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Post by petech on Aug 10, 2016 17:33:37 GMT -5
While I am as hopeful as anyone that MNKD will start selling like crazy, I'd also like to keep our attention on significant future payments that will be necessary and kind of get some thoughts on cash outflow needs and timing. We know fixed costs are 10-12M a month and there is about 60M of cash...so we are not far into 2017 when things start to run dry. I am a bit time limited now to do this, but thoughts that jump to mind: Potential increases: Item Amount Timing A Warrant exercise $36.4M shares X 1.5 cost = 54.6M cash By May 2018 B Warrant exercise $12.1M shares X 1.5 cost = 18.2M cash From May 2017 through November 2019 Sanofi Insulin Put uncertain but another 41M left uncertain Sanofi termination payment uncertain in amount or timing uncertain License of ex-us rights uncertain in amount or timing uncertain Decreases Item Amount Timing Amphistar Insulin Purchase 23M Euros per year By 12/31/17 through 19.
Debt repayments help
Milestones don't think they're going to happen.
Ongoing costs $11M a month every month.
In short, just like disclosed in the 10Q, we're going to have to raise cash again....absent a termination payment / ex-us license sale / something else awesome happening. I am hoping for an ex-US sale....but regardless any path forward needs our afrezza scripts to start validating our expectations. I would say around end November we should have enough data to show if we are a go/no go.
Firmly in the "we are a go" camp.  |
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Post by anderson on Aug 10, 2016 19:02:16 GMT -5
Dont forget increase in script number. Any increase gets us one step closer. If you look at 28mil over 12 weeks that is about 2.3mil. From the scripts revenue it looks like that would be about 8k(if MNKD get ~75% of that) scripts per week to break even. So even if we only get 2k scripts per week by the end of the year that should be a 25% increase in runway.
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Post by agedhippie on Aug 10, 2016 19:16:11 GMT -5
While I am as hopeful as anyone that MNKD will start selling like crazy, I'd also like to keep our attention on significant future payments that will be necessary and kind of get some thoughts on cash outflow needs and timing. We know fixed costs are 10-12M a month and there is about 60M of cash...so we are not far into 2017 when things start to run dry. I am a bit time limited now to do this, but thoughts that jump to mind: Potential increases: Item Amount Timing A Warrant exercise $36.4M shares X 1.5 cost = 54.6M cash By May 2018 B Warrant exercise $12.1M shares X 1.5 cost = 18.2M cash From May 2017 through November 2019 Sanofi Insulin Put uncertain but another 41M left uncertain Sanofi termination payment uncertain in amount or timing uncertain License of ex-us rights uncertain in amount or timing uncertain Decreases Item Amount Timing Amphistar Insulin Purchase 23M Euros per year By 12/31/17 through 19.
Debt repayments help
Milestones don't think they're going to happen.
Ongoing costs $11M a month every month.
In short, just like disclosed in the 10Q, we're going to have to raise cash again....absent a termination payment / ex-us license sale / something else awesome happening. I am hoping for an ex-US sale....but regardless any path forward needs our afrezza scripts to start validating our expectations. I would say around end November we should have enough data to show if we are a go/no go.
Firmly in the "we are a go" camp. The $41 million is a bit misleading. It is tied to the Amphastar Insulin Purchase and would be better stated as €15 ($18) million per year since it is a resale of up to 65% of the Amphastar commitment. If we are claiming the full rebate the Mannkind is only using €8 ($9) million of insulin per year which would be bad news so the cover should be good for at least three years. |
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Post by matt on Aug 11, 2016 7:39:37 GMT -5
Warrants, unless very, very deep in the money, are worth more alive than dead so for that reason they tend to get exercised late in the option period if not on the expiration date itself. For that reason you might want to model the cash inflow later in the exercise period.
Also, don't forget to model costs. Most accountants (and Matt P is an accountant) refer to the expense of doing business (marketing, sales, management salaries) as expenses and those related to producing product as costs. Manufacturing cost for the first half of the year was nearly $2 million a month, and if scripts rise like everybody expects them to, that number will grow. Since we don't have the details on the components, it is hard to figure that number out but I might speculate that there is $9 million of fixed cost in that number (which won't change much as volume increases and $3 million that is variable. Likewise, don't forget to model the cash that goes out for finished goods inventory and accounts receivable since increases in working capital are cash flow items but do not hit the income statement. Once an operation is up and running, working capital is fairly static but during the growth phase it can suck more cash than most expect.
