MannKind Corporation: Dilution Is in the Cards

As MannKind spends precious cash, it moves closer to the next capital raise (a.k.


MannKind Corporation (NASDAQ:MNKD) could be sent to dilute shares in a significant manner, warns Maxim analyst Jason Kolbert in a research note released today. Should you avoid MNKD? As far as the analyst is concerned, the answer is clearly yes. The analyst rates MannKind a Hold, without providing a price target. (To watch Kolber’s track record, click here)

MannKind’s shares were volatile last week, hitting $3.80 on January 25 (over 40% jump), before retreating back to $2.79 the day after. “We see no good fundamental reason for the move and believe as the company continues to spend precious cash, they are moving closer to their next dilutive raise,” Kolbert commented.

On December 13, MannKind’s shareholders approved an increase in the number of outstanding shares of its common stock from 140 million to 280 million. Put simply, “This makes sense as the company needs to raise capital again, but given the fall in the stock we would expect such a raise to be very dilutive,” Kolbert opined.

Kolbert reminds investors that the company guided to the low end of the previous range, and estimated $30-$32M cash burn in 4Q17 which basically means the company may be “out of cash” in 1Q18. This is consistent with our model and as such, raises concerns regarding the company’s ability to field a salesforce and initiate and maintain a TV / Radio marketing campaign to raise patient awareness. It’s our experience that these campaigns need to be long and properly funded, and take time to have an impact. Such a campaign given the company’s limited resources seems unlikely.”

Overall, the majority of the Street sides with the Kolbert’s cautious take on the biotech player, according to TipRanks analytics. Out of 4 analysts polled in the past 12 months, 2 are bearish on MannKind stock, 1 is bullish, and 1 remains sidelined.

 

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