FDA Approval Already Priced-In

[slushy]

Hey BD,

Thanks for the praise, and I totally agree. Up to this point, I've done very little trading because of the "Black Swan" news that makes the price pop. And I would probably still be that way if they didn't make the comment that the partnership is 6-8 weeks, to which Matt said he wasn't as optimistic and it could be longer. Their recent retraction to me is because they realized they screwed up and gave too much away to the investors and are now trying to keep the speculation up.

In regards to the short interest, I don't believe it's because they believe in a failure of the the product or approval, but because of the labeling restrictions. I remember all too well the previous binary events we experienced, and on each one we have a build up on the rumor, and a mass selling on the news because there was some angle the bears could exploit. Put it this way, I invest in MNKD and the benefits of Afrezza, but I trade on the politics of the FDA and on the emotions of investors. I don't trust them to do the right labeling, I trust them to do the labeling that best protects their ass from issues that arise 5-10 years down the road. I'm more than happy to listen if someone can tell me a realistic scenario where the labeling is in our favor... but all I can see is the labeling being either negative or "seemingly" negative for us... enough that the price would drop and present a solid buying opportunity.

Put it this way... there are about 4 main ways this thing could go...

1) The FDA approves, good labeling for us, the stock gaps up to about $12-13 range
2) The FDA approves, bad labeling for us, the stock gaps down to about $7-$8 range
3) The FDA approves, partnership happens within the next few days, the stock gaps up around $20
4) The FDA rejects/delays, the stock gaps down to $4 (or lower)

I think those are the 4 major scenarios with price points that are in the ballpark. In my opinion, there's a very low chance the rejection and the partnership scenario happen... though I'd say it's more likely we get delayed then a partnership happens within days of approval (happy to hear differing opinions). That leaves us basically with the labeling scenario. As I said above, I don't see a way the labeling ends up good for us, especially not to the point of being a 50/50 split between the scenarios. Applying rough weights to the options shows that the most prudent course is to sell pre-FDA approval. The short term super upside is the least likely scenario, while if you sell you not only protect yourself against the "unthinkable" and put yourself into position to rebuy at a discount. Also, keep in mind that if you accept that partnership isn't just around the corner, you could always rebuy at a small loss just for the protection you get from not riding out a political decision that could reduce the stock price by 50% or more... To me, the most prudent investing strategy right now is to trade the stock short term.

[babaoriley]

"And, BTW, Matt's latest comments on partnership timing put the announcement at anywhere from a "few days" after approval to a few months, so that should make things all the more interesting. This entire scenario just screams "Short squeeze!" at me, and I'd hate not to be at the party when that happens!"

BD, haven't had a chance to listen to the latest, so thanks for pointing out Matt's "new" position relative to partnership timing. Seems as though someone talked to him about the effect of his words at the prior conference! As I wrote then, he gave the shorts a real life line, and has now tried to reel that in some.

Slushy, unfortunately, I agree with your post, but haven't wanted to be so blunt about it, I commend you, as did BD, for a very well written and reasoned post. I guess one thing I differ with you slightly on, is I hold out more hope than you for a more reasonable label from the FDA. Also, I'm hoping that we don't fall back very far from the spike which I still anticipate on approval, based on a "go" on both Type 1 and Type 2. Much bigger ballgame with Type 2 included.

For everyone else, based on writing style alone, you can see Slushy is smarter than the average bear (as in Yogi, not as in opposite of bull), but even so, there are others, undoubtedly not as erudite, who think along the lines he does, so that should help to explain price action in the next month or so.

[spiro]

OK, I will make a small concessation to the wolf type longs on this board. FDA approval may be already factored in for a below average label with difficult marketing restrictions and warnings. However, FDA approval is not even close to being factored in with a adequate or strong marketing label. If Afrezza receives an adequate label, you wolves will not see your preferred pull back for quite a while, until the partner hype disappears after the signing. Then technosphere contracts could  provide substantial additional pain for the shorts that were too stubborn to cover after FDA approval. But, it ain't approved until it's approved. 

