UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 29, 2022, there were
MANNKIND CORPORATION
Form 10-Q
For the Quarterly Period Ended March 31, 2022
TABLE OF CONTENTS
1
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MANNKIND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
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March 31, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Long-term investments |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued expenses and other current liabilities |
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Financing liability — current |
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Deferred revenue — current |
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Recognized loss on purchase commitments — current |
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Total current liabilities |
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Senior convertible notes |
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Midcap credit facility |
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Promissory notes |
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Accrued interest — promissory notes |
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Financing liability — long term |
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Recognized loss on purchase commitments — long term |
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Operating lease liability |
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Deferred revenue — long term |
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Milestone rights liability |
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Deposits from customer |
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Total liabilities |
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Commitments and contingencies (Note 13) |
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Stockholders' deficit: |
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Undesignated preferred stock, $ |
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Common stock, $ at March 31, 2022 and December 31, 2021, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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— |
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Accumulated deficit |
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( |
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Total stockholders' deficit |
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( |
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( |
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Total liabilities and stockholders' deficit |
$ |
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$ |
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See notes to condensed consolidated financial statements.
2
MANNKIND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Revenues: |
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Net revenue — commercial product sales |
$ |
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$ |
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Revenue — collaborations and services |
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Total revenues |
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Expenses: |
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Cost of goods sold |
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Cost of revenue — collaborations and services |
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Research and development |
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Selling, general and administrative |
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Gain on foreign currency translation |
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Total expenses |
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Loss from operations |
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Other (expense) income: |
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Interest income, net |
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Interest expense on financing liability |
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— |
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Interest expense on notes |
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Other expense |
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— |
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Total other expense |
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Loss before provision for income taxes |
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Provision for income taxes |
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— |
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— |
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Net loss |
$ |
( |
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$ |
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Net loss per share - basic and diluted |
$ |
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$ |
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Shares used to compute net loss per share - basic and diluted |
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See notes to condensed consolidated financial statements.
3
MANNKIND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net loss |
$ |
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$ |
( |
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Other comprehensive loss: |
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Unrealized loss on available-for-sale securities |
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( |
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— |
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Comprehensive loss |
$ |
( |
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$ |
( |
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See notes to condensed consolidated financial statements.
4
MANNKIND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
(In thousands)
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Common Stock |
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Additional Paid-In |
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Accumulated Other |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Comprehensive Loss |
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Deficit |
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Total |
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BALANCE, JANUARY 1, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Net issuance of common stock associated with stock options and restricted stock units |
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— |
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— |
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Issuance of common stock under Employee Stock Purchase Plan |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock pursuant to conversion of the Mann Group convertible note |
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— |
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— |
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Issuance of common stock pursuant to conversion of the Mann Group convertible note interest |
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— |
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— |
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Issuance of common stock pursuant to conversion of the 2024 convertible notes |
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— |
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— |
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Issuance of common stock pursuant to payoff of the 2024 convertible note interest |
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— |
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— |
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— |
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Issuance of at-the-market placement |
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— |
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— |
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Issuance costs associated with at-the- market placement |
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— |
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— |
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( |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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BALANCE, MARCH 31, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Common Stock |
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Additional Paid-In |
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Accumulated Other |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Comprehensive Loss |
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Deficit |
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Total |
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BALANCE, JANUARY 1, 2022 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Net issuance of common stock associated with stock options and restricted stock units |
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— |
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— |
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Issuance of common stock under Employee Stock Purchase Plan |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock from market price stock purchase plan |
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— |
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— |
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Cumulative loss on available-for-sale securities |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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BALANCE, MARCH 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See notes to condensed consolidated financial statements.
5
MANNKIND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Interest expense on financing liability |
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— |
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Depreciation and amortization |
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Amortization of right-of-use assets |
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Interest expense on promissory notes |
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Gain on foreign currency translation |
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( |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
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Inventory |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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Other assets |
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( |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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( |
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Operating lease liabilities |
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( |
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( |
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Recognized loss on purchase commitments |
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( |
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( |
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Customer deposits |
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— |
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Net cash used in operating activities |
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( |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of debt securities |
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( |
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( |
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Proceeds from maturity of debt securities |
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— |
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Purchase of property and equipment |
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( |
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( |
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Purchase of available-for-sale securities |
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( |
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— |
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Net cash used in investing activities |
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( |
) |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from the Senior convertible notes |
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— |
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Issuance costs associated with Senior convertible notes |
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— |
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( |
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Proceeds from at-the-market offering |
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— |
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Issuance costs associated with at-the-market offering |
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— |
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( |
) |
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Payment of employment taxes related to vested restricted stock units and exercise of stock options |
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Proceeds from market price stock purchase plan |
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— |
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Net cash provided by financing activities |
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
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( |
) |
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL CASH FLOWS DISCLOSURES: |
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Interest paid in cash |
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$ |
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$ |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Reclassification of investments from long-term to current |
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— |
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Common stock issuance to settle employee stock purchase plan liability |
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Non-cash construction in progress and property and equipment |
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Payment on Mann Group convertible note through issuance of common stock |
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— |
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Payment of 2024 convertible notes through common stock issuance |
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— |
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Reclassification of the PPP Loan from current to long-term |
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— |
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Payment of Mann Group convertible note interest through issuance of common stock |
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— |
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Payment of interest on 2024 convertible notes through common stock issuance |
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— |
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See notes to condensed consolidated financial statements.
