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Post by apidistra on Dec 19, 2019 12:44:30 GMT -5
apidistra... sure it does. I said Apple is investing in MNKD on Monday, so obviously MidCap is going to want to be on good terms with MNKD and Tim Cook  Or there is the real explanation I proposed in prior post. No, it doesn't, because it's ironical. You know, when a writer peppers what he thinks is an explanation with irony, he damages the conclusion he thinks he's delivering. The reader need not take it seriously and I don't. |
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Post by ktim on Dec 19, 2019 12:49:16 GMT -5
apidistra... actually it's sarcasm The real answer I gave was neither ironic nor sarcastic.
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Post by mannmade on Dec 19, 2019 12:55:11 GMT -5
Borrowing from a post I wrote on 12.09.19 I don't think mnkd will need the $25m, imho so that may be the reason for the way the deal was revised with midcap. See below... 1. Cash Situation for 2020: According to the most recent Seeking Alpha article, Mannkind will end 2019 with $46m in cash. UTHR milestones for Trep T will provide an additional $25m. Afrezza Sales I will generously estimate at $35m net to mnkd (including 1 or 2 more Brazilian purchases) This equals $106m which should be enough to get thru 2020 If it is not enough or the timing of cash infusions does not meet the date of debt or expenses there is an additional $35m from the Midcap Loan Agreement. In addition, the 12.31.19 warrants are NOT likely to be exercised and so an additional number of shares at a $1.60 valuation will be returned, giving another $30m or so at today's valuation. So cash will not likely be an issue in 2020. Read more: mnkd.proboards.com/thread/11611/2020-bring#ixzz68ZnXR3Ro |
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Post by awesomo on Dec 19, 2019 13:13:35 GMT -5
In addition, the 12.31.19 warrants are NOT likely to be exercised and so an additional number of shares at a $1.60 valuation will be returned, giving another $30m or so at today's valuation. So cash will not likely be an issue in 2020. Warrants being returned because we are lower than the exercise price hurts the cash situation, not helps it. And you're also assuming that MannKind has another dilution to actually raise those funds back (possibly at a lower PPS). Either that or they issue these toxic warrants back out again and they are exercised (possibly at a lower PPS again). |
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Post by apidistra on Dec 19, 2019 13:26:43 GMT -5
Borrowing from a post I wrote on 12.09.19 I don't think mnkd will need the $25m, imho so that may be the reason for the way the deal was revised with midcap. See below... 1. Cash Situation for 2020: According to the most recent Seeking Alpha article, Mannkind will end 2019 with $46m in cash. UTHR milestones for Trep T will provide an additional $25m. Afrezza Sales I will generously estimate at $35m net to mnkd (including 1 or 2 more Brazilian purchases) This equals $106m which should be enough to get thru 2020 If it is not enough or the timing of cash infusions does not meet the date of debt or expenses there is an additional $35m from the Midcap Loan Agreement. In addition, the 12.31.19 warrants are NOT likely to be exercised and so an additional number of shares at a $1.60 valuation will be returned, giving another $30m or so at today's valuation. So cash will not likely be an issue in 2020. Read more: mnkd.proboards.com/thread/11611/2020-bring#ixzz68ZnXR3RoVery interesting idea. And if Tranche 3 isn't expected to be needed, that would not necessarily be considered to be material non-public information that could affect share price requiring disclosure. An educated guess, given the lack of evidence, but for reading in between the tea leaves, yes, but it makes sense. |
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Post by agedhippie on Dec 19, 2019 13:44:56 GMT -5
Very interesting idea. And if Tranche 3 isn't expected to be needed, that would not necessarily be considered to be material non-public information that could affect share price requiring disclosure. An educated guess, given the lack of evidence, but for reading in between the tea leaves, yes, but it makes sense. To be a bit clearer on that point. Until the lender or borrower declines the 3rd tranche there is nothing to report. You only file facts, not probabilities. My suspicion is that MidCap want Mannkind chasing the target to keep them pushing forwards. If they have fallen at the first (second?) fence then the worst has happened and they may well not have the same focus. What MidCap have done is help themselves to an extra $1M and lowered the target net revenues. Miss those revenues again and it might get a lot stickier, but the 2nd tranche is this side of when that is most likely to happen. |
