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Why MannKind Corporation Dipped 4.8% in November

By Brian Feroldi - Dec 5, 2017 at 9:34AM

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Disappointing quarterly results and downbeat guidance caused traders to sell.

What happened

In response to the company reporting worse-than-expected third-quarter results, shares of MannKind (NASDAQ: MNKD), a commercial-stage biotech focused on inhaled insulin, fell about 5% in November, according to data from S&P Global Market Intelligence

So what

Here's a quick review of the headline numbers from the quarter:

  • Revenue was $2 million. That was well shy of the $3.9 million that Wall Street was expecting.
  • Net loss was $32.9 million, or $0.31 per share. That was much higher than the $0.20 loss that analysts were projecting.
  • Cash burn during the quarter was $23.3 million.
  • MannKind's bank account had $20 million in it as of the end of September. However, the company raised more than $57.7 million from a common stock offering in October. 
  • CEO Michael Castagna forecasted that sales in the second half of the year would come in at the lower end of its previously communicated guidance range.

Given the bummer news, it isn't surprising to see that shares took a step back in November.

A businessman in front of a computer thinking hard

Image source: Getty Images.

Now what

MannKind has come a long way since CEO Castagna took over the corner office in May. The balance sheet is in much better shape, Afreeza won a label expansion claim, script volume is growing, and the company has started to wade into international markets. That's a lot of positive developments in a short period of time.

Of course, it won't exactly be smooth sailing for MannKind's from here. Afreeza's sales are still nowhere close to where they need to be and the company's cash burn rate is still quite high. Ramping up sales is going to consume a lot of cash, so there's no doubt that yet another capital raise will be in the cards at some point. That means that current shareholders probably need to be diluted heavily yet again.

Overall, MannKind is in a much better place today than it was six months ago, but this is still a speculative biotech in turnaround mode. That's why I think that the smart move is to root for this company's success from the safety of the sidelines.

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