I used to believe in MannKind Corporation (MNKD) stock. At one time or another, I owned options in the small biotech, or I owned the stock itself. Alas, today I have no position in the forsaken company.
The glory days are over.
MannKind reports first-quarter results after the bell Monday, but investors should know by now that nothing good is likely to come of this report, not after Sanofi SA (ADR) (SNF), MannKind’s marketing partner on Afrezza, jumped ship in January.
When that happened, all the air went out of MNKD stock, and for good reason: It spelled the end for the company.
MNKD Stock: A Cult Classic That Must Be Sold
People like MannKind. I get it. I was a believer, too. Started by the serial entrepreneur, famed scientist and all-around genius billionaire Alfred Mann, people wanted so badly to believe that MannKind would be the company to take inhaled insulin mainstream. And MNKD stock would make everyone rich.
Afrezza, delivered in a novel, handheld durable delivery device about the size of a normal inhaler, was approved by the FDA for the treatment of Type-1 and Type-2 diabetes. Due to its tiny size and limited resources — and the desire to scale quickly — MannKind partnered with Sanofi, who began selling Afrezza in 2015.
Results were disastrous. Afrezza never sold more than $2 million a quarter, and racked up big losses that MannKind was obligated to share 35% of with Sanofi. After about three quarters of miserable underperformance, Sanofi dumped MannKind as a partner.
MannKind now plans to market and sell the product itself, but the looming question is: With what resources? A recent auditor’s report brought up major issues with the way MannKind was internally recording its financials, and noted “substantial doubt about its ability to continue as a going concern.”
On top of it all, founder and former CEO Al Mann — the brilliant mind behind the company who served as CEO and Chairman until just months ago — passed away in late February.
Its current CEO is, how shall we put it, less brilliant. When asked on a conference call last week about how much money MNKD owed to Sanofi, he said, “We don’t owe any money to Sanofi,” then later added, “other than a piece of debt.”
That piece of debt is worth $62 million, which is just a portion of the $220 million in total debt MannKind has on its books. Over time, the company is also required to buy nearly $120 million worth of insulin, including roughly $40 million this year.
This is the real reason MNKD stock is doomed. It has just $59 million in cash on its books (through the end of the fourth quarter, who knows what’ll be left at the end of Q1). Of that, $25 million is restricted cash, meaning MannKind can’t touch it.
So, barring some new out-of-nowhere marketing agreement with another company of Sanofi’s size, MannKind is done. And after Sanofi’s inability to market Afrezza, that possibility is almost nil.
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.
