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MannKind: Experts In Pulling Numbers From Orifices – MannKind Corporation (NASDAQ:MNKD)

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MannKind’s (MNKD) Afrezza was launched into the US market in late January 2015. After this initial launch, the drug is now into the third official launch of the product where there have been few positive results. The initial launch was conducted by a major drug company, Sanofi (SNY), which has been a foremost player in the diabetes market. By the end of 2015, Sanofi had seen enough and opted to return the drug to Afrezza – wiping their hands and staunching the cash burn for their marketing efforts for the second inhaled insulin drug approved by the FDA. At this point we’ve had Pfizer (PFE), which at the time was the largest pharmaceutical company in the world, and they launched the first inhaled insulin product -Exubera. When they observed the futility of their efforts to market Exubera, they stopped their efforts to market the drug and wrote off several billion dollars in this marketing attempt fiasco. And it’s important to note in the short time Exubera was in the marketplace, it still probably has the record of the largest-selling inhaled insulin product.

Then we had MannKind plunging ahead with their version of inhaled insulin – Afrezza. Every other major drug company in the insulin market – shut down their development program for their respective inhaled insulin product. Lilly (LLY) and Novo Nordisk (NVO) being two such examples where their executives and scientists decided such efforts were not prudent investments for their drug development efforts. MannKind with their deep-pocketed founder, having money to burn, foolishly plunged ahead with their effort to get Afrezza approved by the FDA. Finally, on the third attempt, and what is currently more than $3 billion spent on Afrezza, the FDA gave MannKind the approval they had so imprudently sought. I say imprudently, because now with the product on the market for 168 weeks, 42 months, and fourth calendar year, Afrezza probably carries the title as of the Most Expensive Flop in Drug History.

In 2016, MannKind brought on a new marketing leader. He personally confirmed he would develop a marketing plan that would outperform Sanofi’s effort, based on fewer sales representative and a reduced marketing budget. This former marketing expert is now the CEO of MannKind. Plus, we have empirical evidence for what he has accomplished during his tenure with MannKind. And now we can see what he is projecting for 2018.

My following comments are based on MannKind’s recent presentation at the H.C. Wainwright Global Life Science Conference:

What’s Behind Curtain #11:

Slide on Page #11:

Driving Demand for Afrezza

  1. Leadership -100 U.S. Territories
  2. Improve Access – 70% commercial lives are covered in the US
  3. Marketing Campaigns – New FDA Label update in 2017 provides clarity & removes confusion – Positioning inhaled insulin as the next gold standard for mealtime control
  4. New Packaging – These changes will reduce drop-out rates, multiple co-pays and increase ability to appropriate dose and titrate Afrezza

My response:

  1. MannKind has in place 100 sales representatives, so MannKind goes back to data achieved when these representatives were first being introduced into their territories, and had no experience in selling Afrezza. This being the first quarter 2017, MannKind now boasts on Slide 14 that Afrezza achieved a 2018 Cumulative TRX Grew 84% YOY YTD. What they are comparing is the first quarter, 2017 to the first quarter 2018, thus having cherry picked data so they could claim a massive growth of 84%. Why would MannKind opt to brag about 100 sales representatives starting freshly in the field, and then finds it necessary to jump to the results of the first quarter of 2018? MannKind had previously stated the sales team would be showing increasing growth in prescriptions as they gained experience in their territories. They had first quarter, second quarter, third quarter, and fourth quarter of 2017 to develop their marketing skills, so why not use their fourth quarter as the comparator for this latest claim? Why go back to when they were just learning their way in their territory. Why not brag about what should have been their best quarter (fourth quarter 2017) as their foundation for the first quarter 2018 results. Oh! Now I remember! If they had used the actual sequential growth from quarter to quarter, his YTD 84% growth turns into negative growth. So much for the promise about more experience in the field would generate better market capture results.
  2. Now into the third launch and fourth calendar year for Afrezza being available for patients, MannKind has 70% of the commercial patients under their umbrella, yet the capture rate for new prescriptions has turned negative and refills are abysmal.
  3. The much-ballyhooed label changes MannKind delayed for months before revealing the data at the 2017 ADA, patients should have clarity, and this would remove confusion? So why are new prescriptions lagging and patients are still refusing to get refills. Someone at MannKind has a disconnect from the reality of what is happening! And now, once again, MannKind opts to keep the results of their STAT study under wraps and wait for the ADA to unveil the results. Results that I predicate will be worthless! MannKind needs revenue and if STAT is the catalyst, what CEO would delay getting the information into the hands of their sales representatives? Remember they tried this gambit last year with the label change – and how did this hype story turn out?
  4. As for the new packaging accomplishing so many positives things, please refer to my response for #3.

