MannKind: Forget Earnings, MNKD Stock Is Still Speculative

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The bad news: MannKind Corporation (MNKD) didn’t ship an impressive amount of its inhaled-insulin Afrezza last quarter. The good news: The loss was expected to be worse, resulting in a quiet enthusiasm that bumped MNKD stock up in Monday afternoon trading.

Forget the Earnings Beat, MNKD Stock Is Still SpeculativeSo is the glass half-full or half-empty? That is a conundrum that has plagued MNKD stock since it first launched Afrezza in late January of this year.

In fact, it’s a debate not unlike the argument that has dogged MannKind since before Afrezza was approved way back in June of last year: Will Afrezza ever become a profitable product and reward those investors who’ve been patiently holding MNKD stock?

Inhalable Insulin?

Mannkind’s wonder drug, Afrezza, is a divisive issue that many are quite familiar with.

For those who don’t know the backstory, Afrezza is an inhalable form of insulin used as an alternative to needle injections. Although the upside is clear (and it was approved by the FDA in late June of last year), safety concerns still abound. Namely, potential users and investors alike question the safety of inhalants.

The biggest concern: potential lung damage.

Also weighing on investors’ collective minds is the not-too-distant memory of a similar product offered through Pfizer (PFE), called Exubera, which failed due to lack of demand, similar safety concerns and the cost associated with mandatory lung function tests.

It remains to be seen if the market is ready for a second try, but MannKind, in partnership with Sanofi SA (SNY), is forging ahead with an effort anyway.

That effort, however, is off to a lackluster start.

MannKind Earnings, By the Numbers

Two quarters do not define a company, but in light of the buzz surrounding Afrezza, all the way up to and through Afrezza’s January launch, MannKind shareholders may have been expecting too much.

MannKind’s portion of the total shipments of Afrezza rolled in at $5.9 million for Q2, down from Q1’s total of $7.1 million. Technically speaking, those figures weren’t booked as revenue. Rather, they’re booked as deferred revenue, as the agreement with Sanofi requires the joint venture to fully offset some losses first before collecting sales proceeds.

To that end, the losses seem to be abating quickly.

Total operating expenses fell from $69.8 million a year ago to $24.1 million this time around. On a per-share basis, the loss fell from a setback of 19 cents per share a year earlier to a loss of only seven cents per share in the second quarter of this year. Analysts had been calling for a loss of eight cents.

Given the trajectory of falling costs and assuming the adoption of Afrezza will take a while to reach full speed, analysts expect MannKind to book revenue of $48.7 million for all of next year, and whittle the loss down from 31 cents per share this year to a loss of only 22 cents per share in 2016.

As for Wall Street’s interpretation of the past and projected numbers, it’s clear that even the professionals still aren’t sure what kind of future Afrezza may have. By extension, the pros can’t collectively peg what MNKD stock should be worth, now or in the future. Of the six analytical firms that follow MannKind, the lowest price target is only $2 per share, while the highest is $16.25. The average is $7.29, which is still well above where shares are trading now.

Bottom Line for MNKD Stock

All things considered, it’s pretty clear MannKind Corporation is still a work in progress. It’s just too soon to pass judgment.

That hasn’t prevented some observers from doing exactly that, of course. For example, Adam Feuerstein of TheStreet pointed out in late June that Afrezza wasn’t even selling as well as Pfizer’s Exubera did when that product first debuted.

Conversely, for those investors who insist on taking a stand on MNKD stock right now, it’s worth bearing in mind that despite the slow start, there’s no denying that diabetics — the target market — love Afrezza.

Again, it’s too soon to make a call.

With all of that being said, one thing that may comfort MNKD stock holders is that today’s climate is far more advantageous to MannKind than the hesitant insurers Pfizer had to deal with in 2007.

Couple that with the fact that Sanofi and MannKind are altering their marketing efforts to directly approach consumers, and it becomes clear that the saga is far from over.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/mnkd-stock-mannkind-earnings/.

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