MannKind Corporation in Transition

With one drug that just launched and plans to develop more in the works -- but not in the clinic yet -- MannKind is in a state of transition.

The biotech's inhaled insulin, Afrezza, launched earlier this month, so there weren't any sales in the fourth quarter to report. And on the conference call, management was understandably coy about the launch; it's hard to give an update on a two week-old launch especially since its partner Sanofi is in charge of sales and marketing.

Source: Sanofi.

MannKind earned two $25 million milestone payments associated with meeting obligations to manufacture commercial product. You can add those pre-launch milestones to the $150 million signing bonus as a sign of Sanofi's confidence in the drug-device. At the very least, the profits from Sanofi's 65% stake in Afrezza have to cover that $200 million.

There is another $725 million in potential milestone payments left to be earned. As most biotechs do, MannKind hasn't disclosed exactly what the thresholds for earning the milestones, but much of the remaining amount is probably tied to sales, so it's more of a profit sharing than an endorsement in Afrezza's potential since Sanofi won't have to pay it out if Afrezza is a flop.

MannKind is making progress toward getting a 12 unit cartridge approved by the FDA, which will be more convenient for patients that need more insulin; to get 12 units of insulin right now, patients have to take two puffs: one four-unit cartridge and one eight-unit cartridge. It's an incremental good sign, along with plans to triple the manufacturing capacity next quarter.

Sales still matter, though, and we won't get the first sales numbers until first quarter earnings reports in April or May.

Next drug(s)MannKind has plans to develop other products using Technosphere, the inhalation technology that makes Afrezza possible, but still hasn't disclosed plans beyond announcing that the drugs will be used for pulmonary disease, pain, and oncology support.

Given its limited resources -- MannKind ended the year with $120 million, not including the aforementioned $50 million from Sanofi -- and profits from Afrezza joint venture unlikely for the immediate future, MannKind plans to start initial work on one target at a time. That seems like a prudent move; let's just hope the next drug doesn't take as long to develop as Afrezza did.

Like insulin, MannKind is looking for drugs that have been on the market for awhile so their active ingredients are no longer covered by patents but that could use an improvement in rate of onset and/or the convenience of being inhaled -- both things that Technosphere can offer.

There's also potential to use Technosphere for drugs still covered by patents under an agreement with the companies that developed the drugs. Management hinted that it was exploring the possibility, but wasn't under liberty to disclose the potential partners just yet.

For the record, MannKind lost $198 million in 2014, slightly more than it did in 2013. None of that will matter if Afrezza is a success and MannKind is able to bring a second drug to market.

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With four kids,Brian Orelliis constantly in a state of transition. He and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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