[alcc]

Honestly, dear friends, if approval is priced in at today's price ($10-11), why did the price move from the high sixes post Adcom to today's? Approval wasn't priced in then, but it is now? Or was it priced in then, too, by some logic, according to the savants among you? But what has changed from then to now, other than passage of time? Did I miss any positive company disclosures? Is passage of time by itself positive? I can equally argue that silence from FDA augers bad news at least re labeling concerns, can't I? If so, then would a good label should propel the stock to $26.50 exactly at 10:00AM the day after approval is announced?

Why can't we admit as any rational person would that nobody knows how the "market" will move? Speculation is fun. But let's not take ourselves too seriously.

[slushy]

Baba - Thank you very much for the kind words. Trust me, I wish I could be more optimistic. But I remember too vividly the ups and downs of the past year, and how much wealthier I could be if I didn't talk myself out of playing the angles I was seeing with the run-ups we were experiencing. The only smart play of note that I made recently was buying in more at $4 the day before the AdCom when everyone was jumping ship because of the negative tone from the AdCom docs and the doomsday scenarios being pushed by the AFs of the world. The market was emotional then, and I believe it is emotional now with a price that I see as being driven by an assumption of approval and possibly an assumption of a non-negative label (I won't say a "good" label). Approval is highly likely... but that label being in our favor is just tough for me to swallow... and as I said, I'll have my finger on the button to rebuy back in if I don't see the market selling off.

Spiro - I agree, I don't believe the price is depicting an approval with a positive labeling. And if the label comes out in our favor, I'll scramble the best I can to get back in with minimal profit loss. But I don't find that to be a likely scenario, and since I see things weighted towards the stock price going down with the FDA approval, I find it's also a great chance for me to protect the profits I've gained thus far against any cataclysmic events (FDA rejections, delay, Al Mann going down, Matt saying something insane, etc...) And I 100% agree... it ain't approved until it's approved

[spiro]

There appears to be some serious competition going on in this message board for the Alpha Wolf position. IMO, the main contenders are the honorable Babaoriley, whose recent postings seem to indicate some muscular weakening, followed by the crafty veteran A1cc and the wiry Biotec, who is losing ground with his sporadic posting. Two young challengers, Slushy and the rookie Realisticview, must show more if they are to mount a serious challenge to the dominant veteran wolves. A1cc has been very aggressive and seems to want it more than Babaoriley and Biotec. Damn, I wonder if one of these guys is OPC? 

[BD]

If bulls "horn up", and bears "claw down", what do wolves do?

[alcc]

Moi? Bull, ok. But wolf?

[spiro]

They wear sheep's clothing. 

[alcc]

Dammit. My tail again. Hard to keep it tucked in, y'know.

[slushy]

Jun 18, 2014 13:46:18 GMT -5 alcc said:

Honestly, dear friends, if approval is priced in at today's price ($10-11), why did the price move from the high sixes post Adcom to today's? Approval wasn't priced in then, but it is now? Or was it priced in then, too, by some logic, according to the savants among you? But what has changed from then to now, other than passage of time? Did I miss any positive company disclosures? Is passage of time by itself positive? I can equally argue that silence from FDA augers bad news at least re labeling concerns, can't I? If so, then would a good label should propel the stock to $26.50 exactly at 10:00AM the day after approval is announced?

Why can't we admit as any rational person would that nobody knows how the "market" will move? Speculation is fun. But let's not take ourselves too seriously.

If you had no stake in the company right now, what would you price it at? Considering all the known variables and weighing all the outcomes, where would you put the stock price? I'd put it in the $8 range.

