Although MannKind (NASDAQ: MNKD) stumbled along the way toward the launch of its inhaled-insulin drug, Afrezza, many believe that demand will climb now that the drug has won the FDA's blessing and MannKind has found a high-profile marketing partner. One trend that could support that bullish outlook is the increasing utilization of diabetes medicines.
Big and getting bigger
Ask any healthcare industry watcher what the most significant trends affecting the sector in the coming decades will be, and rising diabetes prevalence is sure to be among their answer.
According to the International Diabetes Federation, the number of people globally with diabetes will soar by 205 million, to 592 million people, over the next 20 years.
That forecast is pretty eye-opening, but what may be even more jaw-dropping is the impact that growing demand for treatment could have on spending for diabetes medicine.
According to pharmacy benefit manager Express Scripts, Americans already spend more on diabetes medicine per year than on any other traditional disease class. Last year, the average member covered by one of the plans run by Express Scripts spent $97.68 -- more than double the amount spent on the next highest category.
The cost of diabetes treatment is climbing, too. Last year, spending on diabetes medicine jumped by 18%, in part because utilization of diabetes medicine grew by 1.7%. For comparison, patient utilization of medicine across all traditional disease classes fell 0.1% in 2014.
Increasing demand for diabetes medication offers a significant market opportunity for MannKind, but only if it can capture market share.
Currently, when diabetics' blood glucose levels become inadequately treated by oral medicines such as metformin, patients begin taking short-acting insulin near mealtimes, as well as a long-acting insulin daily. Those insulin doses have historically been delivered via an injection, but MannKind's Afrezza allows patients to inhale their short-acting insulin instead.
The prospect of replacing a large number of weekly injections with a device that is similar to an asthma inhaler is appealing in theory, but it's uncertain whether that appeal will translate into significant market share.
Although injections can be anxiety-producing for many people, drugmakers have developed increasingly more friendly injection pens that are easier to use and less painful.
In addition to converting people away from traditional insulin injections, Afrezza will also need to overcome a prescribing label that limits the number of patients that can take it.
Because Afrezza is delivered through the lungs, smokers and people with chronic lung disease or asthma shouldn't use it. Afrezza patients also have to be regularly screened for lung function, and that could slow market demand for it, too.
Since diabetes can lead to life-threatening conditions including heart disease, the stakes are high to create new treatments that can better control blood sugar and prevent disease progression.
Whether or not MannKind's Afrezza delivers on that goal remains to be seen. It has an arguably easier dosing regimen and acts more quickly than traditional insulin injections, but those advantages may not be enough to differentiate it and persuade patients to convert to it. If that's the case, then Afrezza could get relegated to a niche product.
The opposite, however, could also prove to be true, especially given that it's estimated that 39% of patients fail to take their diabetes medication as prescribed. We'll need to fix that if we have any chance at blunting the impact of rising prevalence. Afrezza's convenience could offer doctors a solution that increases adherence rates. Afrezza could also be a viable alternative for newly diagnosed patients who haven't become used to injections. If so, then investors betting that the growing utilization of diabetes medication will turn Afrezza into a top seller could be proved correct.
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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned.