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MannKind Is On Its Way To Bankruptcy - Are Executives Jumping This Sinking Ship?

White Diamond Research profile picture
White Diamond Research


  • MannKind’s distribution partner, Sanofi, has given up on Afrezza, MNKD’s only product, after investing over $300 million in it.
  • MNKD executives seem to be moving over to their new collaborative partner, Receptor Life Sciences. Is this to transfer over some assets before bankruptcy?
  • MNKD was burning $25 million of cash per quarter and will burn even more now as it takes on all the marketing costs for Afrezza.
  • The bullish thesis that Sanofi was intentionally trying to sabotage Afrezza and make it fail doesn’t make logical sense.

MannKind's Eventual Bankruptcy Is Virtually Certain

We believe the chance of MannKind (NASDAQ:MNKD) going bankrupt is just about 100%. MNKD's fast-acting insulin inhaler, Afrezza, has been a commercial flop. It's not a good product and most doctors in the diabetic community don't prescribe it for a variety of reasons explained later in this report.

Sanofi (SNY, OTCPK:SNYNF), MNKD's previous marketing partner for Afrezza, tried selling Afrezza for one year before calling it quits in January 2016. Sanofi stated "commercialization of AFREZZA is no longer economically viable in the United States." Sanofi invested over $300 million in Afrezza and only sold 7 million euros worth of the drug in the entire year 2015. Now, MNKD is attempting to market Afrezza all by themselves. This will cost MNKD a fortune hiring a new sales force and setting up new distribution channels with pharmacies and hospitals.

We believe management should responsibly sell the rights to Afrezza and shut the company down. By hanging on and attempting to market it themselves, they are leaving less for debt holders once they are eventually forced to file for bankruptcy.

Receptor Life Sciences - An Empty Shell Created For MannKind Executives To Transfer To?

MNKD announced a new collaborative partner named Receptor Life Sciences on January 21, 2016.

Andrea Leone-Bay worked for MNKD from 2003-2015, a long time, as the VP of pharmaceutical development. In 2015, she left MNKD and immediately joined Receptor Life Sciences in October, 2015.

Is this going to be a trend with executives leaving MNKD to join Receptor Life Sciences?

Receptor Life Sciences doesn't appear to be a legitimate company. It has nothing on its website, receptorlife.com, as shown below.

There is no information about the company online except that it's partnering with MNKD.

Receptor Life Sciences was filed as a corporation in

This article was written by

White Diamond Research profile picture
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Analyst’s Disclosure: I am/we are short 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.

White Diamond Research is not a registered financial advisor and does not purport to provide investment advice regarding decisions to buy, sell or hold any security. White Diamond Research currently holds a short interest in MNKD and during the past 12 months has shared fundamental and/or technical research with investors who hold a short position in the stock. White Diamond Research may choose to transact in securities of one or more companies mentioned within this article within the next 72 hours. Before making any decision to buy, sell or hold any security mentioned in this article, investors should consult with their financial adviser. White Diamond Research has relied upon publicly available information gathered from sources, which are believed to be reliable and has included links to various sources of information within this article. However, while the author believes these sources to be reliable, the author provides no guarantee either expressly or implied.

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Comments (99)

walt373 profile picture
Hi White Diamond Research, what's stopping MNKD from taking advantage of their ridiculously large market cap by raising cash via equity? I would think creditors would get behind this considering the equity valuation of 700m is so much larger than their debt amounts. If the company can sell enough stock, they can kick the can down the road, if not pay creditors off at full value. I see that as a flaw in the short thesis - if MNKD can keep the game going for long enough, shorts will lose, given the high borrow cost.

