AF pounces: "Mannkind Silent on Debt Conversion..."

[BD]

Hate posting this; but at least it sheds some light on the PPS action since 1pm. Sigh.

www.thestreet.com/story/13312326/1/mannkind-silent-on-debt-conversion-suggesting-costly-cash-settlement.html


MannKind Silent on Debt Conversion, Suggesting Costly Cash Settlement
By
Adam Feuerstein

10/05/15 - 12:53 PM EDT

VALENCIA, Calif. (TheStreet) -- The deadline for MannKind (MNKD) to settle debt totaling $32 million passed five days ago. The company has said nothing publicly, which probably means debt holders were repaid with cash.

Using cash to settle the debt was MannKind's worst-case option because it leaves the company with little money to fund ongoing operations.

It's possible, but unlikely, that MannKind convinced some of its debt holders to accept company stock.

MannKind CFO Matt Pfeffer didn't respond to e-mailed questions about the outcome of the debt settlement issue, but company executives may have something to say about the matter when they speak at an investor conference on Thursday.

Poor sales of Mannkind's inhaled mealtime insulin Afrezza, as reported by marketing partner Sanofi (SNY - Get Report) , have taken a big bite out of Valencia, Calif-based MannKind's stock price, making it difficult for the company to reach agreement with holders of $100 million in convertible debt that was due on August 15.

Of the original $100 million in debt, $28 million was rolled over into new convertible debt due in 2018 and $8 million was converted into MannKind stock, MannKind said in August.

To settle the remaining $64 million in debt, MannKind floated a proposal to exchange half, or $32 million, for company stock and use $32 million in cash to repay the balance. The deadline for the stock-for-debt offer expired on Sept. 30.

Negotiations between MannKind and the remaining debt holders reached an impasse, according to a source familiar with the situation. If MannKind was unable to convert any of the $32 million in outstanding August 2015 debt into stock, the company would have been forced to double the cash -- $64 million -- necessary to make the debt issue go away. [MannKind would have been compelled to announce an extension of the stock-for-debt offer, so the company's silence means it was settled.]

The problem for MannKind is that it can't really afford to spend cash to settle old debts. The company had $107 million in cash on hand as of June 30, of which $25 million is restricted and cannot be touched due to other outstanding debt obligations.

Subtract another $64 million to satisfy current debt holders reduces MannKind's cash balance to $18 million.

In the second quarter, MannKind used $13 million in cash to fund operations. If MannKind used the same amount cash in the third quarter, that would leave it with $5 million of cash on hand as of Sept. 30.

MannKind does have two ways to raise additional money: A $50 million "At the Money" equity sales agreement and a $30 million "rescue" loan available from founder Al Mann. But having to use some or all of these financing options to make the debt go away means the company will have to raise additional money to keep the lights on and fund future product development.
With Afrezza sales going nowhere fast, MannKind is racking up more debt in its commercial joint venture with Sanofi. If Sanofi abandons Afrezza next year, as many expect, MannKind's financial position will be even more dire.

MannKind shares are up 1 cent to $3.29 in Monday trading.

[harrys]

This is precisely why so many including myself are not exactly thrilled with management, why would Matt not come out with a simple press release annuncing the resolution of the notes? It would be a giveaway as far as a little bit of positive sentiment. I just don't get how anyone can defend their lack of transparency, it's a windfall for Adam & co. They wouldn't be able to keep recycling this garbage if the issue was put to rest.

[harryx1]

BD - remove the hyperlink so you won't be giving link juice to it, so it just looks like this:

thestreet.com/story/13312326/1/mannkind-silent-on-debt-conversion-suggesting-costly-cash-settlement.html

[BD]

harry, the text is in my post so nobody needs to click to read it. We've got bigger fish to fry.

[notamnkdmillionaire]

Oct 5, 2015 14:33:15 GMT -5 harryx1 said:

BD - remove the hyperlink so you won't be giving link juice to it, so it just looks like this:

thestreet.com/story/13312326/1/mannkind-silent-on-debt-conversion-suggesting-costly-cash-settlement.html

The mishandling and silence by Mannkind's management is why people like Adam can do what they do. Don't blame Adam. Blame Hakan and the stooges that run Mannkind for their silence and mishandling of the debt.

