Industry observers believe MannKind could be facing bankruptcy after Sanofi handed back rights to the inhaled insulin Afrezza, following its lacklustre performance on the market.

Sanofi had taken a bit of a gamble on drug in a bid to boost its diabetes franchise, but sales of Afrezza - launched in the US in February last year -  never really took off as the notion of an inhalable insulin failed to take root. 

"The product never met even modest expectations and we do not project Afrezza reaching even the lowest patient levels anticipated at the time of entering the license and collaboration agreement, while costs are projected to remain very high for a significant period of time," a Sanofi spokesman told Reuters, explaining the decision.

MannKind said the firms will promptly commence discussions to secure “a smooth and orderly transition in the development and commercialisation of Afrezza from Sanofi” over the next 90 - 180 days. 

In any event, termination of the license agreement in its entirety will be effective no later than six months from the effective date of Sanofi's notice of termination, or July 4, 2016. 

The company also said it is reviewing its strategic options for Afrezza as a result of Sanofi’s decision, but investors still shrank back on the news, sending MannKind’s shares plummeting more than 40%.