MannKind Corporation Stock: MNKD Third-Quarter Earnings Takeaways

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MannKind Corporation (MNKD) — the $2.4 billion biotech stock with an inhalable insulin product coming to market in early 2015 — reported third-quarter earnings yesterday. Here’s what investors need to know:

mannkind corporation mnkd stock afrezza earningsMNKD reported no revenue. Zilch. Let’s get that out of the way. That said, it would’ve been surprising if it did, as MannKind doesn’t have any products that people can actually buy yet.

Substantially all of the company’s hopes rest on its soon-to-be flagship product, Afrezza, an inhalable insulin approved by the FDA back in June.

The biggest news for MNKD stock in the third quarter was the company’s newfound partnership with French pharmaceutical giant Sanofi (SNY), a strategic move that will help the much smaller MannKind market Afrezza in a far more meaningful way.

Although MNKD stock is down in early morning trading today, nothing too worrisome appeared in the third-quarter results. In fact, after the $150 million upfront payment Sanofi made as part of the partnership deal, the company has $172.5 million cash on hand — $100 million more it had on its books at the end of last year.

One legitimate concern going into yesterday’s third-quarter results was MannKind’s “burn rate,” which is the pace at which a company burns through its available resources. MNKD’s operating expenses actually fell by about $6.5 million from the third-quarter in 2013 — a 15% decrease from the same period last year. On top of that, MannKind has another guaranteed $100 million it can raise through various debt offerings.

MannKind: Good Stock or Great Stock?

I personally think MannKind is extremely attractive at current levels. Consider where the MNKD stock price was back in June, before Afrezza had even been approved by the FDA. Shares flirted with the $10 level, a 60% premium to prices as of this writing. I’ve put my money where my mouth is on this one, and currently am long MNKD call options.

That said, I wouldn’t bet the barn on MannKind Corporation. As an approved treatment for both type 1 and type 2 diabetes, Afrezza is a promising drug in and of itself. When combined with the handheld Technosphere delivery technology that allows for an unprecedented level of convenience in insulin administration, the prospects on the face of it are very appealing.

However, MNKD’s deal with SNY stipulates the company will reap 35% of the profits — or losses — attributable to Afrezza, and if the losses pile up and the drug faces adoption issues, the biotech could be on the hook for some major dough. That’s why cash is so important right now.

I remain bullish on MNKD stock after third-quarter earnings. The company’s liquidity isn’t a concern and the story hasn’t changed. All investors need to do now is sit back and wait for Afrezza.

As of this writing John Divine held MNKD Jan 17 2015 $3 calls, Jan 17 2015 $5 calls and Jan 2016 $7 calls. You can follow him on Twitter at @divinebizkid.


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/mannkind-mnkd-stock-afrezza-earnings/.

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