Post by savzak on Mar 3, 2015 14:07:03 GMT -5
www.forbes.com/sites/kenkam/2015/03/03/goldman-downgrades-mannkind-to-sell-should-you-follow-their-lead/?utm_campaign=yahootix&partner=yahootix
Mostly just a re-hash of what he's written recently...
This morning Goldman Sachs downgraded MannKind to a sell with a target price of $3 due to the disappointing launch of Afrezza. MannKind shares are currently trading down about 10% from yesterday. Nate Pile named MannKind his best idea for 2015. Should you follow Goldman’s advice, or Nate’s.
Nate Pile is a Marketocracy Master and the Editor of Nate’s Notes which Mark Hulbert ranks #1 for the last 15 and 10 year periods, and #2 for the last 1, 3, and 5 year periods. Nate’s Marketocracy portfolio was up almost 34% last year but perhaps more impressively he has beaten both Warren Buffett and the top performing U.S. mutual fund manager for the last decade. Click here to review Nate’s track record.
The main reason initial sales have been disappointing is that Afrezza’s label does not allow Sanofi (MannKind’s marketing partner) to claim it as being superior to existing insulin pens. The best that can be said is that Afrezza is not inferior.
Those who thought Afrezza sales would rocket out of the gate were expecting that Sanofi would be able to say that Afrezza offers significant medical advantages to traditional insulin pens.
While Afrezza has a different pharmacokinetic profile than other insulins, it has not yet been proven that that this will result in reduced complications. It’s going to take years of additional clinical experience with Afrezza before doctors can tell whether there is indeed a reduction in complications.
In the meantime, Afrezza can still succeed as a non-inferior alternative to needles. The appeal of “no needles” rates high with patients but not high enough with doctors to get them to proactively switch patients from successful therapies to a non-inferior one just to avoid needles.
A survey of 100 diabetics on Research Now’s diabetes panel, found that 91% of respondents were not yet aware of Afrezza. Of the 9% who had heard of Afrezza before, none were willing to argue with their doctor even if it mean’t they would have to wait a year to try it. None of the 100 respondents felt that the “no-needles” benefit was enough to warrant changing doctors to a more amenable one.
I gained access to this research from Vincent DeRobertis, Senior Vice President of Global Healthcare at Research Now, and reported the results to Forbes readers in “Afrezza’s Initial Sales Create Buying Opportunity.”
My Take:
When choosing between competing views on a stock, I find its almost always better to pay more attention to the person with the better track record. I don’t know the track record of the Goldman analyst who made the recommendation to sell, but I do know Nate’s track record and I am comfortable following his lead.
Buying high potential biotech stocks after disappointing initial sales has proven to be a sound strategy for more than one Marketocracy Master. Here’s why. At this point, the risk that the drug doesn’t work has been resolved and the risk that the FDA won’t grant approval has been eliminated. The risk has been reduced to marketing, a normal business risk with which lots of people have firsthand experience, while the upside is as big as ever.
MannKind’s current valuation already assumes Afrezza will be fairly successful. Any disappointment is going to result is big price drops like todays. I still think Afrezza will be a success, especially after MannKind and Sanofi have the data to prove that Afrezza reduces complications, but its not going to happen overnight.
If you have a 3 year investment horizon, you have enough time for an investment in MannKind to work out. I like MannKind’s risk-reward profile and I would be willing to bet the farm on a portfolio of 10 stocks with the similar risk-return profiles. But I would not bet the farm on MannKind alone.