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Post by babaoriley on Mar 17, 2016 1:17:27 GMT -5
Sure there is. Mnkd lost a year's worth of sales that they will never get back. The larger damage is that they have given the business and medical community the impression that Afrezza/TS is not viable. That will not be fixed cheaply. Either way, I doubt settlement money will arrive in the near term. But the threat of it will help the SP. And I think that is the name of Matt's game. You can be low in cash or have a sub $1 SP- but you can't sign decent partnerships with both. Maybe game plan is- big noise about lawsuit. SP goes to $2.5. Dilute 50m because case looks very promising. Hit big markets with huge DTC. Play pharma games with formulary, cut price. Hope scripts get over 400/wk. Make bigger noise about lawsuit, script increase. SP goes to $5. Dilute another 50m or sign partnership with much better terms or sell in entirety. SNY case never has to be resolved. Hank, I don't think that the threat of a lawsuit or the filing for arbitration would do much at all for MNKD's share price; winning the arbitration and being awarded very substantial sums likely would.
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Post by babaoriley on Mar 17, 2016 1:20:24 GMT -5
There is an arbitration clause so this never goes to court. Further more since there is a confidentiality clause covering the entire proceeding and judgement there are no messy dispositions, no grandstanding, no bad press. I cannot see what leverage Mannkind have beyond causing the inconvenience of arbitration. Sanofi will be able to justify all their actions (unless they have particularly incompetent risk and legal departments) to the arbitrators. If you are going to exit a contract through a break clause you plan for the ensuing litigation (arbitration in this case) and make sure that your subsequent actions and documentation support your story and will withstand scrutiny later. I think SNY will have to demonstrate and prove that they have " committed" resources, exercised their " best" efforts and incurred " substantial" costs in marketing & selling Afrezza within the validity of agreement(s) and up until the full return of control of Afrezza to MNKD. Resources, efforts and costs are mainly related to quantity and quality (& relevance) of sales manpower, marketing / education seminars (activities), advertisements, targeted regions & patients, insurance coverage, further studies, supporting equipment/ facilities, stocking of Afrezza, etc. To measure the above, SNY will have to convince the court whether the weekly script numbers, feedbacks (from patients, endos, doctors, insurance companies, salespeople) or adverse effects are most relevant to represent and reflect appropriately the sale outcome as well as justifies their decision to terminate the agreement (and of course get away with as least compensation to MNKD as possible). However, MNKD is not here to suffer. In fact, I believe, the Company since January this year, has specifically formulated counteracts to deal with SNY's exit strategies and defend in court. Despite MNKD has not yet declared war, it actually is attempting to adopt much less resources with best efforts to keep Afrezza in the market before its return from SNY and cooperate with diabetic centres, promote the drug via advocate groups, media, collaborate with partners, etc. Any effective result may lead a better chance for the Company to achieve growing weekly script numbers from this year low. Should MNKD be able to continuously get as many (or even more) weekly script numbers than SNY's, the Company would likely provide relevant comparative data and prove to the court easily that SNY has not done enough or has not been effectively promoted and sold the drug and thus is subject to much bigger compensation to MNKD. Besides, it is also critical for the court to understand the role of SNY, MNKD & the joint committee in determining, formulating of marketing strategies, execution plans and the timelines thereof, and to know who makes such ultimate decisions as marketing plans, pricing tactics, resources deployment, who is responsible for evaluating progress performance and altering decisions in joint committee. If it is true that MNKD has played a passive role and raised concerns to SNY about their changes in marketing efforts, SNY would be put in a more vulnerable position to defend themselves. coo2002coo, I would love the contract to have a "best efforts" to market clause, and perhaps it's already been pointed out that one exists. But I doubt it. Usually it's a "commercially reasonable efforts" clause and that's a significant difference.
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Post by cretin11 on Mar 17, 2016 6:58:56 GMT -5
If sales soars after the transition, then there's no damage to claim. Sure there is. Mnkd lost a year's worth of sales that they will never get back. Plus milestone payments SNY didn't pay.
