-mannkind/2014-08-11
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Post by seanismorris on Aug 11, 2014 5:12:30 GMT -5
Sanofi (SAN) agreed to pay MannKind Corp. (MNKD) as much as $925 million for rights to the world’s only available inhaled insulin less than seven weeks after the drug won regulatory approval in the U.S. Sanofi will take 65 percent of profit or loss related to sales of the drug, Afrezza, while MannKind will get 35 percent, the two companies said in a statement today. Paris-based Sanofi will also advance Valencia, California-based MannKind as much as $175 million in expenses. The agreement is Sanofi’s second diabetes-related deal in two months after saying in June it would work with Medtronic Inc. on devices to simplify insulin use. The French drugmaker is looking for ways to buttress revenue and fend off competition from Novo Nordisk A/S when its top-selling product, the Lantus insulin, loses patent protection next year. “Afrezza is a further addition to our growing portfolio,” Pierre Chancel, head of Sanofi’s diabetes division, said in the statement. “It is uniquely positioned to provide patients with another insulin therapy option to manage their diabetes but does not require multiple daily injections.” Sanofi rose 0.6 percent to 78.11 euros at 9:04 a.m. in Paris. MannKind rose 0.1 percent to close at $8.13 on Aug. 8, giving the company a market value of $3.2 billion. Photographer: Antoine Antoniol/Bloomberg An employee takes a sample of pills for inspection at a Sanofi-Aventis SA factory in Compiegne, France. Afrezza was approved in late June as a fast-acting insulin for use at meal times for those with both types of diabetes. The U.S. Food and Drug Administration had twice rejected the drug, most recently in 2011, after the company switched inhalers during the review process. Pfizer Inc. won approval for an inhaled insulin, Exubera, in 2006 but pulled it from the market the following year after sales were lower than expected, according to an FDA staff report. The drug was associated with a higher risk of lung cancer because insulin is directly deposited in the lungs. Afrezza is a powder delivered through a cartridge and is designed to control blood sugar during meal times in less time than standard injections. MannKind was advised by Greenhill & Co. www.bloomberg.com/news/2014-08-11/sanofi-to-pay-mannkind-up-to-925m-for-inhaled-insulin.html
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Post by seanismorris on Aug 11, 2014 5:24:47 GMT -5
Sanofi bets on inhaled insulin with up to $925 mln MannKind deal 1 hour ago (Refiles to remove extraneous text from headline) * MannKind gets $150 mln upfront, up to $775 mln in milestones * Sanofi, MannKind aim to launch Afrezza in U.S. in Q1 2015 * Inhaled insulin offers alternative to daily injections * Consensus sales forecasts for Afrezza about $1 bln by 2019 By James Regan and Ben Hirschler PARIS/LONDON, Aug 11 (Reuters) - French drugmaker Sanofi is betting on inhaled insulin as an alternative option to daily injections for diabetics by signing a worldwide licensing agreement with MannKind Corp worth up to $925 million. Inhalation promises people with diabetes much greater convenience than routine injections but it remains unclear how widely it will be adopted, given concerns about the potential risks associated with breathing powdered insulin into the lungs. The deal is the latest example of Sanofi exploring novel ways of treating diabetes, which it sees as a core growth area for its business as the number of people suffering from the disease rises around the world. Sanofi currently enjoys the No.2 spot in a global diabetes market worth over $40 billion a year but it faces challenges as its top-selling drug Lantus, the world's most prescribed insulin, is set to lose patent protection next year. Under the new arrangement, Sanofi will have the right to develop and market MannKind's recently approved inhaled insulin therapy Afrezza for adults with both type 1 and type 2 diabetes, the two companies said on Monday. The partners plan to launch Afrezza in the United States in the first quarter of 2015. U.S.-based MannKind will receive an upfront payment of $150 million and potential further milestone payments of up to $775 million, depending on the drug's commercial success. Sanofi and MannKind will share profits and losses on a global basis, with Sanofi retaining 65 percent and MannKind the rest. Sanofi has agreed to advance to MannKind its share of the collaboration's expenses up to a limit of $175 million, the companies added. WHISTLE-SIZED INHALER Afrezza is delivered via a whistle-sized inhaler, and it acts more rapidly than injectable insulins made by Sanofi or rivals such as Eli Lilly and Novo Nordisk. However, its path to market has not been easy. Afrezza was developed in the shadow of Pfizer's failed inhaled insulin Exubera, which was approved in 2006 and expected