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Post by matt on Aug 20, 2017 10:56:21 GMT -5
It would be interesting to hear from the company what they think the manufacturing cost per unit is at high volume. There is a lot of fixed cost in a pharma plant that must get allocated to however many units are produced, so the higher the unit volume the lower the fixed cost absorption per unit. Net sales of Afrezza for the first six months were $2.7 million, cost of goods sold were $7.6 million, and because a lot of manufacturing assets and inventory were written down in December 2015, the true cost of manufacturing is understated.
It is interesting to speculate what would happen if the price were dropped to something more affordable, but the ability to drop the price depends in large part on what the actual manufacturing cost is at high volume. My sense is that Afrezza will never be price competitive with other insulins because it has an inherently higher manufacturing cost regardless of production volume, but it would be nice to know what kind of production volumes would be needed to justify a lower price point.
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Post by matt on Aug 17, 2017 10:07:33 GMT -5
Matt from this board. His date was August 16th, yesterday. Was it the 16? heh
He is knowledgeable about shorted stocks, as well as debt.
The reason I mentioned Aug 16 as a possible date is because that was the last date to file a timely 10-Q. I don't know much about shorted stock, that is not something I am knowledgeable about, but I do know a bit about the bankruptcy procedures having been an expert witness in more than one case. There are a ton of disclosures that a company must make when it files for either Chapter 7 or Chapter 11, and that process is facilitated when a company does so on the same date as when they file their 10-Q or 10-K. It gives the company a clean set of financial disclosures to work from, and because the public was just notified up the updated financial status, it is a way to head off shareholder lawsuits for failure to disclose material information. That said, there is nothing that requires filing on any particular date; only a requirement that the company meet certain legal definitions of bankrupt. In Delaware simply having a negative value for shareholder equity meets the definition, but that doesn't mean a company has to file for bankruptcy. There are lots of biotechs that have a hole in the equity section that recover nicely so meeting the legal definition is not the same as having to file. The other factor to keep in mind is that you cannot run the cash to zero and still have a Chapter 11 reorganization because there is a significant cost to Chapter 11 (unlike Chapter 7) so a decision to reorganize must be taken some months ahead of the real crunch time. Ultimately that is a judgment call the board has to make based on the deals that may, or may not, be in the pipeline, the financing promises that may, or may not, exist, market conditions for raising additional capital, and a host of other unknowable facts. That is why we have seen events like Dendreon declaring bankruptcy on the same day they filed their 3rd quarter 10Q even though they still had over $100 million in cash still on the balance sheet; that was a shocking event to most shareholders who did not see it coming. I have said, and will say I again, that Mike has until September 30 to have a workable financing plan executed. October is usually a bad time to raise capital in biotech and I suspect this year will be particularly brutal for the sector as a whole and not just for Mannkind. If the money can be lined up by the end of September, that is very much preferable to pushing the decision later in the year when conditions may turn negative.
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Post by matt on Aug 17, 2017 7:33:36 GMT -5
Are you suggesting MannKind may be working with United Therapeutics on PAH? They wouldn't need to work with United Therapeutics because a federal court ruled that the patent on Trepostinil was invalid. It is now the equivalent of a generic drug, and there are others who have commercialized their own version of the drug to compete with Tyvaso. Inhalation is not the only way to get the drug into the patient; the drug can be administered by injection, intravenously, or orally with extended release tablets.
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Post by matt on Aug 16, 2017 11:23:25 GMT -5
Regarding TREP-T Anyone know how long these take to setup? With nothing filed will they be able to get results in time for this to be one of the two Sept announcements? I wouldn't hold my breath (no pun intended) for a September announcement unless you mean September 2018. Dose escalation studies with human subjects are considered a clinical trial (usually done as part of a Phase I or Phase II) and these require FDA review, approval by one or more Institutional Review Boards, the contracts office at the hospital or university, and then the data has to be collected and analyzed. Six months to a year is a realistic time frame to have a good understanding of the molecule. Unless the work started some time ago, September is too optimistic to see results.
