MannKind(MNKD) - 2023 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) MannKind Corporation's unaudited condensed consolidated financial statements for Q2 2023 and 2022 are presented, covering operations, balance sheets, and cash flows Condensed Consolidated Statements of Operations Net loss significantly narrowed for Q2 2023, driven by a substantial increase in total revenues, primarily from collaborations Condensed Consolidated Statements of Operations (In thousands, except per share data) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Total revenues | $48,611 | $18,894 | $89,237 | $30,886 | | Total expenses | $46,890 | $39,348 | $93,514 | $72,596 | | Income (loss) from operations | $1,721 | $(20,454) | $(4,277) | $(41,710) | | Net loss | $(5,265) | $(29,023) | $(15,060) | $(55,021) | | Net loss per share – basic and diluted | $(0.02) | $(0.11) | $(0.06) | $(0.22) | Condensed Consolidated Balance Sheets As of June 30, 2023, total assets increased, total liabilities rose, and cash and cash equivalents improved, resulting in an increased stockholders' deficit Condensed Consolidated Balance Sheet Highlights (In thousands) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $86,184 | $69,767 | | Total current assets | $230,233 | $234,896 | | Total assets | $313,422 | $295,282 | | Total current liabilities | $96,966 | $67,296 | | Total liabilities | $573,909 | $545,820 | | Total stockholders' deficit | $(260,487) | $(250,538) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly improved for the six months ended June 30, 2023, contributing to an overall increase in cash and cash equivalents Cash Flow Summary (Six Months Ended June 30, In thousands) | | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,752 | $(50,230) | | Net cash provided by (used in) investing activities | $17,456 | $(37,484) | | Net cash used in financing activities | $(4,791) | $(963) | | Net increase (decrease) in cash and cash equivalents | $16,417 | $(88,677) | | Cash and cash equivalents, end of period | $86,184 | $35,507 | Notes to Condensed Consolidated Financial Statements These notes detail the company's accounting policies and financial results, covering revenue recognition, product acquisitions, investments, debt, and significant commitments - The company's main commercial products are Afrezza® (insulin human) Inhalation Powder and the V-Go® wearable insulin delivery device. A key collaboration is with United Therapeutics (UT) for Tyvaso DPI®, for which MannKind receives royalties and manufacturing revenue[27] - In May 2022, the company acquired assets related to the V-Go wearable insulin delivery device from Zealand Pharma for up-front consideration of $15.3 million and potential sales-based milestones up to $10.0 million[82] - The collaboration with United Therapeutics (UT) for Tyvaso DPI is a major revenue driver, with three distinct performance obligations: R&D Services and License, Next-Gen R&D Services, and Manufacturing Services[45][139] - The company has a significant insulin supply commitment with Amphastar, with remaining purchase commitments totaling approximately €63.5 million from 2023 through 2027[179][180] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting significant revenue growth and a narrowed net loss, while affirming sufficient liquidity for the next twelve months Results of Operations Total revenues for Q2 2023 surged 157%, primarily driven by collaboration royalties and services related to Tyvaso DPI, alongside growth in commercial product sales Revenue Comparison (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2023 | 2022 | % Change | 2023 | 2022 | % Change | | Net revenue – commercial product sales | $18,345 | $12,722 | 44% | $35,907 | $22,548 | 59% | | Revenue – collaborations and services | $11,211 | $5,868 | 91% | $22,597 | $8,034 | 181% | | Royalties – collaborations | $19,055 | $304 | * | $30,733 | $304 | * | | Total revenues | $48,611 | $18,894 | 157% | $89,237 | $30,886 | 189% | - Afrezza net revenue increased by 27% for the three months ended June 30, 2023, compared to the prior year, driven by higher product demand and price[202] - V-Go, acquired in May 2022, contributed significantly to revenue growth, with net revenue increasing 132% for the three months ended June 30, 2023, compared to the same period in the prior year[205] - R&D expenses increased 32% in Q2 2023 YoY due to development activities for MNKD-101 (inhaled clofazimine) and the Afrezza INHALE-3 study[214] - Selling expenses decreased 12% in Q2 2023 YoY, primarily due to the termination of a pilot promotional effort for Afrezza targeting primary care physicians[214] Liquidity and Capital Resources The company's liquidity is supported by cash, equivalents, and investments, deemed sufficient for the next twelve months despite significant outstanding debt and purchase commitments - The company believes it has sufficient liquidity to fund operations for the next twelve months based on cash on hand, investments, and projected revenues[225][234] Outstanding Debt Principal as of June 30, 2023 | Debt Instrument | Principal Amount | | :--- | :--- | | Senior convertible notes | $230.0 million | | MidCap credit facility | $40.0 million | | Mann Group convertible note | $8.8 million | | Total | $278.8 million | - For the six months ended June 30, 2023, the company generated $3.8 million in cash from operations, a significant improvement from the $50.2 million used in the prior-year period[229] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks primarily from interest rate fluctuations on variable-rate debt and foreign currency exposure from Euro-denominated purchase obligations - Interest rate risk is linked to the MidCap credit facility's variable rate (SOFR-based), while other major debt instruments have fixed rates[237] - The company has significant foreign currency exchange risk due to its insulin supply agreement with Amphastar, which has obligations denominated in Euros. For the six months ended June 30, 2023, a $1.2 million currency loss was realized[240] - A hypothetical 10% change in the U.S. dollar to Euro exchange rate as of June 30, 2023, would result in a foreign currency impact of approximately $6.9 million to the pre-tax loss[241] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[243] - No material changes to the internal control over financial reporting were identified during the latest fiscal quarter[245] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is subject to ordinary course legal proceedings, which management believes will not materially adversely affect its financial position or results - The company states that it is not involved in any legal proceedings that are expected to have a material adverse effect on its financial condition[247] Item 1A. Risk Factors This section details significant business, operational, and financial risks, including product commercialization, supply chain, regulatory compliance, capital needs, and cybersecurity threats - Business Risks: The company faces risks of limited commercial success for its products, manufacturing challenges, reliance on single-source suppliers like Amphastar for insulin, and the need to raise additional capital despite a history of losses[250][256][266] - Regulatory Risks: The business is subject to stringent government regulation, including ongoing compliance with cGMP, potential for healthcare reform to impact pricing and reimbursement, and complex data privacy laws like GDPR and CCPA[253][347][362] - Financial Risks: The company may not generate sufficient cash to service its significant debt and commitments. Its stock price is volatile, and future equity or debt financing could be dilutive to existing shareholders[284][394][404] - Operational Risks: The company's IT systems are vulnerable to cyber-attacks, and a fire at a contract manufacturer's facility for an investigational product (MNKD-101) is expected to cause a 3-6 month delay in clinical supply production[297][327] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In April 2023, the company issued common stock to the Mann Group LLC for interest payment on a convertible note, exempt from registration - In April 2023, the company issued 13,192 shares of common stock to the Mann Group LLC to pay approximately $0.1 million in quarterly interest on the Mann Group convertible note[410] Item 5. Other Information An executive officer adopted a Rule 10b5-1 trading plan in Q2 2023 for the sale of common stock, set to expire in May 2024 - An executive officer adopted a Rule 10b5-1 trading plan on May 24, 2023, to sell 384,020 shares of common stock over the following year[411][413]