MannKind Corporation (NASDAQ: MNKD) is having a rough time in the pre-market today, breaking the 7-day green streak we’ve seen from the stock. Today’s declines were prompted by a press release offered late last night, informing investors of a registered direct offering. While this has sent the stock downward, I’m looking at it as a buying opportunity. We’ll get to why in a moment. First, we’d like to say thank you to our partners at Trade Ideas for always being the first to alert us to the movement. Currently (8:47), MNKD is trading at $6.18 per share after a loss of $0.53 per share (7.90%) thus far today.
MNKD Announces Registered Direct Offering
As mentioned above, MannKind Corporation is having a relatively rough start to the day in today’s pre-market after the company released a late night announcement informing investors of a registered direct offering. The company said that it has entered into definitive agreements with certain institutional investors and other investors to sell an aggregate of 10,166,600 shares of common stock at a price of $6.00 per share. As a result, the company is expecting to generate about $61 million in gross proceeds through the offering. It is expected that the offering will close on October 13, 2017. However, it is subject to customary closing conditions. In a short statement, Michael Castagna, CEO at MNKD, had the following to offer:
“With this offering, we have made substantial progress in our efforts to recapitalize the company”
In the press release, MNKD informed investors that, after deducting the placement agent’s fees, the company is expected to bring in net proceeds in the amount of $57.7 million. The company plans on using the proceeds from this offering for working capital and general corporate purposes.
This Is An Opportunity
At first glance, investors tend to hate registered direct offerings, or any other form of fund raising through the sale of shares. After all, the process can be quite dillutive. However, in this particular case, the offering announced by MNKD should have investors smiling rather than crying. The reason is simple; this offering will give the company the funding it needs to expand on recent Afrezza news.
For those of you that haven’t been following the story, MannKind announced last week that the United States Food and Drug Administration has approved a label change for their flagship product, Afrezza. The new label includes detailed instructions for both physicians and patients. Ultimately, it is believed that the new label will help to increase sales of new prescriptions and improve the refill rate on these prescriptions. Of course, if this is the case, this will be a great source of revenue for the company.
However, there’s one thing that investors need to remember here. It’s that old saying, “it takes money to make money!” At the end of the day, there’s no doubt that MNKD has been considered a beleaguered biotech company. The company has struggled with regard to Afrezza sales in the past, leading to a less-than-perfect financial picture. However, with the new label change, a breath of fresh air has been breathed into the company. Now, it just needs the funding necessary to take the opportunity that was handed to it by the FDA and run with it. This offering will provide the funding the company needs. Sure, it is slightly dillutive, but at the end of the day, a small amount of dilution for an opportunity at massive long-run gains is a fair trade in my book.
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What We’ll Be Watching For Moving Forward
Moving forward, the CNA Finance team will continue to keep a close eye on MNKD. In particular, we’re interested to see what the company does with the new labeling and how it equates to stronger sales volume surrounding Afrezza. We’re also interested in following the company’s financial data after the announcement of the fund raise, and excited to see how the company’s finances improve as Afrezza sales improve. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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