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Post by coo2002coo on Mar 17, 2016 7:20:37 GMT -5
I think SNY will have to demonstrate and prove that they have " committed" resources, exercised their " best" efforts and incurred " substantial" costs in marketing & selling Afrezza within the validity of agreement(s) and up until the full return of control of Afrezza to MNKD. Resources, efforts and costs are mainly related to quantity and quality (& relevance) of sales manpower, marketing / education seminars (activities), advertisements, targeted regions & patients, insurance coverage, further studies, supporting equipment/ facilities, stocking of Afrezza, etc. To measure the above, SNY will have to convince the court whether the weekly script numbers, feedbacks (from patients, endos, doctors, insurance companies, salespeople) or adverse effects are most relevant to represent and reflect appropriately the sale outcome as well as justifies their decision to terminate the agreement (and of course get away with as least compensation to MNKD as possible). However, MNKD is not here to suffer. In fact, I believe, the Company since January this year, has specifically formulated counteracts to deal with SNY's exit strategies and defend in court. Despite MNKD has not yet declared war, it actually is attempting to adopt much less resources with best efforts to keep Afrezza in the market before its return from SNY and cooperate with diabetic centres, promote the drug via advocate groups, media, collaborate with partners, etc. Any effective result may lead a better chance for the Company to achieve growing weekly script numbers from this year low. Should MNKD be able to continuously get as many (or even more) weekly script numbers than SNY's, the Company would likely provide relevant comparative data and prove to the court easily that SNY has not done enough or has not been effectively promoted and sold the drug and thus is subject to much bigger compensation to MNKD. Besides, it is also critical for the court to understand the role of SNY, MNKD & the joint committee in determining, formulating of marketing strategies, execution plans and the timelines thereof, and to know who makes such ultimate decisions as marketing plans, pricing tactics, resources deployment, who is responsible for evaluating progress performance and altering decisions in joint committee. If it is true that MNKD has played a passive role and raised concerns to SNY about their changes in marketing efforts, SNY would be put in a more vulnerable position to defend themselves. coo2002coo, I would love the contract to have a "best efforts" to market clause, and perhaps it's already been pointed out that one exists. But I doubt it. Usually it's a "commercially reasonable efforts" clause and that's a significant difference. I am thinking if "Commercially reasonable efforts" can be compared with MNKD using LESS resources to achieve similar or even better commercial results (say weekly script numbers, number of doctors' prescription, number of patients adopting Afrezza, number of cities having Afrezza available, number of insurance companies having Afrezza coverage, etc.) than SNY within same timeframe, would this perspective give MNKD a upper hand to negotiate more compensation from SNY?
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Post by matt on Mar 17, 2016 7:54:48 GMT -5
The phrase "commercially reasonable" is generally interpreted by the courts (the only opinion that matters) as whether the judgement of management was so faulty as to be grossly negligent. Put differently, it doesn't matter if YOU agree with the decisions taken or not or even if the judge agrees with the decisions. The standard is whether the reasons given by Sanofi for the decisions that they did make were reasonable in light of everything they know about the market for insulin, prior attempts to commercialize inhalable insulin (that includes the failed launch of Exhubera), feedback from physicians, and their own market research. It doesn't have to be the best strategy, it doesn't even have to be right, it just has to be reasonable given everything that Sanofi knew.
On that standard, it is hard to win the argument. When Afrezza didn't bring in thousands of new prescriptions a week soon after launch, it was commercially reasonable to assume the drug would not be successful. That conclusion may be proven wrong eventually, but it was not unreasonable to draw that inference.
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Post by dictatorsaurus on Mar 17, 2016 8:13:55 GMT -5
Very simplistic outlook and explanation...partnership was established. Mannkind's responsibility was to manufacture and supply, Sanofi's was to market and sell. Guess which party didn't live up to their end of the deal?
