Time is the enemy

Time is the enemy

Yesterday MannKind (NASDAQ: MNKD) reported first quarter results while providing a more detailed overview of the commercialization strategy for Afrezza. Here are some of the highlights;

According to CEO Matthew Pfeffer;

“Building a commercial organization from a ground up is our main objective in the second quarter. Our commercial leadership team is now in-place Mike Castagna that’s head while his two key Vice President’s. We expect to have a diabetes nurse educators deployed by the end of this month and we’re in the amidst of hiring a 60 to 70 person U.S. wide sales force which will be in the field by the end of June.”

Pfeffer also noted; “Our commercial organization will cost in the range of 20 million to 22 million through the remainder of the year.”

With just $27.7 in cash on hand it’s easy to understand why after the call the company announced the pricing of another offering, according to a company issued press release;

“MannKind Corporation (Nasdaq:MNKD) (TASE:MNKD) today announced the pricing of a registered direct public offering of up to 48,543,692 shares of common stock and warrants to purchase up to an aggregate of 48,543,692  shares of common stock to select institutional investors. Each share of common stock is being sold together with a warrant to purchase 0.75 of a share of common stock (A Warrants) and a warrant to purchase 0.25 of a share of common stock (B Warrants) for a combined purchase price of $1.03.  The A Warrants will be exercisable at a price of $1.50 per share beginning upon issuance and will expire two years thereafter. The B Warrants will be exercisable at a price of $1.50 per share beginning in May 2017 and expire 18 months thereafter.  The shares of common stock and the warrants will be immediately separable and will be issued separately.  The offering is expected to close on or about May 12, 2016, subject to customary closing conditions.”

Although Pfeffer did not throw their ex-partner Sanofi (NYSE: SNY) under the bus during the call; and we must admit we admire his restraint, he did provide some additional color as to some of the mistakes made by Sanofi. The reality is we always knew that Sanofi was clueless when it came to Afrezza and the honest truth is they were never fully committed to the product. Simply put MannKind is now in the unenviable position of cleaning up the mess Sanofi created.

The real question is can they stick around long enough to not just clean up this mess but keep Afrezza on the market for the long term. Unfortunately, we don’t think so. Even with all the initiatives being taken by the company time is not on their side. Yes, they have bought some time with the proceeds from the public offering but these proceeds will only last so long. Quite frankly what MannKind needs is sales and given the dynamics of the market the sales they need just won’t come fast enough.

Diabetic Investor further believes it would be foolish for anyone to partner with the company. As we have noted previously given the precarious state of the company’s finances and the many hurdles they must overcome it makes better sense to just wait it out and let nature take its course. The simple fact is anyone interested in a partnership will be in a much stronger position the longer they wait. The sad reality is MannKind is on the clock and time is not on their side.