[compound26]

I have compiled my responses to AF's article together as follows for your easier reading (apology for the repetition as I hate a misleading piece like this by AF): 

Compared with a debt for equity swap at a low price for the equity, I would much prefer a repayment of the existing debt with cash. Here is what I wrote in Why Piper Jaffray is Wrong on Mannkind in regarding to the debt issue. This situation has not changed at all and my assessment remains the same.

HERE IS MY ASSESSMENT OF THE DEBT SITUATION USING THE NUMBERS FROM MANNKIND'S LAST CONFERENCE CALL:

Per Mannkind’s last conference call, Mannkind has $107 million cash, $30 million credit line with Al Mann, $147 million available under the credit line with Sanofi, totally $284 million. According to this article, Mannkind will like receive $25 million manufacturing milestone this year. It is also expected that Mannkind will get $50 million in total approval milestone for approval in EU and Japan. One would expect the EU and Japan approval to be cleared within two years. Adding this additional $75 million to the $284 million, that’s $359 million.

Per Mannkind’s last conference call, Mannkind’s quarterly loss was $28.9 million last quarter. So at this rate, Mannkind has enough cash to go through the next three years without capital raise. Even if we assume Mannkind does not refinance some of the notes that were due in 2015 (say $60 million) and pay that part off with available cash, Mannkind still have enough cash to go through two and half years without the need of raising cash. This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

ALTERNATIVELY, HERE IS MY ASSESSMENT OF THE DEBT SITUATION GOING BY AF’S CASH BURN RATE, WITHOUT CONSIDERING THE SANOFI FACILITY:

Per Mannkind’s last conference call, Mannkind has $107 million cash, and according to this article, Mannkind will like receive $25 million manufacturing milestone this year. That will lead to a total available cash of $132 million.

Even if Mannk paid off $64 million with cash and burned another $13 million cash in the third quarter, that will leave Mannkind with $55 million available cash, plus $30 million credit line with Al Mann, at the end of the third quarter, and $42 million available cash, plus $30 million credit line with Al Mann, at the end of the fourth quarter.

At $13 million per quarter, Mannkind needs not worry about raising additional cash for 2016.

And most likely, within 2016 or at the beginning of 2017, Mannkind will receive either all or part of the milestone payments for EU and/or Japan approval. That will support Mannkind’s operation through 2017.

This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

By that time, what will be Afrezza’s ramp-up, quarterly sales income, and sales-related milestone payments? And milestone payments for other Technoshere applications? Let’s wait and see.

ADDITIONALLY, NOTE THAT IN THE LANGUAGE QUOTED BELOW, AF SNEAKILY AND MISLEADINGLY TOOK AWAY $25 MILLION FROM MANNKIND'S CASH BALANCE.

"The problem for MannKind is that it can't really afford to spend cash to settle old debts. The company had $107 million in cash on hand as of June 30, of which $25 million is restricted and cannot be touched due to other outstanding debt obligations.

Subtract another $64 million to satisfy current debt holders reduces MannKind's cash balance to $18 million."

Even if we assume that $25 million is restricted and can not touched, it is still in the balance book of Mannkind. So that, if we subtract $64 million from Mannkind's cash balance, MannKind's cash balance is not reduced to $18 million as AF claimed, but $43 million (with $25 million restricted, assuming what AF claims is true). There is huge difference between $18 million and $43 million. Adding in the $25 million manufacturing milestone payment that Mannkind is expected to receive, then it is $18 million [the picture AF paints] vs $68 million [the reality] (18 million +25 million (restricted) +25 million (milestone)) million. You see the difference between what AF claims and the reality?

[newmnkdinvestor]

Compound you def point out the holes in his argument but managements silence still gives up ammunition for the bloggers to mess with peoples heads.

[trenddiver]

Oct 5, 2015 15:04:30 GMT -5 compound26 said:

I have compiled my responses to AF's article together as follows for your easier reading (apology for the repetition as I hate a misleading piece like this by AF): 

Compared with a debt for equity swap at a low price for the equity, I would much prefer a repayment of the existing debt with cash. Here is what I wrote in Why Piper Jaffray is Wrong on Mannkind in regarding to the debt issue. This situation has not changed at all and my assessment remains the same.