Answer: It starts with an "S" and ends with "anofi"
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Post by kball on Mar 17, 2016 8:45:32 GMT -5
The phrase "commercially reasonable" is generally interpreted by the courts (the only opinion that matters) as whether the judgement of management was so faulty as to be grossly negligent. Put differently, it doesn't matter if YOU agree with the decisions taken or not or even if the judge agrees with the decisions. The standard is whether the reasons given by Sanofi for the decisions that they did make were reasonable in light of everything they know about the market for insulin, prior attempts to commercialize inhalable insulin (that includes the failed launch of Exhubera), feedback from physicians, and their own market research. It doesn't have to be the best strategy, it doesn't even have to be right, it just has to be reasonable given everything that Sanofi knew. On that standard, it is hard to win the argument. When Afrezza didn't bring in thousands of new prescriptions a week soon after launch, it was commercially reasonable to assume the drug would not be successful. That conclusion may be proven wrong eventually, but it was not unreasonable to draw that inference. Did anyone else find the new CCO's dig in the conference call interesting and relevant? Said something to the effect that he was happy or excited to be a part of a small pharma where their drugs don't compete with one another. That was i think a clear shot across the bow of SNY, before Matt went even further about objecting to the premise of how vigorous SNY's DTC efforts were in the Q&A
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Post by greg on Mar 17, 2016 9:00:35 GMT -5
The phrase "commercially reasonable" is generally interpreted by the courts (the only opinion that matters) as whether the judgement of management was so faulty as to be grossly negligent. Put differently, it doesn't matter if YOU agree with the decisions taken or not or even if the judge agrees with the decisions. The standard is whether the reasons given by Sanofi for the decisions that they did make were reasonable in light of everything they know about the market for insulin, prior attempts to commercialize inhalable insulin (that includes the failed launch of Exhubera), feedback from physicians, and their own market research. It doesn't have to be the best strategy, it doesn't even have to be right, it just has to be reasonable given everything that Sanofi knew. On that standard, it is hard to win the argument. When Afrezza didn't bring in thousands of new prescriptions a week soon after launch, it was commercially reasonable to assume the drug would not be successful. That conclusion may be proven wrong eventually, but it was not unreasonable to draw that inference. You always come across as very reasonable but I almost always disagree with so much of what you say. We may have covered this before, but we'll give it another shot.... In terms of "everything they know about the market for insulin," let's keep in mind there was just ONE prior attempt to commercialize inhalable insulin, consisting entirely of, not including, the failed launch of Exubera. Let's also keep in mind that exubera was a horribly inferior product that was priced horribly. Let's also keep in mind that Sanofi conducted their own market research before signing on the dotted line. As for feedback from physicians, do we have any evidence that this factored at all in the company's decision to terminate the agreement, a decision that appears to have been made very early on. And if this weren't the case, I wonder if you can explain why the Sanofi made ZERO efforts to get Afrezza's label improved or get it approved in any foreign markets. Moreover, I wonder if you can explain why Sanofi priced the product at a level that precluded insurance reimbursement, which, in turn, precluded meaningful sales. As to the product not bringing in thousands of new scripts a week soon after launch, if I need to remind you of the many reasons why that didn't happen, than I'm obviously wasting my time dialoging with you and you've obviously been wasting our time reading your comments.
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Post by centralcoastinvestor on Mar 17, 2016 9:01:28 GMT -5
I must say I have really enjoyed the vigorous discussion I have read related to this thread so far. Lots of differing opinions. It seems to me that what both Mannkind and Sanofi will do next is about risk management. They both face risks in arbritration. Mannkind needs money which is a present risk and Sanofi can pay off Mannkind relatively cheaply and avoid future risk. I know this sounds odd, but $200 million to Sanofi just isn't that much money. With a settlement, prior to arbitration, it removes risk for both companies.
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Post by bradleysbest on Mar 17, 2016 9:22:52 GMT -5
Excellent points & hopefully soon we get the answers to those questions. I am thinking a sweet heart deal (100-200 M) that both sides will be satisfied with so both companies can move on. IMO SNY sand bagged MNKD but will be hard pressed to prove it (court/arbitration) & with cash at a premium we need a settlement. My thoughts are even with minimal effort we should see an increase in script numbers once MNKD has control. After that anything is possible (new partner, foreign approvals, buyout...) Hoping for a great 2016! Happy St Patrick's day!