What’s Behind Curtain #26—Better Than Winning Publisher’s Clearing House Prize?

But the classic slide from MannKind’s presentation at the Wainwright conference is found on Slide 26 – Growth Trajectory Continues for Afrezza. The word ‘trajectory’ defines any path or course. What MannKind uses to qualify the path or course direction on Slide 26 is the world – Growth!

I think if MannKind had merely looked at the previous claim where they proclaimed the amazing 84% growth in the first quarter 2018, being honest with investors they wouldn’t have told them that Growth Trajectory Continues for Afrezza -because it hasn’t. Now as we enter the second quarter 2018, we see the same ‘trajectory’ is down! A candid and honest company resorting to using their qualifier term – growth – based on the first quarter 2017 to the first quarter 2018, without pointing out the effort from 2017 was predicated on there being no sales force marketing Afrezza since November 2016 and several months going forward into 2017. Now MannKind, in their Wainright presentation, implies first-quarter 2018 results were based on 100 sales representatives for the entirety of the cited 84% growth. Having this fact disclosed adds the proper perspective and mitigates the claim of 84% growth and places it in the bin of misguided hype, with no value – by ignoring the fact that sequential quarterly results from the fourth quarter 2017 to the end of the first quarter 2018 shareholders and the audience at the conference would see a chart showing negative growth in prescriptions captured. Thus, destroys the claim of Growth Trajectory continues for Afrezza. Once again, shareholders think they are holding the winning entry for the Publisher’s Clearing House prize, while MannKind executives are living the life of luxury in Monaco and showing 84% growth to their audience which was going to sell $2.00 shares to more true believers.

MannKind: Winner of the Annual Razzie Award for a Flop

If the absurdity of slide #26 isn’t enough distortion of the reality facing MannKind, then look at Side #15. There the claim is- Q4 Pilot TV Campaign Confirmed Afrezza is Promotionally Responsive Across All Key Metrics.

First, MannKind uses Q1-2017 to validate their 84% growth claim for the first quarter 2018. Now they claim the fourth quarter 2018 TV commercial campaign “confirmed” that Afrezza is promotionally responsive. As the company and true believers have insisted, it takes weeks to see an endocrinologist. It takes weeks to get a spirometry testing. It takes weeks for the patients to get approval from their insurance carrier and only then can a patient get their supply of Afrezza. These are the litany of excuses that have been put forth since 2015, in order to explain why it takes so long for patients obtaining their supply of Afrezza! Now the company has the audacity to claim the TV ads proved to be successful across all key metrics. What about the key metric for the first quarter 2018, when all the proof of these fourth quarter 2017 events should be showing the benefits from the TV ad agenda? Rather they merely cherry-pick their data to justify the spending of $5 million for ads that immediately generated a negative gain in new prescriptions.

The Saga of Ghost Riders and Ghost Writers!

And then there is the mystifying claim on Slide #26, where they state in relationship to these TV ads – New Writers grew by 37%. Okay! If something grew by 37% then there must be a base number where it grows by 37% to make this a factual metric. If MannKind stated new writers grew by 37 is one thing, but the percentage claim must be based on a percentage of a concrete base number.

Let’s look at what MannKind stated on November 10, 2016, or about 17 months before this 37% growth number was shared:

Since launch Afrezza had almost 4,000 prescribers prescribe the drug. We continue to see repeat prescribing and we will continue to see that effect compound over time as we go out there. Just since July we had over 200 prescribers to-date.”

