MannKind Corporation (NASDAQ: MNKD)
MannKind Corporation has been one of my favorite stocks to watch since I started covering the stock early this year. However, the company has had to jump a few hurdles, and chances are there are plenty more to come. Nonetheless, MNKD soared in the market yesterday after announcing big moves in Israel. Today, we’ll talk about what we saw from Israel and why I’ve maintained a bullish opinion on this stock even in the face of declines. So, let’s get right to it…
MannKind Will Sell Up To 50 Million Shares To Israeli ETFs
Yesterday, MNKD climbed in the market due to an announcement that it has plans to sell up to 50 million shares to Israeli ETFs. The sales are expected to be complete by November 15th. While this isn’t a new concept for MannKind, it is a revised one. Earlier in the year, MNKD said it was canceling the sale to Israeli ETFs due to pressure from the Israeli Securities Authority. However, later down the road, the company learned that some restrictions apply to such a sale while others they were worried about do not. As a result, MNKD will move forward with the sale and expects to sell 40 million shares for $94 million. This is much needed funding for the company as we are still awaiting positive news with regard to product sales. In a statement, Jefferies analyst Shaunak Deepa had the following to offer:
“Without trying to guess the exact amount of stock investors will buy from the company versus the open market, proceeds from this issue should materially add to the current cash position of $37 million and help calm concerns about near term liquidity…”
Why I’m Still A Bull Beyond Israel
Since I started covering MannKind earlier this year, I’ve maintained my bullish opinion on the stock. As a result, I’ve been met with quite a bit of criticism which is, of course, understandable. After all, while the company does have an incredible product, MNKD has been struggling as a result of lackluster sales. Nonetheless, I believe that the reasons for the slow sales volume are slowly but surely being taking out of the equation. In fact, the company will likely find a solution for two of the biggest issues relatively soon:
- Insurance Still Isn’t What It Should Be – First and foremost, consumers these days don’t generally cover the costs of their medications out of pocket. Instead, they depend on insurance companies to absorb the vast majority of the cost. Earlier in the year, Afrezza (MannKind’s flagship product) wasn’t being covered at all. However today, around 80% of insurance companies are covering the treatment. The only issue here is how they are covering the treatment. Afrezza is currently in a tier that leads to higher costs for the end consumer as well as restrictions with regard to use. MNKD needs to get Afrezza in a lower tier which will relieve these issues. Recently, the company mentioned that Sanofi, a company contracted by MNKD to handle commercialization of Afrezza, was currently in talks with insurance companies. More importantly, those talks are going well.
- Consumer Awareness Could Use A Boost – Another major issue MNKD has been faced with in regards to sales is consumer awareness. During the pre-launch, there was absolutely no advertising for Afrezza. However, that has changed. Currently, we are in the midst of the direct-to-consumer phase, which is designed to improve consumer awareness surrounding the treatment. While I would love to see TV ads, and I’m sure those are coming down the road, it’s clear that we’re seeing small steps in the right direction here.
The Bottom Line
The bottom is that MNKD is attempting to revolutionize the way diabetics view insulin treatment and Afrezza takes the needle out of the equation. While this is a great thing, revolutionary changes to any market are never easy. While the changes may take some time, Afrezza is a great product and, in the long run, it will lead to solid profits for investors. It all depends on how patient you are willing to be.
What Do You Think?
Where do you think MNKD is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]