Deerfield and Mannkind substantially revised the agreement prior to the ADCOM, allowing Deerfield to convert the majority of the Debt already outstanding and to provide for an additional, non convertible, loan up to 90 milllion. Deerfield allowed them to take down 20 in June but the rest was dependant upon FDA approval, which of course they received. Go pull the SEC filings...it is all in black and white.
90 million from Deerfield, non convertible and non dilutive
40 million from Deerfield, based on FDA approval, non convertible and non dilutive
30 million from the Mann Group, could be convertible but unlikely
50 million equity ATM transaction, dilutive but likely modeled in by most analysts
Assume they are burning 30-35 million per quarter...they had 36 million at Q1 end and are a week into Q2.
They will have capacity at launch to handle a few hundred thousand people....how quickly they get lines up and running and the take up rate will determine whether this is a 10 or 20 dollar stock.
At two thirds of full capacity on the Danbury plant, they should be able to service 600K patients yearly, which should justify a 25 dollar stock based on a total royalty north of 40%. Hard to say what the total royalty rate will be at this point given the manufacturing transfer payment/royalty.
Good boy, now add the 50mil from an ATM equity offering which they don't have to annonce in real time. Also, they changed the Deerfield agreement to provide up to another 90 million, on top of the 40 at approval, of which 20 was drawn down. Therefore you can add 70 plus 50 to your number and they get closer to 180 million. Yeah, they will likely keep AL's LOC in reserve, the point is they have plenty of cash available unless it takes them six months to sign a deal. Also, their interest expense is much lower in Q2, as Deerfield converted, therefore, the 30 million estimate... but again, you haven't been able to calculate interest since what 2011.
Once again we hear from the math challenged. The drew down 20 of 90 million in straight debt in May likely to keep the 25 million number to the good...and obviously Deerfield is working with them on this...that means Deerfield is happy....and why not they have become the banker to the first new insulin product in nearly 20 years. Mannkind could take down the 70 of 90 million remaining at any time as per the CFO. Mannkind also has another 40 million coming from Deerfield based on approval, over and above the 90 million. That is a total of 130 million of straight debt, no dilution. Mannkind coud raise another 50 million via the equity ATM at any time if they haven't already done so. They had 36 million at the end of last Quarter and are burning less than 35 million per quarter. By my calculations they could sit on their hands for a year and not need capital.
By the way, the conversion price for the 100 Million of convertible debt is less than the current stock price....any deal and that debt is history, either via conversion or Mannkind buying it back. Don't kid yourself thinking Merrill Lynch has not already hedged this...
Shareholders that have been shaken out are unfortunate, But Al has played this perfectly, from his own personal standpoint. With stagflation in the winds and trillions of dollars being created and loaned around the world at under 2 percent, this will be a hot commodity for growth starved Pharmas. Notice nobody is talking about the tax loss carry forward....
Not 36 million. They have likely spend 30 million in the last Quarter, and that would still leave them access to 165 million in cash without any dilution or doing anything that has not already been announced. Al could finance commercial production and marketing himself if he wished, he has made a billion on paper in the past Quarter alone. A 350 million update to the line of credit based on production is not a big deal for him now. He is not doing this because he needs to spread the wealth so the product doesn't get Zohydroed.
They know the company was going to raise capital under the ATM like every other institution on the street...
Best move this management has made in 4 years. Company will have hundreds of millions in liquidity and a theoretically limited debt level based on current numbers. This is very important to their partnership negotiating position...
Correction, they could have closer to 275 million in cash, given that the ATM is already in the theoretical dilution count. Assumes they sell another 20 million at the 9-10 range, they would still have another 50 million that they could sell to a potential partner under the current plan. Between this and up front global/localized commercialization concession sales, the company could have more than a billion in cash by the 4Q of 2014. The short bet seems to be that the company has no commercial leverage...this seems like an iffy bet given Al again commented that the company has 10 billion in sales worth of insulin in storage.
Above 8.70 they are going to be comfortable executing the ATM and are likely selling other shares under their previous shelf. 20 million shares will not make a material impact on dilution, however, if they report a cash balance near 250 million the same week they get FDA approval in July, while also having a 150 million borrowing capacity between AL and Deerfield, they will be in a real good position vis a vi commercial partners...
On a fully diluted basis, assuming the warrants converted, the book value will be near $1per share on July 1st. This is a proforma number, but telling. The MA federal case will clearly be found in their favor, as federal judges tend to be more inclined toward central gov. power and the constitution than the libdem crowd in many of the white buildings around this country. It will be interesting to see what type of recoveries they get.
The science is not on MA, VT, and PA's side. Hydrocodone needs to be processed by the liver to produce a euphoric high, therefore nasal and transdermal delivery are not that rewarding. The real issues: addicts will know that they can take these pills without worry of getting toxic doses of Tylenol as with other Hydrocodone pills. The FDA is not going to pull a product based on this...this is why they approved Zohydro in the first place. You want to prevent kids from abusing any pills, make it a mandatory 1 year in federal prison for any adult who allows their opiod prescription to be used by a minor.
The FDA, Federal Courts, etc., know that this is about competitors and politicians attacking this company and drug because they cannot be defamed for their defamation. This may hurt the sales trajectory in the short term, but in the end they only need each sales rep to sell 100 bottles of 100 count on a monthly basis to break even on a cash basis. At that point you have a company with no debt, an approved product growing in a 15 billion market, and a positive book value. If this was a china ecommerce stock, it would be trading at 50 bucks.
CEO outed the competition last night as the source of the slander and libel campaign against the company and Zohydro. They need to be more aggressive. They need to publicly tie politicians to companies like Mylan and Purdue and they need to publicly question why politicians are focusing on Zohydro, which now has the most advanced procedures for monitoring and preventing prescription abuse, WHILE there are still opiates being classified and sold as Class III drugs.
The CEO of a public company described what amounts to a criminal conspiracy on an open conference call. The sales trajectory of drugs strongly correlate with launch success and they could easily show cause or business infringement harm. a 500 million or better a 5 billion dollar civil tort lawsuit against PA or MA would prevent politics from being used by commercial interests in this way in the future.