Active Biotech Stock: A Look at Mannkind Corp

Shares of MannKind Corp. have been on a wild ride over the past year. Most of this volatility is the result of emotionally-charged retail investors pushing the stock past realistic valuation levels. This stock serves as another glaring example as to why it’s generally a bad idea to follow the crowd when investing in biotech stocks.

MannKind Corp. (NASDAQ MNKD) is the latest cult biotech to go belly up and investors/gamblers should use it as a prime example as to why these types of stocks are in fact dangerous.

Since signing the long-awaited partnership to market its newly approved inhaled insulin product Afrezza about a week ago with Sanofi (NYSE SNY), MannKind shares have fallen approximately 40% from their former highs. What’s particularly informative about the nature of MannKind’s supporters is that they were claiming that the stock was ready to double-or perhaps even triple, following this news.

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MannKind Corporation (NASDAQ MNKD) signed a $925 million worldwide licensing agreement with Sanofi SA (ADR) (NYSE SNY) (EPA:SAN) on August 11. The French drugmaker already has five principal products in diabetes. However, its top-selling diabetes drug Lantus will lose patent protection next year. Lantus is sold in more than 120 countries, generating $7.6 billion in annual revenue.

MannKind released its second-quarter results on August 11. The company reported a net loss of 19 cents a share compared to Brinson Patrick’s forecast of 13 cents in Q2 losses. Operating expenses rose to $69.8 million, largely due to non-cash stock compensation of $30.5 million. MannKind spent $37.3 million on R&D activities. Brinson Patrick has now raised its full-year 2014 operating expense estimate from $174.4 million to $199.7 million.

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Sanofi will pay MannKind $150 million upfront, and the remaining $775 million will be paid in multiple milestones based on Afrezza sales between 2015 and 2025. Although the Stock does not look in a good shape, it would not be entirely prudent to stay completely away from the stock. To wait and watch might be the best option in the current situation.

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