Post by compound26 on Nov 15, 2015 17:30:07 GMT -5
I know we have deleted a thread on this as we were going nowhere. However, I am thinking about starting a new thread. Here are my thoughts on this. Let's discuss and let me know your thoughts. Apologize as this was written in a short time and I haven't spent much time proofreading it. I want to get it before you guys and get your thoughts on these points as early as possible.
1. We shouldn’t be here.
Leaving alone the fact that our PPS is at around $2.5 and was at a point at $1.76 a few days ago, we are currently being written about by the Street.com and the Fool.com as teetering on the brink of bankruptcy or as an adopted child going to be deserted by Sanofi on a daily basis. Analysts are going around touting $1 or $2 PPS targets. We shouldn’t be here. We last time saw our PPS at around $2 in 2012, when FDA approval was still uncertain. Now Afrezza has been approved and more importantly, with excellent real world user feedbacks, we have Sanofi as a partner and our other Technosphere applications are in the development.
I still firmly believe that the technoshpere technology, the patents and other IP rights are worth more than our current market and if Mannkind is unequivocally backed up by a firm commitment from a big pharma (including Sanofi), our market cap should be at least around 4-5 times at current level.
It appears our current situation (that we are being taken advantage of by the shorts) is to a large extent unintentionally facilitated by many of the decisions made by the company along the way over the last several quarters.
Imagine that what the shorts predicted turns out to be true, that Afrezza is a failure and Mannkind goes bankrupt. That would be such a shame and a huge loss to the millions of diabetics, and tens of thousands of investors. We do not want that to be happen and therefore, the company, the management and the shareholders would better take some decisive actions today.
2. Management
I think our management is decent. In my view, both Hakan and Matt are honest and nice guys. I respect them and appreciate their work and contributions. However, given the slow uptick of Afrezza and unprecedented short interests hang over Mannkind, good leaders are not enough at this juncture, we need great leaders to steer Mannkind through the rough waters. I have confidence in Hakan and Matt. However, at this critical juncture, Hakan and Matt need to step up their gear and efforts and take some decisive actions.
One thing the management can do instantaneously is to announce a pay cut of the top management by 10-25% and state that without the PPS going above $5, they will forgive any bonus. I am not dissatisfied with Hakan and Matt’s performance or pay. Given the recent restructuring in Mannkind, I just think such an announcement will be a huge morale boost to the Mannkind employees and shareholders.
3. Financing
The shorts have been feasting on Mannkind’s cash position over some time. Given the $32.9 cash balance as of 30 Sept. 2015, I believe the shareholders are also legitimately concerned about this issue. I would suggest Mannkind take the following actions to address these concern:
3.1 Have Mannkind Group increase its loan facility from $30 million to $100 million.
The loan facility is there as a backup. Matt has indicated that Mann Group may increase the size of the facility. The right time for the increase is now. An increase of the loan facility to $100 million will demonstrate great commitment of Al Mann to Mannkind and will be a great morale boost to all the Mannkind employees and shareholders. It will in the same time send a strong message to the doubters of Mannkind regarding Mannkind’s staying power.
3.2 Use the ATM and returned BofA shares to get more funds
Respectively, it appears it was a mistake that Mannkind did not sell some shares when the PPS was at $10, $7 or %5 in 2014 and earlier in 2015. I wouldn’t be surprised that Mannkind used its ATM on 12 November 2015 to raise another $20-30 million by taking advantage of the 40 million shares volume on that date. I would think it is a good idea for Mannkind to sell a certain number of shares at $2.5, $3.5 and $5 going forward to raise an additional $100 million or more capital, taking advantage of any good upward movement of the PPS (e.g., like after the announcement of a new Technosphere partner).
3.3 Announce a Technosphere partner as soon as possible
Get as much as possible upfront fee and milestone payments as possible, with some compromise in royalty payment. If we can get another upfront payment at $100-$150 million, that will help greatly.
3.4 Get the $25 million milestone payment from Sanofi as soon as possible.
Based on Hakan’s statement on the last conference call, it appears there is a $25 million related to some Sanofi/Mannkind development efforts. Some have speculated that it is related to certification of Sanofi insulin as a supply source to Mannkind. No matter for what purpose it is supposed to be, it appears it could come in 2015. If that is the case, Mannkind needs to communicate to Sanofi that Sanofi should make the payment of the milestone as soon as possible to demonstrate its commitment to Afrezza and Mannkind (more on this subject below).
