Image source: Centers for Disease Control and Prevention. 

Drug developer MannKind (NASDAQ:56400P706) has had a rough year, with its shares down 62% on a trailing 12-month basis. Unfortunately for the company, things didn't get any better on Monday night when it announced its third-quarter earnings results.

MannKind's Q3, by the numbers
For the quarter, MannKind announced that its Food and Drug Administration-approved rapid-acting inhaled insulin therapy known as Afrezza saw $4.1 million in product shipped. However, as we witnessed from Sanofi (NYSE:SNY) -- MannKind's licensing partner for Afrezza, which reported its quarterly results at the end of October -- these shipments only translate into about $2.2 million in sales, flat from the sequential second quarter. For the full-year, sales of Afrezza have totaled around $6 million.

The silver lining here for MannKind is that the absence of phase 3 studies helped narrow its quarterly loss by pushing expenses lower. Total operating expenses plunged 32% to $26 million, aided by a 67% decline in research and development expenses, a 40% reduction in general and administrative fees, and a drop in non-cash stock compensation.

Altogether, MannKind generated a $31.9 million loss, or $0.08 per share, compared to the $36.5 million loss, or $0.09 per share, that it lost in Q3 2014. Comparatively, Wall Street was looking for a slightly narrower loss of just $0.07 per share.

Image source: Sanofi.

The big concern, of course, has been MannKind's precarious cash position. Its loss-sharing arrangement with Sanofi tacked on another $14.7 million during the quarter to its loan facility, meaning MannKind is now borrowing $43.7 million from an affiliate of Sanofi with the potential for profits still nowhere in sight.

MannKind announced that it ended the quarter with $32.9 million in cash and cash equivalents, down $76.3 million from the sequential second quarter, primarily as a result of retiring debt during the third quarter. The company pointed out in its release that $30.1 million can still be borrowed from the Mann Group, and $37.5 million in stock is still available to be sold in at-the-market offerings.

Throwing a Hail Mary
Despite receiving $150 million in upfront cash from Sanofi when licensing Afrezza, as well as $175 million to cover Sanofi's portion of shared expenses, MannKind's cash situation is looking dire. In football, when things look dire the quarterback typically throws up a desperation Hail Mary pass and crosses his fingers that a member of his team catches it. MannKind issued up its own version of a Hail Mary pass last night.

According to an 8-K filing with the Securities and Exchange Commission, MannKind intends to list its stock on the Tel Aviv Stock Exchange. MannKind plans to sell up to 50 million shares, which at current market prices could raise in the neighborhood of $115 million to $120 million. This money, combined with its remaining at-the-market offering potential in the U.S. and ability to draw down on its Mann Group loan, should provide MannKind enough capital to survive into 2017.

Put simply, this is an odd move. I'm not saying it's not smart, because MannKind was clearly not finding a receptive market in the U.S. to get its hands on additional capital. However, as a whole, this deal reeks of desperation on the part of MannKind. Listing in a foreign market is not a common practice, and it implies that MannKind is down to what could be its last few options to raise capital. 

Image source: MannKind. 

MannKind's even bigger worry
The truly scary thing for MannKind and investors is that its cash concerns aren't its only worry. Afrezza is selling very poorly, even after Sanofi boosted its marketing efforts and MannKind pledged to educate physicians about their new treatment option.

As previously mentioned, Afrezza, once touted as a therapy capable of $2 billion in annual sales, has generated roughly $6 million in sales this year. MannKind is only eligible for tiered royalties of between 31.5% and 37.5% of total revenue generated from the sale of Afrezza, and it'll only see additional milestone payments if sales of Afrezza pick up. Considering that revenue was flat quarter over the quarter, a quick uptick in sales doesn't seem likely.

Image source: Flickr user Bryan Rosengrant.

Even more worrisome, Sanofi may just choose to wave the white flag on the deal altogether. In MannKind's 10-Q filing with the SEC in August 2014, page 41 states "Sanofi may terminate the Sanofi License Agreement at any time on or after January 1, 2016 (a) upon 90 days' written notice if Sanofi determines in good faith that the commercialization of AFREZZA is no longer economically viable in the United States, and (b) without cause upon six months' written notice in its entirety or on a country-by-country basis other than with respect to the United States." A case can be made that Afrezza isn't looking "economically viable" at the moment.

If Sanofi walked away, it would be giving up on the $150 million in upfront cash, $175 million in collaborative expenses, and whatever marketing expenses it already spent trying to get Afrezza off the ground. However, it may wind up being the right move for Sanofi, which has a vast portfolio of internal and licensed therapies that it's trying to market. If Sanofi chooses to walk away from MannKind next year, it could saddle MannKind with the cost of manufacturing and marketing the product on its own. If that happens, MannKind's cash burn could again accelerate.

MannKind looks to be in a no-win situation at the moment, and it's quite possible that its stock could continue to suffer. With its long-term outlook still murky at best, your best bet is probably going to be avoiding MannKind stock altogether until we see definitive signs of sales growth and meaningful loss reductions take place.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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