Sanofi Dumps MannKind Corporation: MNKD Stock Is DONE!

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Well, it has been one hell of a ride for MannKind Corporation (MNKD).

mnkd stock mannkind corporation afrezzaBut that ride is effectively over. Sanofi SA (ADR) (SNY), a $110 billion global pharmaceutical powerhouse, has terminated the deal it made with MannKind to develop and commercialize its only FDA-approved drug, Afrezza. The termination will be effective “in its entirety” no later than six months from today, or July 4, 2016.

MNKD stock immediately plunged Tuesday morning on the news, losing more than 25% in a matter of minutes. The stock, which has a 52-week high of $7.88, trades for just more than $1 today.

As a longtime believer in MNKD stock myself, today is a sad day. It’s the nail in the coffin. It’s tough to admit, but it’s never been clearer: This stock is toast.

But why did Sanofi cut short its partnership with MannKind, and what does it mean?

Afrezza Was Flopping

MannKind’s only hope to become a profitable, sustainable business was in Afrezza, its inhalable insulin drug. After years of trials, it was finally approved by the FDA in summer of 2014, and in August 2014, Sanofi and MannKind reached a worldwide exclusive licensing agreement.

With MNKD running out of cash at the time, and billionaire founder Alfred Mann essentially acting as an ATM for the company, it was vital that MannKind secure a partner like SNY with the resources to commercialize Afrezza. Under the terms of the deal, Sanofi paid MNKD a $150 million one-time fee, and MannKind agreed to share in 35% of the profits or losses associated with Afrezza. Milestone payments of up to $775 million were also possible.

Aside from the lump-sum payment, none of those ever came to fruition, or ever will.

That’s because in its short time on the market, Afrezza never caught on with doctors, who were hesitant to prescribe the new drug. Before MannKind reported third-quarter earnings two months ago, I noted that the situation was looking bleak for MNKD stock, especially since Sanofi had reported a combined 4 million euros in Afrezza sales in the second and third quarters.

That’s roughly $4.4 million, and for a company with global sales in excess of $40 billion annually, it hardly seemed worth Sanofi’s while — especially as the company faced pressure to improve the performance of its struggling diabetes division.

Sanofi will move on from this easily; its stock is virtually unchanged today. As for MannKind, this is a huge blow. MNKD stock will likely never be the same again.

MannKind Stock Is Toast

The company has horrible liquidity problems, and it will eventually go bankrupt if it can’t find another large partner to market Afrezza … soon. The only other option is issuing more stock or taking on more debt, and both are avenues they’ve heavily exhausted already.

My closing line in my Nov. 10 article remains as relevant today as it was then:

“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.”

It’s not impossible for MNKD to find another partner. But it probably won’t have the resources that Sanofi did, and the terms, should they ever come, certainly won’t be as favorable.

Get out of MNKD stock while you can, no matter what your losses. One can hope for another partner to swoop in and save the day, or for a larger company to buy the rights to Afrezza or even snap up the  entire company. But hope is not a strategy, and if “saving the day” means recouping your initial investment, it will likely take years at the very least (but depends obviously on your entry point).

It’s sad to see such a great concept fail so spectacularly. But fail it did, and MannKind stock just became even more speculative than it already was.

As of this writing, John Divine was long Jan 2016 MNKD $7 call options. 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/2016/01/sanofi-terminates-mannkind-corporation-mnkd-stock/.

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