Thursday, March 27, 2014

Daily Dose - Mannkind, Threshold, Arena

Mannkind's MNKD day of reckoning is upon them.  They have their adcom meeting on monday for their inhaled insulin product which has already been rejected by the FDA twice.  Will the third time be a charm?  Maybe but between the chances that the drug gets approved, the commercial potential for inhaled insulin, and Mannkind's insanely high market cap....I'm not a buyer.  In fact, I'm short via naked January $10 calls as I don't see the company worth more than $3 billion in January even if the drug is approved.

Threshold THLD announced that their partner Merck KGaA is initiating a phase 1 trial of their lead compound, TH-302.  The drug is already in two phase 3 studies for pancreatic cancer and soft tissue carcinoma and a number of phase 2/1 studies.  I like Threshold based on TH-302's broad potential in a number of cancers, it's partnership with Merck, and relatively small market cap of under $300 million.  The downside is that Threshold is a one trick pony with TH-302 with nothing else of value in the pipeline.  I own 3,000 shares so we will see how these results play out next year.

Arena ARNA announced the initiation of a phase 2 trial of it's lead compound, Lorcaserin, in smoking cessation.  The company has a market cap of $1.4 billion and sales of Lorcaserin to treat obesity have been underwhelming since it's launch last year.  I feel the company is undervalued and hold a short position via naked July $10 calls.  There's no way this company will be worth north of $2.5 billion come July though there may be long-term potential for the smoking cessation opportunity.


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