This statement is very clear – there is no percentage issue involved. A very straightforward – 4,000 prescribers/writers for Afrezza. Based on the clarity of this 2016 statement, now look at the latest claim – 37% new writers for Afrezza. For MannKind’s latest claim to have any meaning there would have been 4,000 writers and now that number has grown by 37% to a total minimum of 5,480 medical doctors having prescribing history with Afrezza.

When you consider the latest weekly prescription data for Afrezza, it shows that a cumulative number of new prescriptions and refills total 59,065. This breaks out for the hard realization these 5,480 historical prescribers for Afrezza, this reflects that each doctor has been involved in 10 Afrezza prescriptions – new prescriptions and refills.

I simply ask, how is slide 26 relevant to the reality of the cold hard facts? Growth Trajectory Continues for Afrezza is a classic example for the promoter of such, being disconnected from the truth where cherry-picking data is the norm to be expected in their effort for being obscurant in dissemination of information to shareholders.

What is amazing about this issue, MannKind has actually shared a cold hard fact about Afrezza, and the true believers in this stock completely ignore this fact. During the above-cited November 2016, conference call this is what the now CEO openly admitted was the reason why they had found it difficult to market Afrezza:

Couple things I will share with you before I go into details is, we have learned that patients dropped off Afrezza for two reasons, one was because of cost and two was because of efficacy. And there are other reasons they dropped out, but the two predominant reasons are based on these two factors.”

What part of the English language isn’t clear when MannKind clearly admits there is a major issue of Afrezza not showing any efficacy for those using the drug? Those heavily invested in a stock, where they have lost more than 90% of their investment’s value, the true believer would prefer to listen to internet bloggers promoting they should buy more shares at the current bargain price. Now a price of about $0.35 based on pre-reverse split share ownership.

The Truth Shall Set You Free!

The classic example of ignoring scientifically based research and even MannKind admitting an efficacy issue with their drug, the true believers would prefer visiting the most prolific chat board (mnkd.proboards.com) that bans any negative comments about Afrezza, but they get giddy over posts like this—

Only a year ago CGMs and time-in-range were just beginning to move into some mainstream discussions. Hopefully, the coming ADA conference will be buzzing about CGMs, the STAT study and Afrezza. Since many of us follow message boards and the market multiple times a day, it appears the shift is moving at glacial speed but it’s actually starting to happen fairly quickly considering the magnitude of importance. Hopefully, Dr. Kendall heard Mike’s pitch and decided to join Mannkind to implement a plan to accelerate the shift. IMO, he wouldn’t have climbed aboard for any other reason.”

This post was made by a blogger going by the name – Akemp3000, on April 16, 2018. The key claim made by this blogger was in the very first sentence – “Only a year ago CGMs and time-in-range were just beginning to move into some mainstream discussion. Hopefully, the coming ADA conference will be buzzing about CGMs, the STAT study and Afrezza.”

As of April 2018, this promoter for Afrezza is claiming a year ago (2017), CGMs and time-in-range were just beginning to move into mainstream discussion. This will be the latest hyped solution for saving MannKind where the facts are wrong. But the true believers want to believe such ridiculous claims.

So please allow me to share with my readers a peer-reviewed article published by the American Diabetes Association, the very same organization this promoter of Afrezza hopes the upcoming ADA meeting will have a buzz about CGMs – the new addition to diabetic care. The article is written by Dr. Larry C. Deeb, a doctor who isn’t exactly a neophyte and unknown medical doctor with his emphasis on the diabetic care for his patients. Dr. Deeb fully discloses at the end of this article that he has been involved with Sanofi, Novo Nordisk and Eli Lilly.

With this background, read Dr. Deeb’s detailed article and note carefully when this article was published – April 2008. Ten years ago, and not 2017 where the true believer promotes as the beginning of the discussion about the use of CGMs. Once again true believers promote the likes of Videx being the solution for solving MannKind’s problems. Videx, a company with no local phone number to call and make an appointment. With Videx, you go to a website and share your personal information and never have a clue where and who is getting such information. And then there is Receptor, the company with a static website with a pretty grove of redwoods for the true believers to gaze and wonder why there isn’t a phone number where they can verify when they are going to get rich by holding MannKind’s stock.

