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Post by centralcoastinvestor on Jan 12, 2017 1:35:25 GMT -5
Like many of you, I probably spend far too much time thinking about MannKind and Afrezza. So I thought I would put that energy into a post that examines how I believe that MannKind Corp. is building a solid foundation for the future success of not only Afrezza but future Technosphere medications. I am breaking this thread into three parts so that each part of this thread isn’t so long. Remember, these are just my observations and some conclusions. I am not trying to predict the future. I’ve been an investor in MannKind far too long to make absolute predictions on what will happen next.
To begin, I want to share some observations about the construction of a house. How many of you have ever watched the construction of a house from a bare lot to a fully finished home? (Don’t make fun of me. I’m an engineer and we enjoy watching stuff like that.) For those of you who have watched that kind of construction, one thing is always interesting to me. It takes a long time and a lot of work before the concrete foundation is ready to be poured much less seeing actual framing go up. To the general public, it can appear that nothing is being done on a project for months. As you drive by a site each day, you can see that there are lots of trucks and people, but no work is getting done. In fact, there is lots of work being done, you just can’t see it. Here is a small list of things that are being done at work site that cannot be seen by the casual observer:
Removing poor soil Compacting the soil
Pumping Out Ground Water Finding Sewer, Water, Cable Connections
Digging Trenches Placing Sewer & Water Pipe
Placing Electrical Conduit Constructing Forms
Etcetera etcetera …. You get the picture. If the contractor doesn’t do a good job on the foundation work, your house will ultimately fall apart. So why this analogy? Many Mnkd investors complain about how long it is taking MannKind management to get the script numbers up. During the year that Sanofi was our “partner”, I delusionally thought Sanofi was building a good foundation for future Afrezza success. In fact, it was exactly the opposite. Sanofi was actually damaging the construction site before the foundation could even be built. How did they damage the construction site? They focused on marketing to Type 2s only, they were very slow to handle the spirometry problem, they were slow to address titration issues in new patients, they had a lousy advertising campaign that was premature since they hadn’t established good insurance coverage or doctor acceptance. And to add insult to injury, they poisoned the well on their way out of the partnership by telling all of their doctor contacts that Afrezza was going off the market because MannKind was going out of business. Now how would the doctors have heard that Afrezza was going off the market unless it was a parting gift from Sanofi. Wow what a crap partner they were.
So what did MannKind management inherit from Sanofi? Swamp land as far as I can tell. So when MannKind was finally able to take over Afrezza commercialization from Sanofi, it was worse than starting with a bare lot. MannKind management had to clean up before they could even begin preparing to build.
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Post by centralcoastinvestor on Jan 12, 2017 1:41:35 GMT -5
To support my opinions that MannKind management is building a solid foundation for the future of the company, I dissected the 3rd Quarter Conference Call transcript. So most of the following discussion is a result of that examination. For the sake of keeping this thread as short as possible, I am not including every positive item I found, but only big picture items. So here we go:
Building Blocks Of The Solid Foundation:
1. Improving Product Availability (Insurance vs. Product Cost)
In the transcript Mike Castagna began his report by stating that much had been learned as they have transformed Mnkd from a development and manufacturing company to a fully commercialization company. This knowledge comes from both the Sanofi experience along with their own real world experience. He went on to say that there were two main reasons why patients dropped off Afrezza, one was because of cost and the other was efficacy.
The issue of cost was not related to what Afrezza actually costs compared to other fast acting insulins, but more to coverage by insurance companies. Mike seemed to be comfortable with the continued improvement in formulary access. In fact, Express Scripts and Medicaid Part D have Afrezza officially in their formularies with no prioritization necessary. So at this point, MannKind appears to be satisfied that a good foundation is being laid in formulary access, a very good thing.
2. Improving Initial Efficacy For Patients (Patient Retention)
One area where Sanofi appeared to really drop the ball was here. They appeared to push getting people “signed up” for Afrezza without knowing how to keep them. In fact, Mike stated in the transcript that the sample packaging introduced by Sanofi for Type 2s included only four unit cartridges with no inhaler. Yep, no inhaler! What the heck! Give a sample with no way to take it. Wow. Also, Type 2s on the old sample pack could use up all of the cartridges in days as they had to combine so many to make one dose. Mike said that going forward beginning in December 2016, they would ship 60 count samples that include both 8 and 12 unity samples which make the Type 2 experience significantly better. Inhalers included, LOL!
