MannKind Relocation Pushes Share Price Higher

MannKind Corp.’s relocation of its headquarters to Westlake Village on Sept. 5 sparked a 9 percent gain for its share price, the latest in a series of upticks for the stock even though the company faces a liquidity crisis. The company’s new headquarters at 30930 Russell Ranch Road features the MannKind name on the building clearly visible from the 101 freeway. The biotech was previously headquartered in Valencia. In a statement, Chief Executive Michael Castagna cited the available labor pool as motivation for the move, but the relocation had financial considerations as well. “We need to add more talented people to our team. Moving to Westlake Village, which is proximal to a large number of companies in our industry, will help us attract top talent,” Castagna said in a statement. On a conference call in May, former chief executive Matthew Pfeffer said the company had signed a lease in Westlake Village that would reduce its expenses for office space at a critical period for the company. “Due to the rental abatements and tenant improvement allowances and so forth, our cost for that facility will actually be quite a bit less in 2017 and less in 2018,” he said on the May 10 call. On its website, the Business Journal first reported Aug. 10 that MannKind had signed a lease in Westlake Village for 64,300 square feet at a monthly cost of about $41,000, according to a filing with the Securities and Exchange Commission. The lease runs until 2021. In a Sept 9 post on financial analysis site Seeking Alpha, Spencer Osborne cited increased sales of Afrezza, the inhalable insulin that is MannKind’s sold commercial product, as a cause for optimism, but pointed out the company’s looming need to conserve cash. “The problem is that even with that (sales) growth, the numbers are running well below what is needed to impress the Street,” Osborne wrote. “The cash situation at MannKind is likely the biggest concern that the Street has. … The bottom line on cash is that MannKind needs a capital infusion.” Osborne, a writer at Sirius Buzz, a blog about the satellite radio business, estimated that MannKind had about $29.1 million at the beginning of September. However, a loan agreement with Deerfield Management Co. in New York requires MannKind to pay $10 million by the end of October, and it must maintain a minimum of $10 million in cash. The relocation isn’t the first time MannKind has used real estate to free up money. Earlier this year, the company sold 11.4 acres of land and a roughly 146,000-square-foot building in Valencia to L.A.’s Rexford Industrial Realty Inc. for $17.3 million. The vacant building was collateral for a loan MannKind had with a drug company, which was subsequently forgiven and the building was released. The sale allowed MannKind to lower its operating expenses and continue drug commercialization, the company said at the time. Since closing Aug. 9 at $1.15, MannKind stock has made steady progress. On the day of the relocation it rose 17 cents, or 9 percent, to close at $2.04. The stock has since maintained that level, closing Sept. 13 at $2.22.