MannKind's Countdown to Liftoff?

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Perennial underdog MannKind (NASDAQ: MNKD  ) could be on its countdown to liftoff. The company announced its first-quarter results after the market closed on Thursday. Here is the countdown of the highlights -- from least to most important.

3. Financial
At this stage in the game, investors know that the company is still incurring losses. They know there will be little, if any, revenue. There weren't any surprises on those fronts.

MannKind reported a net loss of $41 million, or $0.15 per share. That's only slightly worse in absolute terms than the $38.2 million, or $0.27 per share, loss reported in the same quarter last year. The difference stemmed largely from an increase in operational expenses related to clinical studies.

No revenue was reported for first quarter. However, MannKind does conveniently toss in the cumulative amount of revenue that the company has made since its founding in 1991. That total is just shy of $3.2 million. In case you're wondering, this calculates to an average of around $143,000 per year. My hunch is CEO Alfred Mann made more than that in interest payments from his savings accounts.

The most important financial figure for the company is its cash balance. MannKind announced cash and cash equivalents of $28 million as of the end of the first quarter. That's down from $61.8 million at the end of 2012 as cash burn rates increase with two clinical studies under way. The company also still has $125.4 million available for future borrowing. 

MannKind expects that its current cash reserves will take it into the fourth quarter. However, this doesn't factor in another $90 million of warrants that the company will almost certainly exercise. This added amount should tide MannKind over well into next year.

2. Afrezza clinical studies
Status of the two ongoing clinical studies of Afrezza easily trumps financial results in terms of importance. The news from MannKind is: So far, so good.

Both studies appear to be on track to complete as scheduled, with the first wrapping up in May and the other in June. The company still expects to share data from the studies in mid-August and resubmit the New Drug Application for Afrezza by early October.

While MannKind's Senior Vice President of Clinical Sciences, Robert Baughman, said that the dropout rate in the studies is slightly higher than that of the original protocol in the type 1 diabetes study, there are no real concerns. Baughman noted that the dropout rate is tracking along well with projections and that the company overenrolled patients included in the studies. When asked about how well physicians are adhering to protocols in the studies, Baughman responded that the company is "comfortable" that all is in order.

1. Potential partners
The most important information that was announced related to potential partners for commercializing Afrezza. MannKind is currently in discussions with multiple potential partners. Alfred Mann also stated that several others indicated they would resume discussions and due diligence in August when the clinical results are announced.

The company is talking with global and regional organizations. MannKind might even contemplate tackling the endocrine market on its own, but hasn't made a final decision yet.

At this point, no names have been mentioned. There has been plenty of speculation for a long time about who might be a good fit. My Foolish colleague Max Macaluso suggested last year that Pfizer (NYSE: PFE  ) should get over its Exubera failure from years ago and snatch up MannKind. Max also pointed out that Pfizer needs a new blockbuster drug and offered up the idea that the inhalation technology used for Afrezza could potentially be used for other products -- including Viagra.

I would put Lilly (NYSE: LLY  ) in the same category for the reasons that Max listed for Pfizer. Lilly also gave up on its attempt to market an inhalable insulin product. It also needs a new blockbuster drug. And I don't doubt the company could find some other uses for MannKind's inhalation technology.

However, I think that Sanofi (NYSE: SNY  ) could be an even better fit. The company is a leader in the insulin market and has the sales heft to launch Afrezza globally. It also doesn't carry the baggage of a past failure with inhalable insulin. 

No one knows which company or companies will ultimately partner with MannKind or when they will do so. A partner might not be signed up until Afrezza gains approval.

I do expect that Afrezza will gain regulatory approval, though. And I think MannKind will find one or more partners rather than attempt to market the drug itself. Will this countdown ultimately result in liftoff after all these years? Let us know what you think in the comments below.

The future of MannKind?
Will MannKind's disruptive technology revolutionize the way diabetes is treated around the world -- or will the Food and Drug Administration put the kibosh on this product before it even hits the market? In a new premium research report on MannKind, these complex issues are made crystal clear, in addition to showing you why to buy or sell the stock today. To find out more click here to grab your copy today.

Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

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  • Report this Comment On May 10, 2013, at 11:46 AM, prginww wrote:

    A strong article. A couple of additional comments:

    1) There has been a very large short position (just under 50M as of 4/15/2013) that will have to be unwound over the next couple of months. The risk of the stock taking off upon completion of trials is too great. Data will be unlocked in July and by then everyone should anticipate a stock run up to August news.

    2) Shorts have thrown up smokescreen challenges including lack of financing, pulmonary risk and cardiovascular risk. Financing is no longer a concern since they have enough to analyze data and manage expenses well into Q4. There is an old pulmonary trial that has been ongoing since 2008. This was not a major concern for the FDA during their last CRL. This pulmonary trial will not be complete before their next submission. It's hard to enroll and it may impact labelling but it will not be a determinant in final approval. There is miniscule risk of a cardiovascular adverse event. The first trial is complete and the second will be complete next Monday. As long as there were no cardio events, then we are clear.

    My final comment is that the team clearly stated that they have reached an agreement with the FDA on the type and format of the data that they want. Affinity 1 is a non-inferiority trial (easier to achieve) and Affinity 2 is pursuing type 2 insulin-naive patients. Don't forget that titrate to treatment that is included and being managed by an outside party.

    Al addressed the question as to why he would spend arguably his last active years working so hard on this company. He's invested 930 million of the 2 billion invested. He absolutely believes that this will be a paradigm shift for insulin treatment, HbA1C will go down for patients since there is lower risk of hypo events and this could be the biggest block buster drug EVER!

  • Report this Comment On May 10, 2013, at 10:50 PM, prginww wrote:

    I had dinner with Al and Claude Mann last night in an understated, family-style restaurant with some close friends. We did not discuss MannKind but rather solar panels. Unbeknownst to many, Al developed the solar panels that powered this nation’s first spacecrafts. He sold the business in the early 1960s for $150M and could have easily called it quits. Instead, he went on to develop advanced battery powered pacemakers, cochlear implants, retinal implants, diabetes pumps and, one of his newest companies, Bioness, has developed breakthrough technology that restores function to paralyzed limbs.

    Starting in the aerospace industry, Al has gone on to help the heart beat, the blind see, the deaf hear and now the lame walk. Oh, he also helped millions regulate their blood glucose level with implantable insulin pumps which started him on the path to be the leading expert for managing diabetes.

    He has made billions from his advancements which he has used to start research institutes and the renowned Alfred Mann Foundation, who’s President, David Hankin, continues to pioneer unmet needs in medical science.

    There is little doubt that inhalable insulin will become the standard of care as it eliminates the difficulties inherent in injectable insulin. Telling a child that they no longer need to give themselves a shot or an elderly person that they don’t have to fumble with a needle and syringe, is plenty enough. But, being able to improve the efficiency of insulin to counter hyper/hypoglycemic events is huge.

    Al has put $1B into this endeavor and has stood the criticism of many. Now the time has come and MannKind will be yet another breakthrough in a long list of Al Mann achievements.

  • Report this Comment On May 11, 2013, at 12:31 PM, prginww wrote:

    With the number of patients suffering from diabetes skyrocketing and patient compliance being one of the most problematic areas in treating this insidious disease, I will only hope the FDA approves this drug and perhaps improve the quality of life of so many.

  • Report this Comment On May 11, 2013, at 10:46 PM, prginww wrote:

    Al Mann has proved with his constant developments in the fields of science and biotechnology,that he is one of the most dedicated human beings on the planet and a true believer in improving the lot of mankind. Every user of Afrezza that I have ever read or heard about has said that using it changed their lives for the dramatic better and that they couldn't wait to use it when it gets approved by the FDA for general use .

    I am excited for people like my niece with type II and for all the insulin users in the world...which is the dream Al Mann has..improve lives.

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