MannKind (MNKD) Stock Falls On Piper Jaffray Downgrade

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MannKind Corporation (NASDAQ: MNKD)

MannKind Corporation is having a rough time in the market today as investors take in the news of a recent downgrade by Piper Jaffray. Today, we’ll take a look at what Piper Jaffray has to say about the stock, how MNKD reacted to the news, and what we can expect to see moving forward.

What Piper Jaffray Has To Say About MNKD

According to Street Insider, Piper Jaffray downgraded MannKind from a “Neutral” rating to an “Underweight” rating dropping their target price on the stock from $4.00 to $1.50. Here’s what analyst Joshua Schimmer had to say about MNKD…

IMS scripts for Afrezza have been lackluster to say the least, so we spoke with five primary care and endocrinology specialists with high volumes of diabetes patients to gauge their experience with and outlook for the product. Unfortunately it sounds to us that while awareness is high and some patient blogs on the internet describe some very exciting and differentiated results, Afrezza is being viewed as a very niche product. Physicians envision growing use in their practices, but not dramatically so. We believe MNKD has vastly over-estimated the commercial potential for the drug and are lowering our penetration estimates. Even our revised assumptions may be too aggressive so our discount rate is increasing from 10.5% to 11%. Our new PT is $1.50/share, which is roughly 60% down from current levels.”

How MannKind Reacted To The News

As one would expect, MannKind is having an absolutely horrible day in the market today following the analyst’s downgrade. Currently (11:21), the stock is trading at $3.76 per share after a loss of 7.49%.

MNKD Isn’t A Bad Stock In My Opinion

I know I’m going to catch hell for this one in comments and in social media, but I don’t mind. The simple fact is that, in my opinion, MannKind is a strong stock for the long run. Here’s why…

  • Piper Jaffray Assessment Is Invalid – Piper Jaffray talked to only 5 doctors! Anyone that works in a statistics-based position will tell you that you need at least 30 data points in order to come up with reliable statistics. The simple fact is that there are far too many variables to get realistic figures from only 5 data points. Also, we know nothing of the physicians and endocrinology experts; I’m not sure this was a blind survey. All in all, unless Piper Jaffray interviews at lest 30 doctors in a blind setting, I wouldn’t be willing to take their word.

  • Afrezza Has Had A Slow Start, But Wait! – There’s no doubt that Afrezza has had a slow start; investors have a right to be upset about that. However, every insulin dependent diabetic I’ve spoken to said they would rather inhale insulin than take a shot. It’s a no-brainer. The only problem is that consumer awareness is lacking. However, I’m not sure that will be the case for much longer. As consumers become aware, sales will rise. It’s also important to note that the lackluster sales we’ve seen are, in part, because of insurance coverage. After all, without insurance coverage, companies have a hard time selling prescription medications. However, recent data shows that about 80% of insurers plan on covering Afrezza in one way or another which is likely to give sales a big boost!

  • Afrezza Isn’t The Only Product – Yes, Afrezza is MannKind’s only approved product, but it’s not the only thing MNKD has in the pipeline. Too often, analysts are forgetting that MannKind is working on several different medications, one of which is a pain relief product that looks incredibly promising. So, even if you have absolutely no faith in Afrezza, there is still plenty to be excited about!

What We Can Expect To See Moving Forward

First and foremost, I think that today’s declines are a gross overreaction. Therefore, we can expect to see gains tomorrow as the stock corrects. Beyond that MNKD is likely to run into more turbulence in the near term (2 to 3 months) thanks to Piper Jaffray and other bearish opinions combined with heavy short selling on the stock. However, I think that the year 2016 will bring gains that will take the bears by surprise.

What Do You Think?

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

Image Courtesy of Fool]

3 COMMENTS

  1. You are right about 5 opinions don’t generate sufficient data for a statistical analysis. IMO as people awareness increases so will sales. Insurance coverage, pre-authorization did slow the initial sales but thats behind us now.
    Afrezza is a revolutionary product so it takes a bit longer for everyone to get accustom to it including insurers and prescribers.

    Mannkind has a high value asset called technospere. I can’t wait till its application in other areas come to fruition for ex. migraine.

  2. I find it curious that Piper downgrades MNKD and the stock immediately opens 8% down. Seems like the Market Makers are working in coordination with Piper. I think that 8% down is associated with a short raid connected to the Piper downgrade.

    But, here’s what is more interesting. Although volume is now over 5.5 million shares, the stock is up from where it opened. That tells me that the intended short raid is failing. There is more buying than selling after the opening short raid which drove the price down to 3.72.

    Could this mean that folks are buying shares into Piper’s downgrade? Looks that way.

    It certainly takes some desperate chutzpah to short at this p/s and assume anyone who has not already bailed would sell their shares. And, everyone knows that the top 20 funds and top 20 institutional investors in MNKD are adding shares, not selling shares.

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