8-K:CC excerpt;10-K:$175M avail frm SNY, 65/35 after Term Da
Mar 17, 2016 14:12:47 GMT -5
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Post by lakers on Mar 17, 2016 14:12:47 GMT -5
investors.mannkindcorp.com/secfiling.cfm?filingID=1193125-16-505910&CIK=899460
8-K
Correspondingly, given the continued lower than expected sales of Afrezza, we assessed the impact of the value and recoverability of our long-lived assets in accordance with accounting guidance. As a result, impairment charges of $206.6 million were recorded in the fourth quarter of 2015, of which $140.4 million related to impairment of fixed assets and $66.2 million related to loss on future purchase commitments, primarily insulin.
We expect G&A to remain relatively flat in 2016 as compared to last year, as a result of our restructuring measures in 2015, offset by an expected increase in professional fees related to the Sanofi termination. We anticipate our overall R&D expenses will decrease in 2016 compared to last year, due to our focused efforts in the transition of the Afrezza rights this year, and minimal incremental cost associated with our development pipeline.
We will incur sales and marketing expenses in 2016, as the sales and marketing efforts transition from Sanofi this year. Product manufacturing expenses are expected to remain relatively flat as compared to last year, due to the Sanofi termination, and the associated transition period, as this year’s production levels should be consistent with last year’s volumes.
Matthew Pfeffer - MannKind - CEO
Thank you, Rose.
The most noteworthy financial event in the fourth quarter was clearly the impairment charges recognized as the results of the continued slow sales of Afrezza by Sanofi through the end of the year, which culminated in their decision to return the product to MannKind.
As a consequence, we wrote down our Danbury manufacturing facility, and wrote off essentially all of our raw material and finished goods inventory, including some components not even yet received, but for which we have purchase commitments. These non-cash write-downs will have a positive effect, ironically, on our P&L going forward, as they will reduce overhead and material costs associated with future product manufacture.
While the results of 2015 were well short of our expectations, as we talked about in our earnings release, we are looking forward to the next 12 months with optimism and great excitement. With Afrezza expected to be back under our control next month, we are all enthusiastic about the opportunity to launch a lean, focused, commercial effort that highlights the differentiating qualities of our product.
investors.mannkindcorp.com/secfiling.cfm?filingID=1193125-16-505366&CIK=899460
10-K
We believe that Sanofi lacks a good faith basis for determining that commercialization of AFREZZA is no longer economically viable in the United States. Nonetheless, in the interest of an expedient transition, we are currently working with Sanofi to transfer and wind down the agreement activities by April 4, 2016, or as soon as practicable thereafter. As required by the Sanofi License Agreement, we and Sanofi are currently using diligent efforts to facilitate the smooth and orderly transition of development and commercialization activities related to AFREZZA, and are negotiating in good faith a written transition agreement for this purpose. As a result of the foregoing termination, effective on the Termination Date and thereafter during any period which Sanofi is required to perform any wind-down activities pursuant to the terms of the Sanofi License Agreement, the rights granted to Sanofi under the Sanofi License Agreement to develop and commercialize AFREZZA will become non-exclusive and we will have the right to engage one or more other distributors and/or licensees of AFREZZA. Sanofi will continue to distribute AFREZZA during the wind-down period as required by the agreement until such time that we or our designee takes over responsibility for distribution. All profits and losses from AFREZZA product sales by Sanofi or its affiliates after the Termination Date, if any, will continue to be shared 65% by Sanofi and 35% by us pursuant to the terms of the Sanofi License Agreement. We and Sanofi are also parties to a supply agreement, dated August 11, 2014 (the “Sanofi Supply Agreement”), pursuant to which we are required to supply Sanofi or its affiliates or its sublicensees such quantities of AFREZZA as requested by Sanofi to cover its commercial requirements. As a result of the termination of the Sanofi License Agreement, the Sanofi Supply Agreement will terminate by its terms on the Termination Date. In addition to the foregoing agreements, we and Aventisub LLC, an affiliate of Sanofi, are parties to a Senior Secured Revolving Promissory Note, dated September 23, 2014 (the “Sanofi Loan Facility”) and a Guaranty and Security Agreement (the “Security Agreement”). Both the Sanofi Loan Facility and the Security Agreement remain in effect. Pursuant to the Sanofi Loan Facility, we may borrow up to an aggregate of $175.0 million to fund our share of net losses from AFREZZA product sales by Sanofi or its affiliates. The original maturity date of September 23, 2024 for repayment of the outstanding principal amount of the loans under the Sanofi Loan Facility is not affected by the termination of the Sanofi License Agreement.
As part of the approval of AFREZZA, the FDA required us to conduct the following post-marketing studies:
•
A dose-ranging pharmacokinetic (PK)-pharmacodynamic (PD) glucose-clamp trial to characterize the dose-response of AFREZZA relative to subcutaneous insulin in patients with type 1 diabetes, which Sanofi completed in 2015;
•
A PK-PD glucose-clamp trial to characterize within-subject variability, which Sanofi completed in 2015;
•
An open-label PK and multiple-dose safety and tolerability dose-titration trial of AFREZZA in pediatric patients ages 4 to 17 years with type 1 diabetes, for which Sanofi is in the process of enrolling subjects, followed by a prospective, open-label, randomized, controlled trial comparing the efficacy and safety of prandial AFREZZA to prandial subcutaneous insulin as part used in combination with subcutaneous basal insulin in pediatric patients 4 to 17 years old with type 1 or type 2 diabetes; and
•
A five-year, randomized, controlled trial in 8,000-10,000 patients with type 2 diabetes to assess the potential serious risk of pulmonary malignancy with AFREZZA use.