Keep in mind since the stock is probably grossly overvalued, raising cash by diluting shareholders increases the intrinsic value of the stock, creating value for shareholders, ironically enough. The more money raised, the closer to fair value the stock becomes.
White Diamond Research profile picture
Hi walt373. They can and will do an equity raise, but that will push down the stock because they will be selling shares. That is a way to avoid bankruptcy in the short term. They also might take on more debt.
I am pretty sure the shorts are keying off my retail account like clock work because any time I buy MNKD they bring it down and any time I sell it they bring it up. It's like I have the power to control it. I am going to buy it through another brokerage and sell it all with this account which should take care of things. I'll show em. This should be a good short squeeze.
My son has used it since it went on the market. Lost big Humalog belly almost immediately. Much happier - hated all the injections. Spyromitry testing minimal hassle. Medicine is $150 versus $90 copay for 90 days - big deal. Hba1c well controlled. Great product!
I just paid that for a 30 day. What did the doctor prescribe? Did you use a discount card? What insurance do you use (my wife is pregnant and when the baby comes we will be able to change insurances if there's one out there that covers it!
The company is a total disaster. The product is great. Too bad nobody knows it exists.
01 Apr. 2016
Any change ? MDT buy MNKD ?
deadaim profile picture
Something to think about....Repost from Obamayoumama:

"At the first of 2016 Jay had a sell rating on MNKD with a $1.00 target. On December 31, 2015 MNKD closed at $1.45. On Jan. 19th, 2016 he lowered his PT to $.25 on MNKD. Jay Olson follows only one other stock, PTLA. On December 31, 2015 he had a buy rating on PTLA and a $65.00 price target. On 12/31/2015 PTLA closed at $51.45. So if an investor or hedge fund bought PTLA and shorted MNKD using the 12/31/2015 prices, how are Jay's recommendations doing this year? PTLA made a multi year low yesterday at $18.20 and closed at $19.00. On Sunday Jay removed his buy on PTLA and placed it with a neutral and a $30.00 price target. So let's do the math on our analyst Jay Olson as of last night. If you had invested $50k in PTLA on Dec. 31, 2015 it would be worth $18,464.52. Your $50k in MNKD that you shorted on December 31, 2015 @ $1.45 would be worth $43,793.10. You would now have and account balance of $62,257.62 not including the HTB interest on your MNKD stock. If PTLA stays here and MNKD goes over $3.00, your entire investment is gone after paying the interest, or over $3.43 not including the interest. It gets better! While Jay was suggesting that clients Short or Sell MNKD, Goldman Sachs was buying, see the latest institutional holdings. What was GS doing with their PTLA holdings that Jay had a buy? GS was selling of course, see the latest on PTLA institutional holdings. I believe Jay has a middle name, drum roll please........Jay Patsy Olson!"
Mar 29, 2016 at 9:45am by obamayoumama
31 Mar. 2016
Why do shorts continue to mention the spirometer as a major issue? The argument is ridiculous. This is a quick test. Any real MD that says he can't perform this is either extremely lazy or just plain bad doctor.
And you don't have to take it anymore for gods sake
risingskepticism profile picture
"And you don't have to take it anymore..."

"Besides testing before the first use of Afrezza, spirometry must be repeated after 6 months of therapy and then annually, even if the patient shows no sign of pulmonary symptoms."



Note also it says:

"Sanofi is taking steps to turn the tide. At the annual Scientific Sessions of the American Diabetes Association (ADA) held June 5-9, 2015, in Boston, the education session on Afrezza was packed with physicians seeking information. The Afrezza floor display included efforts to deal with the spirometry issue head on, such as a document, “Guide to spirometry,” which described who can give the test and how, what the parameters mean, and—most important of all—which codes to use for reimbursement, both current procedural terminology and ICD-9 diagnosis codes."

However, that was nonsense. Spirometry IS still a major issue. First, endos are not pulmonologists and don't like the idea of being held to pulmonologist standards for interpreting pulmonary function tests, and that is exactly the standard they will be held to if they happen to misread a PFT and a patient suffers harm in consequence and sues.

Second, it is NOT as simple as many would have you believe. Doing only a FEV1 is meaningless and exposes to practitioner to malpractice risk. A complete workup is required to meet the standards set forth in the afrezza black box "to identify potential lung disease in all patients":


Third, insurance companies don't like reimbursing endos for doing and interpreting pulmonary function tests and will kick it back regardless of the ICD codes. Indeed, many insurance companies refuse to reimburse unless a licensed spirometry technician or respiratory therapist does the test. For example, from the article linked above:

"Most payers require that PFT have some form of accreditation to assure that good clinical and laboratory practices are followed. For example, Medicare has rules of participation and must be assured that the hospital or facility is abiding by these rules."

