MannKind only has one Food and Drug Administration (FDA)-approved drug to its name, Afrezza, an inhalable insulin. Afrezza was launched in 2015 and sales have been far shy of optimistic pre-launch forecasts. As a result, investors have been fearing a cash crunch that could send the company into bankruptcy.
However, insolvency worries abated this summer when United Therapeutics agreed to license a product in MannKind's pipeline that could one day compete with it. Specifically, United Therapeutics agreed to pay $45 million in upfront cash and potential milestones for rights to an inhaled version of its top-selling treprostinil, which MannKind's developing. As part of the deal, United Therapeutics also gave MannKind an additional $10 million for an undisclosed research project.
The cash infusion is critical to MannKind's financial situation, so investors are cheering news today that the agreement closed without a hitch.
The inhaled version of treprostinil that's being developed by MannKind uses the same Technosphere technology that's behind MannKind's Afrezza. There's no telling if MannKind's formulation will be successful in late-stage trials, but apparently, United Therapeutics believed the risk was significant enough to lock up rights. I can't say I blame them. Treprostinil is used to treat pulmonary arterial hypertension, or PAH, and that's a multibillion-dollar market.
The extra cash should come in handy for MannKind, but it's not out of the woods yet. It's still burning through cash because operating expenses are outstripping its $3.8 million in quarterly Afrezza revenue, and that's likely to continue. Because Afrezza will remain MannKind's only marketed drug for awhile and spending is likely to continue to be a drain on its balance sheet, I think it's best to stay on the sidelines with this stock.