3.5 Approve additional ATM facility, before the current ATM is used up
To sum it up, I would like to see that Mannkind line up cash balance, Mannkind Group loan facility and ATM facility to the tune of around $300 million in total (or ideally $500 million in total). That financial resource should be enough to enable Mannkind to have enough cash to support Afrezza ramp up and Technoshere development for at least another three years (and ideally five years).
We simply can not live on a quarter-by-quarter financing any more. We need long term financial planning, and on a very lean and conservative basis. For that purpose, I think we should always have three to five years's funding support lined up, supported with a combination of cash and loan facilities.
Note, I think financial stability currently ranks above no dilution of equity. Of course, when raising capital, the goal should always be to raise capital with as little dilution as possible.
This will be the foundation of my other suggestions below and will also put to rest of all those bankruptcy rumors/nonsenses being recycled by the Street.com and the Fool.com daily.
4. Mannkind to demonstrate strong commitment and confidence in Afrezza by announcing a long term commitment to ramp up Afrezza sales
With healthy financial resources as a foundation, Mannkind should publicly demonstrate its strong commitment and confidence in Afrezza by announce a long term commitment to ramp up Afrezza sales. Mannkind can state that, while it is 100% confident that Afrezza has all the necessary conditions to be a blockbuster and can ramp up swiftly going forward, it is prepared to take five or more years to ramp up the Afrezza sales and Mannkind has both the determination and financial resources in place to do that. And Mannkind is prepared to do that with Sanofi, and (in the unlikely situation that Sanofi and Mannkind choose not to continue the partnership at some point in the future) by itself or with another partner, i.e., no matter what.
History shows that Al Mann can do it and has done it, multiple times.
Pursuant to this article (published in 1995), MiniMed, which has been selling the insulin pump since 1985, has long had trouble making money, in part due to large amounts spent on research into new systems of diabetes treatment. Yet, we also know that MiniMed was successfully sold to Medtronic in 2001.
Let's take at a look at what kind of problem Minimed faced.
Quoting the article, “it's hard to conceive of a more difficult product to develop and market: The pumps must be virtually flawless because their users' health depends on their reliability. But their sales are complicated by their cost--about $4,000 per pump--doctors' skepticism, and the reluctance of diabetics themselves to change their lifestyles.”
“Granted, MiniMed's annual sales have almost tripled to $36.3 million in 1994 from $12.5 million in 1990, but in 1994, MiniMed lost $900,000, compared to a loss of $1.6 million in 1993. However, in the second quarter ending June 30 of this year, the company reported a profit of $101,000.”
So we can see that there isn't anything that is insurmountable with Afrezza. It just takes time, determination and patience.
5. Mannkind to communicate to Sanofi that it needs to demonstrate strong commitment and confidence in Afrezza by announcing a long term commitment to ramp up Afrezza sales
Again, this is on the assumption that Mannkind already obtains a strong financial footing as stated in Section 3 above (i.e., having lined up enough cash to support its next three to five years’ operation), Mannkind should communicate clearly to Sanofi, giving the recent noises raised in the media regarding whether Sanofi will terminate its partnership agreement, whether Sanofi is sandbagging Afrezza and the recent lawsuit against Sanofi for Genzyme Corp., it is reasonable for Sanofi to show that it is making good efforts in marketing Afrezza and committed to the long term success of Afrezza by:
5.1 making a public announcement that it is committed to ramp up Afrezza long term (i.e., at least for the next three to five years);
5.2 taking a minority stake in Mannkind
A 5-10% stake in Mannkind will be a minor capital outlay for Sanofi, but giving the current circumstance, a reasonably expected action by Sanofi to show that is committed to Afrezza long term and Mannkind’s financial situation long term.
5.3 Increacing the Sanofi facility to Mannkind for Afrezza marketing
An increase of $50-100 million should be a reasonably expected action by Sanofi to show that it is committed to Afrezza long term and Mannkind’s financial situation long term.
