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Image source: NIH Image Gallery via Flickr.

It's been a year to forget for MannKind (NASDAQ:MNKD) shareholders, and it may be about to get worse.

Last year everything appeared to be going MannKind's way. Afrezza, the company's fast-acting inhaled diabetes drug, was approved by the Food and Drug Administration, and it landed an experienced licensing partner in Sanofi (NYSE:SNY). The deal MannKind signed with Sanofi provided it with $150 million in upfront cash, and Sanofi provided MannKind with $175 million to cover its portion of collaboration expenses.

Hopes were high with Afrezza because of how quickly it worked within the body and the fact that it metabolized faster than standard insulin, reducing the chances of a hypoglycemic event; many on Wall Street expected it to sell well. Of course, for needle-phobes like myself, the best part of Afrezza might be that it's an inhaled powder instead of an injection.

Afrezza: from hopeful blockbuster to complete bust?
When it was launched in February of this year, Afrezza was expected to leap out of the gate. Unfortunately it's fallen flat on its face from the get-go. Through the partial first quarter, and two full quarters since, Afrezza has generated less than $6 million in total sales. Mind you, this was a drug that once aspired to $2 billion in peak sales, according to Wall Street estimates.

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Image source: MannKind.

What's wrong with Afrezza isn't exactly night-and-day apparent, but there are quite a few theories that likely hold some water. Afrezza's higher price point relative to standard insulin injections could be one of the leading factors why sales are sluggish out of the gate. While direct cost comparisons aren't easy since insurers and pharmacy-benefit managers try to keep wholesale costs private, Afrezza's convenience does come with a premium, and it's a premium that no one seems willing to pay at the moment. What's still unknown is if this is a consumer-driven, physician-driven, or PBM-driven cost issue.

Education seems to be another major hurdle. When informal surveys were done by analysts, a substantial number of physicians weren't aware that Afrezza was even on the market. Sanofi's beefed-up marketing campaign, coupled with MannKind's push to educate physicians, was supposed to take care of this. Considering that sales of the drug were flat in Q3 from Q2, this push to educate physicians and consumers doesn't appear to be working.

Regardless of the reason, Afrezza is looking like a bust in the early going, and that's bad news for MannKind, which is running out of money and time to turn Afrezza around.

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Image source: Flickr user thetaxhaven.

This desperation move just fell flat
On the same day that MannKind released its third-quarter earnings results, it also announced plans to list up to 50 million shares of common stock on the Tel Aviv Stock Exchange. Based on its per share price the day the filing was made with the Securities and Exchange Commission, the hope had been that the company could raise around $120 million in cash. This would be added to the $32.9 million in cash and cash equivalents that MannKind ended the third quarter with, and provide extra cushion beyond the $37.5 million in common stock that can still be sold in the U.S., and the $30.1 million available to borrow based on its loan arrangement with The Mann Group.

But for MannKind and its shareholders, that hope didn't translate into tangible results. Based on a per share price equal to $2.61, MannKind was only able to find buyers for 13,852,435 shares of its common stock, generating $36.2 million in proceeds before fees are deducted. In short, instead of generating enough capital from its dual listing to survive well into 2017, MannKind only bought itself between three and six months' worth of additional time based on its current quarterly cash burn.

What options are left for MannKind?
With north of $60 million in cash following its dual listing, $30 million in borrowing capacity, and the ability to sell $37.5 million in stock, MannKind's remaining options are shrinking fast.

Offering more shares is the easiest option to raise additional cash, but that simply may not be an option for MannKind moving forward. Although it wasn't specifically spelled out in MannKind's Q3 report, one possible reason that the company chose to list on the Tel Aviv Stock Exchange is because it was finding minimal interest for its shares in the United States. MannKind could certainly attempt to list above and beyond the $37.5 million remaining as of the end of Q3, but its attempts to raise capital this way in the U.S. could come up short.

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Image source: Pictures of Money via Flickr.

Reducing costs is another option, but it's also not a long-term solution. MannKind has actually announced three separate rounds of job cuts this year resulting in the reduction of a third of its workforce. Reducing headcount substantially moving forward could extend its remaining cash and give Afrezza more time to grow, but there's no guarantee that such a strategy would succeed.

Hoping for a buyout isn't an option that I view as viable at this point, because Afrezza hasn't demonstrated its value to Wall Street or any other drug developer as of yet. MannKind's crushing debt also adds a reason as to why there will likely be no takers.

Put plainly, things don't look very good for MannKind. Licensing partner Sanofi has the option to walk as soon as next year if Afrezza isn't "economically viable," which could saddle MannKind with added costs, and its cash situation still looks dire even after adding capital via its Israeli stock offering.

MannKind and its still lofty valuation have given investors every reason to keep their distance for the time being.

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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