MannKind Triples (Its Cash)!

MannKind is in a waiting game.

The biotech resubmitted its application to the Food and Drug Administration, responding to issues brought up by the rejection in 2011. The next known catalyst is a potential -- I'd argue expected -- approval of its inhaled insulin product Afrezza. Unfortunately, that's still months away, in April 2014.

Fortunately, it looks like MannKind will be able to get to that point and beyond. The biotech more than tripled its cash reserves during the quarter from $28.5 million at the end of the second quarter to $93.8 million at the end of September. And after the quarter ended, the company received another $45 million from warrants that were exercised.

MannKind looks like it has plenty of cash to get to the FDA decision next year, given its guidance of burning between $30 million and $36 million per quarter. The dilution has been costly to shareholders, but getting to the end of the marathon is the ultimate goal.

Billion-dollar questions remains unanswered
Investors looking for an update on the bigger question of who will eventually market Afrezza didn't get any meaningful update on the process of looking for a marketing partner.

When might the results of the search be announced?
"We are not yet prepared to suggest the date for completion," CEO and Chairman Alfred Mann said on the call.

Well, is it going to be before or after the FDA decision in April?
"I would not make a commentary on that one because then I'm speculating," President and COO Hakan Edstrom said.

What kind of structure are we looking at, because it'll affect the cash situation?
"I think it'd be premature to just speculate on the terms of that kind of a partnership," CFO Matthew Pfeffer said.

Have a backup plan if you can't find a global partner?
"We have several very, very aggressive potential partners and a number -- quite a large number of others that have inquired. But we haven't really followed up with them," Mann said, referring to the potential to divvy out regions to multiple regional partners.

Guessing game continues
From the sound of it -- and it's best to take Mann with a grain of salt -- a partnership is likely, but the timing and structure of the deal (or deals), will likely determine which way the stock moves on the news.

If MannKind can land a big pharma partner with a substantial amount of upfront cash, it'll be a huge endorsement. I continue to think the diabetes partnership of Bristol-Myers Squibb and AstraZeneca would be a good fit. The companies bought diabetes specialist Amylin together and now have a handful of diabetes drugs that they co-market. Having two companies to share the long-term investment should make the risk more palatable.

If MannKind can't snag Bristol-Myers Squibb and AstraZeneca or some other big pharma and it has to settle for some small specialty pharma, investors aren't going to be happy.

At this point, an investment in MannKind is a bet that Mann can follow through on his hype. When and how that's going to happen is still unknown.

Back to waiting.

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