BOSTON (TheStreet) -- Welcome back to another Biotech Stock Mailbag.
I can't answer your MannKind (MNKD) Afrezza question directly, not because I'm trying to dodge, but because I don't know if there's an Afrezza prescription number eight weeks from launch that will tell us much. [I'm assuming the extremes -- only a handful of Afrezza scripts or tens of thousands of scripts written in eight weeks -- doesn't happen.]
Afrezza will compete against other rapid-acting, mealtime insulins, so one way to assess the commercial launch will be to compare Afrezza scripts and market share against the competition.
In a recent research note, RBC Capital Markets analyst Adnan Butt compiled quarterly total scripts, growth and market share for the fast-acting insulins. The data come from IMS Health.
As a new product, Afrezza is not going to match the total scripts of its established competitors right out of the gate, but if the product's launch is successful over time, it will 1) win significant market share from competitors (diabetics switching from their current injectable mealtime insulin to Afrezza), and 2) accelerate growth in the entire rapid-acting insulin category (diabetics not using injectable insulin currently deciding to try Afrezza.)
Afrezza will be viewed as a commercial disappointment if it fails to gain significant market share or grow the mealtime insulin market over the next months and quarters. If you have the ability, watch weekly, monthly and quarterly IMS prescription data (or Symphony Health prescription-tracking data, if that's your preference.)
Afrezza will also draw invariable comparisons to the last, failed inhaled insulin -- Pfizer's (PFE) Exubera. For reference sake, Exubera was approved in January 2006 and launched in September 2006 (delayed due to manufacturing issues.) In October 2007, Pfizer pulled Exubera from the market due to poor sales. Through the first nine months of 2007, Exubera sales were only $12 million.
I'm a MannKind bear, so I'll take the under on Afrezza sales.
RBC's Butt is a quasi-MannKind bull. He has a buy rating on the stock with a $13 price target but with a "speculative" risk warning. Here's how Butt derives his $13 per share price target for MannKind:
We value MNKD at $13 per share, which includes US and EU profit/expense splits for Afrezza with Sanofi. We assume a US launch in 2015 and EU in 2017. MNKD will retain manufacturing responsibilities while Sanofi is responsible for commercial efforts. We forecast peak Afrezza sales of more than $7B WW with peak profit split ~$1.7B for sales in the US and outside the US.
Afrezza peak sales of $7 billion would make it the best-selling mealtime insulin in the world, but that only translates into a $13 per share price target for MannKind in Butt's model. That's another reminder of MannKind's ugly balance sheet.
Butt's $13 price target on MannKind is a double from where the stock trades today, but MannKind was an $11 stock right after Afrezza's approval in late June. In other words, MannKind's valuation already bakes in billions of dollars of Afrezza sales
I can't answer your MannKind (MNKD) Afrezza question directly, not because I'm trying to dodge, but because I don't know if there's an Afrezza prescription number eight weeks from launch that will tell us much. [I'm assuming the extremes -- only a handful of Afrezza scripts or tens of thousands of scripts written in eight weeks -- doesn't happen.]
Afrezza will compete against other rapid-acting, mealtime insulins, so one way to assess the commercial launch will be to compare Afrezza scripts and market share against the competition.
In a recent research note, RBC Capital Markets analyst Adnan Butt compiled quarterly total scripts, growth and market share for the fast-acting insulins. The data come from IMS Health.
As a new product, Afrezza is not going to match the total scripts of its established competitors right out of the gate, but if the product's launch is successful over time, it will 1) win significant market share from competitors (diabetics switching from their current injectable mealtime insulin to Afrezza), and 2) accelerate growth in the entire rapid-acting insulin category (diabetics not using injectable insulin currently deciding to try Afrezza.)
Afrezza will be viewed as a commercial disappointment if it fails to gain significant market share or grow the mealtime insulin market over the next months and quarters. If you have the ability, watch weekly, monthly and quarterly IMS prescription data (or Symphony Health prescription-tracking data, if that's your preference.)
Afrezza will also draw invariable comparisons to the last, failed inhaled insulin -- Pfizer's (PFE) Exubera. For reference sake, Exubera was approved in January 2006 and launched in September 2006 (delayed due to manufacturing issues.) In October 2007, Pfizer pulled Exubera from the market due to poor sales. Through the first nine months of 2007, Exubera sales were only $12 million.
I'm a MannKind bear, so I'll take the under on Afrezza sales.
RBC's Butt is a quasi-MannKind bull. He has a buy rating on the stock with a $13 price target but with a "speculative" risk warning. Here's how Butt derives his $13 per share price target for MannKind:
We value MNKD at $13 per share, which includes US and EU profit/expense splits for Afrezza with Sanofi. We assume a US launch in 2015 and EU in 2017. MNKD will retain manufacturing responsibilities while Sanofi is responsible for commercial efforts. We forecast peak Afrezza sales of more than $7B WW with peak profit split ~$1.7B for sales in the US and outside the US.
Afrezza peak sales of $7 billion would make it the best-selling mealtime insulin in the world, but that only translates into a $13 per share price target for MannKind in Butt's model. That's another reminder of MannKind's ugly balance sheet.
Butt's $13 price target on MannKind is a double from where the stock trades today, but MannKind was an $11 stock right after Afrezza's approval in late June. In other words, MannKind's valuation already bakes in billions of dollars of Afrezza sales
Cramer Says "Sell, Sell, Sell Mannkind
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