So, it is decidedly NOT just a simple matter of blowing through a tube and then going on about your business.
Haven't had a lung test yet. Only had a prescription for a week, and I have an appointment scheduled for June. I'll let you know if I have to do a test then.
bbraxton profile picture
The author states "The bullish thesis that Sanofi was intentionally trying to sabotage Afrezza and make it fail doesn’t make logical sense." - Why not do more marketing, not a single TV or radio add. Sanofi even went to court to keep Lantus from becoming a generic drug even after it had already made millions on the drug(now that is marketing effort). One thing that probably is not well know is not long after giving up on Affezza, Sanofi signed an agreement(a little cash involved) with the JDRF to work on trying to create another smart insulin(glucose responsive), hum. Finally, for everyone saying they have to take more insulin with Afrezza, this is more about food digesting than Afrezza itself. If an injected insulin was as fast as Afrezza the same thing would occur more insulin would be required in 2 hours after some meals as some foods take longer to digest. So this would mean more injections and I know there is no one with diabetes who wants to take more shots.
risingskepticism profile picture
"Why not do more marketing..."

This is from June 17, 2015 -- "MannKind's 3 Can't-Miss Quotes at Goldman Sachs (MNKD)":

"No. 2: Overcoming authorization headaches"

"I mean, this prior authorization with Tier 3 is something that's become much, much more prevalent in recent months [...] and it [is causing a] delay for prescribing [...] But to a great extent, that will naturally disappear as the insurance companies do their reviews.
-- Pfeffer

Most healthcare payers have put Afrezza in tier 3 of their drug formularies, which is creating a headwind for prescription volume. In some cases, the headwind is the result of requiring pre-authorization for Afrezza, and in other cases, the headwind is due to higher co-pays associated with tier 3 drugs.

Sanofi and MannKind hope that when healthcare payers review Afrezza -- as they typically do -- they'll ease restrictions tied to the formulary. If that happens, Sanofi and MannKind can focus less on helping doctors and patients navigate pre-authorization paperwork. It could also allow them to offer fewer discount programs, which are designed to bring co-pays down to levels patients can afford."

Why waste money on advertising a product hardly anyone can afford and that insurance won't cover? Evidently, "that will naturally disappear as the insurance companies do their reviews" didn't pan out and the "discount program" Sanofi offered didn't attract sufficient interest.
bbraxton profile picture
I am sure the same could have been said for Lantus when it first came out. It after all was a new class of drugs.
What a garbage article.! It is a shame that your concern is to only make money and then get rid of a very effective drug. Afrezza has not been really marketed here. No advertisement and effective intoducing the drug to medical community and diabetic patients. Give it a year before you close mannkind as a lost case. I believe the drug has a good chance to make it if well presented.
yazzbro profile picture
Wow, what a Dirtbag article this is. I didn't even need to read past your blurb that you are 100% sure that MNKD is filing for bankruptcy. A 100% sure? I am 100% sure you're an idiot. Don't you think MNKD would reverse split and dilute before they filed for bankruptcy you twit. Don't you think they would at least try that first? Also maybe Receptor Life is a company that is going to take over Technosphere and that Afrezza is going to be sold off to another company. Also, why would an Amgen exec leave a cush job at a great company to come and take over as the Chief Commercial Officer? Why would he do that if MNKD was going bankrupt? Why would he leave that job to come over to MNKD if they were going bankrupt? That makes no sense you dipsh*t. I guess the guy just wanted to commit career suicide. He hated his 6 figure a year job with stock options and full benefits so he thought he would come over to MNKD and say "I feel like being unemployed in 6 months so I thought I would take the job over at MNKD." You're a joke.
This guy is the ultimate short. To infer the drug is not effective is an out and out lie. Nothing as fast acting. Maybe hard to get and tests to get through but it works. Maybe we have another Ted Cruz here.
This has to be the most ill written bashing articles on MNKD that SA has put out!
You have no adhesion to the actual facts about AFREZZA and MNKD!
Not only that, you have misquoted Matt, intentionately or not! (Appears intentionally)
My only request would be for you to revisit this company and it's performance in one year!
And in your next article, please be honest with the actual facts!
risingskepticism profile picture
"...misquoted..." Here is something he said which isn't a misquote -- from the January conference:

"We do have some other non-critical assets. I think it’s fairly well known that we had a facility we opened in Valencia, California, which is now vacant and on the market for sale, which could raise some money."

