MannKind entered into a Market Issuance Sales Agreement (the “Sales Agreement”) with FBR Capital Markets & Co. on Tuesday. The agreement allows the company to issue and sell shares of its common stock with an aggregate offering price of up to $50 million from time to time with FBR acting as its sales agent.
Terms regulating sale of common stock
FBR can use any method for selling the common stock as has been defined under Securities Act 1933, Rule 415. The firm can make sales directly on or through the NASDAQ Global Market or to or through a market maker. FBR also has the right to sell the common stock in negotiated transactions, subject to approval from MannKind.
To sell the common stock from time to time, FBR will use commercially reasonable efforts consistent with its normal trading and sales practices, and based on instructions from MannKind, which may impose limits on price, time or size or other conditions.
Under the Sales Agreement, the company is not obligated to make any sales of common stock. If the company issues or sell the common stock under the Sales Agreement, then it will be subject to the effectiveness of the Company’s registration statement on Form S-3 (File No. 333-210792) that it filed on April 18 with the SEC.
“The Company makes no assurances as to if or whether the Registration Statement will become effective or, if it does become effective, as to the continued effectiveness of the Registration Statement,” MannKind said.
What terminates the deal between MannKind and FBR?
For the common stock sold through FBR under the Sales Agreement, the company will be liable to pay FBR an aggregate commission rate of up to 3% of the gross proceeds of the sales price per share. Also FBR is allowed customary indemnification rights and expense reimbursements for up to $25,000 of expenses. The Sales Agreement will automatically terminate on two conditions (whichever is earlier): “(1) the sale of all common stock subject to the Sales Agreement and (2) April 26, 2019.”
Also MannKind or FBR can terminate the Sales Agreement at any time upon 10 days’ notice to the other party or by “FBR at any time upon 10 days’ notice to the other party, or by FBR at any time in certain circumstances, including the occurrence of a material adverse change in the Company,” MannKind said.
In premarket trading today, MannKind shares were down by over 7%. Year to date, the stock is up by almost 9% while in the last year, it is down by over 66%.