HERE IS MY ASSESSMENT OF THE DEBT SITUATION USING THE NUMBERS FROM MANNKIND'S LAST CONFERENCE CALL:

Per Mannkind’s last conference call, Mannkind has $107 million cash, $30 million credit line with Al Mann, $147 million available under the credit line with Sanofi, totally $284 million. According to this article, Mannkind will like receive $25 million manufacturing milestone this year. It is also expected that Mannkind will get $50 million in total approval milestone for approval in EU and Japan. One would expect the EU and Japan approval to be cleared within two years. Adding this additional $75 million to the $284 million, that’s $359 million.

Per Mannkind’s last conference call, Mannkind’s quarterly loss was $28.9 million last quarter. So at this rate, Mannkind has enough cash to go through the next three years without capital raise. Even if we assume Mannkind does not refinance some of the notes that were due in 2015 (say $60 million) and pay that part off with available cash, Mannkind still have enough cash to go through two and half years without the need of raising cash. This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

ALTERNATIVELY, HERE IS MY ASSESSMENT OF THE DEBT SITUATION GOING BY AF’S CASH BURN RATE, WITHOUT CONSIDERING THE SANOFI FACILITY:

Per Mannkind’s last conference call, Mannkind has $107 million cash, and according to this article, Mannkind will like receive $25 million manufacturing milestone this year. That will lead to a total available cash of $132 million.

Even if Mannk paid off $64 million with cash and burned another $13 million cash in the third quarter, that will leave Mannkind with $55 million available cash, plus $30 million credit line with Al Mann, at the end of the third quarter, and $42 million available cash, plus $30 million credit line with Al Mann, at the end of the fourth quarter.

At $13 million per quarter, Mannkind needs not worry about raising additional cash for 2016.

And most likely, within 2016 or at the beginning of 2017, Mannkind will receive either all or part of the milestone payments for EU and/or Japan approval. That will support Mannkind’s operation through 2017.

This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

By that time, what will be Afrezza’s ramp-up, quarterly sales income, and sales-related milestone payments? And milestone payments for other Technoshere applications? Let’s wait and see.

ADDITIONALLY, NOTE THAT IN THE LANGUAGE QUOTED BELOW, AF SNEAKILY AND MISLEADINGLY TOOK AWAY $25 MILLION FROM MANNKIND'S CASH BALANCE.

"The problem for MannKind is that it can't really afford to spend cash to settle old debts. The company had $107 million in cash on hand as of June 30, of which $25 million is restricted and cannot be touched due to other outstanding debt obligations.

Subtract another $64 million to satisfy current debt holders reduces MannKind's cash balance to $18 million."

Even if we assume that $25 million is restricted and can not touched, it is still in the balance book of Mannkind. So that, if we subtract $64 million from Mannkind's cash balance, MannKind's cash balance is not reduced to $18 million as AF claimed, but $43 million (with $25 million restricted, assuming what AF claims is true). There is huge difference between $18 million and $43 million. Adding in the $25 million manufacturing milestone payment that Mannkind is expected to receive, then it is $18 million [the picture AF paints] vs $68 million [the reality] (18 million +25 million (restricted) +25 million (milestone)) million. You see the difference between what AF claims and the reality?

I think your interpretation of AF article is off base.  As much as I disagree with most of what AF says, he is 100% correct about the restricted cash; MNKD cant spend it.  Therefore if you cant spend it, it's pretty much useless cash sitting in a bank earning maybe 1% interest and you cant count it as cash available to fund operations.  The items you refer to such as ramp up in sales, additional milestones, technosphere advances are all highly speculative events (none of which will have a very significant impact to cash over the next year or two and as such have to be significantly discounted as an investor.  Therefore its seems to me that unless Big Al wants to lend some more money, MNKD is going to have to raise additional capital in 2016.  I'm hoping that Sanofi or management can get more proactive with this insurance coverage issue.  Because unless the insurance problem is solved, the best we can hope for is for sales of Afrezza to just muddle along.  Its just too bad the way things turned out with this inept management team of Hakan and Matt. 

