) recently announced that it satisfied the conditions for the
second tranche of $40 million of 9.75% senior secured convertible
notes under its finance agreement with Deerfield Management
Company L.P. (Deerfield).
We note that in Jul 2013 the companies entered into a Facility
Agreement, as per which MannKind has ensured financing worth $160
million from Deerfield. Deerfield has agreed to provide the loan
through its purchase of four equal tranches of senior secured
notes from MannKind. The notes, due to mature in 2019, will carry
a yearly interest of 9.75%.
Deerfield paid the first of the four $40 million tranches
following the closure of the deal. The next tranche was expected
to be received following the achievement of results from
MannKind's phase III studies (Study 171 and Study175) on Afrezza.
Afrezza, MannKind's lead candidate, is being developed for the
treatment of type I or type II diabetes. MannKind recently
announced that both the studies met its primary objectives and
Afrezza was well tolerated during the study. MannKind expects to
receive the second tranche of $40 million by Sep 6, 2013.
The third tranche is expected to be on the repayment of its
3.75% Senior Convertible Notes due 2013. The final payment will
be received on the approval of Afrezza by the U.S. Food and Drug
Administration (FDA). MannKind further stated in its press
release that a portion of the loan amount can be converted to
shares of its common stock after a specified time following the
publication of data from the Afrezza studies. As per the
agreement, Deerfield received milestone rights from MannKind.
Deerfield will receive up to $90 million on the achievement of
some strategic and sales milestones.
Moreover, MannKind stated that less than 6 million shares will
be issued on conversion if the conversion price is more than
$6.67. Moreover, less than 12 million shares will be issued on
conversion if the price is below $3.33. MannKind also mentioned
that if the conversion price is between $3.33 and $6.67, not more
than $40 million of common stock will be issued on
We are encouraged by MannKind's efforts to raise funds. We
expect the company to utilize the amount raised on Afrezza. The
company is totally dependent on the success of the diabetes
Meanwhile, we expect investor focus to remain on Afrezza going
forward. MannKind now plans to file the amended new drug
application to the FDA for the candidate in early fourth quarter
of 2013 based on positive results from phase III studies.
However, we remain concerned about the company's over
dependence on Afrezza. Any setback related to the diabetes
candidate will be catastrophic for the company.
MannKind, a biopharma stock, presently carries a Zacks Rank #3
(Hold). Other biopharma stocks, such as
Alexion Pharmaceuticals, Inc.
Anthera Pharmaceuticals, Inc.
) are comparatively well placed. While Actelion carries a Zacks
Rank #1 (Strong Buy), Alexion and Anthera carry a Zacks Rank #2
ACTELION LTD (ALIOF): Get Free Report
ALEXION PHARMA (ALXN): Free Stock Analysis
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MANNKIND CORP (MNKD): Free Stock Analysis
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