I merely ask the true believers – what is wrong with the truth?

Conclusion:

Please look at Slide #25 in the Wainright conference presentation. MannKind clearly shows the company netted $9 million in 2017 revenue for Afrezza. MannKind then proceeds to share their projections for 2018 net revenue for Afrezza being between $25 million and $30 million. Let me be more than generous with MannKind’s projections. I will use the lower end of their 2018 net revenue results – $25 million. With the 2017 net revenue results being $9 million, for them to achieve the lowest projected number for 2018 they will need to increase revenues by 2.77 x the $9 million = $25 million net revenues for 2018.

Based on the need for growing 2017 results by 2.77 times, the most accurate way is to show the incremental 2.77 times needed growth is by tracking on a weekly basis, using the 2017 weekly results as your base number. This would be NRx, Refills, and their combined total. Then I share the weekly total result for prescriptions, and then the number needed to reflect growth trajectory is either on target, ahead of target, or flat.

In order to arrive at the weekly status, I have multiplied the 2017 weekly total by 2.77 to get the critical growth in order to arrive at the $25 million on December 31, 2018. The following charts clearly show we have seen 15 weeks of data, we are already in the second quarter of 2018, simply meaning the opportunity for MannKind to generate $25 million in net revenue, 28.8% of 2018, is history. With the hard facts being as of the latest data, MannKind is already behind the needed prescription growth by 3,828 prescriptions. The reality being as the comparable weeks ahead for MannKind, the growth numbers will become even harder to achieve in relation to the 2017 number seen in the last few months before the prescriptions hit a stone wall at the end of 2017.

My suggestion for the true believers, make a copy of this chart, fill in the weekly results and track weekly whether the reality is setting in for you!

2017 2017 2017 2018 2018 Running

Total Whether Plus or Minus

Week: NRx: Refills: Total: Total: 2.77X Required #
1 107 131 238 345 659 -314
2 106 102 208 419 576 -471
3 111 113 224 380 620 -711
4 146 121 267 429 740 -1,022
5 120 149 269 423 745 -1,344
6 102 134 236 424 653 -1,574
7 109 138 247 448 684 -1,810
8 105 120 225 446 623 -1,987
9 104 135 239 449 662 -2,208
10 125 123 248 389 687 -2,506
11 124 134 258 452 715 -2,769
12 133 123 256 494 709 -2,984
13 134 154 288 519 798 -3,263
14 123 118 241 468 668 -3,463
15 142 139 281 413 778 -3,828

It is my sincere wish Afrezza remains available for those patients needing options in treating their health condition. Afrezza is an insulin-based product, and we know insulin has a long history as being an option for treating diabetes. There is no panacea in inhaled insulin being the ultimate treatment or choice for diabetics. MannKind even tells you there are efficacy issues with their product.

And a new comment I might add to my customary ending for my articles. In my articles, I quote what the MannKind’s executives put into the public domain. I always share links for what I cite as sources. In return, those who oppose my opinion, they never rebut with comparable source references. They merely attack my use of a pseudonym for identifying my articles. I will always welcome rebuttals to my articles. I only request you source your material, just like I use the ADA in the above debunking of true believers who think it will be tomorrow when MannKind makes you rich! I proclaim that worthless and futile excuses are cheap! Actual verifiable and positive results are priceless!

In an ironic way, one should applaud the MannKind executive for the manner they have been able to protect their steady bi-weekly incomes. With their legal counsel leading the way, they have kept well with the bounds of expressing their opinion on matters. Plus, when a company tells you their product isn’t beneficial for treating a medical condition, whose fault is it when shareholders file a lawsuit wanting their investment dollars returned to them? Why is it that I’ve found this admission and understand the English wording, but there are still those thinking they are going to get rich by holding MannKind’s common shares. Going on four years those holding a massive short position in the stock have never flinched when the next barrage of dubious hyping claims are placed into the realm of public knowledge. Why hasn’t there been the massive short squeeze against those holding short the stock? On the very day the Sanofi deal was announced, the stock hit the high price over the last nearly five years, and those shorting the stock doubled down on this announcement. Why!

Good luck with your future investing decisions!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

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