Analysts fret over MannKind's disappearing cash
- MannKind Corp. on Wednesday reported sales of its inhalable insulin Afrezza totaled $2 million during the third quarter, more than triple product revenues from a year ago.
- The company spent $23.3 million during the three-month period and expects that cash burn to tick up to between $30 million and $32 million in the fourth quarter.
- Excluding $57.7 million raised in late October through the shares of common stock, the company held $20.1 million in cash as of Sept. 30.
MannKind struggled for more than a decade to get Afrezza across regulator's desks and to market.
That ride was anything but easy, featuring multiple rejections and the loss of its big pharma partner Sanofi SA. Development was largely bankrolled by the company's billionaire founder, who has since died.
Nearly a year after Sanofi bowed out of the partnership, MannKind is still wrestling to find a place for Afrezza in the diabetes market. Other inhalable insulins have failed to gain commercial traction and have since been pulled from the market.
The insulin market is a tricky one, dominated by three major players that market similar products. That lack of differentiation allows each company to undercut the others on price, giving payers an opening to push prices down even further.
Analysts do not paint a rosy picture for the future of MannKind.
"We are disappointed in the reported sales of Afrezza and in the amount of capital raised (~$58M) as based on our assumptions, it does not provide adequate funds (to support the required marketing effort and time) to translate into meaningful signs that the launch of Afrezza will be successful," wrote Maxim Group analyst Jason Kolbert in a Nov. 7 note to clients.
In a note the following day, Kolbert expressed concern the company could run out of cash in the first quarter of 2018.
Kolbert's worries stem from the large commercial push MannKind needs to bankroll for Afrezza. The company has a field salesforce and plans to roll out a TV campaign for the drug before the end of the year.
The multi-million dollar ad campaign will begin playing in nine test markets on networks like CNN and Fox News and will air during popular shows such as 60 Minutes, Dr. Phil and Ellen.
That hasn't convinced Kolbert for better days to come, though.
"Do you remember when Dendreon advertised Provenge on TV during the Super Bowl? That didn't end well for them," Kolbert added, comparing Afrezza to the failed commercial launch of the once hotly-anticipated cancer drug. "This company does not have the financial resources for a long-term campaign, in our view."
While analyst sentiment about MannKind is dismal, management dialogue is only mildly more encouraging.
"Undoubtedly there is never a straight path to any turnaround but it is our goal to provide you with the strategic direction we're heading," said CEO Michael Castagna on the Tuesday evening earnings call. "I believe now more than ever that Afrezza is a highly differentiated product that will earn its rightful place in the insulin market and we are at least growing in a market that is struggling to find growth."
Shares of the company dropped nearly 8% to close at $3 per share on Nov. 8, the first trading day following the company's earnings report.
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