JP Morgan Downgrades MannKind; Jefferies Also Comments

JP Morgan downgraded MannKind Corporation MNKD Monday from Neutral to Underweight following Friday’s earnings release.

Analysts led by Cory Kasimov noted that sales of Afrezza had been slow with Q1 sales coming in at approximately $1.1 million.

“What’s more troubling, however, are the apparent impediments to adoption. Most notably, both partner [Sanofi] and MNKD acknowledged that the pulmonary function testing (spirometry) required by the FDA has been a major hurdle, which is something we flagged as the key risk at the time of approval,” according to Kasimov.

The analysts were “increasingly skeptical” that prescriptions would gain traction “anytime soon” which could put the company’s balance sheet in a “precarious position.”

Kasimov lowered peak sales estimates for Afrezza to $500 million while the analyst believed the current valuation reflected expectations for sales in excess of $1 billion. As a result, Kasimov did not think the company’s valuation was justified.

Jefferies analyst Shaunak Deepak also commented on the stock, however, Deepak maintained a Buy rating and $9 price target.

Deepak said that on MannKind’s Q1 earnings call, the company “focused on two of the key gating factors for Afrezza uptake: lung function testing and prior authorization. As specified on the Afrezza label, prior to prescribing the drug, doctors need to test lung function with a spirometer,” and how partner Sanofi was working on getting low-cost spirometers to doctors.

Difficulty in getting insurance authorization was another hurdle, however, the company was working on facilitating the process.

Deepak thought the company was being pro-active in addressing the above issues and looked “forward to solutions to these problems and advertising efforts driving sales in future quarters.”

Over the past 3 months, shares of MannKind fell nearly 50 percent. The stock recently traded at $3.59, down 5.73 percent.