to generate annual sales of $2 billion. That inhaler was big and bulky and patients were put off by the need for periodic lung function tests. Eventually it was withdrawn. Exubera's failure, together with concerns the inhaled powder could increase the risk of lung diseases, has led to some investor scepticism about Afrezza's future. Industry analysts currently expect Afrezza to generate sales of about $1 billion by 2019, according to consensus forecasts compiled by Thomson Reuters Pharma. MannKind's product was finally approved by the U.S. Food and Administration in June, but it will carry a boxed warning of the risk of acute bronchospasm, or constriction of the airways of the lung, in patients with asthma and chronic obstructive pulmonary disease. As a result, the regulator has required a risk evaluation and mitigation strategy for the product to ensure that its benefits outweigh the potential risks. According to the prescribing information, patients with chronic lung disease should not use Afrezza and doctors are also advised to make extensive checks to identify potential lung disease before prescribing the product. The label also recommends it not be used in patients who smoke or who have recently stopped smoking. BROADER PORTFOLIO For Sanofi, the drug and device combination offered by Afrezza is another way to broaden its diabetes portfolio at a time when many large pharmaceutical companies are eyeing the area with interest. "Afrezza is a further addition to our growing portfolio of integrated diabetes solutions," said Pierre Chancel, Sanofi's diabetes division head. "It is uniquely positioned to provide patients with another insulin therapy option to manage their diabetes but does not require multiple daily injections." Two months ago Sanofi struck another drug-device diabetes alliance with U.S. medical technology company Medtronic. That deal will bring together Sanofi's insulin portfolio and Medtronic's insulin pumps and glucose monitoring, with a focus on sufferers unable to achieve glucose control despite multiple daily injections of insulin. An estimated 382 million people worldwide have diabetes and the number of cases is expected to rise to 592 million by 2035, according to the International Diabetes Federation. Type 2 diabetes, which is associated with obesity, accounts for the vast majority of cases. Greenhill acted as financial adviser to MannKind on the Sanofi deal. (Editing by Erica Billingham) finance.yahoo.com/news/sanofi-mannkind-agree-licensing-deal-051439568.html
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Post by riddock57 on Aug 11, 2014 7:52:15 GMT -5
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Post by 4Balance on Aug 11, 2014 12:50:20 GMT -5
Balanced coverage on SA by Psycho Analyst Points out the artificiality in the trial comparing Afrezza with Humalog Why The Sanofi Deal Is The Best Possible Deal For MannKind InvestorsAug. 11, 2014 1:09 PM ET | 5 comments | About: MannKind Corporation (MNKD), Includes: LLY, NVO, SNY Disclosure: The author is long MNKD. (More...) Summary MannKind and Sanofi Have Just Announced a Partnership to Market Afrezza.The Terms of the Partnership Don't Give a Quick Profit to MNKD Investors. They Do Ensure that Afrezza Has the Very Best Chance of Maximizing its Market Globally. We Detail Some Hitherto Unmentioned Reasons Why This Partnership Will Give Optimal Long-term Results. The suspense is over. As reported by Bloomberg,"French insulin maker Sanofi (NYSE:SNY) will "pay $150 million up front and as much as $775 million if the drug, Afrezza, meets certain sales and development targets." The terms reported were that "Paris-based Sanofi will take 65 percent of profit or loss related to Afrezza, and will also advance Valencia, California-based MannKind (NASDAQ:MNKD) as much as $175 million in expenses." Given what we know about the different players in the diabetes drug marketplace, which was discussed in the two previous articles you can read here and here and this is the very best deal that MannKind could have made. Through this deal MNKD remains very much an independent company taking a 35% share of both profits and, most importantly, of losses, as the drug goes forward. In the short term, this may not result in the kind of dramatic boost to share price that some longs have been hoping for, as MNKD's profits still depend heavily on Afrezza succeeding in the marketplace. The terms of this deal may also keep many shorts clinging to their positions, in the hope that the rollout of the drug, scheduled for the first quarter of 2015, yields disappointing results. But for those of us who are rooting for Afrezza because we believe its novel mode of action provides a unique and potentially very helpful tool for restoring normal blood sugars, this partnership is the very best one possible, as Sanofi is the only company that has the expertise, marketing staff, and motivation to