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"MNKD" - "Potential Partnership Creates Opportunity for Substantial Profits"

The recent FDA decision in regards to Mannkind’s insulin drug, Afrezza, may have created the opportunity for substantial profits on a rebound in the share price due to a potential partnership announcement or buyout offer.
 
Listen to the January 19 conference call where Mannkind’s CEO, Al Mann, makes several references to “our partners”.
 
 
Mannkind's current "cash burn" rate is about $40,000,000 a quarter. The company currently has about $100,000,000 in cash on hand.

Under a worse case scenario the company would need another $150 million to operate through Afrezza's approval.

Although Al Mann could fund this himself, having already invested almost $1 billion in the company, the prudent thing for Al to do at this point in time would be to finalize a partnership and get a cash injection in the $150,000,000 range to cover operating costs until Afrezza’s approval and to allow the continued development of the other eight drugs that the company is developing which includes a very promising cancer vaccine.
 
 
Two recent partnership/acquisitions of note:
 
Merck Buys SmartCells – Up To $500,000,000
 
 
 
Xoma & Laboratoires In Deal To Develop Diabetes Medicine – Up to $800,000,000
 
 
 
Note: Even with the recent delay Afrezza is still closer to approval than either of these drugs.


 

Al expected approval and had planned on having a stronger position when bargaining for the terms of a partnership.Potential partners could be Sanofi-Aventis, Eli Lilly, Takeda, Bristol Meyers, Glaxo Smith Klein, Bayer, Johnson & Johnson, or Pfizer. Each of them has a unique reason why Afrezza would be a good fit for their company.

Sanofi-Aventis would be my partner of choice especially if their current efforts to acquire Genzyme fall by the way side. 

Snofi has billions of dollars in cash on hand and could assist with getting Afrezza approved in both the U.S. and Europe. Sanofi could potentially make an offer to buy Mannkind. It has spent more than $17 billion on twenty-five acquisitions over the last two years.
 
Mannkind’s next earnings report will probably be held the first week of February.
At that time it’s possible that Mannkind might announce a partnership which could potentially take the share price back to the $10.00 range depending on the terms of the partnership.

One way to potentially profit from such an announcement is to purchase call options. I think the August option contracts in the $7.00 range might be the ones to purchase here. They are currently selling under a $1.00/share and could easily triple on partnership news for Afrezza. There is also the possibility of a partnership for Mannkind’s cancer vaccine occurring in the next seven months. It’s an excellent way to leverage your investment dollars.  

Mannkind's shares have a history of recovering from substantial price declines and I expect that this time will be no different although the recovery might be in terms of weeks rather than months.