Hedge fund Tourbillion Capital Partners doesn’t like health care stock MannKind Corporation (NASDAQ:MNKD) and is betting it could tumble by as much as 90 percent, CNBC’s Lawrence Delevingne is reporting.


MannKind’s Afrezza will fail due to potential customer backlash

Tourbillion thinks MannKind Corporation (NASDAQ:MNKD)’s lead diabetes treatment product, Afrezza, which recently won FDA approval, will fail due to potential customer backlash over safety concerns and higher prices than traditional insulin injection treatments.

“While Exubera has previewed what will happen with Afrezza, the market has had a way of ignoring this drug’s past failures until it actually launches,” an investor letter reviewed by CNBC said. “When and if this happens, we believe that MannKind will ultimately trade down 90% to a value around $500 million or $1/share.”

Tourbillion points out how a similar product, Pfizer’s Exubera, failed and then points out Afrezza could be even more likely to fail given harsh warnings on its labels, including one about the potential for lung cancer, the article noted. As well, Afrezza will be more expensive than standard insulin injections, a claim disputed by MannKind.

More expensive and higher risk isn’t a good combination of attributes for a new healthcare product.

Mannkind’s valuation

“Only in a frothy, retail-driven (and now Tweet-driven) market can a stock like MannKind Corporation (NASDAQ:MNKD)  exist with a $4.3 BILLION valuation and in our view no clear prospects of revenue,” the letter said. Tourbillion is run by former SAC Capital Advisors portfolio manager Jason Karp.

“Based on our analysis, we believe the stock implies that MannKind can secure a royalty deal where the partner is convinced that the drug is going to do $5 billion in sales—the entire size of the short-acting insulin market,” the letter said.

MannKind Corporation (NASDAQ:MNKD) didn’t take the matter sitting down.

Matthew Pfeffer, MannKind’s chief financial officer, compared Pfizer Inc. (NYSE:PFE)’s Exubera to a “bong,” noting it was the size of a tennis ball. By contrast, Afrezza is the size of a whistle.

Pfeffer also said the product is likely to be priced around the same price as injectable insulin and said those cancer warning labels were overblown.

“We think it’s a much improved, next generation product,” Pfeffer was quoted as saying in the CNBC piece.