) recently announced the pricing of its public offering of 40
million shares along with warrants to purchase around 30 million
shares of its common stock.
Apart from the pricing of its public offering, the company
also announced that it has entered into a purchase agreement with
The Mann Group LLC. The Mann Group is controlled by MannKind's
chief executive officer and principal shareholder, Alfred E.
Mann. The company stated in its press release that the Mann Group
has assured to purchase all the offered shares and warrants to
purchase shares of MannKind's common stock.
MannKind is offering each share together with a warrant for a
combined purchase price of $2.00. With the purchase of each
warrant the holder is entitled to purchase 0.75 of a share of
common stock. MannKind expects to raise around $80.0 million from
the public offering excluding any future proceedings from the
exercise of the warrants.
The aggregate purchase price is expected to be adjusted
against the principal indebtedness under MannKind's existing loan
arrangement with The Mann Group. We note that, as of October 05,
2012, outstanding debt was $224.6 million. As per the agreement,
another $20.4 million is left to borrow.
Each warrant is expected to be exercisable at $2.60 per share
and will be expiring at the end of the 53
week from the date of issuance. The shares purchased by Mann
Group are expected to be sold at $2.59 per share. Both the
warrants and common stock are separable and will be issued
separately as well. MannKind expects to close the offering on or
about October 23, 2012 depending on customary closing
MannKind is also offering underwriters a 30-day option for the
purchase of an additional 6 million shares and/or warrants to
purchase up to 4.5 million shares of common stock. The company
intends to utilize the fund to meet the expenses of the ongoing
late stage clinical trials of Afrezza.
We note that the company's principal pipeline candidate is
Afrezza, which received a second complete response letter (CRL)
from the US Food and Drug Administration (FDA) in January 2011.
While issuing the CRL, the US regulatory authority had asked
MannKind to conduct two additional trials, one for patients with
type I diabetes (MKC-171 study) and the other for type II
diabetes patients (MKC-175).
The requirement of additional trials has pushed up MannKind's
research and development expenses. Following the receipt of the
second CRL, MannKind already trimmed its workforce by
approximately 41% and cancelled its insulin supply deal with N.V.
Organon, a subsidiary of
Merck & Co. Inc.
We remind investors that the company recently completed the
enrollment process for both the trials. The trials are expected
to complete in the second quarter of 2013 and the company expects
to submit a new drug application by the third quarter of
As of the second quarter of 2012, the company's debt was
approximately $429.3 million. MannKind's cash balance at the end
of the same period was $31.6 million. The company reported a
sequentially low cash burn of $24.7 million in the second
quarter. But the company forewarned that the expenses will
increase towards the end of 2012. MannKind expects cash burn of
about $10-$12 million per month in 2012.
Currently, we have a Neutral recommendation on MannKind, which
carries a Zacks #3 Rank (short-term Hold rating). MannKind is
primarily dependent on the successful development of Afrezza. The
company's decision to raise fund was expected given the cash
burn. We believe an inability to raise funds will affect
MANNKIND CORP (MNKD): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
To read this article on Zacks.com click here.