FDA Approval Already Priced-In

[liane]

Welcome aboard stevedc! very good comments.

[spiro]

Slushy, will we get a pullback if a $50 a share buy out is announced a couple of days after approval? The wolves and coyotes will be howling in pain on that day, along with their short friends. I do not disagree with taking some profit at this stage, but that will be an individual decision that each of us will have to make. But I would not assume that a major pullback is coming immediately after an FDA approval. Any pullback could be small and very short lived, particularly if the short interest is still around 68 million. It's all about the label, with a good label, Afrezza and maybe MNKD is gone. Small piss ant companies do not take mega drugs to the market.  But it ain't approved, until it's approved. 

[babaoriley]

More great discussion on this thread! Good point and counterpoint stuff.

Spiro, if this stock remains at or above $10 from now until fDa Day, the short interest will rise.

As I write, some withered and beaten shorts are covering and other new, fresh-faced, AF-loving, shorts are being born.

[savzak]

Here’s my 2 cents worth (my opinion on this is overpriced even at 2 cents)

1. There is a distinction between (a) whether approval is “priced in” a the current PPS and (2) whether the stock will sell off on the news when approval is announced. Approval being “priced in” does not imply a sell off, only that we won’t run up much further on the announcement.
2. While I think there is some possibility that approval is priced in to some extent, I would expect us to trade up some on an adequate label for two reasons. First, even if “priced in”, there should be some discount to the current PPS for the possiblitly of a further delay or for rejection. That discount may be fairly small, but it should be factored in. Second, once the label is known another uncertainty will be removed. To the extent the current PPS is discounted by the market because of the lack of certainty with regard to the label, that discount should be removed, giving new cause for excitement/enthusiasm over the partnership/buyout prospects.
3. A sell off scenario might be initiated by adverse eventualities in the items I already mentioned (delay, rejection, weak label).
4. I do not see a “sell the news” scenario if the label is ok because of the points made in paragraph 2. I know that “sell the news” happens all the time for apparantly inexplicable reasons but I don’t see it here because there will be too much working on the long side. Short interest is likely to still be substantial at the time of the announcement. Any manipulated sell off will be expensive and difficult to maintain given what is obviously a very fast growing market interest in MNKD as an investment. All the fundamentals will align with the long thesis. The stock has based solidly in the $10 to $11 range. Approval with an adequate label can only be interpreted as clearing a hurdle and setting the stage for the next level of exucution of the business plan. Approval with an adequate label increases the risks on the short side and decreases them on the long side.

All of that being said, obviously, the label is important for the short term pricing of MNKD after approval.

All of which begs the question—what will the market interpret as an “adequate” label?

[babaoriley]

"4. I do not see a “sell the news” scenario if the label is ok because of the points made in paragraph 2. I know that “sell the news” happens all the time for apparently inexplicable reasons but I don’t see it here because there will be too much working on the long side. Short interest is likely to still be substantial at the time of the announcement. Any manipulated sell off will be expensive and difficult to maintain given what is obviously a very fast growing market interest in MNKD as an investment. All the fundamentals will align with the long thesis. The stock has based solidly in the $10 to $11 range. Approval with an adequate label can only be interpreted as clearing a hurdle and setting the stage for the next level of execution of the business plan. Approval with an adequate label increases the risks on the short side and decreases them on the long side."

Savzak, spoken as a true lieutenant of General Spiro!! LOL!   You state as bolded above, then give the (rational) reasons why there will be no sell off.  I cannot dispute your reasoning, and, in fact, agree with it wholeheartedly, however, your bolded language trumps all! 

I've done some more bull call calendar spreads.  I've sold July 25 calls (as close after PDUFA date as possible), strike price $9, and taken the proceeds and bought January 2015 calls, $10 strike.  The downside is limited, because if the stock rockets by July 25, I can close out both positions and break close to even, maybe lose a bit.  But, if the stock drops after approval "for apparently inexplicable reasons," to under $10, I can close out the July 25 $9's by buying them back, and I'll be sitting with a bunch of January $10 long calls, which I will have bought fairly cheap. 

