Cheap Stocks to Buy Now – MannKind (MNKD)
Price as of 8/14/14: $7.04
Since low-priced stocks are frequently high risk shots at big returns, what would a list of cheap stocks to buy be without a biotech play in there that could either win big or lose painfully.
One interesting cheap stock in the biotech space right now is MannKind (MNKD).
MannKind has developed a diabetes treatment, Afrezza, that has shown promise. However, the company also recently entered into an agreement with Sanofi (SNY) to market and sell the drug — giving it just 35% of the upside instead of 100%.
Of course, that also insulates MNKD at just 35% of any potential losses, too.
Shares of MNKD are up 35% in 2014, though they have indeed rolled back from highs in June in part because of this partnership. However, the deal is better than some investors think.
Sanofi actually offered $150 million up front to MannKind as a result of the partnership and also is backstopping some of the financing to roll out Afreeza at scale. For a money-losing, development stage biotech company … this is actually a pretty decent deal.
Furthermore, the relationship here could eventually lead to a buyout — which would provide an instant pop to MNKD shareholders down the road.
There are risks that the drug won’t catch on, or that MannKind has given up too much of its upside to Sanofi. But if you’re looking for a cheap stock in the biotech sector that has big upside potential but limited risk, MNKD is one good option.