But why continue this astronomical short float when there are so many catalysts that could cripple them? All over a small biotech company?!?!?! Pre Afrezza licensing and FDA approval the games though ridiculously manipulated were probably an easy money maker, but now all it would take would be 1 catalyst that could crush them. I've done my due diligence and am comfortable with my investment in MNKD but I just can't get their current angle. They are much smarter individuals than myself but I mean am I giving them too much credit? The pessimistic side of me still says they have inside knowledge on a slow Sanofi strategy for Afrezza or a major roadblock like not being able to obtain the desired Insurance coverage.
kbrion77,
I think I can answer your question.
First, it pays for shorts to continuing shorting because they know that they have an overwhelming supply of available shares loaned to them by longs who are willing to loan out their shares for shorting in return for double digit interest rates, rates that sometimes can reach as high as 60%. Remember, no shares can be shorted without a long deciding to lend them.
Second, absent any really powerful positive or negative events, MannKind is and will continue to be in the hands of traders who profit by pumping the stock up and then sell at the top. They then drive the price per share down and buy shares again at the bottom. They do this over and over again. If you look at a chart of the last two years, you'll see that MNKD was bought at around $5 and sold at $6 six consecutive times.
Those numbers may change for the time being, perhaps trading between $3.75 and $4.75 until a decent positive news event, i.e.. EU approval, but no event will likely be able to sustain a rally. Likewise, no trader will want to see the p/s lowered so much that they catastrophically drive down the volume. Hence, we get a trading range.
Traders know that only one thing can break a continuos cycle of pumping and dumping and that is a dynamic change in the current paradigm. In the case of MannKind, that change would have to be success in the market place, or, at least enough success to be able to demonstrate that the "likely" success of Afrezza will soon be at hand.
Catalysts, while positive, are not intrinsic game changers. Not even FDA approval or partnership with Sanofi were powerful enough positive catalysts to prevent the return of a shorting thesis. The only positive catalyst powerful enough to be responsible for a sustained and permanent end, or large diminishment, of shorted shares will be strong sales of Afrezza.
I believe that Afrezza is a game changer and that the inhaled insulin will replace injection insulin. But, that's a mighty large paradigm shift to be initiating in a powerfully old paradigm. In particular, here are the pillars of that paradigm:
1. Insulin is a multi billion dollar industry and the two powerful companies that control that industry will not simply go quietly into the night. And, they have a war chest of billions of dollars that they can use on behalf of their cause, i.e. FDA "designed" clinical trials that won't allow Afrezza to be shown as a superior insulin, money for hedge funds that will short on their behalf with an eye towards keeping MannKind from becoming a darling child of Wall Street, and money for continuous mass promotion and marketing of their own products.
2. Endocrinologists have been trained in a procedure and method for more than thirty years. Does anyone really think that they are going to abandon what they know overnight? Seriously. It's not going to happen, especially without that needed FDA endorsement of Afrezza as a being superior to injection insulin. The early adopters may know best but their reports are not based on clinical studies. Therefore, most doctors will not find early adopter's findings compelling enough to outweigh the inertia in which those doctors wallow. In short, we need a new study from Sanofi that will show Afrezza as a superior insulin.
That being written, there are, and will continue to be, doctors who learn about Afrezza, and through social media, more and more of those doctor's patients will want to try Afrezza. The best doctor's will figure out for which of their patients Afrezza will work best. Eventually, those first patients will let their doctors know that Afrezza is truly superior, come clinical trial or study or nothing. The results will make themselves clear. But, again, this success will take at least a year to begin and another year to establish itself.
3. Insurance companies are not immediately allowing new drugs to enter their system as Tier 2 category medications. It will likely take a year, or so, to get Afrezza into Tier 2. Therfore, again, sales will be slow until that happens.
4. This last foundation is about the diabetic community, itself. I'm possibly being most speculative on this point but it could be possible that a great number of T1s are simply used to injections and will not find a need to change. I saw a number of those sentiments written in various diabetes forums when Afrezza first entered the market last february. However, I think this may be an example of old dogs not wanting to learn new tricks.
Perhaps, younger members of the diabetic community may be more open minded and interested in change. In regard to T2s, well, that population is huge, over 90% of the entire diabetic landscape. I'm sure less than 1% of that population have heard of Afrezza, so far. It will take a large, sustained, and successful Sanofi promotion and advertising campaign, at least running for a couple of years, before a significant percentage of the T2 population understand the value Afrezza will bring into their lives.
Sorry for the length of my reply. But, I hope that I have been helpful.
Best wishes,
RS
PS: Having written the above statement, I still believe that MNKD will likely trade closer to $10 than $5, YTD, and that today is a wonderful time to add shares to one's position. If I am correct about next years p/s then shares bought today could return over a 100% return by this date, next year.
