MannKind Stock Approaching Pre-FDA Approval Price: Is A Bottom Coming?
Mar. 26, 2015 1:16 PM ET | 6 comments | About: MannKind Corporation (MNKD)
Disclosure: The author is long "MNKD". (More...)
Summary
•Investors consider whether MannKind is trading near its bottom.
•Investors hang their hopes on prescription sales data while early adopters report positive results with Afrezza.
•A MannKind-inspired catalyst is needed.
Volatility in trading MannKind shares seems to be related to major catalyst events in the company's progression, from a pharmaceutical company with an innovative new inhaled insulin, Afrezza, but without F.D.A. approval, to a company with F.D.A. approval for its drug; from a company without a major pharmaceutical corporate partner to a company with Sanofi, a major pharmaceutical partner, and from a company without any sales to a company that just recently commercially launched its very first product.
Shares of MannKind (NASDAQ:MNKD) stock have been subject to volatile swings of momentum over the last year with the stock sold off from a closing high of $6.54 on 2/25/14 to a closing low of $4.02 on 3/31/14, the last trading day before ADCOM. That was a downturn of $2.52 per share over a twenty four trading day period.
Shares of MannKind again peaked on 6/30/14 at a closing price of $10.96, the first day of trading after F.D.A. approval of MannKind's inhaled insulin, Afrezza, only to be sold off again and bottom out on 10/13/14 with a share price of $4.61. That was a downturn of $6.35 per share over a seventy four trading day period.
Shares of MannKind then returned to a closing high of $7.58 on 2/10/15, just days after the commercial launch of Afrezza, and closed at a low of $5.10 on 3/25/15 (the date of the writing of this article). That is a downturn of $2.48 per share over a thirty trading day period.
The questions for investors now seem to be will MannKind trade as low as it was trading before receiving the F.D.A. approval, a price per share of $4.61, or will investors see MannKind as being worth more than it was trading before the F.D.A. decision. Will MannKind's price per share continue to fall without an immediate catalyst event on the horizon or will investor's decide that the company's stock has hit its bottom?
For want of anything better, investors are hanging their hopes on prescription sales data generated at the end of every week. But, with only several weeks since launch, sales numbers are guaranteed to be low although investors are hoping that they will be rising exponentially. However, there is no guarantee that those reported sales figures are accurate.
Sanofi, the company in charge of promotion and distribution of MannKind's Afrezza, has stated that they are initiating a 'soft' launch of the inhaled insulin, apparently preferring to have Sanofi's large force of sales reps meet and discuss Afrezza with doctors before ramping up any kind of consumer marketing program. That seems like a wise idea since Afrezza has a different kinetic profile in comparison to needle based insulin and many doctors know very little about the new insulin.
MannKind management have little or no role in marketing or promotion behind Afrezza. Only Sanofi is in charge of marketing and promotion but Sanofi management have no responsibility to MannKind shareholders.
During this time which may still be many months away from an assumed Sanofi initiated Afrezza consumer marketing and advertising program, continued downward pressure on MannKind's price per share may not inspire a sense of commitment among MannKind's shareholders, some of whom have been holding shares for several years and some of whom have bought in more recently.
Clearly, some sort of MannKind inspired catalyst is needed soon. Or, MannKind shares may really see their price per share trading at $3, the price that a recent Goldman Sachs analyst wrote he thought they were truly worth. But, on the other hand, even if MannKind's price per share should drop to a paltry $3, that would be a worthy price at which to add additional shares to an investor's portfolio, as sooner or later, there will be a catalyst announcement probably having something to do with Technosphere, MannKind's patented technology behind their inhaler which delivers medication through the human lungs.
Hakan Edstrom, President and C.E.O. of MannKind, stated last month at MannKind's last Q4 Earnings Report Conference Call,
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"At this point, we have identified a small portfolio of potential exciting products on which to focus our efforts. These potential new products have in common the following characteristics. First, they all address serious unmet medical need; secondly, they have comparatively relatively short development times or low cost of development; third, they all take advantage of the unique benefit of our proprietary drug delivery technology; and finally, they all address large markets."
He went on to say,
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"In the coming months we will finalize our development plans for each, and at that time we will be able to offer more insight into this process, including timelines, rational, market opportunity, and potential development cost."
Also, for what it may be worth, a post on Forbes says that with MannKind closing below $5.15, the company's stock has entered into "oversold" territory which could mean that the downward trend is about to end.
Pundits claim a myriad of reasons why Afrezza will fail to gain adequate success in the marketplace but early adopters are clearly writing very positive accounts in various highly regarded diabetes forums about the success they are having with Afrezza. More and more people are also talking about their success with Afrezza on individual Twitter pages while naysayers write that those people are not credible and should not be believed.
Most investors assume that eventually Sanofi will initiate a consumer marketing and advertising program on behalf of Afrezza since Sanofi has agreed to pay MannKind as much as 925M for Afrezza global rights. And, if that moment happens to coincide with a MannKind positive announcement on behalf of Technosphere, MannKind's price per share could certainly rise exponentially.
Investors have to make decisions as to whether or not MannKind's price per share has hit bottom or whether the price per share will sink lower, so low that the stock might be trading at a price lower than what it traded at before the F.D.A. approval. However, taking into consideration the possibility of new product announcements making use of MannKind's patented Technosphere technology and a belief that Afrezza will eventually make a big impact within the insulin market, investors may have a great deal more upside than downside from where the price per share is currently located.
