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Post by matt on Jul 28, 2018 9:10:58 GMT -5
I can’t understand why so many are disappointed in this deal. How does it hurt us to have a distributor that can reach more PWD around the globe? The term "distributor" is exceedingly vague and that is part of the confusion. I used to work for a huge multi-line distributor in the industry and we moved product at a gross margin from 4% to 42%. We handled the 4% stuff mainly because our customers wanted us to, but we put in zero effort into sales and the manufacturer was responsible for any and all promotion. Likewise, our payable terms on that 4% business were so generous that we essentially had no working capital tied up. Conversely, on the 42% business we did almost everything but manufacture the product. The manufacturer was a tiny company without any infrastructure of their own, and we both did nicely under the arrangement. If Tanner is like most of the distributors exporting to foreign countries without a dedicated deal they are more like the first business; more order takers than salesmen. They don't spend any time or money promoting the drug, but if orders come in then they will fill them. Just doing the customs paperwork for drug exports is a headache so they earn their commission from that alone, but don't expect them to go door to door promoting the drug; that is not the structure of the business. Most often their business revolves around physicians who have seen a product while visiting a medical meeting in the US or elsewhere, or a wealthy patient that wants to try the drug, but it is still MNKD that has to make the sale. If MNKD gets a sales request, they will pass it along to Tanner. The other thing to keep in mind is that in most of the countries where companies like Tanner do business there are strict, very strict, currency controls. Getting an order is one thing, but getting paid is something quite different and just a few weeks of delay getting paid a hyperinflationary country will wipe out the value of the sale in economic terms. Most of these sales have to be done under a commercial letter of credit or are prepaid on a Visa card linked to a US / EU / Swiss bank. Wealthy patients have foreign bank accounts and free access to hard currency, but most people living in these places do not. This is situation normal for international distributors so they provide value since they know how to deal with foreign monetary instruments, but they do not have enough margin in the business to assume the risk of non-payment so they have to be tough on payment guarantees; many orders simply never get filled because of credit issues. So it is a mixed bag; it never hurts to have more distributors that are willing to handle your product so long as the distributor has their act together and are not more headache than they are worth. It does make Afrezza available to a lot more patients and that is a good thing. However, be realistic about what it takes to do business in most parts of the world because often it is not pretty. Expect some incremental sales, but don't expect Tanner sales to contribute meaningfully to the income statement.
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Post by matt on Jul 27, 2018 9:07:32 GMT -5
It is legal to export any drug that has been FDA approved (and illegal if it has not). Companies like Tanner fill orders for customers in the numerous countries where virtually any FDA/EMA approved drug can be imported without further registration. It is a niche business but there is frequently demand for product in a foreign country, typically from just a few physicians who are familiar with the drug, often from being trained in the US. The good news is that Afrezza is now available to patients in many new countries, but the bad news is that most of those countries have tiny markets with low pricing relative to international standards. Most of the really attractive commercial markets are in Europe and those require will require an EMA approval.
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Post by matt on Jul 17, 2018 16:41:13 GMT -5
Any chance of a rendering a guess how far we fall? Right now the stock price is a reflection of the fact that the company does not generate cash, and is a long way away from doing so. Absent a miracle deal that comes with a nine-figure cash contribution, which is highly unlikely, the only option management has to fund the company is to raise cash through dilution, either selling new shares or converting debt payments into shares. I can't fault them for that, they are between the proverbial rock and hard place because a company has to have cash if it is to continue in business. To put it in hard numbers, the operating cash burn for Q1 was just shy of $22 million. The company realizes about $615 per script after wholesaler discounts, retail margins, and other costs. The company would have needed an additional 35,200 scripts, or 2,700 additional scripts per week, to offset the operating loss for the quarter. Debt service is on top of the operating loss, although if the company was at break even the debt could be refinanced on more attractive terms. I think the market has reached the stage where promises don't have much impact, and it wants to see hard results. It is not necessary to fix everything at once, but gradual improvement is not going to be sufficient either. The challenges are well-known and there are some real potential upsides, but the challenges need to be overcome and some of those upsides need to turn positive before the direction of the stock price is going to reverse in a meaningful way. The gradual fall will continue until some not so gradual improvements happen.
