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Post by matt on Feb 15, 2016 15:59:45 GMT -5
Spirometers have been around nearly forever, which means that this device should qualify for a 510(k) registration as a Class II medical device. While the FDA will likely ask a lot of questions, they can probably get this approved without trials.
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Post by matt on Feb 15, 2016 13:12:31 GMT -5
EU approvals are cut and dried. The file goes to the European Medicines Agency who then has 210 days to act on the file unless there is a "clock stop". A clock stop happens if there are technical questions that cannot be answered quickly, and in theory a clock stop can go on forever, but most are relatively brief. If EMA recommends approval, the recommendation goes to the EU Parliament for final action, a process that takes 60 days. So a normal EU approval process is 210+60 = 270 days which is the same as for FDA.
What you don't see is the back and forth between two rapporteurs, who are country representatives on the Committee for Human Medicinal Products and the sponsor. The rapporteurs go around and get informal advice and guidance from the EMA, solicit opinions from other committee members, and so on as a way to identify speed bumps. Many times the sponsor will work to address any open issues identified informally BEFORE the file is submitted (FDA is also good about giving helpful advice to those that want to listen).
What we can't know is whether Sanofi began the informal consultation with the rapporteurs and, if they did, what feedback they got. Sanofi certainly had enough time to get a non-controversial product through the process so there may have been some unaddressed concerns.
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Post by matt on Feb 15, 2016 11:19:47 GMT -5
The poll is missing one more option; that no consensual deal is possible. Delaware law requires that 90% of shares be owned or tendered in order to consummate a transaction with objecting minority (<10%) shareholders.
Potential buyers will pay a premium over current market price, but few deals go off with more than a 35% premium. Under the current circumstances I doubt there are any buyers at $2 a share, and even if there was, there may be enough minority shareholders to block the deal because they want more than $2. Legally, there is no way around a large minority block and I suspect that is what would happen in this case.
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Post by matt on Feb 14, 2016 10:09:05 GMT -5
The next question, would regional partners have been a better choice? Perhaps, as this would have allowed Mnkd to shift gears on marketing. I just don't think the same kind of lessons would have been learned nor would have the same amount of funding been given to Mnkd up front. Regional partnerships have largely gone the way of the dodo bird. The cost and regulatory intensity required to launch a product successfully have all but eliminated regional pharma companies, most of whom got swallowed up and consolidated into the larger ones. Even in huge markets, like Germany, they are down to just one big pharma in the guise of Bayer, but how many remember Schering, Ciba Geigy, Hoescht, Adventis, Hoffman-LaRoche, Nyomed, and several others. The ones that are left are mostly family firms now in the 3rd or 4th generation of management, especially in Italy, Germany, and Spain, and the majority of those do not have the marketing muscle needed for a drug like Afrezza. The real problem is that most of the big firms want a global deal or no deal at all. Even Japan, which used to be an exception, we have seen a winnowing of Japanese only pharmaceuticals as the keiretsu have had to focus on fewer industries.
And those big upfront payments we sometimes see are for global exclusivity on a novel and interesting drug, not for anything else. If you think the same amount of funding would not have been forthcoming without the likes of Sanofi, you are correct. The only thing Afrezza could have done would be to tie termination provision in the contract to a change in control at Sanofi but given the relative strengths of the companies I am not sure MNKD could have bullied SNY into signing such an agreement.
I agree that cash runway is the big risk. The financial markets are tough at the moment and MNKD has the kind of profile everyone loves to hate at the moment. Money is almost always available to a NASDAQ listed stock, but the terms are going to be brutal and will hurt . . . a lot. However, a punitive financing is still better than the alternative and I hope Matt proceeds to rip of the Band-Aid quickly; it will hurt less if he does it sooner rather than later.
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Post by matt on Feb 12, 2016 16:46:07 GMT -5
We all know the cash position is tight, so the number one risk to the overall scenario is that the handover of Afrezza costs way more than what Matt and friends expect, resulting in a faster drain on the cash that is left. There is a chance to keep this ship afloat, but it will take some time to figure out and without cash there is not time.
