MannKind Corporation (NASDAQ:MNKD) stock was falling on Monday’s market after a report on the company suggested that the diabetes drug it has in development is “overhyped.” The report, which first came to light last Friday, was published by hedge fund Tourbillon Capital Partners and came with a dire warning that the company’s shares could lose around 90% of their value in a coming correction.
The company, which operates in biotech, is in the midst of getting its insulin inhaler, Afrezza, to market. The inhaler could be a viable alternative to self-inflicted injection or surgically inserted injection pumps according to the company. With a growing number of people diagnosed with diabetes every year, and the cure being objectionable to many of them, investors seem to think that Mannkind Corporation (NASDAQ:MNKD) has a real opportunity.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Mannkind stock holds up despite predictions
The fact that Mannkind Corporation (NASDAQ:MNKD) has held so much of its value despite the 90% loss predicted by the Tourbillion report may be a mark of strength in the company. Shares are down by more than 3% on today’s market, but that’s not in the same league as the company’s massive decline at the end of March.
The FDA approval of Afrezza means that volatility in Mannkind Corporation (NASDAQ:MNKD) be lower as market-moving news becomes more spaced out, and investors wait for the company to actually show the financial results of its years of investment.
Biotech stocks have a difficult Monday
Mannkind Corporation (NASDAQ:MNKD) wasn’t the only company to have a difficult time on Monday’s market and it seemed that the entire Biotech industry was suffering from a little depression. Inovio Pharmaceuticals Inc (NYSEMKT:INO) dropped more than 5% of its value this morning while Celldex Therapeutics, Inc. (NASDAQ:CLDX) lost more than 2.5% on today’s market.
Biotech promises much, delivers little
Mannkind Corporation (NASDAQ:MNKD) has been one of the hottest stocks on the market so far this year, with shares up more than 60% since January 1. The company’s recent fall from grace, which has seen it lose close to 6% of its value since Friday morning, leaves it trading at $8.49 at time of writing, still well ahead of where it was at the start of the year. It appears that very few in the market agreed with the dire predictions from Tourbillon Capital Partners.
Biotechnology right now looks a lot like the internet industry did fifteen years ago. A lot of the companies that are attracting attention have what seems to be a marketable product, and they all seem to be inches away from making money. One or two of them are going to be successful.
Investing in Netflix, Inc. (NASDAQ:NFLX) in 2005 would have been a good bet. Back then however, the company didn’t look like it had a real hold on any kind of market. Biotech may not work the same as the web, but survivorship bias still exists, and it’s driving a lot of decision in biotech investment today.
Mannkind Corporation (NASDAQ:MNKD) has had Afrezza approved by the FDA, but the company is looking to find a bigger pharmaceutical company willing to help with distribution of the diabetes treatment. When it finally gets the inhaler to market and is able to show its results in the form of actual earnings, it will be more clear which side of the bet was right. For now, however, the world of biotech remains a risky one.