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Post by compound26 on Mar 17, 2016 9:31:51 GMT -5
I must say I have really enjoyed the vigorous discussion I have read related to this post so far. Lots of differing opinions. It seems to me that what both Mannkind and Sanofi will do next is about risk management. They both face risks in arbritration. Mannkind needs money which is a present risk and Sanofi can pay off Mannkind relatively cheaply and avoid future risk. I know this sounds odd, but $200 million to Sanofi just isn't that much money. With a settlement, prior to arbitration, it removes risk for both companies. centralcoastinvestor . Totally agree. If Afrezza succeeds (no need for wild success, like 5 billion annual sales, etc., just a mild success, say annual sales of 500 million to 1 billion within several few years, which is totally achievable) and Sanofi does not elect to settle right now, Sanofi could face an arbitration award of 500 million to 1 billion considering the damage it made to Mannkind (lost milestone payments, lost time, lost market opportunity, lost M&A opportunity, etc.). If that happens, Olivier Brandicourt will be in great trouble for not electing to settle right now for 100-200 million (which as you pointed out, is not a big sum from Sanofi's point of view). Additionally, a settlement will end the Sanofi-Mannkind partnership in amicable terms and help to improve Sanofi's damaged reputation (for behaving as a less trustworthy partner). I expect Sanofi to settle for 50-100 million cash + forgiving of the loan (I estimate that to be around 80 million by April 5, 2016) + release all security interest Sanofi holds on Afrezza and related assets. So the total settle amount will be 130-180 million from Sanofi. Personally, I hope the settlement turns out to be 100 million cash + forgiving of the loan + release all security interest Sanofi holds on Afrezza and related assets. The 100 million cash will extend Mannkind's runway for another 12 months. (Of course, I wouldn't mind if Sanofi pays us 200+ million. ) And possible milestone payments from RLS + sales proceeds from sale of the headquarter building + second offering of 15-20 million of shares at a PPS above 3 will probably bring in another 100 million within the next 12 months. That will further extend Mannkind's runway for another 12 months, that is up to June/July 2018. Based on what we have heard from Matt in the last several weeks, it is possible that a settlement be announced sometime around April 5, together with announcements of one or more foreign regional partners and a contract distributor for the US.
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Post by kball on Mar 17, 2016 9:36:26 GMT -5
Going back to Matt's comment that he doesn't "expect" (was that the term he used) to tap the 30 million loan i took to mean he foresees money coming from somewhere as others have pointed out.
If however a big chunk or all of that money is expected to come from any SNY settlement, and there turns out to be disagreement and then a dispute, i would think Mannkind then taps that 30 million to pursue said money.
Is that the best use of that money? Not sure. But it would seem....for lack of a better phrase...a 'commercially reasonable' use of it imo
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Post by babaoriley on Mar 17, 2016 9:44:12 GMT -5
One thing to keep in mind, irrespective of our arguments, something is making this stock rise.
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Post by mindovermatter on Mar 17, 2016 9:58:34 GMT -5
Going back to Matt's comment that he doesn't "expect" (was that the term he used) to tap the 30 million loan i took to mean he foresees money coming from somewhere as others have pointed out. If however a big chunk or all of that money is expected to come from any SNY settlement, and there turns out to be disagreement and then a dispute, i would think Mannkind then taps that 30 million to pursue said money. Is that the best use of that money? Not sure. But it would seem....for lack of a better phrase...a 'commercially reasonable' use of it imo If I had to guess, I think cash is coming from deals over seas. I think Mannkind is going to sell the rights to Afrezza for up front cash and % of sales. I am thinking 3 deals. One for Europe, Asia and the Middle East (Israel primarily). As much as I hope for a cash settlement from SNY, I am starting to think there won't be one.
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Post by agedhippie on Mar 17, 2016 10:14:20 GMT -5
I will try and answer this as quite a lot of this gets repeated and seems to be misunderstood. I think SNY will have to demonstrate and prove that they have " committed" resources, exercised their " best" efforts and incurred " substantial" costs in marketing & selling Afrezza within the validity of agreement(s) and up until the full return of control of Afrezza to MNKD. There is no requirement for Sanofi to use best efforts nor to incur substantial costs. Best efforts has a special meaning legally so it should not be used lightly. The agreement says Sanofi will use commercially reasonable efforts and that meaning is spelt out in the agreement (section 1.25). Sanofi do not have to convince the arbitrators (I assume you mean arbitration panel rather than law court) that they are allowed to withdraw. This right it is built into the agreement and no proof is required, Sanofi just have to believe that Afrezza is commercial not viable (section 12.3.a) This simply would prove that a different commercialization approach worked better than the original one that Sanofi and Mannkind agreed on. The key is that Sanofi followed the jointly agreed strategy and it failed. The fact that Mannkind subsequently outsells the joint effort is irrelevant unless they adopt an identical strategy - the difference is due to the strategy, not the commitment. If it is true that MNKD has played a passive role and raised concerns to SNY about their changes in marketing efforts, then Mannkind would be put in a more vulnerable position to defend themselves. The JAC is there to steer the project. Budget and marketing is approved by the JAC which requires unanimous agreement. There is an exception process where the Sanofi co-chair ultimately can make a decision without Mannkind's agreement. It's a nuclear option and I doubt it was used. If this option was not used then Mannkind agreed the budget and plan so saying now that it was inadequate will be impossible. Meanwhile my Jan 2018 options are doing nicely. At this rate I will get back a fair bit of my loss.
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