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Post by matt on Oct 9, 2018 7:21:09 GMT -5
If the combination of a drug and a different delivery system are sufficiently novel, then it may be granted a patent. The patent term on the underlying drug will still expire as scheduled, but if the combination product is more useful than the drug alone this may not matter.
Many pharma companies in the 1990's invented new drugs for metabolic disease that required three-a-day dosing. Along comes Alza (a drug delivery company now part of J&J) with their "XR" extended release technology. Suddenly a lot of drugs that were due to go off patent appeared with an XR version that required once-a-day dosing. The trick to making this work is a full court press by the sales force to get physicians to stop prescribing the three-a-day formulation and start prescribing the XR formulation well before the original drug went off patent and generics enter the market. Generally a switching period of about 24 months was needed. In a few cases the original formulations were withdrawn from the market or otherwise made very difficult to obtain, and a generic drug with different dosing requirements is treated as a different drug. Since most generic firms have almost no sales force, a proper roll-out of a new formulation is equivalent to keeping the generic out of the market. Insurance went along with this because patients are much more compliant with once-a-day medications.
So, would a TS formulation of Tyvasso eligible for patent protection? Almost certainly yes. Are the benefits to the patient so compelling as to justify switching the entire market to the new formulation? That remains to be seen. Insurance companies have gotten wise to the reformulation trick so it comes down to an evaluation of how much the new formulation costs versus the old formulation compared with the differential benefits to the patients. Some drugs can pass that test, some cannot. This will be another case where the benefits have to be substantiated such that the label copy approved by FDA reflects the greater benefit. Absent the right label copy, it will be deja vu all over again.
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Post by matt on Sept 27, 2018 7:07:17 GMT -5
In a disaster scenario, Deerfield is high in the priority for receiving money but they are not necessarily first in line. Keeping the covenant at $20 even though the principal is reduced to $15 makes sense if you are a lender trying to plan for a worst case scenario, and lenders always plan for the worst case (read any car loan or mortgage instrument you might have signed in your life for examples).
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Post by matt on Sept 13, 2018 14:36:17 GMT -5
Do I understand this correctly? Now, our sales reps can tell this info to doctors. In the past, our reps were restricted to the label, and they could not talk about superiority. Now they can. So, this would indeed be a big deal. Per Dr. Kendall: "The completion of this proof-of-concept trial and peer-reviewed publication allows for broad sharing of these data with diabetes healthcare professionals.” Yep, all scientific evidence from an FDA approved clinical trial. What will docs say when they see 30% less hypo and superior PPG control? Will it then become a liability to prescribe insulin apart? What happens if a patient is hospitalized from insulin apart and the clinician knew of this data but ignored it? Medical negligence? This was not a particularly well-designed trial which is why it will not create any physician liability. The protocol required both injectable and Afrezza patients to take their prandial dose and monitor with a CGM, but only the Afrezza patients were allowed to adjust dosing, twice, in response to the CGM reading while injectable patients could not adjust their dose. Should it be a surprise to anybody that patients who have the ability to act multiple times on an out-of-bounds reading on their CGM get better results than those who don't? Wouldn't a better comparison be insulin aspart vs Afrezza where both groups had a chance to adjust dosing. Heck, you could even do it with insulin aspart adjusted with Afrezza puffs. The point is that when you tie the hands of the comparator arm in a trial, physicians are not going to embrace the results. And no, this was not an FDA approved trial. Medical case studies using already approved medications within the scope of their label don't need further regulatory approval. Most hospitals will have an ethics committee / IRB approval the trial, but that is not an FDA requirement.