Of course, there is a small problem since the Sanofi contract mandates that ALL cash raised from the sale of the Valencia property must immediately go to paying down the debt owed Sanofi. In other words, the sale won't "raise" a nickel for MNKD. I find it a little worrisome that the former CFO apparently is unaware of that.
Please write another article after April,5 when you will know more news from MNKD administration getting partners and plans to explode Afrezza worldwide
Good luck with your short positions.....
LMAO! 1:23 am. This article (mankind is on it's way to bankruptcy). At 4:47 am this article hits my email. (shorting mankind may be far more dangerous than some might suggest). This game is so ridiculous.
Is White Diamond Research a subsidiary of Prestige Worldwide?
"Most diabetic patients don't mind the small injections of insulin."

Oh REALLY? So you actually think that ANYONE would prefer several needles a day vs an inhaled medication?

risingskepticism profile picture
One other "detail" from the 10-K:

"Following the receipt by us of the notice of termination from Sanofi regarding the Sanofi License Agreement and the subsequent decline of the price of our common stock, two motions were submitted to the District Court at Tel Aviv (Economic Department) for the certification of a class action against us and certain of our officers and directors. In general, the complaints allege that we and certain of our officers and directors violated Israeli and US securities laws by making materially false and misleading statements regarding the prospects for AFREZZA, thereby artificially inflating the price of our common stock. The plaintiffs are seeking monetary damages. We will vigorously defend against these claims."

Was anyone else aware that lawsuits had been filed IN Israel? I mean, certainly, the US suits were well advertised, but the 10-K was the first I became aware of any in Israel. So much for transparency! Anyone want to give odds on a successful defense IN Israel?
risingskepticism profile picture
One thing that bothered me from the 10-K:

"In connection with our quarterly assessment of impairment indicators, we evaluated the continued lower than expected sales of AFREZZA as reported by Sanofi throughout the fourth quarter of 2015, revised forecasts for sales of AFREZZA provided by Sanofi in the fourth quarter of 2015 and level of commercial production in the fourth quarter of 2015, as well as the uncertainty associated with Sanofi’s announcement during the fourth quarter of their intent to reorganize their diabetes business. These factors indicated potentially significant changes in the timing and extent of cash flows, and WE THEREFORE DETERMINED THAT AN IMPAIRMENT INDICATOR EXISTED IN THE FOURTH QUARTER OF of 2015."

Highlighting is mine. So WHEN in the FOURTH QUARTER did Mannkind determine the NECESSITY to write down assets? NOTE that the decision was established SOLELY on the basis of poor afrezza sales and Sanofi's plan to reorganize their business. That plan was announced November 6, 2015. That indicates that Sanofi's FUTURE abandonment was NOT a factor.

I think it's important to establish when this decision was reached. Was it around the time that Hakan "resigned"? WHY didn't they alert shareholders with a press release of some sort? After all, this WAS a TWO HUNDRED MILLION dollar write down of assets! Shouldn't investors have been alerted immediately once the decision was made?

Legally, MNKD could evade an 8-k disclosure since SEC rules allow a company not file one if a 10-K was approaching. Nevertheless, doesn't the company OWE investors an ALERT when something so SUBSTANTIAL is about to occur? Is this a sample of Mannkind's "transparency"?
deadaim profile picture
Amazing how this is the only stock with a pps less than $5 that gets a hit piece every other day. Shorts are desperate.
I'm buying and buying more as much as I can on a daily and weekly basis until this stock hits it's min fair value of $6. Strong buy below $5, buy above $5 to $6.
Stay long and strong!!!!
I have to chime in on the distribution piece here..Sanofi was not essential, or even a factor, to the distribution of Afrezza. All drugs in the US are distributed to pharmacy by wholesalers (like Cardinal Health, AmerisourceBergen, and McKesson). These wholesalers are fairly agnostic on what they distribute, as long as demand exists. This means there is a pull model, pharmacies order what they want from the wholesaler and it shows up the next day at the pharmacy. The fact that there isn't Afrezza on the shelf is more a function of demand, and the pharmacy not being able to expect regular scripts. They'd rather tell the customer to come back the following day and get their script.
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