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MannKind Contemplates Reverse Stock Split

MannKind Corp. plans to hold a shareholder meeting later this week to approve a reverse stock split that will avoid a delisting from the Nasdaq. The Valencia biotech also announced in a conference call earlier this month that it has a new strategy for selling inhalable insulin Afrezza, the company’s only commercial product. MannKind will take marketing in-house rather than using outsourced pharma representatives to sell Afrezza to doctors. During the call, Chief Executive Matthew Pfeffer said for months the company has worked on initiatives that he hopes “might naturally fix the stock price problem” and avoid the need for a reverse split. However, the shareholder vote on Feb. 24 would authorize the board to conduct a split if necessary to avoid delisting. The deadline to get the price above the Nasdaq threshold of $1 a share is March 13. Shares closed Feb. 15 at 53 cents. “We cannot and we will not allow the company to be delisted,” Pfeffer said. “That would be disastrous for the company on many levels.” Cory Kasimov, an analyst at J.P. Morgan in New York who follows MannKind, wrote in a Jan. 11 report, after Pfeffer outlined the new sales plan at an investor conference, that it entails hiring about twice as many employees as the number of independent reps – a potential expense for the company. However, “doubling of the sales force is not expected to double expenses because of overhead,” he wrote. “MannKind continues to express confidence in its ability to commercialize Afrezza on its own.” According to Bloomberg, of the four analysts who cover MannKind, three have “sell” ratings and one has a “hold.” Kasimov rates it “underweight,” meaning he expects it will underperform the pharmaceutical sector as a whole this year. Kasimov also noted that MannKind has “more aggressive consumer advertising planned that includes TV ads.” During the conference call, Michael Castagna, chief commercial officer at MannKind, said while the television commercials are in production, the company is putting its limited resources into online marketing and social media. For the third quarter of 2016, MannKind reported net income of $126 million because of a nearly $162 million payment from Sanofi, the large French pharmaceutical company that MannKind formerly partnered with to market Afrezza. MannKind took over the marketing of Afrezza on July 25 and from that date until the end of the quarter on Sept. 30 sales totaled $600,000. The company announced Jan. 9 that it received another $30.6 million from Sanofi. Pfeffer said in the conference call that reverse stock splits have a bad reputation because most companies do it under financial duress, a condition that doesn’t apply to this situation because of the Sanofi cash infusion. “Both Afrezza and MannKind are here to stay,” he said. “If we eventually find we need to reverse split the stock, we will be doing it from a position of strength, not weakness.”

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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