3 Critical Answers for MannKind

Hurricane Sandy delayed the release of third-quarter results for pharmaceutical company MannKind (Nasdaq: MNKD  ) , but now we know the story. MannKind beat expectations by posting a loss of $0.22 per share compared to average analyst estimates of $0.24. That's really not the important stuff, though.

Inquiring minds want to know about three critical challenges facing MannKind. Were answers given to these questions? While the earnings release itself didn't shed much light, the company's management did give some answers in the earnings call. Here are the three questions investors interested in MannKind will want to know about.

How is the cash situation?
Better. That's despite MannKind's cash burn increasing from $24.7 million in the second quarter to $29.9 million in third quarter. Expenses were higher primarily due to clinical trial costs. Management expects costs to continue to rise during the rest of 2012.

Although MannKind officially finished the quarter with $2.1 million in cash and short-term investments, the public offering in October replenished its coffers by $86 million. On top of that, Alfred Mann -- founder, chairman and CEO of MannKind -- will help the company improve its financial situation through a shuffle of sorts.

Mann plans to buy $107.4 million in shares to be paid by reducing the amount of debt that the company owes to him. He will then allow MannKind to borrow the amount again through the existing loan agreement. Adding in the existing amount that the company can borrow, this move provides around $120 million in additional funding when needed.

Management expects that the money raised through the public offering combined with the additional borrowing made available will allow it get through 2013. The company also will be able to raise close to $90 million next October through warrants that were included in the recent public offering.

How are the Afrezza phase 3 studies?
Full steam ahead. MannKind finished its patient recruitment and is ramping up two phase 3 studies. The company expects that the first study will conclude in May, with the second study wrapping up soon afterward.

Plans are under way to move things along as expeditiously as possible. If all goes well, the NDA should be submitted to the Food and Drug Administration in the third quarter of 2013.  Mann's phrase to describe where MannKind stands now was "clear path to FDA approval."

Are any partnerships on the horizon?
Maybe. President and COO Hakan Edstrom stated that several "newcomer" companies expressed interest in potential partnerships after the FDA added the second phase 3 study of Afrezza for early-stage type 2 diabetes. Edstrom commented that discussions with different companies are at varying stages. He indicated that more serious negotiations probably wouldn't kick into gear until early to mid-2013.

Foolish take
MannKind's recent public offering did cause a problem with share dilution, but it really didn't have much of a choice. The company can now at least make it through completion of phase 3 studies for Afrezza and should be in decent shape to go beyond that point.

The company seems to have its act together on the phase 3 studies. If the CEO's confidence made the difference, MannKind would breeze through the studies. Mann is quite possibly the best cheerleader for his company out of any CEO out there. And he certainly puts his money where his mouth is.

I'm not sure how much hope to put in the partnership talks at this point. Who are the "newcomers" referred to by Edstrom? My guess is that the prime partner candidates likely include Abbott Labs (NYSE: ABT  ) , GlaxoSmithKline (NYSE: GSK  ) , Johnson & Johnson (NYSE: JNJ  ) , Eli Lilly (NYSE: LLY  ) , Novo Nordisk (NYSE: NVO  ) and Sanofi (NYSE: SNY  ) . All have diabetes products at some stage of development and plenty of cash. However, which of these (if any) were in past discussions, and which (again, if any) are currently talking with MannKind remains a mystery.

The bottom line as I see it is that MannKind is probably in as good of a position as it can be, considering what it's been through to get to this point. If you're willing to take on some risk, this could be a good time to look at this stock. More good answers are hopefully on the way.

While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Fool contributor Keith Speights has no positions in the stocks mentioned above. The Motley Fool owns shares of GlaxoSmithKline and Johnson & Johnson. Motley Fool newsletter services recommend GlaxoSmithKline and Johnson & Johnson. 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.


Read/Post Comments (1) | Recommend This Article (5)

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 02, 2012, at 10:31 AM, WCoastGuynCA wrote:

    Al Mann's comment from yesterday's third quarter conference call regarding the recent share dilutive funding:

    "I've described before, and I'll say again, that we had established similar experience when I was at MiniMed. In the early days there, we, too, encountered financial challenges. I recall that at a slow point, the stock of MiniMed was priced at $1.75 per share, not far from where we are here. In 2001, Medtronic acquired MiniMed, now Medtronic diabetes worth -- was adjusted, $192 per share."

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2091368, ~/Articles/ArticleHandler.aspx, 11/1/2014 8:00:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement