MannKind's Accounting Is 'Murky,' MLV Analyst Says

MLV & Co. commented on MannKind Corporation (NASDAQ: MNKD) following the company’s Q4 earnings report. The firm maintained a Hold rating and $7 price target.

Analyst Arlinda Lee noted that the company reported in line results but looked for data on NRx and TRx for Afrezza, as well emerging products in the pipeline, to be near-term catalysts for the stock.

Lee commented that the Afrezza inhaled-insulin product had only been on the market two weeks and that “impediments to the uptake of Afrezza include physician re-education and the necessity for prospective patients to make an appointment with a doctor for a pulmonary function test.”

The analyst note highlighted the company’s accounting and described it as “murky.” Lee explained that until the company’s profit-sharing partnership with Sanofi SA (ADR) (NYSE: SNY) becomes cash-flow positive, MannKind is unable to book upfront milestone revenues.

Lee thought investors should not expect to see revenues on the P&L until 2016 due to the accounting rules and limited availability of information on the product launch.

The company did mention the possibility that SNY, due to its reporting schedule, may disclose Afrezza sales earlier than MannKind.

Investors would receive more information as "early activity from the profit-share, including the recently earned $50 million in milestones, will be booked on MNKD's balance sheet, with some clarity on sales, profits or losses to be provided via MD&A disclosures in SEC filings,” according to Lee.

The $7 price target was based on a sum of the parts probability-weighted discounted earnings analysis. The firm expected fiscal 2015 to result in a loss per share of $0.28.

MannKind recently traded at $6.84, up 1.8 percent.