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Post by matt on Aug 11, 2017 14:34:09 GMT -5
So with some insurers, even if Mannkind were willing to price match or beat, they might not get the tier they seek. That is the way the rebate game is played, and why ExpressScripts and CVS both have brand exclusivity on their top tier formularies. Manufacturers cannot offer a price contingent on excluding other products, so instead they bundle a group of products and set a rebate contingent on the insurer or PBM reaching a certain penetration rate for their products. Example: We will charge $100 per script if fewer than 95% of your diabetic patients use our brand, but you get a rebate of $30 per script if 95% or more are on our product. Usually the rebates are all or nothing deals; the insurer hits the target or they lose the rebate entirely for that year. If the insurer covers 1 million diabetics loss of $30 million in rebates, which are pure profit, is very significant to their bottom line. The leading PBMs make 100% of their profit from the rebates (which they share with the insurers). The money is all in the rebates which is why formulary placement is so critical. If you can supply a wide range of insulin products, like Lilly or Novo does, then you can use rebates based on portfolio penetration instead of product penetration. That is why Lilly owns the ExpressScripts business and Novo owns CVS/Caremark. If Afrezza were free it might put enough of a dent in the penetration rate that an insurer would risk losing the rebate and winding up would be worse off economically. By building the rebate arithmetic around a portfolio of drugs Mannkind cannot duplicate, the competitors can ensure that Afrezza will never make economic sense for some formularies regardless of the price MNKD charges.
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Post by matt on Aug 9, 2017 13:17:19 GMT -5
Were the preferred shares mentioned on call hypothetical ones to be created or ones already in existence with known terms? The preferred shares exist in that they are already authorized (just look at the equity section of the balance sheet). However, usually the exact terms are left open until the certificate of designation is filed with the Secretary of State. You would have to dig through the articles of incorporation to determine if any limits were placed on the preferred, but normally the terms are left empty to be set in the future as the discretion of the board of directors.
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Post by matt on Aug 9, 2017 13:01:28 GMT -5
Problem resolved with the delisting from TASE. If they offer the preferred to retail investors with a modest interest rate I will load up. How do the preferred shares work? There are no set rules on how preferred shares work. Some of the more commonly seen terms are: - Preference over common to receive a return of capital if the company liquidates (but still subordinate to creditors). - A set dividend percentage, which may or may not be cumulative, and which has to be paid in full before common can get any dividends. - An option to convert the face value of the shares, and sometimes the accrued but unpaid dividends, to common stock at a set ratio. - Preferred can vote separately from common on certain corporate actions, effectively giving preferred a veto over common shareholders. - A stated value or par value that is different from common, especially if there is a stated dividend. - Preferred stock may be redeemable by the company at a set premium over the stated value if not earlier converted. - There may be a requirement to redeem all preferred before the company can repurchase its own shares or pay any dividends to common. The exact rights of the preferred shareholders will be set forth by the board in a "Certificate of Designation" before any shares are issued, and the certificate will contain whatever provisions the board decides. The shares can be registered like the common, or can be unregistered (which is less likely). Generally conversion to a registered common share is the way a preferred holder can be guaranteed liquidity if the shares are not registered, but since MNKD is short on issuable authorized common shares there would have to be a shareholder meeting to approve more shares. Preferred stock may also have a much higher price tag than common, such as a stated value of $1,000 per share with a cumulative dividend of 5% (for example). If the company sets a high price like that, the preferred could work almost like a subordinated bond, and with 10 million shares issuable a stated value of $1,000 would generate a lot of potential capital. As an example, a sale of 50,000 preferred shares at $1,000 each would generate $50 million in financing (minus any discounts and fees) and there would still be another 9,950,000 shares available to issue. What shape all this takes all depends on the certificate of designation says; at the other extreme the stated or par value could be set at $1 and the company could only raise $10 million before running out of shares. You just have to wait and see what the board decides.
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Post by matt on Aug 9, 2017 7:29:05 GMT -5
Vouchers are a way to pay for the medicine as an alternative to insurance or cash out-of-pocket, but you still need a script. I have used vouchers to sample medication before and I just presented a script from my physician to the pharmacist at CVS, gave him the voucher to pay for it, and walked out with the meds. CVS would have reported that to Symphony as a script with a price equal to whatever the manufacturer reimbursed them, which is generally the wholesale cost of the medication to the pharmacy plus a dispensing fee.
