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Post by matt on Jun 19, 2019 14:18:52 GMT -5
The one caveat to the quote you just posted is that there may be some non-public information on a source of material funding, such as another UTHR-type transaction. There is no way to predict such events without knowing exactly what is happening with management and the company. Today's announcement that the company has delayed payment to DF, but still has to deposit the cash into escrow, has me scratching my head as there is little difference between paying them on time and depositing the money so that they can be paid in a few weeks. Once the funds go into escrow they are encumbered such that they are essentially no longer Mannkind's to use as they see fit, and the company will be paying DF more in interest because of the delay than they will be earning in interest on the escrow account.
When you see a transaction that, on its face, seems to make little sense then you can generally assume that there is something else happening that shareholders don't know about . . . yet.
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Post by matt on Jun 18, 2019 11:31:41 GMT -5
What Vdex is promising to do has potential value to MNKD and the company should seriously take a look at it. However, the proposal is vague at best and provides few details about funding and other key operational metrics. It is one thing for MNKD to exchange a promise of exclusivity for retail medical clinics in exchange for a credible, well-funded, and detailed set of performance obligations from Vdex, but it is quite another to exchange a promise for something that is not well-defined. Trying to nail Jell-O to the wall has never been a productive use of management time in any company.
Vdex has gotten everyone's attention; fair enough. Now it is their turn to provide some details that would enable MNKD and its advisors to determine if they are just blowing hot air or whether they are really serious. If Vdex are serious, then MNKD needs to take a hard look and make an informed and prudent business decision. If the evidence of sincere intent and financial capability is not there, there is no obligation for MNKD to respond further. The ball is in Vdex's court.
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Post by matt on Jun 18, 2019 7:33:30 GMT -5
How close to Mike C's speaking engagement at the JMP tomorrow will the next secondary be announced? Not for a while. A secondary presumes that there are a sufficient number of authorized shares available to sell, but the company is almost out of shares at this point and authorization of additional shares for any purpose requires an affirmative vote of shareholders at a special meeting. Due to the mechanics of calling a special meeting and the time required for proxy solicitation, that takes at least four weeks to accomplish so there should be no surprises. The only potential option that the company has it to designate some of the 10 million shares of "blank check preferred" which have been duly authorized. The way blank check preferreds work, the board can adopt a certificate of designation (or multiple certificates) that gives those shares whatever rights the board deems fit, so a single preferred could be make equivalent to 10,000 common (for example). That is legally possible but it is rarely done in public companies except in extreme cases. Suffice it to say blank check preferred is not popular with common shareholders.
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Post by matt on Jun 17, 2019 14:36:18 GMT -5
It sounds like he is asking only for a "Most Favored Nation" type of treatment, meaning that MNKD cannot see to new distributors who are otherwise similarly situation to Vdex in the carved out territories. He was explicit that MNKD can continue to sell to the three national distributors (McKesson, Cardinal, Amerisource) which would not prevent those entities from supplying competing medical practices or, as they do today, pharmacies. I have seen similar language in many distribution agreements and generally such clauses are fairly harmless to both parties. No pharmacy or hospital is ever going to buy bulk product from anyone other than the three national distributors for a host of reasons, so he is really just talking about other physician practices.
So what is Mannkind giving up? Only a price discount and if Vdex only asks for discounts commensurate with what the national distributors receive that is pretty darn neutral. So long as the new third-party distributor is treated the same as the other distributors, I really don't see the difference between having three national distributors and having four. If Vdex asks for more than what others receive that is a different story, but on the face of it there is not a lot of reason for a struggling company to push back on somebody that is trying to broaden distribution for their product. This one goes in the category of it might help, and couldn't hurt.
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Post by matt on Jun 17, 2019 10:58:26 GMT -5
Also, if there is such a partner where have they been? If someone wanted Afrezza why couldn't the DF debt have been settled earlier by a company with deep pockets? I may be wrong but I think that is wishful thinking.. I hope I am wrong.. If Mnkd has such a deal there is still no reason why Mnkd can't respond to Vdex..In the past they have simply ignored them. You would think they would want to keep all options open for the good of the company. I suspect there is no such partner for the reasons I have mentioned earlier. Taking on another company's failed product is expensive and risky, and if you are a senior executive in a big pharma you didn't get there by taking on a lot of risk (that is why most promising new drugs are developed outside big pharma and then the developer is acquired). It is just now how these companies behave but they are the only companies with the deep pockets needed to make the necessary investments. Meet Catch-22. I assume that MNKD has responded to Vdex in some form, albeit not in a way Vdex finds acceptable. Under Delaware law companies are required to consider certain types of overtures in the interest of shareholders, but it is not clear that the Vdex offer is substantially specific or has proof of adequate funding to clear the threshold where the board must take a definitive action. The first thing a good lawyer would ask to see is a budget and a funding commitment in excess of the budget for opening centers in 20 states, and a list of the physicians willing to put their license on the line as the clinic owner in each state (Vdex itself cannot "own" the clinic but if there is a willing physician this can be circumvented fairly easily). Vdex is offering to trade a promise for a promise which can be the basis of a valid contract. However, if the promise is not backed up by the necessary resources it is an illusory promise and that is not a legal form of consideration. I suspect MNKD's version of Jerry McGuire has asked to "show me the money" and that is where it stands.