Another area of huge improvement is the new Titration Pack or what is going to be called the Flex Pack. This pack includes a 60 count of 4 unit, 60 count of 8 unit and 60 count of 12 units, for a total of 180 cartridges. Mike said doctors were really excited about this improvement as it would simplify the onboarding of new patients. The target for Flex Pack to be available is January 2017. This focus on understanding how to retain patients once they have begun Afrezza use is so important to building a good foundation.
3. Building Blocks For Growing New Rx
Mike stated that there were two main reasons why people started Afrezza; the patient asked for it or the doctor recommended it. So the effort to grow new prescriptions is a two pronged approach. Mike seemed to be particularly focused on making sure doctors would want to voluntarily recommend Afrezza. So doctor education continues to be an important focus. Also, Mike said that they would be improving the sales force by hiring full time staff who would work directly for MannKind Corp.
Mike also stressed the need to drive patients to ask for the Afrezza. Mike made the most interesting statement and I quote, “ Patient awareness and experience with Afrezza is extremely low and I am thankful for that, because if a lot of people had negative experiences we’ll have a lot higher road to overcome.” So Mike views that low patient awareness as a positive. It’s a good thing that Sanofi didn’t put much effort into public awareness or we would have a bigger hole to get out of. He said that once patients hear about Afrezza, their desire to start using it is extremely high. Mike stated that they are now ready for accelerating the patient outreach but want to make sure that the messaging is good before they invest a ton in advertising. In the last year, MannKind staff have attended many conferences and diabetes events across the US.
4. Production and Supply Chain
It was a huge task for MannKind to take on supply chain responsibilities once Sanofi announced they were returning the product. They were forced to move from manufacturing only to producing MannKind branded product along with the new responsibility of distribution. MannKind had to build a supply network from scratch. Yet MannKind staff pulled it off. Mike commented that they are continuing to work out kinks in the supply chain. This is very important to do before script demand takes off.
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Post by centralcoastinvestor on Jan 12, 2017 1:47:31 GMT -5
5. Cleaning Up The Books
I don’t think it can be overstated how important the settlement with Sanofi is to MannKind. Matt stated that the financial settlement improved the financial position of the company by $130,000,000. He also stated that this settlement along with rearranging the insulin agreement with Amphastar allow MannKind the resources to comfortably make it to the third quarter of 2017.
In addition to the extended cash runway, the settlement unencumbers Matt to close new deals without the overhang of Sanofi debt or other legal entanglements. I know Matt understands that the biggest risk to the success of Afrezza is the lack of funding runway. I believe that is his top priority now that Sanofi is gone.
6. Studies To Improve Label
Ray Urbanski stated that MannKind has submitted for a label change with the FDA that would document the superior pharmacokinetics and pharmacodynamics of Afrezza as compared to other rapid acting insulins. As we all know, Afrezza blows the doors off of other rapid acting insulins with the fast in, fast out characteristics. It will sure be nice to be able to claim that officially on the label. He said they are expecting approval of the label in Q4 2017.
As most on Proboards know, Mnkd is pursuing a Phase 3 Pediatric study. The protocols for that study are currently being worked out with the FDA. Ray mentioned that they will incorporate evidence not only from the PK study that was conducted previously, but from recent publications as well. They are planning for study execution to begin in the first quarter of 2017.
7. Technosphere Product Line
Even though much of the effort by Mnkd has been focused on building demand for Afrezza, Ray said that they have not lost sight of mid and long range goals for Technosphere. Inhaled epinephrine for the treatment of type 1 hypersensitivity reactions is the current top candidate under development. By now Mnkd staff should have met with FDA staff for a pre-IND meeting. As more funding becomes available, Mnkd has many other Technosphere candidates lined up for development.
