MannKind (NASDAQ:MNKD) investors saw shares of the company rise 25% on heavy volume on April 11th. The move was precipitated by a company announcement that a conference call would be held on April 19th to inform investors about the plans to re-launch the diabetes drug Afrezza. Afrezza was partnered with Sanofi (NYSE:SNY), but the big pharma player walked away from Afrezza earlier this year and returned the NDA to MannKind last week.
In the press release MannKind stated that its Chief Executive Officer Matthew J. Pfeffer and Chief Commercial Officer Michael E. Castagna will discuss the strategic commercial approach for Afrezza in the U.S. As part of the discussion, the company promises to offer plans for the sales and marketing of Afrezza. Details will include reimbursement and access programs for patients, as well as marketing programs and expansion plans. In addition, time-lines for re-launch activities will also be discussed. MannKind also made it clear that Sanofi will continue to distribute Afrezza from existing inventory into Q3 of this year.
It is no secret that MannKind is a stock that carries a cult-like retail following. This dynamic is a double-edged sword. Having retail investors excited is great, but sometimes this group of investors can be their own worst enemy. Savvy traders and speculators can play over-passionate retail investors like a fiddle and collect on the upside as well as the downside. The price action today is a perfect example of what can happen with a cult-like stock.
There was nothing very material in the press release today that would carry value enough to increase the market cap of the company by 25%. The company simply said it would give an update in about a week, and suddenly the value of MannKind rose. For investors, seeing the stock rise is welcomed. That being said, the fundamental situation with MannKind known to investors is no different today than it was last Friday.
Before people get upset, I am not trying to rain on a parade. I am a realist. High speculation on an event such as this has its place. We do know something that we did not know last week. The company has progressed enough on its plan to announce a call to discuss these matters. That, in and of itself, does warrant some positive speculation and could justify the small rise in the stock price we saw. Notice that the rise stopped short of going toward the $2.00 range we saw a couple of weeks ago. In my opinion, that level may be approached prior to the conference call, but there will begin to be caution on anything approaching $2.00.
One metric I use often when assessing a stock is the volume. I would recommend to investors that volume gives an idea of the strength of a move. Today the stock rose 25% on 10.7 million shares. If volume early tomorrow is heavy, then the run has some legs left in it. If volume lightens up, we will likely see the rise peak and could even see speculation back to the bearish side.
What is happening now is simple jockeying for position. Some bullish traders want to get in before a potential announcement, while some bearish traders will seek an opportunity to get out or short if they believe the enforcement is not everything that the bulls think it should be.
Let's set aside the price action for a moment and speculate on what the company may announce. It would appear that MannKind may well be getting ready to go it alone rather than with a partner. If a partnership was in the works, there would be little need to schedule an update for a week from now. In addition, certain elements of the press release seem to indicate that a partner is not in the picture. Simply stated, it would appear to be a bit early for a new partner to be able to offer such details on marketing plans, insurance plans and patient access plans.
The big question here is whether or not the street will show confidence in MannKind going it alone. I suspect that the conference call will accentuate the positive, minimize the hurdles and overall give the over-passionate followers a sense of confidence that could well be dangerous. The news of the re-launch will dominate the trading for a week or so, but then some realities will hit home and take some wind out of the sales.
In my opinion, and as I have stated before, the next few months will not be pleasant in terms of sales and marketing. Sanofi will still be involved, and MannKind is not likely to launch much of anything until Sanofi is off of the label as a distributor and has shipped its last script of Afrezza. That is the hurdle of the near term. The middle term has its own hurdles of MannKind trying to re-launch Afrezza. The street may be forgiving for a period of time, but realistically, MannKind needs to produce good numbers and produce them quickly to keep the street engaged. Good numbers will be handsomely rewarded. Bad numbers will be severely punished. This is the reality with cult-like stocks. They attract the biggest hypesters and the biggest critics.
What I have established here is that active traders and short-term speculators are the ones making money here. A long time long can sit on the sidelines and hope or can play the game that is currently being played and profit from it themselves. What I recommend is watching the volume closely. The moment volume to the upside begins to dry up, this equity will stop a run and could begin a slide. When heavy volume on the downside dries up, the equity is ready to turn again. Volume is a very basic tool that can help passionate investors keep themselves in check.
Afrezza missed on its first shot. The drug deserves another shot and that shot better have it right. There is a lot riding on Afrezza. Even the Technosphere technology is on trial in the court of public opinion. Stay on your toes, and as always... 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.