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Post by matt on Dec 19, 2019 14:16:37 GMT -5
Yes, the swath of material non-public information is wide. Could be just give and take. But why this change and why now? I think the "why now" is easier to answer; the numbers are in the hands of the company for November and they missed the covenant so something had to happen. Unlike shareholders, the lender does not need to wait until the quarterly financials are published to see the sales number. The fact that the company missed should not be a huge surprise to anybody since the sales had to ramp much harder than they have recently to remain in compliance, so this was a ticking time bomb. As to why these particular changes instead of declaring a default and bumping the interest rate, that is a trickier question. In many cases lender like Midcap are using other people's money, which means they split on-going interest payments according to one formula, but exit payments and other fees using another. It would not be the first time that a lender has opted to bump a piece of the consideration that they keep 100% rather than increase the interest rate which has to be split with the ultimate lender. Besides, declaration of default has only been delayed and a future default is not off the table since there are still covenants and some of them are going to be tough to meet. |
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Post by lakers on Dec 19, 2019 14:51:30 GMT -5
spencerosborne 13m neil36 not that simple. To qualify they must be at $36m on July 31. If they miss that date, they are out of compliance. Assume that q3 and q4 of this year bring $13.4m. That means the first 30 weeks of 2020 must bring in $22.6m. That's an average of $753,333 in net per week. They must average $1.8 million retail over 30 weeks....not 52. 13 of those 30 weeks are in a typically weak q1. spencerosborne 46m jcb322000 not really that simple. They must be at $36m traiking net revenue on July 31, 2020. Q2 of 2019 had net revenue of $6.4m. Let's assume q4 of 2019 is 7 million. That gives us $13.4m. This means they need to generate $22.6m in net revenue in the first 30 weeks of 2020. That means an average net revenue of $753,333 must happen. That would require each week to be about $1.8m in retail sales. It makes no sense to model to the $40m trailing required december 31st of 2020, when the next measure date is July 21st and requires $36m. spencerosborne 07:22 AM @shabi93 @vibes121 @detroitish tranche 2 requires only $25.4m by March 31. spencerosborne 06:53 AM @jdhouse30 the next fee is now 7%. Tranche 3 of $25m will be tough to attain. |
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form 8-k
Dec 19, 2019 15:08:43 GMT -5
via mobile
Post by sportsrancho on Dec 19, 2019 15:08:43 GMT -5
spencerosborne
12/18/19, 03:42 PM
@detroitish you need to model on your own. Tranche 3 will be very difficult to get. Build your cash model and consider whether you think another infusion (via deal, debt, or dilution) is necessary. If you feel it will be necessary, assign a probability to each method....then make investment decisions accordingly.
12/18/19, 03:57 PM
@vibes121 @detroitish interest rate was not mentioned specifically. Exit fee is now 7%. Net rev targets lowered. Tranch 3 has raised net rev targets, which seem unlikely to be attained. Bottom line...they can borrow $10m more on this deal with relative ease, but the final $25m is not easy. All things considered, they have funds to mid 2020, and another $35m in anticipated funds to get toward end of 2020.
spencerosborne
12/18/19, 06:53 PM
@vibes121 @notmykind @woody81 I laid out just after the deal was announced that the covenants would ge difficult and laid out that the miss would happen in October or November. It was simply a realistic assessment. I stated that it would lead to an amendment and that midxap would get their pound of flesh. Making tranche 3 almost unreachable removes $25m in potential funds from the coffers. There will be ramifications from that, as the street must now contemplate what will happen in mid to late 2020. They key to playing this equity is to look at it from an accounting perspective until such time that the company demonstrates that close bean counting is not necessary.
