The clock is ticking

The clock is ticking

Watching trading in shares of MannKind (NASDAQ:MNKD) it appears many investors are anticipating a favorable decision from the FDA which is currently scheduled for the 29th of this month. Since closing at $4.94 back on May 20th, shares of MannKind have been on skyrocketing up over 50%.  Given this rise it’s reasonable to ask what impact an approval would have on shares and what might happen if the decision is delayed (again) or if Afrezza is not approved.

Given the current environment at the FDA, Diabetic Investor places the odds of a clean approval (no adverse labeling or warnings) at less than 50%.  While there have been some signals the FDA may be getting back to the business of actually approving new drugs, we do not believe the agency has all of a sudden found religion and will stray too far from their ultra-conservative approach when looking at diabetes medications. Based on the scientific data Diabetic Investor sees no reason for the FDA not to approve Afrezza but as we have seen all too often the FDA does not always follow the science when making a decision.

Considering the roller coaster history of MannKind, Diabetic Investor believes that anyone who had the tolerance for MannKind’s high risk level and invested back when share were below or near $5 should take their money, thank their lucky stars and move on. Frankly there are just too many risk factors here to believe the FDA will simply approve Afrezza. Even with an approval they must be asking themselves where the stock would go given its recent rise. Although there are some analyst who believe shares would double with an approval, Diabetic Investor sees this as overly optimistic.

More than likely Diabetic Investor anticipates a tainted approval limiting where the drug can be used. We’re also not convinced the FDA won’t delay the decision yet again or even decline to approve Afrezza. It would be not surprise Diabetic Investor to see the FDA ask MannKind to conduct even more studies or come up with even more data. Considering what happened when the FDA blindsided Amylin (NASDAQ:AMLN), Alkermes (NASDAQ:ALKS) and Lilly (NYSE:LLY) with Bydureon, MannKind may not even be aware the FDA has concerns. History tells us when it comes to discussions with the FDA; the agency isn’t exactly forthcoming and straight forward.

The bottom line here is whether the clock is ticking towards a celebration or explosion. Given the range of possibilities Diabetic Investor sees more negative scenarios than positive outcomes. Add in the strange way FDA makes decisions and their recent series of decisions this only adds to the risk. Finally one has to wonder how many lives MannKind has. There is no question any delay or non-approval would effectively kill the company, even Al Mann does not have unlimited resources. Even with an approval, the heavy lifting would only be starting as it would take a major effort not just to make the drug but to market and support it.

Considering all that’s known and the many factors that are unknown, its best to have the antacids ready when it comes to investing in shares of MannKind; just as party goers on New Year’s Eve often regret the overindulgence from the night before, investors in MannKind just might experience a mighty hangover come December 30th.