By the way, the bid/ask spread on the July 25 options is pretty brutal, but I think the above is a reasonable play. 

[slushy]

Savzak - Great write up, and as baba stated, you yourself admit that "sell on the news" happens for seemingly no logical reason. I'm not really concerned how much FDA approval is built into the price at this point because labeling presupposes approval, therefore the only real catalyst that will drive the price in the short term is labeling. My case the entire time has been that I believe the FDA is more likely to give us labeling and concerns that will fall into the bearish camp, just as they did with the adcom docs. To boil it down...

1) Good label = price goes up
2) Bad label = price goes down

We can quibble about the details of what "good" and "bad" mean, but I think most people on the board would agree with those 2 statements in their general form. As I've made pretty clear, I think we'll end up on the "bad" label side of the question... couple this with managements original admission of 6-8 weeks minimum for partnership, and I find little incentive to let my profits ride through FDA approval. If I thought the partnership still had a decent probability of happening within a few days of FDA, then I may ride it out... but I don't see that happening. I could very well be wrong, but I have no qualms about locking in guaranteed profits (at a very good ROI as my first buy was at $2) with the potential of picking up another 20% on the pull back (I think $8 is a realistic minimum target with a "bad" label).

I feel like I'm talking in circles at this point, so I'll end it with that. Great discussion, and I wish everyone the best of luck with whatever plays they make.

[babaoriley]

I think everyone's position is pretty clear on this point. As always, will be interesting to see how it plays out, and if, as so often happens, what actually happens is a surprise to most!

[spiro]

It amazes me that the wolves and coyotes still don't get it. An FDA approval with or without a strong label will validate the real winner, TECHNOSPHERE. I care less about a temporary pull back on profit taking. Within month's , if not weeks of Technosphere approval, MNKD will start announcing contracts that will blow the shorts away and sicken  the coward wolves and coyotes. But it ain't approved until it's approved. 

[slushy]

Not sure why protecting profits is cowardly... Hopefully I'm holding a good deal of shares when your eternal optimism pays off.

[mnkdfan]

Great discussion board members. I would love to hear from Slushy and the board what their definition of a "good" and "Bad" label would look like. I have seen the Victoza warning label and can't imagine a worse possible label and yet the drug sales are in the $billions. I can see a label with exclusion of the smokers, COPDs, and folks with lung disease. Warnings about unknown long term affects to the lungs,.....along with standard cautionary message associated with new drugs hitting the market. What additional restriction that you folks have seen in similar drugs that would be so damaging that the stock would be knocked back to $8.00?

As for me, I too think the FDA approval is somewhat baked in to the current price but not fully. I tend to have similar opinion as that of Rockyp and that we could get a small bump up-ward if we stay at the current $10.50-11.00. We would unlikely get the typical sell on FDA news with even a larger partnership news pending. Having the FDA uncertainty removed could finally trigger the massive short hedging to finally cover and push the stock higher.

Your thoughts are much appreciated.

[babaoriley]

Slushy, it takes more guts to sell as you plan to do than to hold, as others do. But even others that do plan to hold, may sell a teensie-weesnie bit of their holdings if we get a spike on approval. I think we will, but it will be maybe an hour long at most.

But, when a good part of the biotech investing world becomes aware of Technosphere, as Spiro deftly suggests, that will be a huge plus for MNKD, and I can only hope the "wolves" will have feasted heavily on the sheep by then and be long since on their way!

For now, "Technosphere" is more like something out of Hollywood, "Technicolor," or maybe a bubble in which a scientist studying global warming rides. To me, anyway, "Technosphere" is not named in any way that suggests what it is or does. I'm thinking Al needs to work on that. As long as it's not eventually called "Spiro's Folly," we'll be fine!

I'm hopeful that we will have some contracts to boast on related to Technosphere as quickly as Spiro suggests.

