Mannkind's ( MNKD - Get Report) announcement this week of a $100-$110 million convertible debt sale just one week after entering into an 18 million-share equity financing deal prompted me to remark on Twitter: "Geezy Peezy, Mannkind is grabbing as much money as it can before the December date with FDA." These financings are not a bullish indicator for the stock, nor do they suggest management's confidence in a speedy FDA approval for the company's inhaled insulin device Afrezza, is what I meant. In response, @quickgainstocks tweeted, "Mannkind: I don't think this is terrible news. Just a mere bump? It's a mere bump if you believe Mannkind is raising all this money now to present a stronger negotiating position to potential marketing partners. That assumes, of course, that these potential partners exist and that Afrezza is on the cusp of approval. I'm more inclined to believe the bear argument that Mannkind faces more Afrezza approval delays, potential partners are hesitant to commit until after approval, and Mannkind's billionaire founder Al Mann is no longer willing to pony up his own cash to keep the company afloat.
The equity financing deal announced last week had a $6.50-a-share floor under which the stock sales won't take place. As of Thursday, Mannkind's stock price is now well under that floor, which probably best explains why the company was forced to sell debt. The high short interest in Mannkind also forced the company to lend 9 million company shares to its bankers for short sales required as a hedge to induce investors to buy the convertible debt.If you step back, all these Mannkind financing arrangements and the downward move in the company's stock price just four months before Afrezza's approval decision date doesn't paint an optimistic picture.
Xoma ( XOMA - Get Report) instituted a 15-for-1 reverse stock split Wednesday in an effort to retain its Nasdaq listing. The stock closed Tuesday night at 28 cents a share and reopened for trading Wednesday at $3.65. Reverse stock splits are never a good thing, and true to form Xoma shares continue to slide. The stock sold off Wednesday and was down again in Thursday's intraday trading to $3.45, or 23 cents a share adjusted for the reverse split. Discussing Xoma on Twitter, @Bobbandera took an upbeat line, stating, "Actually, the reverse split is bullish. Lower float allows them to run them up easier." I'm not sure what that means, exactly; perhaps its trader talk. From a fundamental perspective, which is my focus, Xoma is deep in the danger zone. Investors are staying far away from Xoma for two reasons: Zero confidence in management and no excitement for XOMA 02, the company's experimental diabetes drug. I've heard from a couple of large-ish shareholders who are trying to sow the seeds for a proxy fight and remove current management. The effort isn't gaining traction yet, perhaps because no one cares enough about Xoma. As for XOMA 052, the drug's best and perhaps last chance of generating any investor buzz should come in early 2011 when results are released from a phase IIb study in type 2 diabetes. If the data show a clear signal of efficacy, Xoma may finally be able to snag a XOMA 052 partner -- a deal that's been long promised by management. Given Xoma's weakened financial condition and management's poor track record for execution, however, what confidence should investors have that a XOMA 052 partnership deal gets done on favorable terms?
Last week, I called Vanda Pharmaceuticals' ( VNDA - Get Report) commercial launch of the schizophrenia drug Fanapt "slow and disappointing." This prompted @maxthegoat to ask, "Why are you so adversely biased towards Vanda? It makes you look unprofessional." If by unprofessional you mean warning readers back in October and again in April that Vanda was at best fairly valued but more likely over-valued when it was trading for $12-13, then I guess I'm guilty as charged. Since Vanda now trades around $6.50, others might call my work highly professional and unbiased.
While we're on the subject of over-valued stocks, Delcath Systems ( DCTH) priced an offering of 5.2 million shares at a price of around $7.15 a share this week. On recent conference calls, Delcath management suggested to investors that stock sales to raise money wasn't necessarily in the company's near-term plans. Yet, Delcath sold stock. The deal prompted @johnwelshphd to remark on Twitter, "Delcath secondary offering at less than half ASCO prices. Looks like @adamfeuerstein overvalued comment in heat of cult rally dead right." Thanks, John. One housekeeping note: The Mailbag will go dark next week because of my vacation. I return to work on Aug. 30 so look for the next Mailbag on Sept. 3. -- Reported by Adam Feuerstein in Boston. Follow Adam Feuerstein on Twitter.