MannKind Corporation — Form 10-Q Summary
Business context and reporting period
MannKind is a biopharmaceutical company focused on inhaled therapies. Its lead commercial product is Afrezza inhaled insulin. The company also manufactures and supports development of Tyvaso DPI for United Therapeutics and maintains additional pipeline programs. This filing covers the three and nine months ended September 30, 2021; financial statements are unaudited.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $22.2 million | $15.4 million | $62.9 million | $46.7 million |
| Afrezza commercial product revenue | $9.8 million | $7.3 million | $27.8 million | $22.3 million |
| Collaboration and services revenue | $12.5 million | $8.1 million | $35.1 million | $24.4 million |
| Loss from operations | $(6.6) million | $(9.1) million | $(23.1) million | $(24.2) million |
| Net loss | $(4.4) million | $(11.3) million | $(52.9) million | $(30.8) million |
| Net loss per share | $(0.02) | $(0.05) | $(0.21) | $(0.14) |
| Net cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $(49.4) million | $(28.4) million |
Afrezza commercial gross margin was 61% in the third quarter and 55% for the first nine months, compared with 51% and 49%, respectively, in the comparable periods. Nine-month non-GAAP gross margin was 62%, excluding a $2.0 million Amphastar insulin supply agreement amendment fee.
At September 30, 2021, MannKind had $51.7 million of cash and cash equivalents, $87.3 million of short-term investments and $42.1 million of long-term investments. Total principal debt was $288.4 million, with a net carrying value of $280.7 million. Stockholders’ deficit was $184.7 million and accumulated deficit was $3.1 billion.
Material changes versus the prior comparable period
- Total revenue increased 45% in the third quarter and 35% for the first nine months. Afrezza net revenue increased 34% and 25%, respectively, driven by higher demand, pricing, promotional activity and a lower gross-to-net adjustment.
- Collaboration and services revenue increased 54% in the quarter and 44% year to date, primarily from additional United Therapeutics development work and changes in the estimated revenue-recognition period.
- Operating expenses increased, including collaboration-service costs, research and development, selling expenses and general and administrative expenses. The increases reflected Tyvaso DPI manufacturing preparation, pipeline activities, the Afrezza pediatric study, promotional spending, patient support and higher stock-based compensation.
- The nine-month net loss included a $22.1 million non-cash loss related to the April 2021 amendment of the Mann Group convertible note, partially offset by a $4.9 million gain from forgiveness of the PPP loan. The Mann Group non-convertible note was repaid and the 2024 convertible notes were converted into common stock.
- In March 2021, MannKind issued $230.0 million of 2.50% convertible senior notes due 2026, generating approximately $222.7 million of net proceeds. In April 2021, it prepaid $10.0 million of MidCap debt and repaid $35.1 million of Mann Group non-convertible debt.
- Operating cash use increased to $49.4 million from $28.4 million in the prior-year period. Cash provided by financing activities was $172.9 million, principally from the senior convertible notes. Cash and restricted cash declined by $15.4 million during the first nine months.
Guidance, outlook, risks and unusual items
The filing does not provide formal revenue or earnings guidance. Management states that the company expects continuing significant expenditures for manufacturing, Afrezza commercialization and product development, and believes its resources will fund operations for the next twelve months from the financial statement issuance date.
- United Therapeutics submitted the Tyvaso DPI NDA in April 2021. In October 2021, the FDA issued a complete response letter identifying an open inspection issue at a third-party analytical testing center. The filing states that no issue was cited at MannKind’s Connecticut facility; United Therapeutics expected approval by summer 2022 or earlier, but the timing remained uncertain.
- The MidCap facility had $40.0 million outstanding and up to $60.0 million potentially available, subject to Tyvaso DPI and other conditions. MannKind was in compliance with applicable covenants at September 30, 2021. The facility is secured by substantially all assets, including intellectual property.
- The company remains unprofitable, has substantial debt and states that it may need additional capital. It cannot assure that it will have sufficient resources to repay principal or make future interest payments.
- MannKind had remaining recognized losses on insulin purchase commitments of $85.3 million and aggregate remaining Amphastar purchase commitments of €73.7 million. The commitments extend through 2027.
- The Vertice Pharma co-promotion arrangement for Thyquidity ended effective September 30, 2021, subject to transitional activities and a pending final settlement. MannKind reserved $0.8 million of related receivables.
- On November 8, 2021, after quarter-end, MannKind completed a $102.3 million sale-leaseback of its Connecticut manufacturing property. It entered into a 20-year lease with initial annual rent of approximately $9.5 million, subject to a 50% first-year abatement and future annual increases.
- Key risks include limited Afrezza commercial adoption and payer coverage, regulatory and manufacturing risks, Tyvaso DPI approval uncertainty, COVID-19-related disruption, dependence on suppliers and collaborators, foreign-exchange exposure and potential dilution from convertible debt and equity awards.
Important facts for investors to verify
- Progress and revised approval timing for Tyvaso DPI following the FDA complete response letter.
- Afrezza prescription growth, gross-to-net deductions, payer coverage and whether revenue growth can reduce operating cash burn.
- Liquidity after the sale-leaseback, including lease obligations, debt maturities, interest costs and access to the $60.0 million MidCap tranche.
- Ability to satisfy or renegotiate the Amphastar insulin purchase commitments and the $85.3 million recognized purchase-commitment liability.
- Final settlement terms for the terminated Vertice co-promotion agreement.
- Potential dilution from the senior convertible notes, Mann Group convertible note, stock awards and subsequent warrant exercises.