MannKind Corporation (MNKD) Mild Share Dilution Worth It for Better Short-Term Liquidity, Says H.C. Wainwright

Oren Livnat believes MNKD's revised debt arrangements will be advantageous to the Afrezza launch.

Share dilution can sometimes spook investors, but it appears most on the Street agree that in the case of MannKind Corporation (NASDAQ:MNKD), restructuring debt was a key move that freed up some short-term liquidity edge in the company’s favor.

H.C. Wainwright analyst Oren Livnat falls under the latter category, believing that the drug maker strategized well in delaying its $10 million debt arrangement of a $60 million Deerfield facility loan from the end of the month to the middle of January with likelihood to convert the cash to equity. Additionally, MannKind has pushed its convert maturity from 2018 to three years later.

While the analyst acknowledges slight dilution risk with these two plays, he overall believes the risks are well worth the reward, reiterating a Buy rating on MNKD stock with a $7 price target, which represents a close to 86% increase from current levels. (To watch Livnat’s track record, click here)

Livnat boils down his bullish case for better near-term liquidity into two key points: “(1) we see the tradeoff as worth it to ensure cash is better used to support the Afrezza launch; and (2) with the recent $60M raise at a higher price that we’d expected, MannKind’s fully-diluted share count is still lower that we’d original modeled. Separately, MannKind announced that its Brazilian partner, BIOMM (BIOM3:BZ; not rated), submitted the Afrezza dossier—including the data reflected in the new FDA label—and we expect a 12-18 month review including a facility inspection.”

“Brazil is a top-5 diabetes market, and could potentially be a material contributor but we do not yet include it or any other exU.S.s ales in our estimates. The BIOMM deal terms aren’t disclosed, but we know it is not a profit split, so MannKind should see revenue from day one if and when it is launched. We look forward to additional exU.S. partnerships in the near term. Lastly, MannKind simplified pricing across its SKUs to standardize pricing per insulin unit,” contends the analyst, who underscores a meaningful price boost for titration packs along with an over 30% lift in gross price per prescription.

Additionally, according to TipRanks, out of 4 analysts polled by TipRanks in the last 3 months, half are bullish on MannKind stock while are half are bearish. The 12-month average price target stands at $4.84, marking a 28% upside from where the stock is currently trading.

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