Why I Believe Sny Will Offer A Cash Settlement

[4allthemarbles]

CCI- I agree. I just don't know what they consider cheap. I am just worried because it seems some people have high expectations. Cheap is 20 million for SNY. That's only 2 months of runway for is.
Some posters are looking for 100 to 200 million. I would love to see that kind of payout, I just don't think SNY will part with that kind of money- by choice.

[lakers]

Sales of Afrezza continued to be lower than expected during the fourth quarter of 2015, culminating in a decision by Sanofi on January 4, 2016 to return the Afrezza rights to MannKind after a notice period, all of which impacted the value and recoverability of long-lived assets in accordance with accounting guidance. As a result, non-cash impairment charges of $206.6 million were recorded for the fourth quarter of 2015, of which $140.4 million related to impairment of fixed assets and $66.2 million related to loss on future purchase commitments, primarily for insulin.

Product manufacturing costs for the fourth quarter of 2015 were $51.8 million related to under absorbed labor and overhead and inventory write-offs.
finance.yahoo.com/news/mannkind-corporation-reports-2015-fourth-204853898.html

The settlement will be at least 206.6+51.8=$258.4M. Writing off upfront is smart as it justifies the settlement amount from Sanofi. It gave Mnkd ammo to negotiate w/ Sanofi now that Mnkd finished its HW.
www.pharmatimes.com/mobile/07-11-14/nektar_gets_135_million_to_end_exubera_contract_with_pfizer.aspx?r=1

The firms have announced that Nektar will get a $135 million one-time payment which will leave “resolved all outstanding contractual issues in connection with Exubera (inhaled insulin).” The settlement also covers Nektar’s follow-up inhaled insulin product, referred to as NGI, which is currently in Phase I.

This act of reconciliation comes after Pfizer finally gave up on Exubera, having acquired co-marketing rights to the drug from partner Sanofi-Aventis for $1.3 billion in January 2006. It was launched in the middle of last year but failed to make any sort of mark. Chief executive Jeff Kindler said at the time that “despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians [so] we have therefore concluded that further investment in this product is unwarranted.”

However it appeared that Pfizer had forgotten to tell Nektar and the latter’s non-plussed chief Howard Robin was non-plussed, saying that “we first learned…of Pfizer's decision to walk away from Exubera from their press release". He added that his company “has been very disappointed in Pfizer's performance in marketing Exubera” and his criticism of the latter firm brought some unwelcome press attention which suggested that the New York-based behemoth may not be a great partner for smaller companies.

www.wikinvest.com/stock/Nektar_Therapeutics_(NKTR)/Pfizer_Termination_Agreement_Settlement

Contractual obligations include unbilled product sales and contract research revenue through November 9, 2007, outstanding accounts receivable as of November 9, 2007, unrecovered capital costs at November 9, 2007, and contract termination costs.

We recognized Exubera and NGI related revenue from Pfizer for product sales, contract research, and upfront fees through the contract termination on November 9, 2007 totaling $182.4 million and $41.7 million during the year and quarter ended December 31, 2007, respectively.

[monger]

I'm not disputing your conclusion necessarily, but I will note that one reason Nektar got a good settlement from Pfizer is because they has an additional joint effort underway:

>Mr Kindler and Mr Robin also issued a joint statement saying that the agreement “strengthens our relationship and demonstrates our ability to work together to craft a solution”. They added that the firms “look forward to advancing our joint development of PEGylated human growth hormone therapy”.

So that makes this not completely comparable to the MNKD/SNY situation, and in fact some might say not comparable at all.

Based on Matt's nonchalance at the source of their funding in today's call, I do think a settlement of some sort is likely, although perhaps not this much. And writing everything down NOW should be pretty good going forward as basically they start with almost no cost of goods sold if I understand this correctly.

[agedhippie]

Also Pfizer broke the contract I believe rather than exercised a right to exit.

[lakers]

On January 4, 2016, we received written notice from Sanofi of its election to terminate in its entirety the Sanofi License Agreement. Sanofi's notice indicated that the termination was pursuant to Sanofi's right to terminate the agreement upon Sanofi's good faith determination that the commercialization of AFREZZA is no longer economically viable in the United States, in which case the effective date of termination (the "Termination Date") would be April 4, 2016. In the alternative, Sanofi indicated that the termination was also pursuant to its right to terminate the License Agreement for any reason, in which case the Termination Date would be July 4, 2016. We believe that Sanofi lacks a good faith basis for determining that commercialization of AFREZZA is no longer economically viable in the United

States. Nonetheless, in the interest of an expedient transition, we are currently working with Sanofi to transfer and wind down the agreement activities by April 4, 2016, or as soon as practicable thereafter.