5.4 Publicly announcing time tables for EU and Japan applications and global expansions of Afrezza
5.5 Providing update on the 8,000 safety study
5.6 Providing update on label improvement study.
6. Sanofi and Mannkind JAC to comb through all sales and user data
The JAC to meticulously comb through the sales data, down to each prescribing Afrezza physician to find out why some physicians prescribed a lot, some prescribed a few and most did not and why some sales representatives are more successful than the others in terms of being able to persuade physicians to adopt Afrezza.
The JAC should follow up a large group of Afrezza users and collect their feedbacks and establish a database to at least form a basis on the best practices of Afrezza uses (like how to eliminate dry cough (we know drink water before and after inhalation helps), how to dose on pizza and other fatty foods, and how to correct for runaway highs, etc.).
7. Sanofi and Mannkind JAC to fix formulary placement
JAC should really identify what is holding back the insurance companies to move Afrezza to tier 2 and remove PA. Is a price cut is needed, that cut the price by 30-50%. Before the FDA approval, Al Mann has always maintained that Afrezza will be priced competitively with RAAs. We now know it is now. And we also know that Sam has noted that on average he uses two boxes of Afrezza each month. That’s around $600 per months and $7,200 per years. That is too much. We also know that one of the reasons that contributed to the poor sales of Exubera is its relatively high price tag.
JAC should also discuss if there are ways to make use of the existing data collected by the current Afrezza physicians for support of an improved label or better formulary placement.
8. Have someone (Al Mann, Hakan, Matt or some Afrezza uses like Sam, etc.) appear in popular shows/reports like The Oprah Winfrey Show, 60 minutes, etc.
Sanofi and Mannkind should line up with some popular shows/reports like The Oprah Winfrey Show, 60 minutes, etc. Need not be too fancy or too promotional. Just need to reveal to the world that we have this new weapon to fight against diabetes. It would be great if Al Mann himself can do it. But Hakan, Matt or some Afrezza uses like Sam will also do a great job. Just demonstrate the dreamboat and breathe a couple time would be great.
I do not think this will be that expensive and this will increase the awareness of Afrezza greatly. And I think Sanofi and Mannkind will be to line up such appearances if they take this seriously.
9. Senior management should show their commitment to the company by buying shares in the open market.
If management, with all the non-public information in front of them, were to purchase shares in the open market at these low prices it would be a major blow to the short interests and would encourage buying by many longs sitting on the fence. [note: added per suggestion of trenddiver.]
1. We shouldn’t be here.
Leaving alone the fact that our PPS is at around $2.5 and was at a point at $1.76 a few days ago, we are currently being written about by the Street.com and the Fool.com as teetering on the brink of bankruptcy or as an adopted child going to be deserted by Sanofi on a daily basis. Analysts are going around touting $1 or $2 PPS targets. We shouldn’t be here. We last time saw our PPS at around $2 in 2012, when FDA approval was still uncertain. Now Afrezza has been approved and more importantly, with excellent real world user feedbacks, we have Sanofi as a partner and our other Technosphere applications are in the development.
I still firmly believe that the technoshpere technology, the patents and other IP rights are worth more than our current market and if Mannkind is unequivocally backed up by a firm commitment from a big pharma (including Sanofi), our market cap should be at least around 4-5 times at current level.
It appears our current situation (that we are being taken advantage of by the shorts) is to a large extent unintentionally facilitated by many of the decisions made by the company along the way over the last several quarters.
Imagine that what the shorts predicted turns out to be true, that Afrezza is a failure and Mannkind goes bankrupt. That would be such a shame and a huge loss to the millions of diabetics, and tens of thousands of investors. We do not want that to be happen and therefore, the company, the management and the shareholders would better take some decisive actions today.
2. Management
I think our management is decent. In my view, both Hakan and Matt are honest and nice guys. I respect them and appreciate their work and contributions. However, given the slow uptick of Afrezza and unprecedented short interests hang over Mannkind, good leaders are not enough at this juncture, we need great leaders to steer Mannkind through the rough waters. I have confidence in Hakan and Matt. However, at this critical juncture, Hakan and Matt need to step up their gear and efforts and take some decisive actions.
One thing the management can do instantaneously is to announce a pay cut of the top management by 10-25% and state that without the PPS going above $5, they will forgive any bonus. I am not dissatisfied with Hakan and Matt’s performance or pay. Given the recent restructuring in Mannkind, I just think such an announcement will be a huge morale boost to the Mannkind employees and shareholders.
