- MannKind's Day of Reckoning is Rapidly Approaching
- Dec 20 2010
MannKind Corporation is a 20-year-old development stage biotechnology concern that's based in Valencia, California. The company has yet to commercialize a product and has accumulated a total deficit of $1.7 billion in its history. It burns through approximately $45 million a quarter and presently has enough cash and borrowing capacity to fund operations only through next summer.
MannKind’s fortunes could change dramatically in the days ahead, however, if the Food and Drug Administration issues a favorable decision on the company’s application to market an inhaled insulin product. AFREZZA is a thumb-sized combination drug/device product, consisting of powdered insulin pre-metered into single-dose cartridges and a light, discreet, easy-to-use inhaler. More effective and far smaller than a Pfizer/Nektar Therapeutics product, Exubera, which was pulled from the marketplace some three years ago, AFREZZA could be a game changer in the huge multibillion-dollar insulin market for treating diabetics. MannKind initially submitted the NDA (new drug application) in March 2009 and responded to an FDA request for additional information in July 2010. The regulatory body is scheduled to take action on the application by December 29th.
A favorable decision could trigger a sharp rise in the price of MannKind stock. Conversely, a negative decision, even one in which the FDA simply asked for more information, may well cause the shares to plummet in price. Given the binary nature of the forthcoming decision, investors looking to participate should probably take a hedged position, using both stocks and options. A strategy worthy of consideration is a “straddle” whereby both call and put options are purchased at the same strike price. Alternatively, a bullish investor could go long the stock and buy put options to limit the loss potential, whereas a bearish investor could short the stock and buy a call option to cap the amount of money at risk.
A far more comprehensive assessment of the company’s prospects, along with a detailed review of the alternative investment strategies, is outlined in our December Event Driven Special Situations report, which can be downloaded by clicking on the “Free Sample Report” button.