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Post by matt on Aug 9, 2019 8:17:22 GMT -5
Brazil guarantees health care for all. Since it has been in so many publications isn't there a chance adoption rate increases much quicker than in the US where we're at the mercy of the insurance providers? I imagine it boils down to price and promotion. Interesting article about the cost of insulin in third world countries -- experiment.com/u/3ayn7A Says the cost of a bottle of humalog in Brazil is $35. Will regulatory authorities allow much beyond that for afrezza? No, Brazil probably won't allow a huge premium over Humalog or other insulins. Realize that government pricing in South America is about regulating the price of healthcare and it is about controlling the use of dollars and other hard currencies. Since these countries have to import certain critical materials from the US and Europe and they have limited amounts of hard currency, it doesn't matter what a rich person is willing to pay if the government won't let them use their money to import high priced drugs. There are three prices set by the government as follows: PF: This is the factory price or in other words the maximum amount that the importer (BIOMM) can charge to pharmacies. PMC: This is the maximum retail price that a pharmacy can charge a consumer. PMVG: This is the price that can be charged to certain government owned hospitals and government entities, and it is always lower than the PMC. Each of the prices is different depending on the state where the buyer lives since the sales tax is included and ranges from 12% to 20%. Most states are 18% or 20%. The one that is important for MNKD is the PF price because MNKD will get a portion of the PF. Since Biomm has to cover their costs and can charge pharmacies no more than PF, the PF must be split between the manufacturer (MNKD) and the importer (Biomm). The government sets the PF price and all the other prices are derived from there depending on allowed markups. Brazil, in principal, will not import any new drug at a higher price that treats the same condition already served by another licensed drug. However, the government does allow a modest premium for certain innovations such as a premium for pre-filled injector pens and improved formulations. What are the market prices for competitive products (updated from the August 1st, 2019 official price list and today's Real / dollar exchange rate)?: Humulin R (100U/ml, 10ml vial) 37.63 Reals (US$9.57) Humulin Kwikpens (100U/ml, 3ml pen, 5 pens) 136.10 Reals (US$34.62) Novolin R (100U/ml, 10ml vial) 37.36 Reals (US$9.50) Novolin Pens (100U/ml, 3ml pen, 5 pens) 93.39 Reals (US$23.76) NovoRapid (100U/ml, 10ml vial) 77.25 Reals (US$19.65) <<< Novorapid is the name used in Brazil for FIASP NovoRapid Pens (100U/ml, 3ml pen, 5 pens) 147.34 Reals (US$37.48) <<< Novorapid is the name used in Brazil for FIASP
Again these are the maximum prices that the importer (competitors of Biomm) can charge the pharmacies. The PF price is split between the manufacturer and the importer and must cover the product, freight to Brazil, any marketing by the importer, and distribution costs within Brazil. My guess is that Biomm will want at least a 30% discount from the PF price to cover their costs, so MNKD will get a around 70% of the PF.
All things considered, I don't think it is realistic to expect a PF for Afrezza that is significantly more than the other products in the market. Obviously there is some art in the negotiation of the price, Biomm get 220 Reals for a 10 ml vial of their insulin glargine versus 167 Reals for Sanofi Lantus, but overall CMED is going to follow the rules pretty closely.
If you are wondering, the maximum prices to consumers are roughly 65% higher than the PF prices in places like Rio de Janeiro where the sale tax rate is 20% (PMC price includes the sales tax).
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Post by matt on Aug 8, 2019 9:37:29 GMT -5
I read it as a requirement to maintain all of its intellectual property etc during the terms of the loans. In other words, they cannot sell them off to a third party without triggering a material change of circumstance. The requirement is for MNKD to have rights to all IP that they use, whether that is ownership or license. If you think about how a security agreement works to protect the lender in case of a default, what good is a lien on a factory that produces TS types of products if the lien holder cannot foreclose on the IP rights as well. The building does not have much value on its own, it is just a shell, and the value of the customized production lines and production equipment is tied to the IP. If there is no IP, there is minimal value in the plant collateral. Also, since the IP is the subject of the lien the lender will not allow it to be sold to a third party unless the proceeds of that sale are used to reduce the loan balance. Try selling your house if you haven't paid off the mortgage and the bank will quickly remind you of how collateralized debt obligations work. However, as long as the lender get paid the proceeds (to the extent of the remaining loan) that won't keep MNKD from selling off any asset.
