Upfront payment of $150 million.
Sanofi to partner on inhaled insulin.
Shares of MannKind up 25% in pre-market.
Shareholders of MannKind (NASDAQ:MNKD) are certainly smiling this morning, with the equity up over 25% on the announcement of a global deal to commercialize its recently approved Afrezza inhaled insulin. MannKind and Sanofi made the announcement this morning.
The $925 million deal includes $125 million in upfront payments and $775 million in potential milestone payments attached to regulatory, development and sales targets. Interestingly, both MannKind and Sanofi will share in profits and losses, with MannKind getting 35% and Sanofi 65%. With the announcement today came the news that the companies intend to launch Afrezza in the United States in Q1 of 2015 (6 to 9 months from now). Also announced was the fact that Sanofi has "advanced" $175 million to MannKind, essentially giving the company a loan against future revenues. Terms of the advance were not made public.
MannKind had a long and arduous road to approval in the United States. The company's inhaled insulin is a novel approach to maintaining control of insulin levels. However, the drug's labeling, which some analysts feel is restrictive, makes it clear that it is not a replacement for long-acting insulin. It is thought that it will be well-accepted by consumers because it is not delivered by injection.
In terms of the stock, I anticipate that the cash infusion that came with this deal will be seen as a referendum of sorts to some longs that took the MannKind roller-coaster ride over the last few years. Even with the impressive gain this morning, MannKind is still not at the $11.48 that represented a 52-week high. Investors that think that the roller-coaster ride is over should think twice. With 6 to 9 months before the drug hits the market, there will be a lot of jockeying for position, and I anticipate that the short side will still apply a great deal of pressure to the equity. There are times to take profits and wait for the landscape to find an equilibrium. I suspect that this may be one of those occasions. That is not to say that this drug will not be a success. I am simply looking at the near-term action on this equity between now and the launch. This deal is a big step in the right direction, but is also the beginning of a new phase in the MannKind journey. Stay Tuned!
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