[spiro]

Babaoriley, you are definitely the Alpha Wolf and King Coyote. It's the first time I have ever heard of the same person holding both titles at once. If I recall correctly, you were also howling a similar tone when MNKD was around $6.00.  LOL  But I am noticing some signs of an apparent weakness in your negative optimism.   But, it ain't  approved until it's approved. 

[Deleted]

Of course, we all know exactly what Technosphere is:

en.wikipedia.org/wiki/TechnoSphere 

[babaoriley]

avodadro, that's great! And that's exactly what it sounds like! I remember having no idea what it was for the longest time, when years ago a friend of mine told me Al Mann was acquiring it. I sure hope it's worth what Spiro thinks it's worth, cuz we will all be very happy campers in that event.

We held in there, today, stock-wise. Still folks are covering and keeping things level.

[chmith27]

Jun 19, 2014 13:34:23 GMT -5 spiro said:

It amazes me that the wolves and coyotes still don't get it. An FDA approval with or without a strong label will validate the real winner, TECHNOSPHERE. I care less about a temporary pull back on profit taking. Within month's , if not weeks of Technosphere approval, MNKD will start announcing contracts that will blow the shorts away and sicken  the coward wolves and coyotes. But it ain't approved until it's approved. 

what does the group think technosphere will be used for outside of prandial insulin?  it has to be for a disease process that is treated as an outpatient and requires very fast onset of action to be effective.  I don't see inhaled narcs as being significant as we already have intranasal fentanyl and the onset of oral meds is already pretty fast.  plus if you are that bad off in pain you probably have a paramedic on the way with an IV line with your name on it. or maybe you are a cancer patient with a mediport already in for IV meds. cardias issues?- same thing with an EMT and IV coming to take you to hospital.  nausea and vomiting- now i can see that.  we already have zofran (ondansatron) oral dissolving tablet, but i can imagine how an inhaled antiemetic could be helpful (the rectal route also exists for drugs like phenergan (promethazine) but often these folks are leaking out that end too).  technosphere won't be helpful for HTN nor high cholesterol.  someone had mentioned factor replacement for bleeding diatheses like the hemophilias and maybe this could be an application- but that's a very specific and small population and would be many years down the line at best.  anaphylaxis could benefit- but there is already IM epi-pens.  i like the inhaled epi as well but i think that could already be accomplished with straight epinephrine as it is one of the meds that can be administered down the endotracheal tube if needed (i don't know the absorption and maybe technopshere may augment this considerably).  but true anaphylaxis is pretty rare and i don't know how much money could be made off of this indication.  seizures- nope.  stroke- nope.  heart failure- no.  in almost any patient i can think of where a faster onset of action is needed- that patient is already getting an IV- and let's face it IV is always better than inhalation (outside of direct pulmonary needs, asthma/copd, etc).  i know this has already been discussed but talking about technosphere like it is a panacea for disease has failed to impress me on any tangible, large scale level outside of prandial insulin.  speculating on technosphere's uses has a positive effect on the pps and will help me financially in the short term.  but the real value of technosphere has yet to be specifically explained in any thread i've seen.  i know someone is going to want to pipe up about the pain meds and i'm telling you it's not going to be a big deal, obviously imho.  i once thought that technosphere must be the big winner here and then over the last month i got to thinking..... why?  i'm sorta with slushy. i'm taking some off the table at 12 (hopefully) and letting half ride through pdufa and once partnership occurs i'm all out for a while.  i got caught with my pants down before the adcom and thankfully it worked out great.  but the only reason i can see holding through pdufa is if a quick partnership is announced- and that's why i'm holding about 33000 shares through pdufa.  approval with good label maybe pops us to 15 but settles down to 13 after a couple days.  approval with poor label and we are back to 8 after a few days. but partnership- that pops us above 20 in any scenario i think- eventual pullback to follow though.  yes new money will come in but so will more shorts and it will be a LOOONG time before mnkd sees revenues from afrezza. all speculative, good luck to all.