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Post by matt on Aug 8, 2019 6:46:57 GMT -5
I think the new loan is for up to 75M... which is pretty close to the lower end of 100M in my book. $28M of it used to pay down other debt, so $12M in working capital now and potentially $35M over next couple of years IF certain milestones met. Casper has been talking about restructuring and ending up with $100 to $150M in new "working" capital to use now. That would have been phenomenal (or unbelievable, which is why I suspected it would not happen). What we got was good, though. They pretty much had to pay down some of the other debt because once DF was off the table, those other lenders moved up to a first priority lien on the collateral. Getting a lender to agree to be subordinated again is never free, so the other lenders agreed to be subordinated and extended the loan term in exchange for getting some cash now. Overall the terms are no bargain but not excessive either given where the company is from a development standpoint.
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Post by matt on Aug 6, 2019 9:58:21 GMT -5
So in summary, it's: 1. There is not enough compelling data right now to support use of Afrezza vs other RAAs 2. The risk hasn't proven to outweigh the benefit 3. The cost hasn't proven to outweigh the burden 4. Even if 1, 2, and 3 are proven, the vast majority of people would either still not have access to or be able to afford Afrezza How to fix: 1. Fund an expensive well-designed clinical trial to prove superiority as well as small number needed to treat for cost burden purposes 2. Wait several years for the cream to rise to the top and for all the data to eventually find its way (assuming favorable results with Afrezza usage) I was with your logic all the way until your last point. I don't think you can be passive and assume the data will find its way to the desired audience. Remember the first rule of war; the enemy gets a vote too. The competition will make lots of noise and attempt to preserve their market share, as well they should, so it is foolish to assume that mere existence of the data is all it will take. The rest I agree with. I read a lot of medical journals, every single week, and I have a good sense about the quality of research needed to make a meaningful impact on the medical profession. What MNKD has produced to date is not sufficiently persuasive to change the minds of most clinicians. Shareholders like to talk about the 60-odd studies that Dr. Kendall likes to talk about, but changing medical practice is not about the quantity of studies but it is all about the quality. Large studies mean really large, and for a metabolic disease like diabetes that means several thousand subjects per cohort. Why so many? Because diabetes contributes to so many other comorbid conditions that you need a large population to be able to sort out what was the treatment effect of the drug and which observations were caused by the underlying disease, and in hypothesis testing statistics larger sample sizes are your friend. Until there is better data the label is going to read " Afrezza provided less HbA1c reduction than insulin aspart, and the difference was statistically significant." Honestly, can you blame a physician for not prescribing Afrezza after reading that? The other mistake that was made when bringing Afrezza to market was the failure to do an economic study at the same time the company did the clinical study. Had MNKD started to collect economic data back when the drug was being trialed, they might have some hard data by now and perhaps, just perhaps, an economic argument sufficient to improve reimbursement. It will take even longer to demonstrate the cost benefits of the drug than the therapeutic benefits, but that data will always be 5-10 years away until the company starts a proper study. Every year that goes by without starting such a study is another year before the company can start to drive sales effectively. Likewise, don't assume that the study to prove the economic benefits is "a small number" because the same confounding factors that apply to the therapeutic study will apply to the economic study. The economics need to be part of the clinical study regardless of how many patients that will take. The question, as always, is can the company even think about funding the required studies?
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Post by matt on Aug 5, 2019 8:05:01 GMT -5
Well if the FDA believes Afrezza is safe enough to begin trials with the youngest of Diabetics that will ever use Afrezza, then the black box is a complete contradiction. If a Ball is “Blue” and we can unanimously see it’s blue, we shouldn’t need trials to prove it just because. Our Healthcare System wastes more time and money than I ever imagined FDA allowing a trial to proceed is not equivalent to a conclusion that the medication is safe for children. Ultimately the question of how safe a medication really is can only be determined by administering it to real patients of the intended age group and monitoring them closely for signs of adverse events. In order to conduct a trial all known risks must be mitigated to the extent possible, but the trial itself will identify risk that are, at the moment, unknown. Some of those unknown risks may be trivial inconveniences and some may be seriously life-threatening, but neither the FDA nor Mannkind can determine that without data.
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Post by matt on Aug 3, 2019 12:35:53 GMT -5
i believe that’s a good possibility. Brazil has still not approved pricing for Afrezza (as of today). I check for an updated government price list every few days and will post it when it updates. It gets revised about once a month, but it varies sometimes. The last update was July 1 so another update is due soon. Update to my prior postThe August 1st price list was posted today (Saturday 8/3) and there is still no listing for Afrezza. The next update is due around September 1.