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Post by matt on Jun 16, 2019 14:36:48 GMT -5
I have dealt with literally hundreds of deals in the industry and what Vdex put on the table cannot be called a proposal because it is simply too vague to be enforceable in any practical sense. However, what they did tee up is an offer to engage in serious discussions with management and the board should consider it.
Talk is cheap and merely having discussions alone binds neither side to a deal. There may be valuable ideas tossed around by both sides, a bottle or two of red wine is a wonderful lubricant for brainstorming sessions, but at a minimum it is hard to walk away from such discussions without some new ideas in your head that had not appeared before. I suspect that Vdex has tried to engage management in discussions previously given that they issued a public letter to Mannkind shareholders (that is a very hostile tactic that you only try as a last resort, similar to an unsolicited tender offer). If Vdex hadn't previously approached management on a confidential and friendly basis then they are terminally stupid, but I suspect they are not stupid and so annoyed at being ignored that they figure there is nothing to lose.
I would have two concerns:
1. Going direct to shareholders with the letter may have so poisoned the well that coming to a friendly agreement is well nigh impossible. Once you scorch the earth, it is impossible to unscorch it. Both sides can burn a lot of legal expenses and management time working on a deal that is not going to happen.
2. Alliances that create exclusive or even semi-exclusive deals with practitioners usually end badly for both sides. The economics are not there in almost every case, and the structure of state regulated practice of medicine collides with federal regulation on prescription drugs and medical devices. Even large companies can't fight how the structure of the industry has evolved, and two small organization certainly can't either.
Still, sitting down for a chat and letting cooler heads prevail might help and can't hurt. As a former colleague used to remind me when I was at the point of despair "You already have a no, ask nicely and you might get a yes." He was a wise fellow.
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Post by matt on Jun 16, 2019 11:43:18 GMT -5
The reason companies don't just grab every new drug that might be available is the need to focus. Virtually every "Big Pharma" used to play in fifteen or more therapeutic indications, but it has become increasingly difficult to justify the level of research and sales coverage to support such broad efforts, and most pharmas are now focused on five of fewer therapeutic categories. From a financial standpoint, pharmas have the most to gain by focusing on oncology and neurology so that is where a lot of the emphasis has shifted. In Type I diabetes, the remaining players are Sanofi, Lilly, and Novo and Sanofi has already had their turn at promoting Afrezza. UTHR has a franchise and it is not with endocrinologists so to promote Afrezza would either require them to dilute their sales efforts in their core business or to spend the money to expand their sales presence to the insulin market. Neither option is very attractive for UTHR and Wall Street would punish the stock price if they tried. Afrezza sales for the past four quarters are at a run rate of about $20 million a year, while big pharmas have sales measured in the billions. It takes a product doing hundreds of millions in sales to move the needle on a big pharma's financial statements, and large companies tend to ignore any opportunity that does not add an incremental percent or two to their sales growth rate and bottom line.
As for why don't CGM makers partner, that is also relatively straightforward. Drug companies and device companies don't always mix very well because they have different call points, different manufacturing and distribution strategies, and above all a different regulatory structure. However, if a CGM company wanted to partner MNKD would not be the company of choice. The weekly scripts are in the hundred for Afrezza while they are generally running between 130 and 150 thousand a week each for Lilly and Novo. Who can drive more demand for a CGM device and test strips; the company with a few hundred scripts or the ones with many thousands of scripts? Much is made of improved control if Afrezza is dosed before the meal and is then adjusted after the meal, but the same is true of the other RAI products. Test after the meal and tweak the insulin dose and the patient will get better control. It is not in the interest of the device maker to ally themselves with a single insulin company any more than it would for Ford to align itself with ExxonMobil. A company can sell the most CGM devices (or the most Fords) if they remain independent or others in the supply chain because that way they can be everyone's friend and nobody's competitor.
