Seekingalpha.com
0
All posts from Seekingalpha.com
Seekingalpha.com in Seekingalpha.com,

MannKind: Weekly Data Updates For Prescriptions

This is my second weekly report where I'm sharing the weekly new prescriptions and other relevant data that I hope will help my readers evaluate the underlying critical information relating to MannKind (NASDAQ:MNKD). With eight months of marketing, the trend in prescriptions being written for MannKind's Afrezza needs to start showing a vast improvement - and soon.

I opted to start this weekly endeavor by applying the starting point for the weekly data ending the 2nd quarter of 2015 (6/26/15). With the 3rd quarter now ended, this will give my readers the data that should indicate what they can expect when both Sanofi (NYSE:SNY) and MannKind report their respective financials for this quarter.

The prescription data that I cite is provided by IMS and Symphony, as they represent the best sourcing of information that relates to tracking drug industry information. I obtain my initial information on the Nrx, Trx and Projected Revenue numbers from the MNKD.Proboard. One can find several boards that track the data on a weekly basis. It should be noted that these boards require one to join the site before having access to their information. Plus, I verify the Nrx and Trx data from an associate who has normal access to this information. I assume the data being provided by my sources are providing accurate information. Readers can form their own assumptions as regards the validity of my sources and their data input. For future weeks, I will update the data on Friday, or hopefully, no later than the next day.

Week #

Week Ending

Nrx

%Change

Trx

Running Total

Projected Revenue

Stock % U/D

22

6/26/2015

386

17%

516

5631

$2.745M

-2.51%

23

7/3/2015

329

-15%

465

6096

$2.979M

-9.79%

24

7/10/2015

364

11%

475

6571

$3.231M

2.47%

25

7/17/2015

339

-7%

487

7058

$3.457M

5.20%

26

7/24/2015

319

-6%

485

7543

$3.704M

-12.01%

27

7/31/2015

329

3%

483

8026

$3.946M

-13.85%

28

8/7/2015

315

-4%

454

8480

$4.204M

-7.22%

29

8/14/2015

273

-13%

457

8937

$4.433M

2.76%

30

8/21/2015

338

24%

529

9466

$4.746M

-7.33%

31

8/28/2015

302

-11%

511

9977

$5.026M

3.43%

32

9/4/2015

353

17%

585

10562

$5.297M

-0.07%

33

9/11/2015

311

-12%

477

11039

$5.546M

-4.88%

34

9/18/2015

386

24%

572

11611

$5.852M

-6.48%

35

9/25/2015

394

2%

586

12197

$6.162M

1.20%

With the prescription data reported for September 25th, we saw Afrezza prescriptions achieving the all-time high for Nrxs. Previously, the high number (386) had occurred on June 26th and matched on the September 18th weekly report. The latest report reflects that 394 prescriptions had been written. This was an increase of 8, or 2%, from the previous high. However, the continuing struggle with the prescription numbers can be seen in the reordering data that shows the Trx number being 586, reflecting only 172 refills.

Let's assume that all prescriptions being written are for 90-day supplies, as this time frame will give investors the most favorable timeline. For the June 26th data, we saw 386 Nrxs, so we should have seen the 90-day supply being refilled and reflected in the latest week's total. So, if 394 Nrxs were written, and with the reorder of the June Nrxs, we should have seen 780 total filled in this latest reported time frame. The reality is that with only 586 Trxs, the needed number is short by 194, or about 25%. We have seen this 25% figure in previous data, where it was noted that in the clinical trials, approximately 25% of the patients dropped out of using Afrezza. It appears we are now seeing a continuing phenomenon as it relates to Afrezza users opting out from using this inhaled insulin product.

Investors looking at the reordering imbalance can note that from the July 3rd data until the latest September 25th data, there were 4,352 total Nrxs written. This reflects an average weekly total of 334. Therefore, with re-ordering on a 90-day basis, we now need to see Nrx numbers reflecting the on average weekly increase of 334 renewals. Now, looking at comparable refills during this same period, we see 2,344, for a weekly average of 167 refills. This gives a reorder rate running at only 50% of previous Nrxs.

The projected new prescriptions can be debated as for the current and projected growth trends. However, for a chronic disease like diabetes, when a physician prescribes a particular medication for treating such a disease, only to have the physician later opting not to renew, or if the patients elect not to renew the prescription, the implication are clear. There should be no debate about the repercussions that will happen if patients aren't given a new medication for their diabetic condition.

When one reviews the data compiled by MannKind in its clinical trials, it was clearly stated that patients in the Afrezza arm were having to take increased dosages, whereas the comparator-arm patients had a constant dosage once they had been titrated to their required dosage for efficacy. Should anyone want to debate this issue, they should consider the first action that MannKind/Sanofi undertook after the FDA approval and commercial launch of Afrezza.

Afrezza was approved with two options for dosing - either a 4-unit dose or an 8-unit dose. Clinical data had already shown the need for greater amounts of Afrezza, so immediately, Sanofi requested that another dosage be made available - this being a huge increase to a 12-unit dose. Therefore, it's very clear that Sanofi needed to increase the 4-unit by three times and the 8-unit by 50% in the individual dose options. The action by MannKind clearly told physicians and their patients that the original dosages probably wouldn't show needed efficacy in addressing their diabetic condition.

Now, we have the CFO admitting the launch hasn't gone as planned, plus the data is now clearly showing the patients or physicians are opting not to renewal the medication. So now, when we hear the continuing excuse that more time is needed to bring on board new prescribing physicians, is that really the issue? The same ones clamoring that getting appointments with their endocrinologist is very difficult, in reality could it be a case of the endocrinologist not having the time to prescribe Afrezza, knowing that historical data shows them that 25% of such patients will require a different and less expense medication in quick order? Going three months with flat new prescriptions, and now factoring in the dismal renewals, this is, in my opinion, merely a case of endocrinologists opting for other treatment methods.

The issues facing Afrezza can be summed up with these points:

  1. Endocrinologist don't have time to prescribe Afrezza, knowing that as many as 25% of their patients will stop using the product, which means the endocrinologists having to restart their treatment method with a new product.
  2. Insurance companies don't want to cover a product that requires massive dosage increases for a product that was approved on 4-unit and 8-unit doses and already costing 70% more than regular insulin. Now facing covering a product that offers 12-unit doses, this will require the price being increased further above the already excessive pricing structure.
  3. MannKind's CFO admits that the launch hasn't achieved the desired levels of revenue that were projected. Who would be so naïve as not to think this admission document isn't in the hands of every competitor's sales force member?
  4. After keeping previous staffing cuts from investors, the CFO admits that they had already incurred two reductions this year, plus now the latest, which included staffing at the Danbury manufacturing facility.
  5. The stock dropped below $3.00 this past week, reaching levels not seen since early 2013.
  6. MannKind had a debt note that came due on August 15th, and now, one and half months later, this debt obligation is still outstanding. What does it say about the ongoing solvency of MannKind when debt obligations are going unpaid?

Ignoring these issues and thinking the company only needs more time to train physicians is nothing but a delaying tactic and a wish to ignore reality. Continuing the spin that the ongoing marketing effort is merely a "soft launch" flies in the face of the fact that MannKind needs revenue - NOW!

With the new prescription data being up by 2%, we saw a comparable rise in the stock during the week. Considering the tumultuous events during this period, it's a tribute to investors that MannKind is seeing this increase, though admittedly a small one, in share pricing.

This latest staff reduction has ominous implications for what must be happening in the marketing efforts for Afrezza. The continuing new prescription data and lack of renewals are only confirming the reasons, or the lack thereof, for positive results. I had warned investors in my previous article about the results revealed in their 2nd-quarter filings. It was the following manufacturing data that caused me to believe that there are growing concerns for physicians and patients adopting Afrezza:

"Another surprising item from the 2nd Q report is that MannKind's finished product inventory shipments to Sanofi dropped from $7.1 million in the 1st Q to $5.9 million in the 2nd Q. This clearly indicates there was a drop of 16.9% in Sanofi's inventory demand for Afrezza, which links back to the wholesalers not placing restocking orders for Afrezza. Reduced inventory requests from the wholesalers apparently indicates that for the third quarter, Sanofi must think they have enough inventory to meet the demand. Why else would the Work in Progress show that in the 2nd Q it dropped by 32.3% from the previous quarter, while the raw material on hand increased by nearly 50%?

A required purchase of insulin(raw material) from Amphastar, a lower in progress manufacturing of new product, and then add in the fact that a 16.9% drop in shipments to your marketing partner, one can see that there is an issue with demand from the potential end-users for Afrezza. If one needs further validation on the reduced demand of Afrezza by Sanofi, I will address this issue later in the article when I detail the drop in weekly prescriptions."

With the projected revenue as shown in my above data, we can see that based on the projected revenue numbers for the 3rd quarter, they are expected to be around $3,417,111. With the cumulative projected numbers now being $6,162,971, we are beginning to see that full-year numbers for revenues, will come in around $10,000,000. Considering the MannKind/Sanofi partnership is on track to incur approximately $160 million in joint expenses, we are looking at paltry return of about $0.06 per expense dollar spent.

Why would Sanofi want to spend more marketing monies, thus having to loan MannKind their portion of the expense? Never forget the boasting and remarks on Twitter about how large the physicians' attendance was at the ADA conference back in June. Are investors to assume that none of these doctors have been "trained" after five months of being exposed to Afrezza? If so, it begs a discerning person to ask just what the Sanofi marketing team has been doing, for what is soon to be 12 months of effort, if they are not being able to educate physicians.

The late and great Satchel Paige once stated, "Never look back. Something might be gaining on you!"

What better example of such "gainers" than the myriad of news items issued this week from other major corporation competing in the diabetes market.

  1. Fractyl Laboratories announced the results of its proof-of-concept study for the company's minimally invasive device that could contribute to insulin resistance and how the body absorbs and processes sugar. At this point, Fractyl is a long way from FDA approval, but the company is working on very intriguing new method for addressing our growing diabetes crisis.
  2. Novo Nordisk (NYSE:NVO) received FDA approval for two new diabetes treatments - Tresiba and Ryzodeg.
  3. Sanofi (SNY) has agreed to a patent settlement that will allow Eli Lilly (NYSE:LLY) to begin marketing Sanofi's Lantus product in 2016. With Sanofi seeing continued erosion of their market share, what is the logic behind some thinking they would jeopardy "any" product with a "soft launch", and thus let the product become known as a failure in the medical community? If the CFO tells you that the "soft launch" hasn't worked, why would anyone think the company will continue down this road? Furthermore, the CFO didn't justify the lack of success as being related to a "soft launch". Maybe he isn't on the same page as Sanofi.
  4. China is apparently developing their own internal program for how they plan to address the insulin needs for their citizens.

Good luck with your investing decisions! It is my sincere hope that Afrezza will continue being made available for those patients that need options for how they address their medical needs.


More