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Post by matt on Aug 3, 2019 9:59:09 GMT -5
What is the reference for concluding compensation is too high? I know there are organizations who study and rate such things but I don’t have access to those materials. The gold standard in pharma and biotech is the Radford Survey, compiled by a subsidiary of Aon. Radford compiles the compensation practices of nearly 1,000 pharma and biotech companies rating every job from the CEO down to the janitors that sweep the floor at night. The results are stratified by sales, number of employees, and other metrics and report on all forms of compensation including base, bonus, stock options, restricted stock, and other perqs such as company cars or club memberships. For each job the compensation is shown for the 10th, 25th, 40th, 50th, 60th, 75th and 90th percentiles (as I recall). Each company has to have a philosophy, are they going to pay at the low end and tolerate a lot of executive turnover or are they going to pay up for stability. Some will offer meager base salaries but compensate with huge option packages while others give more cash compensation and less in stock. There is no perfect answer, but once adopted it is better for the company to remain consistent in their approach over time. Also don't look at summary numbers in SEC reports as they often do not reflect reality. Options, for example, are reported based on their theoretical value and not whether the executive has achieved any value at all. An executive might look like they make $1 million a year in an SEC report, but in reality they only earn $300K because the options are underwater. Similarly, if a multi-year award vests in 2020 then compensation for that year might look outrageous in comparison to the numbers for 2019 and 2021, but that is how the SEC requires it to be reported. All that said, MNKD does have some compensation packages that are well-above average for a company this size, and others that approximate the industry averages. Presumably the compensation committee has benchmarked MNKD against 5-10 similar companies, but the committee may need to revisit the benchmarks and pick a different set of comparables going forward.
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Post by matt on Aug 2, 2019 17:58:28 GMT -5
Personally, I like good QTR call on Monday so that the momentum carries on the entire week. on the other hand, a bad one is on Friday with the weekend to soak in. I hope, MNKD will announce a first shipment to Brazil. i believe that’s a good possibility. Brazil has still not approved pricing for Afrezza (as of today). I check for an updated government price list every few days and will post it when it updates. It gets revised about once a month, but it varies sometimes. The last update was July 1 so another update is due soon. Regulated pricing in a place like Brazil has as much to do with foreign exchange controls as it does with healthcare costs, so I wouldn't expect that the product could get off the wharf or airport without the government approved price being set.
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Post by matt on Aug 2, 2019 9:56:53 GMT -5
Reminder ads presume the patients know the drug and its uses. If a drug has such a low visibility the presumption that it is a reminder ad is rebuttable. A lot depends on where the advertising is targeted and previous promotional attempts; ultimately it comes down to a facts and circumstances test. At any rate the debate may well be moot because a broad, untargeted promotion of a brand name with no context is likely a huge waste of money, and a targeted campaign directed at diabetics would presume that the readers would know about the uses (and therefore run afoul of the guidance on reminder ads). Regardless of where you draw the line, the FDA rules are not very helpful to MNKD.
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Post by matt on Aug 2, 2019 8:19:59 GMT -5
The FDA Division of Drug Marketing, Advertising, and Communication has held sponsored links misbrand drugs if they include the name of the drug plus a claim and, therefore, must disclose risk and other information about the drug. Mannkind could sponsor advertising of Afrezza using the name Afrezza, but could not mention that it is a type of insulin of that it is used to treat diabetes. Conversely, Mannkind could talk about insulin or diabetes without mentioning Afrezza. To date the agency has not cut pharmaceutical companies any slack for space limitations such as Twitter messages limited to 140 characters.
Once a communication mentions both the name of the drug and a benefit then the full prescribing information, including the black box, must be included. The rules are subject to change, but this has been the FDA's articulated policy for the last 11 years.
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Post by matt on Jul 29, 2019 16:13:27 GMT -5
It may help. My concern as a shareholder is that MannKind frees up much of the collateral held by Deerfield and, if a new undilutive loan is financed through DF, the collateral will be proportional. No more giving all Assets to secure the financing. Do you mean proportional or appropriate? Since MNKD is a much stronger company now than 2013 they could get away with a Unsecured SENIOR Debt Deal. I don't see any severe covenants on the new deal. Since there is zero net equity in the balance sheet, zero, I don't see any lender that will want to be pari passu with all the various creditors since the debt to capital ratio will far exceed 100% for the foreseeable future. Lenders are sometimes nice guys, but they are not stupid either. The main reason a firm like DF will have strong covenants, but not actually declare the company in default, is because the worst possible outcome for them is a default. The very last thing DF wants is to own operating assets because operating a troubled pharmaceutical company is not something they are good at, but they do want their money and they want it before anybody else gets paid. That is the purpose of security in these circumstances and the covenants insure that management is always thinking about them.
