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): August 8, 2016
MannKind Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 000-50865 | 13-3607736 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 25134 Rye Canyon Loop, Suite 300 Valencia, California |
91355 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (661) 775-5300
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. of Form 8-K):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition |
On August 8, 2016, MannKind Corporation (“MannKind”) issued a press release announcing its financial results for the quarter ended June 30, 2016. A copy of this press release is attached hereto as Exhibit 99.1. As previously announced, on August 8, 2016 MannKind also hosted a conference call to discuss these financial results. An excerpt of the conference call transcript is attached hereto as Exhibit 99.2.
The information in this Item 2.02 and the attached exhibits are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit No. |
Description | |
| 99.1 | Press release of MannKind Corporation dated August 8, 2016, reporting MannKind’s financial results for the quarter ended June 30, 2016 | |
| 99.2 | Excerpt of transcript of conference call held on August 8, 2016 | |
SIGNATURES
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.
| Date: August 10, 2016 | MANNKIND CORPORATION | |||||
| By: | /s/ David Thomson | |||||
| David Thomson, Ph.D., J.D. | ||||||
| Corporate Vice President, General Counsel and Secretary | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press release of MannKind Corporation dated August 8, 2016, reporting MannKind’s financial results for the quarter ended June 30, 2016 | |
| 99.2 | Excerpt of transcript of conference call held on August 8, 2016 | |
Exhibit 99.1
MannKind Corporation Reports 2016 Second Quarter Financial Results
Conference Call to Begin Today at 5:00 PM ET
VALENCIA, Calif., Aug. 08, 2016 — MannKind Corporation (Nasdaq:MNKD) (TASE:MNKD) today reported financial results for the second quarter and the six months ended June 30, 2016.
For the second quarter ended June 30, 2016, total operating expenses were $19.1 million as compared to $24.1 million for the same quarter in 2015. Research and development expenses were $4.3 million for the second quarter of 2016, a decrease of 44% compared to the second quarter of 2015, primarily due to a reduction in force in 2015 following the completion of Afrezza registration trials. Selling, general and administrative costs were $11.1 million for the second quarter of 2016, an increase of 5% compared to general and administrative costs for the second quarter of 2015, mainly due to sales and marketing expenses. Manufacturing of commercial product resumed in the second quarter of 2016, in preparation for the relaunch of Afrezza in the third quarter of 2016, resulting in the recognition of product manufacturing costs of $3.7 million for the three months ended June 30, 2016. With limited production and underutilization of the manufacturing facility in the same period of 2015, product manufacturing costs were $5.7 million for the second quarter of 2015 due to under absorbed labor and overhead.
For the first six months ended 2016, total operating expenses were $39.1 million, a decrease of 15% as compared to $45.8 million for the same period in 2015. Research and development expenses were $9.4 million for the six months ended June 30, 2016, a decline of 45% compared to the same period in 2015, primarily due to the reduction in force in 2015 and the transition from development to commercial activities. Selling, general and administrative expenses for the six months ended June 30, 2016 were $18.5 million, a decrease of 13% compared to the same period in 2015, primarily due to the reduction in force, reduced professional fees related to strategic planning activities and lower non-cash stock compensation expense in 2015, offset by increased sales and marketing expense in 2016. Product manufacturing costs were $11.2 million for the six months ended June 30, 2016, an increase of 47% compared to the same period in 2015, as manufacturing of commercial product resumed in preparation for the relaunch of Afrezza in the third quarter of 2016.
For the three months ended June 30, 2016, the Company earned $0.3 million under the Sanofi License Agreement, which is required to be applied as a prepayment against the balance owed under the Sanofi Loan Facility. As of June 30, 2016, the total amount owed to Sanofi is $70.3 million, which includes accrued interest of $4.3 million.
Included in net loss for the three and six months ended June 30, 2016 is the non-cash effect of a $5.3 million fair value adjustment of the warrant liability related to the registered direct public offering completed in May 2016.
The net loss for the second quarter of 2016 was $30.0 million, or $0.07 per share, based on 455.3 million weighted average shares outstanding, compared with to the net loss of $28.9 million, or $0.07 per share, based on 401.0 million weighted average shares outstanding for the second quarter of 2015. The number of common shares outstanding at June 30, 2016 was 477.7 million.