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Post by matt on Jul 16, 2018 8:42:54 GMT -5
Would such a patent almost put the kibosh on Dance’s inhaled insulin in case it would someday be approved? Unlikely, very unlikely. In order for a utility patent to be valid it must describe something that is novel, useful, and not obvious to someone skilled in the art (all three factors must be met). Afrezza is an inhaled insulin, but it was hardly the first to come to market and any physician skilled in treating diabetics might logically decide that an inhaled insulin is an option worth trying. Further, this patent does not describe a novel composition of matter (patent lawyer speak for a new molecule) so this is not a utility patent at all but rather a process patent. Process patents prevent someone else from using something for a particular described use. In theory, if MNKD developed a suitable protocol for improving glucose control using Afrezza then Dance could not promote the exact same protocol for use with their insulin. However, a physician that was aware of the MNKD process could decide to use it and substitute a competitor's product, and this happens all the time in healthcare. Similarly, a physician could run a small medical study to show that the protocol when used with Afrezza gives essentially the same results as the protocol when used with the Dance product. Once that kind of information is published in a medical journal, the genie is out of the bottle. A company holding a process patent on a medical treatment has the unenviable task of choosing between nonenforcement of the patent, or enforcement of the patent by suing physicians and hospitals. Process patents are useful if the company is a manufacturer and there are a handful of competitors trying to use a proprietary manufacturing method, but imagine the surveillance task of following the prescribing habits of thousands of endocrinologists and primary care physicians to detect potential infringers. In the end, suing your customer is never a good way to drive adoption of your product.
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Post by matt on Jul 14, 2018 7:18:43 GMT -5
A ceiling for a year or two? That needs to be saved and re-posted in a few months. More correctly, I should have said that it is a ceiling for the next 5.75 million shares that Deerfield elects to convert. Since DF is limited to that quantity of shares, when 5.75 million shares have been issued under the conversion option that ceiling goes away. How long it takes DF to use up the stated quantity is anybody's guess, but it makes raising new funds at a price higher than $1.80 almost impossible as new money never wants to bail out old money.
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Post by matt on Jul 13, 2018 7:37:41 GMT -5
What is the significance of $1.80? One significance is that it makes it highly unlikely the last round of warrants will be exercised because they are priced at $2.38. If the stock price increases above $2.00 look for Deerfield to exercise their option to convert at $1.80 and immediately sell the shares, bringing the price down again. It is unlikely that Deerfield can be paid off in full using $1.80 stock before the $2.38 warrants expire in early April next year. Effectively, this deal puts a ceiling on the market price for the next year or two.
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Post by matt on Jul 10, 2018 9:41:29 GMT -5
I could be totally wrong but . . . having done my share of PIPE transactions, when the sales desk at the investment bank starts making phone calls to find buyers the news can leak out that a transaction is coming. Anybody the sales desk contacts is supposedly under a confidentiality agreement not to trade on the information, but we all know that some investors have a habit of leaking information. Depending on the size of the raise, the bankers usually cannot finalize the offering until late in the morning or early afternoon at the soonest, at which point the real buyers will seek to lock in their gains on the discount offered. The volume won't move in a big way until after that happens.
For those that are not familiar with the process, most PIPEs are sold using a Dutch auction method. Each investor contacted will offer to buy a certain number of shares at a certain price and when all the offers are in they will be ranked highest price to lowest price. Those bidding the highest will get filled, then the second highest, and so on until the target amount is reached. Everybody who makes an accepted bid gets the lowest successful price.
Example: Investor A offers $1.60 for 1 million shares, Investor B $1.58 offers for 2 million shares, Investor C offers $1.55 for 2 million shares, Investor D offers $1.54 for 2 million shares. If the total raise is for 4 million shares then A and B get filled 100%, C gets the remaining 1 million shares, and D gets nothing. Everybody pays $1.55 so the raise is 4 million X $1.55 = $6.2 million less fees.
Note about my earlier comment, most PIPEs price on Tuesday but some not until Wednesday. Sometimes the bids are lower than desired and the company takes less money than they had hoped, and the back and forth can take some time while management and the board decide if they are going to reduce the size of the deal. Similarly, sometimes the company wants a friendly investment fund in the mix but that fund has bid too low so a little bit of the hard sell is required and that can delay the process. The goal on these "overnight closings" is to have everything done by the end of the week, and the usual pattern is pricing on Tuesday, contracts countersigned and funds wired to escrow on Wednesday, public announcement late Wednesday or Thursday, and funds available to the company / shares issued by Friday or Monday. However, a lot of things can happen that will move the time line a day or two, and it is pure speculation that this is the week they will choose to do the raise. It could just as easily be next week so there are no guarantees on any of this.
