Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of MannKind Corp. (NASDAQ:MNKD) fell by more than 14% on heavy volume this morning following a downgrade by Goldman Sachs. Specifically, Goldman's analyst Jay Olson cut the firm's price target in half to a mere $3 a share, or 52% lower than where shares finished trading yesterday.
The downgrade reportedly stems from two core issues: prescriptions for MannKind's newly launched inhaled insulin product Afrezza are falling well below the expected pace, and pricing pressure from payers for diabetes products in general might lead to a marked price reduction -- perhaps as much as 40% from current levels.
In its research note, Goldman also lowered its long-term commercial outlook for Afrezza, projecting 2025 sales of $1 billion, down from its former estimate of $2 billion.
So what: MannKind needs Afrezza to get off to a strong start because the market has placed a huge premium on its shares heading into and following the drug's approval. Prior to today's drop, for instance, the company's market cap stood at close to $2.7 billion. A slow launch and/or a price reduction by MannKind's marketing partner Sanofi could put significant downward pressure on this stock going forward.
Now what: The good news is that Afrezza has only been on the market for roughly a month at this point, meaning that it's far too early to panic, especially if you're on an optimist. When MannKind reports its first-quarter earnings sometime in the middle of May, we should have almost a full-quarter of script and revenue data to consider -- giving us a much better feel for how the launch is going and whether any steep discounts might be coming down the pike.
George Budwell has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. 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.