make this drug into the success it deserves to be. Let's look at the reasons why this is true. Sanofi Understands Fast-Acting InsulinSanofi currently sells the fastest of the injected insulins: Apidra, which has a more physiological onset of activity than its competitors, Lilly's (NYSE:LLY) Humalog and Novo Nordisk's (NYSE:NVO) Novolog. However, Apidra came late to the marketplace and was never able to dislodge the earlier entrants. As a result, Sanofi seems to have concentrated its efforts on promoting Apidra for use in insulin pumps, where its faster onset of activity makes the pump's algorithmically delivered insulin far more effective. All this makes it clear that Sanofi's sales force understands not only how to use fast-acting insulin, but how challenging it is to get the benefits of a new pattern of activity across to doctors. Since Apidra does not have much market share among patients with Type 2 diabetes, promoting the use of Afrezza to those patients does not erode sales of SNY's existing product. In fact, the widespread use of Afrezza might boost sales of Apidra, as sales reps could suggest doctors transition to Apidra those patients who start off with Afrezza but find they need to be able to fine tune doses in a way that is only possible with injected insulin. This makes it possible that you will see the two insulins marketed to physicians as part of a step strategy where the message is: Start your patient on Afrezza. If that doesn't give enough control, consider using Apidra which is more like Afrezza than competing insulins but can be dosed with greater precision. Afrezza is Already A Part of Sanofi's Pump-Oriented Future StrategySanofi recently announced a "strategic alliance" with pump-maker Medtronic for "the development of drug-device combinations and delivery of care management services to improve adherence, simplify insulin treatment, and help people with diabetes better manage their condition." There have already been some experiments done as part of the Artificial Pancreas development project, exploring how Afrezza can be used to fine-tune pump control. You can view a video explaining this research here. The JDRF is making the development and commercialization of the artificial pancreas the centerpiece of its research efforts. So here, too, Afrezza adds to, rather than detracts from the sales potential of Sanofi's Apidra. That's because using Afrezza along with the pump-based artificial pancreas which uses SNY's Apidra may make that solution more effective and hence more appealing to doctors and insurers. Sanofi Needs to Juice Up Its Insulin Sales as Lantus Approaches Patent ExpirationLantus, the long-acting basal insulin that has been SNY's blockbuster diabetes drug through the past decade is going to go off patent next year. There are a host of competing basal insulins ready to enter the marketplace, including some ultra-long-acting basal insulins that only need to be injected every few days. So the addition of a new, potentially hot insulin product to SNY's product line gives Sanofi the opportunity to keep its insulin sales numbers healthy. Most importantly, the looming loss of Lantus's exclusivity gives SNY's sales force the motivation it needs to market Afrezza aggressively. One Last Advantage That May be the Most Overlooked and Most ImportantThe biggest problem with the way Afrezza was used during pre-approval drug trials was that basal insulin was not dosed correctly in these studies. This was explained by MNKD executives at various times when asked why Afrezza did not appear to yield better results than injected insulin. That these studies were deeply flawed is crystal clear to anyone who understands how insulin works. For example, this study which is presented as if it were a comparison of Afrezza with Humalog, but is in fact something quite different, since what was actually being compared was Afrezza vs. a NPH/Humalog 70/30 mix. The choice of the mix as the comparison made it impossible to do an apples to apples comparison and led to incorrect dosing of the Afrezza/Lantus combination. Fortunately, Sanofi's sales reps do understand the correct way to set the dose for Lantus when it is being used in conjunction with a very fast mealtime insulin, since they have been doing just that with their injected Apidra. Therefore, it is likely that SNY sales staff will be able to explain to doctors the correct way to prescribe Afrezza for meal-time use so that it works well with a properly adjusted basal insulin dose. This has huge advantages both for SNY and MNKD since correct basal dosing will make it possible to use Afrezza effectively without any fear of hypos and--and here's the punch line--using Lantus and Afrezza together, with proper dosing, will give patients far better results than they can get on those Lilly 70/30 mixes. The Lilly 70/30 mixes are notorious for giving patients the choice of poor control or