MannKind Not So Kind to Bill Miller and Legg Mason

Yahoo! has been a thorn in Bill Miller’s side for some time now, but today he has bigger problems to deal with.

Like MannKind Corporation. In June of 2007 Miller shared a rare interview with Kiplinger’s, no doubt in an attempt to reach out to his funds shareholders, who were starting to fidget due to his deteriorating performance. And while his laid out his theme for mega cap outperformance, he also pitched a speculative stock that he had acquired a large stake in for his Opportunity Trust mutual fund:

Which stock in Opportunity has the greatest potential?

Over the next three years, MannKind. It is a biotechnology company started by a guy named Al Mann. Mann is eightysomething years old and is worth a couple of billion dollars. He’s made all of his money starting and selling medical companies of one sort or another. One of my analysts came to me a year ago and said there’s a little biotech company and there’s insider buying of its shares by the CEO. I said, “That can’t be right because there’s never any insider buying at biotech companies, only insider selling.” I looked, and sure enough, the CEO was buying stock. MannKind is developing an inhalable version of insulin for diabetes, which is a rapidly growing disease of affluence. The drug is now in stage-III trials. Pfizer already has a product out called Exubera, but it looks like a mini saxophone. The MannKind product looks like a little asthma inhaler. You pop it out, take a hit and put it back in your pocket. So far, there are no side effects whatsoever. If it in fact goes through these trials and wins approval, it could be as big as Lipitor, which is a $13-billion-a-year drug. That’s worth $50 billion or $60 billion in market capitalization, and MannKind’s market cap is just $1.5 billion. So that’s a pretty good risk-reward situation.

Of course, MannKind was trading around $13 at the time, and its implosion today (MNKD: -3.41 / -58.29%) pretty much sticks a fork in Miller’s thesis. Karen Finerman suggested last might on Fast Money that Miller’s luck was due to turn do to “reversion to the mean”, but her optimism seems as wrong as Miller’s judgement.

Today’s haircut is another $60 million loss for a fund complex that cannot afford any more high profile disasters.

Mannkind, Nektar battered by Pfizer warning
MarketWatch

A Legend Sizes Up the Market
Kiplinger’s
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