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Post by matt on Aug 8, 2017 6:34:46 GMT -5
The existing security interest aside (which basically prevents the company from sell most of its remaining assets) Danbury is not worth anything close to replacement value. Most pharma plant buildings are relatively cheap to construct as they are just a "big box" with a high roof and nothing inside. Fundamentally, they are not much different from what gets built in a shopping mall to hold tenants like Best Buy.
What is special about pharma plants is the production rooms built inside the box. These production suites are where the money is spent, and each room is custom designed for a particular part of the production process, and there is considerable variability between drugs and manufacturers. The biggest cost is the special air handling which is normally installed between the roof and the ceiling of the production space (that is why the box has such a high roof). Chances are very high that the production process MNKD has designed for Afrezza would need to be different for another pharma manufacturer who would take over the building and immediately demolish the rooms inside, starting from scratch with their own design. While that seems crazy, once you have an FDA approved production process the cost to redesign the process and go through validation all over is more expensive than constructing some new walls inside the box. For the same reason, the production equipment, even if relatively new and lightly used, does not have much value to produce anything except Afrezza.
The land and building is basically worth what similar buildings go for in Danbury. Production equipment has a salvage value of 10-15 cents per dollar, and the production spaces may have negative value (because they have to be removed to make way for a new suite). If by some happy coincidence a new owner is happy with the layout and size of the production suites then there may be a bit of value their, especially in the air handling, but usually that is not the case.
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Post by matt on Aug 3, 2017 14:59:29 GMT -5
Who knows the answer to this for certain: Can they do some type of convertible notes offering as a private placement without having to call a special shareholder meeting to authorize the shares beforehand? (my guess is... likely not) Be nice if the Investment advisor to the stars could band these quasi & wealthy actors together (once you draw in the likes of a Hanks or a Berry, $$ is no object) in a private placement; just tell them all the good that they will be doing for society with this investment. OK, Dream over To issue convertible notes, you generally need to have the shares available to issue. Right now the company is essentially out of authorized shares and approving more shares is at the discretion of the shareholders, and that requires a special meeting. I haven't done the math lately, but as I recall the company is down to about 10 million unencumbered authorized shares. If you look at the last 10-Q you will see a bigger difference between authorized and outstanding, but in the meantime Deerfield has been issued shares and the company has restricted shares to meet warrant and employee option obligations which are technically "authorized" but are restricted such that they are not available for any other purpose. I don't think it is strictly illegal to issue convertibles without the shares to back them, but no good securities lawyer would allow his client to write a big check for a loan convertible into shares that did not exist. Virtually every securities purchase agreement contain a covenant that must be satisfied before closing the deal that restricts a sufficient number of shares to cover any conversion options and/or warrants attached to the deal. A shareholder's meeting is the only way to get more shares authorized, and that takes a minimum of 21 days notice to call the meeting in order to comply with SEC rules. Likewise, any issuance or series of issuances (which includes conversion options and warrants) that exceeds 20% of the outstanding shares in any six month period must have shareholder approval or the company will violate a NASDAQ marketplace rule, the penalty for which is delisting.
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Post by matt on Aug 3, 2017 14:45:47 GMT -5
According to matt "we know the Mann Group has a block of shares but we don't know what other assets they own. They may indeed be trying to quietly liquidate a big chunk of their MNKD holding to raise the money needed to make the payment later this month. It seems to be that they started putting through big blocks around July 20, and today is just a continuation. At one point I calculated that they needed to sell around 450K shares per trading day if they had no other cash assets available." Read more: mnkd.proboards.com/user/2019/recent#ixzz4ohqo1RAHSo according to the "expert" there will be no dilution. Honestly, you excel at quoting people out of context. What I offered in that thread was an explanation of why the stock tanked yesterday, and it could be related to Mann Group converting shares to raise cash to meet the required payment at the end of the month. That money is needed to keep the Deerfield payment deferred until the end of October, nothing more, and it will not provide a penny to finance the company beyond October unless Mann Group sees fit to increase the credit line. Unless you believe in the money fairy, the company will have to give something up to get the cash needed to operate for the next year. Either the company will have a new marketing partner, who will do what Sanofi did and front a nine-figure sum in exchange for taking most of the economic rights (one form of dilution), or else there will be new shares sold (another form of dilution). Given the current debt to assets ratio and the fact that Deerfield has a senior secured interest in essentially all assets, it will be next to impossible to issue more debt. The money fairy is the only non-dilutive means of finance, but some forms of dilution are more palatable than others.