hypos, since it is impossible to match 70/30 mixed insulin to meal intakes. So getting the Lantus/Apidra combination to work properly will not only make patients happier, as they will get better control with fewer shots and fewer hypos, but it could also result in Lantus winning back a portion of the basal insulin market that LLY has been clawing at with its difficult to control but heavily marketed 70/30 mixes. ConclusionAs our earlier review of all the players in the diabetes space suggested, no other Big Pharma company has the combination of product expertise and hunger for a hot new diabetes product as SNY has. The success of Afrezza will not damage the sales of any of its current products, and in fact, Afrezza's success may even lead to more such sales. So this deal gives Afrezza exactly what those of us who have wanting to see it succeed have hoped for: The certainty that Afrezza will be marketed effectively by sales reps who understand insulin and are highly motivated to make Afrezza a huge success. But What About the Stock Price?There you'll have to be patient. So much of MNKD's stock is held short that it probably won't be until third or fourth quarter 2015, when we finally see that sales figures for Afrezza--and the profit numbers for MNKD--that many of these shorts will throw in the towel. But for those of us investing for the long-term, this deal gives Afrezza the very best chance to do what we hope it can do. Launched properly, Afrezza's sales should over the next few years earn the profits for MNKD that will push its stock up to a fully justified price considerably higher than today's. How high? Anyone who tells you they can forecast that number is blowing smoke. Only after we see sales figures and MNKD earnings can believable price projections be possible. seekingalpha.com/article/2410025-why-the-sanofi-deal-is-the-best-possible-deal-for-mannkind-investors?uprof=46&dr=1
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Post by seanismorris on Aug 11, 2014 19:32:08 GMT -5
My Favorite parts from the call today
Matthew Pfeffer - CFO I can tell you that we are very, very pleased and thrilled and quite excited about some of the approaches they are taking. We left their believers and convince that that there is nobody literally in the world that could do a better job than we think they can marketing this, and making this a huge success, we think it has the potential to be. But as for how they are going to go about that, I think you just going to have to wait and see.
Adnan Butt - RBC Capital Markets If can get a follow-up, Matt, so what are the plans for cash that you received. How should we view R&D going forward? The company will -- I mean, are there plans to do some R&D or pretty much it's going to be an AFREZZA-focused company?
Matthew Pfeffer - CFO No, there is definitely plans to do R&D. I mean, we have a lot of exciting possibilities in front of us. We are using this technology in other applications, who was mentioned briefly on the call this morning, although it was primarily about the deal. We did not want people to forget that we view this as a platform technology with a lot of exciting applications and you should expect to hear more from us in the future about that. I mean, it’s the obvious next question post Sanofi.
Adnan Butt - RBC Capital Markets Good. Thanks.
Matthew Pfeffer - CFO In that regard, I've been asked this a couple of times on the phone, so probably clarify it, because people will say what rights in those other areas do Sanofi have? They do have a right of first negotiation if we were to take a formulation of inhalable GLP-1 forward. But they have not rights to those -- any other products beyond that. So, I can't say we would mind talking to them about them when they get to the point when that’s appropriate. But under the current agreement, the only future potential right they have is on the GLP-1.
Alfred Mann - Chairman and CEO They also have rights to our new process.
Matthew Pfeffer - CFO We've not disclosed that yet Alf.
Alfred Mann - Chairman and CEO Sorry.
Matthew Pfeffer - CFO Yeah.
Adnan Butt - RBC Capital Markets So are there…
Matthew Pfeffer - CFO As is expected if there are other developments of enhancements to AFREZZA, you can anticipate that that would be included in the agreement like this.
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Post by joeypotsandpans on Aug 11, 2014 19:41:14 GMT -5
Nice outtakes Sean
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Post by seanismorris on Aug 11, 2014 19:46:12 GMT -5
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Post by liane on Aug 12, 2014 4:54:29 GMT -5
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Post by otherottawaguy on Aug 12, 2014 7:56:26 GMT -5
I saw it last night come across the scrolling news ticker on Business News Network BNN) last night here in Canada (first mention of it that I have seen north of the 49th).
