- MannKind has $100 million in convertible debt that must be paid by August 15, or the company will face a cash shortage, The Street reports.
- The conversion rate is $6.80 per share, although the stock is only trading at around $5.50 at the open of today's market.
- MannKind may have to convince debt holders to accept equity, but that would most likely require offering numerous discounted shares. The net effect would be diluting the value of the stock.
There are many reasons why MannKind is in the position, but one major reason is that it took so long for the company to attain approval for their inhaled insulin Afrezza. In 2010, when it took on the $100 million debt, MannKind had to establish a stock-lending agreement with an investment bank so that creditors could short sell stock to hedge risk. Unfortunately, the company may be forced into the same position once again.
In addition to dealing with debt, MannKind also has to deal with annual operating expenses, which equal roughly $79 million and cover goods and services related to Afrezza manufacturing, as well as insulin supply. Beyond that, the company has R&D expenses for 2015 of $90 million. The total spend is $270 million.
It's not all bad, however. Although MannKind cannot turn to its Afrezza marketing partner, Sanofi, the company's annual report stated that the company has $250 million in cash available to it in 2015. It's a start.