H.C. Wainwright Sticks with the Bulls on MannKind (MNKD), But Lowers Price Target on Sluggish Afrezza Adoption


MannKind Corporation (NASDAQ:MNKD) released its first quarter print for the year last night after the bell tolled, and while H.C. Wainwright analyst Oren Livnat sticks tight with the bulls, he dials down his target expectations. The company’s innovative asset Afrezza, a rapid-acting, inhaled mealtime insulin for Type 1 and Type 2 diabetes is experiencing a more sluggish-to-take-off ramp than Livnat anticipated.

On back of the quarterly earnings show, the analyst reiterates a Buy rating on MNKD stock while dialing the price target from $7 to $5, which implies a 184% upside from current levels. (To watch Livnat’s track record, click here)

Even with the price target cut, the analyst is upbeat for some “exciting data on tap” next month at the American Diabetes Association (ADA) conference. Meanwhile, Afrezza’s momentum will hinge upon physician awareness, anticipates Livnat, following a quarter where Afrezza revenue hit $3.4 million against his expectations for $3.5 million. The Street meanwhile had been betting on $4.2 million. Pull-through demand sales, not including channel inventory draw, which the analyst judges as “apples-to-apples” with his expectations hit $4.0 million. This number outclassed the analyst’s estimate on more robust than anticipated value per script, which spiraled past $600.

Physicians just need to see that “the proof [is] in the pudding,” or in other words, encouraging head-to-head efficacy coupled with safety data compared to injectables, continues the analyst. Livnat predicts this will start to cultivate market interest and then adoption. For now, considering current prescription trends, the analyst finds it smart to play it conservative in his expectations and estimate under the MNKD management team’s guide for the year; at least “for now.” Even with lower estimates, the analyst nonetheless maintains his conviction that Afrezza boasts massive potential that could scale beyond $500 million; and that this could down the line prove to be even a safe estimate.

Bigger picture, “We really believe in the innovation and value of Afrezza to diabetes patients, and do see it as the best meal-time insulin in a multi-blockbuster rapid-acting insulin (RAI) category. We believe MannKind is, with its limited resources, taking the best approach it can to build physician awareness and appreciation for the product […] MannKind hopes to make a big splash at the ADA conference in June where it will have an oral and poster presentation of important data showing improved time-in-rage on continuous glucose monitor (CGM) vs. market-leader Novolog, late-breaking data showing better safety (reduced hypoglycemia) than Novolog, and a symposium on inhaled vs. injectable insulin. We think Afrezza’s success will be a result of physician awareness that what makes Afrezza unique is less about just ease or convenience of inhalation vs. injection, but rather that it is actually a better mealtime insulin treatment than rapid injectables,” Livnat contends.

Overall, this company continues to be on “cash crunch time,” with operating cash burn hitting $22 million in the first quarter, closing out the quarter with $54 million with pro forma cash. Considering the maintained full-year guide calling for $90 to $100 million burn, the analyst bets on $73 million burn for the rest of 2018 believes Wall Street is very keyed into this biotech player needing further funding before the year winds down.

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