MannKind Corporation (NASDAQ: MNKD)
MannKind is an incredibly interesting stock to watch. Throughout the year 2015, I have maintained a bullish opinion on the stock and have been heavily criticized for this opinion. In many ways, I can understand the criticism. At this point, MNKD has fallen more than 60% since I first started covering the stock, and today’s declines are adding insult to the injury. Nonetheless, as much criticism as I may face for saying this, I still maintain a bullish opinion on the stock. Strange right? Let me explain…
The Short Term Outlook Is Very Poor – As I’ve Said In The Past
First and foremost, it’s important that you understand that I’ve expected to see declines on MNKD. Am I happy with the declines? Not at all! However, I’ve said in past posts that we can’t expect to see gains from MNKD until at least 2016. When the gains start, they will continue for quite a while. Nonetheless, we still have quite a bit of time before we see this. The reason is relatively simple to understand. MannKind is the producer of Afrezza. The company is making an attempt to revolutionize an entire industry with this product, and making revolutionary changes takes time. Think about it… Bill Gates and Steve Jobs were both criticized for their computing machines as they built them in a garage. However today, those computing machines are absolutely everywhere! Every business, most consumers, and every school has at least one of these machines.
Now, don’t get me wrong, Afrezza is an entirely different animal than a computer. Regardless, the revolutionary change in medicine can be quite lucrative in the long run. For those of you that don’t know what Afrezza is, it doesn’t take much to explain. Afrezza is an inhaled insulin. In the past, insulin-dependent diabetics had to inject themselves with insulin, but MNKD created a product that changes this. Of course, with any revolutionary product, there are questions and concerns. However, the company is working its way through these concerns.
With Such A Great Product, Why Is It Taking So Long To Generate Sales
Here’s the kicker. Ultimately, investors aren’t going to pile their money into a company on a hunch. They want solid statistics that show that the company is going to generate a profit. This is where sales come in. Unfortunately, MannKind’s Afrezza hasn’t seen much by way of sales. So, what’s the hold up? There are a couple of things:
- Advertising – There are few products in history that didn’t need a solid foundation in advertising to blow up. Unfortunately, MNKD contracted Sanofi for the commercialization of Afrezza. At best, they have done a poor job. At worst, the conflict of interest is keeping Sanofi from doing what it has been contracted to do. You see, Afrezza isn’t the only product Sanofi is working to commercialize in this space. As a result, although we are in the Direct to Consumer phase – the phase that was supposed to raise consumer awareness – we have yet to see a single commercial. All efforts have been in magazine and online ads, and the efforts have failed! The bottom line here is that Sanofi needs to do a better job to get this revolutionary drug the recognition that it deserves.
- Insurance – Insurance has also played a major role in the poor sales we’ve seen from Afrezza. At this point, most main stream insurance companies are covering Afrezza, but there’s still far too much red tape. The drug is in a tier which has limitations and a higher cost to consumers. MNKD and SNY need to work to position Afrezza better with insurance companies.
So, Why Am I Still Bullish?
The answer is simple. Afrezza is an incredible product, and with the right moves made, it could prove to be the goose that lays the golden eggs for MNKD. While I’m not happy with the advertising efforts that have been made, I do believe that this issue will be ironed out in the long run. Also, over time, I believe that word of mouth advertising will help to increase sales. In terms of insurance, there are two things that MNKD and SNY need to do. First, they need to prove that Afrezza meets a need not currently met; it does. Diabetics with fears of needles, pediatric diabetic patients and diabetic patients that work in a place with no access to public restrooms all need a product like Afrezza. The second thing that MNKD and SNY need to do is bring the cost of Afrezza down for insurance companies, which I’m sure won’t be an issue if the changes to tiered coverage are made. All in all, we’re still fighting an uphill battle, and while it seems as though MNKD is losing that battle miserably, reading between the lines proves an entirely different story. Don’t get me wrong, we are still likely at least 6 months away from solid gains, but I do believe gains are coming!
What Do You Think?
Where do you think MNKD is headed and why? Let us know in the comments below.
[Image Courtesy of Wikipedia]