MannKind Enters into a Global Deal with Sanofi for Afrezza

Zacks

MannKind Corporation’s (MNKD) search for a partner to market its only approved product Afrezza ended with the company inking a global licensing deal with French company Sanofi (SNY). Afrezza was cleared by the FDA in Jun 2014 for the improvement of glycemic control in adults suffering from diabetes mellitus.

According to the deal inked by MannKind on the diabetes product, Sanofi will be responsible for commercial, regulatory and development activities pertaining to Afrezza across the globe. The companies also inked a supply agreement according to which MannKind will manufacture Afrezza at its manufacturing facility in Danbury, CT. Moreover, the companies intend to expand manufacturing capacity of the diabetes drug to satisfy its worldwide demand.

The deal will boost MannKind’s balance sheet substantially. The U.S. based company will receive an upfront payment of $150 million under the deal. Furthermore, MannKind is eligible to receive milestone payments of up to $775 million. MannKind is eligible to receive 35% of the global profits/losses emanating from Afrezza sales. Sanofi will get the balance. Under the terms of the deal, Sanofi will advance to MannKind its share of the partnership's expenses of up to $175 million.

Our Take

We are positive on MannKind’s decision to choose a large and experienced company like Sanofi as a partner for Afrezza. Shares of MannKind were positively impacted by the news.

We believe the choice has been well made as Sanofi has significant experience in marketing diabetes products. Sanofi’s marketing muscle should go a long way in making the U.S. launch (expected in the first quarter of 2015) of MannKind’s first approved product a success. The deal will also result in a substantial inflow of cash at MannKind.  We expect investor focus to remain on the performance of Afrezza following its launch.

Both MannKind and Sanofi are Zacks Rank #3 (Hold) companies. Better-ranked stocks in the health care sector include Gilead Sciences (GILD) and Actelion (ALIOF). Both stocks sport a Zacks Rank #1 (Strong Buy).

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