6
MANNKIND CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Significant Accounting Policies
The unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries (“MannKind,” the “Company,” “we” or “us”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022 (the “Annual Report”).
In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months ended March 31, 2022 may not be indicative of the results that may be expected for the full year.
Financial Statement Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates or assumptions. Management considers many factors in selecting appropriate financial accounting policies, and in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process and the COVID-19 pandemic has increased the level of judgment used by management in developing these estimates and assumptions. The COVID-19 pandemic continues to evolve and the ultimate impact of the COVID-19 pandemic is uncertain and subject to change. These effects could have a material impact on the estimates and assumptions used in the preparation of the condensed consolidated financial statements. The more significant estimates include revenue recognition, including gross-to-net adjustments, stand-alone selling price considerations for recognition of collaboration revenue, assessing long-lived assets for impairment, clinical trial expenses, inventory costing and recoverability, recognized loss on purchase commitment, milestone rights liability, stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities, and the valuation allowance recorded against net deferred tax assets.
Business — MannKind is a biopharmaceutical company focused on the development and commercialization of inhaled therapeutic products for patients with endocrine and orphan lung diseases. The Company’s lead product is Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, which was approved by the U.S. Food and Drug Administration (“FDA”) in June 2014. The Company collaborates with a number of third parties to formulate their drugs on the Company’s Technosphere drug delivery platform. Since September 2018, the Company has been collaborating with United Therapeutics Corporation (“United Therapeutics” or “UT”) to develop an inhaled formulation of treprostinil, known as Tyvaso DPI. In April 2021, United Therapeutics submitted a new drug application (“NDA”) to the FDA seeking approval of Tyvaso DPI for the treatment of pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). The NDA was resubmitted in December 2021 following a complete response letter in October 2021. The FDA is expected to complete its review of the NDA for Tyvaso DPI in May 2022.
Basis of Presentation — The condensed consolidated financial statements have been prepared in accordance with GAAP.
The Company is not currently profitable and has rarely generated positive net cash flow from operations. In addition, the Company expects to continue to incur significant expenditures for the foreseeable future in support of its manufacturing operations, sales and marketing costs for Afrezza, and development of other product candidates in the Company’s pipeline. As of March 31, 2022, the Company had capital resources of $
In August 2019, MannKind and its wholly owned subsidiary, MannKind LLC, entered into a credit and security agreement with MidCap Financial Trust (as amended, the “MidCap Credit Facility”). The MidCap Credit Facility currently provides a secured term loan facility with a potential aggregate principal amount of up to $
The Company believes its resources will be sufficient to fund its operations for the next twelve months from the date of issuance of these condensed consolidated financial statements.
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Principles of Consolidation — The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified for consistency with the current year presentation. Changes were made to the condensed consolidated statement of operations to disclose a single caption for interest expense on all outstanding notes. Changes were made to the condensed consolidated balance sheets to reclassify interest receivable from investments from accounts receivable, net to other assets.
Segment Information — Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as
Revenue Recognition — The Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue on product sales to a retail pharmacy as the product is dispensed to patients.
To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company has two types of contracts with customers: (i) contracts for commercial product sales with wholesale distributors, specialty and retail pharmacies and (ii) collaboration arrangements.
Revenue Recognition – Net Revenue – Commercial Product Sales – The Company sells Afrezza to a limited number of wholesale distributors and specialty and retail pharmacies in the U.S. (collectively, its “Customers”). Wholesale distributors subsequently resell the Company’s products to retail pharmacies and certain medical centers or hospitals. Specialty and retail pharmacies sell directly to patients. In addition to distribution agreements with Customers, the Company enters into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.
The Company recognizes revenue on product sales when the Customer obtains control of the Company's product, which occurs at delivery for wholesale distributors and generally at delivery for specialty pharmacies. The Company recognizes revenue on product sales to a retail pharmacy as the product is dispensed to patients. Product revenues are recorded net of applicable reserves, including discounts, allowances, rebates, returns and other incentives. See Reserves for Variable Consideration below.
Free Goods Program – From time to time, the Company offers programs to potential new patients that allow them to obtain free goods (prescription fills) from a pharmacy. The Company excludes such amounts related to these programs from both gross and net revenue. The cost of product associated with the free goods program is recognized as cost of goods sold in the condensed consolidated statements of operations.
Reserves for Variable Consideration — Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, payer rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts between the Company and its Customers, payers, and other indirect customers relating to the Company’s sale of its products. These reserves, as further detailed below, are based on the amounts earned, or to be claimed on the related sales, and result in a reduction of accounts receivable or establishment of a current liability. Significant judgments are required in making these estimates.
Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reduce recognized revenue to the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.