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MannKind Corp. Message Board

  • harshal1981 Aug 23, 2013 3:11 PM Flag

    Don't expect any mercy until Sep 6.

    The big proof of long term bright future of MNKD lies in one near term catalyst. Deerfield exercising to covert their Secured Note in to Stock which is obviously unsecured. Meaning, lets say deerfield decides to convert maximum allowable amount $40million in to stock (assuming price won't go below 3.37).

    That will show that they are so confident on the future of the stock that instead of keeping their secured note which is insured against bankruptcy by collateral of all MNKD assets, IP and rights to recover over Mann Group (very important condition). That means in order to make maximum money, they have chosen to take calculated risk of leaving the protection of their money and covert $40 million worth of their secured notes in to unsecured stock. If they being the second in line to MNKD insiders decided to loose protection on their $40million investment, market will know where the money is.

    Now the painful part of it is, Deerfield has lot to gain if price falls as low as possible. I highly doubt that it will fall below 3.37 to get maximum $12 million shares. So if it is between 3.37 and 6.67, it is in their interest to have the price as low as possible so that they get maximum shares for same amount. i.e. if price is at 6, they will get just 6.66 million shares for converting $40 million worth of notes. But if price is at $4, they will get 10 million shares for coveting same $40 million worth of notes.

    So until Sep 6, this stock may continue painful journey in red. After that milestone, I do not see any reason why it will not start building up in anticipation of NDA filing, Partnership announcement etc.

    If, If they do not have partner by December this year, we all have to unfortunately be prepared for blood bath for another four months until FDA approves the product. I have no doubt that FDA will approve it. But management needs to do manage some careful steps in order to set the company for success.

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    • I went through the agreement and I could not find if there was a deadline for converting into common stock. I see where the conversion commencement date equals the eleventh full trading day following the public release by the Company of Phase III Data for the product. So the conversion commencement date would be August 29. So my understanidng is the earliest they could convert to common stock would be 20 trading days subsequent to August 29 which is much later than September 6.

      Correct me if I am mistaken.

      Sentiment: Strong Buy

    • Seems like it's back dating stock options in a they play the game.. Question? Does the conversion event take Place on the 6th or any time after.

      Sentiment: Buy

    • I've been wondering if Deerfield is in fact the primary seller here. It hedges the risk of their loan (if company goes belly up for any reason, they make enough money on the short to cover the loan loss), but assuming everything is okay, they drive down the price then cover with the conversion at the much more advantageous price.

      I haven't looked at the terms of their lending agreement, but it would be rational behavior, wouldn't it?

      Sentiment: Buy

      • 2 Replies to mannfan
      • i believe Deerfield used similar tactics were used with ARNA last year

      • That makes mathematical sense. Short with abandon, driving down the 20 day VWAP, wait for the pop to go past the 20 day window and then convert & cover.

        I just looked through the agreement - it has no covenant, positive or negative, to prevent Deerfield from shorting and then covering with converted shares.

        However, mathematically, you want to pay the 20 day VWAP on a rising stock, not a falling stock, and converting at the current VWAP would certainly blunt returns. However - if the share price stabilizes, the higher share prices from early and mid August would eventually roll off.

        It's also kind of risky to mess around with the share price of a company you're lending to - kind of like playing with fire.

    • I just am surprised MNKD structured the deal this way that would essentially screw alot of investors into selling their shares. Maybe they dont care short term and look at the bigger picture, but still it seems a bit corrupt if they are looking the other way at Deerfield having any involvement in the manipulation of the price.

      I would be curious to see if Al and company responds at all next week. They still should be providing complete results. Overall though I dont expect any partnership news until after Deerfield converts. Then I would think very shortly after we hear about a partner.

      To me, it makes sense to be partnered with a Big Pharma when filing the NDA because of how the FDA works with its FDA fees that the big drug companies pay. They basically fund the FDA, so its very political, and would enhance their chances of approval rather than going it alone. There is so much at stake with this go-around with the FDA, they should be doing everything they can to ensure approval.

      • 1 Reply to mrbillyrayvalentine
      • harshal1981 Aug 23, 2013 3:54 PM Flag

        I do not believe in conspiracy theories but having spent so much time in corporate america and pharma world in general, I believe two things : 1) Big players can and do control the wall-street way beyond the imagination of normal citizen of the country. 2) High stake deals such as Deerfield/MannKind, lot of things happens behind the closed doors. I am not accusing management of any wrong doing here but do believe that they may have knowingly given in since the beginning to benefit Deerfiled for lending money when they needed the most. The deal was expensive and they were arm twisted by Deerfield. However they accepted Deerfield money in order to avoid even bigger arm twisting from big pharma when they are on negotiation table. MNKD didn't want to go on negotiation table with the fact that they are in dire need of cash come december.

        At least this time consolation is that Al is much more less arrogant (or rigid) compared to last NDA filing and more open to practicality. Last time he might have thought, Oh Afrezza is Super Mega Blockbuster and hence, I will partner only after FDA approval to get maximum money. Yes, If I am optimistic businessman, I would do the same. As I mentioned in my previous posts, Looking at the data, Afrezza will be blockbuster but certainly not Super Mega Blockbuster with $10-15 billion sales in near future. Hence, He must be now open to partnership with future take over rights or outright sale to free up his investment and move on to next thing that he has planned for his life (one more venture or philanthropy what ever it is).

        So last time they might have said that we are in talks with potential partners but looking at Al's attitude last time, they may very well be bluffing or not negotiating with practical aspect. But this time, I am sure, they know the ground reality better than never before. Al is getting old and when you are in 80s, 1 year makes you old with exponential speed! He is wise and more practical this time around!.

    • harshal1981 Aug 23, 2013 3:29 PM Flag

      And I would request investors to start buying the moment they hear Deerfield has converted.

      • 3 Replies to harshal1981
      • I expect that Deerfield will wait until VWAP will be at a discount to market price, will convert and sell immediately. We'll get a signal to buy after the selling pressure abates.

        The VWAP would have to be low enough to make up for forgoing 24% interest on the principle. (9.5 % with principle decreasing by 25% per year) less a coupon rate. If I saw the 20 day VWAP drop below 80% of the share price, I would take that as a signal to (1) buy some puts to protect my shares (2) raise some cash and wait for the sell. (3) on Deerfield's sale and the resultant price pressure, take profits from the puts and buy shares at the now lower price.

      • harshall - If Deerfield is shorting the stock price to buy at a lower price, would Deerfield have to disclose this at some point in the future? If so, only time will tell if you are correct.

      • Agree ... that is a critical point.

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