Hey let’s double down

Hey let’s double down

Anyone whose played Blackjack in Vegas is familiar with the strategy of doubling down. There you sit with an ace and 5 (six or sixteen) while the dealer is showing a 6, naturally you assume the dealers hole card, the card that cannot be seen is a 10. The “book” says in such situations you double down, that is double your bet while taking just one card as there is no card that will put you over 21. Based on statistics the dealer has a greater chance of exceeding 21 and cha ching you get paid.

Yet how many times have we seen this exact situation, you get dealt a 4 making your hand total 20 (16+4), the dealer reveals that yes, a 10 is their hole card meaning they have 16 and must draw another card. At this very moment, your mind is doing the happy dance and you start thinking about that bottle of Veuve when suddenly, the dealers next card is a 5 and instead of busting he has 21 the best hand possible. That great bottle of Veuve suddenly becomes a cheap bottle of Chandon.

Well it seems like our friends at MannKind (NASDAQ: MNKD) are downing their own double down. Yesterday they announced they have drawn down the remaining funds available from the Mann Group. Today they announced they have renegotiated their deal with Deerfield Management; per a company issued press release;

“MannKind Corporation (Nasdaq: MNKD) (TASE:MNKD) and affiliates of Deerfield Management Company L.P. (“Deerfield”) have entered into an exchange and third amendment to their facility agreement (the “Facility Agreement”), pursuant to which MannKind’s $10 million principal maturity previously due on July 18, 2017 will be extended to October 31, 2017, subject to certain conditions, the existing minimum liquidity covenant is reduced as fully described below, and Deerfield will exchange $5 million of the Amended and Restated 9.75% Senior Convertible Notes due December 2019 (the “Tranche 4 Notes”) for 3,584,230 shares of MannKind’s common stock (the “Exchange Shares”). The exchange price for the Exchange Shares is $1.395 per share. The principal amount being repaid and exchanged under the Tranche 4 Notes represents the principal amount that would have otherwise become due and payable in December 2019.

Pursuant to the terms of the exchange and amendment agreement, Deerfield has agreed to extend its existing $10 million principal maturity from July 18, 2017 to August 31, 2017 and, subject to certain conditions on that date, further extend it to October 31, 2017. These conditions include that MannKind has not experienced a Material Adverse Event or an Event of Default (as such terms are defined in the Facility Agreement), that MannKind has received approximately $19.4 million of proceeds from the Loan Arrangement between MannKind and The Mann Group LLC, and that the Company has at least $10 million in Cash and Cash Equivalents (as such terms are defined in the Facility Agreement). Subject to these conditions, Deerfield has also agreed to amend the terms of the minimum liquidity covenant under the Facility Agreement such that, on the last day of each month through October 31 and on December 31, 2017, MannKind must maintain at least $10 million of Cash and Cash Equivalents (instead of $25 million).”

Now we’re pretty sure some will say that Deerfield wouldn’t agree to such a deal which includes converting debt into equity unless they felt MannKind had a viable future. While that is a possibility it sure would help matters if MannKind wasn’t blowing cash on useless reality TV shows or adding to their already heavy debt burden. It would be even better if they found a real strategy for increasing sales of Afrezza. Perhaps a strategy that does not involve hiring a large and very expensive sales force.

What MannKind cannot do, what no one can do is transform Afrezza into a blockbuster. Afrezza is and always will be nothing more than an effective short acting insulin with limited appeal, a niche product at best. Anyone who thinks otherwise also likely believes that pigs can fly, which we suppose is theoretically possible.

Heck they always say that you can build a coffee table that’s strong enough to hold up an elephant, although we’ve never figured out why anyone would want such a coffee table. Then again, we have never figured out why anyone thought inhaled insulin would be a blockbuster drug.