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Recent Tsunami of Insider Shares Purchased: A Prelude To Mannkind Partnership or Acquisition

July 19, 2014 | About:

360 Catalyst Keys

  • The prior day's massive insider shares purchased lend support to investor's sentiment that Mannkind would finalize potential buyout or partnership negotiation soon, and this would unlock significant value for shareholders.
  • Given that CVP Juergen sold significant shares prior to the 2010 and 2013 binary events yet Dr. Juergen purchased more than $1.2 million during Thursday, July 17 2014 which casted the VP's confidence regarding unfolding events going forward.
  • Despite concerns about funding and dilution, Dr. Al Mann, CEO and Founder, put his money where his mouth as he bought shares at the market and also loaned Mannkind his own money at favorable terms.
  • By closing the deal with a potential partner, Mannkind would have access to more capital, robust marketing as well as sales force to ensure a successful launch for Afrezza. Even in the worst-case scenario, Mannkind neither landed a partner nor getting bought out, investor should realize that Doctor Mann is a billionaire serial entrepreneur philanthropist, who will do whatever it takes to ensure Afrezza's success.
  • Mannkind has been improving its balance sheet, including the reduction of both short terms and overall liability. Nonetheless, critical key for Mannkind is Afrezza's market performance, and research showed that Afrezza has highly favored odds in becoming a powerful blockbuster.
  • Oral diabetes medicine indeed offers convenience. However, neither oral nor other injectable drugs are insulin per se. Consequently, they could not be used to treat Type 1 diabetes. Additionally, when Type 2 diabetes progress to advanced stage due to suboptimal glucose control, the pancreatic B-cell would not longer produce insulin, thus, limited any drug beside insulin as treatment.
  • Intensively data driven research strongly supports Afrezza market success, as one top selling blockbuster to create pressure on other competing drugs, given Afrezza has super rapid acting kinetics to mimic the working of healthy pancreas, easy to use, user convenience, removing needles' stigma, and improving overall compliance. Current SP of $9.80 versus our calculated $38 PS based on ultra conservative CMA valuation presents Mannkind as the investing opportunity of a lifetime.

What is the Recent Story on Mannkind

As shareholders anticipated yesterday of news pertaining to Mannkind's acquisition or partnership, a Tsunami of insiders purchased yesterday in the after hours invigorated Mannkind bulls poised to charge ahead. Mannkind Corporation (MNKD) is a small company based in Valencia, California, focusing on the development and commercialization of medicine to treat diabetes. The catalytic event of either a buyout or partnership, would unlock tremendous value for shareholders. Nonetheless, Mannkind has not issued any press releases since the Afrezza's FDA approval on June 27, 2014.

Interestingly, Mannkind filed eleven 4-Ks with the Security Exchange Commission (SEC) in the AH trading on July 17, 2014. The tide of unanimous insider stock accumulation, left investors pondering whether the event was a prelude to the ultimate reward of a buyout or partnership

Source: Open Insider

Investors should note that that Corporate Vice Present (VP), Doctor Marten Juergen, sold significant shares prior to the 2010 and 2013 binary events indirect, evidencing VP Juergen's diligence in risk deleveraging. It could also be the VP's previous disappointment at Nektar Therapeutics, the maker of another inhale insulin, Exubera, delivered through a bong and also lacking the superior kinetics intrinsic to Afrezza. Though considered a failed drug, Exubera was still able to recognize $200 million revenues for Pfizer. Despite Exubera inferiority to Afrezza, readers should be cognizant that the science pioneered at Exubera indeed contributed toward the development of Afrezza.

That being said, I was stoked as I was combing through the 4-Ks and saw that Dr. Juergen did not sell a single share in his $1.2 million shares purchased. Hence, these facts support investor's sentiments that Mannkind could finalize either a buyout or partnership deals any time going forward, now that insiders already built shares. As elucidated in my previous article, Mannkind shareholders are expecting major candidates, including Elli Lilly, Merck, Novo Nordisk, Pfizer, Roche, GlaxoSmithKline, or Johnson and Johnson.