You could make the argument that the initial $4 to $7 jump in price the day after AdCom was the approval being priced in, so let's say that with nothing else happening the AdCom gets us to the $7 range. Post AdCom up until about mid May the stock sat in the low $6 range, and then started to climb up. The climbing up coincided with some positive news reports along with some stock upgrades. The upward movement also started to draw a lot of attention and from my perspective started a bit of a short squeeze. From May 9th to June 9th we had 16 positive days out of 21 (76%)... if I was a short I'd start to get pretty nervous. All of this going on gets emotions rolling and the stock ends up becoming worth more than it should be. This is why the adage "Buy on the rumor, sell on the news" is extremely pertinent to our current situation. In my opinion, the FDA approval has been priced in along with a non-negative label along with the stock being a bit inflated due to bullish emotions. And yes, the passage of time by itself absolutely changes the value of the stock. Otherwise all trading would stop except on the days of catalytic events such as quarterly's and FDA approvals. The passage of time allows for the emotions of traders to take over the movement of the stock, and sometimes you get lulls where the stock trickles down but basically goes nowhere out of boredom (see post-August last year), and sometimes you get movements like right now where there is a lot of anticipation for an event that will basically make or break an entire company.

All that said, the reason I give it $8 instead of $7 is because since then we've had commentary from management along with some increases in ratings (see new $16 price target). To me, management giving a target of 2 months post-FDA approval for a partnership along with some other random tidbits is worth $1 in the stock price (note that $8 is for the information, not the price for if/when partnership happens). Now that's for me personally, and obviously my $8 price is below the current market value. This is a factor when I'm deciding whether to sell, hold, or buy more, but only one of many.

And no, the FDA being silent does not lend itself to bad news. The FDA has little to no incentive to say anything up to this point or to release their decision early. Feel free to base your decisions on their silence, but I don't consider that to be a factor at all.

I don't claim to know how the market will move, but I do believe it will move a certain direction based on all the facts and speculation that I know. Using all information known to me is what makes investing different than picking a number on the roulette wheel and giving it a spin (unless you have a rigged roulette wheel). If you think the market is totally random and you're entirely at it's mercy, then I'm not sure why you're investing versus taking your money to Vegas. Blackjack has decent odds and you get free drinks.

[spiro]

Slushy, i applaud your efforts to be proclaimed the Alpha Wolf, but the gap between you and older wolves is just too big. But the $8 value you place on MNKD was a commendable effort for a wolf puppy. . 

[ezrasfund]

I have to agree that approval is largely baked into the price. On the other hand the details of both the label and the partnership will have an effect. I am a long term investor in MNKD trying to take some profits along the way, so for the most part, I am just holding on to my shares and options, and hoping for a spike of irrational exuberance or a short squeeze.

But what do the insiders say? Al did mention during the annual meeting that "hopefully" investors will be very pleased with the coming news, which I take to mean that the share price will increase substantially.

On the other hand, I again ask you to look at Matt's recent sales, which are unlike those of other insiders. His are standing orders to sell at a given price, as his current sales as well as past sales are always at an exact dollar amount. This month's sales, which would have been expected to be after FDA approval when they were placed were at $10.00 and $11.00 exactly. His sales have caught these momentary spikes before as well. This is not to say that he does not have additional sell orders all the way up. I'm guessing he does. But to me it says that $10/share is a reasonable level to start trimming your position.

[tanner1212]

slushy,

Good post, and you make a few cogent points. That said, it is impossible to know what MNKD will do. You state that historically the stock ran up into these events and then sold off....Duh! They got CRLs!

Partnerships (particularly a profit sharing arrangement), will skyrocket this stock. I do believe what Matt has stated about there being multiple partners on the table. All of them waiting for the label. I think it is too risky to try and "trade" this stock. If you've done well, sell half and let the profits ride is always a prudent option.

I do agree with you on the FDA. Money is very powerful. The fact that people are shorting this stock and hoping the product is denied is sickening. So much misinformation is spouted in Seeking Alpha and on news websites to try and negatively color this company. It's a sad state of affairs when all this company is trying to do is to improve the lives of those with Diabetes.

[slushy]

Spiro - I have no intention of being the Alpha Wolf, very content in my role as the Lone Wolf, or for those Game of Throne fans, the Young Wolf.