MannKind Cuts 3Q Loss

MannKind Corporation’s (MNKD - Analyst Report) loss of 22 cents per share in the third quarter of 2012 was narrower than the Zacks Consensus Estimate of a loss of 23 cents. Loss during the quarter was also narrower than the year-ago loss of 31 cents per share.

Quarter in Detail

MannKind generated revenues of $35,000 during the third quarter of 2012, as against nil revenue in the year-ago period.

Research and development (R&D) expenses increased 10% to $25.5 million in the reported quarter. The increase in R&D expenses was primarily attributable to higher costs for clinical trial-related activities.

MannKind is primarily focusing on the development of its lead pipeline candidate Afrezza. Afrezza, an inhaled insulin, is being developed for the treatment of type I (MKC-171 study) or type II (MKC-175 study) diabetes. In October this year, the company completed the patient recruitment process for both studies. MannKind believes that it can complete both trials in the second quarter of 2013 and submit a new drug application in the third quarter of 2013.

General and administrative expenses increased approximately 5.2% in the reported quarter to $10.1 million. The increase was primarily attributable to a litigation settlement accrual, which was recorded during the quarter.

MannKind’s cash burn during the third quarter of 2012 was $29.9 million as compared to $24.7 million spent in the second quarter of 2012.

In October this year, MannKind closed an underwritten public offering of 46 million shares along with warrants to purchase around 34.5 million shares of its common stock. The company also entered into a purchase agreement with The Mann Group LLC, which is controlled by MannKind’s chief executive officer and principal shareholder, Alfred E. Mann.

We note that Afrezza received a second complete response letter (CRL) from the US Food and Drug Administration (FDA) in January 2011. While issuing the CRL, the US regulatory authority had asked MannKind to conduct two additional trials.

The requirement of additional trials has pushed up MannKind’s research and development expenses. Following the receipt of the second CRL, MannKind trimmed its workforce by approximately 41% and cancelled its insulin supply deal with N.V. Organon, a subsidiary of Merck & Co. Inc. (MRK - Analyst Report).

Our View

Currently, we have a Neutral recommendation on MannKind, which carries a Zacks #3 Rank (short-term Hold rating). MannKind is primarily dependent on the successful development of Afrezza and we expect investor focus to remain on it.