MannKind Corporation (NASDAQ:56400P706) focuses on the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes.

MannKind has received a lot of attention recently with its diabetes drug, Afrezza, facing an impending PDUFA decision on July 15, 2014. Afrezza is an ultra-rapid acting pulmonary insulin that closely approximates the normal early insulin release seen in healthy patients. In phase 3 studies for the treatment of diabetes, Afrezza showed similar efficacy to standard care, thereby validating the significant potential of the product to replace available therapeutics, should it receive regulatory approval next month. 

Afrezza approval may already be priced in
A primary concern of investors is whether or not approval is priced in to the stock. Shares are up nearly 90% since the overwhelmingly supportive Advisory Committee vote on April 1, 2014.

Given the positive sentiment exhibited by management and the subsequent 90% increase in share price leading up to the PDUFA meeting, I suspect that approval for Afrezza would not be a surprise to the market; however, rejection or further delay probably would be.

Regulatory approval doesn't always translate to success
While a positive regulatory approval would represent a giant leap for MannKind, considerable risks do remain. On the one hand, it appears that the immediate concern of shareholders is labeling, which we'll know more about after the FDA hopefully approves Afrezza. If the FDA implements such restrictions, the market for Afrezza would be limited, thus reducing revenue potential and its overall consumer uptake.

On the other hand, management must determine how to commercialize Afrezza, whether that be via partnership, "lone-wolf" or a takeover. Although it remains uncertain, Investors were painted a better picture by management with respect to this key decision during the Goldman Sachs Healthcare Conference on June 12. Specifically, COO Edstrom stated that MannKind intends to enter a partnership for Afrezza and is actively communicating with other companies that operate within the diabetic market. 

Of course, Mannkind's potential partner will wait to see what the label approved by the FDA entails. I presume that the less restrictions placed on the label, the more favorable the terms of a partnership are likely to be. But what if the label for Afrezza is unattractive? Will MannKind still decide to partner under less favorable terms? Unfortunately, these questions remain unanswered, and they also highlight the additional risk of further shareholder dilution. 

If a partner is not acquired, what next?
If a partnership for Afrezza is not formed for whatever reason, the lone-wolf option to commercialization must be examined. MannKind reported a cash position of $35.8 million at the end of Q1 2014, compared to $70.8 million in Q4 2013, with $134 million in operating cash burned over the trailing-12 months. With relatively little money left, in order to market Afrezza alone, MannKind would probably need to raise additional capital before Q3 2014. This would likely be achieved through debt or equity raises, which would dilute current shareholders.

My Foolish final thoughts
Undoubtedly, regulatory approval is one of many hurdles that must be cleared in order for MannKind to transform into a major player in the diabetic market. Thus, it may be best to remain on the sidelines until after the PDUFA decision, as I suspect that the road to profitability could be a whole lot bumpier than the 90% run-up since April appears to suggest.

Trevor Lowenthal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.