MannKind Corporation 2022 Form 10-K Summary
Business context and reporting period
MannKind is a biopharmaceutical company focused on inhaled therapies and drug-delivery devices for endocrine and orphan lung diseases. This filing covers the fiscal year ended December 31, 2022, with comparable results for 2021 and 2020. Its commercial products were Afrezza inhaled insulin and the V-Go wearable insulin-delivery device. Tyvaso DPI, developed with United Therapeutics, received FDA approval in May 2022 and was commercialized by United Therapeutics beginning in June 2022.
- V-Go was acquired from Zealand Pharma on May 31, 2022.
- MannKind manufactures Tyvaso DPI for United Therapeutics and receives manufacturing revenue plus low-double-digit royalties on net sales.
- The pipeline includes MNKD-101, an inhaled clofazimine formulation for nontuberculous mycobacterial lung disease.
Financial performance and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $99.8 million | $75.4 million | Up 32% |
| Commercial product sales | $56.2 million | $39.2 million | Up 44% |
| Collaboration and services revenue | $27.9 million | $36.3 million | Down 23% |
| Royalty revenue | $15.6 million | None reported | New in 2022 |
| Commercial product gross profit | $40.2 million | $22.3 million | Up 80% |
| Commercial product gross margin | 72% | 57% | Up 15 percentage points |
| Loss from operations | $(64.1) million | $(47.0) million | Loss increased |
| Net loss | $(87.4) million | $(80.9) million | Loss increased 8% |
| Net loss per share | $(0.34) | $(0.32) | Worsened |
| Cash used in operations | $(80.7) million | $(61.7) million | Use increased |
- Afrezza net revenue increased by $4.1 million, or 11%. Afrezza gross revenue increased 11%, while its gross-to-net adjustment remained approximately 39% of gross revenue.
- V-Go contributed $12.9 million of net revenue and $5.6 million of gross profit from the acquisition date through year-end. V-Go gross margin was 43%.
- Tyvaso DPI generated $24.8 million of collaboration and manufacturing revenue and $15.6 million of royalties during 2022.
- Gross-to-net adjustments for commercial products totaled $40.8 million, or 42% of gross revenue, compared with $24.9 million, or 39%, in 2021.
- Research and development expense increased 60% to $19.7 million; selling expense increased 18% to $53.8 million; general and administrative expense increased 18% to $37.7 million.
- Cost of collaboration and service revenue increased 88% to $41.5 million, primarily due to increased Tyvaso DPI manufacturing activity.
Liquidity, debt and financial position
- At December 31, 2022, MannKind held $69.8 million of cash and cash equivalents, $101.1 million of short-term investments and $2.0 million of long-term investments.
- Total assets were $295.3 million, total liabilities were $545.8 million and stockholders’ deficit was $250.5 million.
- Principal debt outstanding totaled $278.8 million, comprising $230.0 million of senior convertible notes due 2026, $40.0 million under the MidCap credit facility due 2025 and $8.8 million of Mann Group convertible notes due 2025.
- The senior convertible notes bear 2.5% interest and have an initial conversion price of approximately $5.21 per share. The Mann Group notes are convertible at $2.50 per share.
- The MidCap facility bears interest at one-month SOFR plus 6.25%, subject to an 8.25% cap and a 1% SOFR floor. Principal payments begin in September 2023.
- Contractual cash requirements disclosed at year-end totaled approximately $617.0 million, including debt, the financing liability from the Danbury sale-leaseback and insulin purchase commitments.
- The Amphastar insulin supply agreement had $72.3 million of remaining purchase commitments through 2027. The company has accrued a recognized loss on these commitments.
- Management stated that available resources, projected Afrezza and V-Go sales, and expected Tyvaso DPI royalties and manufacturing revenue should fund operations for at least the next twelve months.
Material changes versus the prior comparable period
- Revenue growth reflected the V-Go acquisition, initial Tyvaso DPI commercialization and new Tyvaso DPI royalty revenue.
- Commercial product gross margin improved from 57% to 72%, but the operating loss widened because of higher collaboration manufacturing costs, research and development, selling and administrative expenses.
- Operating cash use increased by $19.0 million to $80.7 million, while year-end cash and cash equivalents declined by $54.4 million to $69.8 million.
- MannKind raised $19.8 million of gross proceeds through its at-the-market equity offering and issued additional shares through conversions of Mann Group debt and other equity programs.
- Shares outstanding increased to 263.8 million at December 31, 2022 from 251.5 million at December 31, 2021.
- Inventory increased to $21.8 million from $7.2 million, partly reflecting V-Go and expanded production activity; the company recorded a $2.2 million inventory write-off.
- The company transitioned the MidCap credit facility reference rate from LIBOR to SOFR in August 2022.
Guidance, outlook, risks and unusual items
- No formal revenue or earnings guidance is provided in the filing. Management expects continued operating losses and continued cash requirements.
- Management expects FDA approval of a new FDKP source in 2024 and plans to initiate a Phase 2/3 U.S. study of MNKD-101 in 2023. The Afrezza INHALE-1 pediatric study was expected to complete enrollment by the end of 2023.
- Manufacturing capacity is being expanded for Tyvaso DPI, with expansion costs borne by United Therapeutics. MannKind relies on a single qualified insulin supplier for Afrezza and on contract manufacturers in China for V-Go.
- If unrestricted cash and short-term investments fall below $90.0 million, the MidCap facility requires compliance with a trailing twelve-month Afrezza revenue covenant tested monthly. A failure could result in acceleration of the facility.
- The company remains dependent on product adoption, payer coverage, pricing and reimbursement, United Therapeutics’ Tyvaso DPI commercialization, regulatory approvals and additional financing.
- Afrezza remains subject to FDA post-approval requirements, including the pediatric study and ongoing discussions regarding an appropriate long-term pulmonary safety study. The filing states that the long-term safety study has not commenced and has not been budgeted.
- The filing identifies risks from supply-chain disruption, inflation, China-based manufacturing, regulatory enforcement, product liability, intellectual property disputes, cybersecurity, healthcare pricing reforms and volatile capital markets.
- Unusual or significant items included a $9.8 million financing-liability interest expense related to the failed sale-leaseback accounting, a $0.9 million loss on an available-for-sale investment and a $4.8 million foreign-currency translation gain related to euro-denominated insulin commitments.
- The company recorded no income tax benefit despite approximately $2.2 billion of federal and $1.7 billion of state net operating loss carryforwards because its deferred tax assets remain fully offset by a valuation allowance.
Most important facts for investors to verify
- Whether Tyvaso DPI demand and United Therapeutics purchase orders can sustain expected royalty and manufacturing revenue growth.
- Whether Afrezza and V-Go sales can improve recurring operating cash flow after gross-to-net deductions and selling expenses.
- The company’s ability to meet debt maturities, lease-related financing obligations and the $72.3 million insulin purchase commitment without materially dilutive financing.
- Compliance with the MidCap cash threshold and Afrezza revenue covenant as principal payments begin in September 2023.
- Progress toward approval of the new FDKP source and the status, cost and design of the required long-term Afrezza safety study.
- Capacity expansion, supply reliability and quality performance at MannKind’s Connecticut facility and V-Go contract manufacturers in China.
- The final purchase-price accounting for the V-Go acquisition and any resulting changes to goodwill, intangible assets or contingent milestone liabilities.
- The sustainability of the reported 72% commercial product gross margin, particularly as the product mix shifts and Tyvaso DPI manufacturing scales.