Five Reasons MannKind's Q1 Performance Rang Loud Alarm Bells

VALENCIA, Calif. (TheStreet) -- MannKind's (MNKD) first-quarter conference call on Friday morning didn't go well. Management admitted the Afrezza commercial launch is slower than expected. Cash burn and debt remains problems which need to be addressed soon.

Shares of MannKind were slipping 0.4% to $4.01 The stock has lost almost 70% of its value since Afrezza, the inhaled insulin product, was approved at the end of last June.

Five thoughts and observations about MannKind's first quarter performance:

1. MannKind's 35% share of the Afrezza joint venture loss was $12.4 million in the March quarter, which means the overall loss was $35.4 million. Sanofi SNY markets Afrezza and receives 65% of the joint venture's profits, or losses, in this case. Afrezza net sales in the first quarter were 1 million euros, Sanofi disclosed last month. 

If Afrezza sales perk up, the financial health of the joint venture might improve -- losses will narrow or there may even be profits. But right now, Sanofi is losing money on every Afrezza prescription, and that's not good, especially when the French pharma giant makes money more easily selling its other new diabetes product Toujeo.

One more thing to worry about the Afrezza joint venture. Sales may perk up, but costs will also increase as Sanofi doles out cash to pay for direct-to-consumer advertising in the third quarter and starts the large, follow-on clinical trials required by the U.S. Food and Drug Administration.

2. MannKind executives are way too cavalier when describing the company's growing debt to Sanofi. On the call, Chief Financial Officer Matt Pfeffer told investors not to worry about the $12.4 million in losses from the Afrezza joint venture because it's not recorded on the company's income statement. Instead, the loss is added to the money MannKind borrows from Sanofi under a $175 million line of credit.

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