MannKind's Road To Riches - Sales, Sales And More Sales

| About: MannKind Corporation (MNKD)


Reduce the price of Afrezza.

A focused and inexpensive marketing campaign geared towards the diabetic community and insurers.

Hit a home run at the American Diabetes Association meeting in June.

On April 5th, MannKind (NASDAQ:MNKD) assumed full responsibility for the worldwide development and commercialization of Afrezza from its former marketing partner Sanofi (NYSE:SNY). Newly hired Chief Commercial Officer Michael Castagna was brought in to direct this effort with a limited balance sheet and limited time. He joined MannKind from Amgen where he helped to successfully launch oncology and rheumatology products into the marketplace. His resume includes working on the successful launch of over 10 brands in multiple disease areas.

The company announced Monday that on April 19 it would host a conference call to discuss its commercialization strategy for Afrezza. I will preview a few key possible points of this strategy for the coming months based on hints and indications from previous conference calls and other public meetings. First though, let's look at the funds MannKind has to implement this upcoming strategy.

According to MannKind's end of the year balance sheet cash and cash equivalents were approximately $59.1 million on December 31, 2015, along with $30.1 million available to borrow under the amended loan arrangement with The Mann Group. The net loss for 2015 was $368.4 million of which $206.6 million was a non-cash impairment charge. This means the cash loss last year was $161.8 million or about $13.5 million a month. If expenses and sales remain flat that gives MannKind at most till the middle of the year to effect some sort of sales turnaround before it has to raise additional capital through debt borrowing, share dilution or some other agreement with a partner.

MannKind hinted at several strategies in its latest conference call to investors that it could not openly discuss until after April 5th when the rights to Afrezza transferred back to MannKind from Sanofi. Not only do MannKind's actions have to turn around mostly flat sales and growth based on past earnings reports, they have to do it without spending a lot of money as seen above. I see a three-pronged approach to this turnaround that should help increase demand and awareness while not bankrupting the company in the near term.

The first and most obvious way to stimulate demand will be to reduce the price of Afrezza. Sanofi positioned Afrezza as a premium product during its first year of launch that resulted in it costing the average patient more money than other mealtime insulin products it was directly competing against. This premium pricing along with the difficulty of obtaining a prescription due to Afrezza's label resulted in sluggish sales over the first year that resulted in Sanofi's termination of the partnership.

Reducing the direct cost of the drug to be competitive or even below that of other mealtime insulin products should lead to greater demand from the public and more pressure on insurance carriers to cover the drug in their health plans. Moving to Tier 2 in private health insurance providers along with a move to Tier 3 in Medicare will save patients money and would also remove some of the restrictions that health insurance companies might require to obtain the drug. With Afrezza on the market now over a year along with the expected reduction in drug price, getting insurance companies to reevaluate the drug is of paramount importance.

With limited resources and time, MannKind's DTC (direct to consumer) campaign has to be extremely focused and effective. This includes maintaining company websites and social media sites with the latest information in an easy to use format that allows users to understand the benefits of Afrezza along with the process and expectations of obtaining a prescription. MannKind also has to do a better job of bringing doctors and patients together and supporting local communities in this effort. To this point, independent diabetes care centers are starting to open up that bring doctors, patients and the drug together to bring about greater understanding of Afrezza's benefits. These sites would combine Afrezza use with continuous glucose monitoring for a better understanding of real time diabetes control. Promoting, encouraging and expanding endeavors like these will be key to getting the word out while MannKind builds a small sales force to more directly sell Afrezza to doctors.

Finally, MannKind is planning on presenting at least four abstracts at the American Diabetes Association (ADA) scientific meeting in June including the results of two completed post-marketing studies. These presentations will highlight the unique PK/PD profile of Afrezza compared to other rapid acting insulin. This meeting will be essential in showcasing Afrezza as a superior mealtime insulin both in efficacy and in reducing adverse events associated typically with insulin therapies based on the latest scientific evidence to the diabetic community.

The preceding article is speculation on future events based on past events. Do your due diligence on this company if you plan on taking a long or short position in the stock because there will likely be large volatility in the stock going forward until the plan is revealed and until investors see if the plan is gaining any traction in growing sales. Also, MannKind may very well also discuss an update on additional funding at the April 19th meeting which might mean additional share dilution, debt or a partnership to help fund the upcoming commercialization strategy. As of this writing, MannKind is up to $1.49 a share or a 22.13% gain on the day. Enjoy the roller coaster.

Disclosure: I am/we are long MNKD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.