MannKind Corporation (NASDAQ: MNKD) is having an incredibly rough time in the pre-market hours this morning, and for good reason. After reporting earnings, investor fears are starting to pick up yet again. However, that doesn’t seem to be a concern to billionaire investor David Shaw. So, what’s the deal here? Why is Shaw so interested in MNKD?
David Shaw’s DE Shaw Hedge Fund Is A Big Player In MNKD
As mentioned above, David Shaw has quite a bit of interest in MannKind. In fact, in his most recent SEC filing, Shaw increased his holding in the company by 347%. Today, DE Shaw owns 5,275,095 shares of the company, and at the current (8:29) price of $1.06 per share, that works out to be $5.5916 million in investing dollars in the company.
There’s No Doubt That Shaw Is Taking A Risk Here
The reality is that any time you make an investment, no matter how large or how small, you’re taking on some risk. However, in this case, David Shaw seems to have an incredibly high risk tolerance when it comes to MNKD. The truth is that when we dig into the numbers here, the risks become overwhelmingly clear.
Recently, MNKD released its earnings for the first quarter. In the report, investors learned that the company generated a total of $3 million in revenue in that quarter. However, less than half of that total, $1.2 million to be exact, came from the sale of the company’s flagship treatment, Afrezza. In fact, most of the company’s revenue came from selling off its bulk supply of insulin. Unfortunately, Afrezza simply isn’t selling as the company hoped. So, they are being forced to sell off their bulk supplies in an effort to get their hands on what little cash may be available to them.
David Shaw Doesn’t Seem To Mind
While the fact that MannKind can’t seem to get Afrezza sales above the 300-per-week mark, leading to poor earnings, David Shaw doesn’t seem to mind here. We’ve seen no evidence that he has sold or is planning to sell any of his position in the company. So, where’s the rub? What is it that has Shaw hanging on so tightly?
Well, the truth is that I haven’t had an opportunity to speak with Shaw in order to get the answer right from him. Nonetheless, I do have a theory, and thinking about the possibilities here, it may be a good reason to hold on.
While MNKD can’t seem to get sales running, the company is a prime candidate for a takeover. At the moment, they are struggling financially in a big way. So, if another company wanted to take them over, now would be a great time, as they would likely have to pay less of a premium to do so. Nonetheless, Afrezza could be an incredibly profitable product. So, my theory is that Shaw is hanging on in order to reap the rewards of a potential sale coming down the line based on a competitor’s interest in owning the rights to the world’s first inhaled insulin.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will be keeping a close eye on MNKD. In particular, we’re interested in following the company to see if any takeover interest starts to be seen. However, there’s also another silver lining. One Drop | Chrome recently made it to Amazon as a Prime product. The relationship between One Drop and MannKind could mean that this will result in stronger Afrezza sales. So, we’ll be watching the action there as well. We’ll continue to follow the story and bring the news to you as it breaks!
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