Can This Stock Go Higher?

Is MannKind (Nasdaq: MNKD  ) headed higher, or lower?

That's the question we ask when we evaluate insider buying and selling. We ask because how executives spend their paychecks is often a reflection of what they think of their companies' prospects

Here's how MannKind founder Alfred Mann and his team have spent their money over the past year:

Insider Rating

Moderately bullish
Net buying derived entirely from one huge purchase. Only one sale at prices lower than current.

Business Description

Developer of a unique inhaled insulin treatment that's yet to be approved by The Food and Drug Administration.

Recent Price

$6.87

CAPS Stars (Out of 5)

**

Percentage of Shares Owned by Insiders

43.49%

Net Buying (Selling)*

$8.07 million

Last Buyer (% Increase)

Alfred Mann, Founder, Chairman, and CEO
1,000,000 shares at $8.11 apiece on Aug. 10
(Purchase bolstered direct holdings by 2%.)

Last Seller (% Decrease)

Diane Palumbo, VP, Human Resources
5,000 shares at $5.70 apiece on Nov. 6
(Sale represented 4% of direct holdings.)

Competitors

Pfizer (NYSE: PFE  )
Eli Lilly (NYSE: LLY  )
Novo Nordisk (NYSE: NVO  )

CAPS Members Bullish on MNKD Also Bullish on

Johnson & Johnson (NYSE: JNJ  )

CAPS Members Bearish on MNKD Also Bearish on

Overstock.com (Nasdaq: OSTK  )
Vonage (NYSE: VG  )

Recent Foolish Coverage of MNKD

5 Stocks in a Tailspin
3 Stocks Hitting High Notes
MannKind Needs More Leaps

Sources Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Nov. 17.)
*Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: Moderately bullish
MannKind is one of a kind among story stocks.

Founder Al Mann, now 83, is a highly successful entrepreneur that Forbes ranks 522nd on its list of the world's richest, with a $1.4 billion fortune. He'll move higher if MannKind pays off; Mann owns more than 40% of the business as of this writing.

Yet success is anything but assured. MannKind is the last company standing in what was once an emerging market for inhaled insulin products used to treat diabetes. What went wrong? In a word: Exubera. This onetime competitor to MannKind's Afresa was permanently tainted when a safety analysis showed a higher incidence of lung cancer in Exubera-treated patients.

Today, Afresa is still at least two months away from FDA approval, and MannKind is without a marketing partner. The good news: The company's third-quarter loss was smaller than analysts expected, thanks in part to careful expense management.

And insiders? How are they spending? Al Mann bet big in August, at $8.11 a share. I like that buy, but I'm also mindful that MannKind is an all-in bet for him. He'll be first in line to supply capital if the company needs it.

Meanwhile, the selling pattern here is ... confusing. Sure, VP of Human Resources Diane Palumbo sold a portion of her holdings at lower prices than MannKind trades for today. That's not necessarily a bearish indicator; she still owns more than 130,000 shares.

What's more, Chief Scientific Officer Peter Richardson in August sold only a sliver of what he holds, and at $7.79 apiece -- a 13% premium to yesterday's close. I'd expect more lowball selling if insiders genuinely feared that this stock story would end badly.

But that's also just my take. Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate MannKind.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get more of the inside scoop with related Foolishness:

Johnson & Johnson is an Income Investor recommendation. Novo Nordisk is a Global Gains pick. Pfizer is an Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


Read/Post Comments (17) | Recommend This Article (28)

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 November 18, 2009, at 2:46 PM, norman1066 wrote:

    Tim,

    thanks for looking at this story stock. Seems to me that Al Mann is a true believer in Afresa and has put a sizeable portion of his wealth on the line. Of course if he loses 10% of his net worth the 90% he has remaining still looks pretty good.

    Thanks again

    Tim

  • Report this Comment On November 18, 2009, at 2:53 PM, tin123 wrote:

    heard that Vonage is getting acquired by google? right?

  • Report this Comment On November 18, 2009, at 3:15 PM, orlon6 wrote:

    Potential blockbuster stock. New therapy for Type 2 and 1 diabetics. Much different from Exubera and anyone who says differently just has not done an adequate due diligence. Expect this stock to be in the 20's by the end of Jaanuary.

  • Report this Comment On November 18, 2009, at 3:43 PM, goyocafe wrote:

    Tim?

    I couldn't sit idly by and see a few points in your article go unchallenged.

    1. The cancer statistics that have been thrown around with little thought over the past 18 months are simply misleading. The number of cancer cases in the Exubera arm of the study was less than that of the average for the general public of ex-smokers. The fact that there were fewer cases in the non-Exubera arm raises more questions about these statistics than it answers. Far be it to conclude that these ex-smokers' time was up and the years of smoking finally caught up with them. It's pretty easy to blame the new kid on the block. But I suppose it got published once that way, so it is fair game to continue to bellow the same misguided information.