[Mnkd is apparently negotiating with Sanofi for a settlement.]

As a result of this assessment, we recorded an impairment charge of $138.6 million for the Danbury manufacturing facility.

e analyzed our inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value. We performed an assessment of projected sales to evaluate the lower of cost or market and the potential excess inventory on hand at December 31, 2015. As a result of this assessment, we recorded a charge of $39.3 million to record the inventory raw materials on hand at the lower of cost or market, inventory expiry, and write-off other inventory related assets.

In connection with the projected sales assessment, we also evaluated our inventory purchase commitments totalling $116.2 million for potential impairment. As a result of this assessment, we recorded a $66.2 million charge related to a loss on future purchase commitments both from a lower of cost or market and excess inventory perspective. The purchase commitment obligation has been reduced to reflect our expectation that a portion will be recoverable from a third party.

biz.yahoo.com/e/160315/mnkd10-k.html

[alcc]

Mar 14, 2016 16:57:42 GMT -5 monger said:

Based on Matt's nonchalance at the source of their funding in today's call, I do think a settlement of some sort is likely, although perhaps not this much. And writing everything down NOW should be pretty good going forward as basically they start with almost no cost of goods sold if I understand this correctly.

I think there is zero chance of SNY ponying up $$.

I am no idea how they can write off assets (inventory, pre-paid etc.) if such assets even has a remote chance of being used re future revenues. That would never survive an audit.

[Deleted]

Mar 15, 2016 17:24:53 GMT -5 alcc said:

Mar 14, 2016 16:57:42 GMT -5 monger said:

Based on Matt's nonchalance at the source of their funding in today's call, I do think a settlement of some sort is likely, although perhaps not this much. And writing everything down NOW should be pretty good going forward as basically they start with almost no cost of goods sold if I understand this correctly.

I think there is zero chance of SNY ponying up $$.

I am no idea how they can write off assets (inventory, pre-paid etc.) if such assets even has a remote chance of being used re future revenues. That would never survive an audit.

inventory that may expire or has a cost basis in excess of its estimated realizable value

[alcc]

Right, I understand this writedown principle. So company expects future sales to be below cost as carried in inventory? That's a very interesting (not widely reported/understood) piece of data.

[anderson]

Mar 14, 2016 16:31:58 GMT -5 lakers said:

Sales of Afrezza continued to be lower than expected during the fourth quarter of 2015, culminating in a decision by Sanofi on January 4, 2016 to return the Afrezza rights to MannKind after a notice period, all of which impacted the value and recoverability of long-lived assets in accordance with accounting guidance. As a result, non-cash impairment charges of $206.6 million were recorded for the fourth quarter of 2015, of which $140.4 million related to impairment of fixed assets and $66.2 million related to loss on future purchase commitments, primarily for insulin.

Product manufacturing costs for the fourth quarter of 2015 were $51.8 million related to under absorbed labor and overhead and inventory write-offs.
finance.yahoo.com/news/mannkind-corporation-reports-2015-fourth-204853898.html

The settlement will be at least 206.6+51.8=$258.4M. Writing off upfront is smart as it justifies the settlement amount from Sanofi. It gave Mnkd ammo to negotiate w/ Sanofi now that Mnkd finished its HW.
www.pharmatimes.com/mobile/07-11-14/nektar_gets_135_million_to_end_exubera_contract_with_pfizer.aspx?r=1

The firms have announced that Nektar will get a $135 million one-time payment which will leave “resolved all outstanding contractual issues in connection with Exubera (inhaled insulin).” The settlement also covers Nektar’s follow-up inhaled insulin product, referred to as NGI, which is currently in Phase I.

This act of reconciliation comes after Pfizer finally gave up on Exubera, having acquired co-marketing rights to the drug from partner Sanofi-Aventis for $1.3 billion in January 2006. It was launched in the middle of last year but failed to make any sort of mark. Chief executive Jeff Kindler said at the time that “despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians [so] we have therefore concluded that further investment in this product is unwarranted.”