Conclusions:
1. I believe that with the settlement with Sanofi along with the reworking of the insulin supply agreement with Amphistar, that the worst of the financial crunch concern is behind MannKind. Matt understands that the financial runway is probably the largest risk to the success of Afrezza and will be working to extend the runway long before it becomes a crisis again.
2. Mike C. has done a good job of building a solid foundation for commercialization of Afrezza after starting the process in a hole with limited funding, a short timeframe and rampant rumors that Afrezza would soon be pulled from the markets. This solid foundation includes establishing the manufacturing supply chain with MannKind labeled product, doctor education, improved insurance coverage and a big effort to raise awareness in the diabetic community.
3. Although working with a limited budget has lots of downsides, the one upside is that Mike C. and his sales team has had the opportunity to explore the best methods for selling Afrezza without spending big dollars in the wrong direction. In a sense, Mike C. was forced into slower methodical approach due to limited funding that may help as they turn things up this year. And because Sanofi did such a lousy job of promoting Afrezza very few people have a negative view of the drug.
4. It is easy to forget that MannKind isn’t just a one trick pony. Given time and funding, Technosphere will allow MannKind to develop a nearly limitless pool of drugs that are currently taken either orally or by injection to be converted to inhaled delivery.
My overall assessment of the current MannKind situation is that Afrezza will succeed in the market given enough time and sooner than later. All of the pieces are in place. An incredible amount of ground work (foundation work) has been accomplished by Matt and Mike and the whole Mnkd team in a very short period of time. So having the necessary time to grow Afrezza is the biggest issue facing the company. Matt is very aware of this. With Sanofi completely out of the picture, I believe he is confident that the funding runway will not be an impediment to the future success of MannKind and Afrezza. Just like watching a home being built from a bare lot, much of the work that Mnkd has put into building a fully commercialized organization hasn’t been visible. We see glimpses of it and hear about it in quarterly reports, but the script numbers don’t grow so we all wonder what the heck is being done. In fact, lots and lots of work is getting done on the foundation. And I am glad that Matt and Mike have the foresight to build a good foundation for future success.
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Post by Deleted on Jan 12, 2017 2:08:22 GMT -5
TLDR: give then $200 mil and 2 years, they can get sales , but they dont have the money and time. No analogy needed.
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Post by Deleted on Jan 12, 2017 2:12:22 GMT -5
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Post by Deleted on Jan 12, 2017 2:13:05 GMT -5
mods can probably merge all three threads into 1 thread with 3 replies. much needed for the continuity.
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Post by liane on Jan 12, 2017 4:22:46 GMT -5
mods can probably merge all three threads into 1 thread with 3 replies. much needed for the continuity. Already done! cci - I don't know why you created this as 3 separate threads.
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Post by centralcoastinvestor on Jan 12, 2017 9:13:44 GMT -5
mods can probably merge all three threads into 1 thread with 3 replies. much needed for the continuity. Already done! cci - I don't know why you created this as 3 separate threads. It seemed like such a book when it was all together. I thought it was easier to read when broken up a bit. Breaking it up seemed like a good idea at the time. Thanks for combining it.
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Post by mannkindly on Jan 12, 2017 10:57:05 GMT -5
CentalCoast: Excellent job laying out what MNKD has done and is doing
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Post by babaoriley on Jan 12, 2017 11:08:32 GMT -5
That's a tremendous piece of work, CCI!!
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Post by cretin11 on Jan 12, 2017 16:58:54 GMT -5
Thanks CCI for that well reasoned analysis. In your first conclusion, you wrote: "Matt understands that the financial runway is probably the largest risk to the success of Afrezza and will be working to extend the runway long before it becomes a crisis again"
I agree with the first half of that sentence, but my concern is with the second part. "Long before it becomes a crisis again" - what are your thoughts for when that actually is? To me, it is arguably a crisis already, though it's semantics to some extent on how we label the situation. (Maybe i'd use a more neutral sounding word than crisis, but we all get the point.)
