Psycho Analyst strikes again (SA article):
seekingalpha.com/article/2313645-mannkind-are-these-top-big-pharma-companies-potential-partnersMannKind: Are These Top Big Pharma Companies Potential Partners?
Jul. 14, 2014 10:15 AM ET | 2 comments | About: MannKind Corporation (MNKD), Includes: JNJ, NVS, PFE, RHHBY, SNY
Disclosure: The author is long MNKD. (More...)
Summary Mannkind requires a partner to market and distribute Afrezza.
The ideal partner would be a large, global company with a strong presence in the diabetes care niche but with no product whose sales would be threatened by a successful Afrezza.
This article reviews the top five global Big Pharma companies to see if they might be suitable partners for Afrezza.
Now that the FDA has approved Mannkind's (NASDAQ:MNKD) inhaled insulin, Afrezza, investors are anxiously awaiting news as to what company, if any, will partner with MNKD to market and distribute this new, potentially blockbusting drug.
Though there has been no shortage of bears proclaiming that a partnership will never happen, most notably The Street's MNKD permabear, Adam Feuerstein, Mannkind's executives have made several statements over the past month hinting that a partnership would be announced during the first few months following Afrezza's approval. Since the drug was approved on June 27, 2014, the clock is now ticking.
So who are these potential partners? There aren't a whole lot of them, because to market Afrezza effectively, a company will have to be large, ideally global in reach, with the financial resources to market the drug to the thousands of PCPs who treat most of the people with Type 2 diabetes. This is because it is those patients with Type 2 diabetes who make up the largest potential market for Afrezza.
A suitable partner would be already fielding a sales force knowledgeable about diabetes. Its staff would be capable of teaching busy family doctors how to use this novel, fast-acting insulin properly. It is essential that the partner's sales force have this ability, as Afrezza's dosing is far more complicated than that of the pills and once-a-day injectibles it will be competing with.
As Matt Pfeffer, MNKD's CFO, stated in his presentation at the Goldman Sachs Healthcare Conference, "It's going to be a challenging launch... it's going to be a fair amount of education that's going to be required." To surmount that challenge, MNKD's partner will have to have a sales force that has enough experience with fast-acting insulin to be able to provide that kind of education.
But the partner MNKD requires would also have to be a company ready to put its heart and soul into marketing Afrezza, and this is where the real challenge lies. Because most of the big players in the metabolic disease arena all already have invested heavily in other drugs that are direct competitors to Afrezza.
As Hakan Edstrom, MNKD's COO, explained at the same conference, when asked about whether the company was considering partnering with companies that already sell insulin, "If they are enrolled in insulin and insulin business they know the marketplace, they may have a franchise already so there may be a way to access that market very quickly. On the other hand they may also have... a product that's coming out of their own R&D and their own manufacturing. So there may be a margin difference that we would be concerned about in regards to where do they put their emphasis in terms of marketing the product."
This is a lovely, elliptical way of saying, "Mannkind does not want to sell this insulin to a company who will buy it and market it to fail, so that their other insulins can remain profitable."
The problem of pre-existing, competing products extends beyond the companies that are marketing insulin products. Several of the potential partners with strong sales forces also have made large investments in new oral or non-insulin injected diabetes drugs that could see their market eroded, were Afrezza to become successful.
So with this in mind, we will begin our review of the companies with expertise in marketing products like Afrezza that might become MNKD's partner in marketing Afrezza. We'll begin by examining the top five largest Big Pharma companies worldwide to see if any of them might be a good match for Afrezza.
Johnson & Johnson (NYSE:JNJ)JNJ is the largest of the global Big Pharma companies with the highest 2013 revenue, earning $71.31 billion. Though it sells a very wide range of products, ranging from baby powder to Tylenol, to monoclonal antibodies and cancer drugs, it also has a very strong presence in diabetes care. It sells the LifeScan line of Ultra blood sugar meters, Animas insulin pumps, and even owns the very popular social web site for the parents of diabetic children,
childrenwithdiabetes.com.