8-K
Correspondingly, given the continued lower than expected sales of Afrezza, we assessed the impact of the value and recoverability of our long-lived assets in accordance with accounting guidance. As a result, impairment charges of $206.6 million were recorded in the fourth quarter of 2015, of which $140.4 million related to impairment of fixed assets and $66.2 million related to loss on future purchase commitments, primarily insulin.
We expect G&A to remain relatively flat in 2016 as compared to last year, as a result of our restructuring measures in 2015, offset by an expected increase in professional fees related to the Sanofi termination. We anticipate our overall R&D expenses will decrease in 2016 compared to last year, due to our focused efforts in the transition of the Afrezza rights this year, and minimal incremental cost associated with our development pipeline.
We will incur sales and marketing expenses in 2016, as the sales and marketing efforts transition from Sanofi this year. Product manufacturing expenses are expected to remain relatively flat as compared to last year, due to the Sanofi termination, and the associated transition period, as this year’s production levels should be consistent with last year’s volumes.
Matthew Pfeffer - MannKind - CEO
Thank you, Rose.
The most noteworthy financial event in the fourth quarter was clearly the impairment charges recognized as the results of the continued slow sales of Afrezza by Sanofi through the end of the year, which culminated in their decision to return the product to MannKind.
As a consequence, we wrote down our Danbury manufacturing facility, and wrote off essentially all of our raw material and finished goods inventory, including some components not even yet received, but for which we have purchase commitments. These non-cash write-downs will have a positive effect, ironically, on our P&L going forward, as they will reduce overhead and material costs associated with future product manufacture.
While the results of 2015 were well short of our expectations, as we talked about in our earnings release, we are looking forward to the next 12 months with optimism and great excitement. With Afrezza expected to be back under our control next month, we are all enthusiastic about the opportunity to launch a lean, focused, commercial effort that highlights the differentiating qualities of our product.
investors.mannkindcorp.com/secfiling.cfm?filingID=1193125-16-505366&CIK=899460
10-K
We believe that Sanofi lacks a good faith basis for determining that commercialization of AFREZZA is no longer economically viable in the United States. Nonetheless, in the interest of an expedient transition, we are currently working with Sanofi to transfer and wind down the agreement activities by April 4, 2016, or as soon as practicable thereafter. As required by the Sanofi License Agreement, we and Sanofi are currently using diligent efforts to facilitate the smooth and orderly transition of development and commercialization activities related to AFREZZA, and are negotiating in good faith a written transition agreement for this purpose. As a result of the foregoing termination, effective on the Termination Date and thereafter during any period which Sanofi is required to perform any wind-down activities pursuant to the terms of the Sanofi License Agreement, the rights granted to Sanofi under the Sanofi License Agreement to develop and commercialize AFREZZA will become non-exclusive and we will have the right to engage one or more other distributors and/or licensees of AFREZZA. Sanofi will continue to distribute AFREZZA during the wind-down period as required by the agreement until such time that we or our designee takes over responsibility for distribution. All profits and losses from AFREZZA product sales by Sanofi or its affiliates after the Termination Date, if any, will continue to be shared 65% by Sanofi and 35% by us pursuant to the terms of the Sanofi License Agreement. We and Sanofi are also parties to a supply agreement, dated August 11, 2014 (the “Sanofi Supply Agreement”), pursuant to which we are required to supply Sanofi or its affiliates or its sublicensees such quantities of AFREZZA as requested by Sanofi to cover its commercial requirements. As a result of the termination of the Sanofi License Agreement, the Sanofi Supply Agreement will terminate by its terms on the Termination Date. In addition to the foregoing agreements, we and Aventisub LLC, an affiliate of Sanofi, are parties to a Senior Secured Revolving Promissory Note, dated September 23, 2014 (the “Sanofi Loan Facility”) and a Guaranty and Security Agreement (the “Security Agreement”). Both the Sanofi Loan Facility and the Security Agreement remain in effect. Pursuant to the Sanofi Loan Facility, we may borrow up to an aggregate of $175.0 million to fund our share of net losses from AFREZZA product sales by Sanofi or its affiliates. The original maturity date of September 23, 2024 for repayment of the outstanding principal amount of the loans under the Sanofi Loan Facility is not affected by the termination of the Sanofi License Agreement.
As part of the approval of AFREZZA, the FDA required us to conduct the following post-marketing studies:
•
A dose-ranging pharmacokinetic (PK)-pharmacodynamic (PD) glucose-clamp trial to characterize the dose-response of AFREZZA relative to subcutaneous insulin in patients with type 1 diabetes, which Sanofi completed in 2015;
•
A PK-PD glucose-clamp trial to characterize within-subject variability, which Sanofi completed in 2015;
•
An open-label PK and multiple-dose safety and tolerability dose-titration trial of AFREZZA in pediatric patients ages 4 to 17 years with type 1 diabetes, for which Sanofi is in the process of enrolling subjects, followed by a prospective, open-label, randomized, controlled trial comparing the efficacy and safety of prandial AFREZZA to prandial subcutaneous insulin as part used in combination with subcutaneous basal insulin in pediatric patients 4 to 17 years old with type 1 or type 2 diabetes; and
•
A five-year, randomized, controlled trial in 8,000-10,000 patients with type 2 diabetes to assess the potential serious risk of pulmonary malignancy with AFREZZA use.