3. Financing
The shorts have been feasting on Mannkind’s cash position over some time. Given the $32.9 cash balance as of 30 Sept. 2015, I believe the shareholders are also legitimately concerned about this issue. I would suggest Mannkind take the following actions to address these concern:
3.1 Have Mannkind Group increase its loan facility from $30 million to $100 million.
The loan facility is there as a backup. Matt has indicated that Mann Group may increase the size of the facility. The right time for the increase is now. An increase of the loan facility to $100 million will demonstrate great commitment of Al Mann to Mannkind and will be a great morale boost to all the Mannkind employees and shareholders. It will in the same time send a strong message to the doubters of Mannkind regarding Mannkind’s staying power.
3.2 Use the ATM and returned BofA shares to get more funds
Respectively, it appears it was a mistake that Mannkind did not sell some shares when the PPS was at $10, $7 or %5 in 2014 and earlier in 2015. I wouldn’t be surprised that Mannkind used its ATM on 12 November 2015 to raise another $20-30 million by taking advantage of the 40 million shares volume on that date. I would think it is a good idea for Mannkind to sell a certain number of shares at $2.5, $3.5 and $5 going forward to raise an additional $100 million or more capital, taking advantage of any good upward movement of the PPS (e.g., like after the announcement of a new Technosphere partner).
3.3 Announce a Technosphere partner as soon as possible
Get as much as possible upfront fee and milestone payments as possible, with some compromise in royalty payment. If we can get another upfront payment at $100-$150 million, that will help greatly.
3.4 Get the $25 million milestone payment from Sanofi as soon as possible.
Based on Hakan’s statement on the last conference call, it appears there is a $25 million related to some Sanofi/Mannkind development efforts. Some have speculated that it is related to certification of Sanofi insulin as a supply source to Mannkind. No matter for what purpose it is supposed to be, it appears it could come in 2015. If that is the case, Mannkind needs to communicate to Sanofi that Sanofi should make the payment of the milestone as soon as possible to demonstrate its commitment to Afrezza and Mannkind (more on this subject below).
3.5 Approve additional ATM facility, before the current ATM is used up
To sum it up, I would like to see that Mannkind line up cash balance, Mannkind Group loan facility and ATM facility to the tune of around $300 million in total (or ideally $500 million in total). That financial resource should be enough to enable Mannkind to have enough cash to support Afrezza ramp up and Technoshere development for at least another three years (and ideally five years).
We simply can not live on a quarter-by-quarter financing any more. We need long term financial planning, and on a very lean and conservative basis. For that purpose, I think we should always have three to five years's funding support lined up, supported with a combination of cash and loan facilities.
Note, I think financial stability currently ranks above no dilution of equity. Of course, when raising capital, the goal should always be to raise capital with as little dilution as possible.
This will be the foundation of my other suggestions below and will also put to rest of all those bankruptcy rumors/nonsenses being recycled by the Street.com and the Fool.com daily.
4. Mannkind to demonstrate strong commitment and confidence in Afrezza by announcing a long term commitment to ramp up Afrezza sales
With healthy financial resources as a foundation, Mannkind should publicly demonstrate its strong commitment and confidence in Afrezza by announce a long term commitment to ramp up Afrezza sales. Mannkind can state that, while it is 100% confident that Afrezza has all the necessary conditions to be a blockbuster and can ramp up swiftly going forward, it is prepared to take five or more years to ramp up the Afrezza sales and Mannkind has both the determination and financial resources in place to do that. And Mannkind is prepared to do that with Sanofi, and (in the unlikely situation that Sanofi and Mannkind choose not to continue the partnership at some point in the future) by itself or with another partner, i.e., no matter what.
History shows that Al Mann can do it and has done it, multiple times.
Pursuant to this article (published in 1995), MiniMed, which has been selling the insulin pump since 1985, has long had trouble making money, in part due to large amounts spent on research into new systems of diabetes treatment. Yet, we also know that MiniMed was successfully sold to Medtronic in 2001.
Let's take at a look at what kind of problem Minimed faced.
Quoting the article, “it's hard to conceive of a more difficult product to develop and market: The pumps must be virtually flawless because their users' health depends on their reliability. But their sales are complicated by their cost--about $4,000 per pump--doctors' skepticism, and the reluctance of diabetics themselves to change their lifestyles.”
