There a saying among health-care investors about investing in companies that are developing exciting experimental drugs that goes like this — Buy the approval sell the launch. n other words, ride the share price higher amid excitement over clinical trial results and bullish sales but get out before the stock falls back to earth when the launch doesn't live up to expectations.
Until today, that advice suited MannKind (MNKD), the biotechnology company that received FDA approval on July 1 for its inhaled insulin, Afrezza. At the time, Barrons.com advised caution, warning that risks with the drug would make marketing it difficult and MannKind could have a hard time attracting a partner to help with an early 2015 launch.
As of the closing bell on Friday, the shares had fallen 25% to $8.13.
Guess what? MannKind has found a partner. It announced a deal with Sanofi (SNY) early today, sending its stock climbing more than 20% in premarket action. Those gains got parsed, however, with the stock recently trading at $8.53, a 4.7% rise above Friday's closing price.
The deal will get Affrezza onto the U.S. market by the first quarter of 2015. It also alleviates cash concerns at MannKInd, which had $42 million in cash at the end of the second quarter.
Sanofi makes out as well. Analysts at MLV & Co say Sanofi's rapid-acting insulin Apidram, approved in 2008, lags other similar medications, and Afrezza fulfills a weakness in the French drug maker's diabetes franchise.
Sanofi, however, will have its work cut out for it. The next big challenge it fact will be convincing drug insurers to give Afrezza a good spot on their drug formularies, which determines reimbursement and how much patients must pay out of pocket. A big copayment could hurt sales.
The partnership news isn't doing much of Sanofi's stock price. The US-listed ADRs are up 0.1% to $28.37.
Past efforts to develop inhaled insulin have ended in failure. Pfizer (PFE) crashed and burned with its inhaled insulin Exubera.
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