Sanofi (SAN) agreed to pay MannKind Corp. (MNKD) as much as $925 million for global rights to the world’s only available inhaled insulin less than seven weeks after the drug won regulatory approval in the U.S.
Sanofi will pay $150 million up front and as much as $775 million if the drug, Afrezza, meets certain sales and development targets, the two companies said in a statement today. Paris-based Sanofi will take 65 percent of profit or loss related to Afrezza, and will also advance Valencia, California-based MannKind as much as $175 million in expenses.
“It is not going to be in competition” with existing products, “it’s going to be a nice complement and upgrade to our portfolio,” said Pierre Chancel, senior vice president of Sanofi’s diabetes division, in a call with analysts today. The inhaled product will be marketed to patients “struggling to start insulin because of the injections,” he said.
The agreement is Sanofi’s second diabetes-related deal in two months. The company said in June it would work with Medtronic Inc. on devices to simplify insulin use. The French drugmaker is looking for ways to buttress revenue and fend off competition from Novo Nordisk A/S when its top-selling product, the insulin Lantus, loses patent protection next year.
“It’s sensible,” Peter Verdult, an London-based analyst at Citigroup Inc., said in a telephone interview. “Sanofi has a global infrastructure in place and they clearly are trying to do a number of things to give confidence to the market that this is a sustainable, long-term growth platform.”
MannKind rose 4.9 percent to close at $8.53 in New York. The stock has surged 64 percent this year through today, giving the company a market value of $3.3 billion. Sanofi gained less than 1 percent to close at 77.98 euros.
An estimated 29.1 million people in the U.S. have diabetes, a condition in which insulin isn’t naturally produced or used effectively by the body to break down sugar in the blood. The illness can lead to heart disease, blindness and nerve and kidney damage.
Afrezza was approved in June as a fast-acting insulin for use at meal times for those with both types of diabetes. The U.S. Food and Drug Administration had twice rejected the drug, most recently in 2011, after the company switched inhalers during the review.
Sanofi and MannKind plan to begin selling the treatment in the U.S. in the first quarter of next year. Sanofi will be responsible for global development and marketing of the product.
The product will help Sanofi compete with short-acting insulins in which Novo and Eli Lilly & Co. are the market leaders, Odile Rundquist, an analyst at Helvea SA in Geneva, wrote in a note today.
Pfizer Inc. won approval for an inhaled insulin, Exubera, in 2006 but pulled it from the market the following year after sales were lower than expected, according to an FDA staff report. The drug was associated with a higher risk of lung cancer because insulin is directly deposited in the lungs.
“There’ll be deep skepticism in the market given the history of inhaled insulin with Pfizer’s Exubera and what a commercial failure it was,” Citigroup’s Verdult said. “This time round the device is better. With inhaled insulin you’re always going to have the concerns around long-term use and long-term safety.”
Afrezza is a powder delivered through a cartridge and is designed to control blood sugar during meal times in less time than standard injections. The approval of the drug capped almost a decade of work on the therapy.
Alfred Mann, MannKind’s 88-year-old chairman and chief executive officer, founded the company and took it public in 2004.
MannKind was advised by Greenhill & Co.
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