In Support of Michael Castagna
Aug 1, 2020 14:15:12 GMT -5
afrezzamiracle, jlaw277, and 24 more like this
Post by centralcoastinvestor on Aug 1, 2020 14:15:12 GMT -5
I have thought about writing this post for some time now. I have been hesitant to write this because of the largely negative sentiment towards him that has been prevalent on this board the last year or more. Many of you do not think much of Mr. Castagna and you are certainly welcome to your opinion. There are many posters here that I have a great deal of respect for who will not share my viewpoint. I offer this post as my opinion of the current situation at MannKind and its CEO Michael Castagna. I apologize in advance for the length of this post.
Embracing Failure
Many shareholders attack Mike because he has tried so many different approaches to sell Afrezza that ultimately did not gain traction and dare I say failed. What you see as a weakness or flaw, I see as one of Mike’s greatest strengths. He is willing to try anything that has a remote chance of succeeding knowing that he will get mocked if it doesn’t work. Yet, he tries anyway. Here are some of the efforts he has attempted so far:
• Damon Dash – This effort did get the word out in the early years when only a handful of patients were using Afrezza at the time. Long term is appeared to fizzle out.
• Race Car/Driver Endorsement – This effort did not last long and it must have been apparent that the money spent was not worth it.
• Direct To Consumer Advertising Campaign – I was personally absolutely sure this would work. And so were most shareholders. I believe MannKind spent between $9 million and $11 million on this campaign. The return on the investment did not justify continuing this effort. It is my belief that the insurance and doctor acceptance barrier were too difficult to overcome and MannKind could not continue the spending for the number of new subscribers that resulted. Good for Mike for pulling back when it did not work out as planned.
• Attendance at ADA – Mike mentioned that having a booth at this event was costing too much.
• Nationwide Sales Force – Mike mentioned that the company was spread too thin and had to refocus on the best returning regions.
I am grateful that Mike didn't quit after some of his efforts did not pan out. Many lesser CEOs probably would have because their egos could not handle failing. Jeff Bezos was mercilessly ridiculed and mocked in the early years of Amazon. He ignored the criticism and adapted to the failures. I fully endorse the saying that goes “Fail forward.”
Financial Management
I really like what Mike has done in regards to operating expenses for the company. When Mike first began as CEO of the company, operating expenses were nearly $100 million per year or $25 million a quarter. This kept forcing the company into getting additional funding. Under Mike’s leadership, the burn rate has dropped to $11 million per quarter as of the 1Q20. He has consolidated debt and like it or not strategically raised funding through dilution. The lower burn rate will allow the company to make a profit much sooner.
Leveraging Technosphere
By far Mike’s biggest success was landing the United Therapeutics deal for TreT. It cracks me up when some folks credit this huge success to others and yet drop the blame for everything else on Mike. I cannot overstate what a big deal this deal was for the company. In fact, it might have saved the company and Afrezza. Mike recently alluded to the potential that the yearly royalties from TreT could eventually be worth more than the company’s current market value. Think about that. What if it were only half true. What potential here.
VDex
I wanted to also share my thoughts on the division between Bill McCullough and Michael Castagna. I will never be able to fully understand the division that developed between the two of them that lead to the shareholder activism. I don’t know either of them personally and will therefore not be able to hear each side of the dispute equally. That said, I can surmise that both of them strongly believe in the amazing benefits of Afrezza and will do whatever they can to see it be successful. It is not uncommon for leaders who believe in the same successful outcome have radically different visions for how to seek that success. It is my hope that someday, when Afrezza becomes the success we all believe it will be, that Mike and Bill can shake hands and let the animosity fade into the past.
Conclusions
This post is already too long so I will end with some final thoughts. I believe the company is in the best position it has ever been. Mike has cut costs so that the company isn’t bleeding money. I believe Mike and MannKind are currently treading water ("Rest and Grow") until the investment community sees it is clear that royalties will begin rolling in from TreT. To the extent he can, Mike has the company in a place where it can survive for a long time without diluting the heck out of the shareholders. This give him bargaining power when it comes to other Technosphere applications. He needs to be able to tell potential partners to go to hell if they attempt to lowball offers. Once consistent income is generated from TreT, then a more consistent DTC campaign can begin for Afrezza. In the meantime, moonshots like Receptor Life Science, Covid-19 applications many show up as a complete surprise. I think the best is yet to come for the company and I believe Michael Castagna is the right man for the job.