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Post by matt on Jul 26, 2019 11:02:25 GMT -5
Many of the core patents that protect the inhaled delivery system are already expired (recall that Al Mann bought the technology in the mid-90's and that patent lives in those days were only 17 years). That said, until and unless the sales start to take off dramatically there will not be a lot of companies lining up to become Afrezza imitators if for no other reason than generic competitors crushed the market price. So unless the imitator is confident of taking over 20% market share of an expensive drug with strong market penetration they simply won't bother.
This is the dilemma with patents. If the product the patents protect is wildly successful and highly profitable then that success will attract competition and the patent that prevent this are highly valuable. If the product struggles in the market the patents are essentially worthless. This is why patents, in and of themselves, have no inherent value; 100% of their value is tied to the success of the related product and the more valuable the product so too are the patents.
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Post by matt on Jul 24, 2019 9:55:01 GMT -5
Deerfield are BOTTOM FEEDERS. They prey on vulnerable companies. They are LOAN SHARKS. They are a HIGH RISK HIGH REWARD SHOP. If the borrower survives like MNKD they make a killing. If they Default....DF owns the company. It's pretty simple. They charged a high but not crazy rate but it's the other caveats where they make their money. Most people focus on the rate but its the caveats where they get their reward for the risk. That is not a fair characterization of DF. If you go back to their founding and look at their deal stream over time, they have loaned money to some very substantial companies at slightly below market rates hoping to make an outsized profit on their securities, usually through convertibility. They are a bond fund, not an equity fund, and the name of the game for any bond fund is to protect their capital since they have large fixed obligations to their investors. This is no different than what happens when an individual buys a house with a mortgage; the bank puts the borrower through the wringer to insure that they can sell the paper to FannieMae or into the secondary market. However, just like the mortgage company, when things don't work out then the institution gets tough on the borrower. If MNKD had performed as expected, the DF covenants would have been little more than a rounding error on the balance sheet, but that is not what happened. See what happens when the borrower of a 30 year mortgage with 20 years to run loses their job and has a hard time finding new employment; the discussions get ugly very quickly. DF gets aggressive precisely because they don't want to own the companies they loan money to; they are a bond fund and not a biotech management company. When Dendreon declared bankruptcy, despite annualized sales of more than $300 million, DF did not make a more to foreclose on that collateral choosing instead to recover what they could in bankruptcy court when the assets were auctioned (they lost more than $100 million on that loan). That is not the behavior of a predatory lender. DF knows how to play the game, and they play rough when necessary, but they are not as bad as everyone makes them out to be. Few commercial lenders are pleasant to deal with when results are not as expected.
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Post by matt on Jul 22, 2019 7:07:28 GMT -5
1.1MM in retail revenue is less than 25% needed to cover cash costs for the company. That is why the stock price will continue to decline in anticipation for the next round of dilution. MNKD is burning about $15-$18MM per Qtr with a run rate of $12MM but you're not including the add'l milestone payments and other potential revenue streams. So you're 25% is not correct. While mathematically you are correct, that is not a prudent way to run a business. Milestones and license deals tend to be one-time events while salaries, facility costs, and other overhead expenses are periodic costs that happen whether the company is growing rapidly, running steady, or slowly dying. In order for the stock to stabilize, there needs to be predictable, recurring revenue streams that cover the minimum periodic costs of staying in business. Not that milestones or licenses are bad, they certainly aren't, but you should be viewing those occasional revenue flows as opportunities for investment and not as money to keep the lights on.
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Post by matt on Jul 19, 2019 13:17:10 GMT -5
If I remember correctly, on the hook for 5MM in loan payments which is in escrow and about 75MM in milestone payments. 5 MM of the milestone will come due by end of 2h 2019. Ok so much more than I thought. Thanks for the clarification. The remaining milestone payments are tied to cumulative sales of Afrezza and if the company has to pay out the full amount the shareholders will be dancing in the street. Blowing through milestone targets is a good thing! However, don't forget that Deerfield gets so much discussion only because they are the senior lender and are in a position to make life difficult for MNKD. Once the DF debt portion is paid off, there is another $91 million in debt and there will be new senior lenders; the company is a very long way from being debt free. It is a bit like paying off a second mortgage on your house; that is an accomplishment but you still have the first mortgage to worry about. As of the last 10-Q, the liabilities exceeded the value of assets by $188 million.
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