Why MannKind Corporation Popped Today

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What happened

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Shares of MannKind Corporation (NASDAQ: MNKD), a commercial-stage biopharma focused on inhaled insulin, rose as much as 13% in afternoon trading on Monday. Shareholders can largely thank two positive developments for the jump.

So what

First, MannKind announced that the FDA has OK'd an update to Afrezza's prescribing information. Here's a quick review of the labeling update:

  • MannKind will now be able to include study data that shows the time-action profile by dosage strength. The company will be able to show that the 4 and 12 unit cartridges of Afrezza have a first measurable effect after 12 minutes, peak after 35 to 45 minutes, and then returns to baseline after approximately 1.5 to 3 hours. 
  • The new labeling will provide clarity on the "Starting" and "Adjusting" mealtime dose.
  • The new labeling will include updates on pregnancy and lactation that conform to current FDA label guidance.

Here's what MannKind's CEO Michael Castagna had to say about this labeling change on a special investor call:

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Today is a pivotal moment in the history of the company because for the first time since launch, we will no longer have to say, "despite the faster absorption of insulin, the onset of activity was comparable as in Lispro," when we talk about Afrezza. This language really restricted our ability to truly articulate the PK/PD activity of the product.

Second, the company also announced that it was able to exchange 1.3 million shares of its common stock for all of the outstanding Series A and Series B stock purchase warrants that were issued in May 2016. CFO Steven Binder said this move will allow the company to access the full $50 million of its at-the-market facility. That's welcome news since the Series A and Series B warrants had previously limited the company's access to the facility to just $10 million. In Binder's words, this change provides "us with greater options for recapitalizing the company."

Given the two positive news items, it is easy to understand why traders are cheering on Monday.

Now what

Castagna had a few other upbeat tidbits to share with investors on the special conference call, including:

  • Sales of Afrezza have recently stabilized at over 400 prescriptions a week.
  • Castanga believes that the recent approval of Abbott Laboratories (NYSE: ABT) new Libre product will expand the market for Afrezza.
  • The first pediatric patient was dosed in a study last Friday.
  • The company is about to file for regulatory approval in Brazil, with more international deals in the works.
  • Novo Nordisk (NYSE: NVO) recently won FDA approval for its new ultra-rapid-acting insulin Fiasp, which Castanga believes will help the company get the word out about the risks of hypoglycemia associated with other mealtime insulins.

Given all of the good news, you might be asking why MannKind's stock isn't up more. The most likely answer is that shareholders know even more dilution is on the way. MannKind ended June with only $48 million on its books, which isn't much when compared to last quarter's loss of $35 million. With the warrant restrictions out of the way and the stock price up, MannKind is likely to act quickly on issuing stock to shore up its balance sheet.

While MannKind's turnaround continues to impress, I have a hard time getting excited about this growth story since a lot more dilution is coming. For that reason, I'm content to root for MannKind's turnaround from the sidelines.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.