How Martin Shkreli Made a Killing by Shorting Mannkind Stock

Did you know there is a type of insulin that can be inhaled rather than injected? A revolutionary drug called Afrezza may be the best kept secret for people living with diabetes (1). So why don’t more diabetics know about Afrezza? It actually has to do with a man named Martin Shkreli (figure 2).


Figure 2: Martin Shkreli / Source:

Here is the story of how Martin Shkreli sabotaged the MannKind Corporation, which developed Afrezza, for financial gain.

Before he became known for having the most punchable face in America, Martin Shkreli managed a hedge fund called MSMB Capital Management (10). Shkreli boasted about his success as a hedge fund manager, stating: “I have been short MannKind shares regularly for many years. This has generally resulted in fantastic profits for my partners and me (11).” In other words, MSMB Capital Management was profiting from MannKind’s declining stock price. This tactic, known as short-selling, was made famous by the movie The Big Short – which was based on true events. In The Big Short hedge fund manager Michael Burry used his extraordinary intellect to predict a pending financial crisis, which enabled him to bet against, or “short”, the housing market (12). In the case of MSMB Capital Management, hedge fund manager Martin Shkreli used his connections and position to sabotage the MannKind Corporation so its share price would plummet and he could bet against, or “short”, the company (13).

As a small biotech firm with no approved products on the market, MannKind was burning millions of dollars each month. The landscape was extremely competitive and, although 1,000+ biotech companies existed in North America, only the top 1% generated significant revenue (14). For most small biotech companies without approved products the major obstacle tended to be external funding, but this wasn’t the case for MannKind (15). CEO and founder Alfred Mann (hence the name “MannKind”) was a self-made billionaire who financed operations (16). Mann, a highly intelligent philanthropist, had already invented a glucose pump for diabetics. He aimed to do more for the diabetic community with the invention of Afrezza (15 & 16).

To understand why Mann wanted to develop a needle free insulin it is important to understand what traditional diabetes treatment is like,

Kevin Gavit, who blogs about living with Type 1 diabetes, says: “I have been administering injections to myself at least three times a day since I was 5 years old”. He explains that managing this disease meant “having to carefully plan out every hour of every day of my life. If I wanted to go to a sleep over at a friends [sic], take a vacation, work an overnight shift, I always had to prepare my insulin, my syringes, an ice pack to keep my insulin cool, my blood glucose monitor, test strips, emergency snacks (6).”

Like Gavit, people with Type 1 diabetes are forced to have rigid routines and inject themselves with insulin multiple times per day, every day, with no end in sight. Failure to do so would be fatal (8).

The MannKind Corporation’s flagship product, Afrezza, is a needle-free insulin which, according to Gavit, “is the most amazing thing a Type 1 Diabetic could dream of.


Figure 1: Afrezza inhaler / Source:

Afrezza is a two-part system:

1) A small plastic inhaler (figure 1) that looks like a whistle

2) Insulin cartridges which go inside the inhaler (1)

That’s the beauty of Afrezza; it enables patients to discretely breathe their insulin through an inhaler instead of injecting it into their bodies.

In 2010 MannKind completed clinical trials of Afrezza and filed for FDA approval (17). Management was confident the drug would be approved based on positive clinical trial data and ongoing interactions with the FDA (18). On Christmas day, ‘Pharma Grinch’ Martin Shkreli emailed the 12 FDA employees who were in charge of reviewing Afrezza’s application. Shkreli, who was completely transparent about his motives (e.g., he disclosed that he was short, or betting against, MannKind stock), urged them not to approve Afrezza (12 & 18).  Despite the fact that his highest degree was a bachelor’s in business administration, Shkreli said he had performed an analysis of MannKind’s clinical data and concluded that their “clinical trial package was lacking” (9 & 10).

Management at MannKind was shocked when the FDA did not approve Afrezza due to flaws in the study design (18). This was highly unexpected because the FDA had previously approved the study design. Of note, the study design flaws were Shkreli’s main argument for why Afrezza should not be approved (12 & 15). The FDA’s decision meant MannKind had to run more clinical trials. For MannKind this meant spending millions more dollars, laying off 175+ employees, and obtaining major external financing in order to stay afloat (17 & 19).

Shkreli posted an article on investment site Seeking Alpha entitled: “MannKind Is Simply Running Out Of Cash” (11). In the article Shkreli recounted how much he had enjoyed profiting from short-selling MannKind stock. He also predicted the company would soon go bankrupt. What’s more, Shkreli claimed that “inhaled insulin (including Afrezza) is a bad idea conceptually, with marginal theoretical benefits compared to regular insulin and no actual benefits.” That was his opinion; diabetics who have to stick themselves with needles every day would surely disagree.

These actions prompted the Citizens for Responsibility and Ethics in Washington (CREW) to file a grievance with the Securities and Exchange Commission (SEC) accusing Shkreli of manipulating the public and the FDA for profit (13).  In his characteristically smug and perverse tone, Shkreli fired back on the Seeking Alpha message board I like CREW… Great peeps… I am an open book – everything CREW has they have because I gave it to them. Ask me anything.” (19). The SEC never launched a formal probe to investigate Shkreli’s actions, probably due to the fact that hedge funds are not regulated by the SEC (18 & 20)

A couple of years later, Shkreli became notorious for making massive profits off of Turing Pharmaceutical’s HIV drug, Daraprim, when he raised the per pill price from $13.50 to $750.00 overnight (20). That is how Shkreli became one of the most hated men in America.