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Post by matt on Sept 10, 2018 15:18:39 GMT -5
Thanks matt, I appreciate the response. It is strange that mnkd didn’t follow thru with the p4 trial, but what is even more confusing is the fact that the fda actually dropped a safety follow up requirement for some reason ?? I’m not sure what was dropped, or why it was dropped. I just remember something about this a while back. Also, I think the number of adverse reactions to Afrezza has significantly dropped in 2018, I think I read an article that was shared on ST about this. It will be exciting to see MNKD and UTHR move forward with TrepT and the mysterious second molecule that is currently in the r&d stage. ts a good time to be a mnkd long Investor. ✌🏻😎 I don't think the FDA has dropped the requirement; they simply have not enforced the terms of the approval. FDA wanted follow-up data on a large number of regular users, 8000 subjects as I recall, but Afrezza does not have that many users so they are not in a position to do the study. If FDA wanted to play hard ball, they could simply revoke the marketing approval until the study was done but they rarely do that for a small company or when circumstances make it nearly impossible to do the Phase IV study. It is sort of a chicken and egg problem; if Mannkind has 8,000 regular users then they would have enough money to do the Phase IV, but without many thousands of recurring users they are short on cash. Which is my point about UTHR being a larger company with more money, resources, and an established patient base. FDA may have to cut Mannkind some slack on the Phase IV requirement, but they may not do the same for others. At some point somebody is going to have to come up with the long-term data and that is a good thing if it helps avoid a black box warning on the label for other drugs (black boxes are never good for sales).
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Post by matt on Sept 10, 2018 8:05:49 GMT -5
It will be interesting to see just what trials are required for an “already approved drug delivery device” combined with an “already approved drug” ?? Anybody have any ideas on what might be required. 😎 The easy answer is whatever FDA decides they need to show in order to demonstrate safety and efficacy, which is also the mandate under federal law. Usually when a drug is already approved the focus is on the bioequivalence of what has already been approved. We know that Afrezza is not a one-for-one dosing comparable to injectables, so UTHR will be required to show how much inhaled drug is equivalent to the injected formulation. Inhaled drugs, all inhaled drugs, have less precise dosing than injectables so FDA will look carefully at dosing. The narrower the therapeutic window on a drug the more testing FDA will require. Beyond that, this is a combination of a known carrier particle with a known drug so there should be minimal safety issues with the components themselves. However, recall that FDA asked for an never received a Phase IV trial to evaluate the safety of long-term use of Afrezza. FDA may ask for something similar from UTHR and, unlike MNKD, they have the money, staff, and patient numbers to conduct the study so FDA may be less lenient on this requirement.
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Post by matt on Sept 7, 2018 15:16:13 GMT -5
Yep, the employee plan can be dilutive if the employees can buy below market, which they typically can whether via option grants or an employee purchase plan. The 10-K should show the number of employee options and their strike prices. Most employee purchase plans let the employees subscribe at a 15% discount to market for some period, usually 27 months. If the stock price rises, the employees buy at the discounted subscription price and if the stock price falls they buy at 85% of the then current stock price. You would have to read the plan to sort out the details.
Deerfield has a covenant not to convert so many shares as to account for more than 10% of the outstanding shares, but given the remaining balance on the note 10% of the shares would cover the remainder of the note. There is also a "conversion cap" in the original note that you would have to research what those terms are, but given the declining balance it probably doesn't matter.
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Post by matt on Sept 7, 2018 8:58:15 GMT -5
The short percentage has been very bearish the past two days. And on very heavy volume. Shares must be easy to locate. It’s looking like we will settle closer to two dollars (not the warrant price of 2.38) when the volume goes back to normal. There is nothing to push the price toward the warrant strike price. Those with warrants had a chance to short when the price spiked, and now they have two alternatives. If the price drops they can pay the lower price and cover their short letting the warrant expire, or if the price goes up they can pay $2.38 to exercise the warrant and deliver the new share to close out their short position. Either way, I would expect most of the warrant holders did something like that when the news broke.
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Post by matt on Aug 29, 2018 14:28:35 GMT -5
Can you say “crickets” this morning? Talking about no volume. It feels like everyone is holding their breath waiting for something to happen. Nothing new is on the horizon before next quarters results I would expect an 8-K between now and Tuesday. If the company has a new source of cash locked down, whatever the source, that will have to be disclosed. If the new source of cash is still in the works, then it would be prudent to pay Deerfield with shares or negotiate a forbearance agreement (essentially a short-term extension for the payment) and that too requires an 8-K. The only course of events that does not require an 8-K is if the company plans to pay Deerfield $3 million out of the remaining cash on the balance sheet without having a new source of funding arranged. Otherwise, the market tends to slow down in late August and then pick up again after Labor Day. October is historically a heavy volume month as funds that are 13-F filers wait until after September 30 to make portfolio changes, but then aggressively prune their underperforming assets and look for new growth opportunities heading into year end.
