Assistant Managing Editor

MannKind Corp. is boosting its balance sheet with a public offering of 7.4 million shares, even as it works to assure investors that a partnering deal is in the works for Afresa and that an inhaled insulin product still has a fighting chance.

The Valencia, Calif.-based firm did not disclose the share price. Based on the closing stock price Tuesday, the offering could raise about $60 million, though it's likely the deal will be priced at a discount to that $8.13 close. Wall Street apparently thought so, too, sending shares (NASDAQ:MNKD) down 68 cents, or 8.4 percent, to close Wednesday at $7.45.

One million shares in the offering will be bought by MannKind's Chairman and CEO Alfred E. Mann. The company's principal stockholder, Mann also has made available a $350 million bridge loan ($215 million remains for potential drawdown) and has been one of the most vocal proponents of inhaled insulin, a space dominated by failure ever since Pfizer Inc. dropped Exubera, the first approved inhaled insulin product, after dismal sales.

Some cited Exubera's bulky inhaler as the reason for its poor uptake in the market, but that failure was enough to prompt other companies - Novo Nordisk A/S and Aradigm Corp. and partners Alkermes Inc. and Eli Lilly and Co. - to jettison their development-stage inhaled insulin programs, leaving MannKind as the last late-stage player standing.

In Monday's earning call, Mann reported results from a market survey in which roughly 200 endocrinologists and primary care physicians expressed a preference for Afresa for about 25 percent of their adult patients with either Type I or Type II diabetes. That's considerably higher, he said, than the 6 percent to 8 percent in a similar survey conducted just after Exubera's demise in 2007.

"Based on the latest study, it would appear that physicians are now better able to differentiate Afresa from competing insulin products," Mann told investors on the call.

But it will take more than that to ward off the negativity left over from Exubera. Investors are waiting on MannKind to find a partner for Afresa (insulin human [rDNA origin] inhalation powder), a move the company is hoping will come by the end of this quarter.

Hakan Edstrom, president and chief operating officer, said during the call that the firm's partnering activities were "moving to a very advanced stage."

Earlier this week, MannKind also unveiled a second-generation inhaler device and disclosed plans to accelerate development of that device, possibly even to coincide with the approval of Afresa, which has a PDUFA date of Jan 16.

The company is hoping that only a simple bioequivalent study will be required for the use of the device, designated "Dreamboat."

The new whistle-sized inhaler is intended to be an improvement on the current Afresa inhaler MedTone in terms of size and convenience, and also would use less insulin - only 20 units vs. 30 units required to get the same plasma concentration with the MedTone inhaler - a cost benefit that could be an additional selling point to potential partners.

The latest financing would add to the $34 million MannKind had in cash as of June 30. The firm also granted underwriters Jefferies & Co. Inc. and Rodman & Renshaw LLC an option to purchase an additional 960,000 shares to cover any overallotments.

As of June 30, the company had 103.6 million shares outstanding.

In other financings news:

• Auxilium Pharmaceuticals Inc., of Malvern, Pa., obtained a two-year revolving line of credit for working capital needs from Silicon Valley Bank, with $30 million committed at closing, with the potential for an additional $10 million upon mutual agreement. The deal adds financial flexibility for Auxilium, which is hoping to launch Xiaflex (collagenase clostridium histolyticum) for Dupuytren's contracture upon FDA approval. The firm filed a biologics license application earlier this year, and the FDA set an Aug. 28 PDUFA date, though the agency recently scheduled an advisory panel meeting for Sept. 16. (See BioWorld Today, March 4, 2009, and June 19, 2009.)

• BioTime Inc., of Alameda, Calif., is making an offer to the holders of approximately $3.5 million of its revolving credit notes to exchange those notes for common shares and warrants. The warrants will be exercisable at a price of $2 per share, subject to adjustment, and will expire on Oct. 31.

• Idenix Pharmaceuticals Inc., of Cambridge, Mass., priced an underwritten offering of about 7.2 million shares at $3.14 per share for net proceeds of about $21.2 million. Those funds would pad Idenix's balance sheet, which stood at about $52 million prior to the offering, and could help improve the company's position as it anticipates licensing talks with Basel, Switzerland-based Novartis AG for nucleoside polymerase hepatitis C inhibitor IDX184. The company reported proof-of-concept data last month and plans to submit a data package to Novartis this quarter. Leerink Swann is acting as the book-running manager. Shares of Idenix (NASDAQ:IDIX) fell 56 cents, or 15 percent, to close Wednesday at $3.13. (See BioWorld Today, July 22, 2009.)

• Inspire Pharmaceuticals Inc., of Durham, N.C., is raising about $100 million through a public offering of 22.2 million shares priced at $4.50 apiece, a slight discount to Tuesday's $4.97 closing price. The company also intends to grant underwriter Deutsche Bank Securities an option to purchase additional 3.3 million shares of stock to cover any overallotments. Proceeds are expected to be used for general corporate purposes. The offering is set to close Aug. 10. Shares of Inspire (NASDAQ:ISPH) closed at $4.60 Wednesday, down 37 cents.

• Onyx Pharmaceuticals Inc., of Emeryville, Calif., plans to offer 4 million shares of stock and $200 million in convertible senior notes due 2016 in concurrent public offerings. It intends to grant the underwriters 30-day options to purchase up to an additional 600,000 shares and up to an additional $30 million of convertible senior notes. Goldman, Sachs & Co. is acting as the sole book-running manager for these offerings. Shares of Onyx (NASDAQ:ONXX) dropped $5.37, or 14.7 percent, to close at $31.18.

• Pharmacyclics Inc., of Sunnyvale, Calif., said it anticipates total gross proceeds of $28.8 million from its rights offering announced last month. The company offered 22.5 million shares - it increased the offering from 18.8 million shares July 31 - priced at $1.28 per share. As of the offering's close, Pharmacyclics had received valid subscriptions from about 375 participants for the purchase of in excess of the 22.5 million shares offered. Participants included Federated Kaufman Funds, Perceptive Advisors LLC, Quogue Capital LLC, Special Situations Life Sciences Fund and Suttonbrook Capital Management, among other institutional investors. Shares of Pharmacyclics (NASDAQ:PCYC) closed Wednesday at $1.52, up 4 cents. (See BioWorld Today, July 17, 2009.)

• XDx Inc., of Brisbane, Calif., completed a $14.4 million Series G financing led by New York-based Bristol-Myers Squibb Co., with additional participation from previous investors, including Burrill Venture Capital; Duff, Ackerman & Goodrich; Integral Capital Partners; Intel Capital; Kleiner Perkins Caulfield & Byers; Sprout Group; and TPG Biotechnology. Proceeds will be used to support commercial activities associated with the company's AlloMap Molecular Expression Testing and to advance ongoing and new research and development programs.

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