Liquid Biopsy · @Liquid_Biopsy
10th Nov 2015 from TwitLonger
PIPER $MNKD 3Q15 And Outlook Seem Grim To Us; Reiterate Underweight PT $1.50
After the close MNKD reported 3Q15 results. While cost-cutting measures will help
curtail the cash burn, the disappointing launch of Afrezza and increasing net-debt
position seem to be making the company increasingly desperate to pursue new financing
strategies such as opening up a Tel-Aviv listing to take advantage of index buying. But
these are obviously short-term fixes to a deeper, potentially critical liquidity concern.
Should SNY return rights of Afrezza next year, MNKD's problems will only deepen. We
see little reason to own shares and reiterate our Underweight rating. Part of our revisions
reflect higher share count from greater dilution given the low share price and a $50M
Israeli placement.
• Afrezza has a long, long way to go: MNKD expressed disappointment again at
Afrezza's launch, noting challenges gaining reimbursement with payors, and the fact
that the initial rollout was targeted at building awareness. MNKD's share of the
Afrezza loss was $14.1M; there is now $43.7M outstanding on the loan agreement with
SNY which MNKD will ultimately need to pay back by the middle of the next decade.
• Pipeline evolution: The company is looking to advance new Technosphere programs
delivering new compounds for indications like PAH and pain, but is actively seeking a
partner. We've never heard a management team try to reach out to prospective partners
on its earnings call, and this suggests to us that the company is struggling to gain
traction finding further support for its inhalaed platform. We are concerned that the
challenging pulmonary dynamic with Afrezza will have negative connotations for any
other potential applications.
• Financing will buy some time: MNKD still has loan and ATM financing options and
creatively listed on the Tel-Aviv stock exchange in order to take advantage of indexfund
mandated purchasing to add up to $50M to its coffers. Unfortunately these new
shareholders may be quite disappointed with their new holdings if Afrezza's launch
continues at its current pace. On its call, management reiterated its efforts to keep
shares out of the hands of short sellers, but given the performance to date, those short
sellers are likely quite pleased with their gains so far.
• Will SNY hang in there? While SNY indicated it would take time to build awareness
for Afrezza on its recent investor call, it also excluded Afrezza from its 'key launches'
list. SNY could return Afrezza early next year, and such an outcome may prove to be
a death blow to MNKD and Afrezza should it occur.