However it appeared that Pfizer had forgotten to tell Nektar and the latter’s non-plussed chief Howard Robin was non-plussed, saying that “we first learned…of Pfizer's decision to walk away from Exubera from their press release". He added that his company “has been very disappointed in Pfizer's performance in marketing Exubera” and his criticism of the latter firm brought some unwelcome press attention which suggested that the New York-based behemoth may not be a great partner for smaller companies.

www.wikinvest.com/stock/Nektar_Therapeutics_(NKTR)/Pfizer_Termination_Agreement_Settlement

Contractual obligations include unbilled product sales and contract research revenue through November 9, 2007, outstanding accounts receivable as of November 9, 2007, unrecovered capital costs at November 9, 2007, and contract termination costs.

We recognized Exubera and NGI related revenue from Pfizer for product sales, contract research, and upfront fees through the contract termination on November 9, 2007 totaling $182.4 million and $41.7 million during the year and quarter ended December 31, 2007, respectively.

Someone else mentioned this write off could be so they can prove damages in court. If that is the case and they make a deal with an overseas distributor in the near future I believe you would have to add any milestones dealing to overseas to the settlement.  The settlement will be at least 206.6+51.8=$258.4M + overseas market milestones = ?.  This could also make the production milestones come into play if the deals are big enough.

[babaoriley]

Mar 15, 2016 17:24:53 GMT -5 alcc said:

Mar 14, 2016 16:57:42 GMT -5 monger said:

Based on Matt's nonchalance at the source of their funding in today's call, I do think a settlement of some sort is likely, although perhaps not this much. And writing everything down NOW should be pretty good going forward as basically they start with almost no cost of goods sold if I understand this correctly.

I think there is zero chance of SNY ponying up $$.

I am no idea how they can write off assets (inventory, pre-paid etc.) if such assets even has a remote chance of being used re future revenues. That would never survive an audit.

"Zero" chance?  That's a pretty low probability.  Why have you returned, alcc?  Direction of the share price lately not to your liking?

[alcc]

Returned? Never left, baba. Is that ok with you?

[babaoriley]

alcc, we've had our differences in the fairly distant past, those apparently remain and that's fine. Want to make sure newer folk understand where I think you're coming from. I could be wrong, like I have been about MNKD stock and myriad other things, but once in a while I like to express an opinion.

[alcc]

Baba, I am not aware of nor do I remember any difference. I have been on this distressing and frustrating ride along with most of us here. Besides, I am perfectly ok with differences of opinion. I was responding to what I thought was the unexpectedly aggressive tone of your reply, but not the content. 

When I said imo there is zero chance of SNY offering up any cash settlement, my reasoning was (a) I doubt very much they would offer any sort of concession at all; and (b) even if they offer something, for sure they would do so by forgiving, extending or re-structuring the debt, instead of coming forth with additional cash. That is all. Peace?

[greg]

Mar 16, 2016 17:59:46 GMT -5 alcc said:

Baba, I am not aware of nor do I remember any difference. I have been on this distressing and frustrating ride along with most of us here. Besides, I am perfectly ok with differences of opinion. I was responding to what I thought was the unexpectedly aggressive tone of your reply, but not the content. 

When I said imo there is zero chance of SNY offering up any cash settlement, my reasoning was (a) I doubt very much they would offer any sort of concession at all; and (b) even if they offer something, for sure they would do so by forgiving, extending or re-structuring the debt, instead of coming forth with additional cash. That is all. Peace?

I know Baba doesn't need my help but gotta love your logic alcc.

Paraphrasing your comment, you're saying --- There is zero chance of a cash settlement because I doubt they would offer any sort of concession. Isn't that like saying it's definitely black because it's probably black. How about trying to explain why you don't think they'll be any concession?

As to the debt restructuring, you do realize the debt is not due for another 10 years or so, right? Do you really think MNKD cares about the debt to SNY???

And while I'm at it, you had some questions about the accounting treatment for inventory. Any chance you're an accountant? Or is your specialty making statements about stuff you know absolutely nothing?

Don't mean to pick on you but I figure you owe me something for wasting my time. Yup, I can be mean.

[spiro]

Spiro usually doesn't pick on anyone other than Baba. Spiro believes that there is 95% chance that MNKD will receive a cash payment from Sanofi. Spiro does not know how much or when this may occur. But it will happen sooner than later. Spiro believes that Sanofi understands that it is in their best interest to quickly settle with MNKD.

Spiro here, we shall see?