MannKind 'Facing Low Profitability And Delayed Profits' As Afrezza Ramp Fizzles, Goldman Says

MannKind Corporation (NASDAQ: MNKD) shares fell 5 percent Monday after JP Morgan downgraded the stock from Neutral to Underweight. The demotion followed last Friday’s earnings release, which disappointed many investors and analysts.

Jefferies analyst Shaunak Deepak maintained a Buy rating and $9 price target.

Analysts at Goldman Sachs reiterated a Sell and trimmed their price target from $3.00 to $2.00, to account for challenging headwinds.

The News

According to the research note, MannKind's share (Sanofi is a partner) of the Afrezza first quarter loss amounts to $12.4 million, “which was financed by a $175mn loan facility with Sanofi which now stands at $15.4mn. MNKD acknowledged that Afrezza sales were lower than expected and described plans to address certain headwinds including a black box warning on the label that requires spirometry testing and managed care hurdles such as prior authorization. Separately, management anticipates DTC advertising to begin this summer.”

The Implications

As Goldman Sachs has said in previous occasions, they believe MannKind “is facing low profitability and delayed profits based on a slow ramp of Afrezza, patient-driven market dynamics requiring heavy SG&A spending, and challenging deal terms with Sanofi.”

Concerned that Afrezza the sales targets it is required by MannKind (to cover milestone payments to Sanofi), the firm lowered its sales and earnings estimates. They now expect a net loss of $(0.28) per share for 2015, $(0.12) per share for 2016, and $(0.04) per share for 2017.