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Post by ashiwi on Mar 3, 2014 16:49:55 GMT -5
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Post by liane on Mar 3, 2014 18:02:05 GMT -5
Still digesting this part - under Recent Events:
RECENT EVENTS
On February 28, 2014, we amended our existing facility agreement dated July 1, 2013, or the Facility Agreement, with Deerfield Private Design Fund II, L.P., or Deerfield Private Design Fund, and Deerfield Private Design International II, L.P., referred to collectively as Deerfield, to provide for the issuance of tranche B notes to Deerfield in a maximum aggregate principal amount equal to (x) if the FDA approves the NDA for AFFREZZA and Deerfield purchases the fourth tranche of 9.75% Senior Convertible Notes due 2019, or 2019 notes, originally issuable pursuant to the Facility Agreement, 150% of the aggregate principal amount of 2019 notes that Deerfield has converted into our common stock on and after the effective date of the amendment, up to $90.0 million, and (y) otherwise, 33.33% of the aggregate principal amount of 2019 notes that Deerfield has converted into our common stock on and after the effective date of the amendment, up to $20.0 million, in each case subject to the satisfaction of certain other conditions. Any tranche B notes, if and when issued, would bear interest at the rate of 9.75% per year, subject to reduction to 8.75% if we enter into a collaboration with a third party to commercialize AFFREZZA, on the outstanding principal amount, payable in cash quarterly in arrears on the last business day of December, March, June and September of each year. We are required to repay 25% of the original principal amount of any tranche B notes on the third, fourth, fifth and sixth anniversaries of the applicable issue dates of such notes, provided that the entire outstanding principal amount of all tranche B notes will become due and payable no later than December 31, 2019. The tranche B notes will be prepayable without penalty or premium commencing two years after issuance thereof.
In addition, pursuant to the amendment, the outstanding 2019 notes held by Deerfield were amended and restated such that Deerfield may, subject to certain limitations, convert up to an additional $60.0 million principal amount under such 2019 notes into common stock after the effective date of the amendment, at a minimum conversion price of $5.00 per share unless we otherwise consent. We also agreed to register for resale up to 12,000,000 shares of common stock issuable upon conversion of the outstanding 2019 notes, as amended and restated, as of the date of the amendment.
On March 3, 2014, we entered into two At-The-Market Issuance Sales Agreements, or the ATM Agreements, one with MLV & Co. LLC, or MLV, and one with Meyers Associates, L.P. (doing business as Brinson Patrick, a division of Meyers Associates, L.P.), or Brinson Patrick, pursuant to which we may issue and sell our common stock having aggregate sales proceeds of up to $50.0 million from time to time through MLV or Brinson Patrick, acting as our sales agents. We currently anticipate that all or substantially all sales of common stock under the ATM Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended, or the Securities Act. We have not yet sold or issued any shares of our common stock under the ATM Agreements.
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Post by BD on Mar 3, 2014 18:30:03 GMT -5
18:24 EDT MNKD theflyonthewall.com: MannKind enters $50M at-the-market agreements
MannKind disclosed in a regulatory filing that on March 3, the company entered into two at-the-market issuance sales agreements, or the ATM agreements, one with MLV & Co. and one with Brinson Patrick, pursuant to which the company may issue and sell its common stock having aggregate sales proceeds of up to $50M from time to time through MLV or Brinson Patrick, acting as sales agents. The company currently anticipates that all or substantially all sales of common stock under the ATM agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933. The company said it has not yet sold or issued any common shares under the agreements. :theflyonthewall.com
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Post by goyocafe on Mar 3, 2014 18:59:36 GMT -5
Seems they're content giving us this informaiton through minimum means, i.e. we get to find out about it only if we're motivated enough to read their SEC filings. They just don't seem to want to be very transparent the last year if not longer.
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Post by babaoriley on Mar 3, 2014 19:30:09 GMT -5
goyo, I think this disclosure it pretty typical. One needs to review the doc to get the whole sens of it, or be hopelessly confused, or misinterpret it altogether! Mostly designed to allow Deerfield the maximum flexibility in making money, in return for the risk they took in funding us. More dilution, more lending, not sure if some is going to pay Al back.
Whatever it is, we've come too far to turn back now! LOL, this is just the way stuff happens!
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Post by mrhaigs on Mar 3, 2014 20:19:33 GMT -5
Anyone think that the money should be coming from a soon to be potential partner instead of this route? Maybe I'm interpreting this wrong?
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Post by mrhaigs on Mar 3, 2014 21:36:24 GMT -5
Forget my comment. The more I think about this the more it puts them in a better position this year. They will not be at the mercy of a partner for cash. I'm ok with it. It's not like they're going to release all those shares before April 15 or even April 1 for that matter when we will know the status of the product. Nice job Al.
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Post by savzak on Mar 3, 2014 21:59:34 GMT -5
Forget my comment. The more I think about this the more it puts them in a better position this year. They will not be at the mercy of a partner for cash. I'm ok with it. It's not like they're going to release all those shares before April 15 or even April 1 for that matter when we will know the status of the product. Nice job Al. My slim hopes for a partnership pre-PDUFA were halved or even quartered with this announcement. I had acknowledged in my heart that it was unlikely. I now have to accept that it is very, very unlikely. |
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Post by babaoriley on Mar 3, 2014 23:20:04 GMT -5
I think Deerfield will be selling some of its shares before April 1. They are hedging their bets and getting back money that otherwise would be in a loan which would be difficult to collect on if the FDA says no.
