MannKind Corporation Stock Plunges Amidst Third Round of Layoffs

ManKind Corp Stock Plunges Amidst Third Round of Layoffs
October 1, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Valencia, Calif.-based MannKind Corporation announced yesterday that it had laid off an undisclosed number of workers at its Danbury, Conn. facility. This is the third round of layoffs this year.

MannKind produces Afrezza, a rapid-acting inhaled form of insulin to treat diabetes. It was approved by the U.S. Food and Drug Administration (FDA) in 2014 and hit the market in the U.S. in a partnership with Sanofi in February 2015. Writing in The Motley Fool in August, Todd Campbell said, “So far, sales have been more of a trickle than a flood, as headwinds tied to lung screening requirements have proven to be stronger than feared. As a result, Afrezza sales totaled just one million euros in the first quarter and two million euros in the second quarter.”

The company, however, announced on July 31 that it was tripling its manufacturing capacity for Afrezza, adding two additional filing lines. A 12-unit cartridge was recently approved. “With the completion of the validation effort,” said Hakan Edstrom, president and chief executive officer of MannKind in a statement at the time, “we can support a demand of more than 300 million cartridges per year. The addition of the 12 unit cartridge will provide patients with another option to receive their prescribed dose.”

Of the layoffs, Matt Pfeffer, MannKind’s chief financial officer, told The News-Times that the cuts were an ongoing effort of “right-sizing the company to reflect anticipated demand and operational needs. These reductions affected all of our sites, both here on the east coast as well as California, and affected all levels of management in the company.”

According to Sanofi, sales of Afrezza were about $5.5 million as of June 30, well below expectations. The Sanofi-MannKind deal was believed by analysts to be a stepping stone for Sanofi because its leading diabetes product, Lantus, faces patent expiration this year. Lantus generated $7.78 billion in revenue in 2013 alone.

If so, it may have been a questionable call. David Kliff, a diabetes investor, discussed MannKind with Benzinga earlier this week, after he posted a tweet saying that MannKind and Afrezza “are going to turnaround is like believing the Chicago Bears are going to the Superbowl this year.” He noted that the Sanofi deal, which was arranged by ex-chief executive officer Chris Viehbacher, “basically ignored what his team said. His due diligence team said, ‘don’t do this deal.’ But he pushed it through.”

Kliff argues that the only big difference between Afrezza and other products is that it’s inhaled instead of injected, but is unlikely to be an incentive for insurance companies to pay the extra price. “So I think Afrezza has an extraordinary battle because they are not only up against other insulins,” said Kliff. They are, he said, facing many other options for patients with type 2 diabetes.

The company argues differently. “The company is very different today than it was a year ago or two years ago and we have very different needs,” Pfeffer said to The News-Times. “The projected sales curve for our lead product is also different than we anticipated. All these things, taken together, cause us to continually re-evaluate our needs and our organizational structure to make it optimal from an efficiency and cost standpoint. This is just good business practice.”

MannKind is currently trading at $3.09. On Feb. 10, 2015, shares traded for $7.58, plunged to $3.63 on May 14, jumped back up to $7.23 on June 8, and has been on a downward slide ever since.

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