As long as volume remains at or below the average daily volume, it is likely nothing has been finalized. When the volume starts to spike, that is usually an indication that the successful bidders have been notified, have signed their subscription agreements, and have started to hedge their investment. It is not a perfectly reliable indicator, but it is better than most.
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Post by matt on Jul 9, 2018 7:52:08 GMT -5
Management needs to provide clarity on what happened to our promising compounds in these blockbuster categories. On epi, Mylan got so much bad press that several other companies jumped in with competitive products, the latest of which is Novartis. Avoiding a space that has rapidly become crowded with deep-pocketed competitors was probably the right call. Big pharmas set on entering a space can move more quickly than you can imagine and MNKD simply doesn't have the money or the infrastructure to compete with a determined competitor. Palonosetron is a nice niche product, but not one that will generate lots of excitement. The normal route of administration is IV, but so is the route of administration of chemotherapy drugs. If the patient already has an IV drip, adding an anti-emetic before or after the chemotherapeutic is not a big deal so it is not clear what benefit an inhaled formulation adds. Certainly it can help several hours post chemo, but that market would be limited and might not justify the investment required. Pain is an interesting category, but one where FDA has become very conservative in approving new formulations and agents. Even "abuse resistant" formulations are getting shot down at the advisory committee stage so anything new that does not require a needle to administer is going to be a hard sell to the regulators. MNKD would have to convince a skeptical medical community that the improved ease of administration for an existing drug outweighs the potential for increased abuse. If MNKD can find the right agent, likely a totally new drug that does not lend itself to oral administration and which has limited potential for abuse, then there is still promise in the pain sector.
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Post by matt on Jul 3, 2018 10:46:53 GMT -5
No manufacturer can compel the ADA to do anything. STAT, while helpful, did not exactly provide earth shattering results as the conclusion was pretty much predetermined. Physicians look to "levels of evidence" when making treatment recommendations and if you are not familiar with the levels, in the United States these are:
Level I: Evidence obtained from at least one properly designed randomized controlled trial.
Level II-1: Evidence obtained from well-designed controlled trials without randomization.
Level II-2: Evidence obtained from well-designed cohort or case-control analytic studies, preferably from more than one center or research group.
Level II-3: Evidence obtained from multiple time series designs with or without the intervention. Dramatic results in uncontrolled trials might also be regarded as this type of evidence.
Level III: Opinions of respected authorities, based on clinical experience, descriptive studies, or reports of expert committees
Some countries have additional levels of evidence but the framework is similar.
STAT was not a controlled trial since only the patients on the Afrezza arm were allowed to adjust their insulin dose following the meal in response to the CGM. That makes it a Level III study at best, and that is the least persuasive form of evidence. If MNKD wants to move the needle they need to sponsor a large randomized mullti-center controlled trial where all patients are given the opportunity to adjust their insulin dose after seeing the results from a glucose meter. If the results from that study demonstrate that time in range is statistically better with Afrezza than other RAI products, or if Afrezza has similar time in range but with fewer hypoglycemic events that require a visit to the ER, then they will have a compelling argument.
The two big problems with STAT are these:
1. The cohort sizes were too small. In order to get the necessary statistical power, a proper study would require 300-500 patients over a longer period such as 90-180 days.
2. Allowing the Afrezza patients to adjust their dosing in response to the CGM results, not once but twice, stacked the deck against the comparator. Both arms must be allowed to adjust the dose after seeing the initial results for the trial to be credible.
Some will say that patients on injectable insulin will avoid multiple needle sticks or that they will have too many severe hypo events, but that is precisely what the trial needs to show. If so many needle sticks is a major issue then patients on RAI will not be in range as long, and if the second bolus causes hypo events that should show up in the data as well. Opinions are not Level I evidence; data from a well-designed trial is evidence. Level I evidence, preferably with some parallel economic evidence showing that Afrezza is cost effective, is what it will take.
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Post by matt on Jun 28, 2018 9:46:18 GMT -5
With all the postivive news, investors conf, TV ads and all, the PPS is still being pushed down. I think the PPS is going down because of the investor conference. It is no secret that the company needs to raise more money and that it is preparing to do so. As PIPE transactions almost always involve a price discount of at least 10%, and often far more, some people might be exiting until they see where the funding is priced. Holding an investor conference and trumpeting new information like STAT will help keep the price as high as possible, but be realistic and expect that there will still be a discount. I expect few of those attending yesterday's session were there because they wanted to buy on the open market rather they were there to evaluate taking a piece of the next raise.
