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3 Giant Leaps for MannKind

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The small steps are largely behind biotech company MannKind (Nasdaq: MNKD  ) . Over the course of the past few years, the company navigated 61 different clinical studies for its Afrezza insulin inhalant involving more than 5,600 diabetic patients.

The future of MannKind and its lead product still remains in doubt, though. The company must overcome several major obstacles to ultimately succeed. Here are three giant leaps awaiting MannKind.

1. Tango for cash
A lack of money is the root of all kinds of problems for MannKind. And the company must perform a delicate dance to address these problems.

As of June 30, MannKind's cash reserves including equivalents stood at $32 million. The company can borrow up to $26.9 million under terms of its current loan agreement. That's only enough to get MannKind through the fourth quarter of 2012.

Investors already know where the company's dancing for dollars will likely go. MannKind announced on Sept. 4 plans to potentially sell up to $500 million in common and preferred stock, warrants, and debt securities.

The obvious risk for selling more shares is dilution. Current shareholders probably won't be very happy seeing their stock become less valuable. While MannKind could raise cash by selling some shares, another feasible option would be to issue more convertible notes.

2. Waiting to inhale
MannKind should be able to jump over its cash hurdle, at least for the short term. But it still faces the challenge of getting FDA approval for Afrezza. Although the product already went through three phases of clinical studies, the final leap to approval has been a frustrating one.

The company's first attempt at gaining approval from the Food and Drug Administration was met with rejection in 2010. The second attempt got a thumbs-down in 2011. They say the third time's the charm.

Afrezza itself isn't the issue. The FDA needs MannKind to prove that its smaller inhaler, called Dreamboat, works at least as well as the original, larger inhaler used in the clinical trials.

MannKind expects to complete the additional studies in the second quarter of 2013. The company will then submit an amended NDA to the FDA.

There are no reasons at this point to doubt that the Dreamboat inhaler will pass muster. However, the wait has been a long one, and FDA approval still presents a giant leap for MannKind.

3. O partner, where art thou?
Let's assume that MannKind raises plenty of cash within the next few months. Let's even suppose that at long last the FDA grants approval for Afrezza with the Dreamboat inhaler. Will MannKind finally have arrived?

The short answer is "no." The slightly longer answer is "not without some help."

MannKind's management knows that the company's greatest chance for success in actually launching Afrezza is to find a partner. The company has stated for months that it "has held extensive discussions with a number of pharmaceutical companies concerning a potential strategic business collaboration for Afrezza." So far, not so good.

Several pharma companies could be viable partners. Pfizer (NYSE: PFE  ) crashed and burned with its acquired insulin inhalant, Exubera, several years ago. Fellow Fool Max Macaluso presented a solid case back in August why Pfizer should partner with MannKind.

Novo Nordisk (NYSE: NVO  ) and Eli Lilly (NYSE: LLY  ) also failed to launch their insulin inhalant products. Both would at first glance seem to be natural partners for MannKind. However, both also have late-stage long-lasting insulin products with which they hope to challenge leader Sanofi (NYSE: SNY  ) . They could legitimately view Afrezza as a threat for their internally developed products.

MannKind desperately needs a partner. It's desperately seeking a partner. But the odyssey continues for now.

Taking a breather
Investors don't need to wait for MannKind to complete all three giant leaps before considering the stock. However, I recommend at least staying away until the company decides which path it will follow for raising additional cash.

More cautious investors probably will also prefer to wait until one of the other two hurdles has been overcome. In the meantime, take a breather from this stock while MannKind sorts things out. There's no compelling reason to shoot for the moon on this one.

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Fool contributor Keith Speights has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend MannKind. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.

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