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MannKind Corporation (NASDAQ:MNKD): Here's What Matters

MannKind Corporation (NASDAQ:MNKD): Here's What Matters
Written by
Chris Sandburg
Published on
May 30, 2017
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MannKind Corporation (NASDAQ:MNKD) has been a bit of a roller coaster stock throughout the last couple of months. The company traded as high as $2.22 a share post split back in March, but throughout the four weeks subsequent to the split, gave a large portion of its value back to markets, hitting lows of around $0.80 a piece on May 1.This month, however, has been pretty good to shareholders. At market close last week, MannKind went for $1.52. That's a 90% premium to the above-mentioned lows, and – perhaps even more importantly – holds the company at levels that fall in line with NASDAQ minimum bid requirements.On a couple of occasions we have highlighted the potential for a buyout here and while anything to that aim is yet to materialize, as an exit for the company, it would almost certainly be the most favorable option.We got a look at MannKind's most recent financials earlier this month, and while they aren't terrible, they're not great, and in particular sales of the company's lead asset Afrezza remain relatively uninspiring. As we have noted in the past, however, current sales aren’t really representative of the underlying value of the asset and its potential sales at peak if and when it gains some traction on the market.For readers that are not yet familiar with Afrezza, it is a fast acting diabetes product, an insulin analog, and it once formed the basis of a partnership between MannKind and diabetes incumbent Sanofi SA (ADR) (NYSE:SNY). The latter handed back the rights to the drug to MannKind subsequent to what many saw as a failed effort to commercialize it, and now MannKind is attempting to go it alone and improve on the efforts of Sanofi.Of course, a company like MannKind doesn't have the resources of a company like Sanofi, but in this indication (an indication in which the patient population is generally very well educated about treatments types and options) capital resources aren’t everything. MannKind is trying to be smart about its capital allocation (using an internal team, targeting primary care facilities, using social media marketing, about to launch a TV ad) and has also identified a number of key areas in which the Sanofi efforts fell short (primarily, trying to sell to physicians that didn’t have a piece of equipment required for pre-prescription lung function testing, something we've looked at in a bit more detail in the past).So what did the numbers tell us?During the first quarter of this year, MannKind sold $1.2 million worth of Afrezza. As we said, that's not great, but it's also not terrible, and with the above-mentioned TV ad slated for a July showing, there's a good chance we should see an uptick as 2017 matures.Cash is a problem and we're almost certainly going to see some degree of dilution before the end of the year. Management noted on a recent conference call that current cash holding (around $48 million at the end of March) should carry the company through until mid-third quarter, but at that point, an injection of capital will be necessary.For us, right now, we don't see this as being too much of a problem. Obviously, avoiding dilution entirely would be preferable, but the thesis on this one is simple: MannKind needs to remain operational while it drives increased sales of Afrezza, towards one of two aims – the first, a sale of the company or the asset outright. The second, a level of sales that brings in revenues sufficient to sustain operations without the necessity for dilutive issue.Both of these are realistic, and the value (or the value proposition, at least) in a position right now is rooted in how long it takes for one or the other to come around, and concurrently, how much capital is required (read: how much management is going to dilute shareholders) throughout the period in question.We will be updating our subscribers as soon as we know more. For the latest updates on MNKD, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.

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