paul
Researcher
Posts: 134
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Post by paul on Aug 8, 2019 8:22:33 GMT -5
I read it as a requirement to maintain all of its intellectual property etc during the terms of the loans. In other words, they cannot sell them off to a third party without triggering a material change of circumstance. If your interpretation is correct that's awesome. That means MNKD will not be selling Afrezza which means they will partner to market Afrezza. The question is WHEN? Are there more housekeeping items they have to do?? For ex. PEDS Approval, Int'l Filings, etc. In negotiating with potential partners will Mannkind be required to get Midcap's approval before signing any deals:
"The MidCap Credit Facility contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions."
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Post by agedhippie on Aug 8, 2019 8:44:29 GMT -5
If your interpretation is correct that's awesome. That means MNKD will not be selling Afrezza which means they will partner to market Afrezza. The question is WHEN? Are there more housekeeping items they have to do?? For ex. PEDS Approval, Int'l Filings, etc. In negotiating with potential partners will Mannkind be required to get Midcap's approval before signing any deals:
"The MidCap Credit Facility contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions."
They also have to get permission from Deerfield and Horizon Santé to sell because of the milestone rights purchase agreement. In both cases that is not an insurmountable obstacle and it's just a matter of negotiating a suitable amendment (and paying them a sweetener).
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Post by Thundersnow on Aug 8, 2019 9:09:40 GMT -5
In negotiating with potential partners will Mannkind be required to get Midcap's approval before signing any deals:
"The MidCap Credit Facility contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions."
They also have to get permission from Deerfield and Horizon Santé to sell because of the milestone rights purchase agreement. In both cases that is not an insurmountable obstacle and it's just a matter of negotiating a suitable amendment (and paying them a sweetener). I agree. It's standard terms & conditions. This gives us clarity on MNKD's intentions. They will partner at some point. If you read between teh signs yesterday Mike made it a point to tell us that they only have 75 salespeople. That's their limit and we all know they cannot target the Type 2 Market. Something just popped into my head....A partner will not happen until they get better DATA regarding the Type 2 Market. Mike mentioned the Kipnes Study which is a larger Type 2 Study. Once that data comes out (probably ADA 2020) then they will get a partner.
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Post by jcastle on Aug 8, 2019 9:22:35 GMT -5
From the 8K at the end under Schedules
What is this all about? Goes on until July 2024.
MINIMUM AFREZZA NET REVENUE SCHEDULE
Testing Date Minimum
Afrezza Net
Revenue
Amount
July 31, 2019
$ 21,000,000
August 31, 2019
$ 21,500,000
September 30, 2019
$ 22,500,000
October 31, 2019
$ 24,000,000
November 30, 2019
$ 25,500,000
December 31, 2019
$ 27,000,000
January 31, 2020
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paul
Researcher
Posts: 134
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Post by paul on Aug 8, 2019 9:33:38 GMT -5
From the 8K at the end under Schedules What is this all about? Goes on until July 2024. MINIMUM AFREZZA NET REVENUE SCHEDULE Testing Date Minimum Afrezza Net Revenue Amount July 31, 2019 $ 21,000,000 August 31, 2019 $ 21,500,000 September 30, 2019 $ 22,500,000 October 31, 2019 $ 24,000,000 November 30, 2019 $ 25,500,000 December 31, 2019 $ 27,000,000 January 31, 2020 "The MidCap Credit Facility also contains a covenant relating to trailing twelve month minimum Afrezza Net Revenue requirements (as defined in the Credit Agreement), tested on a monthly basis, as described in more detail in the MidCap Credit Facility. If we fail to meet this covenant, we may lose the ability to borrow the Tranche 2 advance and the Tranche 3 advance if the other conditions for those advances are satisfied, and any outstanding borrowings, together with accrued interest, under the MidCap Credit Facility could be declared immediately due and payable."
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Post by matt on Aug 8, 2019 9:37:29 GMT -5
I read it as a requirement to maintain all of its intellectual property etc during the terms of the loans. In other words, they cannot sell them off to a third party without triggering a material change of circumstance. The requirement is for MNKD to have rights to all IP that they use, whether that is ownership or license. If you think about how a security agreement works to protect the lender in case of a default, what good is a lien on a factory that produces TS types of products if the lien holder cannot foreclose on the IP rights as well. The building does not have much value on its own, it is just a shell, and the value of the customized production lines and production equipment is tied to the IP. If there is no IP, there is minimal value in the plant collateral. Also, since the IP is the subject of the lien the lender will not allow it to be sold to a third party unless the proceeds of that sale are used to reduce the loan balance. Try selling your house if you haven't paid off the mortgage and the bank will quickly remind you of how collateralized debt obligations work. However, as long as the lender get paid the proceeds (to the extent of the remaining loan) that won't keep MNKD from selling off any asset.
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Post by Thundersnow on Aug 8, 2019 9:43:44 GMT -5
I read it as a requirement to maintain all of its intellectual property etc during the terms of the loans. In other words, they cannot sell them off to a third party without triggering a material change of circumstance. The requirement is for MNKD to have rights to all IP that they use, whether that is ownership or license. If you think about how a security agreement works to protect the lender in case of a default, what good is a lien on a factory that produces TS types of products if the lien holder cannot foreclose on the IP rights as well. The building does not have much value on its own, it is just a shell, and the value of the customized production lines and production equipment is tied to the IP. If there is no IP, there is minimal value in the plant collateral. Also, since the IP is the subject of the lien the lender will not allow it to be sold to a third party unless the proceeds of that sale are used to reduce the loan balance. Try selling your house if you haven't paid off the mortgage and the bank will quickly remind you of how collateralized debt obligations work. However, as long as the lender get paid the proceeds (to the extent of the remaining loan) that won't keep MNKD from selling off any asset. True and we all know Afrezza is worth more than $75M. So technically they can sell of Afrezza which will trigger the CIC but I doubt MNKD will.
