Why Struggling MannKind is Struggling No More

Published: Sep 21, 2017

Why Struggling MannKind is Struggling No More September 20, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Earlier this year, MannKind Corporation was cited as a company that could disappear entirely by 2019. Its inhaled form of insulin, Afrezza, bombed in the marketplace, Paris-based Sanofi (SNY) abandoned a sales and marketing deal, and the company’s cash was dwindling at an alarming rate. By May 2017, shares were down 73 percent year to date. Since May, however, shares have climbed more than 140 percent, and in the last month alone, around 40 percent.

Keith Speights, writing for The Motley Fool, looks at what’s going on with MannKind and why the stock has made such a dazzlingly turnaround.

First off, it wasn’t caused by the company’s financial performance. It reported a $16.3 million loss in the first quarter on total revenue of $3 million. For its second quarter, announced Aug. 7, it reported $35.3 million in losses on $2.2 million in revenue.

More positively, Michael Castagna was named chief executive officer on May 31. He was formerly the company’s chief commercial officer and is viewed as a solid choice. MannKind also brought in a new chief financial officer and chief commercial officer in July.

Speights writes, “What about other developments since May? MannKind improved its cash position in a couple of ways. The company drew the remaining $30.1 million under its existing loan arrangement with The Mann Group in late June. MannKind also renegotiated its near-term debt maturities with Deerfield, moving a payment initially due July 18, 2017, back to Oct. 31, 2017. These were only short-term improvements, though, and wouldn’t have caused MannKind stock to skyrocket the way it has.”

One of the key things about Afrezza is that it’s a great idea. With millions of people taking insulin as an injection, the thought of using an inhaled form of insulin seemed like a slam dunk. The biggest killers were insurers and how they classified the drug, which was as Tier 3. Tier 2 is typically where a preferred brand name prescription drug falls, and is where MannKind and Sanofi wanted it to be. At Tier 3, consumers had to pay a higher co-pay and physicians were generally not being persuaded it was a better option.

In June, MannKind hired Locust Walk to help it find strategic partners and investors for its non-insulin pipeline that use the same inhaled drug-delivery platform, and launched a study with One Drop of Afrezza with One Drop’s integrated digital diabetes-care platform.

Although these are all positive things, probably the biggest catalysts for MannKind’s stock jump is that Billionaire Israel “Izzy” Englander’s Millennium Management hedge fund bought 745,000 shares of MannKind stock in the second quarter. Around the same time, analyst firm Maxim Group in August gave MannKind a “buy” rating and a price target of $4. Jason Kolbert, an analyst with Maxim wrote that the company is “transforming the diabetes market with inhalable insulin Afrezza,” and praised the new management team, noting it had “built commercial infrastructure, and is executing a commercialization strategy that poises the company for a turnaround, which should unlock value for investors.”

Speights isn’t convinced the trend will last, particularly given the company’s cash position, which is improved but still dismal. At the end of the second quarter it had $43.4 million, and is likely to burn through $18 million to $24 million in the third and fourth quarters.

Speights writes, “CEO Michael Castagna said in MannKind’s second-quarter conference call that no one at the company is ‘losing sleep’ over the situation, since MannKind has several alternatives for raising capital. One of those ways, however, is by offering more stock—a move that would dilute the value of existing shares and almost certainly halt the stock’s recent momentum. It remains to be seen how MannKind will fare over the longer run. For now, though, MannKind can legitimately claim to be one of the hottest biotech stocks around—something that many would never have predicted.”

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