Why MannKind Corporation Shares Took Off

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of MannKind (NASDAQ: MNKD  ) , a clinical-stage biopharmaceutical company focused on developing therapies to treat cancer and diabetes, vaulted higher by as much as 10% on the day after receiving an upgrade from research firm Piper Jaffray.

So what: Before the opening bell, Piper Jaffray upgraded MannKind to neutral from underweight and more than tripled its price target on the company to $6.50 from $2 on the heels of management's confidence that experimental inhaled diabetes drug Afrezza will be approved by the Food and Drug Administration, and based on commentary that the company is already in talks to find a partner for the drug (once approved). As a refresher, Afrezza has been rejected by the FDA once before, and its latest new drug application filing was delayed three months from a PDUFA date of April 15 to July 15.

Now what: As usual, I wouldn't pay too much attention to analyst ratings as they rarely have a meaningful long-term impact on our investment thesis. In addition, these research firms aren't accountable for your investments -- you are! With that being said, Piper Jaffray's price target of $2 looked a bit silly with MannKind trading around $6.50 already, so the upgrade seemed like a logical reactive response. While I, too, feel there's a better than 50-50 chance of approval for Afrezza on or before its July 15 decision date, I still see a number of obstacles which makes its $2.6 billion valuation appear quite frothy. Its ability to successfully launch Afrezza, and its inability thus far to land a partner with its cash pile dwindling are all front-and-center concerns in my book. With that being said, I plan to remain a casual observer on the sidelines until well after the FDA's decision.

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  • Report this Comment On May 15, 2014, at 7:16 AM, mrmarkaallen wrote:

    With a unanimous vote I favor of approval the FDA will be hard pressed to deny approval.

    A partner has been found and approval is pending approval. Listen to the quarterly.

    As to the markitabity, if I didn't have to stab myself several times a day and at the same time could lower my risk of hypoglycemic events with no risk of side effects I think I would use Afrezza. You?

    Market cap is slightly higher than what has been spent getting this drug to this point in the process. I think a premium is long overdue!

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