How is the Stock Trading Recently

Perhaps Thursday's 4-Ks filing echoed an incoming tide in the affairs of Mannkind, because Mr. Market has been more optimistic in quoting Mannkind shares. During the July 18, 2014 trading session, 8.5 million shares traded hands in the range of $9.25 to $9.80 and closed with 5.5 percent gained at $9.80. During the past 52-weeks, shares traded from $3.80 to $11.48 having an average volume of 11.8 million shares.

Source: 360 Biotech

Tell Me More About The Company

Mannkind has a market cap of $3.81 billion with 388 million common shares outstanding. Mannkind's lead drug, Afrezza was FDA-approved on June 27, as treatment indicated for both Type 1 and Type 2 diabetes.

Revolutionary in its ability to mimic the action of healthy pancreas, Afrezza is delivered through a tiny second-generation Cricket inhaler called Dreamboat immediately prior to mealtime. Further, it's imperative for readers to understand that Mannkind's proprietary Technosphere is an innovative drug delivery platform, having vast potential applications to deliver additional drugs. The Technosphere platform packaged drugs into a unique powder formulation, enabling fast drug delivery into the lungs' circulation, thus, bypassing the "first pass effect" characteristic of oral drugs.

The Dreamboat is available in different colors, simple to use, convenient, aesthetic appealing. As mentioned, Afrezza has superior kinetics enabling it to be superior to competitors. Despite many oral or injected anti-diabetes medications being available such as metformin, Victoza, Byetta, Avandia and etcetera, they are not insulin per se. Though oral medications are convenient to use, they are not insulin and could not replace insulin in general. These drugs undergo different mechanisms but they all have a common end point – improving insulin sensitivity to lower blood sugar. However, oral medicines work, if and only if, the pancreas is still making insulin. Given Type 1 diabetes predominantly affect young patients and these patients do not make insulin, oral medicines are indeed obsolete.

Pertaining to Type 2 diabetes, pancreatic Beta cells (or B-cells) increase insulin production during the "honey moon" phase as the pancreas compensating for the lowered insulin efficacy due to increased insulin resistance. Unfortunately, pancreatic B-cells eventually become fatigued and die, thus, stopped all insulin production. This explained the fact that the American Diabetes Association (ADA) is pushing for early insulin treatments to save the pancreas. Hence, this should favor healthcare providers such as MD, DO, NP, or PA to prescribe Afrezza over competitors. It's important to reiterate that Afrezza ease of use, patience centered, and superior kinetics would improve patients' compliance, thus, reducing the striking annual $245 billion spent on treating diabetes complications.

What About The Fundamentals

Given Afrezza has characteristics of an elite blockbuster –potentially procuring revenues surpassing the Illustrious Lipitor –Mannkind is fundamentally sound because the company's success is directly dependent on Afrezza. Further, Mannkind also exhibited reducing trends in both current and total debts.

Source: 360 Biotech

While Mannkind might appeared to have dilution concerns, the company actually only issues shares that are truly needed to raise capital needed for Afrezza's success. In assessing the big picture, Mannkind only increased 34 percent shares counts (from 289 million shares to 388 million shares) during the past several quarters to complete its huge Phase 3 Affinity Trials. This was not to mention Mannkind had to tie up loose end for Afrezza approval and preparation for its launch. It is luxurious to have a billionaire CEO and Founder to reassure shareholders that if cash is needed, CEO Mann would provide the company loans at highly favorable terms.

Similar to the Oracle of Omaha Mr. Buffett, CEO Mann, also "put his money where his mouth is" by purchasing most shares at the market price. Needless to say, the serial entrepreneur CEO has not sold a single share of his majority stake in the striking 45 percent insider ownership, which voted high confidence in the company prospect going forward.

Source: Open Insider

What is The Bottom Line for Investors

Based on 360 Biotech, Afrezza is poised to capture the enormous $29 billion insulin market, of which $9 billion constitute rapid acting insulin, and growing rapidly to reach $45 billion by 2020. The intelligent investors could take advantage of this "once in a lifetime" opportunity, as Mr. Market quoted Mannkind shares only $9.80 PS. This is a mouth-watering bargain is significantly lower than the $38 valuation calculated using highly conservative CMA. Investors can rest assured that CEO Al Mann would successfully navigate to capture the incoming tides for Afrezza blockbuster market entry.