“Granted, MiniMed's annual sales have almost tripled to $36.3 million in 1994 from $12.5 million in 1990, but in 1994, MiniMed lost $900,000, compared to a loss of $1.6 million in 1993. However, in the second quarter ending June 30 of this year, the company reported a profit of $101,000.”
So we can see that there isn't anything that is insurmountable with Afrezza. It just takes time, determination and patience.
5. Mannkind to communicate to Sanofi that it needs to demonstrate strong commitment and confidence in Afrezza by announcing a long term commitment to ramp up Afrezza sales
Again, this is on the assumption that Mannkind already obtains a strong financial footing as stated in Section 3 above (i.e., having lined up enough cash to support its next three to five years’ operation), Mannkind should communicate clearly to Sanofi, giving the recent noises raised in the media regarding whether Sanofi will terminate its partnership agreement, whether Sanofi is sandbagging Afrezza and the recent lawsuit against Sanofi for Genzyme Corp., it is reasonable for Sanofi to show that it is making good efforts in marketing Afrezza and committed to the long term success of Afrezza by:
5.1 making a public announcement that it is committed to ramp up Afrezza long term (i.e., at least for the next three to five years);
5.2 taking a minority stake in Mannkind
A 5-10% stake in Mannkind will be a minor capital outlay for Sanofi, but giving the current circumstance, a reasonably expected action by Sanofi to show that is committed to Afrezza long term and Mannkind’s financial situation long term.
5.3 Increacing the Sanofi facility to Mannkind for Afrezza marketing
An increase of $50-100 million should be a reasonably expected action by Sanofi to show that it is committed to Afrezza long term and Mannkind’s financial situation long term.
5.4 Publicly announcing time tables for EU and Japan applications and global expansions of Afrezza
5.5 Providing update on the 8,000 safety study
5.6 Providing update on label improvement study.
6. Sanofi and Mannkind JAC to comb through all sales and user data
The JAC to meticulously comb through the sales data, down to each prescribing Afrezza physician to find out why some physicians prescribed a lot, some prescribed a few and most did not and why some sales representatives are more successful than the others in terms of being able to persuade physicians to adopt Afrezza.
The JAC should follow up a large group of Afrezza users and collect their feedbacks and establish a database to at least form a basis on the best practices of Afrezza uses (like how to eliminate dry cough (we know drink water before and after inhalation helps), how to dose on pizza and other fatty foods, and how to correct for runaway highs, etc.).
7. Sanofi and Mannkind JAC to fix formulary placement
JAC should really identify what is holding back the insurance companies to move Afrezza to tier 2 and remove PA. Is a price cut is needed, that cut the price by 30-50%. Before the FDA approval, Al Mann has always maintained that Afrezza will be priced competitively with RAAs. We now know it is now. And we also know that Sam has noted that on average he uses two boxes of Afrezza each month. That’s around $600 per months and $7,200 per years. That is too much. We also know that one of the reasons that contributed to the poor sales of Exubera is its relatively high price tag.
JAC should also discuss if there are ways to make use of the existing data collected by the current Afrezza physicians for support of an improved label or better formulary placement.
8. Have someone (Al Mann, Hakan, Matt or some Afrezza uses like Sam, etc.) appear in popular shows/reports like The Oprah Winfrey Show, 60 minutes, etc.
Sanofi and Mannkind should line up with some popular shows/reports like The Oprah Winfrey Show, 60 minutes, etc. Need not be too fancy or too promotional. Just need to reveal to the world that we have this new weapon to fight against diabetes. It would be great if Al Mann himself can do it. But Hakan, Matt or some Afrezza uses like Sam will also do a great job. Just demonstrate the dreamboat and breathe a couple time would be great.
I do not think this will be that expensive and this will increase the awareness of Afrezza greatly. And I think Sanofi and Mannkind will be to line up such appearances if they take this seriously.
9. Senior management should show their commitment to the company by buying shares in the open market.
If management, with all the non-public information in front of them, were to purchase shares in the open market at these low prices it would be a major blow to the short interests and would encourage buying by many longs sitting on the fence. [note: added per suggestion of trenddiver.]
