MNKD: Q1 In Line Afrezza On Track--Widening Loss Estimates: Maintain Market Perform
- Summary: MKC-171/175 on track for completion by June and data readout around mid-August 2013, but MNKD faces a financing overhang and will likely require additional financing in Q4 2013. Q1 loss per share of $0.15 in line with consensus. Widening 2013 and 2014 loss per share estimates to $0.56 (from loss of $0.48) and $0.20 (from $0.13), respectively, primarily on higher operating expense (opex). Maintain Market Perform. Valuation range: $3.00-4.00 (10-11x 2016E EPS of $0.52, r=20%, 3 years) from $2.50-3.50.
- Maintain Market Perform. The near-term focus remains on MKC-171/175, which are both on track for completion by June and data readout around mid-August 2013. MNKD is targeting Afrezza NDA submission around late September/early October 2013, which implies a potential FDA decision as early as late Q1 2014. By our model, MNKD faces a financing overhang as additional cash resources will be required by Q4 2013. With MKC-171/175 data readout not expected until mid-August and the financing overhang, we prefer to remain on the sidelines for now.
- We are widening 2013 and 2014 loss per share estimates to $0.56 (from loss of $0.48) and $0.20 (from $0.13), respectively. 2013 and 2014 estimate revisions are primarily driven by higher opex, and 2014E interest expenses are higher on our assumption of incremental debt of $200MM (from $120MM). See page 2 for key assumptions.
- Key Takeaways: 1) MKC-171/175 data readout by mid-August and Afrezza NDA submission by late September/early October 2013. 2) Cash on hand and available borrowing capacity ($153MM in total as of end of Q1) can take MNKD into Q4 2013. 3) Afrezza partnership discussions ongoing and MNKD could be interested in retaining co-promotion rights. 4) MNKD to shift focus to EU filing for Afrezza after US NDA submission.
- Q1 2013 loss per share of $0.15 was in line with consensus, but wider than our $0.13 loss estimate. Both R&D ($26MM A vs. $25MM E) and SG&A ($10MM A vs. $8MM E) were higher than our estimate.