UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): February 27, 2018
MannKind Corporation
(Exact Name of Registrant as Specified in Charter)
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Delaware |
000-50865 |
13-3607736 |
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
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30930 Russell Ranch Road, Suite 301, Westlake Village, California 91362 |
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(Address of Principal Executive Offices) (Zip Code) |
(818) 661-5000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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[ ] |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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[ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On February 27, 2018, MannKind Corporation issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated February 27, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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MannKind Corporation |
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Date: February 27, 2018 |
By: |
/s/ David Thomson, Ph.D., J.D. |
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David Thomson, Ph.D., J.D. |
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Corporate Vice President, General Counsel and Secretary |
EXHIBIT 99.1
MannKind Corporation Reports 2017 Fourth Quarter and Full Year Financial Results
Conference Call to Begin Today at 5:00 PM ET
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Q4 and 2H 2017 Afrezza net revenue were $4.5 million (+238%) and $6.4 million (+240%) vs. 2016, respectively |
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Q4 and 2H 2017 net cash used in operating activities were $30.0 million and $53.3 million, respectively |
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Cash and Cash Equivalents were $43.9 million and Restricted Cash was $4.4 million at December 31, 2017 |
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Recapitalization plan gains momentum: |
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o |
Raised $57.7 million (net) in a registered direct offering in Q4 |
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o |
Restructured $27.7 million principal amount of Senior Subordinated Convertible Notes due 2018 to extend the maturity date to October 2021, lower the conversion price to $5.15 and reduce outstanding principal by $4.0 million in exchange for the issuance of common stock |
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o |
Restructured the Facility Financing Obligation by deferring $10.0 million principal amount due October 31, 2017 to January 15, 2018, and subsequently converting $8.8 million ($5.6 million in Q4; $3.2 million in January 2018) of such principal amount into common stock, with the maturity date for the remaining $1.2 million of principal extended to May 6, 2018; and allowing for additional debt to equity conversion at market prices subject to a conversion floor of $2.75 per share and a 10 million share cap |
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Increased the Company’s authorized shares from 140 million to 280 million |
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Treprostinil Technosphere® Investigational New Drug application filed with the U.S. FDA in January 2018 |
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David M. Kendall, MD, a world renowned diabetes expert, joined MannKind as Chief Medical Officer in February 2018 |
WESTLAKE VILLAGE, CA, February 27, 2018 (GLOBE NEWSWIRE) — MannKind Corporation (NASDAQ:MNKD) today reported financial results for the fourth quarter and full year ended December 31, 2017.
Fourth Quarter 2017 Results
For the fourth quarter of 2017, Afrezza net revenue was $4.5 million, an increase of 125% compared to the third quarter of 2017 and 238% compared to the fourth quarter of 2016. Included in the fourth quarter net revenue is a favorable adjustment for a change in estimate of $1.4 million. The change in estimate relates to obtaining new and more comprehensive data regarding the inventory in the distribution channel – specifically inventory in the retail channel. This data indicated that the amount of inventory in the distribution channel was less than had been previously estimated using syndicated prescription data. As of December 31, 2017, the amount of Afrezza shipped to wholesale and retail channels, but not yet recognized as net revenue, was $3.0 million, the same amount as September 30, 2017. A reconciliation of gross to net revenues can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the form 10-K for the year ended December 31, 2017.
Cost of goods sold was $5.0 million in the fourth quarter of 2017 compared to $4.6 million in the third quarter of 2017 and $1.6 million in the fourth quarter of 2016, an increase of $0.4 million and $3.4 million respectively. Cost of goods sold during these periods is greater than the associated product sales due to the under-utilization of our manufacturing facility.
