MannKind shares fell 2.64% to $3.69 in early trading Friday. The stock has declined 30% in the last 30 days and 46% in the past six months. The biggest problem for MannKind has been the slow commercial launch of its inhaled insulin drug Afrezza. Poor sales have forced the biopharmaceutical firm to sell shares to retire a portion of its debt. The diabetes drug has to start carrying its weight. Otherwise MannKind could find itself in a major financial mess.
Debt holders lack confidence in Afrezza
The Valencia-based company failed to settle a chunk of its $100 million convertible debt before the August 15 deadline. That’s because many of MannKind’s current lenders refused to accept the company’s stock in exchange for their paper. Their lack of confidence in the company arises from weak Afrezza sales, says Adam Feuerstein of The Street. The drug fetched just $1.1 million of sales in the first quarter and $2.2 million in the June quarter.
On July 29th, MannKind had announced plans to pay off $100 million in debt by converting $57 million worth of debt into equity via a pricing scheme. The company was also supposed to repay $15 million in cash and issue $28 million in new convertible notes due 2018 to get rid of the old debt. However, according to the company’s latest 10-K filing with the SEC, MannKind was able to convert only $8 million worth of debt into 1.9 million newly issued shares.
Will debt holders accept MannKind’s stock this time around?
Since most of debt holders had refused to accept the company’s stock, MannKind was forced to roll over $32 million of unsettled debt until next month. The company will also have to increase the amount of cash used to repay debt from $15 million to $32 million. So far, the company has rolled over $28 million of debt into a new 2018 note, and converted $8 million of debt into equity.
The remaining $64 million is expected to be paid off in the form of $32 million cash and $32 million in stock-for-debt exchange. It will be interesting to see if debt holders will be willing to accept the company’s stock this time. MannKind ended the June quarter with $107 million in cash and cash equivalents.