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Exactly correct, and your admitted generous number also assumes that 100% of Tyvaso sales are converted to the new delivery system.  Getting physicians to change prescribing habits is not easy, and if the new formulation costs significantly more than the liquid then the managed care companies writing the checks may have a strong opinion about what they are willing to pay.  MNKD has experience putting an established drug into better deliver system that costs a lot more than other options, and that story has not ended so well.

At the end of the day, the acquiring company's board (and in some cases their shareholders) has to approve the transaction.  A takeout premium much above 35% for what is essentially a single drug delivery technology where most of the key patents are already in the public domain is a stretch.  Remember that everybody has a boss, and convincing the acquiring company's management to stick their necks out that far is a challenge.  

A convertible note is a hybrid security that can be valued as the sum of the pieces.  There is the value of the 7% bond maturing in 2024, the fair value of which can be estimated by looking at what companies similar to MNKD have to pay for vanilla debt of the same maturity and priority in liquidation (it would be more than 7%).  There is also the value of a four-year call option to buy MNKD stock at $10, the value of which can also be estimated using various methods.

Companies offer hybrid securities because they are cheaper to issue than straight debt, and if wonderful things happen and the option portion is in the money in 2024 that is a good problem to have.  Holders of convertible notes rarely convert before the expiration date because when a note is converted to stock the value of the option is cancelled, and a shareholder has more risk than a debt holder if the business situation goes south.  So the winning strategy for the note holder is to hold the note all the way to maturity (or just a few days before expiration) before deciding whether to convert or not.  Some holders will short the stock a few days before maturity, immediately give conversion notice to the company, and deliver the newly converted shares to the broker to cover the short; this is a common way to lock in a gain on the convertible without taking any market risk.

The one flaw in your statement is that most convertibles are structured as zero coupon bonds such that the holder delivers the bond in exchange for the shares, and since the bond includes the accrued interest, the holder has to surrender the interest when they exercise the conversion option.  This does not always happen, but as I recall the Mann Group is not entitled to current interest payments.  You would have to read the security agreement to discover those details.

That is about the only plausible solution.  Midcap has to be paid, which means $40 million plus accrued interest from September, plus 8% in exit fees and penalties, but at the same time if that happens it contradicts the latest 10-Q filing which said:

    "The Company intends to amend the Midcap Credit Facility to address this probable covenant violation; however, such amendment, if completed, would occur after the date of this report."

It would not make much sense to amend the Midcap covenants unless the company can get rid of the albatross around its neck completely.  That would be the smart thing to do and I would hate to see the Midcap debt paid down but have the covenants remain, even if softened.  You are correct that I did not include the $12.5 million in milestones, but I also did not include the cash burn that will happen in Nov and Dec (about $18MM) which is significantly more than the milestone payment.  

The question is whether UTHR loves MNKD as much as MNKD loves UTHR.  United wanted, and got, a license to the technology, so while MNKD is the logical manufacturer they are not the only one that can make this product.  Regardless, sale of the plant is not going to fix this cash problem.  I still think a significant equity raise is prudent, albeit painful for longs.

The reason pharma plants have little residual value is as follows:

1.  The exterior shell of the building (literally the fours walls and the roof) plus any attached warehouse and office space are pretty generic.  Those have value to any purchaser of industrial property and will fetch the going price in Darien for a building of that age and condition.

2.  Inside the building is what I call "the box".  The box is an empty shell that does nothing but keep the rain out and provide some insulation.  Inside the box, production rooms are built and any necessary utilities (like air handling for clean rooms) are run between the top of the production room and the roof of the box because there is a lot of space up there.  A single box might have twenty different production rooms depending on the size of the plant.

3.  The production rooms themselves are built to house a specific production process and each of them is unique.  If a different product moves into the space, the existing room is taken down and a new room is built in its place.  Some factories use modular walls that are moveable and this reduces the cost of reconfiguration, but the bigger expense is moving around the utilities.  Sometimes the room is just demolished as the materials are not that costly.  That is why the interior of the plant has little value to a new purchaser; it is almost inconceivable that a new purchaser can recycle MNKDs room layout into an efficient facility so they just demolish what they find and start over.

4.  A lot of the money is spent on production equipment that goes inside the room.  Production equipment that is fairly modern (say,five years old or newer) has a resale value of about 10 cents on the dollar.  Why so low?  It has to do with drug regulation.  When a drug goes through clinical trials, the production process is part of what is approved.  If in Plant A a company controls a production process with a piece of equipment from ThermoFisher and in Plant B there is a similar piece of equipment produced by Siemens, that production process has to be totally revalidated in case the ThermoFisher instrument performs differently from the Siemens instrument.  This is expensive to do and, more importantly, revalidation is very time consuming and extends the length of the project just when additional production capacity is needed.  So pharma companies are in the habit of ordering the exact same equipment from the exact same manufacturers when they build out a new production suite because the additional costs involved are normally less than the loss of sales caused by the delay.  Even using identical equipment does not guarantee that the final product will be identical, but if there is a problem it is easier to track down the reason for it.

So, that is why the outside of the building has considerable value to a third-party buyer, but the inside of the box has much less value.

And yes, depreciation is a tax-deductible expense that reduces the income subject to tax.  This only helps if the entity is a taxpayer and, as of now, MNKD has $3 billion in tax loss carryforwards.  The company does not need any more tax deductions!

Generally LT liability of this nature is treated as a reserve.  The expense hit has been taken so when excess inventory is actually discarded it is charged against the reserve rather than the income statement.  However, the auditors will not let the company write the inventory off until it is actually disposed because that would open up all sorts of possibilities to game income in future quarters.  Thus they can book the expense now, but so long as the physical inventory remains theoretically useable both the asset and the liability remain on the books.

I racked up over 3 million frequent flyer miles as a globe trotter for a major corporation.  It used to be two Excedrine PM and a large quantity of Scotch that got me across the Pacific, especially when heading to Australia and New Zealand on those damn night flights.  A quick puff on the old inhaler would be a welcome alternative.