I don't think you need to worry about the debt, as that is likely to get rolled-over or refinanced, or a Sanofi termination payment. I know a lot of people have a fantasy of Sanofi paying out a huge settlement because the launch did not go as planned, but there is no legal basis for asserting such a claim and if you look at Sanofi's second quarter and forecast they are not going to be in the mood to write a check just to be nice guys, especially when they are already owed $70 million. Lantus, their only remaining blockbuster drug, goes generic in December.
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Post by agedhippie on Aug 11, 2016 8:28:12 GMT -5
I know a lot of people have a fantasy of Sanofi paying out a huge settlement because the launch did not go as planned, but there is no legal basis for asserting such a claim and if you look at Sanofi's second quarter and forecast they are not going to be in the mood to write a check just to be nice guys, especially when they are already owed $70 million. Lantus, their only remaining blockbuster drug, goes generic in December. CVS have dropped Lantus and Toujeo from their 2017 formulary in favor of the generic, Basaglar. Express Scripts decide later in the year but I expect they will follow. Matt's right about warrants. I trade warrants (LINDW is worth a look) and it would be silly to exercise them as soon as possible any more than you would an option with a long expiry as you lose the time premium. You want to hold warrants while the share price rises to maximize the return. Besides that if the company is doing well they may offer to buy out your warrants to get rid of the share overhang created by warrants and boost the share price. |
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Post by anderson on Aug 11, 2016 8:53:58 GMT -5
what if the warrants are not listed for trade? Didnt MNKD say they had no plans to list them. Sure they could be listed some other way, but if the only way to get cash out is the exercise and sell what then?
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Post by agedhippie on Aug 11, 2016 10:07:04 GMT -5
what if the warrants are not listed for trade? Didnt MNKD say they had no plans to list them. Sure they could be listed some other way, but if the only way to get cash out is the exercise and sell what then? Mannkind cannot stop them from being traded. I don't believe they are listed (I cannot find a symbol for them) but they can certainly be traded directly between counter-parties. I am willing to bet that most of the warrants have already been traded at least once as the original holders will have wanted to offload them ASAP since they are not investors. If, for arguments sake, the only way out was to exercise the warrant then you would wait as long as possible. Since you cannot sell the time premium you would use it to maximize your return by waiting on the grounds that the price will steadily rise over time. |
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Post by petech on Aug 11, 2016 10:47:40 GMT -5
Thanks all for the responses. Unfortunately, I can't edit the initial post for updates, so I'm going to have to continue this in subsequent responses such as this. The thing that sticks out to me is the Deerfield debt that started being repaid July 1 of this year; what's the schedule on repayment? When MNKD said they see cash lasting until 1st Q 17, is that tapping into the ATM and/or LOC? It would appear so. They need to end every quarter with $25M in the bank. Comments/questions welcomed. This is just a rough draft.
Potential increases:
Item Amount Timing
A Warrant exercise $36.4M shares X 1.5 cost = 54.6M cash By May 2018
B Warrant exercise $12.1M shares X 1.5 cost = 18.2M cash From May 2017 through November 2019
Sanofi Insulin Put uncertain but another 41M left uncertain
Sanofi termination payment uncertain in amount or timing or probability uncertain
License of ex-us rights uncertain in amount or timing or probability uncertain
RLS 4th Q milestone uncertain in amount 4th Q of 2016
Mann LOC draw-down $30.1M uncertain
$50M ATM Approx $47M after expenses (assuming) uncertain
Decreases
Item Amount Timing
Amphistar Insulin Purchase 2016 25.4M Euros Left for 2016; 3.4M paid - offset partially by insulin put 4th Q of 2016
Amphistar Insulin Purchase 2017-19 23M Euros per year - offset partially by put By 12/31/17 through 19.
Amphistar Insulin Cancellation $5.3M IF cancelled; not in any way saying it will be uncertain
$80M debt to Deerfield start 7/1/16; not sure of repayment schedule all repaid by 12/9/19
Milestones $9M as long term amount uncertain
Ongoing costs - fixed $7M a month - estimated recurring
Ongoing costs - variable $4M+ a month - estimated - some overlap with Amphistar recurring
Deerfield Restriction $25M cash on hand end of quarter until Deerfield paid off
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