MannKind Corporation (MNKD - Free Report) recently entered into a Facility Agreement with investment management firm Deerfield Management Company L.P. (Deerfield). As per the agreement, 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 will be paying the first of the four $40 million tranches following the closure of the deal. The next tranche will be received following the announcement of certain results from MannKind’s two phase III studies (Study 171 and Study 175) on its diabetes candidate Afrezza. MannKind is expected to receive its third tranche on the repayment of its 3.75% Senior Convertible Notes due 2013.
The last and final payment will be received on approval of Afrezza. 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.
MannKind is yet to decide the conversion price, which will be decided by the volume weighted average price of the common stock during the next 20 trading days following the conversion date. 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 conversion.
We are encouraged by MannKind’s efforts to raise funds. We expect the company utilise the amount raised on Afrezza. MannKind is totally dependent on the success of the diabetes candidate.
Meanwhile, MannKind completed both the phase III studies (Study 171 and Study 175) on Afrezza. MannKind intends to resubmit the New Drug Application to the FDA for Afrezza in late September or early October this year. MannKind intends to get Afrezza approved for treating adults suffering from type 1 or type 2 diabetes. We expect investor focus to remain on Afrezza going forward.
MannKind, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Other biopharma stocks, such as Jazz Pharmaceuticals (JAZZ - Free Report) , Santarus, Inc. and Cadence Pharmaceuticals Inc. are comparatively well placed. While Jazz Pharma and Santarus carry a Zacks Rank #1 (Strong Buy), Cadence carries a Zacks Rank #2 (Buy).