An Investor's View Of Where MannKind Is With Afrezza

[robsacher]

An Investor's View Of Where MannKind Is With Afrezza
by Rob Sacher

Summary:

Why Afrezza Sales Have Been Slow So Far.
What To Expect For The Next Several Months.
What Still Must Come Before Sanofi's TV Advertising.

Now that management has settled the issue regarding the August 2015 convertible debt, MannKind (NASDAQ:MNKD) investors can now look towards the remaining months of the year in order to see if sales of Afrezza will finally begin to improve. Working quietly with endocrinologists, Sanofi (NYSE:SNY) sales reps have been informing doctors about the inhaled insulin, demonstrating how the Technosphere inhaler works, and leaving over 50,000 samples of Afrezza in various endocrinology offices.

This process began six months ago with the official product launch of Afrezza. So far, sales have been slow but that was to be expected as Afrezza is a very different insulin in comparison to injected insulin and there will be a time period necessary in the education of the nation's endocrinologists in regard to which of their patients would be best served by the new inhaled insulin. It is assumed that Sanofi reps will continue making their rounds, educating doctors for another several months.

Sanofi has sold 2.2 million dollars worth of Afrezza so far; that may represent around 3,000 early adopters now using the inhaled insulin. Considering that Afrezza was virtually unheard of in the diabetes community before its launch in February, the first few thousand customers may have been the most difficult for the company to have acquired. What may be more important is how quickly Afrezza may be embraced by the remaining percentage of diabetics still using injectables, some of whom are just learning of Afrezza, but many of whom have still not heard of the inhaled insulin.

There are a variety of ways in which diabetics can learn of the inhaled insulin. So far, it can be reasonably argued that almost all of the first few thousand early adopters have learned of Afrezza through social media, i.e. You Tube and Vimeo videos, diabetes websites and forums, and Twitter postings. These places are likely to be where T1 diabetics discover Afrezza, as T1s tend to be much younger than the population of T2s who become diabetic much later in life. A sampling of early adopters who are now using Afrezza shows that most who use social media to inform about their experiences with Afrezza are T1 diabetics. But, the T1 population is only about 5% of the entire diabetic community. That leaves about 95% of the entire market still undiscovered.

The T2 population of diabetics are less likely to learn of Afrezza in the same way that younger T1 diabetics discover the inhaled insulin. Older diabetics, the T2 population, are much less likely to use social media. They will learn of Afrezza through their doctors if their doctors are willing to consider discussing it with their patients. And, that brings us back to the work that Sanofi is doing with the nation's endocrinologists and why this process is going to take some time.

In consideration of the fact that around 9% of the entire country is now diabetic, the large number of T2 diabetics may be the reason for the long waiting time to see an endocrinologist, often several weeks. That makes it difficult for pharmaceutical sales reps to obtain appointments. It can take multiple calls before gaining that valuable thirty minutes of an endocrinologist's time. And, it seems likely that even after a first consultation with a doctor, Sanofi reps will certainly need to follow up with additional meetings. Therefore, it seems likely that Sanofi will need another several months as they initiate this first stage of Afrezza's product launch. This is more likely the reason why sales of Afrezza have been slow, not the argument that Sanofi is purposely trying to sabotage their relationship with MannKind.

There is a vocal segment of MannKind investors who believe that Sanofi should just start spending millions of dollars on TV advertising. These investors suggest that Sanofi can create product demand for Afrezza quickly once that large segment of the T2 diabetic community see it promoted on television. While there is validity to the idea that TV advertising can create Afrezza awareness for millions of diabetics in a very fast timeframe, it is also the case that many of the endocrinologists for whom those diabetics are being prescribed, still know little of the value of Afrezza.

There is no wisdom in putting the cart before the horse. It is imperative that doctors be allowed enough time to learn of the pros and cons of Afrezza and obtain some experience in prescribing the inhaled insulin, especially, because the results coming in from their first patients seem to be contradicting the results found in the FDA designed trials.

