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Post by matt on Oct 31, 2016 16:51:31 GMT -5
I sincerely hope MNKD doesn't go bankrupt.. But, if they have to file bankruptcy, will it be 11 or 7? Correct me if I'm wrong. In chap 11, some (all?) of teh debt is forgiven, and they can come up with a reorg plan with financing. But, who will finance? Wont they lose both Danbury and Valencia? As it is, many Drs are saying incorrectly that MNKD is going out of business. If MNKD does go bankrupt, it would be fair to say that the chances of coming back are close to 0. Every thing will be on fire sale, and some pharma company (Chinese?) will buy them for pennies on dollar.
Chapter 7 is very easy. The company closes the doors, everything is auctioned off, and creditors are paid out of the auction fund according to their legal priority. Danbury will go to Deerfield Partners and Valencia will go to Sanofi under their respective UCC security agreements, and they become unsecured creditors for any deficiency (difference between the loan and value they get for the property). Creditors are paid pro rata according to their legal priorities; any remaining debt is discharged. The company dies.
Chapter 11 is way more complicated. The company continues to run, if it can, and the creditors battle it out in court. All cash in the company is collateral for creditor claims and cannot be spent without a court order. If the company spends money on salaries, that reduces the cash to pay creditors so the creditors have a right to object. The company will be in default to both Deerfield and Sanofi, and both the parties can make a motion to the court to take possession of their security for the purposes of auctioning it off, but the court would have to approve that motion. Valencia is no big deal, MNKD can rent a different office, but if Danbury goes the company is essentially out of business. So if Deerfield moves against their security the court will have to decide if MNKD has any chance of surviving long enough to file a reorg plan that the court can approve. The hurdle is that somebody has to put fresh cash into the company to keep it running during the time it takes for the reorganization plan to be created; salaries have to be paid, drugs have to be manufactured, and utilities have to be paid, and more money has to be available to exit bankruptcy.
<Crystal ball mode on> What will probably happen is that the court will order an auction of the assets that are not security for the debt. If some pharma company wants to buy Afrezza and/or TS, then they can cut a deal with Deerfield on the side, which suits Deerfield just fine because they really just want their money back and have no interest in owning Danbury. If nobody bids at auction, or the amount bid is very small, the court will authorize Deerfield and Sanofi to foreclose on their security. <Crystal ball mode off>
Chapter 11 is typically a consensual process where everybody tries to get as much as they can, but everybody knows going in that they are not going to recover 100%. The reorg plan might say that some pharma will put in $100 million for 80% of the assets, the creditors get 20%, and shareholders take nothing. Or the reorg plan could say the some pharma takes the intellectual property for $10 million and walks away, leaving the rest to be auctioned with the proceeds paid to creditors. Or the court could rule that there is not enough cash left to keep the company running while a reorg plan is finalized and the case is converted to Chapter 7 (see above). Or I can paint a hundred other scenarios so long as I am unencumbered by facts, all of them speculative.
The Mann Foundation is like anybody else. They can bid at auction (anybody reading this can bid too, just bring your checkbook) but will they? If they can buy the company cheaply and pay Deerfield just enough to go away (so they can keep Danbury) that might be in their interest, but then they (the foundation) would own the company 100%. I don't know what the trust indentures say, but do they really want to own the company and be responsible for turning it around, and can they legally deplete the fund assets for this purpose? I can't answer those questions; only the trustees can.
The court will likely not allow any shareholders not contributing "new money" to keep any share of the company unless the creditors are paid in full. The best economic result is for some pharma company to buy Afrezza and TS, let Deerfield and Sanofi take their security, and have somebody with a bit of cash bid for the rest of the company with the proceeds to pay off creditors according to their legal priority. Debt in excess of the available cash is discharged. However, that is a very complex transaction that would take $10-15 million up front to execute, but shareholders might recover something a year or two down the road depending how the deal is structured. Until then there would be no liquidity, and nothing to trade, but it wouldn't be a total wipe-out. However, somebody with cash might just buy it and keep it all for themselves, which they can do as well. Don't shoot the messenger, but in most scenarios the shareholders will get nothing. The company may die or it may live on, depending on the circumstances, but existing shares are typically cancelled.
