One of the great maxims of traders and Wall Street pros is to follow the "smart money."
I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.
Next up: MannKind (Nasdaq: MNKD ) . Are institutions bullish or bearish when it comes to this supplier of inhaled insulin?
|Motley Fool CAPS stars (out of 5)||**|
|Bullish pitches||93 out of 108|
|Highest-rated peers||Trubion Pharmaceuticals, Codexis, Neostem|
Data current as of Nov. 8.
Shares of MannKind took a beating last week after previously undisclosed details of a lawsuit were made public via court documents. In them, former regulatory affairs director John Arditi describes a pattern of "scientific misconduct" in tests of its inhaled insulin drug, Afrezza, conducted in Bulgaria and Russia. MannKind disputes the claim.
The lawsuit itself isn't new. Arditi filed for wrongful termination in a New Jersey state court in September. MannKind broadly disclosed the claim and its response in a quarterly filing with the Securities and Exchange Commission last month, but had avoided discussing details until last week. The company issued a press statement after TheStreet.com and Bloomberg, among others, published Arditi's specific claims.
"We believe that Mr. Arditi's claims have no merit," Chief Financial Officer Matthew Pfeffer said in a press release.
If Fools aren't convinced, it may be because this is the second time MannKind has been sued by a former executive responsible for regulatory affairs.
In 2005, former Chief Medical Officer Dr. Wayman Wendell Cheatham filed a $4 million wrongful termination suit that accused the company of presenting misleading data to the Food and Drug Administration. MannKind denied the claim and countersued for libel before settling in June 2007, the Los Angeles Times reports. Terms weren't disclosed.
Meanwhile, some Fools wonder if the FDA isn't ready to approve an inhaled insulin treatment. From MannKind or anyone else.
Last week, CAPS All-Star typeoh wrote, "While I have an AMAZING amount of respect for Al Mann, he's wrong on inhaled insulin. Pfizer's (NYSE: PFE ) Exubera was a $2 Billion DISASTER, and I don't see this going much better."
Institutional ownership history
|Legg Mason Investment Counsel||14,122,121||0||5,175,387||5,175,387|
|Legg Mason Capital Management||1,550,840||6,911,953||5,175,387||3,352,909|
|The Vanguard Group||1,287,390||2,322,759||3,064,440||3,243,056|
|Oracle Investment Management||823,375||1,790,604||1,325,710||1,413,816|
|TOP 25 TOTAL||35,915,226||26,608,404||32,788,631||26,026,778|
Source: Capital IQ, a division of Standard & Poor's.
*Indicates the number of shares owned.
Institutions were sellers in 2008, buyers in 2009, and are now selling again. In every case, profits have proven as elusive for investors as FDA approval has been for MannKind. Now, with more accusations plaguing the business, there might be further regulatory delays.
But the sell-off could also make for an opportunity. While most institutions have either sold or held firm in the past quarter, a couple have bought. Bank of New York Mellon and Lockwood Capital Management, specifically.
Competitor and peer checkup
|Biodel (Nasdaq: BIOD )||46.43%||18.23%|
|Insulet (Nasdaq: PODD )||91.63%||1.03%|
|Novo Nordisk (NYSE: NVO )||57.74%||0.04%|
|sanofi-aventis (NYSE: SNY )||35.73%||0.03%|
Source: Capital IQ. Data current as of Nov. 4.
MannKind gets the least amount of institutional support among its peers, but that's largely because of uncertainty in the business. Also, while it's nice to see founder Alfred Mann owning 39% of MannKind's outstanding shares, he's also a billionaire who won't go broke if his company fails.
I wish Mann and his team luck, but given Afrezza's regulatory hurdles and the history of accusations facing the company, I'm unwilling to bet alongside them by investing in MannKind.
Now it's your turn to weigh in. Do you think the institutions are wrong about MannKind? Let us know what you think using the comments box below. You can also recommend other stocks for Tim to evaluate by sending him an email, or replying to him on Twitter.
Interested in more info on MannKind? Add it to your watchlist by clicking here.