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Post by matt on Feb 12, 2016 10:21:10 GMT -5
Another factor to consider is that many of these funds are not actively managed but still have a reporting obligation. If you have 25 million people with self-directed IRAs or 401(k) plans that direct the plan manager to invest 10% of their retirement in MNKD, the fund is obligated to do so. Similarly, if the employees direct that a percentage of their plan be invested in certain stock indicies, and MNKD is part of such an index, then the fund manager will be obligated to do that as well.
It does not mean that professional money managers have looked at a company, decided it is a good investment, and allocated part of their proprietary funds to that investment. For huge and complex fund families, like Fidelity, it can be a combination of index matching, proprietary funds, and self-directed retirement securities, all of which shows up as "FMR" in securities filings.
All institutional money is not "smart money". It is worth learning who the actively managed healthcare investors are and tracking what they are doing; just looking at the top ten institutional holdings on Yahoo will usually get you a bunch of index funds that are just trying to match an allocation formula. If you see VCs staying in their investment after the IPO or you see the big healthcare funds loading up, that is a good sign (and vice versa).
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Post by matt on Feb 12, 2016 8:37:41 GMT -5
Going concern statements are required at the date of the annual audit opinion if the company does not have adequate cash to continue for another operating cycle (that is auditor talk for one year) unless additional sources of financial are reasonably assured. To reach the "reasonably assured" threshold, the amount and source of the funds need to be virtually guaranteed so that is not MNKD's situation. Going concern opinions have gotten fairly common, especially in biotech, so they don't sting quite as badly as before but they still sting a bit and MNKD is guaranteed to get one unless something dramatic happens in the next few weeks.
Maybe the poll doesn't ask the right question. If the question is how long can MNKD "survive" with no qualifications, the answer is several years. If the question is how long can MNKD survive while remaining a public company listed on NASDAQ, taking over the marketing of Afrezza, seeking out TS development deals, and doing all the other things it wants to do, the answer is more like 6-9 months. The survival time line is very much a factor of what you expect MNKD to look like a year from now.
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Post by matt on Feb 12, 2016 8:24:51 GMT -5
Give the guy a break, at 92 he is entitled to some retirement where his main focus is getting a little white ball in the hole. If you are more than a titular director, it can be a lot of work at any company which is why most countries in Europe put hard age limits on initial or re-election to public company boards when the director has attained age 70.
That doesn't mean he can't still advise MNKD or EYE, but on a less formal basis.
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Post by matt on Feb 11, 2016 9:11:58 GMT -5
The FDA grants a period of exclusivity separate from patent law. Since it often takes so long to get through the FDA process, some companies are up against patent deadlines by the time their medication hits the market so this provision gives an innovator at least some protection. Because it is the FDA, this exclusivity period has no effect elsewhere. To understand what a competitor must do to market a generic, you have to research each of the patents listed as these may, or may not, be used in the manufacture of Afrezza.
If the patent on the composition of matter for a small molecule has expired, but patents on method of manufacture have not, a competitor could figure out a different production method to synthesize the same molecule. Generic drug companies excel at this and could figure out a way to get to a powered recombinant human insulin, although it would be a bit more tricky than a typical small molecule drug. In the case of Afrezza, they would also need to have their own inhaler device, dosing canisters, and so on that did not infringe on any unexpired patents.
However, that last part is a purely commercial issue and not one for the FDA; once the period stated in the Orange Book expires then FDA will grant the generic a marketing license. If there are other patent issues that is a matter for the District Court to decide. The purpose of the Orange Book is to communicate the first date at which a generic for a particular drug will be considered for FDA registration, nothing more.
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Post by matt on Feb 8, 2016 8:54:14 GMT -5
There are plenty of ways to stretch out the remaining cash to last longer than six months, but the problem will come when the company pops the Deerfield debt covenant on having $25 million in cash at the end of every quarter. Once that happens there is probably no going back so that event has to be avoided at all costs. If the company can run on its available cash (minus the $25 million Deerfield reserve) then it can run until March next year.
