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Post by matt on Jun 2, 2019 8:24:38 GMT -5
I think it would be awesome if they got Deerfield paid off and got a nondilutive loan from a friendlier lender. Indeed it would be awesome to have a "friendly" lender, but like the unicorn I am not so sure such a beast exists. I used to do a lot of merger and acquisition work for a major industry player and that required me to read a lot of debt instruments because the buyer always winds up paying off the existing debt and the details matter in figuring out how much that will cost. The covenants imposed by Deerfield were pretty much standard in the industry, and far less onerous than those imposed by other lenders. Certainly those covenants became burdensome, but only because MNKD was not executing well on its business plan. Had the Sanofi relationship worked out better or if MNKD has been able to grow sales as originally planned then those covenants would not even be mentioned. Reasonable covenants only become "unfriendly" when the company does not perform to plan and the lender starts enforcing them to ensure that the debt is paid. If lenders wanted to take on the risk of owning MNKD they wouldn't be lenders, they would be equity investors. The other challenge with finding a new source of "friendly" money is that Deerfield is the most senior claim to the assets, but both the Mann Group loan and the convertible debt have junior secured claims. Any new lender would be third in line in the event of worst case scenario, and the only way for new money to be first in line is for the other lenders to agree to be subordinated. That may be possible with the Mann Group (although the company is now dealing with trustees and not the Mann family directly), but it is highly unlikely that the convertible debt will agree to subordination. Absent a secured first priority lien on all assets of the company, any lender will want something else to mitigate the lending risk and that is almost certainly going to be dilutive. The only truly friendly non-dilutive money is license deals like with UTHR, but those deals are not easy to find and the timing is unpredictable. There are not a lot of easy answers to fixing the capital structure.
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Post by matt on May 30, 2019 11:53:34 GMT -5
MNKD has been at the ADA since Sanofi. Last year we had the trial results and two posters. How much has this helped? Posters almost never help, podium presentation do. If you have never been to a large medical conference, the main poster session is a large hall filled with corkboards and the posters are tacked up to the cork. Some venues have gone to 55" video monitors instead of paper posters, but almost still use old fashioned paper posters. There is no formal presentation at poster session, the attendees are free to walk around the room and browse and the author(s) of the poster can stand next to it to answer any questions. The MNKD poster on Monday is one of 647 in a one hour general poster session, which allows for about 6 seconds of viewing time for each poster. Meanwhile, there are nine competing poster sessions, most of which are moderated with about 8 posters each, happening at the same time, and attendance at the poster session also means the attendee is not interested in grabbing lunch during the break. Assuming that any significant number of eyeballs will land on the MNKD poster is unrealistic. What posters are good for is networking. If the author stands next to the poster and has a stack of business cards to exchange, that can be productive. Just how productive depends on whether there has been an effort to promote the poster in advance such that a given conference attendee walks into the room looking for a handful of posters to study. If MNKD has done a good job of promoting the poster and sending out notices to physicians who may be interested in treating pediatric patients or working with MNKD on a pediatric trial, that might generate some useful foot traffic and create some new contacts for Dr. Kendall and others to chat with. If the groundwork has not been laid to drive traffic, don't expect wonders from poster presentations especially if the poster is not near the door since tired feet are less likely to walk to the back of the room on a whim. Unfortunately, poster placement is usually in numerical order and there is not much MNKD can do to improve their position if they get a bad location.
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Post by matt on May 28, 2019 15:01:59 GMT -5
So we're pretty much back at the levels before the UTHR partnership and after the December dilution. Every day seems to just bleed out a little more on low volume. Management seems to be in a "wait and see" mode for Q2, which is probably why the stock is being completely ignored in terms of buying interest. I don't think management is in wait and see mode; the quarter is almost two-thirds over and they have a pretty good idea at this point whether the numbers will be up, down, or about the same. What we might be seeing is some ATM sales hitting the market causing the slow decline in PPS. Rule 415 offerings (the ATM is one form of that) only have to be disclosed once per quarter so there will be no news on that until the middle of August, but that is what the dribble down feels like. As for the pipeline, I don't think anybody should get too excited about pipeline candidates that are generic drugs as the competition model there is not going to be favorable to TS formulations. When a major player like UTHR has a drug coming to the end of its protected life, putting a new formulation into the market to extend exclusivity is a great play for that manufacturer and that is why UTHR was willing to write a decent sized check. I can only hope that Mike and friends have scrubbed the list of drug currently patent protected with sunset dates coming in the next five years; that list might have the next UTHR on it.
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Post by matt on May 23, 2019 12:28:47 GMT -5
Wouldn't it be nice, a stock for stock deal with UTHR for $2B so they can take advantage of the NOLS.
Heck, I'd be happy with $1B lol
It might be nice, but he change of ownership to UTHR would essentially wipe out the economic value of the NOLs, Section 380 of the tax code was specifically inserted to eliminate buying and selling of NOL carryforwards. The only exception to Section 380 is when the NOLs are transferred in a Type G reorganization, and Type G reorgs are what happen following declaration of bankruptcy and I don't think you want to go there. Buying companies with large tax loss carryforwards used to be a brisk business which is why the law was changed, but that happened during the Reagan administration so it was a few decades ago. I am not sure why the myth of value in NOLs persists, but it does. But for the bankruptcy exception, they closed the door tightly on the NOL strategy.
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Post by matt on May 17, 2019 9:58:00 GMT -5
Europe is a bit more complicated than this. The approval process via the Europeans Medicines Agency is similar to the FDA and approval under that mechanism lets a company sell anywhere in the EU countries plus Lichtenstein, Iceland, Norway, and Switzerland who are EFTA but not EU members. It is also possible to get approval country by country but that procedure is rarely used anymore.
Regulatory approval is one thing; reimbursement is another. Approval is centralized, payment is decentralized. Wealthy countries, like Germany and Norway, cover more medicines at higher prices than countries with less money, like Portugal and Greece. Pharmas used to price drugs at different price points, higher in Germany and lower in Portugal for example, but this created a gray market where German pharmacies would buy from Portuguese wholesalers to get lower prices, and the EU courts ruled that this was a legal way to do business. Most companies have gone to a model where they will only supply their drugs at a single EU price which means that in many countries drug have regulatory approval but patients have essentially no access to the drug. There are 29 separate markets to deal with and 29 different sets of rules; there is no "European" market. In some places the reimbursement depends on the provincial government so it gets even more complicated within a country as there is not a single payor is these places. Madrid, for example, pays its bills in about 180 days and they are the fastest local government in Spain, in other regions payment does not happen for over 500 days. In short, it gets messy.
Since Afrezza is inherently more expensive than every other insulin product, there may be a limited market in Germany, Austria, Switzerland, Netherlands, perhaps Belgium, and some of the Nordic countries. However, UK, France, Spain, Italy, southern / Mediterranean Europe, and newer members that used to be part of the East Bloc do not have sufficiently generous healthcare systems. As always, there are pockets of wealthy private pay patients that don't care about the cost but it is hard to build a market on the backs of those individuals.
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Post by matt on May 17, 2019 7:53:06 GMT -5
It seems like a straightforward process, and doesn't seem as though it would be expensive, and it seems feasible that they could mix up hundreds of small batches of different drugs. Is there a technical issue that restricts them to looking at only eight or so? Not so much a technical issue as a cost issue. Every batch needs to go through the same quality testing whether there are 1 million doses or just 1 dose produced, and that is not a cheap process. That is one reason patient specific cell therapies seem like a good idea in principle but they wind up costing an arm and a leg due to manufacturing cost, a good chunk of which is QC driven. The other hot button for FDA is avoiding the risk of contamination of one batch with residual drug from a different batch (this is true whether it is the same drug or a different one). Cleaning the production line to eliminate any trace of active pharmaceutical ingredient from a prior run is costly, both in labor and in machine downtime, and this remains true even in high-tech production lines with clean-in-place or steam-in-place technologies. Combine those two factors and the production economics of any small batch drug are unfavorable despite it being technically feasible to do so.
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Post by matt on May 16, 2019 7:13:42 GMT -5
Generics have a predictable effect on sales and it is always negative, and the more successful a drug the more intense the competition. When Lipitor went off-patent it was a $14 billion a year drug, 18 months later Pfizer had lost 95% of that revenue and was doing just $700 million. Reformulating drugs for new delivery methods can buy the owner of the molecule some extra years of patent life which is why TS holds value for partnering of novel drugs, but not much value for already generic medications like epinephrine.
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Post by matt on May 15, 2019 10:27:25 GMT -5
But please keep your wallets open when we come back to the table for more cash... Imo, Mannkind doesn't depend at all on retail investors for cash. In fact, retail investor financial concerns are routinely sacrificed in order to raise money from the valued investors. MNKD does depend on retail investors for its cash, albeit indirectly. Mannkind and most companies of its size finance via PIPE transactions where the investment bank sells shares to a handful of hedge funds at a discount (often with warrants) and those hedge funds sell their discounted shares back to the market. The success of the strategy depends on retail investors willing to soak up the new liquidity as so long as there are lots of retail holders willing to average down or making comments like "I am going to pick up a few thousand more shares at these cheap prices" then all is well. When retail decides that averaging down is not a good strategy or when retail portfolios get so overloaded with MNKD that retail stops buying more, then the hedge funds will have nowhere to offload their newly acquired stock. Hedge funds are stock churners, not long-term stock holders. That means the end of PIPE funding and the start of 100% reliance on Rule 415 transactions which are even more dilutive. The switch to 415 offerings is usually the beginning of the end for a biotech.
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Post by matt on May 14, 2019 15:22:00 GMT -5
How much freedom does VDex have? If they are getting the great results some here believe they are, and if ordinary FDA rules regarding pharmas do not apply, why are adverts from VDex touting great results not being posted here? FDA regulates manufactured products; that is their legislative mandate and also limits the scope of their authority. VDEX is not a manufacturer, but rather a healthcare provider that is licensed by a state government in the form of a professional standards board. What a physician can, and cannot, say in advertising is a matter of state law and there are likely fifty different sets of rules. So long as VDEX does not make product performance claims they don't have to worry about FDA. They may have to worry about a state regulator if they claim that their patients achieve superior results to other physicians without proof of that claim, but suffice it to say physicians generally have more wiggle room than a manufacturer.
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Post by matt on May 13, 2019 8:13:27 GMT -5
Usually debts like Deerfield's are not callable, but an alternate procedure known as defeasance works almost as well. In a defeasance the money is paid, usually in the form of US Treasury bonds, into a trust administered by a third-party bank and the debt can then be removed from the books. As the debt comes due, the trustee makes the required payments.
Practically speaking, no sophisticated party will care about the difference between a May and July expiration of the Deerfield obligations so the remaining Deerfield debt is not a barrier to getting some other deal done. What is a barrier is the fact that both the Mann Group and the convertible bond holders have security interests that get promoted in seniority when Deerfield goes away. Both of those parties would have to agree to be subordinated in order for some new party to have a senior claim on the assets, and that would be a very difficult discussion to have with either group as the trustees have little discretion to negotiate beyond the language of the trust indenture.
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Post by matt on May 10, 2019 14:56:17 GMT -5
Does anyone know how this affects those $1.20 warrants? I think you must mean the $1.60 warrants because I don't think the company has any at $1.20. In short, the present price puts them underwater which means they are unlikely to be exercised as the expiration date approaches unless the price has gone back above $1.60. Some people are mentally calculating the $42 million that would potentially be received as cash already in the bank, but that will not be the case unless the price improves. It takes a lot of R&D deals and milestone payments to make up the $42 million that would have been received from the warrant exercise.
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Post by matt on May 9, 2019 9:43:23 GMT -5
There are a couple of things you are missing. Firstly, the debt as of the end of the quarter was $102 million, and of that roughly $11 was Deerfield and $72 was due The Mann Group. There is another $19 million of so of convertible debt due in 2021. Shareholders like to think of The Mann Group as a benevolent lender that will be as easy to deal with as Al Mann himself, but Al has passed on so the asset is now controlled by trustees who have legal obligations to act in the best interest of the beneficiaries of the various Mann trusts and estate. Those legal obligations tie the trustee's hands in many ways so the amount of flexibility the trustees are willing to provide may be significantly less than Mr. Mann himself would have allowed during his lifetime.
There are other fixed obligations which, strictly speaking, are not debt but which will cause a significant use of cash. Chief among these is the Amphastar supply agreement which is an $84 million obligation or which $4 million is due this year, and $16 million next year.
When counting sources of cash, you can't count $5 million of sales as a source because that ignores the cost of goods sold. For the most recent quarter sales were about $5 million, but production costs were about $4 million so the net is only $1 million. That number is unlikely to change much during the next year. Costs are what the company spends to produce its product, expenses are what the company spends on research, selling, marketing, and general administration. Shareholders tend to included expenses in their mental calculations but leave the cost piece out. Going forward, the expense burn should be less as the advertising campaign is over, but research spending needs to increase if the company wants to have a credible pipeline or to earn progress payments under the UTHR and other contracts. Spending on R&D was only $1.6 million for the quarter and in the world of pharmaceuticals that amount of spending won't get you very far.
Finally, don't confuse a $50 million shelf registration with the ability to actually issue $50 million in stock; they are not the same thing. A shelf registration gives permission from the SEC to list shares for trading on the NASDAQ if new shares are issued, but the SEC has no authority to grant the company permission to issue anything. Corporations are creates of the states and the company charter and relevant Delaware law determine how many shares can be issued. The company is almost out of shares although they did get 14 million freed up when the April warrants expired worthless. So the company can sell those 14 million shares under the ATM agreement, but at today's price (minus fees) that would raise less than $18 million. The authorized share count caps the amount of a potential raise, not the SEC shelf registration. Of course the company can always ask the shareholders to authorize more shares, but that takes a special meeting of shareholders and at least 30 days to comply with the relevant legal formalities.