Early adopters are reporting extremely positive blood glucose A1C numbers. But, since it takes three months between A1C tests, it will take at least six months for endocrinologists to begin to see a trend in their prescribed Afrezza patient's results. Doctors are just now beginning to witness these findings with their very first patients who started in the first few weeks of Afrezza's launch. Obviously, only a handful of doctors then prescribed Afrezza. Therefore, we will need another six months before a larger number of endocrinologists witness the A1C success of their patients more recently starting on Afrezza.

Once there is a reasonably knowledgeable population of endocrinologists who have experience in prescribing Afrezza and have seen positive results with their early adopter patients, then that would be the ideal time for Sanofi to start their TV advertising. But, even then, that advertising should be limited and first tested in various markets. The worst thing that could happen is for a national TV advertising campaign to be unsuccessful because of a poorly constructed commercial. Companies often create several commercials and test them over several weeks in order to see which one works best. The same should be required for Afrezza. In the meantime, Sanofi's print media campaign can continue, especially in magazines oriented towards the diabetes community.

Patience is required for investors who are long on MannKind Corporation. Early adopters, so far, are reporting successful results with Afrezza. Over the next six months, additional endocrinologists may witness the success of more early adopter patients. When enough doctors are on board with Afrezza, Sanofi will eventually initiate their TV advertising campaign for Afrezza. In the meantime, investors might be best served by adding to their positions while MannKind is still trading in its current range. It seems reasonable to assume that sales should increase substantially, YTD, and this $4 stock could double in value next year.

[peppy]

Well Done story.

[Deleted]

This is going to take several quarters for sales pick up dramatically. I mentioned Afrezza to someone I know that is on metformin and he in turned asked his PCP. Despite developing vascular issues in his toes, they are turning black, his doctor told him metformin is sufficient, and referred to Afrezza as a cannon. The sad part is patients are accepting what their doctors a telling them despite near certainty of amputation of toes and possible limbs due to vascular complications.

[nylefty]

I have to wonder why Sacher didn't even mention the insurance problem.  Every doctor in the country could be prescribing Afrezza but if the insurance plans weren't covering it not many prescriptions would be filled. That said, I think that most insurance plans will be covering Afrezza after it's been on the market for a full year in February. Supposedly, many insurance plans take that long to add drugs to their formularies.

[robsacher]

Aug 20, 2015 11:46:54 GMT -5 nylefty said:

I have to wonder why Sacher didn't even mention the insurance problem.  Every doctor in the country could be prescribing Afrezza but if the insurance plans weren't covering it not many prescriptions would be filled. That said, I'm confident that most insurance plans will be covering Afrezza after it's been on the market for a full year in February. Supposedly, many insurance plans take that long to add drugs to their formularys.

You raise a valid point. Insurance is another hurdle but I think that Sanofi will be able to acquire Tier 2 status next year in exchange for a lowering of the price of Afrezza. 

[prosper]

Your comment implies a reduction in the profitability of A for both S & M.
I think that is worthy of a new discussion of what that implies and means.
The more i think about the situation, the more i think the old "reasons" for slow adoption of A are real, but not the real brick wall we are hitting and will continue to hit. That huge wall is insurance. No matter how good A is, if the discounts for early users disappears after an intro, then the cost will stop any growth now, and sour people that now tried but had to drop out because of costs.
I think the fantastic reports from users are good, but i also think that the more i read the more i am concerned that even these very sophisticated and aware type !'s that are going through the efforts to experiment with trial and error and documented efforts are not indicative of what the giant market of type 2's will be willing to do.
Net result of my thinking this through is that neither S or M are currently prepared to hand hold the type 2's through the increasingly complex process of becoming a knowledgeable and successful user of this wonderful drug.
That means they are either oblivious to what is going to be required, or they have been prescient in their awareness that we need a documented experiential record of actual users in order to write the "manual" of how to actually use this wonderful invention.
There are three goals for A. An operating manual (detailed, including "tweaking hints"), higher level insurance coverage, and going back to the first point, education of doctors on all levels on how to manage A.
As great as A is, it is not "take a puff before your meal".

[phantomfj]

For those diabetics and/or more knowledgeable folks out there.........just how much trial and error action is or was there to get your injections "dialed in"? Is it that much more complicated to dial in with Afrezza? I do know a few diabetics, but that would not be a question I would ask in passing conversation.........I would think it would be easier to inhale more if needed, vs sticking yourself with a needle again, especially if the inhaled product is faster acting. And, as a new injection user, because shots are not fast acting, would you not run the risk of thinking that your first injection wasn't enough, give yourself another dose , thus overdoing it on insulin?

[notamnkdmillionaire]

Aug 20, 2015 9:45:47 GMT -5 robsacher said:

An Investor's View Of Where MannKind Is With Afrezza
by Rob Sacher

Summary:

Why Afrezza Sales Have Been Slow So Far.
What To Expect For The Next Several Months.
What Still Must Come Before Sanofi's TV Advertising.

Now that management has settled the issue regarding the August 2015 convertible debt, MannKind (NASDAQ:MNKD) investors can now look towards the remaining months of the year in order to see if sales of Afrezza will finally begin to improve. Working quietly with endocrinologists, Sanofi (NYSE:SNY) sales reps have been informing doctors about the inhaled insulin, demonstrating how the Technosphere inhaler works, and leaving over 50,000 samples of Afrezza in various endocrinology offices.

This process began six months ago with the official product launch of Afrezza. So far, sales have been slow but that was to be expected as Afrezza is a very different insulin in comparison to injected insulin and there will be a time period necessary in the education of the nation's endocrinologists in regard to which of their patients would be best served by the new inhaled insulin. It is assumed that Sanofi reps will continue making their rounds, educating doctors for another several months.

Sanofi has sold 2.2 million dollars worth of Afrezza so far; that may represent around 3,000 early adopters now using the inhaled insulin. Considering that Afrezza was virtually unheard of in the diabetes community before its launch in February, the first few thousand customers may have been the most difficult for the company to have acquired. What may be more important is how quickly Afrezza may be embraced by the remaining percentage of diabetics still using injectables, some of whom are just learning of Afrezza, but many of whom have still not heard of the inhaled insulin.

There are a variety of ways in which diabetics can learn of the inhaled insulin. So far, it can be reasonably argued that almost all of the first few thousand early adopters have learned of Afrezza through social media, i.e. You Tube and Vimeo videos, diabetes websites and forums, and Twitter postings. These places are likely to be where T1 diabetics discover Afrezza, as T1s tend to be much younger than the population of T2s who become diabetic much later in life. A sampling of early adopters who are now using Afrezza shows that most who use social media to inform about their experiences with Afrezza are T1 diabetics. But, the T1 population is only about 5% of the entire diabetic community. That leaves about 95% of the entire market still undiscovered.

The T2 population of diabetics are less likely to learn of Afrezza in the same way that younger T1 diabetics discover the inhaled insulin. Older diabetics, the T2 population, are much less likely to use social media. They will learn of Afrezza through their doctors if their doctors are willing to consider discussing it with their patients. And, that brings us back to the work that Sanofi is doing with the nation's endocrinologists and why this process is going to take some time.

In consideration of the fact that around 9% of the entire country is now diabetic, the large number of T2 diabetics may be the reason for the long waiting time to see an endocrinologist, often several weeks. That makes it difficult for pharmaceutical sales reps to obtain appointments. It can take multiple calls before gaining that valuable thirty minutes of an endocrinologist's time. And, it seems likely that even after a first consultation with a doctor, Sanofi reps will certainly need to follow up with additional meetings. Therefore, it seems likely that Sanofi will need another several months as they initiate this first stage of Afrezza's product launch. This is more likely the reason why sales of Afrezza have been slow, not the argument that Sanofi is purposely trying to sabotage their relationship with MannKind.

There is a vocal segment of MannKind investors who believe that Sanofi should just start spending millions of dollars on TV advertising. These investors suggest that Sanofi can create product demand for Afrezza quickly once that large segment of the T2 diabetic community see it promoted on television. While there is validity to the idea that TV advertising can create Afrezza awareness for millions of diabetics in a very fast timeframe, it is also the case that many of the endocrinologists for whom those diabetics are being prescribed, still know little of the value of Afrezza.

