But again, let's give MannKind the benefit of the doubt and assume by some miracle it does find a partner who likes to waste millions of dollars. Let's also assume Afrezza somehow finds its way onto insurance companies' formularies and physicians will actually recommend this unproven and unknown product to their insulin-using patients. What are the chances Afrezza will be reimbursed at the same rate as injectable short-acting insulin? Zero.Wow! David does not pull punches, which is why I admire him so much. If you invest in diabetes stocks, David's newsletter is a must read. You can subscribe here.
Keep in mind, should Afrezza actually make it to market, it will launch around the same time biosimilar, short-acting insulins will also be arriving. Biosimilar insulins will cost less than the branded insulins and ultimately force the major players to either cut their prices or risk losing valuable market share. Even without a biosimilar, short-acting insulin, the major branded companies are already using price as a weapon to gain share. Insulin is becoming a commodity where price trumps performance.
MannKind could find itself in a situation in 2014 similar to what Novo is facing today: Launching a premium-priced product into the market just when insurance companies are demanding further price concessions. Afrezza might receive reimbursement but that reimbursement will carry a higher overall price for the patient, who will be given a choice -- pay more out of pocket to use Afrezza or pay much less to stick with injectable short-acting insulin.
Try as he might, Mann cannot get around the fact that when it comes to inhaled insulin, it doesn't matter if Afrezza is the best insulin ever invented (which it isn't.) Suckers who invest in MannKind believe Afrezza will be a blockbuster because it's inhaled rather than injected. Diabetic Investor doesn't necessarily fault Mann for his belief in Afrezza, after all he's invested nearly $1 billion of his own money into the company, so it makes perfect sense for him to make grandiose over-the-top statements about its potential. The fault lies with the investors who are dumb enough to believe the hype and buy into the inhaled insulin myth. Consider that Pfizer -- a company with far more resources than MannKind -- lost over $4 billion on Exubera.Diabetic Investor has tried to warn everyone that MannKind is nothing more than a disaster waiting to happen. It would be wiser to invest in lottery tickets than shares of MannKind. Yet just as there are baseball fans who believe the Chicago Cubs will win the World Series in the next century or so, there are also investors who believe in the inhaled insulin myth. As a good friend of Diabetic Investor likes to say, there is no cure for stupid.
Moving on, Bruce Y. would rather stick his head in the sand than hear about the bear thesis on Ariad Pharmaceuticals (ARIA - Get Report) and its leukemia drug Iclusig. Bruce writes, "You and TheStreet should, and hopefully will, be sued for your above referenced article. Because of your misleading story, many long-term investors in Ariad sold their shares at a greatly reduced price. This is a manipulative event which TheStreet has participated in. I now feel that my eyes have been opened to TheStreet and will never ever consider information for you or TheStreet to be of any value whatsoever." Bruce, if you believe the bear thesis on Ariad is false, then the drop in the stock's price is a wonderful opportunity to buy the company at a more attractive price. Of course, while you're buying Ariad shares, CEO Harvey Berger intends to sell some of his holdings. He insists his pre-planned sales (via a 10b51 plan) have nothing whatsoever to do with faltering confidence in Iclusig or the rest of the company. Berger, speaking Thursday: "10b5 plans are plans for selling shares. What determines or limits my ability or any insiders' ability to acquire shares in the open market is our insider trading policy because you can either buy shares or sell shares possessing material inside information. If I could buy shares today, I would buy all the shares that I sold and ten-fold more. Today. But I can't because I know more than everybody else about what's going on in the company and what to expect. But there should be no doubt I would buy these shares in a second." I hope Berger mispoke because 10b5-1 plans allow executives to buy or sell shares. He should know that. If Berger is so confident in Ariad, why is he selling any stock at all? Perhaps he can't buy more shares because he possesses inside information, but he could certainly terminate his 10b5-1 plan at any time. Berger isn't doing that. In my experience, CEOs have an uncanny ability to sell their shares at the top.
Laurence O. emails, "In view of the somewhat unexpected and encouraging results of T-Vec announced by Amgen (AMGN), do you feel this calls for a reconsideration of your views regarding Reolysin of Oncolytics Biotech (ONCY)?" Not yet, for a couple of reasons. First, Reolysin is a "dumb" cancer-killing virus. I know, that's not exactly a scientific description but what I mean is Reolysin is unmodified. Just like all viruses, Reolysin enters cells, hijacks the cell's replication apparatus and copies itself until the cell explodes. Oncolytics claims healthy cells have anti-viral capabilities to neutralize Reolysin. In some cancer cells, however, this anti-viral defense is turned off, which enables Reolysin to invade and destroy. Supposedly.