Seeking Alpha
Long/short equity, event-driven, research analyst, activist investor
Profile| Send Message|
( followers)  

Summary

  • MannKind receives positive vote of 13-1 at FDA's ADCOM for Afrezza.
  • Stock is already trading up over 100% this morning.
  • Due to bearish sentiment and massive short interest, stock could easily blow through 52 week highs today.

Like most biotech or pharmaceutical companies, it's often a long road while trying to get a drug approved by the FDA. That road is often littered with short sellers, naysayers, and heavy skeptical and bearish sentiment.

MannKind (NASDAQ:MNKD) shareholders know this all too well. For the past couple of years, it's been a battle for MannKind's Afrezza to go mainstream. Everything had culminated to the news that the company was going to have its ADCOM meeting to discuss Afrezza on April 1st of this year.

From MannKind's website:

AFREZZA® (pronounced uh-FREZZ-uh) is a first-in-class, ultra rapid-acting mealtime insulin therapy being developed to improve glycemic control in adults with Type 1 and Type 2 diabetes mellitus. It is a drug-device combination product, consisting of AFREZZA Inhalation Powder single use dose cartridges, and the small, discreet and easy-to-use AFREZZA inhaler. Administered at the start of a meal, AFREZZA dissolves immediately upon inhalation and delivers insulin quickly to the blood stream. Peak insulin levels are achieved within 12 to 15 minutes of administration, mimicking the release of mealtime insulin observed in healthy individuals.

Afrezza certainly had its naysayers, as well. The Street's Adam Feuerstein had weighed in on the drug in early January of this year, claiming that, "the results from the two phase 3 studies announced this summer were barely passable [and] we still don't know, exactly, how the current 'Dreamboat' inhaler performed relative to the older Medtone inhaler." He also claimed that, "there's certainly precedent for an Afrezza rejection. Two, actually." This was news that sent MNKD down 11% on the day that it announced its ADCOM date.

His comments were echoed by numerous shorts and drove a lot of the negative sentiment behind the stock, its short interest, and MannKind as a company.

From MannKind's website:

MannKind Corporation (NASDAQ: ) is a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes. Our lead investigational product candidate, AFREZZA® (pronounced uh-FREZZ-uh) is a first-in-class, ultra rapid-acting mealtime insulin therapy. AFREZZA is being developed to improve glycemic control in adults with type 1 or type 2 diabetes. It is a drug-device combination product, consisting of AFREZZA Inhalation Powder single-use dose cartridges and the small, discreet and easy-to-use AFREZZA inhaler. Because of its unique pharmacokinetic profile, AFREZZA may be a promising new therapy for patients with Type 1 and Type 2 diabetes, as it has been shown in clinical studies to control post meal-time glucose levels, cause less weight gain and have lower risk of hypoglycemia than current standard insulin therapies.

MannKind trading has been anemic at worst, volatile at best leading up to this event. The company's stock is off 24% in the last three months alone, on waning optimism about Afrezza.

(click to enlarge)

But, yesterday, in one fell swoop, after months of debate and argument, MannKind scored a massive victory over the naysayers, as it's Afrezza was recommended approval by an FDA advisory committee who gave it a vote of 13-1.

Seeking Alpha reported:

  • The FDA's advisory committee voted 13-1 to recommend Afrezza be given marketing approval for treating type 1 diabetes, and 14-0 for treating type 2 diabetes. The PDUFA date for the FDA to complete its review of Afrezza is set for April 15.
  • MannKind shares were halted all day, and remain halted AH. The company notes Afrezza, if approved, would be "the first ultra rapid-acting mealtime insulin therapy available in the United States."

(click to enlarge)

MNKD Short Interest data by YCharts

As you can see, the shorts have absolutely piled into MannKind over the last couple of years. With the shorts come negative sentiment and bearish skepticism - the same skepticism I have around my two biggest short positions.

But, this morning, longs were treated to a massive victory, as they woke to this, after MNKD was halted for most of the day yesterday. This is on the heels of MNKD opening after-market yesterday and making new 52 week highs of $8.70.

Again, as you can see - this the definition of getting carried out on a short. MannKind still has not traded during normal hours on this news.

(click to enlarge)

MNKD Percent of Shares Outstanding Short data by YCharts

This is a little bit different of a situation than a normal stock run up, however, which is why I'm taking the time to pen an article about it. This has potential to be a massive squeeze during trading today, Wednesday.

There's going to be some house calls made today, I assure you. If you're a MannKind shareholder and are unloading pre-market, there might actually be a case for holding on throughout the day here. Much of the short interest in this stock either isn't out of bed yet, or is going to wait for a dip in the price mid-day today to cover at a slightly lower price.

Ultimately, this could drive the stock higher during the day today and well through the company's 52 week high of $8.70. Taking profits is always a good idea, especially when you're up over 100% in a day - but, in this investor's opinion, the prescription is here for this stock to continue upwards during the day today. The combination of downward pressure and sentiment, combined with 16% of the outstanding shares being held mean that there's a recipe for genocide for the short interest in this company.

Best of luck to all investors and congratulations to MannKind longs.

Source: MannKind's FDA Win Is A Short Seller Massacre