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Why MannKind Corporation Stock Broke Down in April

By George Budwell - May 8, 2018 at 7:28AM

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Investors didn't take kindly to MannKind's latest secondary offering last month.

What happened

MannKind Corporation (NASDAQ: MNKD), the maker of the inhaled insulin product Afrezza, had yet another bad month in April. Specifically, the biotech's shares lost a quarter of their value last month, according to S&P Global Market Intelligence

What sent MannKind's stock spiraling downwards? On April 6, the biotech announced another secondary offering of common stock and warrants in an effort to raise a mere $28 million. The company has now tapped the public markets for funds three times in just the past seven months, according to MannKind's SEC filings. 

A person in a lab coat holding a sign with the word "diabetes" written on it.

Image source: Getty Images.

So what

Raising capital via a public offering when your share price is hovering around $2 is never a good sign. Long story short, MannKind is running out of ways to avoid either another reverse split or an outright bankruptcy filing due to Afrezza's exceedingly poor sales. As things stand now, the company has maybe two more quarters of cash on hand, implying that even more dilution is on the way. 

Now what

MannKind is set to report its first-quarter results this Wednesday, May 9, where the Street is expecting Afrezza's sales to come in at $4.24 million for the three-month period. Although that consensus estimate would represent a stellar 40% jump in sales compared to the same period a year ago, it's simply not enough to change the company's downward trajectory.

In short, Afrezza's sales need to make a quantum leap in the next two quarters or MannKind will have to take additional value-destroying measures to keep its doors open. Given this stock's sky-high risk profile, investors may want to search elsewhere for more compelling growth opportunities. 


George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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