Although approved in 2014, Afrezza has not been widely adopted. The number of users hovers somewhere around 400 (23 & 24).  Many, like Gavit, are vocal advocates for this product. Before discovering Afrezza Gavit had to give himself a shot before each meal. Now that he has Afrezza, he says “[I] can take my insulin anywhere I want and not have to sneak off to the bathroom to drop my pants or pull up my shirt (6).”  It’s easy to imagine what a godsend Afrezza must be for a Type 1 Diabetic on a first date.

Eric Fenar, another avid Afrezza user, tweeted a picture of himself at Niagara Falls. The stunning, iconic waterfalls can be seen in the background; at his side, his adorable young daughter grinning widely; in his hand, the Afrezza inhaler. The caption cleverly reads: “World’s greatest wonder! P.S. Niagara Falls.”

According to users like Fenar, Afrezza lets them enjoy long road trips, hikes, and vacations in a way they never could before. It has freed them from a prison of needles, ice packs, glucose kits, emergency snacks, and the dreaded blood sugar crash (9).

Clinical data continues to show that the drug is safe and effective. Patient testimonials speak volumes about Afrezza’s life changing potential. The AfrezzaArmy page on Twitter urges: “if you have diabetes, you should fight for #Afrezza! Spread the word, support it, share your experience… make the difference!” (9). Their banner is a picture of the late Alfred Mann, who passed away in 2016, smiling widely (22). Lurking behind him in dark sunglasses is Martin Shkreli, who has become notorious in the Afrezza community.

Shkreli finally did get his comeuppance; he was sentenced to 7 years in prison. This was not because he sabotaged the Mannkind Corpoartion, nor was it because he grossly inflated the cost of a life saving HIV drug. It was because he lied to investors about how much money they made (21).

Disclosure: Jessica Cuesta’s husband is long on MannKind stock

Works Cited

  1. Fuss, Breanna. Here’s the best-kept secret for anyone living with diabetes . Spectrum News Buffalo. [Online] May 1, 2018.
  2. Fenar, B. [@Peakbull]. Twitter. [Online] December 31, 2017.
  3. Hyland, B. [@brendanphyland]. Twitter. [Online] December 14, 2017.
  4. Finta, S. [@afrezzauser]. Twitter. [Online] April 19, 2018.
  5. Sharp, B [@BSharp6669]. Twitter. [Online] November 10, 2016.
  6. Gavit, K. N. [@KevinGavit]. Afrezza. [Online] February 14, 2018.
  7. [@M4ngo3], mango. Twitter. [Online] January 19, 2018.
  8. Smith-Marsh, Daphne E. Type 1 Diabetes . endocrineweb. [Online] March 2, 2016.
  9. @AfrezzaArmy. AfrezzaArmy. Twitter. [Online]
  10. Barrett, Paul M. Once a Notorious Short Seller, Martin Shkreli Now Sees a Future in Biotech. Bloomberg Business. [Online] April 17, 2014.
  11. Shkreli, Martin. MannKind Is Simply Running Out Of Cash. Seeking Alpha. [Online] January 19, 2012.
  12. Sandercock, Tony. A Short Explanation Of What A ‘Short’ Is In ‘The Big Short’. (Don’t Worry, It’s Not Long). Huffpost. [Online] Jan 24, 2016.
  13. CREW Letter to SEC. Scribd. [Online] March 9, 2012.
  14. Investopedia Staff. The Industry Handbook: Biotechnology. Investopedia. [Online] 2014.
  15. Exploration and exploitation alliances in biotechnology: a system of new product development. Rothaermel, F. T., and Deeds, D. L. 2004, Strategic management journal, Vol. 25(3), pp. 201-221.
  16. Mann, Alfred. Mannkind Interview. s.l. : youtube, October 22, 2013.
  17. Davis, Stacy. MannKind Corp lays off 131 Danbury workers, 41 percent of employees nationwide. News Times. [Online] February 11, 2011.
  18. Zinn, Marcelo. MannKind Corporation: One Large Step for Shareholders, One Gigantic Step for Diabetics. [Online] December 11, 2013.
  19. Shkreli, Martin. Martin Shkreli. Seeking Alpha. [Online]
  20. Associated Press Reporter and Reporters. Disgraced ‘pharma bro’ Martin Shkreli SMIRKS at Congress committee, calls them imbeciles and pleads the Fifth as he refuses to answer questions about his 5,000% price hike on HIV drug. Daily Mail. [Online] February 4, 2016.
  21. Horowitz, Aaron Smith and Julia. Martin Shkreli convicted of securities fraud, conspiracy. CNN Money. [Online] August 4, 2017.
  22. Alfred E. Mann, Pioneer in Medical Devices, Dies at 90. The New York Times. [Online] February 26, 2016.
  23. Afrezza Approval History. [Online]
  24. The New York Times. Deerfield Invests $160 Million in MannKind Corporation. Business Day Markets. [Online] July 1, 2013.
  25. Mannkind Corporation. AFREZZA® – A First-in-class Ultra Rapid-Acting. Mannkind Corporation Insulin. [Online] 2013.
  26. The Industry Handbok: Biotechnology. n.d.
  27. Osborne, Spencer. MannKind – Afrezza Scripts Trudge Along. Seeking Alpha. [Online] April 28, 2018.



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