    2. The PDUFA date for Afresa is Jan 16, 2010, with the expectation that notice may go out on the 15th since the 16th is a Saturday. That is exactly 8 weeks and 2 days from now. I don't know how that equates to several months.

    3. The insider "selling" you refer to can be easily explained and substantiated via SEC filings. These sales were to offset taxes due on specific options that vested for these individuals.

    Hope the additional input helps shed some light on this very "light" article.

  • Report this Comment On November 18, 2009, at 4:27 PM, sscutchen wrote:

    orlon6 is 100% correct.

    Suggesting that because Exubera and Afresa are both inhaled insulins and so the problems with Exubera are also problems with Afresa is like saying Baycor is a pill-based statin so all pill-based statins (Lipitor, Crestor, Zocor...) cause significantly increased levels of fatal rhabdomyolysis.

    Even the insulin itself contained in Afresa is significantly different than the insulin contained in Exubera.

    The ONLY thing they have in common is that they both are inhaled. NOTHING about the drugs, their carriers, their delivery systems or their therapeutic effects are similar at all.

    Please do even just the slightest bit of due diligence before painting with such a large brush and perpetuating this FUD.

  • Report this Comment On November 18, 2009, at 4:51 PM, jdorsey41 wrote:

    I'm personally kind of shocked that MNKD has failed to be selected as a Rule Breakers pick. IMO it has far greater potential than many of the existing biotechnology picks. From what I have seen the potential upside is huge!

  • Report this Comment On November 18, 2009, at 5:59 PM, TMFMileHigh wrote:

    'Afternoon all,

    Three clarifying points, if I may.

    First, we modified the phrasing in the story above from "several months" to "two months." We agree that precision is important -- thank you for the comments and email.

    Second, for as stark as the differences are between Exubera and Afresa, I'm not aware that the FDA has ruled out lung function tests. That's the "long shadow" of Exubera that this Reuters report refers to:

    http://www.reuters.com/article/marketsNews/idUSN064383362009...

    Third and finally, while there were some sales to cover taxes, goyocafe, there were also open market sales that had nothing to do with Uncle Sam. Links below.

    Palumbo:

    http://www.sec.gov/Archives/edgar/data/899460/00012091910905...

    Richardson:

    http://www.sec.gov/Archives/edgar/data/899460/00012091910904...

    Thanks for reading and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On November 18, 2009, at 5:59 PM, trademissuh wrote:

    You forgot to mention a direct competitor called Generex Biotech (GNBT). Although their drug, Oral-lyn is not inhaled, it is an insulin sprayed in the mouth and absorbed by the buccal mucosa of the cheeks. By not being inhaled, it will not have the possible side affects of a drug absorbed in the lungs.

    It is in the final phase III study and hopefully will be submitted to the FDA next year. It is already available for sale in other countries. As a diabetic myself, I would much rather avoid inhaling insulin but I would also like to avoid injections, therefore, Oral-lyn makes perfect sense.

  • Report this Comment On November 18, 2009, at 6:28 PM, RoadShow wrote:

    One of the inside sellers was doing so as part of a divorce settlement. It is notated in the sec filing.

    :)

  • Report this Comment On November 18, 2009, at 6:33 PM, RoadShow wrote:

    Ora Lyn needs to be administered before and after the meal. The overseas phase trials are sparce. No telling if the FDA will accept thier application.

  • Report this Comment On November 18, 2009, at 6:49 PM, eeerrriiiccc wrote:

    Unfortunately there are not many people around who have any first hand experience with Exubera. I am a type 1 diabetic who has been using Exubera since it was first released - when it was pulled from the market, I bought as much as I could so that I could keep using it, and I am still using it today. Exubera has completely changed my life for the better - there is no comparison in the ease of manageability with inhaled insulin compared to injected insulin. Inhaled insulin enables a completely different approach when it comes to meal planning and flexibility. I have regular pulmonary function tests every 3 months and there has been no change - I also train hard on a bicycle nearly every day so if my lungs were struggling, I would know. Why Exubera failed is a complete mystery to me - as was mentioned by someone else, the cancer statistics are a non-issue. The story about it being cumbersome is also complete nonsense, remember we are comparing this to carrying temperature sensitive glass vials and syringes! I have traveled all around the world with Exubera and it is quite a lot easier than traveling with vials and syringes (I have been kicked out of restaurants and gone through all kinds of hysterics at airport security with the syringes...). If you are looking for a valid opinion about inhaled insulin - be wary of the 'experts' who cast their doubts. Find someone who is diabetic and has experience with it. As far as my experience goes, inhaled insulin is the next best thing to finding a cure - it is a real shame that it is not currently available to the millions of people who could benefit. I will be first in line when Afresa becomes available!

