NEW YORK (TheStreet) -- Investors on StockTwits.com struggled with their faith in MannKind (MNKD) Friday after an analyst's bearish note. The small-cap biotech company has an inhaled diabetes drug that could be worth hundreds of millions annually-if the medication receives FDA approval. If the drug isn't approved, it has little in the pipeline to cushion the blow.
The path to approval might not be easy. In a note to clients, Piper Jaffray analysts wrote that an FDA panel's briefing documents on MannKind's insulin inhaler "Afrezza" suggest an "uphill battle." The FDA's Endocrinologic and Metabolic Drugs Advisory Committee will meet on Tuesday April 1 to discuss the drug.
MannKind shares had dropped nearly 6% by mid-day, though they recovered some by 1 p.m. EDT. In a report, the FDA said Afrezza is effective in treating Type 2 diabetes but can cause breathing problems. The FDA reviewer also wrote that the drug showed "statistically inferior" blood sugar reduction in patients with Type 1 diabetes compared to other fast acting insulin drugs. The cashtaggers dilemma illustrates a problem with investing in early stage biotech companies with one major, unapproved drug. If the drug is approved, the stock can go up more than 100%. But if the drug fails along the way, there's little reason for investors to keep holding shares, and the stock plummets.