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This Analyst Sounds the Alarm on MannKind Corporation (MNKD)

What do you do when a company has "more debt than assets?" Maxim's Jason Kolbert just lost patience with MNKD.


MannKind Corporation (NASDAQ:MNKD) shares have shed almost 9% in value ever since releasing a rocky fourth quarter showcase yesterday. The company’s lead asset rapid-acting inhaled insulin Afrezza so sorely underwhelmed expectations that the company just lost a cautious analyst to the bearish camp.

Maxim analyst Jason Kolbert cheekily notes that not even Dr. Phil could help improve Afrezza’s suffering revenues after that dismal fourth quarter.

The fourth quarter saw MNKD hit the bottom of the already lowered guidance barrel looking for $6 to $10 million in the back half of the year; MNKD posted a mere $4.5 million for the fourth quarter. “The results are clearly disappointing given management’s robust marketing plans they discussed to launch patient awareness campaigns using ‘Dr. Phil and Ellen’ shows,” writes Kolbert.

In reaction, the analyst downgrades from a Hold to a Sell rating on MNKD stock while setting a new $1 price target, which implies a close to 67% downside from current levels. (To watch Kolbert’s track record, click here)

Throughout 2017, the company “burned” right through a whopping $120 million, and $33 million in the fourth quarter alone, which leaves only $44 million left on the balance sheet. By Kolbert’s calculation, this is barely over 1 operational quarter. Just today, the MNKD team revealed it will be turning to an at the market (ATM) transaction for $50 million.

“Given the stock price level and low volume, we believe such a vehicle is likely to do more harm than good. We note that the company increased its authorized shares (again) from 140M, to 280M and we expect additional capital raises, where we assume dilution,” warns the analyst.

For 2018, MNKD has set full year revenue between $25 made $30 million, which aligns with the analyst’s expectations. Considering the company angles for $100 million plus in operating expenses for this year, Kolbert anticipates a capital boost coming in the near future. Moreover, with just how “lackluster” fourth quarter earnings were, “terms will likely be less attractive versus the prior raise.” This means shares are about to feel the heat of what Kolbert anticipates will be a “very dilutive” next capital raise.

Overall, the odds now look bearish from where Kolbert is standing: “MannKind’s poor performance in the quarter and the need for cash may set up a downward spiral. We see a company with more debt than assets, so in essence the company could be forced to reorganize in bankruptcy proceedings. Combined with assuming multiple dilutive raises over the next several years in our model puts valuation at an extremely distressed level, at $1 per share.”

TipRanks is showing bullish opinion is fading fast on this biotech player. Out of 4 analysts polled in the last 12 months, only 1 rates a Buy on MNKD stock, leaving 3 issuing a Sell. The 12-month average price target stands at $2.85, marking a 4% loss potential from where the stock is currently trading.