MannKind Corporation Tumbles On JPMorgan Downgrade

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MannKind shares fell as much as 6.69% to $3.56 at 11:41 AM EDT on Monday after JPMorgan Chase analysts downgraded the stock from Neutral to Underweight. The research firm also removed its $6 price objective. JPMorgan said that Afrezza, which went for sale in February, continues to struggle. MannKind will find it difficult to overcome Afrezza launch struggles.

Afrezza sales disappoint analysts

On Friday, Piper Jaffray had cut its price target on MannKind from $7 to $3.50, though it maintained a Neutral rating. Piper Jaffray expressed concerns about MannKind’s financial position The Valencia-based biotech company had recorded a loss of $12.4 million for its 35% share of Afrezza venture. It means the total loss on Afrezza during the March quarter was $35.4 million. Sanofi absorbed the other 65% loss.

Sanofi revealed in its fiscal first quarter results that Afrezza generated just $1.1 million in sales, way below $3 million-$4 million expected by Wall Street analysts. MannKind recorded $7.1 million in Afrezza shipments during the March quarter, but that sum likely included free samples provided to patients and inventory stocking.

What’s worrying MannKind investors?

MannKind incurred a net loss of $30.7 million or 8 cents per share during the quarter. At its earnings call, MannKind executives admitted that Afrezza launch is not doing well. Doctors have been reluctant to prescribe the inhaled insulin drug because it requires all patients to go through lung function test before the drug can be prescribed.

Given Sanofi’s might and worldwide presence, Afrezza sales may pick up, but costs are also expected to increase as the French company shells out money for direct-to-consumer advertising campaigns later this year. At the earnings call, MannKind CFO Matthew Pfeffer told investors that the $12.4 million loss on Afrezza would not be recorded in the company’s income statement, so investors need not worry. It will be added to MannKind’s borrowings from Sanofi under the $175 million credit line. But the debt has to be repaid eventually.

MannKind shares were down 5.77% to $3.59 at 12:19 PM EDT on Monday.


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