OOG
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Post by BD on Aug 12, 2014 8:50:37 GMT -5
This one was posted in another thread, but Matt's rebuttal at the end is worth enshrining here as well: blogs.wsj.com/pharmalot/2014/08/11/breathe-deeply-sanofi-will-market-mannkinds-inhaled-insulin/ Breathe Deeply: Sanofi Will Market MannKind’s Inhaled Insulin By Ed Silverman After months of anticipation, MannKind has finally found a marketing partner for its inhaled insulin product. And the drug maker willing to bet the device can become a huge success is Sanofi SAN.FR -0.72%, which hopes to plug a gaping hole in its diabetes strategy. Under the terms, Sanofi has agreed to pay $150 million up front and up to another $775 million in milestones while assuming responsibility for marketing Afrezza around the world. For now, the product will be made at a MannKind facility in Connecticut, but the companies are exploring the possibility of expanding production through an unspecified manufacturing collaboration. The deal comes just a few weeks after MannKind won FDA approval for Afrezza. The product generated considerable skepticism over the ability of inhaled insulin products to succeed, after a spectacular crash-and-burn experience Pfizer endured several years ago with a failure called Exubera and subsequent setbacks that MannKind encountered at the FDA. Nonetheless, MannKind persisted thanks to the stubborn involvement of company founder Al Mann, who reportedly invested a considerable portion of his personal fortune to see the effort through. In a brief statement, Mann says the company is “so very pleased” that Sanofi has agreed to bring the product to patients. The next challenge, though, will be for Sanofi to convince payers – such as pharmacy benefit managers – that Afrezza is worth providing meaningful coverage. Pricing has not been announced, MannKind chief financial officer Matt Pfeffer tells us, but he reiterated earlier remarks that Afrezza would cost about the same as any pen-like device used to inject insulin. A Sanofi spokesman writes us that the pricing has not been determined. A key issue for the drug makers is whether payers will agree to award preferential treatment on so-called formulary lists for a product that some patients may prefer for the sake of convenience. These lists determine whether a product is given favored status for reimbursement. Such decisions are often based on pricing more than product convenience. Sanofi is obviously betting that many of the nearly 26 million Americans with diabetes will prefer an alternative to injectable treatments. Indeed, Afrezza represents a much-needed chance to plug a hole in its diabetes strategy, since its Lantus insulin, a franchise product, faces looming competition in the U.S. and Europe. And Sanofi has few products that are immediately available to flesh out its existing portfolio. Winning over payers, however, will be a big test of a five-year plan to develop diabetes into a linchpin of its overall corporate growth strategy, an effort that has largely floundered. And as we recently noted, Anne Whitaker, who joined Sanofi three years ago to run its North American pharmaceutical operations, is leaving this month and will become chief executive at Synta Pharmaceuticals. In a note to clients, Diabetic Investor analyst David Kliff called this a “sweet deal” for MannKind, but a sign of desperation for Sanofi. “If Sanofi truly believes that Afrezza is the answer to their problems then they’re in worse shape than we thought.” …The product is “not a bad drug, but it isn’t the blockbuster product many believe it is. Afrezza is nothing more than a niche product that will reach peak sales in the hundreds of millions, at best.” Why? He argues that Afrezza dosing may not be easy and will require greater patient training. Moreover, he believes that Afrezza will be reimbursed by insurers, but at a price to consumers. Insurers are will offer reimbursement, but at a level that will mean a higher out-of-pocket expense for patients. “The question,” he writes, “is will patients pay this difference just so they don’t have to inject?” And how does MannKind react to such assessments? The chief financial officer, Matt Pfeffer, sent us this note: “We have done substantial market research that has convinced us that the potential for Afrezza is many, many times what Mr. Kliff is speculating. Equally important, this independent research was validated by Sanofi and other potential partners, who did their own research into market potential prior to entering into discussions with MannKind. Sanofi did not become such a powerhouse in the field of diabetes by making foolish or uninformed choices, and I don’t think their deal with us is an exception. “In regards to his other contentions, I believe he is simply wrong. Based on quite a lot of research with actual patients, much of it FDA mandated studies, we believe that contrary to what Mr. Kliff suggests may occur, the evidence suggests that Afrezza is in fact easier to dose than injected insulin, as it requires less dose titration, and we have found it much easier to train patients to use Afrezza than it is to train them to use traditional injected insulin. “In regards to end-user pricing, I believe Mr. Kliff is again mistaken. I do not imagine he has engaged in extensive discussions with hundreds of reimbursement agents regarding Afrezza, as we have. Those discussions were the basis for our initial conclusion that we should price Afrezza comparably to insulin pens. Our discussions with these agents convinced us that Afrezza could move to Tier 2 reimbursement status relatively quickly, thus avoiding any price disadvantage to the end user. Mr. Kliff has stated that we have said all along that we plan to ask for premium pricing for our product, but this is simply not true. We have consistently said that our intention was to price Afrezza at levels comparable to existing insulins in pen form. So I believe his conclusions are based on a false premise.”