Research and development expenses were $3.5 million in the fourth quarter of 2017 compared to $4.4 million in the third quarter of 2017. The $0.9 million decrease was primarily due to a $0.6 million decrease in clinical study expenses and a $0.4 million decrease in compensation expenses. Research and development expenses were $1.6 million in the fourth quarter of 2016, representing a period-over-period increase of $1.9 million which was primarily due to a $1.3 million increase in compensation costs, a $1.4 million increase in consultant and supply costs and a $0.3 million increase in facilities costs, all due to increased clinical studies, partially offset by a decrease of $1.0 million related to a one-time FDA submission fee for a label expansion incurred in 2016 that did not recur in 2017.
Selling, general and administrative (SG&A) expenses were $23.3 million for the fourth quarter of 2017 compared to $17.7 million for the third quarter of 2017. The $5.6 million increase was primarily due to $5.0 million in selling expenses associated with our first direct-to-consumer television advertising campaign in the fourth quarter of 2017. SG&A expenses in the fourth quarter of 2016 were $15.3 million representing a period-over-period increase of $8.0 million which was primarily due to the $5.0 million DTC TV campaign and growth in our commercial infrastructure.
The net loss for the fourth quarter of 2017 was $32.8 million, or $0.28 per share based on 116.5 million weighted average shares outstanding, compared to a $32.9 million net loss in the third quarter of 2017 or $0.31 per share based on 104.7 million weighted average shares outstanding. During the fourth quarter of 2016, we had net income of $54.0 million, or $0.56 per share based on 95.7 million weighted average shares outstanding. The net income in the fourth quarter of 2016 included net collaboration revenue of $10.2 million related to our license and
collaboration agreement with Sanofi and a $72.0 million gain from the extinguishment of debt owed to Sanofi pursuant to a settlement agreement.
Full Year 2017 Results
Due to the termination of the Sanofi license and collaboration agreement in early 2016 and our commencement of commercial activities for Afrezza in the third quarter of 2016, a comparative analysis for Afrezza product revenue and commercial support between the year ended December 31, 2017 and the prior year is not meaningful.
For the year ended December 31, 2017, total net revenue of $11.7 million was comprised of $9.2 million of Afrezza net revenue, $1.7 million from the net revenue of surplus bulk insulin to a third party, $0.6 million from the sale of certain oncology intellectual property, and $0.3 million from collaboration net revenue.
Research and development expenses were $14.1 million for the year ended December 31, 2017 compared to $14.9 million for the prior year. The $0.8 million decrease was primarily due to a $3.6 million decrease in research and development expenses associated with a reduction in workforce in 2016, and a one-time FDA submission fee for label expansion of $1.0 million incurred in 2016. These decreases were partially offset by a $2.5 million increase in clinical trial expenses, a $0.7 million increase in expenses incurred for the development of manufacturing improvements.
Selling, general and administrative expenses were $75.0 million for the year ended December 31, 2017 compared to $46.9 million for the prior year, an increase of $28.1 million primarily due to the creation of a commercial support infrastructure after termination of the Sanofi license and collaboration agreement.
The loss on foreign currency translation is related to our purchase commitment for insulin which is denominated in Euros. For the year ended December 31, 2017, the loss was $13.6 million as compared to a gain of $3.4 million in the prior year, a $17.1 million change due to the unfavorable movement of the U.S. dollar-Euro exchange rate.
The net loss for the year ended December 31, 2017 was $117.3 million, or $1.13 per share based on 104.2 million weighted average shares outstanding, compared to net income for the prior year of $125.7 million, or $1.37 per share based on 92.1 million weighted average shares outstanding. The net income for the prior year included net revenue – collaboration of $171.1 million and a gain on the extinguishment of debt of $72.0 million due to the recognition of previously deferred revenue following the termination of the Sanofi license and collaboration agreement.