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Post by matt on May 8, 2019 8:41:57 GMT -5
Keep in mind Matt, using the current benchmark, A1c patient time in range and otherwise control of BG levels is abysmal. Diabetes and its associated healthcare costs will bankrupt the US healthcare system, its no longer if but when. The DCCT validated the economic, clinical and human benefits of very tight control of BG levels 20+ years ago. The advent of CGMs is the conduit to measure patient performance in a way that even a few years ago was not possible. I won't even try to disagree that control of A1c is pretty bad in a significant number of patients. I have written a number of clinical trial protocols that attempted to allow reasonably well-controlled diabetics into the trial and exclude those who were seriously out of range. I have had to move the goal posts for inclusion on some trials to those that achieve A1c levels of 10%, and even then there were issues with enrollment. The well-controlled diabetic with an A1c < 6.5% is observed about as often as unicorns, at least in those with advanced disease, most of whom are Type II and the DCCT trial was done on Type I. At any rate, I don't think anybody with significant medical experience would argue your point that a well-controlled patient is less expensive to treat than a poorly-controlled patient. The problem with Afrezza is that they cannot demonstrate that they are superior to cheaper alternatives (it says so right on the label), and that is what prevents managed care from covering the drug. Had MNKD done economic studies along with the pharmacology studies during the development phase, they might have the necessary data to argue that the higher price for Afrezza is justified by superior economic outcomes (managed care is all about better economics). While it may seem obvious to some that Afrezza does a better job of controlling post prandial glucose levels and therefore should translate to lower long-term costs, the insurers want to see the data with some hard numbers attached. Are the savings enough to justify a $400 per month insulin, a $600 per month insulin, or an $800 per month insulin? Those are numbers the manufacturer needs to come up with (suitably audited by an independent third-party) because the insurance industry is not going to do the work themselves. That is a long and costly study, but one that needs to be done. Unquantified benefits, no matter how real they may be, don't move the needle on managed care acceptance; hard numbers do.
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Post by matt on May 8, 2019 6:52:15 GMT -5
Sports - we have been saying for a long time until significant changes are made to the SOC afrezza scripts will grow but they will grow very slowly. TV ads are not going to sell afrezza but I think the TV ads worked out better than I expected as a lot of people saw them and afrezza is no longer a total unknown. When Mike gets serious about selling afrezza he will partner to open dedicated health and wellness clinics which specialize in diabetes and leverage CGM and connected care technology and afrezza. I would expect each clinic to do a minimum of 100 scripts per week which is a lot more than our current sales staff is doing. and the clinics would be profitable. Endos are not our friend and PCPs just don't have the focus to properly treat PWDs. What you are suggesting is the corporate practice of medicine which is illegal in every state. Ultimately every clinic needs to be owned by a physician licensed to practice in that state, and their compensation cannot be tied to prescribing any particular treatment without violating the Stark Act or a host of other federal and state laws. The fact that VDEX exists is good, but if the company gets tied up with VDEX contractually then both VDEX and MNKD will be in hot water. There is promise in helping to set up clinics with a concept similar to VDEX just so long as the clinic is financially independent. The issue that raises is that the physician must have deep enough pockets to cover the cost of operating the clinic in the absence of insurance reimbursement which will be minimal, at least at first. This strategy would be possible, even with a non-inferior designation on the label, but somebody still has to write the checks or the clinic fails, and managed care does not seem interested in covering Afrezza in a big way. When a particular treatment gets reimbursed, there are plenty of physicians who can figure out how to make a buck out of it but there are many promising technologies that never see the light of day because of reimbursement issues. Fix reimbursement and Afrezza will be fine, but that is easier said than done.
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Post by matt on May 7, 2019 9:50:23 GMT -5
From what I've read they don't have the numbers yet.. Still analyzing. Sounds more like "we'll get back to you on that because it's not good." No idea how they wouldn't have some sort of data on the DTC program... Of course they know the numbers; they have precisely one pharmacy filling those scripts and all it takes is a phone call to ask them how many they have filled, but more likely Eagle Pharmacy dumps the details of order flow and inventory level by electronic data interchange. EDI records flow at least once every 24 hours, and in many cases every hour, or the manufacturer can poll for the data on demand. So yes, they have the numbers but they aren't sharing the details. Shareholders have no legal right, per se, to view detailed operational data, but when the company makes a big public splash about a new marketing program then they sort of have an obligation to make some disclosures about how effective that program has been. If management hadn't announced the DTC channel they would have less obligation to talk about it, but keeping quiet about leaves people to speculate on what the facts really are and that is rarely desirable.
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