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Post by babaoriley on Mar 4, 2014 2:54:01 GMT -5
Also, are we going to catch a nasty article or two on this latest tomorrow morning?
And, finally, the markets seem to be setting up for a good opening, maybe even a good day. Let's see how the market reacts to this deal, my guess is negatively, but I have no strong conviction on that. I will let the market decide for me if the deal is favorable or not.
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mnkdnyc
Lab Rat
Posts: 48
Sentiment: Long
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Post by mnkdnyc on Mar 4, 2014 8:48:33 GMT -5
This money is a small fraction of what they need to commercialize. They might be thinking that a couple of months delay may be in order and this will help them get through it.
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Post by mrhaigs on Mar 4, 2014 9:38:52 GMT -5
I highly doubt they have that long of a delay. Maybe a week or two but definitely by beginning of may for approval decision. They're going to need money after approval too. Capital is always nice to have available if needed.
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Post by harshal1981 on Mar 4, 2014 11:45:37 GMT -5
If I understand correctly. This is positive sign than negative as some of you are inferring. This is just increasing sign of confidence that Deerfield is showing in MNKD. As per the amendment in the 2019 notes, DF can convert another $60 million worth of principle in to stocks at $5 minimum which equals to 12 million shares additional in dilution for all of us. This is on top of $40 million worth of conversion that has already taken place. Which essentially means out of $160 million, Deerfield is converting $100 million worth of secured landing in to unsecured stocks. Now this may or may be interpreted as bad sign as well. One may think that what prevents them from selling $100 million worth of stock they got at $5 price right at the peak of run-up prior to AdCom at lets say about $10 and make 100% profit rather than waiting until 2019 to get their principle back and make merely 40 to 50% (if you take 10% annual interest for four / five years)
My thinking however is that Deerfield is not shooting for just 100% profit. The fact that they have no way to guess FDA's decision, the only thing they can do is take chances with their internal DD. Deerfield has upper hand compared to any other institutional investor since they entered in to landing agreement with MNKD instead of buying shares from the market. As a result of that, they got to review the data in detail prior to releasing their second tranche upon publishing of the trial results. This essentially means, DF got insider peak even if their investment in MNKD is less than lets say Vanguard or Fidelity who bought shares in open market.
If DF to employ very simple hedge strategy, they would hedge the loan of $120 million (out of which only $100 million is converted and $20 million remains as notes. $40 million last tranche is payable only after FDA approval which is essentially risk-free landing), by offloading half the shares (about 10 million) at about $10 right before AdCom and recover $100 million. So out of $120 million loan, you have already recovered your principle of un-secured investment. Remaining 10 million shares, they may sell it lets say at $20 a year down the road, and get another $200 million. So you have recovered $300 million for $100 million un-secured loan - a 200% upside. Downside loss potential - 0%. since you have already recovered your principle before the binary event. And remaining un-converted portion of $20 million is secured. So even if FDA to reject, they will for sure recover $20 million from liquidation as the notes are secured above even Al's investment. And of course, in the event of FDA rejection, they don't have to pay last tranche of $40 million at all.
Not sure how market will react to this move. This can really go both ways.
Now I ask the question as to why MNKD management entered in this agreement if they were to handout shares at $5 conversion price. Could they not have sold shares in open market to begin with at higher price than $5. It would have been less dilution. May be they wanted to install confidence by entering in to such deal rather than simple dilution which usually /always perceived as negative.
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Post by harshal1981 on Mar 4, 2014 11:55:17 GMT -5
Another thought that crossed my mind is that this can be a sign of buy-out. If I am making an offer to buy out MNKD, I am going to quote a number irrespective of shares outstanding. Of course, as a part of buy-out, I have to assume all the debt as well. As a buyer, I would prefer that secured loans are converted in to stocks. In short - if I quote lets say $20 billion for buying out MNKD right now, I assume the debt of $120 million DF loan as a debt. So repaying that debt is in addition to my cost of $20 billion to buy out MNKD. Now if that loan is converted to stock, even if out standing shares go up from, let's say 400 million to 420 million, I am still going to quote $20 billion buy-out price tag. The benefit for me is that now I inherit only $20 million worth of debt as $100 million worth of loan is already converted to shares and that only means that common share holders will get less amount from the total $20 billion that I am paying to buy out. But for me the cost of buy-out is $20 billion + $20 million compared to $20 billion + $120 million. (100 million less - which is not a small amount in absolute terms)
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Post by rak5555 on Mar 4, 2014 12:32:23 GMT -5
Whether the DF conversion is bullish or bearish hinges on whether there are any restrictions on the shares they acquire through conversion. If they can convert the debt to shares and then immediately sell the shares in open market, this would allow DF to liquidate their investment in MNKD at a profit (profit results from debt being issued at discount). If this were to occur and get reported...............................
I don't know if there are restrictions on shares acquired by DF through debt conversion. I have a question into IR to see what we can learn.
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