MannKind Corp. is raising $175 million through a private stock and warrant sale, with its top executive buying into half of the placement, to further fund the pivotal development of its lead product.
"We publicly stated in our last SEC filing that we would have sufficient cash to last through the third quarter of this year," Dick Anderson, MannKind's chief financial officer, told BioWorld Today. "The Street was expecting us to go out and raise money sometime this summer, so this was not a surprise."
Nevertheless, the financing was well received as the Valencia, Calif.-based company's shares (NASDAQ:MNKD) gained $1.20, or 11.7 percent, to close at $11.43 Wednesday.
The bulk of the proceeds will go to further developing its Technosphere Insulin System, which already is in Phase III testing. A U.S.-based study, which began earlier this summer, is testing the safety of inhaled Technosphere Insulin, while an efficacy study got under way in Europe late last year. Anderson declined to forecast timelines for the completion of those studies, but said that analysts expect regulatory submissions near the end of 2008.
The delivery system includes a dry powder Technosphere formulation of insulin that is inhaled into the deep lung using the company's MedTone inhaler. Past findings on the system, from a Phase IIb study, showed that it produced significant reductions in HbA1c levels over a three-month period without increasing the risk of hypoglycemia. Other clinical data have shown that postprandial glucose control was significantly improved when Technosphere Insulin was added to oral therapy, and that the variability of insulin absorption and glucose lowering effect of repeated inhalations of Technosphere Insulin compared favorably to regular subcutaneous insulin during the first three hours of dosing.
The definitive purchase agreement, which is scheduled to close tomorrow, calls for the company to issue about 17.1 million common shares and warrants to purchase up to another 3.4 million shares at an exercise price of $12.228 apiece. Its principal stockholder, Chairman and CEO Alfred Mann, is investing $87.5 million as part of the arrangement. The other half is being bought by unnamed institutional investors, a group that includes new and existing backers.
"We're very pleased that they demonstrated their interest in the company by going into this round," Anderson said, adding that specific investors were targeted in the lightly advertised financing, and some previously have invested in Alfred Mann-founded companies. "It's clear, from my discussions with investors, that they believe that investing alongside him in the past has worked out very well for them."
Before MannKind, Mann founded two medical device firms that sold for more than 10 figures. MiniMed Inc. was sold for about $4 billion to Medtronic Inc., of Minneapolis, and Advanced Bionics Corp. was sold to Boston Scientific Inc., of Natick, Mass., in a deal with a projected value ranging between $3 billion and $4 billion after milestone payouts.
Already, Mann had sunk about $240 million into MannKind, worth about 48.3 percent of the business prior to the new financing. Upon closing, MannKind will have about 49.9 million shares outstanding, and Mann will control about 48.9 percent.
Before securing the new funding, the company reported reserves of $42.4 million in cash, cash equivalents and marketable securities as of June 30, as well as a $24 million net loss in the preceding three months.
Absent a partnership on Technosphere Insulin, MannKind likely would return to the financing well for additional capital late next year, as its burn rate continues to climb given the program's expense. But Anderson noted that the company continues to have "discussions with some major pharmaceutical companies."
Additional proceeds from the latest financing will be directed toward other product development efforts, such as a cancer vaccine program expected to enter the clinic by the end of next year, as well as for working capital and general corporate purposes.
Incorporated in early 1991 as Pharmaceutical Discovery Corp., the company later that year changed its name to MannKind following a merger of its wholly owned subsidiaries with two other companies, AlleCure Corp. and CTL Immunotherapies.
Wachovia Securities, of Baltimore, and Leerink Swann & Co., of Boston, acted as the transaction's placement agents.