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MannKind Doubles on FDA News, Could Drive Short Covering in Biotech Sector


After a big slump, biotech is having a great week.

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MannKind (NASDAQ:MNKD) is up over 100% this morning to $8.14 after the US FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted to recommend its Afrezza inhaled insulin.

FDA reviewers had previously expressed concerns over side effects including risk of bronchial spasms and lung infections.

On Monday, I discussed biotech making a stand following a 20% decline in SPDR S&P Biotech ETF (NYSEARCA:XBI), and this is the second piece of unexpected good news in two days. Big boy Gilead Sciences (NASDAQ:GILD) popped on a bullish Wall Street Journal article yesterday and is extending its rally in early trading today.

This MannKind development adds another positive element because it could drive short covering.

Small- and mid-cap biotechs had already been waking up the past few days. Check out these charts of Arena Pharmaceuticals (NASDAQ:ARNA), Acorda Therapeutics (NASDAQ:ACOR), and Insmed (NASDAQ:INSM).

If shorts are now seeing MannKind double overnight and the sector pop this morning, they're likely to lock in whatever gains they have left.

Plus, as shown Monday, we just saw big outflows in health care/biotech ETFs -- are we about to see inflows on expectations of a rebound? I have no current exposure to the group as I closed my long Gilead trade yesterday, but that may change very soon.

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Twitter: @MichaelComeau

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No positions in stocks mentioned.
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