MannKind Shares Keep Rising As Short Seller Myths Continue To Be Discredited
MannKind (NASDAQ:MNKD) shares have risen from around $7.00 a share to close at $10.04 as of yesterday's trading session, since my last article on MannKind. As of the last short interest report, almost 30% of the shares are short, which equates to more than 68 million shares. The large short interest is a result of several years of misinformation relayed to investors in the past, and largely accountable to the Street's Adam Feurestein. The timeline of events that have occurred over the years explains the recent desperation by the large short interest to control the price of the stock, hoping for denial by the FDA to approve Afrezza. Obviously, the short sellers are in trouble here.
Afrezza has been on the target list of shorts for several years. However, every tactic used by the shorts has been thwarted time and time again. When Afrezza first came on the scene, short sellers used the failure of Pfizer's Exubera as the main reason why Afrezza would fail. It wasn't long after the trial data was released; that the short followers found out the Afrezza was for real, and completely different than Pfizer's failed product.
Heading into the 2nd CRL, shorts again were sure of the demise of Afrezza and the short sellers increased their position in the stock. The 2nd CRL called for additional trials, which were completed by MannKind, and the data release once again thwarted any signs of demise for Afrezza, and actually improved the chances of approval. Yet still, after the trial data was released, the Street's Adam Feurestein continued to claim that Afrezza would be rejected by the FDA. In fact, he called for 60% chance of rejection, by what he noted as, " The BEST Afrezza FDA Panel Review Ever", where he continued to lead investors into shorting the stock absolutely sure of rejection by the Adcom Panel. Leading up to the Adcom the short sellers were all-in making claims of FDA concerns regarding Afrezza being tied to lung tissue function, which none of the trials ever showed in the data. The short sellers even made claims that data was missing, and the FDA would reject Afrezza once again.
After an intense and very astounding presentation by the company and actual trial patients, the "best ever Adcom panel" voted overwhelming 27-1 to approve Afrezza for both Type I and Type II diabetes. Of course, the stock gained significantly in value in the afterhours session on the news, and it took no time for the short sellers to change stories once again, and claim that the FDA would not approve Afrezza based on lung cancer concerns, or a label so restricted, that it would not be accepted in the market. Even though the ALL of the trials conducted, even the additional FDA trials requested after the 2nd CRL, showed absolutely no pulmonary neoplasm's, the short sellers piled into the stock again knocking it off a new 52wk high of $8.70. How the FDA can restrict a label for cancer that none of the trials ever showed is beyond me, and I would be very shocked if the FDA did this at all. Even the Adcom panel would have voted differently had they seen this risk. This is yet another myth of the shorts that has been thwarted again.
Now that the chances of approval have grown significantly, short sellers have now switched their tactics once again; even after all of their other claims have been discredited over the years, now they are targeting MNKD's valuation and balance sheet, and lack of a partnership, as the reason for their sticking around. Some are even comparing it ultimate value after an approval to other biotech stocks that are not even in the same market. Adam Feuerstein has even now offered a full published apology on his botched Adcom panel article since that time too, but too late to save all those who followed his advice of Afrezza's demise and shorted the stock. Even Piper Jaffray rode the short bandwagon, and after the Adcom vote, renigged their sell rating.
Within a few weeks, investors will find out the fate of Afrezza, and I believe the chances of full approval without restrictions is 95%+ based on the Adcom panel review and vote. The FDA is likely to ask for a post approval study for lung cancer risk as part of the approval, but I would have never expected less with anything inhaled, but it certainly does not mean something is wrong with Afrezza, or that it causes cancer. The fact is, all the trials show otherwise. This post approval study will likely used as a monitoring study for Afrezza users. Nothing alarming like the short sellers would like you to believe. Several articles have been written over the past few months to show how undervalued MNKD shares are right now, based on sales potential and market penetration. MNKD is still a ground floor opportunity for all investors willing to hold long term. Short term volatility will occur, especially leading up to an FDA decision, and should be expected. Ultimately, those who stand their ground and not worry about the day to day fluctuations will be successful.
Personally, I can't wait to see what the short sellers come up with next. In the meantime, MNKD shares will continue to climb, as I believe some short sellers are pulling out of their losing position and moving on. I also believe the shorts are very close to starting a short squeeze of their own making against themselves. Many brokerage firms have already raised their margin requirement for MNKD to 100%, and triggering those stops, will create automatic buy-in margin calls against the shorted stock. This will create even sharper price increases for MNKD shares. Also, I believe institutions are beginning to stake their claim in MNKD prior to approval. Once approved, the shares are likely to spike to levels that will make CNBC headlines for several days. With a short interest this high, patient investors will be FULLY rewarded on an FDA approval announcement, and again with a partnership announcement. There is nothing more fun in the stock market to watch short sellers scramble for the exit and try to leave their fellow short sellers that last one out the door.
In my opinion, MNKD shares will trade significantly higher heading into the FDA decision, and likely double from there on approval. A partnership announcement along the way will be added fuel to the fire. With the amount of trading volume this week alone, shares have to be getting more and more scare, since Al Mann and his groups own the largest portion of the outstanding shares. Opportunities like MNKD don't come around often in the markets, and those who sell now will definitely wish they had stood strong amongst all the short sellers and their deceitful tactics. With such a strong Adcom vote, I doubt the FDA will need the full 90 days to approve Afrezza.
Disclosure: I am long MNKD.