You knew this was coming

You knew this was coming

Just as Diabetic Investor predicted it looks like MannKind (NASDAQ:MNKD), besides dealing with issues they have with the FDA, will soon be facing legal action. According to a press release issued by Bronstein, Gewirtz & Grossman, LLC, “Bronstein, Gewirtz & Grossman, LLC is investigating potential claims on behalf of purchasers of the securities of MannKind Corporation (“MNKD” or the “Company”) (NASDAQ:MNKDNews), concerning whether the company has violated federal securities laws.

On January 19th, 2011 trading of MNKD shares was halted by Nasdaq Group Inc. because the biotechnology company founded by the billionaire inventor Alfred Mann planned to release news, Nasdaq spokesperson Wayne Lee said. Prior to the trading halt of MNKD shares, the stock dropped 38% to $6.05 that morning on no news and then subsequently shot back up to $9.11 when the trading halt began. Shares of the Company then plunged nearly 50% in after hour trading after the Food and Drug Administration deferred approving Afrezza, an inhaled insulin treatment for hyperglycemia. On this news the company shares plummeted to $5.21.”

Given that MannKind shares continue to fall and there are serious concerns over the future viability of the company, investors looking for a legal remedy better hope this happens sooner rather than later.  Although Diabetic Investor believes the peculiar trading in shares of MannKind should be investigated, we do not have much sympathy for investors who were duped into investing their money in MannKind. Nor will we have any sympathy whatsoever for those investors who continue to believe the MannKind fantasy.

Taking a realistic view into the future for MannKind, the company needs just about everything to fall their way without any further hiccups just to survive let alone make any money. The company has already stated they only have enough capital to make through the third quarter of this year. It’s also true given the precious situation facing Afrezza® it’s unlikely the company will find a partner or white knight. Just as obvious it’s equally unlikely they could tap the capital markets for the funds they will need. (Surely the supply of investors too stupid to do their homework must be running out by now.)

Just as when he started and continued to fund the company, MannKind’s future capital needs will likely come from Al Mann.  Yet even a billionaire does not have unlimited resources and won’t be a billionaire much longer if he continues to continually fund MannKind’s operations. Should he continue to fund MannKind, Mr. Mann will likely accomplish a different goal he has stated in the past, which was not to leave his fortune to his family. The way things are going with MannKind, not only will his family be left with nothing, his many charitable interests will also be left high and dry.

The most likely scenario for MannKind is one we have seen in the past, running out of options look for Al to step away from MannKind with the new CEO finally selling the company at a deep discount. The reality here is the company made several miscalculations with Afrezza® from which they could not recover.  Put simply, Afrezza® wasn’t the problem it was how management handled Afrezza® that created the problem. While Afrezza® gets all the attention, the company does have some very intriguing technology and in the right hands could actually develop into something.

The bottom line for MannKind is it was late to the party, stayed too long, drank too much and now is suffering a massive hangover that just won’t go away.