No matter what happens, all of this will go down within about 100 days after filing. If somebody does have access to the necessary transaction financing, now is the time to get the ducks in a row because once the case starts the process will move very rapidly; the auction is typically conducted three weeks after the court orders it. Once the auction is over the assets are gone and there is no turning back. Bankruptcy auctions, except in very rare cases, are both final and non-appealable, and everything that happens from that point forward is a legal winding up of the company. Lawyers will argue over the scraps for a few months, but without the operating assets Mannkind as we know it will no longer exist. That is the likely reality, don't shoot the messenger.
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Post by matt on Oct 31, 2016 7:25:23 GMT -5
Thanks I try not to let any ones opinions influence my position but deep down when you read so much negativity on this board one cant help themselfs.. I'm sure some have been influenced into selling and if you dont think thats true your living in a dream world.. Thanks just venting here its been tough for all of us and very frustrating.. The original poster asked a question about what would happen to the family trusts if the company did BK, and I provided an answer to that question. I can agree that BK is not inevitable but the company is legally insolvent as a matter of Delaware law, and has been for some time, so the possibility of legal problems cannot, and should not, be ignored.
If you want to turn the discussion in a positive direction then discuss some plausible alternatives on how the company will raise the money it needs to stay funded. That is where the focus needs to be at the moment, and I am sure the company has obtained outside advice on how best to do that.
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Post by matt on Oct 31, 2016 7:17:32 GMT -5
Matt does and if so when must the trust alert the market of a sale of shares. Is the trust the same as any investor owning 5%. Is it possible the fund has sold shares? They must report and did. If you recall, I posted that the Mann Group had increased its holdings of MNKD shares. At the time I surmised that the trust manager had converted Al's stock awards that had vested, including restricted options and Options to Buy. Regardless, the point is that they filed the transaction with the SEC. If they had sold stock, they'd have filed again, IMO. mnholdem, I think you are correct on this one. Holders of 5% or more of a stock are presumed to be insiders and that triggers the obligation to file transaction reports. There are some exceptions to this reporting rule, for example large mutual funds might hold more than 5% but generally are not be considered an insider, but I don't think the family trusts can qualify for the relevant exceptions so they would have to report transactions until their ownership falls below 5%.
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Post by matt on Oct 31, 2016 7:04:15 GMT -5
The (IMO overblown) issue of capital loss tax credits some have mentioned before, do those vanish with a BK? The simple answer is no, a loss on a capital asset is the same regardless of what causes the loss.
On going private, the debt does not go away so that has to be dealt with. The threshold for causing involuntary bankruptcy is exceedingly low, it just takes three creditors that are collectively owed a specific amount ($10,000 indexed for inflation, I forget the current amount) so there is a need to take out the debt and the equity given that the company does not generate cash. Effectively, that is equivalent to a buyout under present circumstances.
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Post by matt on Oct 28, 2016 15:42:56 GMT -5
There is a way to save some of the economic value of MNKD with a cleverly structured but complicated transaction. Saving Afrezza at this point may not be feasible due to the low script numbers, regardless of who owns it. Sadly, there are therapies that work and help patients, but which cannot be manufactured and marketed at an economically feasible cost and Afrezza might be one of those.
If the company declares BK with a prepackaged deal, essentially a reorg plan that has been agreed by all the major creditors before they file, then those are fairly easy to get confirmed over the objections of some smaller creditors and all shareholders due to the cram down rules. In such a case the family shares would get whatever regular shareholders get, which might well be zero. If the family wanted to lead a complex transaction that salvaged economic value they could do very well, and what happens to the remaining shareholders depends on how benevolent they feel (the range is from very benevolent all the way to remaining shareholders get nothing at all).
Bankruptcies are the ultimate in game theory. There are numerous ways to play the game, there are multiple parties with different objectives, and a fair amount of pain to go around for all. The game determines who gets how much pain. That is not meant to sound flippant, it is simply the reality of how the process works. There are always some people who get kicked in the shins that don't deserved to be kicked, and others who come out with a decent result, and it usually hinges on having a bit of money in hand when everybody else has run out of cash. Small retail shareholders are generally disorganized, don't understand the process, don't have the money to control the process, and miss the very tight and inflexible bankruptcy court deadlines so they tend to suffer an outsized percentage of the pain.
Once in court there is no more discussion of extending runways, when a motion is made in bankruptcy court there is a period to object (usually two weeks) and that is it. At the end of the notice period the court rules, often in a matter of minutes, and that matter is settled. Unless the judge does something illegal, most rulings cannot be appealed. Shareholders tend to take a wait and see attitude and when the judge rules against them, they try to organize and get the decision overturned. 99.999% of the time that is a waste of time and energy; the ship has already sailed.
