On January 5, news came that Sanofi and MannKind were severing ties on a licensing and marketing agreement the two companies reached for Afrezza in mid-2014, meaning that one of the biggest diabetes companies in the world was walking away from inhalable insulin. It was the biggest news of the day, but not unexpected; Afrezza sales had been very slow. The move could mean that Afrezza will be the second inhalable insulin system to fail in the 21st century, joining Exubera, which Pfizer pulled the plug on within a year of its launch in 2006.
Even though major investment analysts like Goldman Sachs had downgraded Afrezza sales forecast as far back as March 2015, Sanofi officials had remained outwardly optimistic until the end. The hope was that boots-on-the-ground education about Afrezza by Sanofi sales representatives would pull up sluggish sales. Those hopes were echoed by a passionate Twitter base of users and Mannkind investors, who talked up Afrezza’s possibilities online and fiercely defended the product.
MannKind’s CFO Matthew Pfeffer repeated that same kind of optimism on the January 5 conference call, pointing out that Sanofi’s move on January 4 to terminate the agreement frees MannKind from a non-compete obligation. Pfeffer noted that MannKind was now free to pursue worldwide licensing of its product.
“This is not what we anticipated, but we knew that change would have to come,” Mr. Pfeffer reported. “But what doesn’t have to change is the experience of users. With resolve, I can say that this is not the end of the line for MannKind or Afrezza.”
With the news, the price for Mannkind stock plummeted, losing nearly 50% of its value on January 5th alone. Pfeffer closed the fourteen minute call by assuring Afrezza users of a continuing joint commitment with Sanofi to deliver inventories, and assuring investors that the company has adequate cash and borrowing availability to fund production and distribution operations at least through the first half of the year. Moreover, he pointed out that contrary to what has been reported in the financial press, Mannkind is under no obligation to return Sanofi’s initial $150 million up-front licensing fee payment.
Despite his optimism, it appears unclear at the moment how the company can move forward with the product if a deep pockets pharmaceutical company was unable to make inhalable insulin work economically.
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