At first glance, JNJ might seem like an ideal partner for Afrezza, as it does not sell any insulin products that might compete with it. It also has access to the users of the Animas insulin pumps, who might find Afrezza very useful as a supplemental insulin.
But unfortunately for those who hope for a JNJ partnership, JNJ sells another, newly launched, first-in-class oral drug, Invokana, an SGLT2 inhibitor, which would be marketed to the same doctors and -- indirectly -- Type 2 patients as Afrezza. This drug was approved in March of 2013 after years of delay caused by concerns raised in clinical trials, including suggestions that the drug might cause heart attacks and strokes in patients who had just started taking it.
Though Invokana is the first of its class to be approved, there are several other companies awaiting approval of very similar SGLT2 inhibitors, so JNJ's sales force must be working very hard now to claim as big a market share for it as possible before these competitors's drugs reach the marketplace. How well Invokana is selling is unknown, as JNJ declined to reveal sales figures as of this past May. But while it is a viable product, this new drug, into which JNJ has already sunk so much of an investment, is likely to soak up the marketing muscle that MNKD investors would prefer to see used to sell its drug.
In addition, to see what might happen were Afrezza to partner with the wrong company, we need only look at the history of another novel insulin delivery method, the Finesse meal-time insulin delivery patch. This device, which allowed for the quick administration of doses of fast-acting insulin, was approved by the FDA in 2010 and acquired by JNJ in 2012 from Calibra Medical, a private company. Now, more than two years after it was acquired, there is no hint that JNJ ever intends to market it. It is quite possible that JNJ bought it to limit competition with products in its Animas insulin pump line. This kind of acquisition is precisely what those who want Afrezza to succeed do not want to see.
Novartis (NYSE:NVS)The Swiss firm, Novartis, is currently the second-largest Big Pharma company. It had revenues in 2013 of $56.67 billion. But unlike JNJ, whose fortunes have turned up during this past year, Novartis is a company facing decreasing revenues as the upcoming expiration of the patents on its two largest blockbuster drugs, Diovan and Gleevec, hangs heavily over its future profit expectations. The company has recently cut jobs and its R&D budget.
This might make it hungry enough to be a good choice as a potential partner, were Novartis executives to see Afrezza as a potential blockbuster drug. But the company's weak performance in the past in the diabetes market may be waving red flags MNKD brass would be wise to heed.
Its DPP-4 inhibitor, Galvus, meant to compete with Januvia and Onglyza, has never been approved by the FDA due to its side effect profile, though it is currently available in Europe. The company's only other diabetes drug, Starlix, approved by the FDA in 2000, competed with the similar and now-generic drug, Prandin (repaglinide). Starlix never sold very strongly, and is now the subject of a lawsuit brought by the U.S. Justice Department, which alleges that Novartis gave doctors kickbacks in return for prescribing the drug.
A company whose marketing geniuses can think of no better way to market its also-ran diabetes drug than bribery is probably not what Al Mann had in mind when he poured so much of his own money into the development of Afrezza.
Roche (OTCQX:RHHBY)This Swiss company had the third-highest revenue of all Big Pharma companies in 2013, at $52.31 billion. It is best known in the diabetes care world for its blood sugar meters, sold under the Accu-Chek brand name. However, it does not field a marketing sale force in the US, but partners here with Genentech to sell its successful cancer drugs that include Avastin and Herceptin.
Roche had hopes at one time of becoming a power in the diabetes drug arena. But over the past five years, Roche has encountered a string of failures with several of the developmental drugs it had hoped would become diabetes blockbusters, including aleglitazar, a member of a new class of drugs, the dual PPAR antagonists, whose clinical trial was halted out of safety concerns after the drug was found to cause heart failure, kidney impairment and bone fractures.
Roche currently has another novel diabetes drug under development, an incretin drug that mimics the hormones GLP-1 and GIP. But this drug looks very much like a "me too" drug when compared to Januvia, which affects the same hormonal system, and it is still only in the early stages of development, years away from hitting the market.
Perhaps because of these setbacks, Roche is reported to have put its entire diabetes business on the market last year, only to find no market for it. Given Roche's lack of a diabetes-trained sales force and its desire to leave the diabetes care marketplace, it does not seem to be a likely partner for Afrezza.
Pfizer (NYSE:PFE)This fading Big Pharma giant now ranks fourth among the global Big Pharma companies, with revenue in 2013 of $51.58 billion, but it has suffered greatly through the expiration of its patents on its blockbuster drug Lipitor and on Celebrex. But no matter how badly PFE might need an exciting new drug to add to its inventory, it is very difficult to imagine any executive at Pfizer signing on to market an inhalable insulin. Not after the catastrophe the company experienced with Exubera, the first inhaled insulin product, which it launched in 2006 and withdrew from the market a year later in response to anemic sales and troubling aftermarket findings linking Exubera to lung cancer.
In addition, the company has recently partnered with what used to be one of its greatest competitors, Merck (NYSE:MRK), to bring to market another SGLT2 inhibitor, ertugliflozin, which is currently in Phase III trials. The plan is to sell this drug in combination with Merck's blockbuster DPP-4 inhibitor, Januvia. Both the new drug and Januvia would be competing for the same Type 2 diabetes dollars as Afrezza. This competitive factor could make both PFE and MRK poor matches as partners for Afrezza, even if Pfizer had not been so badly burned by Exubera.
Sanofi (NYSE:SNY)Sanofi, the fifth-largest global Big Pharma company with a 2013 revenue of $52.31 billion, has a very strong presence in the diabetes care space. Its most successful diabetes product is Lantus, the long-acting insulin, which is now the best-selling diabetes drug in the world after having beat out the previous leader, Merck's Januvia. But its dominance in the niche is threatened by the looming 2015 expiration of its patent on Lantus and by the likely future approval of Novo Nordisk's ultra-long lasting insulin, Tresiba.
Sanofi also markets a fast-acting injected insulin, Apidra, which has a slightly faster activity than Novo Nordisk's Novolog and Lilly's Humalog. But its sales lag behind those of the other brands, possibly because many insurers do not cover it, for cost reasons. Currently, it appears to be a niche product used mostly in insulin pumps.
The company also has an injected GLP-1 analog, Lyxumia, similar to Byetta and Victoza, which is approved for use in Europe but is years away from approval in the US due to concerns about possible cardiovascular side effects.
ConclusionOf the five companies reviewed so far, Sanofi would appear to be by far the best candidate to partner with MNKD in selling Afrezza. It has a strong presence in the diabetes marketplace. Its sales force is familiar with the use of fast-acting insulins and possibly with insulin pumping, which makes it likely they would be able to understand the unique benefits that the ultra-fast Afrezza offers insulin users.
Afrezza does not compete with Sanofi's most profitable drug, Lantus, as Afrezza is a fast-acting insulin, not a basal insulin. And while Afrezza might be considered a competitor to Apidra, Apidra's having found a niche as a pump-user's insulin, rather than one used by patients with Type 2 diabetes, make Afrezza less of a direct threat to cannibalize current profits.
The delay in the approval of Lyxumia and the fact that it would, if approved, enter a crowded market where there are already strongly selling pre-existing drugs, also means that if Sanofi were to have success selling Afrezza, that success would not pose a threat to an established money maker.
So Sanofi has the marketing muscle, the sales force knowledge base, and the motivation to launch Afrezza into the marketplace. Of course, this is only an outsider's take. Whether the company is interested in Afrezza is currently unknown.
Though Sanofi is the largest global company that could be a strong partner in the marketing of Afrezza, it is not the only one. There are several smaller companies that would be potential partners, too. And we will examine them in a future article.
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