Why MannKind Corporation's Shares Rocketed Higher Today

By Markets Fool.com

What: A week after partner Sanofi announced the commercial launch of MannKind Corporation's inhaled insulin Afrezza, MannKind's shares surged by nearly 10% at one point earlier today before closing with a gain of just under 8%.

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Source: MannKind Corporation.

So What: Afrezza's circuitous route to FDA approval included an agency rejection in 2011 and ongoing debate over whether safety concerns would overshadow the convenience of inhaled insulin.

The often-contentious debate tilted in favor of bulls last year when the FDA approved mealtime use of Afrezza in combination with long-acting insulins such as Sanofi's top-selling Lantus.

Bulls were delivered another win late last summer when a co-marketing pact with Sanofi provided MannKind with much-needed financial flexibility. In that agreement, Sanofi agreed to pay MannKind $150 million up front and to advance $175 million to MannKind to help cover expenses. Sanofi also agreed to an additional $775 million in milestone payments to its new partner, through which MannKind received$50 million in January.

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Those payments have significantly improved MannKind's balance sheet, but the marketing might of Sanofi's diabetes sales force -- a team that turned Lantus into the second-largest diabetes drug by spending --could ultimately prove much more important to MannKind investors.

Now what: MannKind isn't out of the woods yet. The company's balance sheet is better, but still strained. MannKind's current ratio of 0.66 suggests it could still have trouble making good on its financial obligations if debtors come knocking.

Regardless, following Sanofi's launch of Afrezza last week, investors appear less worried that bill collectors are feeling antsy. If that proves true, MannKind shares could head even higher. Sellers are sitting on 33% of MannKind's shares short, and that could suggest that despite questions remaining over whether doctors and patients will flock to Afrezza, the MannKind rally might not be over.

The article Why MannKind Corporation's Shares Rocketed Higher Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.