I wouldn't count on Sanofi paying anything. They worded the contract terms very carefully, phrases and legal terms of art that normal people might not notice but no competent deal lawyer would fail to notice, that pretty much gave Sanofi carte blanche to do what they did. The contract was entered into by experienced businessmen running public companies that were well-advised by their legal teams. My calculations suggest that Sanofi spent at least $400 million on Afrezza and to convince a judge that this was not "commercially reasonable" (one of those legal terms of art) will be difficult to impossible.
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Post by matt on Feb 7, 2016 10:42:52 GMT -5
I am not sure why bankruptcy is continuing to be mentioned on this board. Mannkind's potential upcoming problem would be one of operating cash first - not creditors attacking their assets who need to be stayed by the court. The issue is with some of the secured debt. The assets that secure the debt are not protected in bankruptcy and the secured party has the right to move against the collateral whether the company is BK or not. This is similar to an individual; it doesn't matter if you are personally bankrupt or not; the bank can still foreclose on your mortgage and take your house. A bankruptcy can stay that for a few weeks, but the bank will almost always win. In MNKD's case, Deerfield has rights to the production facility and enough IP to keep making Afrezza, and they have a security interest in the last $25 million of cash. Deerfield plays hardball and that could be enough to end MNKD as you know it.
As for Al, it is hard to say what will happen. On the one hand he might look at the situation and conclude that he is throwing good money after bad and shut off the taps. That is what a rational businessman would do if he though the situation hopeless. In the alternative, he might decide that letting the company go BK is the best thing and he can then step in and buy up the assets at the BK auction for less money then he would have to inject to save MNKD. The better question to ask is what motivation he has to keep MNKD running as is. He can always give shares to his friends and family if he starts a new company with the assets, so why should he bail out all the retail common? If he does that then he is a REALLY nice guy.
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Post by matt on Feb 6, 2016 9:45:37 GMT -5
Biotech is not for the faint of heart. The problem, in most cases, is that the people looking at a technology don't understand enough about the science, and the implications of the science, to make an intelligent investment decision. When new technology arrives that is truly breakthrough technology, instead of just claimed breakthroughs, the big pharmas will throw BILLIONS at it immediately.
Anavex is a good case in point. They claim to have a new Alzheimer's drug but the balance sheet is a joke. To get a new metabolic drug to market if absolutely everything goes right the first time is on the order of $400 million, and nothing ever goes right the first time, which is why big pharma has an advantage in bringing drugs to market. However, Anavex is not working on a metabolic drug, they are working on a neurological drug that is likely to be orders of magnitude more expensive to get through the trial process. As of the last 10-Q they had just $15 million.
There is a reason people are throwing the BS flag on this company. If they really had something credible they would be in a lucrative partnership already. I have been in the industry since the late 1970's and I have never once seen a single promising new drug or device get sandbagged. Pharma executives are not as evil as Hollywood makes them out to be. We have children and spouses and parents and grandparents who get disease and die just like you do. Even if the evil executives were that evil, you can make more money for yourself by launching a truly new technology than you can by sitting on it.
I have done due diligence on lots of potential deals, and the warts only became evident after spending a month of more of investigating the opportunity. I normally worked with a diligence team that included regulatory, scientific, clinical, legal, finance, and marketing talent. We looked at everything. We paid to convene private focus groups of practicing physicians (many of them experts in their field) to get their opinions on the potential product and ask a lot of questions about what it would take to get them to prescribe. A lot of times we heard "yeah, that looks good but save your investment capital because here are all the problems with that approach . . ." When that happened we usually sold the patents to a willing buyer who then formed a small biotech company to develop the idea further while we moved onto the next thing.
Even with decades of experience in the industry and years of doing due diligence, I got surprised by the due diligence team more often than not. It was often some esoteric little point that I could not possibly have known about, but somebody on the team caught it and stopped the deal because it was a failure waiting to happen. If I could not spot all the pitfalls despite years of deal making, what is the chance of a retail investor truly understanding a biotech. There are many 10-15 biotechs in the entire world that I understand completely (maybe even half that amount), and for most of those I have run them myself or run one of their competitors in the past so I know where all the warts and soft spots are.
