MannKind Corporation Earnings: Are Better Times Ahead?

On Monday, MannKind (NASDAQ: MNKD  ) will release its quarterly report, and investors don't expect any immediate positive results from the clinical-stage biotechnology company. The company has been waiting for a long time for FDA approval of its Afrezza inhaled insulin product, but established insulin producers Eli Lilly (NYSE: LLY  ) and Novo Nordisk (NYSE: NVO  ) are working hard to protect their competitive advantage, and it's still unclear whether MannKind will convince the FDA that any safety issues with Afrezza are less substantial than the potential benefits.

Dealing with insulin is a big hassle for patients suffering with diabetes, as the need for injections is at best a chore and at worst can cause complications for diabetics. The promise of an inhalable insulin product is attractive to many diabetes sufferers, and that has driven interest in MannKind for years. Yet investors are impatient for FDA approval to see just how big the opportunity will be for MannKind, especially in light of potential competition. Let's take an early look at what's been happening with MannKind over the past quarter and what we're likely to see in its report.


Dreamboat (2nd generation) inhaler. Source: MannKind.

Stats on MannKind

Analyst EPS Estimate

($0.13)

Year-Ago EPS

($0.15)

Revenue Estimate

$0

Year-Ago Revenue

$0

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Will MannKind earnings ever appear?
With MannKind earning no revenue, analyst earnings projections all hinge on how much they expect the company to spend. Those loss projections have risen recently, with first-quarter loss estimates widening 30% and full-year 2014 loss projections widening by 40%. Yet the stock is up 22% since early February.

MannKind's fourth-quarter financial report didn't hold any big surprises for investors. Operating expenses rose 39%, with the rise coming largely from stock-based compensation charges. Losses per share fell, but only because the number of shares MannKind had outstanding rose dramatically.

The key event for MannKind during the quarter, though, came in April, when an FDA advisory committee recommended that Afrezza be approved, with a unanimous 14-0 vote for type 2 diabetes and by 13-1 for type 1 diabetes. That news was especially welcome because of a scare among investors when the advisory panel presented its briefing materials, which indicated that MannKind had thrown some curveballs at the FDA.

Unfortunately, MannKind investors haven't gotten everything they wanted, as the FDA announced that it would delay its full approval decision beyond its initial April 15 deadline. Yet even though some investors got nervous about the delay, the fact that the deadline fell so close to the date on which the advisory panel made its recommendation is a good reason for the FDA to give itself more time to evaluate briefing materials and make a more considered decision.

One essential aspect of MannKind's future is whether it will find a partner for distributing Afrezza if it gains FDA approval. Because Eli Lilly and Novo Nordisk compete directly against Afrezza with insulin products of their own, MannKind will likely have to look elsewhere for potential partners. Yet with some other major pharmaceutical companies looking to ramp up their exposure to the diabetes space, MannKind should find little trouble gaining interest -- as long as the product gets approved.

In the MannKind earnings report, investors will want to listen for whether the company has made progress in finding a partner. For the most part, though, investors simply have to wait and see what the FDA has to say before MannKind can come up with a strategy for making the most of the Afrezza opportunity.

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Read/Post Comments (4) | Recommend This Article (15)

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 May 11, 2014, at 8:45 AM, theeseer wrote:

    I believe this was a fair assessment of the situation with MNKD except the author fails to point out several important points.

    1. MNKD has hired a respected company for the partner search and that company Greenhill investment bank has itself invested in MNKD showing its commitment. 2. Legal issues prevent the disclosure of any progress towards a partner as charges of stock manipulation or violation of confidentiality agreements have limited what MNKD can say except to mention that the effort is ongoing and several companies are interested probably pending approval. 3. The potential market for Afrezza has been estimated by respected analysts such as George Rho to be between 500 milion and 1 billion a year and an eventual price per share of 36.50 in one to two years.

    Testimony at the ADCOM public hearing by major Endocrinologists with large patient practices and extensive surveys of Doctors worldwide backing approval of Afrezza point towards a blockbuster in the making. 4. Several major diabetes companies have filed patent applications to include Afrezza in combination with their existing insulin as Afrezza works well with basal insulin for type 1 diabetes and provides the patient with a convenient protocol that allows for an initial injection and the rest of the day free from needles. Patients in the study were extremely pleased with this change in their lives.

    I am a long investor in MNKD because my Grandmother died of diabetic complications as her daily injections became a big problem regarding needle skin damage and inconvenience as she aged. Afrezza will save lives and should and I believe will, be approved.

  • Report this Comment On May 12, 2014, at 9:15 AM, larryw101 wrote:

    This article does not say anything new whatsoever. It's all about what is already known.

    I find it amazing how Motley Fool authors can make an article out of nothing.

    Maybe the next article will be about yesterday's weather.

  • Report this Comment On May 12, 2014, at 11:47 AM, yazzbro wrote:

    I find this part of your article kind of funny, "Because Eli Lilly and Novo Nordisk compete directly against Afrezza with insulin products of their own, MannKind will likely have to look elsewhere for potential partners." Say what!?!?! Why wouldn't Eli or Novo be interested in buying? Just because they are competitors that prohibits them for being interested in MNKD? Come on man. Eli and Novo could be very interested in continuing to dominate the diabetes market by purchacing or partnering with MNKD. Allowing another company like Roche, J&J or Sanofi to get in on MNKD now creates more competition for Novo or Eli. So your logic is flawed there. I think companies like Eli and Novo could be very interested in getting together with MNKD.

    Also, the delay to me is not a big deal. You are correct in your assessment that the Adcom was very close to the PDUFA date and that a delay was expected for that reason. The FDA needs some time on how it plans to label Afrezza and it also wanted MNKD to continue with a longer term study post approval. So the FDA needs this time to figure all that out. I also would not be surprised if the FDA came back a bit early with a decision for MNKD. Either way, right now it's just a waiting game. The conference call this afternoon might add a little insight but I am not expecting any grand announcements. We will see. Cheers!!!

  • Report this Comment On May 13, 2014, at 3:27 AM, 1AisA wrote:

    Mr. Caplinger is ignorantly wrong in saying: " ... established insulin producers Eli Lilly (NYSE: LLY ) and Novo Nordisk (NYSE: NVO ) are working hard to protect their competitive advantage..." There is no advantage of any nature in the supremacy of insulin injections over insulin inhalation. "... and it's still unclear whether MannKind will convince the FDA that any safety issues with Afrezza are less substantial than the potential benefits." How does Caplinger reconcile such a pronouncement with the ADCOM vote of 14-1 and 15-0? I speak as a diabetic who has self-administered over 21,000 injections into my pizzafied buttocks. Call your next case!

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