There is no wisdom in putting the cart before the horse. It is imperative that doctors be allowed enough time to learn of the pros and cons of Afrezza and obtain some experience in prescribing the inhaled insulin, especially, because the results coming in from their first patients seem to be contradicting the results found in the FDA designed trials.

Early adopters are reporting extremely positive blood glucose A1C numbers. But, since it takes three months between A1C tests, it will take at least six months for endocrinologists to begin to see a trend in their prescribed Afrezza patient's results. Doctors are just now beginning to witness these findings with their very first patients who started in the first few weeks of Afrezza's launch. Obviously, only a handful of doctors then prescribed Afrezza. Therefore, we will need another six months before a larger number of endocrinologists witness the A1C success of their patients more recently starting on Afrezza.

Once there is a reasonably knowledgeable population of endocrinologists who have experience in prescribing Afrezza and have seen positive results with their early adopter patients, then that would be the ideal time for Sanofi to start their TV advertising. But, even then, that advertising should be limited and first tested in various markets. The worst thing that could happen is for a national TV advertising campaign to be unsuccessful because of a poorly constructed commercial. Companies often create several commercials and test them over several weeks in order to see which one works best. The same should be required for Afrezza. In the meantime, Sanofi's print media campaign can continue, especially in magazines oriented towards the diabetes community.

Patience is required for investors who are long on MannKind Corporation. Early adopters, so far, are reporting successful results with Afrezza. Over the next six months, additional endocrinologists may witness the success of more early adopter patients. When enough doctors are on board with Afrezza, Sanofi will eventually initiate their TV advertising campaign for Afrezza. In the meantime, investors might be best served by adding to their positions while MannKind is still trading in its current range. It seems reasonable to assume that sales should increase substantially, YTD, and this $4 stock could double in value next year.

Thanks for posting your thoughts here. We don't delete them like they do over at Investor's Shlub. 

I realize that under HIPAA rules, a doctor can not disclose patient info unless the patient gives permission. Could some of the ENDOs Sanofi has targeted to Rx Afrezza possibly be keeping stats on those patients who give permission tracking A1Cs, weight gain or loss and any other pertinent info so that Sanofi/Mannkind can glean from it just how good or bad Afrezza is working? And could that data be part of a milestone that would be paid to Mannkind either in cash or equity stake if the data supports what Al Mann has been saying for a decade in regards to how well Aferzza works?

[ezrasfund]

"I realize that under HIPAA rules, a doctor can not disclose patient info unless the patient gives permission."

I spoke to Hakan at the ASM about the idea of some of the lead endos compiling aggregate data from their patients. I do not believe there are any HIPPA rules that would not allow an endo to say, for instance, that in the group of my first 50 patients started on Afrezza the average HbA1c reduction after 3 months was X%.

[ezrasfund]

"For those diabetics and/or more knowledgeable folks out there.........just how much trial and error action is or was there to get your injections "dialed in"? Is it that much more complicated to dial in with Afrezza? "

There is a point here similar to one that was  made by Afrezzauser, who said, [paraphasing] "when a diabetic measures her BG level at 300, she doesn't say 'my Humalog isn't working!" All insulins have a learning curve and must be "dialed-in". Afrezza is probably much easier to dose than RAA's. But the situation is that the diabetic who is starting Afrezza has been using her RAA for years and has mastered the fine points. Now those patients have to unlearn what they know about insulin dosing and start thinking differently about timing, dosing, carb counting and such.

[notamnkdmillionaire]

Aug 21, 2015 20:18:51 GMT -5 ezrasfund said:

"I realize that under HIPAA rules, a doctor can not disclose patient info unless the patient gives permission."

I spoke to Hakan at the ASM about the idea of some of the lead endos compiling aggregate data from their patients. I do not believe there are any HIPPA rules that would not allow an endo to say, for instance, that in the group of my first 50 patients started on Afrezza the average HbA1c reduction after 3 months was X%.

Did you get any sense from his answer/body language/facial expressions that they have been collecting this data?

