This is a big step back for MannKind.
After months of disappointing sales, Sanofi (SNY) has finally ended its bid to market MannKind’s Afrezza inhaled insulin product, which was one of the more controversial and closely watched product launches in the pharmaceutical industry over the last few years. In a memo to employees, the drug maker said it plans to transfer rights to the product back to MannKind in April.
“Despite substantial efforts leading to high levels of brand awareness with key … healthcare professionals, Afrezza has continued to demonstrate low [prescribing] volume and revenue performance in the marketplace,” wrote Jez Moulding, who runs the Sanofi business in the US, and Andrew Purcell, who oversees the company’s US diabetes business. (The memo can be seen at the bottom of this post).
As for MannKind, the company initally issued a terse statement to say it is reviewing options for the product, but later maintained a new marketing partner will be sought.
Afrezza, you may recall, was single-mindedly championed by Al Mann, a wealthy entrepreneur who reportedly invested a considerable portion of his personal fortune in MannKind to bring the product to market. Despite various setbacks with regulators, he stubbornly touted Afrezza as a winning alternative to Exubera, a failed Pfizer (PFE) product that spectacularly flopped before being withdrawn in 2007.
Nonetheless, for years, there was skepticism about the extent to which doctors and patients would embrace the product. And they never did. Afrezza sales totaled a meager $5 million or so through the first nine months of 2015. Among the naysayers, by the way, was Martin Shkreli, who urged the Food and Drug Administration not to approve Afrezza while betting against MannKind stock. The agency approved the drug in 2014.
Sanofi, however, appeared unfazed. In August 2014, the drug maker agreed to pay $150 million upfront to MannKind in hopes of reviving its struggling diabetes franchise. At the time, Sanofi was about to face competition for its all-important Lantus insulin — a franchise product — and was betting that many of the nearly 26 million Americans with diabetes would prefer an alternative to injectable treatments.
In fact, the deal with MannKind was reached just two months before Chris Viehbacher was ousted as Sanofi chief executive. He had been clashing with the board over a raft of issues and even took the unusual step of submitting a letter to argue why he should keep his job. However, there was already building pressure on the diabetes franchise and investor concern that a price war would accelerate.
Ever since Viehbacher was replaced by Olivier Brandicourt, a former Bayer (BAYRY) executive who also oversaw the Exubera launch at Pfizer, there was speculation that he would dump Afrezza. And as Afrezza failed to ring the register over the past few months, it appeared to be just a matter of time before Sanofi would exercise an option to terminate the agreement with MannKind on Jan. 1.
“Frankly, this news was not unexpected,” wrote David Kliff in Diabetic Investor, an industry newsletter in which he has regularly argued that Afrezza would become a niche product, at best. “So kudos to Olivier Brandicourt for making this decision, even if it was the obvious one to make.”