Mannkind is a pharmaceutical company developing inhaled insulin (Afrezza) to treat diabetes. The author proposes a long position in Mannkind due to its undervaluation from a previous FDA denial and competitors' failures. The author believes the stock price will rise in anticipation of a potential FDA approval of Afrezza in Q1 2014. Mannkind also presents acquisition opportunities for large pharmaceutical companies seeking new diabetes treatments. However, the stock could decline significantly if the FDA denies approval again.

1. Mannkind (MNKD)
Aloke Desai

2. Proposal
 Long position ($20,000) in Mannkind (MNKD)

3. Thesis
 MNKD undervalued because of previous FDA
denial and failure of competitors
 Capture rise of price because of anticipation of
FDA announcement in Q1 2014
 M&A possibilities by large pharmaceutical
companies

4. History
 Founded in 1991 by Alfred Mann, didn’t take
present form until 2003
 Pharmaceutical company producing:
 AFREZZA- inhalable insulin
 MKC1106-MT- immunotherapy drug for
advanced stage melanoma
 MKC1106-PP- immunotherapy drug for
prostate cancer
 FDA rejected Afrezza on January 19, 2011 asking
for two more clinical trials

5. Afrezza
 A low-cost inhalable insulin
powder aimed at treating type
2 diabetes
 In late stage clinical
trials, possibly over
 Drug was originally scheduled
to be approved Dec 29th, 2010
 FDA announcement was
delayed and ultimately denied
on Jan 19th, 2011

6. Competitors
 Pfizer (PFE) tried to release a form
of inhalable insulin in 2007 with
Exubera
 Took it off the market before its
release in Oct. 2007 because of
many problems:
 Risk of lung problems
 Size of a can of tennis balls
(cumbersome to use)
 Dosage can’t easily be adjusted
 Long time to take into effect (49
minutes)

7. 1/17/13
11/17/12
9/17/12
7/17/12
5/17/12
3/17/12
1/17/12
11/17/11
9/17/11
7/17/11
5/17/11
3/17/11
1/17/11
11/17/10
9/17/10
7/17/10
5/17/10
10
3/17/10
1/17/10
11/17/09
9/17/09
7/17/09
5/17/09
3/17/09
1/17/09
11/17/08
9/17/08
7/17/08
5/17/08
3/17/08
5 Year Trend
12
10.48
9.64
8
7.16
6
5.05
4
2
0

8. Valuation Measures
Valuation Measures
Market Cap
582.25M
Enterprise Value (Feb 25, 2013) 737.63M
Trailing P/E
N/A
Forward P/E
N/A
PEG Ratio
0.03

9. Financials
Revenue vs Net Income
Revenue vs Cash Flow Operations
100,000
100,000
0
0
-50
80,000
-50
80,000
-100
-100
60,000
60,000
-150
40,000
-200
20,000
0
-250
-300
Revenue
Cash Flow
40,000
-150
-200
-250
20,000
-300
0
-350
Revenue
Net Income

10. Income Statement
Dec 2012
Revenue
Dec 2011
Dec 2010
Dec 2009
Dec 2008
0.04
0.05
0.09
0.00
0.02
Cost of Goods Sold
0.00
0.00
0.00
0.00
0.00
Gross Profit
0.04
0.05
0.09
0.00
0.02
45.47
40.63
40.31
53.45
55.34
(146.96)
(140.54)
(152.50)
(209.78)
(305.77)
(1.19)
1.54
(0.73)
0.05
(0.06)
(21.62)
(21.81)
(17.34)
(10.38)
2.79
(169.77)
(160.80)
(170.56)
(220.10)
(303.04)
(0.41)
0.00
0.00
0.00
0.00
Net Income After Taxes
(169.37)
(160.80)
(170.56)
(220.10)
(303.04)
Total Operations
(169.37)
(160.80)
(170.56)
(220.10)
(303.04)
(169.37)
(160.80)
(170.56)
(220.10)
(303.04)
SG&A Expense
Operating Income
Nonoperating Income
Nonoperating Expenses
Income Before Taxes
Income Taxes
Total Net Income

11. Effect of FDA in 2011
12
$10.05
10
8
6
$6.05
4
2
0
12/1/10
12/8/10
12/15/10
12/22/10
12/29/10
1/5/11
1/12/11
1/19/11
1/26/11

12. The Mann
 Alfred Mann, founder, supports the company through subsidiary, The
Mann Group
 Recently purchased 40M worth of shares
 Has stated that he cannot continue to fund company if Afrezza is not
approved
Buy (P) / Sell Filed Date
(S)
Insider
Relationship
Share Amt
Unit Price
Total Proceeds
P
12.21.2012
Mann, Alfre
d
CEO
4M
$2.59
$10 M
P
1.27.2011
Mann,
Alfred
CEO
700K
$7.15
$5,005,000
P
1.13.2011
Mann,
Alfred
CEO
700K
$8.73
$5,111,000

13. M&A Implications
 With Pfizer and GSK losing patents this year,
MNKD could be a possible target for either of
them to acquire
 Pfizer estimates that inhalable insulin could be a
$2B market

14. Risks
 FDA could deny Afrezza again
 If so, it’s possible stock could tank
 If FDA were to approve it, Afrezza could hit $10+
based on 2010 results

15. Ways to Hedge Risk
 FDA announcement expected in Q1 2014
 Sell principal and 10% of earnings on Jan 2, 2014
and keep rest to move based on decision

16. Questions