MannKind: It All Comes Down To This

| About: MannKind Corporation (MNKD)

MannKind Corporation (NASDAQ:MNKD) is a bio-pharmaceutical company that focuses on the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes and cancer. MannKind is most notably known for its investigational product candidate, Afrezza. Afrezza is a novel, ultra rapid-acting mealtime insulin therapy being studied for the treatment of adult patients with Type 1 and Type 2 diabetes for the control of hyperglycemia. Afrezza is currently wrapping up Phase 3 clinical testing and ultimately seeking an FDA approval for commercialization.

Plain and simple, MannKind has exploded this year. In the last six months, MannKind investors have been rewarded with robust gains. The stock has skyrocketed from $2.10 to Monday's (6/3/13) closing price of $7.63 per share. Stockholders during the last six months have been beneficiaries of well over 250% in returns, and in turn made MannKind one of the biggest gainers in the market year to date.

On 5/10/13, MannKind reported their earnings for the first quarter of 2013. MannKind reported a loss of .15 per share, which beat Zacks Consensus Estimate of a loss of .16 per share. The market liked what they saw from the earnings report as MannKind rose nearly 10% the following day. However, there was quite possibly even better news than the earnings beat: MannKind spoke about potential investors for its product Afrezza. Alfred Mann was quoted, "Affinity data will be a pivotal event for partnership activities. Discussions and some diligence efforts are underway with a number of prospective partners. Several others have indicated they will require and resume their diligence activities upon the availability of the AFREZZA data in August."

MannKind offers the unique potential for a big time partnership or buyout. Among the possibilities is Pfizer (NYSE:PFE), who in 2012 had revenues of nearly $60 billion and has once failed trying to enter a similar market as MannKind's Afrezza. In 2007, Pfizer withdrew their insulin inhalation product Exubera, and in turn accrued gigantic losses. Pfizer may want to cash in on Afrezza in order to make up for Exubera- if indeed the FDA decides to ultimately approve Afrezza.

Ely Lily & Co (NYSE:LLY) is another possible partnership for MannKind going forward. Just like Pfizer, Lily gave up on an inhalable insulin product. While Lily has been an impressive stock over the years and in 2012 saw revenue shoot over $20 billion, a blockbuster drug like Afrezza could be just the boost they're looking for.

MannKind is not shy to speak about its possibility to partner. Alfred Mann stated, "Having multiple potential partners engaged in last step will keep us fairly busy this fall. At the same time, our potential partners will themselves have to be quite focused. The company that can quickly translate its diligence findings into a decision to move forward will have a distinct advantage over its peers in the partnering process that we are creating."

If the FDA approves MannKind's Afrezza they will be poised to grow and establish some serious stockholder value. MannKind will finally be able to commercialize their 'groundbreaking' product and will at last get their opportunity to help those who suffer from the disease. MannKind has generated no revenue for years and after various forms of funding and dilution of shares is sitting on only 36 million in cash reserves- which makes an Afrezza approval by the FDA drastically important. However, if Afrezza is ultimately approved it will allow MannKind their chance to take a slice out of the now $35 billion market which is slated to jump to $58 billion by 2018.

Will the FDA approve Afrezza? MannKind Corp. Founder, Chairman and CEO Alfred Mann certainly believes so. "We are expecting some exciting events that we're confident will lead to FDA approval and launch of this important drug device combination which is to address the enormous diabetes pandemic. The need is so great that I believe AFREZZA could potentially even become the most significant [medical] product ever." Afrezza is significant because it is unlike any other product currently on the market. It is fast acting, simple, effective, and it is inhalable insulin-which creates an easier experience for the patient. Additionally, the dreamboat inhaler is self-administered device. Think about an inhaler for people with asthma, the dreamboat inhaler is a similar concept except it is used to treat diabetes.

Yes, MannKind has been denied from the FDA before, so why would it now pass? Alfred Mann suggest the FDA were the ones who prompted them to continue onward with the studies, "I had always that thought that AFREZZA would be a very effective antiglycemic in early type 2, but it was the FDA who has actually guided us to do this study. AFREZZA certainly should significantly reduce prandial excursion. And that should result in clear differentiation from the placebo cohort in this trial." With the FDA providing guidance and direction, I can see why Alfred Mann is so confident.

Certainly there are many potential risks involved with MannKind. Firstly, the affinity data will make or break this company. If the data does not show any strong relation to Afrezza being effective the same way other current non-inhalation products on the market, another FDA denial may be on the way. A denial from the FDA would not only send MannKind back down, but most likely well past all of its recent gains. Additionally, what if MannKind doesn't gain a large partnership or buyout? MannKind will undoubtedly be stuck with a cash flow problem. Currently they are burning through cash in order to support their trials, all the while generating no revenues or sales. Maybe it is all too good to be true. Maybe Afrezza won't gain FDA approval. Maybe MannKind will not gain any major partnerships.

Regardless, Alfred Mann will not give up on his vision and has poured at least $930 million into MannKind. Those who have questioned how MannKind will fare- given Alfred Mann's age, can rest easy knowing what he said on the most recent conference call. "People ask why at my advanced age and after such a successful career I'm so committed to AFREZZA, even having personally provided about $930 million of the $2 billion so far invested. If we could significantly contribute to resolution of the enormous diabetes crisis, wouldn't that justify all this? Perhaps you can now understand what is driving me."

Disclosure: I am long MNKD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.