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Post by matt on Apr 15, 2018 16:29:39 GMT -5
Given that MNKD does not have cash for 5 years,if what you said were true, then MNKD's only hope is somebody with a sh*t load of money to make a big bet on MNKD. As that is not a manageable event, MNKD, according to your theory, is doomed. In practice, thank goodness, there are other ways. Did the two raa’s thet have a majority share of the prandial market have such a study? Those came to market at a different time. Prior to Medicare imposing DRGs for hospital costs, any new product at almost any cost would be reimbursed. After DRGs, hospitals tried to shift cost to private insurance which started the whole managed care movement. Prescriptions were still not a big cost back then; I was involved in setting up one of the first mail order pharmacies and uptake at the time was tepid because there was not that much money to be saved. That was 1990 and the money to be made running a PBM was not what it is now. Now you do have established products that have a foothold and they have killer market share that drives rebates for the PBMs. Back when PBMs started, the insurance companies were no so concerned by what was, or was not, on formulary. Now if you want to add anything to a formulary you had better bring a good economic argument especially if your product is premium priced. Amgen and Sanofi are battling it out in the segment for PCSK9 inhibitors, and both are losing (although Amgen is doing better than Sanofi). The main reason is that these are $14K/year drugs that control cholesterol better than now generic Lipitor for a small segment of patients, but they really don't have the data to avoid pre-authorization and other barriers. It is just the way it is now. It was not like that ten years ago.
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Post by matt on Apr 15, 2018 12:07:27 GMT -5
I don't agree. To gain acceptance by PBMs, Mannkind needs to either be cost competitive or demonstrate that covering afrezza will save the PBM money in the long term. The latter likely will require another extended trial with a better dosing protocol. Also, I suspect that if insurers were were more accepting of the product, doctors would also be as well. You are mostly right, but you do need to change PBM to insurance company in the sentence. If insurers can save money then the PBMs will put a drug on formulary; it is that simple. PBMs make their money by filling scripts efficiently and via the rebates they get, but ultimately their customer is the insurance fund writing the checks. Most of the MNKD advocates assume a fairly logical progression: rapid acting insulin --> fewer excursions from desired glucose ranges --> overall reduction in HbA1c --> rapid elimination --> fewer hypoglycemic events --> improved control of diabetes --> fewer adverse health consequences --> reduced cost for payors. While that sequence is completely logical, it is entirely theoretical. There have been many drug and medical device innovations which should have reduced long-term cost but didn't do so by a sufficient amount to make it cost justified, and the insurance industry has become skeptical of any claim that is not backed up by long-term economic analysis. The right way to do a clinical trial would have been to track Afrezza against lispro, not just on clinical parameters, but on patient adherence and overall cost burden as well. There are still relatively few examples where pharma companies do the economic modeling up front, but it is necessary just the same to drive acceptance. Shareholders asserting that the faster the insulin works the better the economic outcomes is not going to get the job done. Pharmacoeconomic studies are not quick, cheap, or easy to conduct, but that is the only thing that is going to move the needle in the right direction. It is probably at least a five year study once underway.
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Post by matt on Apr 13, 2018 9:24:28 GMT -5
Any one keep tab of the total outstanding shares?.. WSJ reports 123 mil and I am sure that doesnt include latest offering and not sure if it includes the debt payments paid by equity. WSJ, Yahoo, Google and other news sites buy their numbers, frequently from Standard & Poors. The numbers reflect what is in SEC filings, but not everything triggers a filing and they only count what is actually issued. A company could have lots of deep in the money warrants that are nearly certain to convert to shares, but until that happens they fall out of the statistics. Similarly, if MNKD is selling shares under the ATM then those will only get reported once per quarter. Your best bet is to wait for the 10-Q. The number of shares outstanding is always on the first page of any 10-Q or 10-K near the bottom. That figure is no more than four days old so it is almost always the best indicator. Starting from that, you have to troll through the footnotes and figure out how many warrants and convertible securities there are and at which prices they are likely to convert. Deerfield, for example, has the option to exchange debt for shares but they are unlikely to do so at today price ($1.65 as I write this). Similarly, the warrants on the last deal will not be exercised unless the price goes back over $2.38 and, as mentioned, the ATM has already been disclosed but the number of shares issued under Rule 415 offerings are only updated quarterly. That answer may not be helpful, but it is the answer.
