Why MannKind, Rackspace Hosting, and Dollar General Tumbled Today

Friday brought a positive end of the week for the broader stock market, as investors continued to bet that the U.S. economy will be able to grow fast enough to ward off a long-awaited correction in major market benchmarks -- at least for a while longer. Yet, many market participants remain uncertain about the longer-term prospects for the market as a whole, and signs of weakness from particular stocks kept gains quite limited. Among the worst performers in the market were MannKind (NASDAQ: MNKD  ) , Rackspace Hosting (NYSE: RAX  ) , and Dollar General (NYSE: DG  ) , each of which posted large declines Friday.


Source: MannKind.

MannKind fell 5.5% after getting mixed news from the Food and Drug Administration's decision on the company's key Afrezza inhaled-insulin product. The FDA approved Afrezza, and most investors thought that would send shares soaring. Yet, as part of its decision, the FDA required MannKind to include warnings on the product's box. The stock plunged as much as 22% after the announcement near the end of the trading day, but in the first hour of after-hours trading, MannKind shares regained about half of their lost ground from the regular session, and by the close of the after-hours session at 8 p.m. EDT, the stock had reversed all its losses and jumped 10% from its 4 p.m. closing level.

What's uncertain at this point is the impact that the warnings of potential problems for those with asthma or chronic obstructive pulmonary disease might have on doctors in their choice of whether to recommend Afrezza to patients. Nevertheless, the larger question is whether MannKind will be able to develop a product that can act as a long-term alternative to injected insulin, and the jury will be out on that front for quite a while longer.

Source: Rackspace Hosting.

Rackspace Hosting dropped 7% after market commentators noted that the cloud-computing company hasn't gotten the positive response it had hoped to see after essentially putting itself up for sale last month. The stock jumped when Rackspace first said it was seeking a buyer, and had several bidders interested. But as more time goes by without an actual offer on the table, Rackspace shareholders are getting more nervous. Given the challenges Rackspace faces in fighting larger competitors selling commoditized cloud services, it's not surprising to see investors' patience wearing thin.

Dollar General declined 7%, as well, on news that company CEO Richard Dreiling said that he would retire within the next year, or when the dollar-store retailer finds someone to replace him. The move puts a big question mark on the prospects for a potential merger with Family Dollar (NYSE: FDO  ) , with Carl Icahn having suggested that Family Dollar pursue its larger rival in the hopes of drawing takeover interest. With Dollar General's massive expansion recently, investors have to worry that a change in leadership at this critical time could leave the retailer unprepared for changing conditions in the industry. The move shows just how important M&A prospects have become to valuations generally.

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Read/Post Comments (10) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On June 27, 2014, at 7:25 PM, ddbikessamsara wrote:

    Once again The Fool's ineptitude is on display. Mannkind is well UP in after hours - marking a 5% GAIN .

    "Nevertheless, the larger question is whether MannKind will be able to develop a product that can act as a long-term alternative to injected insulin".

    Good lord, what do you think just got approved? The best alternative to injected insulin ever developed is now going to market as soon as they can crank up the lines and get it out the door.

    The TRUE larger question is how long can the inferior and much more complicated insulins now in use compete against the superior pharmacokinetics and ease of use that Afrezza offers?

    This article, like the vast majority of anything The Tool puts out, is just embarrassingly, laughably, wrong. For the life of me I can't figure how this stuff makes clickable "headline" news.

  • Report this Comment On June 27, 2014, at 8:38 PM, TMFGalagan wrote:

    @ddbikessamsara - Original article was prepared an hour into after-hours. I updated the numbers.

    As for the other question, the FDA itself notes that Afrezza can't take the place of long-acting insulin.

    http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/uc...

    So I think that's the true larger question. You're free to your opinion, of course, but the FDA disagrees with you.

    best,

    dan (TMF Galagan)

  • Report this Comment On June 27, 2014, at 8:42 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. Note that the price is back up to about $11 in after-hours trading.