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Post by matt on Jun 15, 2019 6:58:12 GMT -5
Clinics selling drugs directly to patients is not a problem at all. Historically, most physicians would stock medicines and give them directly to the patient as part of the office visit. That only ended because the breadth of drugs available to prescribe exploded in the 1960's and 1970's which meant that physicians had to stock too many medications and that is when retail pharmacies really started to grow, but the practice has never gone away. ExpressScripts got started not by doing mail order drugs, but by repackaging bulk drugs (which come in containers of up to 5,000 pills) into small bottles containing 30 pills and then selling those smaller containers to physician offices. My wife had a practice in a rural area outside Chicago where the closest pharmacy was a 15 mile drive so she used to stock the ten or so most commonly prescribed drugs for short-term used (antibiotics for example) and patients could either pay her or else she would write them a script to fill elsewhere. About half of the patients appreciated the convenience and filled on the spot. Dispensing to your own patients does not require a pharmacy license; if you have a license to prescribe then you have a license to dispense.
The challenge with a VDEX/MNKD partnership is the difficulty of forming a binding contract that is equally restrictive. VDEX may want exclusivity in that MNKD will not support a competitor with the same business model, but VDEX cannot promise that they will only prescribe Afrezza insulin because the physicians working in the clinics are legally obligated to act in the best interest of the patient and Afrezza is simply not always the best drug for every patient. Even if VDEX and MNKD signed such a contract, it would likely be legally unenforceable as contrary to public policy. If money also changes hands, such as with cross-investment, that is an invitation to an unwanted OIG or state attorney general's investigation.
There is also an issue with "tying" prohibitions under federal anti-trust law where a party uses a patented product to enforce purchasing of some other good or service that is not patentable. What VDEX has is a method of doing business which is easy for any licensed physician to copy and they could not use an exclusive relationship with the manufacturer of a patented drug to create more clinics without running afoul of the law. Best case, VDEX could franchise their concept and brand name to physicians that wanted to open an independent clinic. MNKD could assist that effort, just like other pharma companies often assist start-up practices to build goodwill, but there is a fine line between marketing promotion and bribery. It usually turns on the question of whether MNKD is fishing for future sales that may happen because of the goodwill generated by their actions or whether they have locked a physician into a restrictive relationship that will definitely produce future sales.
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Post by matt on Jun 13, 2019 10:55:42 GMT -5
Minn, The problem with your plan is simply the fact that Afrezza is at the top of list in causing this inability for patients being able to afford their insulin cost. Afrezza is the most expensive insulin on the market--so you want MNKD to now give it away for free? This is clearly an issue. The net revenue MNKD gets from Afrezza can barely cover the cost of manufacturing, and any other expense contributes to the monthly operating loss. In short, MNKD is not is a position to lower prices as any price reductions would increase the losses dollar for dollar. Remember too that Lilly and Novo were both highly profitable selling their products ten years ago, and if they reduced prices back to 2010 levels they would likely still be profitable (most of the price increases have gone to PBMs and managed care companies in the form of rebates; Lilly recently claimed that they make 8% less on insulin than they used to due to changes in the rebate structure). So yes, insulin costs to much in MN and every other state when compared with Canada. The last thing MNKD shareholders want to do is to see a roll-back to 2010 pricing with no rebates as that would cast a huge spotlight on just how expensive Afrezza is relative to other products. However, if we want drug costs to come down in this country then PBM rebates are going to go away, or at least be passed onto the patient that buys the drug.
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Post by matt on Jun 11, 2019 14:25:18 GMT -5
Fiasp is already on the market in Brazil. I don't know if they advertise it as "ultra rapid" or not, but I assume they would.
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Post by matt on Jun 6, 2019 11:38:42 GMT -5
There is nothing magic about 30 degrees C; it was picked as the upper permissible temperature when the USP was written. Every drug manufactured is tested for stability at 30C regardless of whether it would also be stable at 35C or 40C. It is simply a regulatory convention for the temperature point to be tested, just like stability is only tested out for 36 months (that is why all your drugs have a three year expiration date even though many are stable indefinitely).
As to pricing expectations, CMED sets the ceiling price and nobody can charge more than that. Afrezza will almost certainly be a Category 2 drug which means that it will not receive a price higher than similar products for the same indication. What prices do other RAI products have in Brazil?
Novolog (Novorapid in Brazil) 100U/ml, 10ml vial 96.57 Reals which is about $24.92 Fiasp 3ml injector pen 35.66 Reals which is about $ 9.21 (so about a 20% premium for the pen on a unit for unit basis) Humalog 100U/ml, 10ml vial 92.91 Reals which is about $23.96, similar to Novorapid
The prices quoted are the maximum the manufacturer (or importer) can charge pharmacies in the state of Rio de Janeiro. Prices for other states are slightly lower, and prices are substantially lower for government sales. There is another price list that limits what pharmacies can charge patients and those are designed to give the pharmacist a 40% gross profit margin. Importantly, the CMED determined ceiling prices are the maximum that can be charged in Brazil regardless of insurance. This is party due to the fact that drugs are expensive and most South American countries still maintain strict controls over how their limited foreign exchange reserves can be spent.
