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Post by ktim on May 9, 2019 10:52:23 GMT -5
There are a couple of things you are missing. Firstly, the debt as of the end of the quarter was $102 million, and of that roughly $11 was Deerfield and $72 was due The Mann Group. There is another $19 million of so of convertible debt due in 2021. Shareholders like to think of The Mann Group as a benevolent lender that will be as easy to deal with as Al Mann himself, but Al has passed on so the asset is now controlled by trustees who have legal obligations to act in the best interest of the beneficiaries of the various Mann trusts and estate. Those legal obligations tie the trustee's hands in many ways so the amount of flexibility the trustees are willing to provide may be significantly less than Mr. Mann himself would have allowed during his lifetime. There are other fixed obligations which, strictly speaking, are not debt but which will cause a significant use of cash. Chief among these is the Amphastar supply agreement which is an $84 million obligation or which $4 million is due this year, and $16 million next year. When counting sources of cash, you can't count $5 million of sales as a source because that ignores the cost of goods sold. For the most recent quarter sales were about $5 million, but production costs were about $4 million so the net is only $1 million. That number is unlikely to change much during the next year. Costs are what the company spends to produce its product, expenses are what the company spends on research, selling, marketing, and general administration. Shareholders tend to included expenses in their mental calculations but leave the cost piece out. Going forward, the expense burn should be less as the advertising campaign is over, but research spending needs to increase if the company wants to have a credible pipeline or to earn progress payments under the UTHR and other contracts. Spending on R&D was only $1.6 million for the quarter and in the world of pharmaceuticals that amount of spending won't get you very far. Finally, don't confuse a $50 million shelf registration with the ability to actually issue $50 million in stock; they are not the same thing. A shelf registration gives permission from the SEC to list shares for trading on the NASDAQ if new shares are issued, but the SEC has no authority to grant the company permission to issue anything. Corporations are creates of the states and the company charter and relevant Delaware law determine how many shares can be issued. The company is almost out of shares although they did get 14 million freed up when the April warrants expired worthless. So the company can sell those 14 million shares under the ATM agreement, but at today's price (minus fees) that would raise less than $18 million. The authorized share count caps the amount of a potential raise, not the SEC shelf registration. Of course the company can always ask the shareholders to authorize more shares, but that takes a special meeting of shareholders and at least 30 days to comply with the relevant legal formalities. Here is my question. Who has to be paid off for MNKD to have control of their patents? Deerfield and who else? I don't think there has ever been any restrictions on licensing the patents, so I don't think paying off Deerfield will create a bunch of new opportunities for monetizing them. |
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Post by peppy on May 9, 2019 10:54:44 GMT -5
Here is my question. Who has to be paid off for MNKD to have control of their patents? Deerfield and who else? I don't think there has ever been any restrictions on licensing the patents, so I don't think paying off Deerfield will create a bunch of new opportunities for monetizing them. right now if MNKD went under I believe Deerfield ends up with the patents. Is that correct? |
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Post by ktim on May 9, 2019 11:04:29 GMT -5
I don't think there has ever been any restrictions on licensing the patents, so I don't think paying off Deerfield will create a bunch of new opportunities for monetizing them. right now if MNKD went under I believe Deerfield ends up with the patents. Is that correct? I believe you are correct. However, it would be standard for the agreements to allow MNKD to license the patents to third parties now and in the event MNKD defaults on debt and DF acquires the patents, the licenses would remain valid and any revenue stream from royalties would then go to DF. |
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Post by Deleted on May 9, 2019 11:41:17 GMT -5
right now if MNKD went under I believe Deerfield ends up with the patents. Is that correct? I believe you are correct. However, it would be standard for the agreements to allow MNKD to license the patents to third parties now and in the event MNKD defaults on debt and DF acquires the patents, the licenses would remain valid and any revenue stream from royalties would then go to DF. That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission. |
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Post by boca1girl on May 9, 2019 11:51:58 GMT -5
I believe you are correct. However, it would be standard for the agreements to allow MNKD to license the patents to third parties now and in the event MNKD defaults on debt and DF acquires the patents, the licenses would remain valid and any revenue stream from royalties would then go to DF. That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission. How do we know that Deerfield hasn’t given MNKD permission to cut deals using Technosphere? If Deerfield “is not giving permission” has that created a delay in P3 trials of TreT starting? |
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Post by mnkdfann on May 9, 2019 12:03:51 GMT -5
Why would Deerfield prevent Mannkind from licensing Mannkind's own patents, in order to (as a byproduct) make money to repay Deerfield?
