MannKind Is Crushing It, but Beware or You’ll Be Crushed

What’s alluring about biotechnology companies like MannKind (NASDAQ:MNKD) is that they can generate a whole lot of buzz with just one breakthrough product. For MNKD stock investors, this could translate to jaw-dropping returns in a short period of time.

MannKind Is Crushing It, but Beware or You'll Be Crushed

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Seasoned traders know, however, that hoping for quick gains isn’t much of an investing strategy. One would need to have uncanny luck and timing in order to consistently anticipate the pops in MNKD stock. And, there have been plenty of steep drops in the share price to punish anyone with less-than-perfect timing.

What makes MNKD shares especially volatile, is the company’s heavy dependence on one therapeutic product. It’s a good product, but over-reliance on a particular revenue source can be problematic.

Plus, even if prospective investors are willing to overlook that potential issue, the stock’s current price point could dissuade value seekers.

A Closer Look at MNKD Stock

As alluded to previously, MNKD stock draws speculators in because of the occasional sharp pops in the share price. This is not unusual for biotech stocks as they often tend to be driven by news and by emotion.

Granted, the bulls have been in complete control of the price action lately. The MNKD share price has more than doubled from 84 cents in the middle of March to approximately $2 in late June.

But let’s not restrict our focus on recent price action. MNKD stock is notorious for draining investment accounts. The shares traded at more than $100 apiece in the summer of 2006, then down to the $55 area in 2014, followed by a heart-rending plunge to $2 and change in 2016.

And yet, on a short-term basis, MNKD shares appear overbought after a practically vertical run-up in June. So, unless you like the strategy of buying a steep spike in a very long-term downtrend, you might want to think twice before taking a position in this stock.

The Flagship Product

While it’s not Mannkind’s only product in the company’s pipeline, Afrezza is clearly the star of the show. It’s an inhaled-insulin product for diabetes patients, and it’s already approved for adult use while pediatric use is in Phase 2 clinical trials.

If we had to identify Mannkind’s second most important therapeutic candidate, it would most likely be Treprostinil Technosphere. In partnership with United Therapeutics (NASDAQ:UTHR), Mannkind is pursuing clinical studies for Treprostinil Technosphere in patients diagnosed with pulmonary arterial hypertension.

In addition, Mannkind has a Covid-19 program in its pipeline. For some biotech firms, a program for Covid-19 is their most important product. However, that’s simply not the case with Mannkind.

Recent news items pertaining to Mannkind have generally been about Afrezza. It’s mainly been good news, but it could only take one piece of unfavorable news about Afrezza to sink MNKD stock.

A Bull Charges Ahead

To be honest, sometimes analysts can get ahead of themselves. Sure, MNKD shares have been on a tear lately. However, that’s no guarantee of a continuation in this positive price action.

In particular, H.C. Wainwright analyst Oren Livnat, assigned a very lofty price target of $2.50 on MNKD stock. Wainwright also maintained a rating of “Buy” for MNKD shares.

Yet, at the same time, Wainwright expects “a sequential 2Q Afrezza volume and revenue decline.” So, obviously this particular analyst isn’t counting on Mannkind’s flagship product to be the company’s primary revenue driver going forward.

Rather, Wainwright apparently believes that the aforementioned Treprostinil Technosphere (sometimes shortened to “TreT”) will “ultimately supplant Afrezza as the main MannKind value-driver.”

But then, that event (assuming it happens, which is by no means assured), would still leave Mannkind as a company primarily dependent on a single therapeutic product. In short, replacing one revenue driver with another doesn’t really solve that problem.

The Bottom Line

Speculators might choose to take a small position in Mannkind as long as they understand the risks involved. But with the price being high in the short term and over-reliance on a single product remaining an issue, MNKD stock fails to present a compelling value proposition.

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

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