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Wider-than-Expected Loss at MannKind

Zacks Equity Research

MannKind Corporation’s (MNKD) loss of 17 cents per share in the third quarter of 2013 was wider than the Zacks Consensus Estimate of 14 cents, but narrower than the year-ago loss of 22 cents per share.

Quarter in Detail

MannKind did not generate any revenues in the third quarter of 2013. However, the company recorded revenues of $35000 in the year-ago quarter.

Research and development (R&D) expenses increased 7.2% to $27.3 million in the reported quarter. The rise in R&D expenses was primarily due to higher non-cash stock compensation expense, which was partially offset by lower clinical trial expenses.

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 and type II diabetes.

Last month, MannKind resubmitted the New Drug Application (:NDA) to the U.S. Food and Drug Administration for Afrezza in adults suffering from type I or type II diabetes. The NDA resubmission was on the basis of positive results from the Afrezza clinical development program and also from two phase III studies, Affinity 1 (type I diabetes) and Affinity 2 (type II diabetes).

General and administrative expenses increased approximately 73.6% in the reported quarter to $17.5 million. The increase was primarily attributable to higher non-cash stock-based compensation expenses.

Our View

We expect investor focus to remain on the approval of Afrezza. A final decision from the U.S. regulatory body on the approval of the drug is expected by Apr 15, 2014. MannKind is expecting a feedback shortly from the FDA regarding its NDA. The management stated that for the time being the company’s primary focus will be on supporting the FDA’s review.

Meanwhile, we are concerned about the company’s over dependence on Afrezza. Any setback related to the diabetes candidate will be catastrophic for MannKind.

MannKind, a biopharma stock, presently carries a Zacks Rank #4 (Sell). Stocks such as Actelion Ltd. (ALIOF), AMAG Pharmaceuticals, Inc. (AMAG) and Isis Pharmaceuticals, Inc. (ISIS) are well placed in the pharma space with a Zacks Rank #1 (Strong Buy.

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