Waiting to Exhale

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Finally, the time is near when we will know if there’s big demand for the inhalable insulin product on which Al Mann has bet close to $1 billion of his own money.

The product, Afrezza, has been sold since February and the early results have been somewhat disappointing. However, Mann’s little company, MannKind Corp. of Valencia, has a big partner, Sanofi, which will begin marketing the drug straight to consumers in the coming weeks. So we’ll see.

This crucial point should have come years ago. The Food and Drug Administration needs to put safety first, of course, but there was no apparent reason for it to dawdle for years and to keep sending Afrezza back for more tests upon more tests. Good thing Mann is a billionaire and was able to keep the company going. (And people actually wonder why American drugs are so expensive.)

But now, finally, comes the real test for Afrezza.

The arguments against? Longtime diabetics may be comfortable with injections, and besides, needles have gotten thinner in recent years. Also, insurance companies may push back against this new technology, especially if the final price is high. Beyond all that, there’s no proven market demand: An earlier inhalable insulin, Pfizer’s Exubera, was one of the biggest flops in pharmaceutical history.

The arguments for? The doctors and diabetics who’ve learned about Afrezza reportedly are eager to try it. Inhalable insulin has to be a relief to many diabetics, particularly new ones. And MannKind’s product supposedly is better than Exubera and it fits in a pocket; Pfizer’s discontinued product resembled a small fire extinguisher.

And unfortunately, so many people have diabetes – the market is so big – that MannKind doesn’t need to dominate it to succeed.

One stockholder, Robert Sacher, wrote in SeekingAlpha last week that if only 5 percent of diabetics become customers, “Sanofi and MannKind may have a new blockbuster drug on their hands.”

• • •

There’s been a great deal of political puffery lately about how the Golden State’s finances have improved. The state government keeps getting described as “flush with cash.” You’d think Sacramento was suddenly beset with gorillas, what with all the chests being thumped.

And that set off a predictable dustup last week over how to spend all this found money. Lawmakers approved a $117.5 billion general-fund budget, but Gov. Jerry Brown declared that a profligate impulse and wants to spend $2.2 billion less.

But a couple weeks earlier, a report came out that serves as a good reminder of the still-alarming big picture for the state.

Called Truth and Integrity in State Budgeting, the report is by the Volcker Alliance, headed by former Fed Chairman Paul Volcker. The non-partisan alliance aims to keep state budgeters honest.

The report complimented California for improving generally and using better budgeting methods. But it went on to say: “The state is still saddled with $94.5 billion in bond debt supported by tax revenue, and it has amassed another $195 billion in unfunded promises to pay pension and other retiree benefits. … Further, California has a $64.6 billion shortfall in deferred infrastructure maintenance.”

As for the point about deferred infrastructure, the Volcker report cited a 2013 report from the American Society of Civil Engineers that said 11 percent of the bridges in California are considered structurally deficient and close to 17 percent are considered functionally obsolete; 34 percent of the state’s major roads are in poor condition.

All that needs to be paid for. Somehow. Some time. And nobody’s even talking about the massive prison space the state lacks.

Add up the three numbers – the bond debt, unfunded pension and health care liabilities and the deferred infrastructure costs – and you’ll see that the $2.2 billion the legislators were bickering about last week represents 0.6 percent of that amount. Not even a 1 percent down payment on the state’s obligations.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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