*** The following is excerpted (with a few slight modifications and additions) from Issue #257 of Nate’s Notes and reflects our opinions of the situation as of 6/17/16. ***

First off, for those of you who did not read the most recent Inter-Issue Commentary, I want to remind you that yours truly got a nice write up on the Forbes website a few weeks ago, and if you have not yet done so, I encourage you to read the interview I did with Ken Kam from Marketocracy.com regarding my outlook for MannKind.  You can find that interview via the following link:

http://www.forbes.com/sites/kenkam/2016/06/01/top-equity-manager-still-believes-in-mannkind/

Next up, please enjoy the following discussion of the MannKind situation taken from the commentary and company write-up sections of the June issue of Nate’s Notes.

MannKind

Though you would never guess it based on the “flat line” action we have been seeing in the stock lately, there have actually been several positive twists in the MannKind story over the past couple of weeks… and, while I can’t tell you when these positive news items will eventually impact the stock price (good news is often ignored when stocks are trading at the “extremely bearish” end of the fear-greed spectrum), I can tell you that the data that was presented by the company at ADA this week turned out to be every bit as good as I hoped it would be in terms of providing new information for Mike Castagna and his team to take into the field as the rollout of Afrezza 2.0 gets underway (educators will start to be deployed roughly a week from now, with the main sales force gearing up for a mid-July relaunch of the product).

In particular, I believe it is extremely encouraging that the company now has official data showing that Afrezza clearly has a much faster onset and much shorter duration in the body that existing mealtime insulins… and this is important because it finally provides a scientific framework against which to build the case for an honest-to-goodness paradigm shift in terms of how patients think about managing their diabetes relative to diet and exercise.

The “faster in” side of the coin is important because, as stated many times before, as more and more people with T1 diabetes start to use continuous glucose monitors to watch their blood sugar levels in real-time, they are naturally going to want an insulin that is capable of addressing blood sugar spikes in real-time… and though Afrezza’s label does not yet say “ultra-rapid acting,” there is now data out there supporting this type of claim (and Afrezza is the only insulin that can make it).

And, of course, the “faster out” side of the coin is perhaps even more important because with existing mealtime insulins (which tend to have “tails” on the order of several hours), when, for whatever reason, patients don’t correctly match their dosing with their diet and/or activity levels around said meal, the “extra” insulin that is left lingering in the bloodstream several hours later can lead to hypoglycemia (low blood sugar), a condition that can be fatal… and, if you were not aware of this, it may help you understand why patients and doctors may have been hesitant to “tinker with their existing insulin regimen” (i.e. give Afrezza a try) without any supporting data, eh?

Those of us who have been following the story closely have known about the validity of the “faster in, faster out” properties of Afrezza for well over a year now based on the anecdotal evidence that was being provided by early adopters of the technology, but now that it is has officially been shown to be true,

a) it ought to silence the uninformed – but very vocal – skeptics who have been relying on outdated secondary data (from old studies that were not even designed to show faster onset and shorter duration, mind you) to support their bearish thesis,

and, much more importantly,

b) it will provide a much more positive and compelling story for doctors who are just now learning of Afrezza and starting to research it on their own (previously, most of the information they would encounter first was the very literature just mentioned in “a” above!).

And, speaking of anecdotal evidence of better blood sugar control, better A1Cs, less need to count carbs, etc., it continues to flow in on many fronts.  No – Mike Castagna and his team are hardly looking at a “slam dunk” in terms of being able to walk into doctors offices and generate new prescriptions with little or no effort; however, between the obvious immediate benefits that Afrezza provides… and the anecdotal evidence that will continue to grow via social media as more people try the product (and will eventually be converted into data via clinical trials)… thanks to the new clinical data, I now believe more strongly than ever that, at current prices, MannKind probably represents the most extreme example of a mis-pricing of assets that I have ever seen in my 28 years of following the sector (and the stock market as a whole, for that matter).

As always, please be careful about owning more than you can afford to lose if I am wrong, but provided you still have some room to average down, you are strongly encouraged to do so.

Top Picks (for new money this month)

All else being equal (i.e. you already own “pretty much everything” in the newsletter), my top picks for you this month are:

Cirrus Logic (CRUS) – though it has not broken out yet, Cirrus’ stock is one of the better acting in the newsletter this month, and if it does start hitting new highs, there could be a nice run in store for us.

MannKind (MNKD) – with the release of the data associated with the abstracts that were presented at ADA last week, my confidence has only grown that, at current prices, MannKind probably represents one of the best investment opportunities most investors will ever see in their lifetimes.

NVIDIA (NVDA) – NVIDIA’s stock continues to march to its own drummer, and, at least for now, it appears to wants to march higher.

MannKind

MannKind’s stock has been trading in an extremely tight channel following the announcement of the secondary offering last month, and it will be very interesting to see where the stock heads next once the battle between buyers and sellers at this price level finally runs its course.  Given that MannKind received the rights to Afrezza back on April 4th (right at the 90-day mark per one of the clauses invoked by Sanofi as part of the termination), it will be interesting to see if anything usual is announced on (or about) July 4th, which, of course, represents the 180-day mark cited in the other clause that Sanofi invoked as part of the termination… stay tuned (heh).  MNKD is a very strong buy under $2 and a buy under $5.