Stupidity, chutzpah or a combination?

Stupidity, chutzpah or a combination?

Although Diabetic Investor did not listen to the MannKind (NASDAQ:MNKD) earnings call, we did have a nice laugh while reading the transcript of the call. Given what was said, more on this in a minute, we began to wonder whether there is a new and unfortunately growing segment of the diabetes industry that is stupid, has more chutzpah than a Republican Presidential candidate or a combination of the two. Wednesday morning we saw the first evidence of this when Paula Deen opened her mouth and inserted her foot. Perhaps not wanting to be out done Wednesday afternoon Al Mann, the founder of MannKind, opened wider and inserted deeper. Here is a small sampling of what Mr. Mann said;

“Many of our long-term stockholders have expressed concern about the loss of value of their investments. That is certainly understandable given that MannKind’s stock has dropped by about 3 quarters since the CRL. I have shared in that loss of value. In fact, my loss has been the greatest of all. I had personally invested $575 million to purchase what is about 40% of MannKind and the current value of that equity is but a fraction of my actual cash investment, yet I expect that loss to be reversed by developments over the next couple of years.”

It’s nice to see that Mr. Mann can be both compassionate and arrogant at the same time, not an easy task by any streak of the imagination. While he sympathizes with the company’s stakeholders who have lost millions, mainly due to Mr. Mann’s arrogance and stupidity, they really shouldn’t feel all that bad as he has lost a greater amount of money because he believed he actually was the smartest person on the planet and everyone else was too stupid to notice.

“We are continuing to work on several minimally dilutive financings, but in today’s world, it seems to take much longer to complete such transactions. We therefore certainly needed to act decisively and quickly to raise capital, not to do so would have been very foolish. We therefore undertook the recent equity offering with net to the company about $81 million. Unfortunately, that financing was quite dilutive, yet it will provide resources for the company while we continue our pursuit of non-dilutive and minimal prediluted financing to satisfy our needs to approval and beyond.

Let us not dwell on the past and instead focus on the future. Our situation and the outlook for MannKind soon could very well change substantially for the better.”

Well with just slightly over $3 million in the bank at the end of the year and a burn rate of over $20 million a quarter; it wasn’t a matter of dilution but a matter of survival, had Al not put in more money there would not be a company. But it really doesn’t matter that the stock has been diluted more times than Jeremy Lin has been mentioned on ESPN, everything will be ok in the long run so let’s not dwell on the millions investors have lost due to one man’s hubris.

“Some of you may recall a somewhat parallel story regarding my experience in MiniMed, which had protocol — which had pioneered in insulin pumps and continuous glucose sensors. After some negative publicity by the serious problem with another company’s pumps, the 3 major companies competing for that market all dropped out. Our stock was then priced at $1.75 per share. Later, Medtronic acquired MiniMed for a split-adjusted $192 per share. The story for MannKind have been similar with the low stock value. I am not suggesting an ultimate future gain by a factor over 100 for MannKind, but I do remain very optimistic about the value of AFREZZA as well as several other product opportunities at MannKind. While the financial consequences of this past year have been costly, the company now has the resources to bridge our current needs and enable us to prepare for the future.”

At this point if there is one investor dumb enough to buy this line of BS they deserve to lose every penny they invest in the company and should be subjected to waterboarding as an added bonus. This is the biggest load of crap Diabetic Investor has heard in some time and believe us when we say, we have heard some whoppers (and not just the ones being eaten by our fat friend Ms. Deen) over the years. We know that CEO’s are supposed to paint a bright picture but seriously Al must be taking some really serious acid if he actually believes what he is saying.

We could go on but what’s the point as no one seems to be listening to what Diabetic Investor has been saying. The company continues to find investors who seem to enjoy buying into the hype and losing money. Honestly if these investors are seriously trying to create a tax loss, Diabetic Investor can think of several diabetes related charities that really need the money and would actually spend it wisely.  It’s one thing for Al Mann to lose his once vast fortune, after all the company carries his name and when you’re well past your prime and really should be enjoying retirement but instead choose to prove beyond a shadow of doubt that you are the smartest person on the planet, by our guest. But to try and bilk investors into believing that this company actually has a chance, when in reality no chance exists, that borders on being criminal.

There was time not that long ago, when Diabetic Investor held Al Mann in high regard as he really did something special with MiniMed. However, that was long ago and Medtronic (NYSE:MDT) has changed MiniMed to such an extent that Al and the many fine people who worked with him, wouldn’t recognize what was once the finest diabetes device company around.

Sadly Al did not ride off into the sunset or play the role of diabetes elder statesman after his success at MiniMed, instead he choose to start MannKind. While his intentions were good, the execution just wasn’t there and the timing wasn’t great either. Rather than cut his losses or at minimum hand the reins over to someone else, he compounded his mistake and not just doubled but tripled, then quadrupled down. Like a compulsive gambler, who in desperate attempt to get even puts more money on the table, Al seems to believe that his MannKind gamble will eventually pay off; when in reality he is just like that gambler who fails to see there are times when it’s better to walk away from the table.

Frankly the game has been over at MannKind for some time, the only problem has been no one has the heart to tell Al Mann or if they have he hasn’t listened.