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Post by matt on Apr 10, 2018 15:27:55 GMT -5
Anyone know how long it takes to get from a signed term sheet to a signed contract during negotiations? It seems like the terms would be the most difficult part of that process and the rest would be relatively quick and easy. It all depends on the deal. I have negotiated term sheets in a matter of hours, told the attorney to not screw it up, and we had a signed deal in 48 hours. I have had others linger for months. A lot depends on how detailed the term sheet is. Sometimes one side will sign a weak and highly modifiable term sheet to help the other side out if, for example, they are under pressure from their board. That paper is not worth much. Other times all substantive terms have been discussed, agreed, and documented such that the lawyers can draft a contract with nothing more. There have even been cases where a detailed term sheet was ruled to be sufficient to form a binding contract despite written language to the contrary.
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Post by matt on Apr 10, 2018 9:57:14 GMT -5
COGS is generally measured as the manufacturing costs deducted from gross revenue to yield net profit. Higher volume is beneficial because it spreads out fixed costs over more units produced and typically lowers COGS per unit, although there is a point of diminishing return as volume increases. Mostly correct; gross revenue minus COGS yields gross profit. Gross profit minus operating expenses yields operating profit. The vast majority of companies establish a standard cost per unit which has an allocation of fixed costs that is static as well as a budgeted cost per unit of labor and materials. Differences from the standard cost are charges to a manufacturing variances account which gets folded into the total cost of sales. Variances are generally broken out by overhead, labor, and materials. The benefit of a standard cost system is that management (and shareholders) can see how much it costs to make a unit when the factory is running at capacity, and the impact that shortfalls in volume have on the financial results. That would end a lot of guessing about the impact of Amphastar and the magnitude of fixed cost underabsorption for the Danbury plant. Conversely, it would highlight exactly how much the company should be spending to drive additional volume. I think most shareholders would like to know that.
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Post by matt on Apr 10, 2018 8:23:53 GMT -5
Given the characteristics of the warrants Sabby need to hold the position for at least six months, and less than a year. So they are looking to exit this position in that time range. It's hard to tell what that means but at a wild guess from the value of the Puts I think they have built a position that is a $2.00 to $2.50 Call, and a $4.00 to $5.00 Put. They have a position that it is almost impossible to lose money on if I am right. The other possibility is that they really have no plans for the warrants. This latest stock offering was near the limit of what the company could do under the NASDAQ 20% rule, and if the warrants had been included it would have exceeded the 20% rules. However, NASDAQ has ruled that if the warrants are priced at par with the last price before the date of the transaction (i.e. not at a discount) and if the warrants are not exercisable for 6 months, then the offerings will not be integrated. The integration rules are a bitch to understand and I will not even try to explain them, but essentially NASDAQ has elected to look at the share offering as one transaction and the warrants as another transaction. Since the 20% rule applies to each transaction individually, MNKD could sell the full 20% of shares at a discount without the warrants being counted against the total. If the warrants had been exercisable immediately the 20% limit would have been applied to the shares plus the warrants.
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Post by matt on Apr 7, 2018 15:43:20 GMT -5
If that were the case, then why Mike does this instead of use the ATM and ask the shareholders for more capability of the ATM? The reason why an ATM or any other Rule 415 funding program is not feasible has to do with volume. If a company puts fresh shares into the market that represent more than about 10% of the total daily volume, that will impact the PPS negatively. That sets a practical limit on MNKD of about 200K shares per day, or at recent prices of $2.70, they can raise no more than about $540K in new cash per trading day. However, if the company does that every day then the PPS will start to take a hit and each placement will require more shares to yield the same dollar proceeds. In those cases it is better to take the pain on a single day. The other issue with the ATM as a funding vehicle is that the amount that can be raised (in dollar terms) is close to what the company spends per day exclusive of debt payments. That is a risky financial strategy because if anything goes wrong, company related or not, the ATM cannot deliver enough new cash going forward, and the cost of doing a substantial PIPE raise in those conditions would be punitive.
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Post by matt on Apr 7, 2018 15:31:52 GMT -5
It is likely that this happened, and it is likely that those not involved in the transaction did so as well. In PIPE transactions, those who are solicited but elect not to participate in the offering are, in theory, banned from short selling. There are a few funds that have been caught doing this and the SEC smacked them pretty hard.
Funds that did participate in the offering are legally allowed to short the stock once they have signed the subscription agreement. Previously, the SEC had ruled that this was illegal until the transaction had been made public but the court felt otherwise and the SEC lost. So long as the subscriber has created a bona fide financial obligation to be long MNKD stock then they are allowed to hedge that economic risk by going short or establishing option positions.
