This week, MannKind (MNKD) announced a global partnership with United Therapeutics (UTHR) to develop and commercialize Technosphere treprostinil (TreT) dry powder inhalation for pulmonary arterial hypertension (PAH), as a potential next-generation of United’s $400M Tyvaso inhalable treprostinil. For MannKind, the deal brings in $55 million up front ($45M for TreT plus $10M for work on an undisclosed DPI candidate), up to $50 million TreT development milestones, and low-double-digit royalties.
In reaction, H.C. Wainwright analyst Oren Livnat reiterates a Buy rating on MannKind shares, with a price target of $4.00, which represents a potential upside of 128% from where the stock is currently trading. (To see Livnat’s stock picks, click here)
Livnat commented, “This deal, in our view, represents additional validation of MannKind’s underappreciated DPI and delivery platforms beyond Afrezza. Crucially, the deal brings in non-dilutive financing, raises the floor on MNKD’s valuation, and offers a new path to potential long-term upside from here even if Afrezza never reaches the potential we think it deserves. MannKind Skeptics understandably focus on current Afrezza trends and cash burn, but if the company found it absolutely necessary to dramatically scale down on Afrezza, the current $340M enterprise value (including UTHR up-fronts) could potentially undervalue the TreT royalty opportunity alone”
“Our $4 target is based on a DCF reflecting only U.S. Afrezza sales, assuming a strong sales ramp in 2019 and beyond, and peak potential approaching $500M. We do not yet explicitly include any Technosphere Treprostinil for PAH in our estimates as we are awaiting more development pathway clarity from MannKind’s partner, United Therapeutics […] MannKind had approximately $26M cash at end-2Q18, or pro forma $81M including $55M from United Therapeutics and $115M debt. By our estimates, the company will still need additional capital in 2019, and we conservatively model additional equity dilution, though it could come via debt and/or partner milestones,” the analyst concluded.