MannKind Soars on Deal With Sanofi, Investors Say Hold On
This was the deal pharma investors were waiting for. Sanofi said it will pay MannKind Corp $925 million for global rights to inhaled insulin therapy Afrezza for adults with diabetes.
The companies plan to launch Afrezza in the first quarter of 2015 in the U.S., they said in a statement. The stock soared 29% in premarket before paring at 16% at the open. Investors said striking this lucrative partnership deal was a crucial win for MannKind, and that the stock will see higher gains.
The dip in stock after premarket was because of shorts, say investors. They suggested holding on to the stock and wait till the shorting spree is over. Sentiment was 92% bullish, according to StockTwits analytics at the time of writing.
In July, Jason Karp of Tourbillon Capital Partners had said in a note that MannKind was overhyped, had no clear prospects of revenue and would find it difficult to strike a marketing partnership. Karp seems to be wrong on all counts, as investors on Stocktwits had said at the time. Today investors questioned his judgment again.
Paris-based Sanofi said it will pay $150 million upfront and up to $775 million if Afrezza meets certain sales and development targets. Sanofi will retain 65% of the profits or loss on a global basis, and will will also advance MannKind $175 million in collaboration expenses. Sanofi will be responsible for global development and marketing of the drug, the companies said in a statement.
For long-term MannKind investors, this deal vindicates the faith they had in the company, which spent over a decade developing Afrezza. Despite being a revolutionary product in terms of technology, sales are not a given. Pfizer had launched its inhaled insulin product Exubera in 2006 but pulled it from the market the next year after disappointing sales.
Investors believe MannKind’s product has more promise in part because the company plans to price it around the same level as injectable insulin, unlike Exubera which was more expensive, and Sanofi would do a better job of marketing the drug.
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