Trend

[compound26]

Oct 5, 2015 18:29:19 GMT -5 trenddiver said:

Oct 5, 2015 15:04:30 GMT -5 compound26 said:

I have compiled my responses to AF's article together as follows for your easier reading (apology for the repetition as I hate a misleading piece like this by AF): 

Compared with a debt for equity swap at a low price for the equity, I would much prefer a repayment of the existing debt with cash. Here is what I wrote in Why Piper Jaffray is Wrong on Mannkind in regarding to the debt issue. This situation has not changed at all and my assessment remains the same.

HERE IS MY ASSESSMENT OF THE DEBT SITUATION USING THE NUMBERS FROM MANNKIND'S LAST CONFERENCE CALL:

Per Mannkind’s last conference call, Mannkind has $107 million cash, $30 million credit line with Al Mann, $147 million available under the credit line with Sanofi, totally $284 million. According to this article, Mannkind will like receive $25 million manufacturing milestone this year. It is also expected that Mannkind will get $50 million in total approval milestone for approval in EU and Japan. One would expect the EU and Japan approval to be cleared within two years. Adding this additional $75 million to the $284 million, that’s $359 million.

Per Mannkind’s last conference call, Mannkind’s quarterly loss was $28.9 million last quarter. So at this rate, Mannkind has enough cash to go through the next three years without capital raise. Even if we assume Mannkind does not refinance some of the notes that were due in 2015 (say $60 million) and pay that part off with available cash, Mannkind still have enough cash to go through two and half years without the need of raising cash. This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

ALTERNATIVELY, HERE IS MY ASSESSMENT OF THE DEBT SITUATION GOING BY AF’S CASH BURN RATE, WITHOUT CONSIDERING THE SANOFI FACILITY:

Per Mannkind’s last conference call, Mannkind has $107 million cash, and according to this article, Mannkind will like receive $25 million manufacturing milestone this year. That will lead to a total available cash of $132 million.

Even if Mannk paid off $64 million with cash and burned another $13 million cash in the third quarter, that will leave Mannkind with $55 million available cash, plus $30 million credit line with Al Mann, at the end of the third quarter, and $42 million available cash, plus $30 million credit line with Al Mann, at the end of the fourth quarter.

At $13 million per quarter, Mannkind needs not worry about raising additional cash for 2016.

And most likely, within 2016 or at the beginning of 2017, Mannkind will receive either all or part of the milestone payments for EU and/or Japan approval. That will support Mannkind’s operation through 2017.

This does not take into account sales ramp, additional milestone payments from Sanofi and potential partner payments for other Technosphere applications.

By that time, what will be Afrezza’s ramp-up, quarterly sales income, and sales-related milestone payments? And milestone payments for other Technoshere applications? Let’s wait and see.

ADDITIONALLY, NOTE THAT IN THE LANGUAGE QUOTED BELOW, AF SNEAKILY AND MISLEADINGLY TOOK AWAY $25 MILLION FROM MANNKIND'S CASH BALANCE.

"The problem for MannKind is that it can't really afford to spend cash to settle old debts. The company had $107 million in cash on hand as of June 30, of which $25 million is restricted and cannot be touched due to other outstanding debt obligations.

Subtract another $64 million to satisfy current debt holders reduces MannKind's cash balance to $18 million."

Even if we assume that $25 million is restricted and can not touched, it is still in the balance book of Mannkind. So that, if we subtract $64 million from Mannkind's cash balance, MannKind's cash balance is not reduced to $18 million as AF claimed, but $43 million (with $25 million restricted, assuming what AF claims is true). There is huge difference between $18 million and $43 million. Adding in the $25 million manufacturing milestone payment that Mannkind is expected to receive, then it is $18 million [the picture AF paints] vs $68 million [the reality] (18 million +25 million (restricted) +25 million (milestone)) million. You see the difference between what AF claims and the reality?