However, you didn't need to be a genius to see this coming. On March 14 the company issued a press release titled "MannKind Corporation to Present at Oppenheimer 28th Annual Healthcare Conference" and another on March 19 titled "MannKind Announces Participation at the H.C. Wainwright Annual Global Life Sciences Conference". That is about as subtle as erecting a red neon sign on the corporate headquarters announcing that a PIPE raise was imminent. The funds that attend these conferences, and especially those that go to the HC Wainwright conference, are not there to look for novel investment ideas; they are there to place money and the companies chosen to present are those that have a near term need for money. HC Wainwright is not a charity, they are an investment bank looking to make some bucks on the placement fees which is why they throw the conference!
Don't believe me? Go back and look at the historical data, especially the thread on the broker loan rate around that time, and the news.
On March 16, right after the first press release, Zacks had a release tilted "Options Traders Expect Huge Moves in MannKind (MNKD) Stock"
In the thread on loan rates, boca1girl posted this from another site:
Largest borrow rate increases among liquid names (TheFlyOnTheWall) — 8:45 AM ET 03/19/2018
Latest data shows the largest indicative borrow rate increases among liquid option names include: MannKind (MNKD) 53.12% +0.06
You get the idea; once the company started signaling that they were actively looking for PIPE money anybody who follows this stock knew, or should have known, that a big raise was coming and given the lack of highly positive catalysts in the first quarter, the raise would likely be at a deep discount. Zacks knew this, TheFlyOnTheWall knew this, and you can be sure that a lot of other people figured it out as well. That is also why the PPS dropped from $2.71 the day before the first announcement to $2.20 the day before the PIPE was announced. Sure, the broader market was down a bit as well but MNKD was down more than its beta would predict.
So it is almost certain that lots of people were short MNKD in the weeks leading up to the deal, and a lot of those covered and have locked in their profit. Given that, does it matter if the private placement shares themselves were shorted, or not, since all of Wall Street could see what was coming? The signs were there for those who choose to look for them.
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Post by matt on Apr 6, 2018 15:37:20 GMT -5
1. Did they offer the max amount that was available to them of this supposed 20%? I know they previously authorized a ton of shares that were supposed to be used for emergency purposes (I.E. keep the lights on), but have not been used from last years shareholder meeting.
The 20% is a moving target based on the shares outstanding, and every issuance to Deerfield, Amphastar, or the Mann Group in lieu of debt repayment changes the outstanding number. However, given that shares outstanding as of the date of the 10-K were 120 million, this offering is close to the maximum issuable on these terms. Each discounted issuance has its own 6 month clock so the math gets messy with multiple layers of discounted sales.
Example, if a company had 100 shares outstanding on January 1 they could issue up to 20 new shares at a discount. However, if they only sold 10 shares in January they could sell the other 10 at a discount in March. In July, they could sell 20% of the then authorized shares (120 X .2 = 24) but since 6 months had not elapsed since the last discounted sales, they could only sell 24 - 10 = 14 shares in July and would have to wait until September to sell the last 10. Like I mentioned, every transaction, whether at a discount or not, changes the math going forward.
2. Is it true that they can only do an offering every 6 months or is it a “discounted offering” that this rule applies to?
The rule is that they cannot issue more than 20% of the outstanding shares in any six month period at a discount unless there is specific shareholder approval. The company can issue all the shares they want, subject to the authorized limit, if the offering is at market price or if there has been a shareholder vote.
3. There are conflicting reports to who bought these shares and whether they have already been purchased and where they at a discount or not (warrants... etc)
Typically these transactions close within one or two business days after they are announced. I suspect the money moved today. The press release was clear that the unit (share plus warrant) was priced at $2.00 which is a substantial discount from yesterday's close. You will have to wait and see if the purchasers are named in the prospectus supplement; sometime they are and sometimes not.
As to your other question regarding a catalyst, that is in the eye of the beholder. There is an old saying in biotech that the wise CEO raises money when he can and not when he needs it. Are the term sheets with upfront cash payments Mile alluded to real or not, and even if they are real would it be reckless to pass up a financing transaction when the money is available. I could tell you a story either way, but I cannot fault the company for improving the balance sheet. The financial ratios are far too weak, even after this transaction, and it is prudent to improve that situation.
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Post by matt on Apr 6, 2018 14:43:41 GMT -5
Every investment bank has a clientele that they serve (hint: the clientele is the investors putting in the money and not the companies paying the fees). HC Wainwright and their affiliate Rodman & Renshaw have a well-established track record for the kind of deals they do and their clientele. The fact that Mike stylized the investors as "healthcare funds" does not mean they are long-term strategic investors like Atlas or Orbimed. Once the announcement was made that MNKD would be presenting at the Monaco conference it shouldn't have been a big surprise to anybody that today's announcement was only weeks away.
