US pharmaceuticals company MannKInd, which has developed an inhaled insulin device for diabetics and is traded on the Tel Aviv Stock Exchange, has announced a debt restructuring agreement with Deerfield Management Company L.P. Under the agreement, MannKind repaid $4 million of a debt of $10 million and converted $6 million to equity. The debt was due for repayment in May and June this year. MannKind's share price for the purposes of the agreement was $1.15, a discount of 10% on the market price.
Following the transaction, Deerfield becomes a 5% shareholder in MannKind.
MannKind drew down $160 million in four tranches of a credit line that Deerfield made available to it. $65 million remains to be repaid, $10 million of this July.
MannKind developed an insulin inhaler, Afrezza, which, until mid-2016, it marketed through Sanofi. Sales of the product did not meet targets, however, and Sanofi decided to end the collaboration and returned the product to MannKind, which relaunched it in the third quarter of 2016.
MannKind's 2016 revenue totaled $174 million, of which $172 million derived from the agreement with Sanofi, and included a lump sum paid by Sanofi to end the agreement. In other word, MannKind's revenue from independent marketing of its product was just $2 million.
At the end of 2016, MannKind had $22.9 million cash. After the year end it received an additional $30.6 million, the remainder of the cash due to it under the agreement with Sanofi, and a further $16.7 million from the sale of a building. The company currently employs about 100 people, including an independent sales team, and is presumably burning tens of millions of dollars annually. It has to hold $35 million cash at all times in order to abide by the terms of the remaining loan from Deerfield.
Following today's announcement of the current agreement, MannKind's share price fell 6% in Tel Aviv, giving it a market cap of NIS 398 million.
MannKind, which has no connection to Israel, was listed on the Tel Aviv Stock Exchange in October 2015, after finding itself in a situation in which it urgently needed new sources of finance. The listing exploited a loophole in the Tel Aviv Stock Exchange's dual-listing regulations. Just before it listed in Tel Aviv, MannKind had a market cap of over $1.4 billion, but it has lost no less than 95% of its value since then.
Published by Globes [online], Israel business news - www.globes-online.com - on April 20, 2017
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