In what can only be characterized as an odd turn of events, troubled MannKind (NASDAQ:MNKD) entered into a collaborative agreement with a "newly formed" company called Receptor Life Sciences. At first glance, such an announcement may seem like welcomed and much needed positive news. However, looking deeper, there may be more questions than answers.
- Who is Receptor Life Sciences?
- Was Receptor Life Sciences created for the purpose of this deal?
- Will Receptor Life Sciences really do anything, or is it simply window dressing?
- How close of a relationship does Receptor Life Sciences have with MannKind management?
Even if the obvious question marks are above board, the deal announcement smells of a desperate attempt to create something out of what may be nothing. If an investor were to Google Receptor Life Sciences, you would not even find a website with ease. Compounding the question is the fact that the "website" simply leads to pictures of Redwoods and offers little else.
Digging deeper into the website issue we learn that the domain name was bought on January 10th of this year, while the current the MannKind CEO has taken to Twitter to express that this deal has been in the works for months. There seems to be a disconnect in information in some form or another, and I can imagine that MannKind critics will have a field day portraying this deal as a "shell game".
In my opinion this "deal" will carry little impact on the equity in a positive manner. I feel that it gives the bears far more ammunition than it gives the bulls. The market seems to agree in that the stock barely moved on the news.
Mannkind will officially be in non-compliance of NASDAQ listing rules on February 17, 2016 if it does not get its closing bid price above $1.00. That is just a few weeks away. Thirty trading days below $1 and management will have the added distraction of developing plans to correct NASDAQ listing deficiencies. In my opinion, the likelihood of a delisting process being initiated on February 17th is very high.
In my opinion MannKind made a grave error in the manner in which this deal was announced. At a time when investor trust in the company is at an all-time low, it was not prudent to make an announcement that lacked transparency and can be construed as an effort to manipulate. Has the company just signed away technology to another party for no up-front cash and a possibility for only about $100 million in milestones if all goes well? It would appear so.
When the company held an update after the announcement that Sanofi was throwing in the towel on Afrezza, there was not even really a hint that such a deal was in the works.
With the announcement today, I think MannKind is in even more trouble than it was prior. I think the company will find itself outside the NASDAQ listing requirements, and I think that even those that wanted to speculate on the company are now looking at it with a more critical eye.
I suppose that there could be something positive in the near term, but I would much rather have concrete information that a deal with a company that did not even own a website until a bit over a week ago. Something simply does not pass the smell test here and I have no desire to inhale until I know more about exactly what I am inhaling. My stance is staying on the sidelines and watching the drama unfold. I do not think this company will do anything prior to February 17th that will take it back above a buck. Stay Tuned!
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.
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