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Post by matt on Aug 2, 2017 16:00:35 GMT -5
You should already know by now that Mann Group has endless amount of funds, probably more than Apple has in their cash stockpile. We don't know that. I have attempted to unravel all the various Mann entities, and while Al Mann no doubt had very significant wealth, he spread it across many legal entities. The line of credit is from one of those entities, and the only thing we know for sure about Mann Group is that is a Delaware LLC and that it holds only slightly more value in MNKD stock than what they have committed to deliver in cash. They have filed no reports for any other entity except MNKD so there are no significant other shareholdings. Without a balance sheet to look at, it is not possible to say that they have an endless amount of funds. Likewise, each Mann entity has a particular purpose and particular beneficiaries, and the trustees are required to enforce the trust agreements. So if Mann Group does not have liquid assets, they can't just move them over from another Mann entity. Absent disclosed financial statement they could very well have the cash just sitting around, in which case all they need do is write the check, but there is a reason they have a sixty day notice period before any credit is paid out and a reason the Deerfield extension is contingent on them delivering.
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Post by matt on Aug 2, 2017 14:56:43 GMT -5
What is going on with the MNKD stock today? Two reasons I can think of. First, we know the Mann Group has a block of shares but we don't know what other assets they own. They may indeed be trying to quietly liquidate a big chunk of their MNKD holding to raise the money needed to make the payment later this month. It seems to be that they started putting through big blocks around July 20, and today is just a continuation. At one point I calculated that they needed to sell around 450K shares per trading day if they had no other cash assets available. The other reason is that people may be expecting the company to announce that some dilutive event is coming, which is far more likely than announcing that material cash will be coming from some other source. It may be that people think the downside risk outweighs the upside potential between now and Tuesday, and if the stock does fall they can reload later next week at a lower price. Or it could be a random event of the universe.
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Post by matt on Aug 1, 2017 12:10:56 GMT -5
What are your specific plans to remain a going concern long enough into the future to reach break even and then move into profitability? This ^^^. The more specific Mike is the better the reception by the market. A dose of dilution should not be unexpected, albeit unwelcome, but if that is what it takes to save the company then man up and say so. At least if unwelcome news is out there, the market will react within a day or two, and then it will be over. If the news does not come out the price will stagnate and the PPS will go nowhere due to the overhang of uncertainty. At this point almost anything is better than more uncertainty. Another "stay tuned" CC or not addressing the financial issue would be a disaster.
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Post by matt on Jul 28, 2017 19:36:00 GMT -5
The manufacturer cannot set the final selling price; that is a per se violation of the Sherman Antitrust Act. Period, full stop.
However, the manufacturer can cut off product supply to any retailer that undercuts the target price which is why you don't see luxury goods sold at Wal-Mart. Once a manufacturer sells a product, they can no longer control what happens to it or what prices a subsequent participant in the supply chain sells it for. That said, price changes by the manufacturer will ripple through the pharmaceutical distribution channel very quickly because they work on very tight margins.
The issue with MNKD is that they may not be seeing usual and customary price behavior because of low volumes. The distributor might only stock nationally instead of locally, so when an order comes in they have to air ship it via FedEx to meet service level obligations to the pharmacy. Those extra costs ultimately fall on Mannkind either through lower wholesale prices or higher retail prices to the end customer. The distributor is agnostic about what they sell, a box is a box, but they run on about 1% profit margins so they have to make a profit on every shipment. Low volume hurts.
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