The SEC file I posted earlier also talks about patents held with others, e.g. UTHR.
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Post by peppy on May 9, 2019 12:13:38 GMT -5
That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission. How do we know that Deerfield hasn’t given MNKD permission to cut deals using Technosphere? If Deerfield “is not giving permission” has that created a delay in P3 trials of TreT starting? MNKD is still an on going concern. It is not up to deerfield in the moment. All agreements have been met. |
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Post by peppy on May 9, 2019 12:18:08 GMT -5
I believe you are correct. However, it would be standard for the agreements to allow MNKD to license the patents to third parties now and in the event MNKD defaults on debt and DF acquires the patents, the licenses would remain valid and any revenue stream from royalties would then go to DF. That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission.This is why I ask. MNKD turning into a good looking woman that needs to get rid of some debt? |
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Post by ktim on May 9, 2019 12:44:46 GMT -5
I believe you are correct. However, it would be standard for the agreements to allow MNKD to license the patents to third parties now and in the event MNKD defaults on debt and DF acquires the patents, the licenses would remain valid and any revenue stream from royalties would then go to DF. That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission. At least in my business experience, loan agreement often stipulate that patents can be licensed, but not sold. I couldn't say for certain in this case, but the agreement with Sanofi would have involved a license for them to sell the patented Afrezza as well as the fact it contemplated that they'd take over manufacturing at some point pulling in manufacturing patents. Do you think DF needed to give specific permission for that deal? I'm unaware of that. What makes it "look" to you like Deerfield is not giving permission, or that such permission wasn't baked into the loan agreements? |
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Post by figglebird on May 9, 2019 13:16:35 GMT -5
So not to make things even more complicated but there's some potential caveats i believe implied by several filings including the facility agreement some amendments and the annual report... Though I am not a lawyer, this is generally how I presently interpret the situation with regard to debt/leverage and control.
deerfield's remaining debt on paper(small fraction) is secured while the Mann groups debt(large) is unsecured - this would seem to be a positive... but it seems there are likely contingencies that connect the two parties which from Deerfields perspective makes complete sense with respect to their long-term lender debt holding part of the relationship and funder of afrezza as a commercial product... so even though it says Mann trust/group has no direct claim in the event MannKind were to become insolvent there seem to be certain requirements about MANN being repaid in order for the companies relationship with Deerfield to be officially severed. the reason for this I believe as filings seem to suggest is that some of the MANN affiliated capital leant to the co as unsecured debt has been in part issued by Deerfield... Which means if correct mann in some partial capacity has served as a pass through for deerfield to issue more capital than was allotted from the facility agreement and by doing so found a way to indirectly lever their position.
moreover the direct capital that was issued by deerfield via the fa was done so to commercialize afrezza - you do not issue capital without trying to maximize your return on the investment of that capital which speaks to the milestones and so forth.
but filings allude and annual report risk factors seem to underscore this issue even more as the company is limited in its ability 2 potentially offload afrezza because of certain contingencies that dfld has beyond the potential pass through.
that does not mean that an agreement couldn't be had but it would have to be signed off on by Deerfield who would also then have to be paid in full with respect to the milestone payments.
now i also would assume that if any of this is correct James Flynn has at times acted in a manner that has exceeded basic business codes of conduct and might therfor be liable when publicly disclosing a strong belief in the commercial prospects of the product(18 months ago) in turn eliciting greater retail support, but doing so without full disclosure of his interests.
lastly I do not see any of this as dire but have alluded to it in the past 6 months as something potentially more complicating then as previously laid out with respect to debt situation and other related matters.
and of course I am not legally inclined to really know if any of this is accurate.
I continue to add to my position daily.
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Post by mnholdem on May 9, 2019 15:38:49 GMT -5
That's incorrect. If the Patents/Assets are used as collateral they can not be used in deal making. You cannot sell or commit any future obligation of an asset when it's being used a collateral unless the lienholder gives permission and in this case it looks like Deerfield is not giving permission. At least in my business experience, loan agreement often stipulate that patents can be licensed, but not sold. I couldn't say for certain in this case, but the agreement with Sanofi would have involved a license for them to sell the patented Afrezza as well as the fact it contemplated that they'd take over manufacturing at some point pulling in manufacturing patents. Do you think DF needed to give specific permission for that deal? I'm unaware of that. What makes it "look" to you like Deerfield is not giving permission, or that such permission wasn't baked into the loan agreements? Deerfield had to (and did) sign off on rights granted to Sanofi related to the now defunct Agreement for Afrezza. |
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