Don’t get to excited

Don’t get to excited

This morning MannKind (NASDAQ: MNKD) reported third quarter earnings which at first glance looks like good news. According to a company issued press release;

“Cash and cash equivalents at September 30, 2016 were $35.5 million, compared to $59.1 million at December 31, 2015. Currently, $30.1 million remains available for borrowing under the amended loan arrangement with The Mann Group along with $50.0 million available under the at-the-market facility.”

As we noted yesterday this is the only number that matters. Per a piece by the Motley Fool;

“The company does have $30.1 million available to borrow through an existing loan arrangement with The Mann Group. There’s also another $50 million that MannKind can raise through a public offering under an existing at-the-market facility.

The company’s loan agreement with Deerfield Private Design Fund requires MannKind to maintain a cash and cash equivalents balance (including available borrowing from The Mann Group) at the end of each quarter of at least $25 million. “

Still MannKind shares have responded well to the results and are up as we head to the close of trading.

The bottom line for MannKind is, well, the bottom line. As we also noted yesterday the company faces many obstacles and now on their own these hurdles have gotten higher. Yes, we suppose it’s possible they would find another partner but this we see as extremely unlikely. Yes, we suppose it’s possible that to increase sales of Afrezza they will lower its price, but this hurts margins which are already being hurt by the higher than manufacturing costs of Afrezza, something else we noted yesterday.

Now it is also possible they could back to the capital markets and attempt to raise more money but this too looks very problematic.

Yet, here’s what gets lost in all the hoopla all the money in the world won’t solve the many structural issues facing Afrezza. It won’t make Afrezza cheaper to make. It won’t make it a better insulin than existing injectable short-acting insulins. It won’t convince payors to change its formulary status not when the competition offers a much cheaper option which works as well. Most importantly it will not change the fact that one and perhaps only point of differentiation between Afrezza and the competition is that its inhaled rather than injected.

And this my friends is the core problem.

Is there a place for Afrezza, absolutely. Is this market niche large enough for Afrezza to be commercially viable, sadly no.

From day one we have said that Afrezza is a niche product, that it would never achieve blockbuster status. This hasn’t changed and all the money in the world won’t make it so either. Quite frankly why would anyone partner with MannKind when all they have to do is wait it out and let nature take its course.

Put another way the late Al Mann invested nearly a billion dollars of his own money in Afrezza and well.