I think your interpretation of AF article is off base.  As much as I disagree with most of what AF says, he is 100% correct about the restricted cash; MNKD cant spend it.  Therefore if you cant spend it, it's pretty much useless cash sitting in a bank earning maybe 1% interest and you cant count it as cash available to fund operations.  The items you refer to such as ramp up in sales, additional milestones, technosphere advances are all highly speculative events (none of which will have a very significant impact to cash over the next year or two and as such have to be significantly discounted as an investor.  Therefore its seems to me that unless Big Al wants to lend some more money, MNKD is going to have to raise additional capital in 2016.  I'm hoping that Sanofi or management can get more proactive with this insurance coverage issue.  Because unless the insurance problem is solved, the best we can hope for is for sales of Afrezza to just muddle along.  Its just too bad the way things turned out with this inept management team of Hakan and Matt. 

Trend

First, we do not know whether AF is correct or not about the restricted nature of the $25 million cash.

Second, if it is restricted, we do not know when and how the restriction can be lifted and the cash therefore becomes available.  

Third, if the cash has zero value, then how can Mannkind publicly claim its cash balance is $107 million? Should it say $82 million?  I just pointed out that, assuming what AF said in his article is true, then Mannkind's cash balance will be reduced to $43 million (with $25 million restricted if AF's claim on restricted nature of such money is true).  But AF should not say Mannkind's cash balance is reduced to $18 million. That is a misleading statement.  If, however, he says that Mannkind's freely useable cash is reduced to $18 million.  That's different.

Further, Mannkind has sold certain amount of Afrezza and has not recognized revenue on these sales yet. At some point, Mannkind will be able to book recognized revenue on these sales. So it is not speculative that Mannkind will be able to recognize some sales at some point. Even at $20 or $30 million, that's not a small number.

"At the same time MannKind had $5.9 million in deferred product sales of Afrezza, and there was no recognized revenue. The first quarter had $7.1 million in deferred product sales." (247wallst.com/healthcare-business/2015/08/10/mannkind-cheered-despite-lower-afrezza-shipments/#ixzz3nk0oiU).

[gwb]

Trend

With the limited information I receive from MNKD and the message boards ; All I can conclude is SNY hasn't delivered on their end . MNKD has done their part in manufacturing and product development . If SNY doesn't step up , I am sure NVS , AZN or many others would want this deal , especially because we are much further down the road ( Humalog / Afrezza , clamp study complete , pediatric study FDA approved and enrolling ). You were around when SNY F/ed MNKD out of the German insulin plant from PFE ( we only received the insulin for 3 million ) Al was pissed , he wanted the German plant SNY got for something like 33 million. After history such as this , I am hopeful MNKD's partnership agreement has some resolutions to each party, if either drop the ball .

All the deleted posts at YMB ( clicking on report abusive posts , deletes the message ) starting last Friday , the high short interest , AF's new hit piece and some of the new Sh*t posters here at proboards are not a coincidence , this I believe points to a positive catalyst occurring in the near future. 

Just thoughts from an old timer .

All the best ,

GWB

[trenddiver]

Oct 5, 2015 18:58:34 GMT -5 gwb said:

Trend

With the limited information I receive from MNKD and the message boards ; All I can conclude is SNY hasn't delivered on their end . MNKD has done their part in manufacturing and product development . If SNY doesn't step up , I am sure NVS , AZN or many others would want this deal , especially because we are much further down the road ( Humalog / Afrezza , clamp study complete , pediatric study FDA approved and enrolling ). You were around when SNY F/ed MNKD out of the German insulin plant from PFE ( we only received the insulin for 3 million ) Al was pissed , he wanted the German plant SNY got for something like 33 million. After history such as this , I am hopeful MNKD's partnership agreement has some resolutions to each party, if either drop the ball .

All the deleted posts at YMB ( clicking on report abusive posts , deletes the message ) starting last Friday , the high short interest , AF's new hit piece and some of the new Sh*t posters here at proboards are not a coincidence , this I believe points to a positive catalyst occurring in the near future. 

Just thoughts from an old timer .