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Post by brentie on Aug 12, 2014 9:19:56 GMT -5
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Post by jpg on Aug 12, 2014 23:55:09 GMT -5
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Post by BD on Aug 13, 2014 15:39:05 GMT -5
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Post by BD on Aug 13, 2014 15:45:15 GMT -5
seekingalpha.com/article/2418605-a-deeper-look-at-mannkind-sanofi-deal-and-valuation A Deeper Look At MannKind - Sanofi Deal And ValuationAug. 13, 2014 10:02 AM ET Summary MannKind shares in 35% of profits and losses. Sanofi is very experienced in the sector. The street will begin to assess MannKind valuation. The excitement of the new deal between MannKind (NASDAQ:MNKD) and Sanofi (NYSE:SNY) has now been absorbed, and the street is now assessing how it feels the deal will impact MannKind. The equity currently trades at a market cap of $2.8 billion. The first thing that needs to be understood is that getting a deal to commercialize the drug Afrezza is great news. The fact that the launch in now just months away is great news. The fact that MannKind now has "official" Big Pharma validation for its science is big news. Lastly, the fact that consumers will now have a non-injection treatment is great news. That being said, the story of an equity is not all about news. In my opinion, the biggest challenge for MannKind over the next 6 months is managing the expectations of the street. If expectations get set too high, the equity can suffer. One only has to look at Arena Pharmaceuticals (NASDAQ:ARNA) (market cap of $1 billion) to see what happens when the expectation bar is set too high. Arena's partner Eisai (OTCPK:ESALY) announced sales numbers of $200 million at an Eisai shareholder meeting last Spring and $150 million a few weeks later leading into the launch of Belviq, an anti-obesity pill. The gross sales came in at about $45 million. Needless to say, Arena's stock has suffered along the way, despite seeing sales finally pick up. With MannKind, the current market cap is $3 billion. There are many that have felt that this number was over-inflated. On the other side of the coin, there are bullish speculators that feel the market cap could go substantially higher. With the announcement of the Sanofi deal, analysts and the street can, for the first time, begin to apply real dates to sales models and consider the 35% share of profits and losses that the deal will bring MannKind. Is it possible that Afrezza will be a blockbuster? Certainly. Blockbuster status is earned by obtaining $1 billion in gross sales in 1 year. Before you go and tally up $350 million to MannKind, remember, the 35% is on profits or losses. Gross sales do not equate to profits. The companies will divide up a net sales number. If we take a stab at the gross to net ration and simply use 50%, the $1 billion in gross sales would equate to $500 million in net sales. That would give MannKind $175 million (equating to the amount of milestone money that Sanofi fronted MannKind, in addition to the $150 up-front payment). The purpose of this article is not to rain on the proverbial parade of a new and exciting deal. The purpose is to get you to assess this company with a more critical eye now. The pure speculation is evaporating away, and now it comes down to performance. Now let me shift gears a bit and look at the $775 million in milestones that was announced as part of the deal. These are potential payments that MannKind can earn when certain regulatory and sales goals are met. When I look at milestones in deals, I often look at it is a very simple manner. The first third of that money is essentially money in the bank. The second third is earned with good success. The last third requires "uber-success" to be earned. Rarely are all targets in a deal like this earned. While very simple, this model has served me very well over the years. In essence, look for $260 million to be easy to obtain, $260 million to be harder to obtain and the last $260 million to be at a level that everyone is swimming in money anyway, and the milestones will be a small part of the excitement. There is still a lot to digest with this news and still a lot that we simply do not know. I do not recommend rushing to judgment in either direction, but I do think it is very important to begin looking at potential revenue to MannKind vs. the current market cap. I am not trying to be a bear here, but the $3 billion market cap that we have been seeing in the pure speculation phase now needs to begin to stand up to a much stronger fundamental test. The big piece of information we want now is the price point of the product and an understanding of what the insurance industry will be doing. Sanofi has a lot of work to do for the remainder of 2014. Over the next 6 months, there will certainly be debate about revenue models, pricing and expectations. I will close with how I began. MannKind needs to carefully manage expectations. Additional disclosure: I have no position in MannKind, Sanofi, or Eisai.
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