No Hope for Mannkind Corporation in Q3 Earnings (MNKD)

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MannKind Corporation (MNKD), the small-cap biotech with one approved product on the market, has had a tough go of it in 2015.

mnkd stock mannkind corporation afrezzaAnd after third-quarter earnings on Monday, things aren’t getting much better. MNKD stock is down as much as 15% in morning trading, adding to the 50% year-to-date losses MannKind had already piled up.

While analysts technically expected about $180,000 in revenue (and MNKD reported $0 in revenue), the revenue miss wasn’t the real rub here.

The major issue was that MannKind is running out of cash rather quickly, and with sales of its only FDA-approved product, Afrezza, faltering, it looks like the company’s big-time marketing partner, Sanofi (SNY) may opt out of the partnership come 2016.

MNKD Q3 Results

MNKD reported no revenue in the third quarter, and a net loss of $31.9 million, or 8 cents per share. That was a penny worse than consensus estimates going into the report.

Shipments of Afrezza, its inhaled insulin product, were $4.1 million in the third quarter. Those shipments were recorded as deferred product sales; Sanofi itself reported that Afrezza revenue on its end was just $2.2 million in the most recent quarter.

Those poor results confirm what MNKD investors had feared: Sanofi may be on the verge of terminating its agreement with MannKind to market and distribute Afrezza. After all, it’s a money-losing venture for both companies so far, and if SNY is trying to reinvigorate its diabetes division, its resources may be better allocated elsewhere.

Sanofi is allowed to inform MNKD of its disinterest as soon as Jan. 1, 2016.

The other issue is MannKind’s liquidity, which isn’t great, to say the least. MNKD ended the quarter with a mere $32.9 million in cash on its books, of which $25 million was restricted. That means MannKind can only access $7.9 million of it, and at a burn rate of about $20 million last quarter, the company will need to raise more capital just to keep its head above water.

That shouldn’t be a problem right now, as MNKD can borrow a total of up to $68 million from various creditors, including its founder Al Mann. It also plans to sell 50 million shares of common stock on the Israeli markets to Israeli index funds. The index funds will be required to buy those shares, because MNKD has intelligently dual-listed on the Tel Aviv Stock Exchange as a way to raise further capital and insulate itself from bankruptcy.

While we won’t know until next year whether Sanofi decides to terminate its MannKind partnership, the fact that SNY hasn’t funded a 8,000-patient lung study the FDA is asking for should raise some eyebrows.

The question going forward is increasingly becoming: Can MNKD find another marketing partner after Sanofi runs for the hills? If SNY bails, the process won’t be easy for MannKind.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/mannkind-corporation-mnkd-q3-earnings/.

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