The Mann family and foundations can afford to play the game, if they want to, but there is no way of predicting whether they will sit this one out or not. Figure that Deerfield Partners will sell Danbury in an Article 9 sale and file a deficiency claim, and Sanofi will do the same with Valencia and file their deficiency claim. The rest is auctioned off and that is where the family can step in if they are in the mood. They need to spend some money to rescue the value ($10 million for starters), and even if successful there is a long and uncertain process ahead. Personally, I wouldn't bet on the family risking more than they have already.
The same comment goes for pretty much anybody; with new cash of $10 million the case is theirs to control.
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Post by matt on Oct 28, 2016 12:32:39 GMT -5
All correct, however no one expects them to do all these at once. I wish that were the case, but the issue is that too many people are expecting too many things to happen. Partly Matt shot himself in the foot by hyping the total RLS milestone payments and letting other discussions get out of hand. I agree completely that the #1 job is convincing more endos to write. That is also the #2 and #3 job, and there is no #4.
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Post by matt on Oct 28, 2016 11:30:55 GMT -5
We know the cash situation is not good, but we don't really know how bad it is. We have the June 10Q, but Sanofi was 100% in control back then and MNKD has been ramping up its sales efforts though the late summer and the coming 10Q will give the first glimpse of cash flow in the post-Sanofi era. Even then, Q3 was kind of mixed up and the first time we get a glimpse at a 100% clean MNKD quarter won't be until the 10K in March.
There are ways to conserve cash, but it is not possible to conserve cash and execute all the programs shareholders expect. Label changes require significant regulatory submissions and those aren't cheap, DTC advertising is not free, Publicis wants to get paid, R&D progress on Epi or the RLS deal costs money. Just be realistic; management is not going to be able to cut spending to conserve cash without sacrificing some projects shareholders want to see. Cut them a little slack.
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Cash
Oct 28, 2016 10:30:02 GMT -5
Post by matt on Oct 28, 2016 10:30:02 GMT -5
However, I have no idea what the financial arrangement is between sales and mnkd - do they get paid a salary or is it performance based compensation? Virtually all contract sale deals are a combination of salary plus bonus plus a fee for the third-party. Publicis will get paid for their efforts, regardless, and they will make sure that they can pay base salary and car allowances for their salesmen. Some sales people, no doubt, will be looking for other jobs but since contract pharma jobs are usually not very lucrative most contractors are just paying the bills until something better comes along; that is not peculiar to MNKD.
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Next CC
Oct 28, 2016 10:25:44 GMT -5
Post by matt on Oct 28, 2016 10:25:44 GMT -5
Matt, What will happen to the shares of a bankrupt company. If MannKind goes bankrupt how do I declare a total loss to offset any other capital gain? What happens depends a lot on what goes on in court; it ain't over till the fat lady sings. However, if the fat lady does sing most times the shares are simply cancelled on the effective date of the bankruptcy plan, sometimes the corporation lives on in name only until the final tax return is filed whereupon the trustee files the paperwork for an administrative dissolution of the corporation. There are too many options to list.
If you have a loss you want to realize for tax purposes you can always sell your shares. Even if a stock is no longer trading (and plenty of BK companies have stock that still trades) most brokers will execute a commission-free courtesy buy of all your shares for a penny so that you have a reportable transaction.
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Post by matt on Oct 28, 2016 9:20:32 GMT -5
Well that is election day, so perhaps not the 8th? Yes, the 8th is election day but it is also the due date for the third quarter 10Q, which is set as 40 days after quarter end. It just happens to coincide with the election this year. Management really can't have a conference call until the auditors sign off on the numbers, and given the increasing risk of insolvency, the auditors are going to be checking that the i's have been dotted and the t's crossed more than usual. Don't expect anything to be early.
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Post by matt on Oct 27, 2016 8:45:45 GMT -5
It's collateralizing (is that even a word?) a revenue stream. Right now the revenue stream is so weak you would not get much. The market loves potential and hates news so Mannkind has a problem because it's revenue and sales figures are out there so the value is known. If you are a new company then they will value against potential. Plus there is the whole security for loan problem. I thought one of the Deerfield loans was sort of made on this basis - we pay milestones when certain sales targets are hit. ^^^ What he said. There are lots of investment vehicles out there which are essentially royalty trusts, investing money for a cut of the sales. When the sales are highly speculative or non-existent, the expectation of those investors is that the royalties will not be interesting either so they will decline to invest.
