Before anyone else decides to pile into a MNKD position before the likely July 15th approval, or is planning on only getting into the stock after we know for sure the FDA is going to give Afrezza the green light, here's a warning to keep in mind: MannKind Corporation shares are likely to implode following the Food and Drug Administration's approval.
This is NOT a judgment call on the drug. This isn't a judgment call on the company either. This is a judgment call on how emotional and distracted traders can get from time to time, and we only have to look at Antares Pharma Inc. (NASDAQ:ATRS), Avanir Pharmaceuticals Inc. (NASDAQ:AVNR), and VIVUS, Inc. (NASDAQ:VVUS) to see how drinking the proverbial Kool-Aid ultimately punished anyone who bought rather than sold ATRS, VVUS, and AVNR right when the news seemed to incredibly encouraging.
Avanir Pharmaceuticals
Remember back in 2010 when Nuedexta was all the rage as a budding treatment for pseudobulbar affect (PBA)? AVNR shares were running up to that October 29th approval date, and jumped when the FDA finally gave it the thumbs up. Shares started to lose value the very next day, and didn't stop falling until they had more than been cut in half.
In the interest of completeness, Avanir Pharmaceuticals shares are now above their post-Nuedexta-approval peak. They took three years to get there though. That's three years of wasted time.
VIVUS
Remember how sure the market was back in early 2012 that weight loss drug Qnexa - now Qsymia - was going to change the world, generate hundreds of millions in annual revenue, and reward VVUS shareholders with life-changing gains? The story was so good, some people were proverbially going for broke in an effort to make as big of a bet as they could (and were ferociously, publicly defending their trade while simultaneously squashing anyone who dared to disagree). Yep, after nearly tripling in price leading up to the June-2012 approval, VIVUS shares peaked that same day and have since lost nearly 2/3 of their value.
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Antares Pharma
By October of last year, Antares Pharma shares had made a 30% advance (from April of that year) as traders were jockeying to get into the stock before the October 14th PDUFA date for injectable Otrexup, for arthritis and psoriasis. ATRS shares gained another 20% or so that day on the heels of the news, and then spent the next month and a half losing about half of that peak value.... doling out some real anguish for anybody who waited for the "all clear" signal to get in.
To be fair, Antares did perk back up again to the $5.00 mark in January of this year, giving investors one last shot at a decent exit. If they didn't act quickly though, that's when the pain really got tough - ATRS shares fell back below $3.00 by April as reality started to sink in.
Again, this isn't what some will inevitably call a "hit piece" on MannKind Corporation. Afrezza is a compelling drug/delivery mechanism, and should prove to be marketable. The stock and the underlying company value has become separated though - because of a scintillating story - and the stock has taken on a life if its own. Sometimes that can work to your advantage. It's an unpredictable situation though, and all too often sparks a "buy the rumor, sell the news" outcome.
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