More Hot Air From MannKind

More Hot Air From MannKind

This morning according to an article posted on the Barron’s web site Lilly (NYSE:LLY) is getting ready to acquire MannKind (NASDAQ:MNKD) for $12.50 per share, which is almost double where the stock is trading today. If the rumors are true, and Diabetic Investor does not believe they are, this would mean that Lilly would pay over a billion dollars for a company that does not yet have a product approved for sale. 

Skipping for the moment the many issues surrounding MannKind, Lilly just isn’t known for acquiring any company without first partnering with them. Granted Lilly’s insulin franchise isn’t doing all that well but Diabetic Investor does not see MannKind as the answer, especially when you consider the company is already partnered with Amylin (NASDAQ:AMLN) and Alkermes (NASDAQ:ALKS) and will soon have the most promising new diabetes drug on the market, as Bydureon the once-weekly GLP-1 PUDFA date is fast approaching. Given the potential of Bydureon it makes no sense that Lilly would waste valuable resources just as Bydureon is coming to market.


However this is the diabetes world where wacky things are known to happen and this would be one of the wackiest ever.


A more likely scenario is that MannKind leaked this “rumor” hoping it would do exactly what it is doing; driving their shares higher. Keep in mind that MannKind has a history of over-promising and under-delivering. As Diabetic Investor has reported in the past, a conference call doesn’t go by without the company hyping their many discussions with possible partners, but just like the boy who cried wolf no partnerships have materialized.


Looking at the insulin market, currently dominated by Sanofi-Aventis (NYSE:SNY) and Novo Nordisk (NYSE:NVO) and the checkered history of inhaled insulin (can you say Exubera) paying nearly $1.5 billion for an unapproved, unproven product isn’t just wacky, it’s completely crazy. Even if Lilly executives have lost all sense of reality, which is what would need to happen to make this happen, the acquisition price is just the beginning of a sinkhole, as the company would have to invest millions more just to market the product. As Diabetic Investor has noted on several occasions, inhaled insulin is nothing more than a niche product and sales, if the product ever gets here, will likely be in the millions not billions.


Not sure which business school the executives at Lilly went to but even undergrads understand that it’s not exactly good business to invest billions to get back millions. Or as one diabetes executive said “The surest way to get to a small fortune is to start with a big one.”


Looking at the Al Mann, the founder of MannKind, and his history of being able to sell ice cubes to Eskimos (just ask the executives at Medtronic (NYSE:MDT) who paid over $4 billion for MiniMed) nothing is outside the realm of possibility. We know Mr. Mann is huge believer in his product as he promotes it every chance he gets with the zest only a true believer can. It’s easy to understand how investors can be duped into investing in his company as the way he tells it; his product will revolutionize diabetes management.


Given that Diabetic Investor lives in the real world and not fantasy land, we would say this “rumor” is just another attempt by MannKind to pump (pun intended) up the company’s share price.