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MannKind Corporation (MNKD) Stock Is a Lost Cause After Q3 Earnings

MannKind stock jumped on Wednesday ... but the beleaguered drug company did little to give shareholders legitimate hope

If there was ever a company that needed an earnings report to show some evidence — any evidence — of life, it’s MannKind Corporation (NASDAQ:MNKD). The organization has found nowhere near the success it expected to find with its inhalable insulin Afrezza, and MannKind stock has paid the price, falling from a mid-2014 peak price of $11.48 per share to the current price of 46 cents.

MannKind Corporation (MNKD) Stock Is a Lost Cause After Q3 Earnings

It wouldn’t be overstating the issue to say MNKD was in a do-or-die situation headed into Wednesday’s earnings news.

Though MannKind stock responded bullishly to the report, advancing nearly 9%, it would be tough to argue it produced strong evidence that everything is going to be OK.

MannKind Stock Earnings

On Wednesday, drugmaker MannKind reported third-quarter numbers, posting a 26-cent-per-share profit on revenue of $162.4 million. That compares favorably to the year-ago loss of 8 cents per share. It also compares to the 6-cent loss per share analysts were collectively expecting for the recently completed quarter.

Those same analysts were also calling for a top line of about $1.33 million.

That’s a far cry from the peak sales of more than $3 billion (annualized) some analysts had predicted for Afrezza shortly before after the insulin option was approved. Indeed, the numbers may not even be as strong as they seem on the surface.

Big Disappointment

It was a rather dramatic rags-to-riches-back-to-rags story. Between 2012’s low and 2014’s high, when an approval became likely again [Afrezza had previously been rejected by the FDA], MannKind stock rallied from a low of $1.57 to that high of $11.48. The rationale for bullishness wasn’t difficult to understand — when diabetics are given the choice between poking themselves with a needle and simply inhaling insulin, they’ll choose the latter.

Somebody, however, forgot to actually ask diabetics how they felt about Afrezza. The initial buzz was strong, but overall adoption was weak.

Some observers, and several major MNKD shareholders, suspected it wasn’t the product itself, but rather, ineffective marketing… sales are not MannKind’s forte. Later in 2014, drug company Sanofi SA (ADR) (NYSE:SNY) signed an agreement with MannKind to market Afrezza. Some were sure that would solve the sale problem.

It didn’t. The “relaunch” of Afrezza from Sanofi earlier this year doesn’t appear to have done much to ignite sales either. Of the $162.4 million in revenue booked for the quarter, $161.8 million of it was generated by a cash payment from Sanofi related to the licensing agreement itself. Sales of Afrezza only reached $573,000.

That partnership no longer exists.

One key problem other than marketing the drug (if marketing is indeed the problem): Only 35% of those diabetics that start using Afrezza continue using it, suggesting it may not be the panacea it was made out to be.

Looking Ahead for MannKind Stock

With Afrezza essentially a bust and its future at least partially dictated by Sanofi, MannKind is looking for its next potential hit.

One possibility is an entry into the recently disrupted emergency epinephrine-injection business. That’s a market currently dominated by the EpiPen, from Mylan NV (NASDAQ:MYL). Mylan opened the door to competitors a few weeks ago, however, when it was essentially deemed a ripoff artist by overcharging for the device. There’s no competing device on the near-term radar though, and so far, MannKind’s alleged solution would be another inhaled solution even though the premise didn’t fly as a way of administering insulin.

Some have suggested MannKind may try to divest the Afrezza franchise. It can only sell what someone is willing to buy, though, and with the insulin delivery solution proving to be a “tough sell,” suitors aren’t exactly lining up.

Indeed, Sanofi may be breathing a sigh of relief that the bulk of its cost to garner licensing rights to Afrezza came in the form of performance-based payments that haven’t had to be paid yet.

Whatever the case, cash is dwindling fast, falling to only $35.5 million from $63.7 million just a quarter earlier. Something big has to change, and soon.

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

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