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Post by matt on May 16, 2017 11:58:46 GMT -5
I make it 21.8 million. That is 140 million authorized, minus 101 million issued, and 17.2 million not issued but reserved for convertible debt, options, and warrants. That leaves 21.8 million as the balance. Currently the warrants are on 9.7 million shares and as of 3/31 were only worth 752,000 dollars, which is 8 cents per share. They're worth considerably less now than on 3/31. I assume the company could exchange them for a small number of warrants that are close to at the money, and a similar argument could be made for the rest of the 17.2 million shares. To be clear, the 17.2 million consists of 0.7 in restricted stock, 0.8 in senior convertible notes, 9.7 in warrants, and 5.9 in employee options (plus 0.1 rounding). I don't ever recall seeing a transaction like you describe, essentially an exchange offer to swap outstanding warrants for a different number of warrants with different terms. At a minimum I think that would require a new or heavily amended registration statement, and those are neither fun to write nor cheap to have reviewed by the law firm and accounting firm (who must sign off). What I have seen done a number of time is that the company will unilaterally reduce the exercise price of the warrants to some amount slightly in-the-money to encourage immediate exercise, although that usually causes a decline in all shares to the new exercise price, similar to a discounted share offering. However, it would still be cheaper than issuing new shares at a discount plus warrants plus a banking fee. Certainly you can do this on the 9.7 in warrants and the 0.8 convertible debt, but it probably wouldn't be possible on employee options and restricted stock for a variety of reasons.
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Post by matt on May 16, 2017 11:15:49 GMT -5
Thanks matt . I was try out how many they could offer in a rights offering. Someone else posted that a non-dilutive rights offering is not subject to that same constraint. if no one else beats me to it, I will try and find that post in a bit. Delaware law is unclear on this point, and it has been the source of considerable debate. In at least one case the court held that a shareholder resolution was required for a forward stock split in the absence of a sufficient number of authorized shares. The whole idea of authorized capital and par value in this day and age is a bit antiquated, but these provisions trip up the best securities lawyers from time to time. The preceding is a comment on Delaware law, other states may be different so be careful on that point. Delaware is all that matters for Mannkind.
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Post by matt on May 16, 2017 10:47:10 GMT -5
I make it 21.8 million. That is 140 million authorized, minus 101 million issued, and 17.2 million not issued but reserved for convertible debt, options, and warrants. That leaves 21.8 million as the balance.
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Post by matt on May 16, 2017 9:22:37 GMT -5
What are you trying to say , Amgen would not want to involved themselves with Mnkd in which would make diabetes patients healthier / and therefore reduce sales for them drastically .on their existing portfolio. Amgen, and other pharmas, do not want to partner every therapeutic in every disease state where they have some tangential relationship based on disease state. A company cannot be everything to everybody; Pfizer tried that around 2007 and failed miserably. Similarity in research intensity and specific manufacturing expertise are far more predictive of who will want to partner or merge than the disease being treated. True biotechnology companies, and I put Amgen in that category, are exceptionally good at certain manufacturing technologies related to recombinant protein production. That is their competitive advantage and when they have been successful in engineering new protein drugs, they have made a small fortune. They are interested in diabetics, not necessarily diabetes, because those same patients represent a market for their other drugs. Metabolic disease takes many forms and most diabetics have systemic metabolic disease that requires a range of drugs to treat hypertension, kidney failure, cardiac manifestations, and other comorbidities. However, in the final analysis Amgen's core strength is making money from turning innovative biotechnology into new protein therapeutics. The insulin market on the other hand is more like a barroom brawl with three large and highly entrenched players, arguably about to become two even more highly entrenched players as price erosion may squeeze Sanofi out of the market completely. There are plenty of companies that compete on price and do nicely, just look at Walmart, but Walmart has no business trying to sell luxury goods. Amgen spends about $4 billion a year on research, something they can do because they have a gross margin of 82% while insulin products will never have a gross margin in that range. When a company is used to high margin and a high R&D spend takes on what amounts to a commodity product, albeit one with some unique features, the result is usually a disaster.
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Post by matt on May 16, 2017 7:13:49 GMT -5
So a rights offering are additional securities offered to current shareholders at a discounted price to raise capital in a "non-dilutive" manner. Does anyone have experience with rights offerings, the effect on share price of the underlying security and can explain how this is "non-dilutive"? Even if an offer were made by the company, why would anyone take advantage of the offering without some indication that scripts were growing? I was involved in some rights offerings many years ago in Australia where they tend to be a more common way to raise money. Essentially the company distributes rights to buy more shares, either at market or at a discount, to every shareholder in lieu of going to the market via an investment bank. In the transactions I was involved with, the stock was a high flying tech stock that I had spun out of one of our subsidiaries and we were exiting that investment so we didn't buy more, but the rights themselves were tradable and we sold them off for a several million in extra cash. In some offerings the rights are tradable, like a warrant, and in other cases they are not tradable which means the right is a "use it or lose it" deal. In order to be tradable, the security has to be separately registered with the SEC and admitted for trading on the NASDAQ, neither of which is cheap. If a company has to raise money (and I think MNKD does) they can offer stock at a 30% discount plus warrants to hedge fund investors that will crush the price, or they can offer the same deal to their shareholders. Those who want to double down can send more money and keep on owning the same percentage of the company as now, so in that sense it is non-dilutive. If you don't want to invest more, or don't have the cash, then you will get diluted by others but you can soften the blow by selling off the rights if the rights have been registered, but if the rights are not registered they simply expire. Typically rights are only good for a short time, like 60 days, and stock related to unused rights is sold into the market by an investment bank. So, the cash will be raised one way or another, but the shareholders have the chance to enjoy the discount instead of the hedge fund. As for who got yellow cards, I mentioned that the names likely came from the DTC's NOBO list. If you are an objecting beneficial owner (an OBO) then you are not listed, and the list shows how many shares you own. The mailing might have gone out to those who held a certain minimum number of shares and you don't have enough to trigger a mailing, or else you have enough but the shares are spread over several accounts. The NOBO list does not have a way to consolidate multiple accounts so if you have 5,000 shares at five different brokers, you might show up on the list five times as a holder of 1,000 shares. I don't really know the particulars of what these particular guys are up to, but that is generally how NOBO information works; the rest is an educated guess.
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Post by matt on May 15, 2017 15:53:12 GMT -5
Now the list had to come from individual brokerage houses. Not true. As I explained in another post yesterday, there is a master list of all shareholders that hold shares in street name and who have not objected to being on the list (by default you are automatically put on the list). The list has your name, address, and the number of shares in your account but no other data. While generally the list is ordered by the company, it can also be obtained by anybody else upon payment of a small fee to obtain the names. The list comes from the DTC, not your broker.
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Post by matt on May 15, 2017 11:59:36 GMT -5
It would be important to clarify what they mean by "meeting". I have presided over annual meetings where the "official meeting" lasted less than 15 minutes. All that is legally required is to confirm the auditors, poll the corporate secretary for the vote count on the proxy items, and, assuming the proxy votes are sufficient, confirm the resolutions and adjourn the meeting.
That said, we had a session that immediately followed the meeting where we presented slides and answered questions from shareholders for another 90-120 minutes, followed by informal one-on-one chats over coffee. The annual meeting is one of the few times management gets to interact face-to-face with its shareholders and that interaction is good for both sides. I would hope management would take the opportunity to meet with those who care enough about the company to show up at the meeting.
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Post by matt on May 15, 2017 9:44:37 GMT -5
"Amgen used to have an interest in diabetes but they got out of that market years ago. Their current and very profitable focus is nowhere near diabetes" Just curious if Amgen had a booth at 2016 ADA, cause they have 2 near entrances at the 2017 ada. I expect they did, and not because they were interested in diabetes. Certain diseases appear together and diabetes comes with its close relatives cardiovascular disease and kidney failure, both of which are markets where Amgen has a major presence. Their very first product back in the 1980's was erythropoietin which is used to treat anemia, a frequent side effect of kidney failure. More recently Amgen has been trying to build a market for the first PCKS9 inhibitor, Repatha, used to treat high cholesterol levels that do not respond to statin drugs. Since Repatha sells for about $14 thousand a year it is a high potential drug for Amgen. Given the increasing difficulty of getting salesmen through the office door to actually call on physicians, any convention that has a large number of potential prescribers for any drug in the portfolio is fair game. While the ADA meeting might be about diabetes, the exhibition floor is about moving drugs and the exhibitors are not limited to drugs that treat diabetes itself.
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Post by matt on May 14, 2017 15:02:01 GMT -5
I'm surprised an organization not affiliated with any of my brokerage firms or Mannkind can actually get shareholder information, including addresses, in order to mail stuff like this. Any transfer agent, and not just MNKD's transfer agent, can request the NOBO (Non-objecting beneficial owner) list upon payment of a small fee. This is a list of all shareholders that have shares in "street name" but who have not specifically tagged themselves as an objecting beneficial owner. By default, all street name accounts are NOBO and your brokerage has a special procedure that you must follow to become an OBO. The list contains shareholder information including name, mailing address, and number of shares held as of the date it was created, but the list does not include email addresses or telephone numbers. Aegis had to send a post card because mail is the only way they have to contact the shareholder, and they can't do anything if you don't reply to their solicitation. The only provision in the rules is that the information cannot be used for a purpose that violates the security laws, and if all they are doing is soliciting retail holders so that they can borrow shares for shorting, that is a permissible purpose. Given some of the borrowing rates quoted in the past week, there is lots of money to made by any broker able to lend shares.
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Post by matt on May 13, 2017 14:25:05 GMT -5
I'm in the logistics business. If the shipping quote was accurate you would not have seen it on a public web site. There are quoting tools that are used 24-7 by companies, logistic companies, freight forwarders that have no public access. The posting was a game played by some shill who was trying to manipulate the market. Even amateur shippers working for a company would not have posted that information. I don't doubt that a shipment is being planned but not on a freight forwarding brokerage web site. Drug transportation is specialized and the MannKind department handling the exporting of the Afrezza whether internal or external distribution would not have published it on that site. I call BS. BS. What he said. I used to supervise shipment of 20 tons of manufactured pharmaceuticals a week, and there were very specific requirements as to temperature control, transit time, logging of temperature and humidity in-transit, and so on. The storage conditions specified for the drug by the FDA have to be maintained the entire trip, and an air container or shipping can sitting in the hot sun on the airport tarmac or wharf go out of spec very rapidly. Containers without special handling can sit on the wharf for days or weeks while paperwork gets straightened out so nearly all high value pharma shipments move by air and even that has to be closely coordinated to insure that 100% of the total shipment arrives on a single aircraft or else the regulatory agencies will make you retest each batch/flight combination. That costs time, dollars, and warehouse space because quarantined product has to be stored physically separated from released product. As it is, most countries require retesting of every batch upon receipt even if the drug was tested in the US before shipping. However, to answer the original poster's question a sale is generally considered made when title to the goods and risk of loss has passed. If the purchaser of the goods is willing to accept the goods at the factory door, the sale is made the second the truck pulls away from the loading dock. In other cases it is when the goods go on the aircraft, when the aircraft lands, or when the goods are delivered to the purchasers place of business. It all depends on the terms agreed between the parties. In the medical industry title normally passes when the goods are delivered to the hospital, pharmacy, or other place designated by the purchaser. Generally, accounting follows the passage of title rule, however, if there are questions about the credit status of the purchaser, the sale may be delayed until the invoice is paid. When dealing with large, well-known wholesalers transfer of the goods is enough, but if the goods are shipped to an unknown small retail pharmacy, the auditors may defer the sale until they see some case. In the case of companies with more selling experience than Mannkind, credit defaults tend to fall into a pattern over time so a fixed amount is reserved from total sales to cover anticipated bad credit loss, say 1% a year. In the case of a foreign company, the sale will almost certainly be reserved until paid unless the contract is guaranteed by a letter of credit (LOC) from a well-known US bank. With an LOC in place, if the purchaser defaults then the bank will pay and either that bank or their foreign correspondent bank have to chase the other party for payment. If a strong US bank, like Citibank or Chase, has issued the LOC credit risk is essentially eliminated and the auditors will allow the transactions to be booked. It all depends on exactly what the paperwork says.
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Post by matt on May 11, 2017 10:36:00 GMT -5
Unless the company breaks it out for you, the shareholders only get to see net sales and not the detail that goes into it. As for how much cash is brought in sales for Q1 were $1,196 net of all the adjustments, and cost of sales was $2,548, or a negative $1,352. This usually happens due to poor overhead absorption (i.e. fixed manufacturing costs are allocated over too few units), and that situation turns around when unit volumes increase, but like sales adjustments we have to guess which costs are truly fixed (like building depreciation) and which vary with the number of units produced (like packaging materials).
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Post by matt on May 11, 2017 8:42:41 GMT -5
But that raises another question - doesn't MNKD take depreciation? Depreciation is a non-cash loss that should be added to income in the cash flow calculation Yes, MNKD takes depreciation and amortization. For the quarter it was $908 thousand and you are correct that this is a non-cash expense thus is a source of cash (in accounting terms). This accounting depreciation is much lower than the true economic depreciation because of the big write-down for accounting purposes in Q4 2015 (i.e. accounting was ahead of economics). Don't try to wrap your brain around cash by looking at the income statement, just go directly to the Statement of Cash Flow in the 10-Q. The net cash provided by operations was $8,507, of which $30,557 was a one-time event from the Sanofi settlement, leaving a net cash usage of $22,050. Divide by 3 months and you have your $7.4 million burn rate. So looking ahead, if the cash burn remains at that level the cash remaining at June 30 will be $48.0 less (3 X 7.4) = $25.8 million with a $10 million debt payment due on July 11. So that is $15.8 million plus the $30.1 Mann Group credit line heading into Q3. That will get the company through Q3 but not into Q4. The company doesn't have many authorized shares available to issue as of this date; there are 140 authorized, 101 issued and outstanding, and 17.2 million restricted for issuance against warrants and convertible securities. That leaves 21.8 million available to issue unless there is a special shareholders meeting to authorize more. I can easily see Deerfield doing another discounted debt for equity swap to settle the $10 million that is coming due in July, but that would exhaust most of the remaining shares. The only thing that troubles me is that Matt assumes that he can avoid dilution by raising $20 to $30 million of debt in Q3. Deerfield has a lien on substantially all of the assets as security for their senior notes, so Matt needs to raise $20 to $30 million of subordinated, unsecured, non-convertible debt with no warrants. The company already owes $284 million and is burning $22 million a quarter with no near-term turnaround in sight. I think raising debt under those circumstances will be almost impossible and that was the one thing in the conference call that stood out as being less than credible.
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Post by matt on May 10, 2017 15:59:21 GMT -5
For what it's worth, it appears that the monthly cash burn rate dropped from approx. $8M/month down to $5.4M. The cash burn from operations was slightly over $22 million, or $7.4 per month. The actual number was $8,507 positive, but that included a one-time $30,557 from Sanofi, so a net negative of $22,050.
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Post by matt on May 10, 2017 13:49:40 GMT -5
Once companies reach a certain size and are public, they must remain public. SEC would not permit a going private transaction with so many individual shareholders.
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Post by matt on May 10, 2017 7:25:10 GMT -5
Who is going to do the math and figure out how many scripts MNKD sold per its earnings reported 1st Q vs the amount of scripts reported by symthony.. That's always a tough one to try to figure with all the discounts and what not.. I took a whack at that one already. Q3 revenue from commercial sales was $573, and Symphony reported $2,215 although there might have been some residual Sanofi activity in there. Q4 revenue was $1,322 and Symphony reported $2,350 but it should have been exclusively Mannkind product. For Q1, Symphony has reported $2,322 so about the same as Q4. I would be surprised if the number was more than about 20% different (up or down) the Q4 figure. Note that my numbers are just commercial product sales and exclude other sources of revenue such as bulk insulin sales.
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