I believe that a good portion of the shorts don't care whether Afrezza is approved or not because they are betting it is a marketing failure (think Exhubera). So why short now or back when it was $1.90? Because they know the timing of FDA PDUFA event, they are able to hedge away the interim runnup with call options. So they short a share today at $4 and simultaneously purchase $4 call options that expire after PDUFA but before commercialization. If MNKD runs up to $20 on PDUFA, the short will sell the option for enough gain to offset the loss on their short position, thus in effect locking in the $4 original short cost basis through PDUFA. However, after PDUFA (and after option expiration), if they are right about Exhuber effect, they will make profit on MNKD demise.
This theory supports the increase in both short interest and call volume.