It is tricky to guess what Afrezza will cost because 1U of Afrezza is not the same as 1U of injected RAI, but if CMED does a unit for unit conversion, 1000 units of insulin will have a maximum pharmacy price of around $24. That $24 has to cover MNKD's selling price, cost of freight and duties, Biomm's costs and a distributor profit. Given typical expense and distributor profit rates in the industry, I would expect MNKD to receive about two-thirds of that or roughly $16 for 1000 units. If CMED allows a premium for the inhaler, the way they do for the Fiasp injector pen, the price could be up to 20% higher.
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Post by matt on Jun 5, 2019 16:49:53 GMT -5
What maybe of more value is now Mannkind holds the patent on what VDex is doing and going forward Health and Wellness clinics or connected care services promoting one of the patented protocols probably needs to license the protocol from Mannkind. Maybe thats worth something, maybe even a lot with future connected care services popping up. I don't think that would work. Has there ever been an instance of a pharma charging people to administer their drug beyond the cost of the drug? That seems like it would be counter-productive. Yes, there have been examples of that but it is a horrible business practice that doesn't work in the real world. This is a "methods" patent which restricts how a drug can be used, but the only people who can infringe on the patent are physicians. Besides the difficulty of identifying every infringer out there, bringing a lawsuit against the relatively few customers that are actually using your product is not prominently featured in the book "How to Win Friends and Influence People". What it does do is prevent competitors from using the idea in their marketing materials but even that is of questionable value as a methods patent does not prevent medical journals from describing the method. Could a Fiasp salesperson hand out copies of a medical journal describing the method? You bet.
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Post by matt on Jun 4, 2019 14:56:18 GMT -5
The big question is the pricing. There is both a government controlled maximum price that the importer (Biomm) can charge retail pharmacies, and a maximum price that pharmacies can charge consumers. This arrangement leaves the pharmacies with about a 40% gross profit on most branded drugs. The allowable prices vary by state with the largest states paying slightly more.
For reference, a 10ml via of Lilly's Humalog (Lispro), 100U/ml costs about $125 at retail in the US. The maximum price Lilly can charge pharmacies in Rio de Janeiro is $24 and the maximum consumer price is $33.30. If the sale is made to the government itself the maximum price is $19.25.
Biomm will be limited to charging the pharmacy price, and MNKD will have to discount Afrezza by some amount to allow Biomm to make a profit on the business. Typically third party distributors in the industry make 3-5% of sales in pretax profit. I don't know what Biomm's costs will be on this business but 25-30% of sales is not a bad guess. That would leave MNKD with about 65% of the Brazil wholesale price assuming that MNKD is paying the freight and duty to get the product into the country. At this point a lot depends on the negotiating skills of Biomm to get the best PMVG price because all the price charts are computed from that number. In short, whether the drug is sold to the government or to an individual via a pharmacy, the ceiling price will be set by the government based on the negotiations with Biomm so a lot depends on their ability to make a case that the government should pay a premium over other products already in the market.
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Post by matt on Jun 4, 2019 10:47:37 GMT -5
No ‘long FUD’ about it. Thread is talking about things that might happen in next 6 mo. Possibilities. MNKD is not predictable - no reason a stock buyback is not a possibility at these low prices. Would be great to see an activist or more come in and make huge buys - something like that could happen too. You do realize there is 100 million in debt and insulin obligations on the books after Deerfield is paid off. There will not be a stock buyback. I stand by my statement that it is just as irresponsible fud to say a buyback is possible. There are also legal barriers to doing a stock buyback. MNKD meets the legal definition of bankrupt in the State of Delaware because of the negative shareholder equity on the books. A stock buyback reduces the assets available to pay creditors and since there are not enough liquid assets for the company to meet all of their liabilities, a buyback would be considered a fraudulent conveyance. The consequences of a fraudulent conveyance are complex, but suffice it to say the shareholders who are bought out would have to return the money and there are personal legal ramifications for officers and directors as well.
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Post by matt on Jun 3, 2019 9:25:29 GMT -5
I am very pleasantly STUNNED!! Does anyone know if the level of corruption in the Brazilian public healthcare system is comparable to the FDA or is there a reasonable belief that Afrezza will actually be available to patients without having to fight for it? Brazil, like most South American countries, has a fair degree of corruption but that does not make doing business impossible so long as there is strong lobbying presence in the government agencies. The level of healthcare funding is, by far, the biggest obstacle. For the product lines that I have experience with, the market prices in Brazil run about 20-25% of that obtainable in the US, which is almost certainly below MNKD's variable manufacturing cost. In certain segments of the medical industry it is normal practice to bribe doctors in return for writing prescriptions. Bribing physicians is often the only way to get sales in markets where the government doesn't pay enough for providing treatment. A number of major companies, including Zimmer-Biomet, Eli Lilly, Olympus, and Orthofix have all been fined by the SEC under the Foreign Corrupt Practices Act for paying bribes to physicians.
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