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MannKind's Run to Glory

Shares of MannKind (NASDAQ: MNKD  ) have nearly tripled over the last year. The value of the biotech is up a whopping 584% when you look at the company's market cap because of all the additional shares it's sold.

MNKD Chart

MannKind data by YCharts.

What's caused this increase?
Increased revenue? Nope, MannKind doesn't have any products for sale.

Clinical trial data? Not really. The company completed enrollment for two phase 3 trials testing its inhaled insulin Afrezza in October, but the trials aren't expected to read out until this summer.

Big licensing deal? No, MannKind has been talking about one for years, but nothing has materialized yet.

Instead, it looks like the price increase is simply because investors are more interested in owning MannKind than they were a year ago. More buyers and fewer sellers means the price has to go up. Valuation be damned.

Why now?
It's the typical run-up that biotechs see before data will be released or before the Food and Drug Administration is scheduled to make a decision about a marketing application. In MannKind's case, it's those phase 3 trials that are being wrapped up and should report shortly.

With no binary event in the foreseeable future -- and for some traders, foreseeable can be a month, often less -- few investors want to own a biotech as it's unlikely to change in value with no news. As the binary event approaches, more people want to own the company, which drives the shares higher.

Priced in
The problem with this run up, especially for events like MannKind's phase 3 trials that are widely expected to be positive, is that most of the upside is already gone.

ARIAD Pharmaceuticals (NASDAQ: ARIA  ) , for instance, fell more than 20% after receiving FDA approval for its leukemia drug Iclusig. ARIAD had more than doubled from the year before as it ran up to the decision. Shares still haven't recovered to their pre-run-up level. Binary event traders have moved on. To add to its $3.6 billion valuation from here, ARIAD is going to have to do it the old-fashioned way: increasing sales.

There's risk that, even with good data, we could see the same issue for MannKind. Unless the company signs a big marketing partnership, investors are going to be rightfully worried about the launch of Afrezza after Pfizer's flop with its inhaled insulin, Exubera, a few years ago. Afrezza is arguably a much better product than Exubera, but MannKind is still going to have the same problem Pfizer had; invoking a paradigm shift on how doctors treat diabetics that need insulin isn't easy and will require a lot of marketing muscle.

Looking for more?
In a new premium research report on MannKind, our analyst breaks down whether MannKind's technology will revolutionize the way diabetes is treated around the world, 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 (2) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On May 23, 2013, at 4:41 PM, haigs159 wrote:

    Fair article... Partnership can come at any time. Afrezza's demand will be much higher than Iclusig. Think about the amount of people with diabetes and treatment alternatives. There is nothing like this on the market. It doesn't work like Exubera, nor does it require the "bong" that you used to have to carry with it. The delivery mechanism is smaller than the palm of your hand. You can carry it in your pocket, purse, etc. The time it takes for Afrezza to work after inhaling is faster than most if not all current treatments. I appreciate all the attention to this product because not only am I an investor, but someone with a personal interest in the product itself. This truly could be one of the biggest things to hit the market in a long time. The simple yet substantial improvement in quality of life for so many people is game changing.

  • Report this Comment On May 23, 2013, at 5:48 PM, ajax0805 wrote:

    I disagree with this article completely. To compare an insulin treatment to a leukemia drug just because they are both biotechs is like comparing apples to oranges. MNKD has the ability to completely transform a the daily lives of people with a chronic condition. So you should compare Afrezza to Lipitor, it is equally as much a game changer and it solves another chronic condition. Also, the statement about marketing is obvious and if you bothered to listen to the last conference call they already addressed partnerships and stated that there are many partners interested. Mark these words MNKD has not even begun to rise in price. No one can predict what a stock will do and these arguments are more a fear tactic thru a loose association to a drug that isn't even in the ballpark, than based on sound analysis. I read a similar article to this not 3 months ago and all the stock did was go up and up and up.

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