January 4 CC agenda:
s1.q4cdn.com/460208960/files/News/2018/Zacks_SCR_Research_12102018_MNKD_Marckx.pdf- Afrezza s label recently updated to include language of its rapid onset of action, specifically that it gets into the blood within ~1 minute and reaches measurable effect in 12 minutes. Update also includes new table describing optimal titration. As determining correct injected insulin-to-Afrezza conversion and lack of physician awareness of Afrezza s superior time-action-profile have been cited as impediments to uptake, this label update has the potential to facilitate steepening sales growth
- New published data such as from the STAT study should bolster MNKD s direct-to-physician awareness efforts. Management has commented that physicians largely lack understanding of the significant clinical and quality-of-life benefits of Afrezza s time-action-profile. That has undoubtedly stunted adoption and utilization. Expect additional manuscripts to be published in the near term as MNKD looks to further leverage clinical evidence to support the case of Afrezza s superiority to injected insulin
- DTC campaigns. MNKD has recently tested new DTC programs in certain markets. If conducted effectively we think this marketing channel can drive patient demand - key will be to prompt insulin users to ask their doctors about Afrezza as physician inertia to move away from injected insulin can be significant
- Patient stickiness will also be key and with the updated labeling providing more hand-holding as to adjusting dosing, along with the outcomes of STAT, demonstrating benefits of doing so, we think stickiness will benefit. DTC campaigns could be an important tool in that regard. Repeat Rx increased an average of 75% through the first nine months of 2018, which also indicates patients who try Afrezza, remain on it
- Cash and debt position have greatly improved. Total debt has been cut by nearly $40M over the last 12 months. Liquidity benefited from recent $45M upfront payment from UTHR related to TreT and another $10M for research unrelated to the agreement. MNKD expects to receive $25M of milestones in 2019 and another $25M in 2020 from the United agreement. The improved debt and liquidity position should provide MNKD with added flexibility to put resources behind Afrezza marketing such as expanding the direct sales force and advertising, including TV and digital
- Payers loosening their grip. Requisite prior authorization has undoubtedly been a headwind. Based on our due diligence and conversations, we believe the reimbursement picture is evolving to MNKD s benefit. Lawsuits against Eli Lily, Novo Nordisk and Sanofi claiming unfair trade practices as a result of collusive insulin price hikes appears to have made payers and pharmacy benefit managers somewhat skittish in continuing to protect (our words and our conclusions) the big three injected insulin makers. If that is indeed the case, MNKD could be a major benefactor as eliminating prior authorizations would essentially put Afrezza pari passu with the likes of Humalog, Novolog and Apidra. In addition, management mentioned on the Q3 call in early November that managed care contract resets for 2019 should reduce the amount of rebates they pay which should increase the gross-to-net Afrezza sales ratio (and also benefit margins)
- Patient testimonials. While we typically would not cite patient feedback as a catalyst towards increasing adoption, we think for Afrezza it is warranted. Users have documented the ability to change their lifestyle and overall QoL with Afrezza in ways that were not possible with injected insulin. Such as dosing as they take their first bite of a meal or even afterwards. The relative lack of hypoglycemia appears to have significantly changed the way diabetics can live. This may be the most compelling illustration of the difference between injected insulin and inhaled insulin. While there is little to no difference between when, how and how much Novolog vs Humalog an insulin user will take and little to no difference in how they feel afterwards, there is a difference between injected insulin and Afrezza on these same parameters. Patients desire to have access to Afrezza may eventually prove to be one of the most potent catalysst to driving payer access and by extension, adoption of MNKD s product
- Pediatric indication. MKND is pursuing a pediatric indication for Afrezza that, if successful, would expand its total market opportunity
- International commercialization. MKND has regulatory filings for Afrezza in-progress in Mexico and Canada. They are also pursuing commercialization in Brazil and India. While we do not anticipate international commercialization to generate anywhere near the profit potential as the U.S., they can be important from a manufacturing capacity utilization standpoint (i.e. margins) as well as for pass-through demand to help meet MNKD s insulin purchase agreement
- Collaborations increase shots on goal, add credibility to Technosphere. R&D collaborations have been a significant source of capital for MNKD but they also add pipeline shots-on-goal. Such an approach could help mitigate the risk of significant idle capacity of the facility. Tyvaso was the most prescribed medication for PAH and generated more than $370 million in net sales in 2017 for United Therapeutics. Along with TreT, RLS cannabinoid program for inhalable Dronabinol could be a fast-moving development program. Management is actively evaluating additional opportunities. These partnerships also further bolster the credibility of the Technosphere platform technology and, by extension, the differences between injected insulin and Afrezza
