Why MannKind Corporation Stock Was Whipsawed in Late-Day Trading

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 biopharmaceutical company focused on developing therapeutic products to treat diabetes and cancer, were absolutely whipsawed following the release of the Food and Drug Administration's decision to approve its inhaled insulin therapy, Afrezza, for patients with type 1 and type 2 diabetes. Shares surged nearly 5% immediately following the late-day approval, then collapsed as much as 26% from its high of the day to ultimately finish lower by 5.5%. Shares have since regained a little ground in after-hours trading.

So what: Under normal circumstances a drug approval by the FDA would lead to a move higher in a company's shares, however this approval came with a couple of warnings that didn't appear to sit well with investors. Specifically, the FDA approved Afrezza with a boxed warning label indicating that it shouldn't be used in patients that have chronic lung diseases like asthma or chronic obstructive pulmonary disease, or COPD, because of reports during its study of breathing spasms in chronic lung disease patients. The agency also advised against smokers using the drug.

Now what: This is understandably a push-pull in terms of positive and negative news. On one hand there had been concern that MannKind wouldn't get the nod in type 1 diabetes, but after eight years of studies and a prior complete response letter from the FDA it now has access to some 25.8 million diabetic patients. Afrezza is fast-acting and incredibly convenient relative to administering an insulin injection, so it could be a notable advance in patient quality of care.

However, for as many potential patients as Afrezza has access to, it also will lose quite a few patients from its patient pool because they're smokers, have asthma, or have COPD. The real hang-up seems to be in determining how much of a market Afrezza has left following this warning label. In addition, we're still waiting on where MannKind will price Afrezza, whether or not it'll find a partner to help launch its drug, and how it'll finance this venture with its cash on hand quickly dwindling.

All told, it's a genuinely positive day for most diabetics in the U.S. who will soon have a new treatment option available. For MannKind, though, that optimism is considerably more guarded until it provides investors with answers to some of these key questions above.

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Read/Post Comments (16) | Recommend This Article (19)

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 June 27, 2014, at 11:05 PM, etbob1 wrote:

    Fools rush in where angels fear to tread. This hit piece failed badly because it has no defense left when this stock goes to $50!

  • Report this Comment On June 28, 2014, at 7:49 AM, bufnyfan1 wrote:

    "However, for as many potential patients as Afrezza has access to, it also will lose quite a few patients from its patient pool because they're smokers, have asthma, or have COPD"

    how many potiential patients? it has been estimated that >80% of the entire diabetic population (type 1 and type 2 and eventually children) will be eligible to use Afrezza--in fact I would bet many type 2 patients who have COPD/smoke will still find a way to get Afrezza despite the "spasm" risk (which is also overblown)---admit it this is an attempt to "short" this stock so you can cut your losses---is it not??

  • Report this Comment On June 28, 2014, at 11:11 AM, missjessiecat wrote:

    I am a big Motley Fool fan, but I've never understood their reluctance to recommend purchasing shares of MNKD. I firmly believe that Afrezza will be a huge success and that's exactly why MNKD is my biggest holding, by far!

  • Report this Comment On June 28, 2014, at 12:39 PM, diabeticneeds1 wrote:

    It sounds like your to smart for your own good and you shorted this stock.

    Oh sorry people with Diabetes chronic lung disease and asthma can smoke but can't use AFREEZA for there diabetic condition.

    I'm surprised you don't have a tobacco company to recommend today.

    Oh yea you don't have a penchant for that sector.

    Its up 10% from the close so be clear,

  • Report this Comment On June 28, 2014, at 12:53 PM, mellow33 wrote:

    Oh yea..I have 10 million shares too.

  • Report this Comment On June 28, 2014, at 5:20 PM, surfish wrote:

    COPD, smokers, and asthmatics making up a large percentage of diabetics?

    You make me laugh.

  • Report this Comment On June 28, 2014, at 6:23 PM, larryw101 wrote:

    Another worthless article by a true Motley Fool.

    Their name sure fits them appropriately.

    This bozo has bashed Mankind for months and now a box warning label is all he can come up with.