Cash and cash equivalents at June 30, 2016 were $63.7 million, compared to $27.7 million at March 31, 2016. In May 2016, the Company received net proceeds of $47.4 million upon completion of a registered direct public offering, $9.2 million from Sanofi for the sale of insulin inventory in connection with a contractual obligation upon termination of the Sanofi License Agreement, and $0.7 million from Connecticut as a Research & Development tax credit. Currently, $30.1 million remains available for borrowing under the amended loan arrangement with The Mann Group along with $50.0 million available under the ATM facility.
Conference Call and Presentation Webcast
MannKind will host a conference call and presentation webcast to discuss these results today at 5:00 p.m. Eastern Time. To view and listen to the webcast, visit MannKind’s website at http://www.mannkindcorp.com and click on the “Q2 2016 MannKind Earnings Conference Call” link in the Webcast section of News & Events. To participate in the live call by telephone, please dial (888) 771-4371 or (847) 585-4405 and use the participant passcode: 41477572.
A telephone replay 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: 4147 7572#. A replay will also be available on MannKind’s website for 14 days.
About MannKind Corporation
MannKind Corporation (Nasdaq:MNKD) (TASE:MNKD) focuses on the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes. MannKind maintains a website at http://www.mannkindcorp.com to which MannKind regularly posts copies of its press releases as well as additional information about MannKind. Interested persons can subscribe on the MannKind website to e-mail alerts that are sent automatically when MannKind issues press releases, files its reports with the Securities and Exchange Commission or posts certain other information to the website.
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, 2015 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.
MannKind Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue |
$ | — | $ | — | $ | — | $ | — | ||||||||
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| Operating expenses: |
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| Research and development |
4,310 | 7,737 | 9,440 | 17,115 | ||||||||||||
| Selling, general and administrative |
11,110 | 10,623 | 18,460 | 21,102 | ||||||||||||
| Product manufacturing |
3,704 | 5,691 | 11,236 | 7,573 | ||||||||||||
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| Total operating expenses |
19,124 | 24,051 | 39,136 | 45,790 | ||||||||||||
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| Loss from operations |
(19,124 | ) | (24,051 | ) | (39,136 | ) | (45,790 | ) | ||||||||
| Other (expense) income |
(5,959 | ) | (10 | ) | (5,892 | ) | 1,403 | |||||||||
| Interest expense on note payable to principal stockholder |
(721 | ) | (721 | ) | (1,443 | ) | (1,435 | ) | ||||||||
| Interest expense on notes |
(4,181 | ) | (4,131 | ) | (8,401 | ) | (13,753 | ) | ||||||||
| Interest income |
26 | 3 | 41 | 6 | ||||||||||||
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| Net loss |
(29,959 | ) | (28,910 | ) | (54,831 | ) | (59,569 | ) | ||||||||
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| Net loss per share — basic and diluted |
$ | (0.07 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.15 | ) | ||||
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| Shares used to compute basic and diluted net loss per share |
455,305 | 401,018 | 442,082 | 399,972 | ||||||||||||
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MannKind Corporation
Condensed Consolidated Balance Sheet
(Unaudited)
(in thousands)
| June 30, 2016 | December 31, 2015 | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 63,733 | $ | 59,074 | ||||
| Inventory |
2,866 | — | ||||||
| Deferred costs from collaboration |
22,742 | 13,539 | ||||||
| Prepaid expenses and other current assets |
1,423 | 4,041 | ||||||
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| Total current assets |
90,764 | 76,654 | ||||||
| Property and equipment — net |
47,422 | 48,749 | ||||||
| Other assets |
1,248 | 1,009 | ||||||
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| Total |
$ | 139,434 | $ | 126,412 | ||||
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| Liabilities and Stockholders’ Deficit |
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| Current liabilities: |
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| Accounts payable |
$ | 2,849 | $ | 15,599 | ||||
| Accrued expenses and other current liabilities |
10,252 | 7,929 | ||||||
| Facility financing obligation |
75,452 | 74,582 | ||||||
| Deferred sales from collaboration |
17,680 | 17,503 | ||||||
| Purchase commitment loss - current |
20,986 | 12,475 | ||||||
| Deferred payments from collaboration |
144,431 | 140,231 | ||||||
| Warrant liability |
18,056 | — | ||||||
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| Total current liabilities |
289,706 | 268,319 | ||||||
| Note payable to related party |
49,521 | 49,521 | ||||||
| Sanofi loan facility and profit/loss share obligation |
69,978 | 62,371 | ||||||
| Senior convertible notes |
27,623 | 27,613 | ||||||
| Non-current purchase commitment loss |
52,515 | 53,692 | ||||||
| Other liabilities |
16,668 | 15,225 | ||||||
| Stockholders’ deficit |
(366,577 | ) | (350,329 | ) | ||||
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| Total |
$ | 139,434 | $ | 126,412 | ||||
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Company Contact:
Rose Alinaya
SVP, Finance
661-775-5300
ralinaya@mannkindcorp.com
Exhibit 99.2
AUGUST 8, 2016 / 5:00 PM EDT, MNKD – Q2 2016 MANNKIND CORP EARNINGS CALL
CORPORATE PARTICIPANTS
Rose Alinaya MannKind Corporation - SVP and Principal Accounting Officer
Matthew Pfeffer MannKind Corporation - CEO
Michael Castagna MannKind Corporation - Chief Commercial Officer
Raymond Urbanski MannKind Corporation - Chief Medical Officer
CONFERENCE CALL PARTICIPANTS
Steven Weil Oppenheimer - Analyst
PRESENTATION
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation 2016 second quarter conference call. My name is Sherri and I’ll be your operator for today’s call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.