The bottom line is that recent share accumulation by insiders, notably, corporate VP Marten Juergen as a risk averse and prudent investor purchased $1.2 million is likely a prelude to the favorable unfolding event. Investor should also note that I could not guarantee 100 percent accuracy due investing research's dual natures of art and science. As the final note, investors need to be realistic and convicted in holding Mannkind shares regardless of market fluctuations or whether buyout or partnerships indeed occur soon, or if occurring at all. Whether a partnership or buyout deal would close ultimately depends on Doctor Mann. We trust that the captain would make the right choice for loyal shareholders like the ADCOM patient advocate, Mr. Eric Fenar, and his daughter, Leila.

"Integrity, Ingenuity, Essence, and Essentially All Else Follows"

About the author:

hvt2107
I have the background as an MD and a researcher. I am currently the Chief Medical Analyst for Retail Investor 360 and I host my internet show 360 Biotech With Doctor Tran. I am also a contributing author for Seeking Alpha.

Visit hvt2107's Website


Rating: 5.0/5 (1 vote)

Voters:

Comments

jonmonsea
Jonmonsea premium member - 4 months ago

Well-written, thank you.

mm1523
Mm1523 - 4 months ago

Very much appreciate your articles. They are well written and always a good read. For the past 5.5 years I have been a investor in MNKD and accumulated many shares, warrants, and options during the rollercoast ride of the stock. I now control 125,100 shares of stock with substantial gains. I have been thru two CRLs, relentless negative false articles by shorts and their cronies (you know who they are right Adam?) manipulating the stock, and a hostile FDA at the ADCOM. But, I have held strong and tried to avoid the negativity but it has been stressful and made for some sleepless nights. Your positive articles have at times lifted my spirits when I began to question my investment in the company. I believe the company will be sold outright or at the least, Afrezza will be sold with MNKD licensing the use of the Technospere technology. I believe very soon all investors will be handsomely rewarded and I will be the benefit of many millions of dollars. Thanks for your continued efforts and I will look forward to your next publication.

dubbyao
Dubbyao - 4 months ago

Although as a shareholder I want MNKD to do well, I can't believe you can't read a Form 4. The insiders bought these shares thru options and many sold from half to all of them.

Thomson acquired 30,000 shares @ $1.69 and sold all at $9.41

Pfeffer acquired 229K shares @ $0 and sold them all at $10

Dianne the "disposal queen" Palumbo sold hers too.

Your boy Juergen acquired 247K @ $0 and sold 120k @ $10.

Hardly the zealous insider enthusiasm you disingenuously make a case for.

hvt2107
Hvt2107 - 4 months ago

@Jonmonsea I am glad you enjoy the article. Thank you!

@Dubbyao The management as a group predominantly accumulated shares and either sold an insignificant fraction or sold a tad bit for TAX payment purpose. It's imperative to read the data and to look at the overall big picture. You can read about the power of using option to accumulate stakes in the company from managers like Carl ICahn. You could also research how companies sell some shares for TAX purpose. More importantly, you should be be nice and readers will take u more seriously.

@Mm1523 I noticed over the years that the majority of the Mannkind longs are highly intelligent and patience shareholders. The Mannkind investors held on to their stock and voted faith in Doctor Alfred Mann with conviction, especially when Mr. Market persistently shouted colorful names as well as forecasted doomed scenarios for the Affinity Trials, negative Advisory Committee (ADCOM), or the FDA would not approved Afrezza. I filtered out the noises by exercising diligence, patience, and rechecking the Mannkind story!

Before the data release for the Affinity Trials, Mr. Market stated that since the confidence interval (CI) set by the FDA was 0.4, there is no way Afrezza would post positive trial data. As an analyst who is data driven, I experienced tremendous stress. So I consulted an expert scientist working for Forest Lab and with the help a Toxicology research specialist, Tammy Pham, I ran 360 in-house statistics and the results were reassuring indeed. Hence, my trust in the merit of diligence, camaraderie, as well as, the power of small units friends/intelligent Mannkind shareholders fighting side by side, rather than the inconsistency and fickle nature of Mr. Market.

I also trusted Dr. Alfred Mann, CEO and Founder, calling for shareholders to be patience when the stock was selling around $2. Dr. Mann brought up the fact that his previous company Minimed experienced the similar dilemma with the stock was at $1.75. Dr. Mann called for investor to have faith and patience in Mannkind during the conference call. Investors who listened to Dr. Mann would have experienced the bonanza profit when he sold the stock at around $175. Having patience is a prelude to market outperformance.