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Post by celo on Dec 19, 2019 15:21:44 GMT -5
Yeah looking at trends, afrezza sales should average about 1.5 to 1.6 million a week for the first 6 months of the year and won't reach 1.8 to 2.0 million until the end of the year. The dip at the beginning of each calendar year really hurts Afrezza's chances. Not the first time Mannkind has had to look a bad deal right in the face. I'm getting used to it.
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Post by brotherm1 on Dec 19, 2019 15:35:36 GMT -5
yep. odds are for more dilution and lower prices
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Post by ktim on Dec 19, 2019 15:57:21 GMT -5
yep. odds are for more dilution and lower prices I think some further dilution probably already priced in. I wouldn't fear drastically lower prices unless management does something stupid like double the number of authorized shares again in the near term. |
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Post by prcgorman2 on Dec 20, 2019 9:50:19 GMT -5
yep. odds are for more dilution and lower prices Assuming you’re referring to warrants expiring and those shares returned to the company and then sold again later at some discount on the stock price which has been relatively flat for an extended period of time. I agree that this is dilution, but whether the warrants are exercised or whether they are sold later, is this really “more” dilution, or “expected” dilution? Also, people seem to often be of the mindset that the only things that can happen are those that they expect. Unexpected things do happen. They happen every year. The question is whether the good unexpected things will outweigh the bad unexpected things. No way of knowing of course, so it’s understandable to dwell endlessly on what is publicly known and expected, but I cannot dismiss the thought that there are some pretty smart people in management who appear to work fairly tirelessly. Releasing study results of “significantly lower rates of hypoglycemia” is a nice recent example of both unexpected (in the timing at least) and working hard. How many people can get their doctorate in pharma while also performing the duties of a CCO and CEO? A sarcastic answer cannot be respected. The point I am laboring to make is that dilution is not unexpected, but it also isn’t a given. The loan covenants were known to be unrealistically aggressive from the beginning. I assume MidCap’s willingness to modify the agreement was probably not unanticipated by either lendor or lendee. What may be the most interesting part of the restructure are the requirements associated with UTHR and TreT. I haven’t tried to read either of the agreements preferring to rely on the usual upside/downside reviews that come out. Was UTHR/TreT part of the original agreement, or is this new? If it is new, I think it helps firm up expectations associated with confidence in MNKD’s abilities to develop the pipeline that extracts additional value from Technosphere, and that MidCap does indeed want in on the action as investors, not predators (although it’s always good to be able to be both). |
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Post by matt on Dec 20, 2019 10:20:45 GMT -5
If it is new, I think it helps firm up expectations associated with confidence in MNKD’s abilities to develop the pipeline that extracts additional value from Technosphere, and that MidCap does indeed want in on the action as investors, not predators (although it’s always good to be able to be both). The amended wording certainly is new. It does not strike me as a vote of confidence in MNKD's ability to develop the pipeline, but rather a hedge by the lender in case of MNKD's inability to achieve the good outcomes implied by the UTHR deal. Since decisions that can be taken unilaterally by UTHR affect the ability of MNKD to stay funded under this agreement, it is a new element of risk. How much risk is in the eye of the beholder. As for dilution, the warrants expiring do create risk of a dilutive event. The warrants were priced at $1.60 so that risk is priced in, but with the stock trading below that level any sale of the underlying share will have a different price and one that is most likely a significant haircut from yesterday's closing price of $1.38. Since future warrants cannot be offered on any new deal due to lack of authorized shares, the only way to entice a new buyer is with a deep discount, and percentage discounts starting around 20-25% would be typical (i,e, a discounted price of $1.04-$1.10). The problem that causes is not so much the loss of funding at $1.60, but when a company sells shares at a discount all of the outstanding shares get discounted to the same price. MNKD is literally in a situation where selling the last 22 million available shares at a discount would destroy more market value than the cash it would bring in. That is an entirely untenable position. |
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Post by sportsrancho on Dec 20, 2019 10:37:09 GMT -5
I completely agree and if so I also don’t think anybody’s hanging around for that. I’m not. Not another year of dead money. Deader...should say
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