All the best ,

GWB

GWB,

Although I don't always agree with your posts, they are always well thought out.   Its hard to say whether or not Sanofi has delivered.  There are two big issues that had to be tackled by Sanofi.  Informing doctors about Afrezza and its benefits and dealing with the insurance issues.   From anecdotal information only, I don't think they did a great job of introducing the product to doctors.  And I don't know enough about the insurance coverage issue to know what else could have been done.  The insurance coverage issue is the big elephant in the room.  You can inform all the patients and doctors in this country, but without insurance coverage, Afrezza is going nowhere fast.  The problem with our situation is - who can we hold accountable? SNY?  MNKD?  We are MNKD shareholders and thus we can really only hold MNKD accountable.  Although MNKD is a minority partner, if the majority partner isn't doing what is expected, then changes either in strategy or tactics have to take place.  Its hard to imagine Hakan or Matt being forceful advocates for change at these partnership meetings, so we're kinda stuck where we are.  Furthering the problem is the inability to provide answers to shareholders.  I'm always frustrated when Matt doesn't answer questions regarding these important topics, pointing to confidentiality concerns.  Whether anyone else could do a better job than SNY, its hard to say.

I dont necessarily take this AF article to be a hit piece.  He is pretty much saying what is so as its relates to the cash burn and MNKD's available cash. 

Trend

[chuck]

"First, we do not know whether AF is correct or not about the restricted nature of the $25 million cash."

It's in the 10-K. Risk Factor #6.  

"Second, if it is restricted, we do not know when and how the restriction can be lifted and the cash therefore becomes available."

It's a quarter end financial covenant test which is tied to the Deerfield facility expiring 2019. See the 10-K.

"Third, if the cash has zero value, then how can Mannkind publicly claim its cash balance is $107 million? Should it say $82 million? I just pointed out that, assuming what AF said in his article is true, then Mannkind's cash balance will be reduced to $43 million (with $25 million restricted if AF's claim on restricted nature of such money is true). But AF should not say Mannkind's cash balance is reduced to $18 million. That is a misleading statement. If, however, he says that Mannkind's freely useable cash is reduced to $18 million. That's different."

Read his article again. He is talking about liquidity, not cash value.  

"Further, Mannkind has sold certain amount of Afrezza and has not recognized revenue on these sales yet. At some point, Mannkind will be able to book recognized revenue on these sales. So it is not speculative that Mannkind will be able to recognize some sales at some point. Even at $20 or $30 million, that's not a small number."

The article was talking only about liquidity. Not recognition of revenue. Completely different. There is no pile of cash waiting for mnkd from afrezza sales. Rather the opposite. They have generated losses so far (expenses have been greater than revenue give the low sales), and such losses (mnkd's 35% share) have been financed by the Sanofi $175m facility. I would expect these losses will accelerate if sales remain flat to slightly up and marketing expenses ramp up.

AF's article is largely accurate although I don't appreciate the tone. The item he didn't address is future milestone payments. I'm not familiar with any company statements on such topic so can't comment but would appreciate others comments on the matter.

Chuck

[trenddiver]

Oct 5, 2015 18:52:05 GMT -5 compound26 said:

Oct 5, 2015 18:29:19 GMT -5 trenddiver said:

I think your interpretation of AF article is off base.  As much as I disagree with most of what AF says, he is 100% correct about the restricted cash; MNKD cant spend it.  Therefore if you cant spend it, it's pretty much useless cash sitting in a bank earning maybe 1% interest and you cant count it as cash available to fund operations.  The items you refer to such as ramp up in sales, additional milestones, technosphere advances are all highly speculative events (none of which will have a very significant impact to cash over the next year or two and as such have to be significantly discounted as an investor.  Therefore its seems to me that unless Big Al wants to lend some more money, MNKD is going to have to raise additional capital in 2016.  I'm hoping that Sanofi or management can get more proactive with this insurance coverage issue.  Because unless the insurance problem is solved, the best we can hope for is for sales of Afrezza to just muddle along.  Its just too bad the way things turned out with this inept management team of Hakan and Matt. 

Trend

First, we do not know whether AF is correct or not about the restricted nature of the $25 million cash.

Second, if it is restricted, we do not know when and how the restriction can be lifted and the cash therefore becomes available.  