Joining us today from MannKind are Chief Executive Officer, Matthew Pfeffer, Chief Commercial Officer, Michael Castagna, Chief Medical Officer, Raymond Urbanski, and Principal Accounting Officer, Rose Alinaya. I would now like to turn the call over to Ms. Rose Alinaya, Senior Vice President and Principal Accounting Officer of MannKind Corporation. Please go ahead.
Rose Alinaya - MannKind Corporation - SVP and Principal Accounting Officer
Good afternoon, and thank you for joining us on today’s call. Before we proceed further, please note that comments made during this call will include forward-looking statements within the meaning of federal securities laws. It is possible that the actual results could differ from these stated expectations. For factors, which would cause actual results to differ from expectations, please refer to the reports filed by the Company with the Securities and Exchange Commission under the Securities and Exchange Act of 1934.
This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 6 (sic - 8), 2016. We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this call.
I am now pleased to introduce Matthew Pfeffer, CEO of MannKind. Matt?
Matthew Pfeffer - MannKind Corporation - CEO
Good afternoon. In January of 2016, I announced an audacious plan, to pivot MannKind in a dramatic way, transforming the Company from one who’s primary purpose was manufacturing into a fully developed commercial enterprise. This plan involved several critical elements. First, by the end of Q1, we had to put into place the organizations and systems necessary to support a commercial product in the marketplace. It included transitioning ongoing clinical programs back to MannKind, setting up medical information request system, developing a pharmacovigilance program, transitioning the safety database, and setting up an adverse event reporting and tracking system, transferring all of the NDA paperwork and other documentation, and so forth. Tremendous undertaking.
At the same time, we are negotiating a transition agreement with Sanofi to ensure that Afrezza would continue to be available until we had built the capability to manufacture and distribute the product ourselves. All this was completed in time to transition the product back to us on April 5 of this year as planned.
Next, we had to build from scratch our commercial infrastructure, including hiring a commercial management team, developing a marketing organization, hiring nurse diabetes educators, medical science liaisons, a payer management organization, and of course hiring and training a field sales force. While again at the same time, we had to convert our manufacturing organization to supply our own MannKind branded product, including new product configurations and to arrange for commercial distribution through a wholesale distribution network.
All of this was completed in record time and as announced last week, MannKind branded Afrezza is available now throughout the United States. Finally, we needed to ensure that we have the necessary financial resources to give us the time to change the commercial trajectory of Afrezza. Accordingly, we executed a financing in May, which provides us sufficient runway to get us into the first quarter of next year. At the same time, we continue to weigh the value proposition of every expenditure the company makes to make our existing and anticipated cash last us for as far into 2017 as possible.
Should we need to raise additional funds, we want to allow as much time as possible to demonstrate the sustained commercial growth. This will ensure that if we need to finance, we will do so under the best possible circumstances. So 2016 to date is a story of a successful pivot to the organization, transforming it into a new entity with the tools to execute on that audacious plan I mentioned earlier.