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2017 increased to $43.9 million compared to $22.9 million at December 31, 2016, primarily due to cash inflows of $57.7 million of net proceeds from a registered direct offering of common stock, $0.5 million through sales under the at-the-market equity offering facility, $30.6 million received from Sanofi pursuant to a settlement agreement, $16.7 million from the sale of our Valencia, CA facility, $15.4 million from a net increase of debt, and cash received from revenue of $12.5 million offset in part by commercial and general corporate spending of $95.6 million. In addition to the $43.9 million in cash and cash equivalents, the Company had $4.4 million of restricted cash at December 31, 2017 of which $3.2 million was released in January 2018 following a conversion of Facility Financing Obligation debt to equity. The net cash used in operating activities for the fourth quarter of 2017 was $30.0 million.
2H 2017 Results vs. Guidance
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Afrezza gross revenue was $8.3 million for the six months ended December 31, 2017 compared with a range of $9-$14 million. |
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Afrezza net revenue was $6.4 million for the six months ended December 31, 2017 compared with a range of $6-$10 million. |
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Net cash used in operating activities was $30.0 million in the fourth quarter 2017 and $23.3 million in the third quarter 2017 totaling $53.3 million compared with a range of $48-$56 million. |
Conference Call
MannKind will host a conference call and presentation webcast to discuss these results today at 5:00 p.m. Eastern Time. To participate in the live call by telephone, please dial (888) 771-4371 or (847) 585-4405 and use the participant passcode: 46307898. Those interested in listening to the conference call live via the Internet may do so by visiting the Company’s website at www.mannkindcorp.com.
A telephone replay of the call will be accessible for approximately 14 days following completion of the call by dialing (888) 843-7419 or (630) 652-3042 and use the participant passcode: 4630 7898#. A replay will also be available on MannKind’s website for 14 days.
About MannKind Corporation
MannKind Corporation (NASDAQ: MNKD) focuses on the development and commercialization of therapeutic products for patients with diseases such as diabetes and pulmonary arterial hypertension. MannKind is currently commercializing Afrezza® (insulin human) inhalation
powder, the Company’s first FDA-approved product and the only inhaled rapid-acting mealtime insulin in the United States, where it is available by prescription from pharmacies nationwide. MannKind is headquartered in Westlake Village, California, and has a state-of-the art manufacturing facility in Danbury, Connecticut. The Company also employs field sales and medical representatives across the U.S. For further information, visit www.mannkindcorp.com.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding MannKind’s ability to directly commercialize pharmaceutical products. Words such as “believes”, “anticipates”, “plans”, “expects”, “intend”, “will”, “goal”, “potential” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon the MannKind’s current expectations. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, the ability to generate significant product sales for MannKind, MannKind’s ability to manage its existing cash resources or raise additional cash resources, stock price volatility and other risks detailed in MannKind’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2017 and subsequent periodic reports on Form 10-Q and current reports on Form 8-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and MannKind undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Audited)
(In thousands, except per share amounts)
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Three months ended |
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Twelve months ended |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenues: |
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Net revenue – commercial product sales |
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$ |
4,466 |
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$ |
1,322 |
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$ |
9,192 |
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$ |
1,895 |
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Net revenue – collaboration |
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63 |
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10,184 |
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250 |
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171,965 |
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Revenue – other |
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1 |
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898 |
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2,303 |
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898 |
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Total net revenues |
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4,530 |
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12,404 |
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11,745 |
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174,758 |
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Expenses: |
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Cost of goods sold |
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5,018 |
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1,553 |
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17,228 |
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17,121 |
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Cost of revenue - collaboration |
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-- |
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10,230 |
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-- |
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32,971 |
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Research and development |
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3,507 |
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1,559 |
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14,118 |
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14,917 |
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Selling, general and administrative |
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23,278 |
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15,333 |
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74,959 |
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46,928 |
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Property and equipment impairment |
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-- |
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1,259 |
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203 |
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1,259 |
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Loss (gain) on foreign currency translation |
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1,564 |
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(3,433 |
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13,641 |
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(3,433 |
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) |
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(Gain) on purchase commitments |
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-- |
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(2,265 |
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(215 |
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(2,265 |
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) |
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Total expenses |
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33,367 |
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24,236 |
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119,934 |
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107,498 |
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(Loss) income from operations |
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(28,837 |
) |
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(11,832 |
) |
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(108,189 |
) |
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67,260 |
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Other (expense) income: |
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Change in fair value of warrant liability |
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-- |
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(2,510) |
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5,488 |
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5,369 |
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Interest income |
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115 |
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15 |
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293 |
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85 |
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Interest expense on notes |
