How Martin Shkreli Made a Killing by Shorting Mannkind Stock

A decade ago, before he was known for having the most punchable face in America, Martin Shkreli was getting rich from short selling biotech stock. Short selling occurs when an investor borrows a security and sells it on the open market, planning to buy it back later for less money. One of the most famous examples of short selling occurred when Michael Burry bet against the housing market in 2008 as seen in the movie The Big Short. Both Burry and Shkreli were hedge fund managers. While Burry saw the financial crisis coming and correctly guessed the value of mortgage products was about to plummet, Martin Shkreli took a more direct approach. He sabotaged certain biotech companies by inserting himself into the FDA approval process and by posting on investment websites to undermine investor confidence. The MannKind Corporation was one of the companies he sabotaged (1).


Figure 1: Martin Shkreli


In 2010 MannKind was a small biotech firm headquartered in Los Angeles. The company had no approved products and was burning millions of dollars each month but had a unique source of funding. Its CEO and founder, Alfred Mann (hence the name “MannKind”), was a self-made billionaire who used his personal fortune to help finance the company’s operations. Mann’s previous firm, MiniMed, “pioneered insulin pumps, continuous glucose sensors and even an artificial pancreas”(3). MannKind’s new product, a needle-free insulin, was going to further revolutionize diabetes management.

Diabetes is the seventh leading cause of death and the number one cause of kidney failure, lower-limb amputations, and adult blindness in the United States. Diabetes is a metabolic disorder in which the body can’t digest glucose (sugar) properly. Insulin is the hormone that helps the body digest glucose. Type 1 diabetics cannot produce insulin, and Type 2 diabetics cannot properly use the insulin they produce. People with Type 1 diabetes must abide by rigid routines and inject themselves with insulin multiple times per day, every day, or they will die.

MannKind’s needle-free insulin was about to change all that. Instead of painful needle sticks with insulin which required refrigeration, patients would be able to take their insulin through a tiny inhaler anytime, anywhere.  Simply put, Afrezza was a game changer. 


Figure 2: Patient injecting self with insulin (T) Patient using afrezza inhaled insulin (B) 

As the year drew to a close, results from MannKind’s Phase III clinical trial were positive. Phase III clinical trials compare the safety and effectiveness of the new treatment against the current standard treatment. Afrezza was shown to be a more effective, convenient, needle-free alternative to standard diabetes treatment so the company felt confident the FDA would soon approve it for commercial use.(2). 

In January 2011, the FDA notified MannKind that they were not going to approve Afrezza due to concerns with the Phase III clinical trial design. Mann and his team were understandably shocked (2). 

What they did not realize was that Shkreli had been behind the scenes working hard to sabotage MannKind. On Christmas morning he had emailed the 12 FDA employees in charge of reviewing the company’s application, urging them not to approve Afrezza. He sent them a 30+ page analysis of MannKind’s clinical data, claiming their “clinical trial package was lacking”. With a bachelor’s degree in business administration, Shkreli was no medical expert (3). 

Despite the fact that his credentials were lacking and he was upfront about being short on MannKind stock, the FDA agreed with Shkreli’s argument that, per FDA guidance, insulin inhalers should be tested in clinical trials prior to approval (2, 3). MannKind’s insulin inhaler (see Figure 2) had been tested in bioequivalence studies, not in clinical trials. Even though the FDA had approved the Phase III clinical trial design, they now cited the same rationale Shkreli used as their rationale for rejecting Afrezza. This meant MannKind had to run more clinical trials, spend millions more dollars, lay off 175+ employees, and obtain major external financing in order to stay afloat (4).

The following year Shkreli posted an article on Seeking Alpha, a popular investment site, entitled: MannKind Is Simply Running Out Of Cash. He bragged about how much he enjoyed profiting from short selling MannKind stock and predicted the company would soon go bankrupt. He also claimed that “inhaled insulin (including Afrezza) is a bad idea conceptually, with marginal theoretical benefits compared to regular insulin and no actual benefits.”(5) This was an interesting opinion for someone with no medical training; plus, diabetics who have to stick themselves with needles might not agree.

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Figure 3: Shrkeli’s Article on Seeking Alpha


Shkreli went on to sabotage additional biotech firms and profit from their declining stock prices. Citizens for Responsibility and Ethics in Washington (CREW) filed a grievance with the Securities and Exchange Commission (SEC) accusing Shkreli of manipulating the public and the FDA for profit. The SEC never launched a formal probe to investigate. A couple of years later, Shkreli became notorious for making massive profits off of Turing Pharmaceuticals’ HIV drug, Daraprim, when he raised the per pill price from $13.50 to $750.00 overnight (6). That is how Shkreli became one of the most hated men in America.

Afrezza was approved in 2014 and has a small but mighty following. Sometimes referred to as “the best-kept secret for anyone living with diabetes” it has not been widely adopted (7). Shkreli is currently serving seven years in prison – not because he sabotaged biotech companies like MannKind for profit, nor because he grossly inflated the cost of a life saving HIV drug. Martin Shkreli is in prison because he lied to investors about how much money they made (8).

Disclosure: Jessica’s husband is long on MannKind stock

  1. CREW Letter to SEC. Scribd. [Online] March 9, 2012. 
  2. Zinn, Marcelo. MannKind Corporation: One Large Step for Shareholders, One Gigantic Step for Diabetics. [Online] December 11, 2013. 
  3. Barrett, Paul M. Once a Notorious Short Seller, Martin Shkreli Now Sees a Future in Biotech. Bloomberg Business. [Online] April 17, 2014.
  4. Davis, Stacy. MannKind Corp lays off 131 Danbury workers, 41 percent of employees nationwide. News Times. [Online] February 11, 2011. 
  5. Shkreli, Martin. Martin Shkreli. Seeking Alpha. [Online] January 19, 2012.
  6. 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. 
  7. Fuss, Breanna. Here’s the best-kept secret for anyone living with diabetes . Spectrum News Buffalo. [Online] May 1, 2018. 
  8. Horowitz, Aaron Smith and Julia. Martin Shkreli convicted of securities fraud, conspiracy. CNN Money. [Online] August 4, 2017.