The second half of 2016 will be about taking those tools and increasing sales of Afrezza. As part of mapping out our strategy for rebuilding the company and relaunching Afrezza, we identified a number of issues that could slow or prevent the sales growth we sought. We then developed a plan for addressing each of them. These issues included, amongst others, pricing, access, reimbursement, titration, spirometry, product positioning and targeting, and potential label changes. Many of these plans have already been put into place. Others are still to come. Mike and Ray will be talking about many of them later in this call.
Bottom line, we built a strategy to get Afrezza into the hands of our target market and maximize its chances of success. But the MannKind story will not stop with Afrezza. We still have a lot of very exciting product opportunities in our pipeline. We have intentionally slowed development of some of the earlier Technosphere programs to preserve cash, but our lead program, (Epi), continues to move forward on the timeline announced at the start of the year. Ray will be providing an update on the development pipeline overall, as well as some important plans to broaden and strengthen the Afrezza label.
In summary, I believe we’ve successfully transformed our Company with all the pieces necessary now in place to execute on our aggressive sales plans and show sustained growth in Afrezza prescribing. We’ve also obtained the cash needed to finance these efforts, keep our burn rate flat by using savings in other areas to fund our commercial operations.
And finally, we continue to advance our pipeline judiciously, keeping our lead development program on track. With that short introduction, I’d now like to turn the call over to Rose to go over our financial results just announced, after which both Mike and Ray will provide some important updates. Rose?
Rose Alinaya - MannKind Corporation - SVP and Principal Accounting Officer
Thank you, Matt. Turning to the financials, the net loss applicable to common stockholders for the second quarter of 2016 increased to $30 million, or $0.07 per share, compared to the net loss applicable to common stockholders of $28.9 million, or $0.07 per share, for the same quarter last year.
Research and development expenses decreased 44% for the second quarter of 2016 compared to the second quarter in 2015, largely due to the restructuring measures taken in 2015 following the completion of Afrezza registration trials. We anticipate our overall R&D expenses will decrease compared to last year as we continue to focus our efforts on the commercialization of Afrezza for the remainder of this year with minimal incremental costs associated with advancing our development pipeline and the initiation of certain clinical studies, balancing these equally critical efforts with our current financial runway.
General and administrative expenses increased 5% for the second quarter of 2016 compared to the same quarter last year, primarily due to sales and marketing expense. We estimate our continuing commercial efforts of Afrezza for the second half of this year will be between $16 million to $18 million. To date, we have spent approximately $4 million related to our sales and marketing efforts. We expect other G&A expenses for the remainder of 2016 to remain relatively flat compared to the prior year.
Manufacturing of commercial product resumed in the second quarter of 2016 in preparation for the relaunch of Afrezza, resulting in the recognition of product manufacturing costs of $3.7 million for the second quarter of 2016. We expect product manufacturing costs to remain relatively flat as compared to last year as we continue to manufacture commercial product.
In the second quarter of 2016, we earned $0.3 million under the profit and loss sharing arrangement with Sanofi related to Afrezza, which will be applied as a prepayment against the balance under the Sanofi loan facility. As of June 30, 2016, the total amount owed to Sanofi is $70.3 million, which includes accrued interest of $4.3 million. Under the terms of this facility, it is not due for repayment until August 2024. Cash and cash equivalents were $63.7 million at June 30, 2016, compared to $27.7 million at the end of first quarter of 2016. In May 2016, we received net proceeds of $47.4 million upon the completion of the registered direct offering.
As part of this transaction, we also issued warrants. Under the accounting rules, provisions of a portion of the warrants resulted in them being reflected as a liability on our balance sheet. This liability is revalued at each quarter end and for the quarter just ended, resulted in a charge to other expense in our income statement. This is a non-cash charge and there is no reason to expect that the adjusted liability will ever be satisfied in cash. If the warrants are exercised, they will result in a net cash — in a cash payment to the Company in exchange for shares. If they are not exercised, they will expire.
In addition to the foregoing cash inflows, we received $9.2 million from Sanofi for the sale of insulin inventory in connection with the insulin put option we exercised following termination. We expect additional receipts from Sanofi under the terms of this agreement later in the year and for some time to come.
Finally, we received $0.7 million from Connecticut as a research and development tax credit. We still have $30.1 million available to borrow under the amended loan arrangement with the Mann Group, and because there has been no use of our ATM facility since its effectiveness, $50 million still remains available.
….
Operator
Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for your participation. You may now disconnect.