Piper Jaffray Drops Hammer On MannKind

• Shares of MannKind Corporation MNKD have declined more than 28 percent, year to date.
• Piper Jaffray’s Joshua E. Schimmer has downgraded the rating on MannKind from Neutral to Underweight, while reducing the price target to $1.50.
• Schimmer believes the company has “vastly over-estimated” the commercial potential of Afrezza for diabetes. The drug is being viewed as a very niche product.

According to the Piper Jaffray report, the launch of the company’s new diabetes drug, Afrezza, has been “lacklustre to say the least.” Checks with specialists suggest that while there is an increasing use of Afrezza in their practice, although not a “dramatic” increase.

Schimmer pointed out that physicians were viewing Afrezza as a “niche” product that is mainly beneficial only to a small group of “needlephobic” patients. “The hassles of PFT monitoring and repeated cartridge administration were seen as drawbacks unlikely to abate any time soon” the report said.

The patient blogs, on the other hand, describe “good” glucose control but view the drug as a device that is “very challenging” to use and takes a lot of time to learn.

“While the unmet need for glucose control is high, we are skeptical that MNKD will find attractive commercial opportunities where the TI profile can command premium pricing and be differentiated versus alternative easy-to-use injectibles,” Schimmer added.

In addition, MannKind has been struggling with its convertible notes, high expenses and its obligation to Sanofi SA (ADR) SNY under the 35/65 split for Afrezza. Schimmer also expressed concern regarding Afrezza weak sales dragging the stock down further.

The EPS estimates for 2015 and 2016 have been reduced from $0.28 to $0.25 and from $0.19 to $0.17, respectively.