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Post by centralcoastinvestor on Jan 21, 2017 15:31:29 GMT -5
Thanks CCI for that well reasoned analysis. In your first conclusion, you wrote: "Matt understands that the financial runway is probably the largest risk to the success of Afrezza and will be working to extend the runway long before it becomes a crisis again" I agree with the first half of that sentence, but my concern is with the second part. "Long before it becomes a crisis again" - what are your thoughts for when that actually is? To me, it is arguably a crisis already, though it's semantics to some extent on how we label the situation. (Maybe i'd use a more neutral sounding word than crisis, but we all get the point.) Hi cretin11, sorry it has taken me so long to respond to your question. Life got busy. I have been thinking about how to answer your question and wanted to give you a well reasoned answer. I believe that MannKind has passed the most dangerous part of the cash crisis for the company. Over the last 8 months, I believe that Matt has been very focused on reaching a settlement with Sanofi. I always believed that there would be a settlement (see my post mnkd.proboards.com/thread/5274/why-believe-offer-cash-settlement). The cash from the settlement will allow the company enough cash to comfortably reach the 3rd quarter 2017. One could argue that we will just go through another cash crisis as we head closer to June 2017. I don’t think that will happen and here’s why: 1. Matt has been burned enough times by lack of cash that he has now become a seasoned veteran of the bare knuckle brawling world of biotech finance. I believe Matt will not allow the company to be in the same position again in June. I believe that Matt has many “irons in the fire” when it comes to raising cash. It could be anything from a partnership to new financing. I do not believe the company will be sold or taken private. I also do not believe we will need a reverse split. 2. Along with providing cash, the settlement with Sanofi provided the more important clean slate needed to make new deals. Gone is the debt to Sanofi. Mnkd has a new contract with Amphastar that doesn’t burn as much cash. Matt can now negotiate with other companies without the overhang of Sanofi. Also, getting the settlement done gives him more time to focus on new deals. 3. Matt hit it out of the park when he hired Mike Castagna. Matt can focus on financing while Mike C. builds the commercialization of the company. Early on when Sanofi returned Afrezza to MannKind, I believe it was pure chaos at the company. There is now a plan with the people to get the work done. 4. Yes, yes, the script count is ridiculously low. However, I believe that MannKind’s plan to staff with internal sales people is the right move. Stock incentives help. I think that if the weekly script count can reach 500 with growth of 30 to 40 scripts a week, the share price will begin to grow. If share price grows, then raising capital in the market will be attractive again. I have been invested in this company since 2007. It has been a tiring, frustrating and teaching roller coaster of a ride. As I have verbosely mentioned at the beginning of this thread, a good foundation has been laid for future success. I believe the table has been set and the company is now in a good position to begin growing and sustaining script growth.
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Post by tw12 on Jan 21, 2017 16:12:17 GMT -5
Central: Thanks so much for taking the time to offer us your calm, well-reasoned, well-organized thoughts.
The MannKind story is a page-turner for sure -- part mystery, part drama, part comedy -- but I agree that the lead actors (Matt and Mike) are working hard and well, and I suspect the next few chapters will surprise, excite and please all but the most die-hard skeptics!
In fact, I wish Michael Lewis would catch wind of this story...
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Post by kball on Jan 21, 2017 17:08:43 GMT -5
Central: Thanks so much for taking the time to offer us your calm, well-reasoned, well-organized thoughts. The MannKind story is a page-turner for sure -- part mystery, part drama, part comedy -- but I agree that the lead actors (Matt and Mike) are working hard and well, and I suspect the next few chapters will surprise, excite and please all but the most die-hard skeptics! In fact, I wish Michael Lewis would catch wind of this story... Actually a horror movie where the protagonist (Al Mann) died too early
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Post by dreamboatcruise on Jan 21, 2017 19:55:22 GMT -5
Central: Thanks so much for taking the time to offer us your calm, well-reasoned, well-organized thoughts. The MannKind story is a page-turner for sure -- part mystery, part drama, part comedy -- but I agree that the lead actors (Matt and Mike) are working hard and well, and I suspect the next few chapters will surprise, excite and please all but the most die-hard skeptics! In fact, I wish Michael Lewis would catch wind of this story... Actually a horror movie where the protagonist (Al Mann) died too early Night of the Living Dead... but it's my retirement account devoured rather than my brain.
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