Third, if the cash has zero value, then how can Mannkind publicly claim its cash balance is $107 million? Should it say $82 million?  I just pointed out that, assuming what AF said in his article is true, then Mannkind's cash balance will be reduced to $43 million (with $25 million restricted if AF's claim on restricted nature of such money is true).  But AF should not say Mannkind's cash balance is reduced to $18 million. That is a misleading statement.  If, however, he says that Mannkind's freely useable cash is reduced to $18 million.  That's different.

Further, Mannkind has sold certain amount of Afrezza and has not recognized revenue on these sales yet. At some point, Mannkind will be able to book recognized revenue on these sales. So it is not speculative that Mannkind will be able to recognize some sales at some point. Even at $20 or $30 million, that's not a small number.

"At the same time MannKind had $5.9 million in deferred product sales of Afrezza, and there was no recognized revenue. The first quarter had $7.1 million in deferred product sales." (247wallst.com/healthcare-business/2015/08/10/mannkind-cheered-despite-lower-afrezza-shipments/#ixzz3nk0oiU).

1.  I perused the latest 10-q and didn't notice any restricted cash.

2.  As has been previously stated, deferred product sales and deferred revenue will not ever add to cash.  The cash for those deferred revenue amounts has already been received by MNKD  The only question is when the revenue gets recognized for financial statement purposes.

[james]

Oct 5, 2015 18:52:05 GMT -5 compound26 said:

First, we do not know whether AF is correct or not about the restricted nature of the $25 million cash.

Second, if it is restricted, we do not know when and how the restriction can be lifted and the cash therefore becomes available.  

Third, if the cash has zero value, then how can Mannkind publicly claim its cash balance is $107 million? Should it say $82 million?  I just pointed out that, assuming what AF said in his article is true, then Mannkind's cash balance will be reduced to $43 million (with $25 million restricted if AF's claim on restricted nature of such money is true).  But AF should not say Mannkind's cash balance is reduced to $18 million. That is a misleading statement.  If, however, he says that Mannkind's freely useable cash is reduced to $18 million.  That's different.

Further, Mannkind has sold certain amount of Afrezza and has not recognized revenue on these sales yet. At some point, Mannkind will be able to book recognized revenue on these sales. So it is not speculative that Mannkind will be able to recognize some sales at some point. Even at $20 or $30 million, that's not a small number.

"At the same time MannKind had $5.9 million in deferred product sales of Afrezza, and there was no recognized revenue. The first quarter had $7.1 million in deferred product sales." (247wallst.com/healthcare-business/2015/08/10/mannkind-cheered-despite-lower-afrezza-shipments/#ixzz3nk0oiU).

The $25M AF refers to is a condition of the facility loan agreement in place with Deerfield and must be observed until this loan is retired which is scheduled for 2019.  And actually, the $25M is not fully restricted, the covenant is that MNKD must hold $25M in cash on hand at the end of each quarter but remains available as working capital in the interim.  That's fairly reasonable, and you probably don't want them going much below that line either.  The cash is certainly not worthless, cash on hand was absolutely $107M at end of last quarter.  The $25M minimum requirement is listed appropriately in the notes, there is nothing being hidden from the public.  The only thing it means in the end is that additional cash may need to be raised sooner than if it weren't in place.  What I dislike about this agreement is that Deerfield owns a portion of various future milestone payments (undisclosed amounts and milestones) in addition to required repayments beginning mid 2016.  This agreement is one of the items that allows AF to make statements about the balance sheet being a mess.

On another note, while there is certainly a link between them, unfortunately recognizing revenue and receiving cash are different events in an accounting sense.  So, past sales of Afrezza have already shown up in cash flow and the future ability to recognize these past receipts as revenue will not improve the cash situation.  Only future receipts do that.  On the cash flow statement, this is being recorded as 'Deferred product sales from collaboration'.  I think we can expect to see a few million per quarter on that line item.  The wording is confusing, but cash is cash.

[james]

Oct 5, 2015 19:41:41 GMT -5 trenddiver said:

1.  I perused the latest 10-q and didn't notice any restricted cash.

2.  As has been previously stated, deferred product sales and deferred revenue will not ever add to cash.  The cash for those deferred revenue amounts has already been received by MNKD  The only question is when the revenue gets recognized for financial statement purposes.

Note 14 (page 16) of the MNKD 10-Q filed 8/10/2015.