What happened

Shares of MannKind Corporation (NASDAQ: MNKD) are soaring today, up 43% as of 9:35 a.m. EDT, following news that the company has struck up a collaborative partnership with United Therapeutics (UTHR -0.98%) that features a much-needed up-front payment. 

So what

Here are the must-know details of the agreement:

  • United Therapeutics and MannKind Corporation have signed an exclusive global licensing and collaboration agreement to develop a dry powder formulation of treprostinil as a hopeful treatment for pulmonary arterial hypertension.
  • United is assuming responsibility for all development, regulatory, and commercial activities. MannKind's role will be to manufacture clinical supplies and initial commercial supplies of the product. Longer-term, the manufacturing responsibilities will be handled by United Therapeutics. 
  • MannKind will receive an up-front payment of $45 million and the ability to earn up to $50 million more in milestone payments. The company is also entitled to receive low-double-digit royalties on any product sales. 
  • MannKind has also provided United Therapeutics with an option to expand its license to include other drugs that could treat pulmonary hypertension. If United exercises its option, then MannKind could receive up to $40 million in additional milestone payments and low-double-digit royalties on any sales.
  • The two companies have also signed a research deal that provides MannKind with an additional $10 million up-front payment to explore new products outside of the scope of this agreement. 
Businessmen looking over a contract

Image source: Getty Images.

MannKind CEO Michael Castagna was enthusiastic about this deal: "We are pleased with this new opportunity to demonstrate the value of our drug and device combination platform for delivering therapeutic products. We believe this collaboration will have the potential to significantly improve the lives of people living with pulmonary arterial hypertension."

Given the immediate non-dilutive cash infusion and long-term optionality of this deal, it is easy to understand why shares are soaring today.

Now what

In total, this deal will immediately add $55 million to MannKind's bank account, which is great news. That buys the company some much-needed time to continue ramping sales of Afrezza. 

However, that additional $55 million might not last too long because the company's net loss in the first six months of 2018 was just over $53 million. In essence, MannKind just bought itself about six months of runway. That's certainly a positive development, but it isn't enough to permanently fix this company's troubled financial situation. 

Overall, investors have every right to cheer today's announcement, but success in the medium and long term still hinges on the MannKind's ability to turn Afrezza into a highly profitable commercial product. Since the company is nowhere close to claiming victory on that front, I continue to believe that caution is warranted.