Everyone's searching for that next great Penny Stocks To Buy. With markets trading near all-time highs, finding a stock with huge potential for return is certainly difficult.
But not impossible…
There are always stocks ready to take off, just waiting for investors to buy up shares. Amazingly, there's one out there now that's just barely preparing to take off- even after a huge news announcement last month that can change the course of the diabetes industry forever.
If you've invested in biotech stocks in the past, there's a better chance than not you've been burned. Waiting for the various stages of testing and trial results to be announced can be trying. Then there's the almighty FDA approval of a commercial product which always send a stock on a roller coaster ride.
Shareholders get tossed about pretty hard and many times those very investors who would have been rewarded if they had just held on in the bad times end up brutally burned. They end up giving up when short sellers crush their dreams causing them to do what they believe is the "conservative" thing - sell their shares before they were worthless.
But this time around for shareholders in MNKD, things are looking up. There are 3 reasons why this penny stock is poised to take off. And for starters, we will see a sharp move upon the release of the FDA's approval decision of Afreeza.
But should you be investing in this company now?
I say there's no doubt about it. Let me dive into those three reasons I mentioned...
1. MNKD is in position to benefit from the massive short position that still remains in the stock. Currently, over 28% of the float… or more than 65 million shares of MNKD are being held short. I just don't know what in the world these folks are thinking. The FDA is on the verge of approving their blockbuster drug. And this very product about to be approved could revolutionize the multi-billion insulin market.
Even if you believe that the nearly unanimous voting by the FDA's advisory committee earlier this year won't hold any weight in the FDA's decision, where is the financial risk management? The upside potential for MannKind on good news, which by the way is widely expected (just read other expert opinions)... is massive.
2. If the FDA announces approval of Afreezza, MNKD will then need to find a big-phara partner for the product. Some bearish analysts see this as a big hurdle to clear. But seriously, can you imagine anyone currently in the diabetes marketplace not wanting to get in on this new insulin tech?
It would be like massive oil companies ignoring clean, natural gas and other alternative fuels they can resell under their current business model (or a similar one). It would be bad business to ignore this product. It seems clear to me that some pharma giant will pickup a piece of MannKind's product - and the big pharma company that sees this value can only hope there isn't a biding war already ensuing.
Now onto my final point...
3. If and when all these event come to pass, investors will want confirmation that Afreeza is a commercial success. Will patients switch over to the certain-to-be more expensive… and more than likely not-covered-by-insurance Afreeza. That's the billion dollar question!
But given the reasons stated by the FDA's advisory committee as to the populations that this drug can help, we may end up seeing a government subsidy on it. Hell, if that little blue pill can end up covered by Medicare, I sure hope a life altering inhaler-based insulin would end up making the cut.
I believe MNKD could see a short-term move from $7 to $11 immediately following a positive FDA decision. Additionally, the announcement of a commercial partner could drive this penny stock even higher - say to the tune of $13-$15 per share.
And after the first initial quarter where Afreeza sales are tracked by the company, we will see the stock move pretty aggressively once again.
Even as positive as I am on this stock, trying to pretend I can see that far out would be absurd... there are potential issues out there. Nothing's a guarantee. Should the FDA fail to approve Afreeza at this stage of the game - the shorts could be proven right, and the stock could absolutely tank.
I wouldn't think there's much recovering at this point.
But from what I've seen so far this year, and heard during the advisory board's meeting… I wouldn't bet against MNKD from here out.
Now, for those of you wondering how I can substantiate my overly optimistic price targets- well... have you seen shares of AMZN lately? What's that P/E again? And what's supporting the price right now... it's surely not profits.
PS. I'm personally long this stock- and you should be too. There are fewer "good bets" in the small cap world than MNKD right now.
Disclosure: I am long MNKD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.