Pertaining to the ADCOM, Mr. Market went on strike again, and declared that Afrezza would be doomed! His negativity caused sleepless nights for many shareholders. Needless to say, real experts at the ADCOM all voted with the near unanimous votes to approve Afrezza for both Type 1 and Type 1 diabetes. Hence, investors need to take it with a grain of salt whether Mr. Market's shouting is reflective of his mastery of statistics, medicine, science, valuations ... or did he just Neely wheelied forecast doomsday to grind a buck, and whether he is "pumping or bashing" for WS crooks to fatten his pockets while robbing good folks their retirement savings.

Again prior to the FDA approval, Mr. Market brought dark cloud to enshroud any Mannkind's hope for receiving super rapid acting insulin, Afrezza. I fought hard to dispel their myths and once again, Mannkind prevailed in the midst of negativity.

Now as Mannkind shareholders are awaiting for the ultimate rewards, Mr. Market loads up his forces and strike hard. As a lone author in the midst of WS giants, I traversed the distance, dug up graves of genius who walked the Earth before us like Ionian Greek Pythagoras, hoping to once again be the guiding light for Mannkind, long and strong! More importantly, I voiced my support for the management of integrity, who is working diligently to bring Afrezza to million of patients suffering from diabetes, ... be it via partnerships, sold out, or organic lauch! As the final notes, it's important for shareholders to have conviction, patience, looking at the big picture (via comprehensive data analysis), and the resiliency to not be trap in "the captivity of the negativity."

Best of luck!

dubbyao
Dubbyao - 4 months ago

I'm well aware of selling for tax reasons, but in your title you decided to refer to it as "insider shares PURCHASED" which is not quite correct when those shares were given to them for free or bought at a deep discount. It seems to me you were trying to imply that a favorable partnership/buyout deal was imminent and insiders were buying as you pointed to their filings, which was not at all the case. It was options distribution.

Perhaps you should have phrased it differently, such as "insider shares accumulated". Big difference.

hvt2107
Hvt2107 - 4 months ago
The central thesis concisely stated, now that insiders built significant shares the odds indeed improved significantly for Mannkind investors' sentiment, one that is reflective an incoming tide of ultimate reward, namely a buyout or partnership.

Whether the mechanics of building shares either via direct market purchased or option should not affect the thesis. Simply stated, now insiders built shares they are likely to close whatever negotiations going on behind closed doors because all shareholders INCLUDING insiders would benefit from the unlocked values of Afrezza.

I illustrated the thesis using both "accumulation" as well as "purchased" in the article to accurately reflect some insiders who purchased shares via option exercised while some accumulated via options reward. To digress for illustrative purpose, even Carl Icahn (Trades, Portfolio) used options to accumulate shares as he built stakes in companies before major showdowns. Leveraging on option is a practice employed by sophisticated investors and funds, to not only hedge risks but also profit from being acquired or to acquire other companies.

It's important for investors to note that nearly all companies' insiders accumulate shares via options. Hence, it's rather luxurious for investors to have the billionaire philanthropist, Doctor Mann who predominantly purchased shares via direct market because the CEO and Founder "puts his money where his mouth is" and took punches for shareholders.

The bottom line is that you and I may disagree on the semantics or word choice –perhaps due to our different level of understanding and/or the amount of research we put into the company –but we could certainly agree on the fact that Mannkind is indeed a prudent investment or else why would you be a shareholder. I'll keep your inputs in mind regarding the choices of semantics. Thank you and sleep well my friend!

jeanlucrocco
Jeanlucrocco - 4 months ago

Dr. Tran - thank you for being such a strong MNKD advocate in a sea of madness!

The one thing I'd ask is weren't the awarded 'options' part of the post-approval incentive we shareholders voted for in may?

Also, could you be kind enough to shed your insight into % stock ownership? Per May's DEF 14A listing stock ownership there are 3 entities which appear to be Dr. Mann's control which when added up equaly ~76% MNKD stock ! Does Dr. Mann really control this much stock?

With 20% institution means we're fighting over 5% of shares? If so, how on earth can the 30% shorts ever cover?

Thanks again & best to you & yours!!

- JR -

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