    Where does Motley come up with these clowns at?

    @Sean Williams ........ Find a new job.

  • Report this Comment On June 28, 2014, at 6:28 PM, Topdoginvesting1 wrote:

    In 2012, 29.1 million Americans, or 9.3% of the population, had diabetes.

    In 2010 the figures were 25.8 million and 8.3%. The prevalence rate for adults age 20 and older in 2012 was 12.3%, compared to 11.3% in 2010.

    - See more at: http://www.diabetes.org/diabetes-basics/statistics/#sthash.e...

  • Report this Comment On June 28, 2014, at 6:36 PM, Topdoginvesting1 wrote:

    19% Of Adults smoke in the U.S. and the number is steady or in a slight decline. 25 million people in the U.S. have Asthma. Chronic Obstructive Pulmonary Disease effects around 12.7 million Americans. Diabetes effects over 29 million Americans and hundreds of millions world wide..Nobody knows the number of Diabetics with lung disease or that smoke and to suggest a real number would be misleading. Allot of Asthma and Copd patients already use an Steroid inhaler. So if you add up the Smokers, the Asthma, and the Copd patients this would roughly be around 95 million people. Divide that number by 9 and roughly 10 million people are affected by the Label. Take away the Smokers and roughly 4.1 million people are affected by the Label, or 14% of Diabetics in America, this isn't counting the world. With Diabetics growing by the thousands on a Daily Basis, and smokers on the decline, Afrezza will become more popular everyday in America and the World. After all, who wouldn't want to inhale rather than poke.

  • Report this Comment On June 28, 2014, at 6:45 PM, sept1200 wrote:

    I find your writing is not very well researched and your numbers make no sense .

    At the announcement, the share went down because someone reported that the FDA did NOT

    approve Afrezza and that must have been a setup to drive the price down to steal share with a stop- loose orders and nervous investors.

    What it is important is the it is Approved by the FDA and the (IT WILL BE USED BY MILLIONS OF PEOPLE ) rest of what the losers and the shorts say is GARBAGE

  • Report this Comment On June 28, 2014, at 6:50 PM, surfish wrote:

    Topdoginvesting1, nice you felt like doing the numbers to the polemic.

    Actually, made me smile!

  • Report this Comment On June 28, 2014, at 8:27 PM, WordDog wrote:

    All the label warnings were expected. The price drop almost certainly was the result of a bear raid, designed to blow out stops and help shorts cover. Price closed after hours at $11, just 10 cents shy of the day's high. Expect much higher Monday. Even after the covering Friday, short interest on this stock is still huge -- margin calls flying thick and fast.

  • Report this Comment On June 28, 2014, at 9:21 PM, TMFUltraLong wrote:

    bufnyfan1,

    "admit it this is an attempt to "short" this stock so you can cut your losses---is it not??"

    Per the disclosures above:

    "Sean Williams has no material interest in any companies mentioned in this article."

    &

    "The Motley Fool has no position in any of the stocks mentioned."

    Ergo, no vested interest for either me or TMF in MannKind... so I'm going to err with "Not" on this one.

    Sean

  • Report this Comment On June 28, 2014, at 9:42 PM, Jammnott wrote:

    During the run up to approval this site and the other one cut from the same burlap, ran stories that pushed investors away from MNKD. Other sites at the same time encouraged shorting. I thought this site was aimed at retail investors. Now an exit is needed. The streets are more silent when lying awake all weekend. Foolish indeed.

  • Report this Comment On June 29, 2014, at 8:41 AM, larryw101 wrote:

    Garbage journalism.

  • Report this Comment On June 29, 2014, at 10:02 AM, SHYT wrote:

    Whenever someone brings up issues with the "Label" they expose their lack of knowledge in the T1 and T2 diabetes market. The "Fool" who wrote this article doesnt even know what diabetes is. Several recently launched products with "label issues" are blockbusters. Novo Nordisks Victoza is a perfect example. $3 Billion in sales and its loaded with label warnings, its also an injectable. Mannkind stocks fell because the FDA didnt release its approval until late Friday afternoon and the shorts had a chance to get out.

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