MannKind Corporation (NASDAQ:MNKD) had a solid Q2 conference call after the expected sub-par earnings as Sanofi's (NYSE:SNY) branded product is now pretty much out of stock and MannKind has taken over sales of Afrezza. Some of the highlights of the call, in my opinion, were the cash and financing numbers that project to last into early next year excluding sales, a better explanation of MannKind's target market with numbers, a better look into expanding the market by progressing towards treating the pediatric population, and finally, an all important label change request coming later this fall.
First of all, the all important cash situation. Taking a look at last quarter's cash situation from my Q1 article, a lot of the numbers look very similar and in line with expectations. This stability leads to predictability which should help ease investor concerns that the company can last into Q1 of next year with its current cash and financing resources.
As of June 30, 2016, MannKind had $63.7 million in cash and cash equivalents compared to $27.7 million at the end of Q1. The cash gain was mainly from last quarter's $47.4 million registered direct stock and warrant offering along with $9.2 million from Sanofi from the sale of insulin inventory from an exercised put option following termination. MannKind said investors should expect additional inflows from Sanofi and the put option going forward, but did not project if the cash flow would be similar to this quarters or significantly higher or lower.
Along with cash, MannKind still has $30.1 million left to borrow from the amended loan arrangement with The Mann Group. Also, no money has yet been raised from the $50 million dollar ATM facility. Adding the cash to the financing available gives MannKind $143.8 million excluding any future benefits from sales of Afrezza and additional capital from the Sanofi insulin put.
MannKind spent around $30 million last quarter ($10-$12 million a month is a good projection) and sees $16-$18 million in commercialization efforts for Afrezza for the second half of the year. So, simple math gives MannKind a cash and financing cushion of approximately 10-12 months not including additional Sanofi cash and cash raised by sales of Afrezza. When MannKind says it should be able to support its commercialization efforts through Q1 of 2017, the numbers support that argument given past performance and future guidance.
Now for some of the other highlights of the conference call. First, their discussion of their target market and segmentation was pretty interesting. Their target market is 6.5 million patients with diabetes who are basil plus or minus insulin, many who are not at goal. This market equates to around 1.7 million monthly prescriptions. MannKind, with its limited sales force, is currently targeting approximately 1.4 million of these prescriptions. According to Symphony and IMS data, MannKind's total script count over the past 4 weeks was 1,005 prescriptions. This shows the possible runway MannKind has if they can get Afrezza scripts rolling. The potential is there. It's all about execution and sales.
Next, MannKind is working on gaining access to the pediatric population. MannKind has entered into a collaboration effort with the JDRF (formerly known as the Juvenile Diabetes Research Foundation) (press release) to help spur this process. Any expansion of the target market is a huge boost to potential sales and I will be eager to learn more about progress on this front later this year and in 2017 as the pediatric trials are completed and regulatory hurdles are addressed.
Finally, MannKind will be putting in a request to the FDA for a label change this coming fall. The basis for the change request comes primarily from the abstracts presented at the 2016 ADA conference concerning PK/PD differences compared to other rapid-acting insulin. The label change request is scheduled to occur in September or October of 2016 and should help instruct physicians on how to optimally dose and titrate Afrezza to exploit its competitive advantage in the marketplace.
MannKind, hopefully, had its last sub-par earnings report and gave nice rays of hope with its conference call. The call stressed that MannKind does have funds available to survive through Q1 of 2017, its target population is a huge source of future potential sales growth, the company is working on expanding its market by continuing to work on opening a pathway to pediatric patients, and an upcoming potential label change could help MannKind exploit Afrezza's competitive advantage. I continue to be long MannKind.
Disclosure: I am/we are long 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.
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