The Big Money Says to Sell MannKind

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?

Foolish facts

Metric

MannKind

Motley Fool CAPS stars (out of 5) **
Total ratings 587
Percent bulls 80.6%
Percent bears 19.4%
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

Top Owners

2007*

2008*

2009*

Latest*

Legg Mason Investment Counsel 14,122,121 0 5,175,387 5,175,387
BlackRock 105,942 81,607 4,088,878 4,192,146
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

Company

Institutional Ownership

Insider Ownership

Biodel (Nasdaq: BIOD  ) 46.43% 18.23%
Insulet (Nasdaq: PODD  ) 91.63% 1.03%
MannKind 20.78% 39.58%
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.

BlackRock and Pfizer are Motley Fool Inside Value picks. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.


Read/Post Comments (7) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 08, 2010, at 4:51 PM, c335358 wrote:

    Your numbers are not accurate. Al Mann I think owns 49% of the stock...then there are the other insiders..then the institutions..then the rest of us..and I aint giving my shares to institutions..them there shares is mine..all Mine!

  • Report this Comment On November 08, 2010, at 4:57 PM, sscutchen wrote:

    When the value for "Latest" is greater than the value for "2009", that's buying. Not selling. Four of five institutions in your table are buying. One is selling. How are the other 20? Can't tell. Why? Can't tell. Your statement "Institutions were sellers in 2008, buyers in 2009, and are now selling again." seems vacuous.

  • Report this Comment On November 08, 2010, at 5:00 PM, c335358 wrote:

    analyst with no memory span..are doomed to repeat their errors..imo Mannkind Long!http://www.entrepreneur.com/tradejournals/article/63795155.h...

  • Report this Comment On November 08, 2010, at 5:10 PM, zBigD wrote:

    I have been in and out of this stock for years. And, with the help of his executive team, Al's big ego and big money are about to be flushed down the toilet with Obamas FDA. Good luck. Im out for good. I'll live off the ride from LVS.

  • Report this Comment On November 08, 2010, at 5:17 PM, JoeyHolland wrote:

    Why have you and Adam F been so interested in MNKD for the last few days (lots of articles)? Why did you feel it necessary to give credit to 'Bloomberg among others' when Adam F 'broke the story'. Shouldn't you be congratulating your cohert on a job well done / or / has that already been done in another capacity..........................................................................like a plaque of course, no other interpretation needed.

  • Report this Comment On November 08, 2010, at 5:44 PM, TMFMileHigh wrote:

    @c335358,

    >>Your numbers are not accurate. Al Mann I think owns 49% of the stock...then there are the other insiders...

    According to Capital IQ, insiders own 39.6% of the shares outstanding. Here's a more specific look at the principal insiders and the numbers of shares they held as of the latest reporting period:

    Mann, Alfred E.

    Founder, Chairman and Chief Executive Officer 48,651,309

    Edstrom B.Sc., M.B.A., Hakan S.

    President, Chief Operating Officer and Director 265,146

    Richardson, Peter C.

    Chief Scientific Officer, Corporate Vice President

    124,654

    Palumbo, Diane M.

    Corporate Vice President of Human Resources 115,186

    Martens Ph.D., Juergen A.

    Chief Technical Officer and Corporate Vice President of Operations

    60,472

    Kresa, Kent

    Director, Chairman of Compensation Committee and Member of Nominating & Corporate Governance Committee

    56,834

    Pfeffer CPA, Matthew J.

    Chief Financial Officer, Principal Accounting Officer and Corporate Vice President

    42,733

    Thomson Ph.D., J.D., David

    Corporate Vice President, Corporate Secretary and General Counsel

    28,677

    @sscutchen,

    You're only looking at the top five. If you look at the top 25 total, you'll see that, as a group, they've sold more than 6.7 million shares since December.

    Thanks for the questions and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On November 08, 2010, at 9:33 PM, NoMoeMoney wrote:

    Find it hard to believe the 'new' FDA will approve a new, inhaled, insulin for diabetics (that now has credibility issues) when they just shot down in flames two compaines in Oct: Amylin Pharmaceuticals-Bydureon and Biodels-Linjeta? Unless Al Manns been dumping millions in some politicians pocket and they're pressuring the FDA: watch this stock, the bears will be all over it....

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10/23/2014 3:59 PM
BIOD $1.36 Down -0.03 -2.16%
Biodel, Inc. CAPS Rating: ****
MNKD $5.65 Up +0.26 +4.82%
MannKind Corp CAPS Rating: ***
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