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Post by jcastle on Aug 8, 2019 9:44:59 GMT -5
Yes, but what is $24,000,000 on October 31st, 2019?
What is the "Minimum Afrezza Net Revenue Amount" ?
It increases by 1Mil some months and 1.5 Mil other months.
Total of 86,900,000 by July 31st 2024.
Is this an estimate of the total Revenue for the next 5 years?
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Post by ktim on Aug 8, 2019 9:50:59 GMT -5
From Credit and Security Agreement between MannKind Corporation, MannKind LLC and Apollo Investment (lender) and Midcap Financial (lender & Agent): 6.15(d) Borrower shall own, or be licensed to use or otherwise have the right to use, all Material Intangible Assets subject to Permitted Licenses. So, essentially MannKind has put up all IP, patents, trademarks etc. as security for a $75 million (minus interest & fees) loan. MannKind is also required obtain permission from the Borrower before being allowed to assign rights to MI assets to any future partner. So, for any who thought that freeing up assets held by Deerfield who give leverage back to MannKind for partnership negotiations...guess again. DF never posed a problem for a partnership, and no reason to think new lender would either. That was just a weird pumper story line. Obviously a creditor doesn't try to prevent income that helps repay their loan.
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Post by ryster505 on Aug 8, 2019 10:08:44 GMT -5
From Credit and Security Agreement between MannKind Corporation, MannKind LLC and Apollo Investment (lender) and Midcap Financial (lender & Agent): 6.15(d) Borrower shall own, or be licensed to use or otherwise have the right to use, all Material Intangible Assets subject to Permitted Licenses. So, essentially MannKind has put up all IP, patents, trademarks etc. as security for a $75 million (minus interest & fees) loan. MannKind is also required obtain permission from the Borrower before being allowed to assign rights to MI assets to any future partner. So, for any who thought that freeing up assets held by Deerfield who give leverage back to MannKind for partnership negotiations...guess again. DF never posed a problem for a partnership, and no reason to think new lender would either. That was just a weird pumper story line. Obviously a creditor doesn't try to prevent income that helps repay their loan. Exactly. People are jaded in the belief that mnkd having IP etc tied as collateral with some fancy language attached makes it look like we cut a terrible deal. Not the case.
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Post by agedhippie on Aug 8, 2019 10:10:42 GMT -5
Yes, but what is $24,000,000 on October 31st, 2019? What is the "Minimum Afrezza Net Revenue Amount" ? It increases by 1Mil some months and 1.5 Mil other months. Total of 86,900,000 by July 31st 2024. Is this an estimate of the total Revenue for the next 5 years? The number is the trailing 12 months nett revenue for Afrezza as of the associated date. In your example Mannkind will need to have net revenue sales as of July 31st 2024 of $86.9M for the 12 months prior to that date.
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paul
Researcher
Posts: 134
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Post by paul on Aug 8, 2019 12:48:32 GMT -5
Yes, but what is $24,000,000 on October 31st, 2019? What is the "Minimum Afrezza Net Revenue Amount" ? It increases by 1Mil some months and 1.5 Mil other months. Total of 86,900,000 by July 31st 2024. Is this an estimate of the total Revenue for the next 5 years? The number is the trailing 12 months nett revenue for Afrezza as of the associated date. In your example Mannkind will need to have net revenue sales as of July 31st 2024 of $86.9M for the 12 months prior to that date. Are those goals reasonable? Can they make the 22,500,000 number required by the end of the 3rd quarter?
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Post by ktim on Aug 8, 2019 13:26:02 GMT -5
The number is the trailing 12 months nett revenue for Afrezza as of the associated date. In your example Mannkind will need to have net revenue sales as of July 31st 2024 of $86.9M for the 12 months prior to that date. Are those goals reasonable? Can they make the 22,500,000 number required by the end of the 3rd quarter? I believe the TTM number at the end of this last quarter is $21.258M. So we'd need to do roughly $1.24M more in Q3 this year than last. Fortunately that is $5.6M, so unless revenue drops from this quarter's $6.06M, which seems highly unlikely, we will meet that covenant.
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Post by Thundersnow on Aug 9, 2019 8:19:32 GMT -5
Are those goals reasonable? Can they make the 22,500,000 number required by the end of the 3rd quarter? I believe the TTM number at the end of this last quarter is $21.258M. So we'd need to do roughly $1.24M more in Q3 this year than last. Fortunately that is $5.6M, so unless revenue drops from this quarter's $6.06M, which seems highly unlikely, we will meet that covenant. Agree - IMO that is a SANDBAG covenant. They threw that in there to justify someone's salary.
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paul
Researcher
Posts: 134
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Post by paul on Aug 9, 2019 9:30:37 GMT -5
Are those goals reasonable? Can they make the 22,500,000 number required by the end of the 3rd quarter? I believe the TTM number at the end of this last quarter is $21.258M. So we'd need to do roughly $1.24M more in Q3 this year than last. Fortunately that is $5.6M, so unless revenue drops from this quarter's $6.06M, which seems highly unlikely, we will meet that covenant. I'm unable to comprehend the details but Spencer Osborne seems to think they will fall short: "Interestingly, prior to my latest revision downward in my projections, I had US net revenue at $27 million in 2019. That happens to be where the 12-month trailing covenant sets for December 31. Today, I have US sales in 2019 closer to $25 million." Is his assessment fair?
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