Top Picks 2020: MannKind (MNKD)

01/10/2020 5:00 am EST

Focus: HEALTHCARE

Nate Pile

Editor, Nate’s Notes and The Wagmore Advisory Letter

Given how things are shaping up for MannKind (MNKD) as we begin 2020, it is once again my Top Pick for speculative investors in the coming year, suggests Nate Pile, editor of Nate's Notes.

For those not familiar with the company, MannKind has a proprietary drug delivery platform called Technosphere that allows it to deliver a wide variety of drugs to the body through the lungs rather than via pills or injections (thus allowing for an often much faster onset of action). 

The company's lead product is Afrezza (inhalable insulin), and it is already approved by the FDA for use by both type 1 and type 2 diabetics. 

Though still quite small relative other mealtime insulins, sales of Afrezza have been growing steadily for the past couple of years,

Doctors need to see results in a small group of patients before they'll start expanding use of the new therapy into the rest of their practice, and the reality is that this "trial" period often takes 12-18 months when it comes to managing diabetes.

And, given the manner in which new ways of managing diabetes have been adopted in the past, I believe the odds are good that 2020 will be the year that Afrezza finally starts to gain some meaningful traction in the marketplace.

Along with Afrezza, MannKind is also developing a Technosphere-based version of treprostinil (along with another undisclosed molecule) with its partner United Therapeutics (UTHR).

It also has an agreement in place with privately-held Receptor Life Sciences (RLS) under which RLS is developing cannabis-based products utilizing the Technosphere platform.

And though they are not yet licensed to partners, MannKind is also working on inhalable versions of a number of interesting compounds, most notably epinephrine (for anaphylactic shock), sumatriptan (migraines), and tadalafil (erectile dysfunction).

Thanks to a very aggressive group of short sellers who have flooded the market with 40 million "extra" shares over the years, MannKind's market cap has been beaten down just over half of what it was when the company first came public back in 2004.

At that time, the company did not have an FDA approved product nor anywhere near as much data about the potential for Technosphere to revolutionize drug delivery in a number of different categories.

While it remains to be seen how things will actually play out (short squeezes are far less common than people like to believe they are), I do find it encouraging that all of those short sales represent pent up buying demand for roughly 40 million shares when those short sellers eventually close out their trades. MNKD is a strong buy under $5 and a buy under $10.

(Editor's note: Nate Pile's Top Pick for 2019, Catasys (CATS), has risen 71%. The company has developed a proprietary data analysis platform to help individuals in healthcare plans better manage chronic conditions. He The advisor says, "This is a rapidly growing field. I believe there is still plenty of upside ahead.)

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