  • Report this Comment On June 27, 2014, at 9:04 PM, ddbikessamsara wrote:

    Your "true larger question" doesn't even make sense because Afrezza was never and will never be intended as a replacement for long term basal insulin. It was never submitted as a replacement for that in the first place. It's like saying Afrezza will not cure foot fungus when it was never designed for that to begin with.

    Afrezza is an ultra-rapid acting prandial/mealtime insulin which can and does replace the required injectable insulins which until now have been the only mealtime offering. SO Afrezza can replace at least 3 prandial injections per day on a long term basis for someone who previously had to stick themselves before each meal. Your "larger question" is irrelevant and was never in the equation to begin with.

    Yet the Motley Fool gets to print this poorly researched information like it is real news - THAT is what I object to and why I rarely read the Fool.

    The FDA would agree with ME since Afrezza was never submitted in the first place as a substitute for injected basal insulin.

    But I don't hold myself out to be a pillar of financial "news" and my comments aren't picked up and published by major wire services.

  • Report this Comment On June 27, 2014, at 10:27 PM, larryw101 wrote:

    Another foolish article by the fools at Motley.

    This author has no absolutely no idea of what he's talking about regarding Mankind.

    Motley Fool = Garbage Journalism

  • Report this Comment On June 27, 2014, at 10:42 PM, Topdoginvesting1 wrote:

    MNKD fell and quickly gained traction after investors realized the Label will only affect a Very small number of Diabetics.. MNKD fell 5.5% according to the writer making it one of the worst performers?? Really?? IBCP down 6.09%.SQBG down 6.04% ROCK down 7.89% TRIV down 5.84% CLFD down 7.02% BBW down 6.56% TWOU down 6.01% This is just a few that were down more than MNKD. When a huge percentage are short MNKD, articles are going to Flow to try and get the stock to tank in the coming days. After the Approval Committee gave a thumbs up to MNKD'S Diabetic inhaler, one has to wonder what would make a person short MNKD. Was it because Pfizer had failed in their attempt to get an Inhaler approved? Was it because MNKD had been shot down before? Was it a little bit of both or something else? This is a Great thing for Diabetic's. The next few days, weeks and months are going to be very interesting. There will be a partner or maybe even a buyout, either way I am glad of two things. One is I am Glad I am not short MNKD, the other being I am glad I am long MNKD. Merry Christmas to all longs, and congratulations to MNKD and their staff for bringing a New treatment to the Millions of Diabetic's who will be so thankful for the inhaler.

  • Report this Comment On June 27, 2014, at 11:09 PM, etbob1 wrote:

    Another hit piece soon to join the hall of shame!

  • Report this Comment On June 27, 2014, at 11:42 PM, jpokergman wrote:

    The Fool is run by a bunch of Idiots instead of Fools.

    The FDA, decides to "JAM" the single largest disease on the Bloody planet with an approval, with exactly 29 minutes to digest the news.

    This with a disruptive new technology, and 33% of the float is short....????

    What kind of nitwits do you have on staff?

    This just goes to show, that you get what you pay for...!

    Why aren't you hammering the FDA..?

    Thanks for absolutely NOTHING Motley noshow Fools...!

  • Report this Comment On June 28, 2014, at 8:49 AM, surfish wrote:

    'Fool' is the right term, indeed!

    I'll listen to Alfred Mann!

  • Report this Comment On June 29, 2014, at 3:11 PM, fuzzface52 wrote:

    Watch out for your disappearing comments when commenting on the Foolish Articles put out by the Fool. I put up a contrarian comment to this article without foul words or accusations and they removed it. The Fool and all of its journalist are dead set against MNKD and they show it with every negative article they write. No wonder know one actually considers them for investing advice. They should remove the word Motley from their title and just call them selves FOOLS! Other good synonyms for them would be idiot, ass, blockhead, dunce, moron, ignoramus, imbecile, simpleton, nitwit, dummy, jerk twit, lamer, schmuck and schlep to name a few. I wonder how long it will take them to remove this comment since they love censorship against what they believe. I believe they have a little communistic approach to their journalism and editorial staff. I think they would be better suited to be reporting in Moscow or Beijing.

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