MannKind (MNKD) Declines Ahead Of Earnings: Get Ready For Gains


MannKind Corporation (NASDAQ: MNKD)

MannKind is one of my favorite stocks to follow because there are few others that invoke as much emotion as this one does. Those that don’t like the stock hate it and those that do like the stock absolutely love it. Today, MNKD reports earnings. Unfortunately, it seems as though investors aren’t expecting much as the stock is down quite a bit on the day. Currently (11:13), the stock’s trading at $3.01 per share after a loss of 9.06%. However, I believe that the earnings report is going to be better than expected, proving to act as a catalyst for the stock. Today, we’ll talk about why.

MannKind Is Very Underestimated

Before we get into why I believe we’re going to see a stronger than expected earnings report, it’s important that you understand why the stock has been declining throughout the year. It all started after the approval of Afrezza. While the FDA approval was great news, investors expected the inhaled insulin to fly off the shelves. Unfortunately, that’s not what happened. Instead, MNKD has been dealing with a sluggish launch plagued by poor insurance coverage, little to no advertising, and poor consumer and physician awareness. However, throughout the year, things have been changing with regard to all of these issues. On the insurance coverage front, most insurance companies now cover Afrezza in one way or another, awareness is starting to build in physicians and consumers, and advertising has started for the treatment. In my opinion, investors are holding on to the past with a very tight grip. Nonetheless, things are moving in the right direction for Afrezza and MNKD as a whole.

Why I Believe MNKD Earnings Will Be Better Than Expected

Overall, analysts are expecting a loss of $0.06 per share on MNKD. This figure hasn’t been revised even once during the quarter, but there has been quite a bit that has changed. Here are a couple of key things to keep in mind:

  • Cutting Expenses – One of the bigger concerns for investors and analysts alike has been expenses. Unfortunately, MannKind was running with expenses that it simply couldn’t maintain. However, throughout the quarter, the company has been working hard to cut expenses. While some investors were surprised with certain layoffs that happened earlier in the quarter, I have to say that I wasn’t surprised at all. In fact, it was good to see this happening. As expenses decline, earnings go up. Yet, no revisions to expectations have been made.
  • Increasing Sales – Another important factor to keep in mind is that while Afrezza prescriptions aren’t necessarily growing at the rate that anyone wanted to see, they are growing and at a faster rate than analysts expected to see in the beginning of the quarter. As a result, we’re seeing increased sales, which will equate to dollars on the earnings report.

Between these two factors, I believe that MNKD is going to produce at a better rate than analysts expect. Although I do think that MNKD will produce a loss, I don’t think that the loss will be quite $0.06 per share. Personally, I’m looking for earnings to come in at a loss of $0.02 per share.

Moving Forward

I know that I’m going to catch a bit of flack from the bears, but moving forward, I’m expecting to see positive news. First off, the earnings report for MNKD is likely to show better news than anyone is expecting. As a result, I’m expecting for earnings to act as a catalyst. Moving forward, Afrezza is likely to see better coverage from insurance companies as well as move into regulation in other regions like Europe and Asia. This will also lead to sales growth. All in all, I think the wait for positive news is nearing an end and the stock is trading at a relatively decent discount at the moment.

What Do You Think?

Where do you think MNKD is headed and why? Let us know your opinion in the comments below!


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