MannKind Is Still a Risky Investment Even With FDA Approval

NEW YORK (TheStreet) -- MannKind (MNKD) investors received a healthy dose of good news when the company announced the Food and Drug Administration had finally approved Afrezza, MannKind's inhaled insulin product.

The announcement came late Friday and on Monday investors wasted no time displaying their own brand of approval, sending the stock up roughly 10%. Shares are currently trading around $10.45, up over 100% for the year to date, including gains of 172% since the stock bottomed at $4.02 in April.

Investors are getting too giddy. It's time to lock in gains and move on to the next great idea.

There's no denying this is a huge milestone for the company especially after numerous setbacks. Investors have to remember, however, there are still execution risks MannKind must overcome -- starting with distribution of the product and getting it to market.

Let's assume MannKind does find a commercial partner to get Afrezza into the hands of consumers. There is still no guarantee Afrezza, an alternative to injected insulin, can gain enough traction to make it a business worth pursuing.

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Management has done a great job selling the potential benefits, including the fact that Afrezza limits the need for injections. Still, MannKind is entering an area where there are competing products from dominant and much larger rivals Eli Lilly (LLY) and Sanofi (SNY).

MannKind is certain to have a difficult time separating Afrezza from Lilly's Humalog. Getting FDA approval is a step in the right direction. But the FDA did not allow MannKind to make any sort of claims on its label that suggests Afrezza was a more rapid-acting insulin.

This is a clear distinction from Lilly's Humalog, which was granted FDA permission to make such a claim on its product.

Emails sent to MannKind requesting comment were not immediately returned. But it's worth noting that management has insisted Afrezza is indeed a faster-acting insulin. For now, we'll just have to take the company at its word. But in these cases only the FDA's word should be considered gospel.

There's a small bull case to be made here nonetheless. MannKind has put plenty of resources helping it achieve this small victory. Assuming that management executes through these potential headwinds, MannKind can emerge as clear leader in inhaled insulin.

As of now, even Lilly or a strong insulin company like Novo Nordisk A/S (NVO) can't match what MannKind brings to the table with Afrezza. Not to say they don't have the resources. But up to this point they haven't shown the interest in inhaled insulin. All of that can change in the next six to 12 months.

Why? Maybe it's the perceived lack of market viability for inhaled insulin. But once MannKind begins to make money competitors' minds will likely change. If that happens the larger companies, with their much deeper pockets, can develop their own products, apply pricing/margin pressure and put MannKind out of business.

But for now, these companies will make their decisions -- including whether to partner with MannKind to get Afrezza to market -- based on how MannKind proceeds from here.

This could provide opportunities as well as risks to MannKind shareholders, which is what must be assessed before jumping into this stock. With shares up almost 200% in the past three months, I wouldn't want to get caught betting wrong.

At the time of publication, the author held no position in any of the stocks mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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