  • Report this Comment On November 18, 2009, at 6:51 PM, c335358 wrote:

    MotleyFool Please explain;

    While you are saying that Exubra had a higher incidence you are failing to say the rest of the story about those specific cases. For example;

    "The drugmaker noted that all of the lung cancer victims had a history of smoking cigarettes, adding that there were too few cases to conclude that Exubera had triggered the disease"

    "In a statement, New York-based Pfizer /quotes/comstock/13*!pfe/quotes/nls/pfe (PFE 18.17, -0.02, -0.11%) said that a review of patient data on the product showed that out of 4,740 diabetics who took Exubera during clinical trials, six developed lung cancer. This compared with only a single case out of 4,292 who did not take the product. "

    Even the guy that was not on thier drug developed a cancer and even so it was not the FDA the pulled the drug as it was inconclusive that Exubera caused the cancer. Would that be correct? More obvoius was that the product was as large as a tennis can, expensive, and the insulin was not really that differant or any better from existing therapies of the olden days other than being inhaled right? Now Afresa is completely different from Exubera except that it is inhaled.. can you admit that? For example;

    Vasiline and Greese are applied the same way but are totally different

  • Report this Comment On November 18, 2009, at 6:54 PM, XMFHoopz wrote:

    Alfred Mann does indeed have an amazing record as a founder and leader of numerous innovative companies. Among them, MiniMed was eventually acquired by Medtronic; Pacesetter was acquired by Siemens and is now part of St Jude Medical; and Spectrolab and Heliotek were both bought by Textron and are now part of Boeing.

    If Aresa is approved and performs as advertised, it should be a blockbuster and will provide benefits over existing insulain products.

    MannKind is certainly risky, but I'm a believer and shareholder.

    Brian (TMFHoopz)

  • Report this Comment On November 18, 2009, at 7:36 PM, goyocafe wrote:

    Tim,

    Why do you put more value in an analyst poll than you do the actual data reported by MNKD and submitted to the FDA? Multi-year safety studies have shown no health risks. I will take that to the bank over another analyst's outlook on lung testing. Even the medical community is now saying that diabetics as a class encounter greater declines in lung function by merely having the disease. It is being suggested now that Afresa may actually prevent the progression of the disease, effectively preventing the effects the disease has on lung function.

    One more point. If you had to look that hard to find a couple of measly sellers (rationalized in whatever terms you want to define them) it would seem this stock should earn a great deal more enthusiasm on the part of TMF. When the rubber hits the road on this one, there won't be anyone on the sidelines. They'll either be at the finish line or going home losers. If you really want to score, take a real stand. VERY BULLISH, or SELL NOW (Or better yet, SHORT NOW).

    Thanks for correcting the issues you concur with.

    Hopefully we'll see you at the finish line!!!

  • Report this Comment On November 19, 2009, at 6:33 AM, TMFMileHigh wrote:

    'Morning all,

    Thanks for the further comments. Allow me to briefly address one point so that it's clear how this series works:

    >>If you had to look that hard to find a couple of measly sellers (rationalized in whatever terms you want to define them) it would seem this stock should earn a great deal more enthusiasm on the part of TMF.

    Please understand, goyocafe, that (a) I didn't have to do much looking, and (b) these are *not* cherry-picked sales. We do these analyses the same way, every time. Over the past year, there has been one open market buy, and two open market sales. Everything else was either options-driven or under the purview of a 10b5-1 plan.

    So while I agree that it's always better to have a firm conviction when choosing stocks, it's dangerous to form convictions in the face of conflicting data. Here, looking solely at insider action, the data doesn't support anything more than a moderately bullish view.

    That's my $0.02. Thanks again for the comments.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 01, 2009, at 1:43 AM, eeerrriiiccc wrote:

    Oh goodness. c335358 (if that is your REAL name), this is exactly the kind of nonsense I was talking about.

    "More obvoius was that the product was as large as a tennis can, expensive, and the insulin was not really that differant or any better from existing therapies of the olden days other than being inhaled right?"

    I have an exhubera inhaler in front of me right now - I just took it out of my pocket - I assure you, it is smaller than a tennis ball can and indeed even smaller than the insulin vial/syringe kit that it replaced. Additionally it is not nearly as temperature sensitive, cannot shatter, and does not require a sharps container or STICKING A NEEDLE INTO MY BODY 6 TIMES A DAY (oddly, I didn't really mind the injections, but it takes its toll on the injection sites and really limits the number of small doses you are willing to take compared to exubera). There is no comparison between this and 'therapies of the olden days.' I don't really understand the need to separate afresa from exubera - in my type 1 diabetic mind, if afresa comes anywhere close to being as good as exubera, it will be right up there with news of a cure on my list of things to celebrate.

  • Report this Comment On December 17, 2009, at 1:09 PM, Fool wrote:

    SO in anyone's opinion, is this stock worth buying in this bullish market?

    LG

Add your comment.

DocumentId: 1046927, ~/Articles/ArticleHandler.aspx, 7/31/2014 3:44:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement