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Post by matt on Mar 4, 2017 14:43:11 GMT -5
Shorting doesn't bankrupt companies. Running out of money does This is the ultimate issue. We know what the gross sales of Afrezza are in the market, and we know how much the company spends per month to support those sales. Heading into Q4 there were only a few pots of money hiding out there, a Sanofi settlement and sale of the Valencia facility, and those have now been monetized. Anybody with a spreadsheet can calculate the month when the money finally runs out and anybody who knows anything about Deerfield Partners knows they are not bashful about seizing their collateral upon a default. It comes down to a long bet that MNKD can find enough fresh capital to support Launch 3.0 on terms that are not horribly dilutive, or make some deals that come with big up-front payments, or some combination of the two, before the money runs out sometime around July. The short thesis is that any capital raise will be so punitively expensive that it will drive the share price down another 30-40%, there will be no material deals, or that the company will have to file for bankruptcy just to obtain the automatic stay that will prevent Deerfield from foreclosing on the Danbury plant. You may hate the shorts as much as you love the product, but given the condition of the balance sheet and track record of management on deal making, their thesis is not crazy. July is only four months away.
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Post by matt on Mar 2, 2017 14:33:19 GMT -5
Oh, wasn't there talk on here about the possibility of the RS being approved just to get the 180 day extension? I am trying to understand how the delisting is going to be handled as well. This is what I have from threads. I understand the NASDAQ regulations pretty well, having had experience sparring with the listing qualifications group in the past. If they follow their own regulations to the letter, then MNKD will be out of compliance on March 13 and will be delisted. At the same time, the exchange only makes money when shares are traded so there is an incentive to keep actively traded stocks listed when possible. This is an unusual case where the company executed a reverse split sufficient to cure a listing defect four days too late. I have never seen that happen before. I can imagine three responses: 1. The exchange ignores the bright line rule that says 10 consecutive days prior to March 13, essentially conceding that what has happened is "close enough". No delisting notice issues. 2. The delisting notice is issued and the company appeals. The panel grants an exception but writes the company a nastygram pointing out that they had 180 days advance notice and thus there was no excuse for the late compliance. This is essentially a slap on the knuckles with teacher's ruler and being made to stand in the corner for being a bad boy, but when the tears dry up all goes back to normal. 3. The delisting notice is issued, the company appeals, and the panel does not grant an exception. The panel notes that the company had fair warning of the compliance deadlines, and that the company is deficient on multiple listing criteria so the stock will be delisted in the public interest. I doubt #1 happens as that would set a very bad precedent that the heretofore sacrosanct listing rules have suddenly become flexible guidelines. I think #2 is the most likely; MNKD rightfully deserves a slap on the knuckles, but delisting the stock is in nobody's interest. However, having dealt with the listing guys before I cannot rule out #3. A lot may depend on exactly which two lawyers they assign to the appeals panel. My rationale for choosing #2 as the most likely is that the brokerages (i.e. the market makers) actually own the exchange, the listing panel works for the exchange, and brokers can't make money from stocks they can't trade. There needs to be some rules, but not so many rules that the exchange does not make money.
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Post by matt on Mar 2, 2017 13:29:26 GMT -5
I know this has been mentioned before but just to confirm, even though the RS 1:5 was approved, doesn't mean it's 100% certain that it will happen correct? Still a possibility for 180 day extension? Cash infusion, etc.? It is 100% certain to happen, effective at the end of the day today. See this morning's 8-K for the details.
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Post by matt on Mar 2, 2017 10:55:06 GMT -5
FYI, the last figure I heard was there were about 750 naked shares that were shorted. I could be wrong, but I don't think the naked shares will have much of an impact one way or the other I agree with you, but assume for a moment that there is a huge naked short position. Would this event have an impact on those shorts? If the answer is yes then this is the acid test as to the naked short thesis. Naked shorts are created when a customer sells shares they don't own and haven't borrowed AND the broker does not chase the customer to close out the position when they have a fail to deliver. If the broker was not chasing the customer yesterday, they are not going to suddenly chase the customer tomorrow. The Depository Trust Corporation knows how many shares are owned in "street name" by each of the participating brokers and financial institutions, and each of those shares on the DTC ledger represents a legal, fully paid, authorized share of Mannkind. If the brokers do not enforce the fail to deliver rules, that is between them, their customers, and the SEC Enforcement Division. The brokers are ultimately liable to the other participants in the DTC to deliver any shares that cross between institutions so it is the broker's financial risk, but most will take that risk to keep a major client happy.
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Post by matt on Mar 2, 2017 10:41:03 GMT -5
I also noticed they are able to issue 10,000,000 preferred stocks - is this something new or were there 50,0000,000 preferred stocks before and they were reduced 1:5 too? It's not new. The preferred were not affected by the 1:5 r/s. They cannot issue them without breaching TASE regulations. I'm not sure why they keep them around. Any ideas anyone? There is no reason to not keep the preferred around; it doesn't cost anything. As a practical matter, it is up to the company to decide where its shares are traded and dropping TASE as an participating market is a decision that can be taken at the management or board level. On the other hand, adding or removing categories of securities from the corporate charter requires shareholder approval to amend the articles of incorporation. I think if a new investor came along that demanded preferred shares in exchange for making a significant cash investment in the company, that would outweigh the benefits of a continued market listing in Israel.
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Post by matt on Mar 1, 2017 16:21:26 GMT -5
This is like a soap opera. Now multiple people think management is stupid enough to risk delisting by delaying the meeting.... I gotta ask then why are you long Mnkd? You don't think Mnkd was already in constant contact with Nasdaq about this ordeal as was stated in the email correspondence? I don't think they would be deliberately that stupid, but management has been unacceptably sloppy with other legal and compliance issues so they might have gotten there just the same. I have managed multiple publicly traded companies, and I have had significant dealings with the NASDAQ listing qualifications group. They are mostly securities law lawyers and trying to get a straight answer out of them is sometimes akin to trying to nail Jell-O to the wall. I have found them to be less than 100% transparent, frequently arbitrary, and bordering on capricious at times. Largely it depends on which regulator you are dealing with; some are very helpful and some are anything but helpful. When a registrant has a clear path to continued listing and they don't take it in favor of one that puts the decision in the hands of the listing panel, that is reckless in my opinion. As has been noted, the company doesn't have the required shareholder equity to meet the initial listing standards for the NASDAQ Capital Market, but what hasn't been said is that they lack the required shareholder equity to meet the standard for any NASDAQ market. The deficiency is not minor, it is on the order of $200 million, and if the listing panel is looking for an objective reason to deny continued listing, they have one. Why give them the opportunity to even consider the matter when moving the voting date a few days earlier would have prevented the need, and cost, of a hearing. It will probably turn out fine, but it could have been definite.
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Post by matt on Mar 1, 2017 15:10:11 GMT -5
What good would that do? Even if MNKD executed the R/S today there are not 10 business days remaining between now and March 13. So either way, MNKD technically needs an extension. Even if MNKD does a reverse split today, it will be getting a delisting notice for the reason you stated. So long as the hearing is requested within seven days, the delisting is suspended pending the outcome of the hearing, and during that hearing process the company can pull the trigger on the reverse split (or commit to doing so). What is strange is if the reverse split had been authorized last week then the company would have had time to accumulate the ten consecutive business days with a bid above $1, instead they waited until it was impossible to do so. Now the decision of whether to stay listed is in the hands of two compliance lawyers at NASDAQ (they comprise the hearing panel) and that panel has the discretion to go either way. Why give them the chance to say no when you could have had the vote a week earlier and obtained a definite yes?
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Post by matt on Mar 1, 2017 12:04:05 GMT -5
If the stock reverse splits today, the company will have enough time to regain compliance before delisting. If that occurs there is no need to request an extension because the company will already be in compliance.
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Post by matt on Feb 24, 2017 12:55:42 GMT -5
There are two things working against rapid script increase:
1. Physicians are a conservative bunch. I once brought a new product to market and the physicians were positively clamoring for it. When it became available they each treated ONE patient and stopped. This was a product that did not show efficacy for about twelve weeks so they waited, and waited, and waited some more. When they saw that it worked on the first patient, they tried number two and waited some more. After both patients showed good results, they became regular customers because they had good experience treating their patients, but there was six months of almost no activity until that happened. A stellar clinical trial will get you the first patient or two, but those early patients had better have good results if you want the doctor to become an adopter.
2. Like I said, physicians are a conservative bunch. Normally they will try a new medication on a brand new patient or an old patient that is having compliance problems. Every physician knows that writing the script is easy, but getting the patients to actually take their medications properly is a struggle. If a diabetic is well-controlled and compliant with their medication regimen, there are not very many physicians that will volunteer to switch those patients without a very good reason, and company funded studies are not that good reason. If the physician sees better glucose control in those new patients and the old patients with compliance issues that they put on Afrezza, that might impress them enough to start swapping patients. That is not going to happen soon; I am thinking six to twelve months is more likely before scripts increase in a meaningful way.
I know that nobody wants to think in terms of another six to twelve month runway before things turn around, but that is reality in a highly competitive market.
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Post by matt on Feb 23, 2017 10:45:28 GMT -5
Seems like just about everyone, with the except of a few, on the consensus committee are associated with one of the insulin cartels involved in the alleged insulin price fixing. I am sure it is rather coincidence. 🙄 It's not a coincidence at all. If you are an endo doing research you will be getting grants from diabetes drug companies. That doesn't mean they are in anyones pocket, just that a pharma is funding a project. Exactly correct. I have funded lots of investigators that were working on projects of interest to my companies, but in my experience academics (especially) are in nobody's pocket. I have cringed more than once when an investigator that we had funded generously tactfully suggested to a room full of his colleagues that he would not use our product in particular circumstances. He was right of course, but it was not fun hearing him say it. I am not saying that some people cannot be bought off, but it doesn't happen for the amounts discussed here and in many cases, those funds are tracked and controlled by the hospital or university. Many of the checks are payable to the institution, not the physician directly. The physicians you have to worry about are not those who are disclosing. The ones you need to worry about are those who are getting envelopes full of cash via a quasi-related party (like an "independent" distributor) out in the parking lot after dark. Pay to play is alive and well, but not for those participating in highly public panel discussions.
