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Still Neutral on MannKind - Analyst Blog

We are maintaining our Neutral stance on MannKind Corporation ( MNKD ) with a target price of $2.50 following the fourth-quarter and full year 2011 results disclosed by the company.

Last month, MannKind released its fourth quarter and full year 2011 results. The Valencia, California-based biopharmaceutical company suffered a net loss of 30 cents per share in the fourth quarter, which was narrower than the year-ago loss of 33 cents per share. The narrower loss was attributable to lower research & development (R&D) expenses.

The lower R&D spend was primarily attributable to lower purchases of raw materials following the termination of the insulin supply agreement with Merck 's ( MRK ) subsidiary, Organon. Due to the termination of the deal, MannKind did not buy any insulin in the final quarter of 2011.

The deal was terminated following MannKind's receipt of a second complete response letter ( CRL ) from the FDA in January 2011 for its lead pipeline candidate Afrezza. Afrezza is an inhaled insulin for the treatment of type I or type II diabetes.

While issuing the second CRL, the FDA had asked the company to conduct two phase III trials with Afrezza, one in patients with type I diabetes (MKC-171 study) and the other in type II diabetes patients (MKC-175). Both trials are currently underway.

The requirement of additional trials is not good news for MannKind as its cash position is anything but strong. Management believes that the current cash balance and available credit facility will fund operations only until the fourth quarter of 2012 including the $80.6 million (net) raised in February 2012 through a public offering.

Any setback in the development of Afrezza could make it challenging for the company to raise additional funds. Inability to raise sufficient funds will jeopardize Afrezza's future.

Consequently, we expect investor focus to remain on the fate of Afrezza. We see limited upside from current levels until more visibility is obtained on Afrezza's approval process. This leads us to retain our Neutral stance on the stock.

MANNKIND CORP ( MNKD ): Free Stock Analysis Report

MERCK & CO INC ( MRK ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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