Source: MannKind.

This week, MannKind (NASDAQ:MNKD) reassured investors that its plans to list on Israel's stock exchange remain on track, but I can't help but think that this move to get its hands on much-needed cash is too much like shifting deck chairs around on the Titanic.

MannKind's financial situation has become so bad that I'm simply not sure if there's any move that this company can make to keep it afloat.

Bad news gets worse
The appeal of exchanging a daily insulin injection for a small inhaler would seem big, but sales of MannKind's rapid-acting Afrezza have remained a trickle since the drug's launch this past February.

Sanofi (NYSE:SNY), MannKind's marketing partner on Afrezza, sold about $2 million of Afrezza in the second quarter, which was double what was solid in the first quarter, but sales in the third quarter stalled from the second quarter and, frankly, an $8 million annualized run rate isn't going to be enough to offset the hundreds of millions of dollars (and growing) that MannKind owes or bring an end to the company's quarterly losses.

MannKind exited the third quarter with accounts payable of $33.6 million, short-term debt of $99 million, and $49.5 million in long-term debt -- and that was after the company forked over $64.3 million in cash it didn't want to spend to pay off maturing notes.

Overall, if you remove the $157 million in deferred payments from Sanofi that show up under current liabilities for accounting purposes, MannKind's total liabilities stand at nearly $300 million and that's a pretty daunting figure when you consider MannKind has just $33 million in cash on the books. 

Source: MannKind's Q3 10-Q SEC filing.

Also worrisome is the fact that despite its cost-cutting moves, including multiple rounds of layoffs, MannKind's expenses are still too high.

In the third quarter, MannKind's operating expenses totaled $26 million and while that was down from $38.3 million the year before, the company can't seem to right-size itself quickly enough.

A big flop?
Investors cheered when Sanofi signed on to sell Afrezza because Sanofi's diabetes sales team is arguably one of the most successful in the business and the deal provided MannKind with desperately needed cash.

Sanofi's sales team turned the company's long-lasting insulin, Lantus, into a mega-billion-dollar blockbuster and as part of its licensing agreement, Sanofi handed over $150 million in cash upfront.

Unfortunately, Sanofi's sales team hasn't gotten any significant traction rolling out Afrezza and that upfront money is now gone.

There are many reasons why Afrezza has been such a disappointment, beginning with the fact that the marketing agreement was made by Sanofi's former CEO Chris Viehbacher only months before being surprisingly jettisoned from Sanofi's top job.

I'm not convinced Sanofi's successor has been as committed to Afrezza's success as his predecessor might have been, and given Afrezza was Viehbacher's idea, it wouldn't be surprising if Sanofi cuts ties with MannKind when it gets its first opportunity to do so in January.

There is, however, one reason why Sanofi will stick it out with Afrezza and that's because MannKind now owes Sanofi a bunch of money.

As part of the licensing deal, Sanofi agreed to finance MannKind's share of Afrezza's loss if MannKind couldn't foot its share of the bill. So far, MannKind has borrowed $43.7 million from Sanofi under this agreement, including $14.7 million last quarter alone.

Obviously, Sanofi could write off this loan, but if it doesn't want to do that, it could hold on in hope that Afrezza sales build to a point that would allow MannKind to eventually pay it back.

Sanofi could also decide to ride it out and let MannKind fail. The way this loan is written, if MannKind can't make good on its debt to Sanofi, then Sanofi can take over MannKind's pledged assets.

"In the event of certain future defaults under the Sanofi Loan facility agreement for which the Company is not able to obtain waivers, the lender under the Sanofi Loan Facility may accelerate all of the Company's repayment obligations, and take control of the Company's pledged assets, potentially requiring the Company to renegotiate the terms of its indebtedness on terms less favorable to the Company, or to immediately cease operations" --MannKind's second quarter 10-Q.

Looking ahead
MannKind has blamed Afrezza's struggles on everything from the requirement of lung tests, to payer formularies, to free samples.

Perhaps it's simply that when push came to shove, patients who were controlling their blood sugar with injections simply didn't see a need to switch.

Regardless, according to MannKind's third quarter 10-Q, an inability to raise additional money would raise "substantial doubt about the company's ability to continue as a going concern," and since MannKind's stock listing in Israel is a short-term rather than a long-term fix, I don't think that warning should be ignored.

Todd Campbell has no position in any stocks mentioned.  Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies 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.