Those with the stomach for it either bought slightly out-of-the-money puts or sold short, and covered today. MNKD announced that they would be presenting at the conference on March 19 and the borrow rate promptly increased at several brokerages over the following days before settling back down. That was not a coincidence; it pays to study tea leaf reading.
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Post by matt on Apr 6, 2018 12:55:12 GMT -5
Seems to me that they issued as many shares as they possibly could. I am eager to read where / why I am mistaken. The NASDAQ Marketplace Rules prohibit issuing more than 20% of the outstanding shares at a discount to the market price in any six month period. This is a perpetually moving target as each sale will affect the start of the six month period and the number of shares outstanding. I don't have the patience to do the math, but you can easily get there if you troll back through all the SEC filings. The numbers below are for example purposes only. Each discounted raise resets the calendar, in full or in part, which determines when the next raise can happen. Similarly, since the 20% limit is based on outstanding shares, not authorized shares, the more shares that get sold the larger the next raise can be. Imagine if a company does the maximum permissible discounted raise on January 1 and after the raise they have 100 shares. The rules allow a follow-on raise for 20% of the outstanding no earlier than July 1, but the outstanding shares after that raise will be 100 + 20 = 120. Similarly, the following January 1 the company can sell 24 more shares for a new total outstanding of 144. There is a built-in incentive to sell the maximum permissible as soon as possible after the six month waiting period is over as that sets the limits for the next raise even higher. To understand MNKD you need to build a spreadsheet with dates for every share issuance in the past six months, keep a running computation of the total outstanding, and know which sales were under the ATM (which is not discounted) and which were discounted (like Deerfield / Amphastar deals). With that data in hand it will be easy to see what the maximum number of shares issuable on any given date looks like.
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Post by matt on Apr 6, 2018 8:31:37 GMT -5
I'd like to know the names of the "select healthcare dedicated institutional investors." I suspect it's more like "select hedge funds" getting 24 million shares and warrants to cover their short positions. You will get your chance. When the company closes this financing they will have to file a prospectus supplement to the S-3 shelf registration and there is a table of selling shareholders in that document. Normally the kinds of funds that place money with HCW are indeed more like hedge funds than strategic investors, but you will have to wait and see.
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Post by matt on Apr 6, 2018 8:27:28 GMT -5
I personally don't think this is bad. Possible $52mil raise if SP gets back above $2.38. Personally I think they should have tried for $3-3.50/share. When all is said and done, it will be 20% dilution for funding for the rest of the year. With good news coming and rising scripts.... Hence I believe they should have pushed for a higher price. A company can ask for a higher strike price, but any combined offering is priced as a unit. Just like squeezing on a balloon, if you take away value on the warrant then the unit price is going to be even lower. Anybody who plays the registered direct game has their favorite warrant pricing model, and I think what you suggest would take 30-40 cents off the warrant value. Would you be willing to trade a $1.60-$1.70 unit price if the strike on the warrant was $3.50? If you don't give up more on the unit price to compensate for the higher warrant strike then the issue will probably not sell at all.
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Post by matt on Apr 5, 2018 8:14:06 GMT -5
Can anyone verify/confirm a US pharmacy will honor a prescription from a non-US licensed DR? To prescribe medications on DEA Schedules II-IV the practitioner needs a DEA issued drug license and, in many states, a state issued license to practice medicine as well. If a non-US doctor has the necessary licenses, the pharmacy can fill the script but most foreign physicians will not have the necessary licenses. What is regulated as a drug in the US may not be regulated the same way in India. You can walk into most pharmacies and simply ask for the medication you seek with no prescription needed in many cases. One of my children got sick when we were travelling in India some years ago and we were shocked at what was available over-the-counter including many medications that are Schedule III narcotics in the United States. India seems to be a fairly open market in that respect so I expect it would be easy for a pharmacy to order Afrezza. FDA does not seem overly concerned about export of medication to foreign countries provided that the drug has been approved for sale in the US and has a current expiration date, but they will not allow exports of unapproved medications except by special arrangement.
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Post by matt on Apr 3, 2018 17:52:52 GMT -5
What are the fixed manufacturing costs per unit, and what are the variable manufacturing costs per unit. The "unit" can be any measure they like, but one box in the new configuration is probably the most sensible.
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