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(2,056 |
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(3,010 |
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(9,494 |
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(15,576 |
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) |
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Interest expense on note payable to principal stockholder |
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(1,174 |
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(729 |
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(3,782 |
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(2,901 |
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) |
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(Loss) gain on extinguishment of debt |
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(781 |
) |
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72,024 |
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(1,611 |
) |
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72,024 |
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Other (expense) income |
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-- |
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18 |
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13 |
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(597 |
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) |
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Provision for income taxes |
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51 |
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-- |
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51 |
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-- |
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Net (loss) income |
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$ |
(32,784 |
) |
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$ |
53,976 |
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$ |
(117,333) |
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$ |
125,664 |
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Net (loss) income per share — basic |
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$ |
(0.28 |
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$ |
0.56 |
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$ |
(1.13 |
) |
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$ |
1.37 |
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Net (loss) income per share — diluted |
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$ |
(0.28 |
) |
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$ |
0.56 |
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$ |
(1.13 |
) |
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$ |
1.36 |
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Shares used to compute basic net (loss) income per share |
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116,451 |
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95,676 |
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104,245 |
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92,053 |
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Shares used to compute diluted net (loss) income per share |
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116,451 |
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96,510 |
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104,245 |
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92,085 |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Audited)
(In thousands)
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December 31, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
43,946 |
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$ |
22,895 |
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Restricted cash |
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4,409 |
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-- |
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Accounts receivable, net |
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2,789 |
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302 |
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Receivable from Sanofi |
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-- |
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30,557 |
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Inventory |
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2,657 |
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2,331 |
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Asset held for sale |
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-- |
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16,730 |
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Deferred costs from commercial product sales |
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405 |
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309 |
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Prepaid expenses and other current assets |
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3,010 |
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4,364 |
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Total current assets |
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57,216 |
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77,488 |
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Property and equipment, net |
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26,922 |
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28,927 |
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Other assets |
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437 |
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648 |
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Total assets |
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$ |
84,575 |
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$ |
107,063 |
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Liabilities and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable |
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$ |
6,984 |
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$ |
3,263 |
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Accrued expenses and other current liabilities |
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12,449 |
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7,937 |
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Facility financing obligation |
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52,745 |
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71,339 |
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Deferred revenue, net |
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3,038 |
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3,419 |
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Deferred payments from collaboration - current |
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250 |
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1,000 |
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Recognized loss on purchase commitments — current |
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12,131 |
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5,093 |
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Total current liabilities |
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87,597 |
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92,051 |
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Note payable to principal stockholder |
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79,666 |
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49,521 |
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Accrued interest — note payable to principal stockholder |
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2,347 |
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9,281 |
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Senior convertible notes |
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24,411 |
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27,635 |
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Recognized loss on purchase commitments — long term |
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97,585 |
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95,942 |
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Warrant liability |
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-- |
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7,381 |
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Deferred payments from collaboration – long term |
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|
500 |
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|
-- |
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Milestone rights liability and other liabilities |
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7,201 |
|
|
|
8,845 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
299,307 |
|
|
|
290,656 |
|
|
Total stockholders’ deficit |
|
|
(214,732 |
) |
|
|
(183,593 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit |
|
$ |
84,575 |
|
|
$ |
107,063 |
|
|
|
|
|
|
|
|
|
|
|
Company Contact:
Rose Alinaya
SVP, Investor Relations and Treasury
818-661-5000
ir@mannkindcorp.com