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Is MannKind Corporation Stock Still a Strong Buy?

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

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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.

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