[suebeeee1]

Aug 21, 2015 18:41:59 GMT -5 phantomfj said:

For those diabetics and/or more knowledgeable folks out there.........just how much trial and error action is or was there to get your injections "dialed in"? Is it that much more complicated to dial in with Afrezza? I do know a few diabetics, but that would not be a question I would ask in passing conversation.........I would think it would be easier to inhale more if needed, vs sticking yourself with a needle again, especially if the inhaled product is faster acting. And, as a new injection user, because shots are not fast acting, would you not run the risk of thinking that your first injection wasn't enough, give yourself another dose , thus overdoing it on insulin?

My husband had been on Afrezza for about 2 1/2 weeks.  He went from Metformin and onglyza to it.  Since he did precious little testing of his BG, leaving almost all testing to his quarterly A1c.  We had to strong arm his doctor into prescribing it as he was happy with an A1c in the 7.6 range after having diabetes for 8 years.  Consequently, he is now testing several times a day.  His doctor gave him virtually no instructions as our insurance company, Kaiser Permanente does not have it in their formulary yet.  This had been trial by fire.  The logistics have been challenging but he it's starting to get it down.  In the beginning, we were testing a lot more than now.  It seems that he can intake 4 units immediately preceding eating, test about two hours later and (usually) correct with an additional 2 to 4 units at that time.  There have been no hypos.  

We are also paying full price until our insurance starts reimbursement.  We are using the discount coupon, but that is only for$150.  The prescription cost over $500. We are willing to pay that until Feb when it is expected to be picked up by Kaiser.  

So, it would seem that Rob is right on target with his article  Without strong physician education this will fail.  Let Sanofi take the time they need to get everyone trained and on board.  Most patients will not be as determined or smart or as able to network in order to do this themselves.

This will take time.  It IS a paradigm shift.  I know we don't want  to hear that and we don't want  to wait any longer.  But, this will happen.  One nice bright Friday morning, we all are going to go to Liane's script numbers and sleepily open the file that gives us the weeks sales, only to see them double! It will happen.

[kball]

Aug 21, 2015 23:43:07 GMT -5 suebeeee1 said:

Aug 21, 2015 18:41:59 GMT -5 phantomfj said:

For those diabetics and/or more knowledgeable folks out there.........just how much trial and error action is or was there to get your injections "dialed in"? Is it that much more complicated to dial in with Afrezza? I do know a few diabetics, but that would not be a question I would ask in passing conversation.........I would think it would be easier to inhale more if needed, vs sticking yourself with a needle again, especially if the inhaled product is faster acting. And, as a new injection user, because shots are not fast acting, would you not run the risk of thinking that your first injection wasn't enough, give yourself another dose , thus overdoing it on insulin?

My husband had been on Afrezza for about 2 1/2 weeks.  

*snip

It seems that he can intake 4 units immediately preceding eating, test about two hours later and (usually) correct with an additional 2 to 4 units at that time.  There have been no hypos.  

*snip*.

2 question
1. How is it possible for a 2 unit correction at this time?

2. Has he tried that first puff 5-10 minutes into that meal to see if that would make correction dose unnecessary?

[bretzyboy]

From Suebee;
"Rob is right on target with his article Without strong physician education this will fail. Let Sanofi take the time they need to get everyone trained and on board. Most patients will not be as determined or smart or as able to network in order to do this themselves.

This will take time. It IS a paradigm shift. I know we don't want to hear that and we don't want to wait any longer. But, this will happen. One nice bright Friday morning, we all are going to go to Liane's script numbers and sleepily open the file that gives us the weeks sales, only to see them double! It will happen."

Bingo!

[ezrasfund]

Aug 21, 2015 22:02:47 GMT -5 notamnkdmillionaire said:

Aug 21, 2015 20:18:51 GMT -5 ezrasfund said:

"I realize that under HIPAA rules, a doctor can not disclose patient info unless the patient gives permission."

I spoke to Hakan at the ASM about the idea of some of the lead endos compiling aggregate data from their patients. I do not believe there are any HIPPA rules that would not allow an endo to say, for instance, that in the group of my first 50 patients started on Afrezza the average HbA1c reduction after 3 months was X%.

Did you get any sense from his answer/body language/facial expressions that they have been collecting this data?

I didn't get any sense of whether they are considering compiling data from the first patients, but I did get a feeling that he was acknowledging that the data from the 171 study did not show Afrezza's real advantages.