Biotech stock MannKind (MNKD) is trading on the absolute cheap right now, so any investors with a high tolerance for risk now have a unique opportunity at their doorstep.
What kind of risk are we talking about? Well, here’s some background on MNKD stock.
MannKind is a mid-cap biopharmaceutical company focused on treating diseases such as diabetes, and it currently has just one approved product — Afrezza — which just got the green light back in June.
It’s also a company run by an octogenarian, Alfred Mann. The guy’s a billionaire entrepreneur — he has founded 17 companies that have sold for a combined $8 billion — and a brilliant biomedical engineer, but he’s not immortal, and if he dies the company will be without its leader and biggest believer.
Moreover, before last Wednesday, MNKD hadn’t logged a single dollar of sales since 2012, when the company posted a whopping $35,0o0 in revenue. (That’s right. Just three zeroes.) In the past two years alone, MNKD has traded as high as $10.96 per share, and as low as $1.60.
So why am I so bullish on such a volatile, risky play?
Helping MannKind
MannKind does only have one product, but what makes the company one-of-a-kind is the scope of the problem its product addresses, and the unique way Afrezza addresses it.
Diabetes is a worldwide health epidemic. In October 2013, the WHO estimated that nearly 350 million people worldwide suffer from diabetes. CDC estimates from 2012 peg the number of U.S. adults over age 20 with diabetes at 28.9 million. It’s a sweeping problem, and one that leads to a number of other health issues and even death.
It’s also a problem with a huge treatment market, which is where investors’ ears should perk up.
What makes MNKD stock a screaming buy is that Afrezza is unlike any other insulin product currently on the market. Afrezza is a rapid-acting inhaled insulin product — treating both type 1 and type 2 diabetes — taken at the beginning of each meal. And it can fit in your palm. That’s dramatically different from other products in the market, many of which are not rapid-acting and require needles to inject the insulin.
As InvestorPlace’s James Brumley noted in April, the mentality behind trading MNKD boils down to one concept and one concept only: “Buy the rumor, sell the news.”
MannKind stock peaked at $10.96 immediately after news of the Afrezza FDA approval in late June. Since then, traders have been selling off in droves and MNKD is down some 50% since the FDA’s green light.
Part of that likely was because MannKind had been searching for a partner to take its product to market. But MannKind found that partner in Sanofi (SFY) back in August, and MNKD shares remain under heavy pressure as impatient biotech investors put their money elsewhere in the interim period before Afrezza goes on sale in Q1 2015.
I’m putting my money where my mouth is on this one, because I strongly feel that Wall Street is being shortsighted with respect to this stock, and institutional money will start flowing back into it as speculators return just before Afrezza’s big launch early next year.
While I think MNKD stock is a steal at current prices, things could get worse before it gets better as the “what have you done for me lately” mind-set dominates trading. So you don’t necessarily need to buy now to ride it higher … but I’d strongly consider it.
As of this writing, John Divine held MNKD Jan 2015 $3 calls, Jan 17 2015 $5 calls and Jan 2016 $7 calls.