It is not so much that the game is rigged against retail investors, it is that you are playing a different game than the financial funds. Anavex smells like scam (this my personal opinion from someone who has done zero due diligence on that particular company) so the predatory funds will crush them and the retail investors who have invested. Afrezza was a clever idea, but I suspect that the focus groups turned thumbs down on an inhaled version of a hormone and that was validated by the slow sales after launch. If there was really pent up demand for inhaled insulin, Sanofi could have done zero marketing and still made a go of it. In pharma, if the idea is really good then there is a 99% chance that leading healthcare VCs hold a controlling interest, but if the drug is already in retail hands via a public company then it probably won't be a blockbuster. Afrezza is not too early to be gobbled up, it is too late.
Look for companies where a group of healthcare VCs (not just any funds, known healthcare funds) have provided the cash to get through Phase II and well into Phase III, and where those same funds and insiders hold maybe 40% of the stock (Al Mann is an individual and does not count as a VC). The big healthcare funds perform due diligence on opportunities that is nearly as brutal as corporate buyers. If the healthcare VCs have already exited their position in a public company, then take the hint and stay away. If the VCs are still hanging in there, they are expecting a bigger payday. Learn which funds are fundamental investors that pick and choose investments versus index funds that have to own the stock just because it is 0.005% of the NASDAQ index (ask the folks at TASE how buying the biotech index worked out). A lot of institutional money is passively invested (i.e. stupid money), and you need to follow the smart money not just any random institution.
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Post by matt on Feb 5, 2016 11:56:57 GMT -5
That is a nice summary of how the real world works. Ultimately it comes down to what the eventual payor has to shell out to the insurance company, and insurance is looking for a price break wherever they can get it whether it is from the PBM or the local hospital. Obviously the larger the rebates the more the PBMs and insurance companies like it.
The only comment I will make is that while some superior drugs will eventually lower long-term costs, insurance contracts run year to year. The only payors that look at the effects on long-term healthcare economics are those which are truly self-insured and have the expertise to make appropriate decisions. There are only a handful of those remaining.
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Post by matt on Feb 5, 2016 7:46:01 GMT -5
Price was not Provenge's problem, nor was there a lack of market. It was complicated to use and was only on the market a short time before J&J introduced a pill that worked about as well, and a second pill entered about a year after that, both priced about where Provenge was priced (cancer drugs cost a boatload).
I think what Hawaiiguy is alluding to, which I agree with, is that MNKD has come down to a binary opportunity. There is no middle ground where MNKD does kind of OK; either it recovers based on the Afrezza product and the technologies in its portfolio, or else it goes BK. The thing to keep in mind is that there are financial portfolio management strategies that let you make money either way, albeit not as much as a purely naked position betting on the correct outcome. Go ahead and take your favorite bet, whether up or down, but then buy some options to protect your downside so that if you guess wrong, you lose a lot less. Yes, there is a cost to the option if you don't use it but it is less than the cost of having 100% of your bet wiped out by an incorrect guess. Remember the market doesn't compensate you for taking financial risks that you could have hedged.
Several people have asked me if I am long or short. I am neither. I think the smart way to play this is to take an option straddle (depending on the price of the securities) around announcement dates. If the price moves in response to an unexpected announcement, whether good or bad, you make money on the position. The losing trade is if the price does not move at all in which case both the options expire worthless, but with a stock this volatile that is unlikely to happen with any form of unexpected news.
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Post by matt on Feb 5, 2016 7:31:24 GMT -5
Corporate officers and directors have a blackout period at the end of any quarter that extends until the financials for that period are published. This automatically means that insiders cannot buy six months out of the year (at a minimum) due to three periods of 40 days while the 10-Qs are in preparation, and 60 days while the 10-K is in preparation. In addition, if there is any other material event that has occurred or is about to occur of which the officer has knowledge, and in a small company that is pretty much all officers for all material events, that creates another blackout period until an 8-K is filed. Likewise, trading is restricted when there is a pending registration statement at the SEC that has yet to go effective.
Selling has the same restrictions unless the sale is made under a 10b-5 plan. Given that a company with a lot of activity can wind up with rolling blackout dates, it is not unusual to sell almost all officers dumping shares within one of the few narrow windows available. The officers are not to blame, the purchase and sale patters are driven by the SEC requirements.
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