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Post by matt on Feb 22, 2017 7:50:12 GMT -5
Page 13: What I don't understand is the language on the following page that applies to the right to acquire within 60 days of February 1, 2017 pursuant to the exercise of outstanding options that both the Mann entities and the management team has available. I assume it means nothing other than based on their contract they have rights to the outstanding options in the event of some right to exercise the options. That is exactly what it means. The SEC has very rigid reporting rules for insiders, such as 5% beneficial owners, officers and directors. Any contractual right to acquire more shares, even if the exercise price of the underlying option is way, way out of the money must be included.
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Post by matt on Feb 21, 2017 11:17:17 GMT -5
Every issued share is accounted for by the transfer agent, either as belonging to an individual entity (as in a certificate with your name on it) or as held through the Depository Trust Company (DTC). In turn, the DTC provides a weekly report of their holdings to the issuer (Mannkind) showing the number of shares held in street name by each of the participating brokers and financial institutions. The transfer agent knows exactly how many shares have been issued and to whom, and that number ties precisely to the issued and outstanding number that the auditors approve and which is shown on every SEC filing.
Short shares are created by the brokers who are members of the DTC when they lend out shares from their brokerage accounts. However, it is all a zero sum game as the DTC knows how many "real" shares are held in street name by Merrill-Lynch, Fidelity, Goldman Sachs, TD Ameritrade, and so on. If there are naked short shares those were created by the brokerage, and it is up to the brokerage to keep track and to force buy-ins when necessary. Neither DTC nor Mannkind have visibility to the internal accounting systems of the brokerage houses, and executing a reverse split will not change that. The SEC can always demand to see such records, but that doesn't happen very often.
So essentially the reverse split changes little with respect to institutional accounting for shares. Mannkind, the transfer agent, and the DTC will simply divide the share counts by the split ratio, a few shareholders will get some pennies to liquidate fractional shares rights, and life will go on.
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Post by matt on Feb 20, 2017 13:52:08 GMT -5
The company has both outstanding debt and a negative balance in shareholder equity so any cash is there to secure the interests of the creditors. The creditors would undoubtedly argue that any buyback is a fraudulent conveyance because it transfers cash to select shareholders and further increases the risk of financial loss to the creditors. Given the condition of the balance sheet, the creditors would have a slam dunk argument in the Chancery Court because as a matter of Delaware law the company meets the legal test for insolvency.
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Post by matt on Feb 19, 2017 11:04:14 GMT -5
• The name of the inhaled insulin, Afrezza, is not stated. A passive gesture was merely used in the two instances that mentioned 'inhaled insulin'. The author(s) clearly, and by clearly I actually mean deliberately, mentioned inhaled insulin as an afterthought that is easily overlooked/read-over. It is common for medical societies and scientific papers to refer to all drugs by their generic names. If you look at the package insert the description is "Afrezza ® (insulin human) Inhalation Powder". Inhaled insulin is a valid generic description. Don't expect that a position paper like this is going to mention a brand name specifically, regardless of the brand, unless the brand itself has become a generic term (Bayer, for example, lost the trademark on the word "aspirin"). It is not up to the endos to advertise Afrezza. As for payments to thought leaders, is that really surprising? Pharmaceutical companies always seek out physicians with good reputations and deep experience in a field to advise them on their drugs, and frankly that is a far better practice then using uninformed physicians. A lot of times those advisory sessions take an entire day, and there are 8-10 outside advisors involved in a committee, so that involves paying them for their lost work time plus travel expenses. A top consultant can charge $5-6K for a meeting, especially if travel and several hours of preparation time are included. That may sound like a lot, but it is on the low side of the market when compared with hourly billing rates for top consultants, auditors, lawyers, and other skilled professionals, some of whom bill $1,000 / hour. Given the number of advisors involves it is easy to drop $100K on a single meeting, and if the advisors meet quarterly, the price tag is $400K per year for the panel. Large companies with multiple therapeutic categories will have multiple advisory panels and those aggregate costs run into the millions. So long as a single physician is not making more than about $20-30K in consulting fees per year, plus reimbursement of expenses, from a particular firm that is not out of line. Research support is generally paid directly to the affiliated university or hospital system, just like it is for NIH grants or any other grant support, and that money is not paid onward to the physician; it supports R&D expenses and graduate student stipends. You may not like the fact that pharma pays so much into the research world, but if the pharma companies don't do it then a lot of useful science would never get done. Both the industry and the medical world would love a workable alternative, but so far that hasn't happened. It is unfair to call it corrupt unless you have a better, and more practical, solution.
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Post by matt on Feb 17, 2017 8:09:40 GMT -5
Or as plainly laid out previously; line by line, fund by fund, it's index funds. There can be a lot of self-directed IRA / 401(k) plans for which Vanguard is the financial intermediary but the clients make their own investment decisions. While those accounts get reported by Vanguard, that is hardly what most people consider institutional money. However, I think Derek is right; nothing moves numbers in a big way more than index fund trading and there are lots of index funds these days.
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