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Post by matt on Aug 27, 2018 9:42:22 GMT -5
The value of Danbury is not just building and land. I didn't lowball anything. Let me say it again; Danbury has maximum value to a strategic investor that wants to be in the business of manufacturing and selling Afrezza. It would be valued at the market price in Danbury for land and buildings, net of restoration costs, to a non-strategic investor. A strategic investor may be willing to pay the full replacement cost of the facility plus a premium since it already has FDA approval to produce Afrezza as a commercial product. That figure may well approach $200 million, but only for the right kind of investor. However, for the plant to have that kind of value the strategic investor must also have access to all other rights needed to make, use, and sell the product which includes licenses to all manufacturing technology, patents, and trademarks because without those assets the investor cannot produce and sell Afrezza. It is very hard to unbundle the value of those assets as they were created to support a specific business and the assets themselves do not have inherent value on their own. That is why there is very little profit margin in contract drug manufacturing; the contract manufacturer owns the means of production but the economic value accrues to the owner of the intangible assets. Try to sell the plant without the associated intangibles and the price will be reflective of raw real estate value. Sell the plant with the intangibles and $200 million may be possible to the right buyer, but that would turn Mannkind into a drug discovery and research company. Becoming a drug discovery company may not be a bad thing, but it is a different kind of business.
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Post by matt on Aug 26, 2018 9:24:36 GMT -5
I’ve heard so many conflicting opinions on how much the plant is worth.. did Mike mention that it was worth that much? I think at some point Mike stated the $200 million figure, but that is what it cost to build and certainly not the value if it is sold. Pharma and medical plants are generally constructed as "empty boxes" with utility connections and provisions for clean room air handling. The majority of the investment takes place inside the shell building where production rooms are built-out and equipped to support a specific manufacturing process. The value of the plant itself is just the value of the land and the shell building, about $20-30 million based on comparable facilities in Danbury. Used pharmaceutical manufacturing equipment has a resale value that is generally about 10 cents on the dollar not because the equipment is in bad shape, but because an FDA approved production process is tied to specific manufacturers and models of equipment. If a piece of production equipment is not the identical model used in the validation for approval, the production line has to be revalidated and that can cost more than simply buying the right equipment to begin with. I have toured three production plants that cost north of $100 million (in one case $250 million) that have never produced a single dose of product. Each is state of the art with brand new equipment, but in each case the drug was acquired in a merger and the new owner wanted to manufacture the drug somewhere else. Nice as they were, none of the plants were designed in such a way that they could be economically reconfigured to support the production process I had in mind. These plants still sit empty with weeds growing through the asphalt in the parking lot. So who would pay $200 million for Danbury? A company that wanted to manufacture Afrezza and a company that wants to be located in Danbury. The plant has great value for supporting the Afrezza business, but far less value for any other drug product. On a sale-leaseback arrangement, any lender is going to take a conservative view of the value since they will value it at the real estate value in a liquidation scenario. If Mannkind moves out, there would be a significant cost to remove the Afrezza production rooms to return the plant to its "shell" configuration which is why a value closer to $20 million is the likely scenario. A strategic buyer that wanted to be in the business of producing and selling Afrezza would pay more, but then they would be looking at buying out Mannkind in total and not just the building. That is a different calculation entirely.
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Post by matt on Aug 24, 2018 12:02:21 GMT -5
Matt made a mathematical boo boo. It happens, but generally not to Matt. Interesting. Matt was off by half. 8 million dollar run rate divided by 20 trading days a month = 400K per day. Not easy for the company to sell 380K shares per trading day to net the cash burn rate. Yep, I was off by half. Burn is closer to 400K per trading day (before debt service). That happened because the 10Q mixes quarterly data with YTD data and I pulled the wrong number when I should have taken the difference with the former 10Q. Still the basic point remains true, the company cannot be selling very many shares if the price is remaining stable. Taking the average of the last 10 trading days, the volume has been around 1.25 million which allows selling about 125K shares to be sold via the ATM without impacting the price. At $1.10 that means the ATM will only produce about $135K in new funding which is far below the daily burn. Factor in debt service on top of the operating burn and there remains a big gap that the ATM cannot fill without tanking the PPS. Regardless, something has to give in the next week because a payment is due to Deerfield on the 31st. We won't have to wait long to see how the shortfall is dealt with.