Embracing Failure
Many shareholders attack Mike because he has tried so many different approaches to sell Afrezza that ultimately did not gain traction and dare I say failed. What you see as a weakness or flaw, I see as one of Mike’s greatest strengths. He is willing to try anything that has a remote chance of succeeding knowing that he will get mocked if it doesn’t work. Yet, he tries anyway. Here are some of the efforts he has attempted so far:
• Damon Dash – This effort did get the word out in the early years when only a handful of patients were using Afrezza at the time. Long term is appeared to fizzle out.
• Race Car/Driver Endorsement – This effort did not last long and it must have been apparent that the money spent was not worth it.
• Direct To Consumer Advertising Campaign – I was personally absolutely sure this would work. And so were most shareholders. I believe MannKind spent between $9 million and $11 million on this campaign. The return on the investment did not justify continuing this effort. It is my belief that the insurance and doctor acceptance barrier were too difficult to overcome and MannKind could not continue the spending for the number of new subscribers that resulted. Good for Mike for pulling back when it did not work out as planned.
• Attendance at ADA – Mike mentioned that having a booth at this event was costing too much.
• Nationwide Sales Force – Mike mentioned that the company was spread too thin and had to refocus on the best returning regions.
I am grateful that Mike didn't quit after some of his efforts did not pan out. Many lesser CEOs probably would have because their egos could not handle failing. Jeff Bezos was mercilessly ridiculed and mocked in the early years of Amazon. He ignored the criticism and adapted to the failures. I fully endorse the saying that goes “Fail forward.”
Financial Management
I really like what Mike has done in regards to operating expenses for the company. When Mike first began as CEO of the company, operating expenses were nearly $100 million per year or $25 million a quarter. This kept forcing the company into getting additional funding. Under Mike’s leadership, the burn rate has dropped to $11 million per quarter as of the 1Q20. He has consolidated debt and like it or not strategically raised funding through dilution. The lower burn rate will allow the company to make a profit much sooner.
Leveraging Technosphere
By far Mike’s biggest success was landing the United Therapeutics deal for TreT. It cracks me up when some folks credit this huge success to others and yet drop the blame for everything else on Mike. I cannot overstate what a big deal this deal was for the company. In fact, it might have saved the company and Afrezza. Mike recently alluded to the potential that the yearly royalties from TreT could eventually be worth more than the company’s current market value. Think about that. What if it were only half true. What potential here.
VDex
I wanted to also share my thoughts on the division between Bill McCullough and Michael Castagna. I will never be able to fully understand the division that developed between the two of them that lead to the shareholder activism. I don’t know either of them personally and will therefore not be able to hear each side of the dispute equally. That said, I can surmise that both of them strongly believe in the amazing benefits of Afrezza and will do whatever they can to see it be successful. It is not uncommon for leaders who believe in the same successful outcome have radically different visions for how to seek that success. It is my hope that someday, when Afrezza becomes the success we all believe it will be, that Mike and Bill can shake hands and let the animosity fade into the past.
Conclusions
This post is already too long so I will end with some final thoughts. I believe the company is in the best position it has ever been. Mike has cut costs so that the company isn’t bleeding money. I believe Mike and MannKind are currently treading water ("Rest and Grow") until the investment community sees it is clear that royalties will begin rolling in from TreT. To the extent he can, Mike has the company in a place where it can survive for a long time without diluting the heck out of the shareholders. This give him bargaining power when it comes to other Technosphere applications. He needs to be able to tell potential partners to go to hell if they attempt to lowball offers. Once consistent income is generated from TreT, then a more consistent DTC campaign can begin for Afrezza. In the meantime, moonshots like Receptor Life Science, Covid-19 applications many show up as a complete surprise. I think the best is yet to come for the company and I believe Michael Castagna is the right man for the job.
, can you expand on this part of your post? This is a very subjective perspective so was just wondering how you perceived this as a sad experience, still swimming uphill and tired. Was that your takeaway from any particular statements made? Also from a time context when was that visit. Just curious to how you came to this conclusion. Thanks in advance -J