Before I was a general management guy, I did complex corporate tax/legal planning, and then I was a merger/acquisitions/divestiture guy so I have seen and participated in a lot of different transaction structures; the best transaction planners are higher creative individuals because they have to be. I can think of only a few ways to profitably salvage the assets owned by MNKD, but all but one of those would wipe out the current shareholders.
When Sanofi hit the dump button on Afrezza, the strategy was pretty much locked in stone; MNKD had to find a way to market Afrezza on their own until it can get enough traction to partner again or be acquired. It has always been a race against time given the limited capital resources on the balance sheet and management does not have the luxury of trying something different at this point. Matt & Mike took on the challenge and have been doing the best they can, but unless they can secure more financing VERY soon this will end badly, but honestly their list of viable financing options is shortens by the day. There are ways to pull a lot of value out of MNKD, but none that can help the retail longs unless one of you has a friend with the money to organize the legal machinations (find a friend with $10-15 million in liquid cash).
Most disturbing is the Matt is presenting at investment conferences organized by the likes of Rodman & Renshaw. Rodman is a known bottom feeder and when R&R comes knocking then you have fallen off the radar of any decent investment bank and your company can no longer do attractive deals at market rates. The last best hope is a strategic partner, one that is not obvious, will see MNKD as a worthwhile addition to their portfolio and cut a sweet deal, but such deals are a lot harder to find than they were 15-20 years ago.
I for one cannot fault Matt or Mike; they are playing the hand they were dealt.
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Post by matt on Oct 26, 2016 11:22:40 GMT -5
I'm not sure. There is also the downstream problem that once it is approved you have to get it adopted by each of the national health systems or you have a drug that can be sold but no customer. For anything like a filing with EU for a new drug approval, it is far more than paying the filing fee and submit the application, I would imagine you will need a team of dedicated people to prepare the filing to the best you can and coordinate with the approval authority (EU central and then on a national level, as necessary) on many issues. Yes, and no. A filing with the EU is not dissimilar to an FDA filing, but since the major drug authorities around the world have gone to the use of CTD (Common Technical Documents) the vast majority of the data that EMA will look at has already been prepared for FDA in the same format. There is some supplemental information required, but it is not too bad. Still, it is a committee driven process and it takes some people management to get it done.
Where you are wrong is that a decision by EMA is binding on all countries and there are no national drug approvals required in addition to EMA. There are reimbursement decisions take on a national or regional level and the generosity of funding varies dramatically from one part of Europe to the other. Germany, Austria, Netherlands, and the Nordic countries are well funded, most of the Southern / Mediterranean countries are very poorly funded, and the rest (UK, France) are somewhere in the middle. In some countries it is the state or provincial government that provides most of the healthcare funding so you can't even generalize within some countries. In Spain, for example, the local government in Madrid has historically has paid drug bills in 180 days while some of the outlying provinces can take up to 500 days to pay. Germans regularly pay their drug bills in 20 days. Europe remains a place on the map and not a unified system of government.
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Post by matt on Oct 26, 2016 8:33:20 GMT -5
It's irrelevant. This will all be over one way or the other long before we reach the delisting deadline. On my list of things to worry about delisting doesn't even make the cut. I agree that they are more pressing matters, but without a guarantee of continued listing obtaining financing on favorable terms will be much more difficult. Investors look at price vs potential for appreciation, but they also at liquidity and NASDAQ provides much more liquidity than the OTC. Since the minimum time to execute a reverse split is 21 days, and most companies take longer, if MNKD is going to reverse split they should get on with it. A reverse split will hurt the share price and will not cure the root problems facing the company, but compliance with listing standards potentially allows for a financing to extend the runway. No easy choices here.
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Post by matt on Oct 24, 2016 16:41:23 GMT -5
I am just looking for some updated numbers. I was a finance guy before I got into general management and a lot of the questions I have will be answered by an updated balance sheet and cash flow statement. We will finally know if MNKD has a 16,000 foot jumbo jet runway or an 800 footer like Saba ( Video). I did Saba once, but once was enough.
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Post by matt on Oct 23, 2016 15:13:15 GMT -5
Why not hire nurse practitioner to prescribe afrezza at events like jdrf walk? Is that even legal? While it depends on the circumstances, the answer is generally no. A prescribing physician or nurse cannot have an economic incentive to prescribe a particular drug or medical device over others, nor can they have an economic incentive to prescribe more than is general accepted as a normal dose.
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