LQDA - MannKind's Tyvaso DPI Royalty Deal Signals Undervaluation
2024-02-14 19:49:34 ET
Summary
- MannKind sold a 10% stake in Tyvaso DPI for $150 million upfront, with an additional $50 million possible, indicating the potential value of the remaining 9% to be upwards of $1.8 billion.
- Liquidia's likely entry into the market with a competing formulation poses a slight concern but is unlikely to significantly impact MannKind's market share.
- MannKind's Q3 earnings showed a strong year-over-year surge, but concerns over equity dilution and a debt-heavy balance sheet remain.
- MannKind's strategic moves, financial strengthening via the Sagard deal, and a manageable competitive landscape advocate for a "Buy" rating.
Evaluating MannKind's Position in Light of Recent Tyvaso DPI Sale
MannKind ( MNKD ) is down 14% since my "Buy" recommendation in October. This is in spite of favorable advancements. In January, MannKind sold 10% of its Tyvaso DPI, developed in collaboration with United Therapeutics ( UTHR ), for $150 million upfront (with the potential for an additional $50 million depending on Tyvaso DPI revenue) to Sagard Healthcare. The milestone payment is outlined as follows:
MannKind's Tyvaso DPI Royalty Deal Signals Undervaluation$50 million in the event that the trailing 12-month net sales of Tyvaso DPI equals or exceeds $1.9 billion by December 31, 2026; or if the preceding milestone is not achieved, $45 million in the event that the trailing 12-month net sales of Tyvaso DPI equals or exceeds $2.3 billion by September 30, 2027.