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Post by matt on Jun 28, 2018 9:06:15 GMT -5
Hedge funds rotate in and out of stocks constantly. They could easily dump their Novo and Lilly shares after increasing their MNKD holdings at bargain basement prices. Actually now would be a great time for them to start the rotation. More likely they would dump their MNKD for a short time, then reload. It is no secret the company has to raise money soon, that is why they had an investor conference, and when shares go out at a discount that usually drops the share price for everybody. Rather than jump into the stock most hedge funds will wait to go long, or short if they are not long, wait for the dust to settle from the financing, and then invest. The signs are all there for a near term financing event.
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Post by matt on Jun 26, 2018 11:17:18 GMT -5
Is it possible MNKD has used the ATM to raise money for commercials? The ATM is not active when the stock price is below $2.50. There is nothing I can see, either in the engagement letter with Cantor Fitzgerald or the prospectus supplement, that bars the company from activating the ATM at any price they want. There is an overall limit of $50 million under the prospectus, but there is no minimum price limit per share. The company has the option to set a minimum share price and/or a maximum number of shares, but they also have the option to change those limits at any time. Whether they have chosen to use the ATM, and at what price, won't be disclosed until the Q2 form 10Q is filed in August. If you have information to the contrary I would appreciate a citation to the source.
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Post by matt on Jun 26, 2018 8:59:31 GMT -5
FDA has been pretty clear on what they will, and will not, approve. Marijuana contains over 80 active chemical substances, and all drug approvals are for particular active ingredients. The drug just approved this week refined a single chemical from marijuana and then refined and purified it until it was the only one left and FDA approved that chemical, not marijuana in general.
A huge part of any drug application is the ADME and CMC sections, which outline the absorption, dosing, metabolism and excretion of every active substance, and the chemistry, manufacturing, and controls used to produce a drug. If the manufacturer cannot demonstrate what the active ingredient is, or cannot prove what dose is given to the patient, FDA is not going to approve the drug. There is so much variability in basic marijuana plants, and so many active substances, don't expect to see an approval of pot. Specific substances processed and refined from pot, definitely possible.
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Post by matt on Jun 22, 2018 15:37:37 GMT -5
Most index funds have to hold the index participants at the close of regular trading. A few will start to buy a hour or more before the close, most do it in the run up to the close. The price usually comes right back down if its all index trading, and when last I looked it was down to $1.90 in the AH session.
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Post by matt on Jun 22, 2018 11:42:06 GMT -5
I could be wrong but I recall seeing an article that said Maxim had stopped covering Mnkd and i interpreted the recent downgrade from Wainwright as others did that we had moved on, so my hope (not a strategy) was that we might attract a larger bank using the results from the stat study as the basis. Guess we will find out soon. The larger banks all do fully underwritten offerings, and MNKD is not in that league. For those that don't understand the difference, in a fully underwritten offering the bank buys the stock for an agreed price from the company and then it is their responsibility to find buyers at a higher price. In a "best efforts" offering the bank agrees to search for buyers but if not enough buyers appear at an acceptable price then the deal is undersubscribed and the balance of the stock goes unsold. Virtually all PIPE offerings for small companies are done on a best efforts basis. Banks like Maxim and Wainwright have lots of private investors they can go to including high net worth individuals, family offices, micro cap funds, and others who will buy almost any stock if the discount and warrants are good enough. The other reason a big bank is not going to do an underwritten offering is that the demands for MNKD shares is simply not there. Average volume of around 1 million shares per day on a sub 2$ stock creates a big risk that the underwriters will be stuck with a lot of stock they can't resell for a price higher than what they paid for it. If daily volume was 10 million or 15 million shares it might be different, but a daily turnover of $2 million in value is tiny by Wall Street terms. Remember that MNKD has a market cap < $300 million so stay realistic. However, there are lots of middle tier banks that are better than Maxim and Wainwright, but not in the Merrill-Lynch, Goldman, UBS category. They tend to have a different type of clientele and that would be good for MNKKD because the new buyers would not be dumping the shares the next day. Many of these banks are well-established regional players with some national reach as well and if that is who got invited to the presentations then that is a positive. Management is trying to take the right steps; we will have to see who handles the next raise before we know if they have been successful or not.
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