MNKD MannKind Corporation

By Denise Roland and Noemie Bisserbe 

The history of inhalable insulins for diabetes care is full of disappointments, but Sanofi SA thought a new approach would turn all of that around. It was wrong.

The French drugmaker last month ended a licensing pact with MannKind Corp. for the rights to sell the insulin inhaler Afrezza, saying that despite substantial marketing efforts, the product was unlikely to reach even the lowest patient levels anticipated. The product, launched in the U.S. in February last year, notched just EUR7 million ($7.8 million) in sales in 2015, as safety concerns and reimbursement issues damped uptake.

Sanofi's bet on inhaled insulin shows the strain pharmaceutical chiefs are under to acquire innovative products when their own pipelines aren't delivering. It came at a tough time for the company's all-important diabetes franchise, which has been forced to offer deeper discounts on its products amid pricing pressure from U.S. payers.

On Tuesday, Sanofi said sales of its diabetes drugs in the U.S. slumped 25% at constant exchange rates to EUR1.1 billion in the fourth quarter, dragging world-wide revenue from the diabetes franchise down 13% to EUR1.9 billion. That weighed on total sales, which came in at EUR9.3 billion, a drop of 1.6% on a constant currency basis; including currency effects, revenue rose 2.3%.

Profit slid 75% to EUR334 million, while business net income, which excludes certain one-time items, fell 7% to EUR1.7 billion.

Sanofi Chief Executive Olivier Brandicourt had been down the inhaled-insulin path before. Nearly 10 years ago, he presided over the multibillion-dollar flop of insulin inhaler Exubera as head of metabolic and cardiovascular medicine at Pfizer Inc. Shortly after, Novo Nordisk A/S and Eli Lilly & Co. shelved advanced plans to develop their own inhaled products.

The failure of Exubera was, in large part, one of design: diabetes patients were reluctant to use the unwieldy device in public as it resembled a bong for smoking marijuana.

But others saw more fundamental reasons to scrap the idea: Novo Nordisk said at the time that it couldn't overcome the fact that inhaled insulin wouldn't eliminate the need for injections. That is because only short-acting insulin, which is taken as a boost at mealtimes, could be administered via an inhaler. Most diabetes patients on insulin--those with Type 1 or advanced Type 2--also take a long-acting version to provide a constant minimum level, which would need to be injected.

Furthermore, doctors are cautious about prescribing inhaled insulin because of worries it could lead to lung cancer in the long term, said Simon O'Neill, director of health intelligence at Diabetes UK, a nonprofit patient-advocacy group. While there is no evidence that inhaled insulin causes lung cancer, other so-called growth hormones have been linked to the disease.

Despite the industrywide retreat from inhaled insulin, former Sanofi CEO Christopher Viehbacher believed the advantages of inhaled insulin--speedier delivery to the bloodstream and a reduced dependence on needles--meant it was still worth a bet. In 2014, he agreed to pay MannKind up to $925 million, mostly in milestone payments, for the rights to market the recently approved Afrezza. By ending the agreement when it did, Sanofi capped its 2015 losses at roughly EUR200 million, according to the company.

Analysts have predicted that without the support of Sanofi, MannKind would end up in bankruptcy. Nonetheless, the Valencia, Calif., company's new CEO, Matthew Pfeffer, has vowed it is "here to stay." After the break with Sanofi, he told investors he planned to cut the price of Afrezza and find a new partner for the product, adding that MannKind had enough cash to get "comfortably into the second half of the year."

MannKind also announced Jan. 22 that a newly established company called Receptor Life Sciences had agreed to license MannKind's inhaler technology in other diseases such as chronic pain and neurologic diseases, paying $102 million in milestone payments but no upfront cash.

One reason Sanofi believed it could succeed where Pfizer had failed was that Afrezza's compact, whistle-shaped design overcame Exubera's design flaws. A spokeswoman for Sanofi said the track record of MannKind's founder, the billionaire Alfred Mann, also bolstered the company's confidence in the product. Among Mr. Mann's past ventures is the best-selling MiniMed insulin pump, now marketed by Medtronic Inc.

But Sanofi badly underestimated the toll that safety concerns would have on Afrezza's sales.

Existing worries among doctors over links with lung cancer were compounded by the U.S. Food and Drug Administration's warning that inhaled insulin could cause breathing difficulties in people with respiratory problems. The agency also required MannKind to run a follow-on trial to determine whether Afrezza did increase patients' cancer risk.

The agency also stipulated that doctors test patients' lung health with a device known as a spirometer before prescribing the drug. As most diabetes doctors don't have a spirometer, they would need to send patients to another physician for the test.

Doctors might have been more willing to take on the risk and effort of prescribing Afrezza if MannKind had demonstrated that it is more effective than injected insulin, said Jane Chiang, senior vice president for medical affairs at the American Diabetes Association. But the company's clinical trials for Afrezza proved only that it is as effective as, not better than, the injected alternative, a status that is reflected in Afrezza's FDA label.

Further, most payers in the U.S. have Afrezza in a "tier three" reimbursement category. That generally comes with higher copays and requires physicians to explain why they prescribed Afrezza over standard injected insulin. Sanofi also priced Afrezza at a premium to its injectable counterparts.

MannKind's Mr. Pfeffer said pricing and reimbursement issues "dramatically outweigh the other factors" related to Afrezza's slow uptake.

Without a clinical trial showing that Afrezza worked better than injected insulin, Sanofi's advertising campaign centered on the novelty of inhaling versus injecting. But the company overestimated the extent to which patients would switch to Afrezza due to a needle aversion, said Eamonn O'Connor, an analyst at the health-care consulting firm Decision Resources Group.

Despite these setbacks, Afrezza has gained a small but avid following among patients who say it works significantly better for them than injected insulin.

Forty-year-old Mike Parise said his blood sugar starts falling within five to 10 minutes after he takes Afrezza, much quicker than with injected insulin. "For someone who's had Type 1 for 20 years, that's a beautiful thing," he said.

Jackie Klass, 52, said using Afrezza had helped her gain control over her blood-sugar levels for the first time since she was diagnosed 17 years ago and had "changed my life." She owns shares in MannKind.

But many others didn't stick with it: A Sanofi spokeswoman said that of the 6,000 patients prescribed Afrezza since its launch, only 35% stayed on the treatment.

Write to Denise Roland at Denise.Roland@wsj.com and Noemie Bisserbe at noemie.bisserbe@wsj.com

(END) Dow Jones Newswires

February 09, 2016 16:21 ET (21:21 GMT)

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