Jefferies Believes Additional Efforts by MannKind (MNKD) to Expand Afrezza Could Provide Upside

Jefferies affirms MannKind (Nasdaq: MNKD) at Buy with a price target of $9 folloinwg a recent Afrezza survey.

Analyst Shaunak Deepak said Jefferies surveyed 56 endocrinologists and primary care physicians about their expected use of Afrezza for diabetes.

Deepak commented, In screening physicians, we found that 35 percent did not know about Afrezza. Those that did, however, expected to use Afrezza more frequently than we had expected, especially among Type 1 diabetics.

On reasoning behind such a low launch, Deepak said, Ignorance is a big factor: of the 120 physicians screened for this survey, 35 percent were not familiar with Afrezza. Combined with the 8 percent who knew about Afrezza but did not expect to prescribe it, this suggests nearly half of potential prescribers are not currently writing Afrezza scripts. Indeed, only 12 doctors surveyed had written a prescription for Afrezza. Separately, in keeping with MNKD’s 1Q commentary that lung function testing was a gating factor for Afrezza uptake, prescribers who did not own a spirometer rated the test a 5/5 burden, compared to a 2.5/5 burden for those who did.

But, Deepak maintains a Buy rating, commenting, Only a tenth of doctors screened had written an Afrezza script, we see MNKD’s efforts to expand access to spirometers and begin advertising in 3Q as key catalysts for uptake. With advertising, we expect the eventual rate of non-prescribers will fall closer to 12 percent. The 2015-2017 Afrezza use numbers implied by our survey suggest penetration rates nearly four times higher than we had previously modeled, and a $37 PT. To account for potential overreporting by surveyed physicians, we have discounted reported penetration rates by 70 percent and assumed that the reported 2017 penetration is a stand-in for peak.

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