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Post by matt on Aug 23, 2018 10:26:02 GMT -5
Dropped Wednesday, 8/22, to 5.25%. Just a little more indication that the company is selling shares via the atm in the open market. I am not sure of that. Typically a company cannot sell more than about 10% of the daily volume in new shares without having a noticeable impact on the share price. Based on last quarter's 10Q, the company burns about $800,000 in cash per trading day to fund operations so at recent prices, say $1.10 net of fees, the company would need to sell 728,000 new shares per day just to keep even PLUS there is debt service to Deerfield and Amphastar that would be in addition to the daily operating cash burn. If you look at volumes traded over the last week or so, it does not follow that there are that many ATM shares hitting the market or else the price would be a lot lower. Which of course begs the question if the company is not hitting the ATM hard, what are they up to? Something has to give by August 31 when the next payment is due to Deerfield so I guess we will all find out soon enough.
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Post by matt on Aug 17, 2018 10:04:14 GMT -5
nonsense. It certainly matters to anyone doing any funding with us It depends on whether the financing source is in it for the long-term or just an opportunistic hedge fund looking to grab some discounted shares. If the funding source is just in it for the discount (and maybe some warrants) they don't care about sales, the industry, or anything else except volume because the volume is what gives them a quick exit. As for why today's price is not up, it comes down to the expectation of news and what it will do to the stock price. Everybody knows the balance sheet needs more cash, and everybody knows that Deerfield Partners is owed a $3 million payment by the end of this month. Some people expect (not unreasonably) that Deerfield will settle for shares at a discount and maybe a further renegotiation of future payments and conversion prices, and that this will set a new indicative price. Alternatively, there is an expectation that the company will do a PIPE or accelerate use of the ATM to get over the near-term cash crunch, both of which are likely to exert downward pressure on the PPS. There is, of course, the possibility that Mike can pull a deal out of his magic hat that includes some up-front cash which would send the price upward instead of downward. On balance, there will be a binary event of some type between now and August 31 and the near-term impact of that pending announcement overshadows a one week movement in script price. If there was no announcement on the horizon, things might be different.
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Post by matt on Aug 16, 2018 11:27:30 GMT -5
I keep hearing about a cash crunch, and debt being paid down but still more owed. This has been going on for a long time. Are we near to a major event such as major dilution .... or bankruptcy? What prevents a bankruptcy and then starting again? The company is, no doubt, short on cash. That said, there are many alternatives available to fend off a BK filing, and realistically any of those will be dilutive. The only question is how dilutive will it be. As for what prevents BK and then starting again is absolutely nothing. However if the company goes through a BK the common would likely be wiped out and the assets would be auctioned to somebody new. That new entity can restart the business if they want or dismantle the business and sell the pieces.
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Post by matt on Aug 14, 2018 7:56:08 GMT -5
The flaw in that argument is that the whole is not equal to the sum of the pieces. For example, Danbury would cost $200 million to replace but the fire sale value to an unrelated third-party that did not own Afrezza is in the $20-30 million range (most pharmaceutical plants have a resale value that is a small percentage of the replacement cost so this is not unusual). Similarly, the operating loss carryforwards cannot be sold or transferred due to the operation of Internal Revenue Code section 380 except in the case of a Type G reorganization which only happens in bankruptcy; that is not helpful to current shareholders.
I could go on, but the sum of the pieces approach does not work because it is not possible to sell off key assets and still have the business running. Sell Danbury and the company can no longer make Afrezza (or TreT for that matter), but if you tie the hands of the party purchasing Danbury so that they have an obligation to make Afrezza then they are not going to pay $200 million for the assets. Whatever the sum of the parts is worth, don't forget that the first $270 million belongs to the creditors and not the shareholders. That puts the enterprise value at $270 + $175 = $445 million, which is probably not too far from reality as a going concern.
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