Sanofi Pulls Plug on Afrezza Deal, Putting Drug's Future in Doubt

Disappointing sales were blamed on prior authorization, the FDA label restrictions, and the need for spirometry before doctors could write prescriptions.

Shockingly poor sales have led Sanofi to opt out of its deal to sell the inhalable insulin Afrezza for the company that developed it, a move that led shares of California-based Mannkind to fall 48% yesterday despite management’s promise to find a more effective marketing partner.

The 2 companies have pledged to try and keep the drug available while they work together to ensure a smooth transition over the next 90 to 180 days. Indeed, a Sanofi spokeswoman wrote in an email that the French drugmaker will keep supporting Afrezza on a number of fronts.

“Sanofi will, until the date of termination, continue to work with key national plans reviewing Afrezza in the hopes that they will continue including the product when making formulary decisions,” spokeswoman Susan Brooks wrote.

New deals to put Afrezza on payer formularies could provide a significant boost for Mannkind’s efforts to find a new partner and make its drug a success. Some analysts believe that the single biggest reason for Afrezza’s disappointing sales to date has been the nearly universal need for would-be users to get prior authorization before filling a prescription for the drug.

Still, despite such hurdles, Mannkind’s leadership says that Afrezza can still be the big seller that many people once expected it to be.

“Although this news is obviously not what we anticipated when Mannkind commenced the partnership agreement with Sanofi in August, 2014, it became clear as 2015 progressed and sales forecasts were not met that change would be required if Afrezza were to achieve the market success that we believed and still believe should be possible,” said Matthew Pfeffer, the company’s chief financial officer, speaking with investors on a conference call Tuesday. “This is not the end of the line for Afrezza or MannKind by any means.”

Investors and at least some who follow Mannkind were not so confident about the future of either the company or the 1 drug it has shepherded through the regulatory approval process. Mannkind’s stock price fell 70 cents to close at 74.8 cents a share on Tuesday. The stock has lost more than 90% of its value since share prices briefly rose over $10 when the FDA approved Afrezza in mid-2014.

Analysts from JP Morgan believe that Sanofi’s decision to terminate the sales partnership will most likely end any real chance of major success for Mannkind and Afrezza. “We can't imagine that another legitimate diabetes company would show serious interest in this asset," they wrote yesterday in a note to investors. "With little hope for resuscitating Afrezza and a dismal balance sheet (net debt), we see Mannkind in an increasingly precarious position.”

Even before Afrezza became available to consumers early last year, predictions about its potential impact varied widely. Skeptics argued that the recent failure of Pfizer’s Exubera demonstrated how little demand there was for inhalable insulin. Worse, they said, the FDA’s insistence on labels urging against Afrezza for patients with any breathing impairment would scare many other patients away. Optimists countered that it was ridiculous to discount the compelling appeal of replacing more than 1000 shots a year with painless sniffs. They attributed Exubera’s failure to shortcomings with an inhaler design that Afrezza avoided, and said that the newer drug would attract even more users when doctors and patients learned of advantages that Sanofi could not advertise—advantages that ranged from its incomparable speed of action to its tendency to induce unusually few hypoglycemic episodes.

This split opinion showed up in the initial sales projections that analysts made. Estimates of Afrezza’s peak annual revenues ranged all the way from $182 million to $2 billion.

So far, however, even the lowest of those estimates has proven wildly overoptimistic. Sanofi reports that total Afrezza sales during the product’s first 9 months on the market barely exceeded $5 million.

Mannkind and others have offered a number of explanations for the poor sales. The prior authorization requirements from insurers not only raise potential copays for many patients but also create enough paperwork to prevent many doctors from suggesting the drug in the first place. An FDA requirement that potential patients undergo a spirometry test before receiving prescriptions creates another hurdle, particularly given that most doctors lack the equipment needed to provide such a test in the office. These obstacles, some believe, convinced Sanofi to hold off on the sort of major add blitz that would not only make Afrezza widely known but also inspire patients to ask for it.

Mannkind asserts that such factors, rather than any inherent shortcomings with the drug, are the reason for poor sales to date. Company officials have therefore worked in recent months to devise new strategies for getting Afrezza to patients, strategies they hope to implement in tandem with a new marketing partner.

“Future marketing plans must center on educating patients and doctors about Afrezza’s compelling value proposition and how to obtain maximum benefit from the product. In addition, positive market momentum depends on redefining pricing and contracting tactics to improve reimbursement and patient access with commercial and government payers,” Pfeffer said. “The 1 thing that does not need to change is the real-world experience of Afrezza users, which is everything we hoped it would be. We continue to hear, and see reported in social media, overwhelmingly positive communications by Afrezza users.”

Sanofi started with similarly high hopes about Afrezza, but company officials dispute assertions that they have failed the product and say that the real problem lies with true demand.

“Sanofi appropriately negotiated reimbursement on behalf of Afrezza,” Sanofi spokeswoman Brooks wrote in the email. “The initial rollout of Afrezza was targeted and focused on building awareness behind the product and appropriate usage. Promotional efforts started with raising awareness of product benefits among providers and Sanofi subsequently launched several direct-to-consumer efforts that included widespread print and digital coverage. The direct-to-consumer activity did not result in a change to the uptake trend for Afrezza showing that increased patient awareness did not result in increased prescriptions. Market research shows that healthcare provider awareness of Afrezza was very high, indicating that there were limited opportunities to increase prescriptions through increasing awareness.”

As for Pfeffer’s assertion that patients who do use Afrezza love the product, there is plenty of supporting evidence available from online anecdotes. At least 3 Twitter users — Afrezzauser, Afrezza Army and Afrezza Guy — have attracted communities of enthusiastic supporters. That said, Sanofi’s figures indicate that such enthusiasm is far from universal. Brooks wrote in her email that only 35% of the 6000 patients who have ever started on Afrezza are still using it.

There is also plenty of skepticism about Mannkind’s ability to survive long enough to test the effect of any new strategies for getting Afrezza covered and getting it out to customers. Piper Jaffray analyst Joshua Schimmer slashed his target price on Mannkind from $1.50 to just 5 cents after the Sanofi announcement.

“The company did not take Q&A at the end [of the conference call] because the new CEO wouldn't be able to field questions. So unfortunately we didn't have an opportunity to ask how the company can avoid bankruptcy,” he wrote. “With what we believe is, at best, one year of cash left, assuming it significantly curtails spending during a product launch where spending is required, and with an outstanding net debt position, we're not sure how this plays out successfully. Our lower Afrezza estimates may be too generous and our updated spending estimates may be too low. And we still haven't addressed the lingering outstanding debt position. We await clarity on how MNKD plans to work its way out of this pickle.”

Mannkind, however, isn’t admitting any doubts.

“While some of you may be wondering how we can speak so assertively in the face of this difficult situation, I will say that we have had difficult situations before and we have prevailed,” said Pfeffer, who promised that Mannkind’s new CEO, Duane M. DeSisto (who officially started his job just as the Sanofi news came out yesterday) would give more details about the company’s plans at an investor conference later this month.