MannKind Corporation (NASDAQ: MNKD)
Watching MannKind over the past year has been hard. Since February, the stock has fallen from $7.58 per share to yesterday’s close at $2.26. So, for many, it’s hard to imagine that there are still a ton of investors with bullish opinions on the stock, however, there are plenty of bulls. Just look at the snapshot of StockTwits above. Digging through the social investing website, it’s clear that the vast majority of investors on the platform are bullish – including myself. The next question for many is going to be, “Why?” Today, I’ll take a shot at answering that question.
Understanding Why MNKD Dropped
Before we get into why there are still so many bulls on MNKD, it’s important that you know why the stock dropped. In February, the stock climbed to $7.58 per share after approval of the inhaled insulin product known as Afrezza. When this happened, there were several investors that believed that Afrezza would fly off of the shelves, bringing massive gains to MannKind moving forward. However, that’s not exactly what happened. In fact, in the pre-launch phase, sales were absolutely horrible. As a result, several investors started taking out short positions on MNKD. Between divesting investors and massive short positions, MNKD fell like a lead brick from a high altitude.
Why There Are Still MannKind Bulls
I’ve received quite a few emails, nasty comments, and more since MNKD started to decline. However, even through all of this, I maintain my bullish opinion, just like several other investors. The reason for this is simple. Ultimately it boils down to the fact that MannKind created an incredible product, one which will lead to sales in the long run. I know, several of the bearish investors are going to comment on this post and send me emails saying that if we haven’t seen sales yet, we can’t expect to see growth. However, I beg to differ. Here’s why:
- Inherent Need For The Product – There are several people that need a product like Afrezza. First and foremost, I’m deathly afraid of needles, and I know I’m not the only one in this boat. In fact, fear of injections is one of the most common fears in the world. Diabetics with this fear will absolutely love Afrezza. In addition, there are several people that work in areas where they don’t have access to a public restroom, making it hard to find a private place to inject their insulin. Based on their work restrictions, I’m sure these people would rather use Afrezza as well. Finally, children are perfect candidates for the inhaled insulin!
- Insurance Coverage Is Moving In The Right Direction – In the beginning, sales were very poor because there was absolutely no insurance coverage. Today, the vast majority of insurers cover MannKind’s flagship product in one way or another. The struggle for MNKD now is how insurers are covering the inhaled insulin. Insurance works on a tier basis. The tier that Afrezza is currently in, in most cases, has restrictions and leads to higher costs for patients. Nonetheless, MNKD announced that SNY is currently working with insurance companies to change this. When Afrezza reaches a more broadly covered tier, we can expect sales to explode.
- Consumer Awareness – Another problem in the beginning is the simple fact that, with Afrezza, MNKD is making an attempt at revolutionizing the way diabetics see insulin. However, if diabetics don’t know about Afrezza, we can’t expect them to ask their doctors for it. Now the direct to consumer phase in moving forward and advertising is improving consumer awareness.
- Regulatory Approval – While there hasn’t been much discussion about it recently, MNKD and SNY are still working on getting Afrezza approved through regulatory agencies around the world. Currently, they are working on getting the product approved in Asia and Europe. When this happens, we can expect to see far more sales as the market reach expands.
The Bottom Line
The bottom line here is that MannKind is a great company that has created a revolutionary product. In most cases, revolutionary changes to any industry take time. Unfortunately for MNKD and its investors, this is a change that will take time. Nonetheless, over the long run, I believe that the bulls when send the bears running as the pieces of the puzzle continue to fall into place.
What Do You Think?
Where do you think MNKD is headed and why? Let us know your opinion in the comments below!