Please ensure Javascript is enabled for purposes of website accessibility

Is MannKind Corporation Stock Still a Strong Buy?

By George Budwell - Oct 5, 2017 at 5:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

MannKind's stock has more than doubled since the start of October, but can it maintain this blistering momentum much longer?

What happened

MannKind Corp. (NASDAQ: MNKD), the maker of the inhaled insulin product Afrezza, saw its shares rise by another 40% today. As a result, the biotech's share price has now gained an impressive 126% since the start of October -- thanks to the U.S. Food and Drug Administration approving a favorable label change for Afrezza, as well as a successful common-stock-for-warrant swap that improved the company's capital structure.

Tiny rocket taking off from a person's open hand

Image source: Getty Images.

So what

Because of Afrezza's anemic sales since its launch, MannKind seemed to be on the brink of collapse. The company, after all, had essentially exhausted the majority of its financial resources bringing Afrezza to market in the first place, and therefore needed the drug to get off to a quick start. Based on MannKind's recent momentum, however, investors now appear to think that these recent label changes will finally unlock Afrezza's megablockbuster potential.

Now what

While a less restrictive label for Afrezza is certainly good news for MannKind and its shareholders, the fact remains that this beaten-down biotech needs to recapitalize in a significant way. MannKind, after all, exited the most recent quarter with less than $44 million remaining in cash. That's nowhere near enough to ramp up Afrezza's commercial launch, at least in a way that could spark the leap in sales needed to make this company viable on a long-term basis.

So, even though MannKind does have some funds remaining through its current at-the-market (ATM) facility, investors should probably brace themselves for a sizable secondary offering soon -- especially after this rapid rise in the company's share price. In other words, MannKind's rocket-like trajectory may start to taper off, once the company does the inevitable by raising capital via a public offering.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.