MannKind shoulders $160M in debt for PhIII inhaled-insulin gamble

More than two years after the FDA forced MannKind ($MNKD) to go back to the drawing board and plan two more late-stage studies of its inhaled insulin Afrezza, the biotech is drawing close to raising the curtain on the long-awaited results. And in anticipation of finally achieving success at the FDA, it's adding $160 million in new debt to prepare for a commercial launch.

Deerfield Management has stepped into the breach, committing to handing over $160 million in four tranches as MannKind hands over the Phase III data and renews its quest for an approval. In exchange for a $19.4 million upfront, MannKind also sold Deerfield the rights to the first $90 million in milestones based on initial sales--though the biotech can terminate that part of the deal if it can pay back the first $40 million tranche ahead of schedule.

Just days ago MannKind announced that it had wrapped the Phase III study for Type 2 diabetes. In early 2011 the biotech was also required to put Afrezza through a separate Phase III trial for Type 1 diabetes after the FDA pronounced--for the second time--that it was unsatisfied by MannKind's application for marketing approval.

MannKind's shares plunged on that news. By that time many analysts had already grown skeptical about its chances at the FDA after Pfizer ($PFE) and Eli Lilly ($LLY) had already tried their hand at inhaled insulin--and failed. But under the guidance of founder Alfred Mann, the company raised $370 million in debt in 2011 and pushed ahead on another round of studies. The latest round of debt takes the company well past the half-billion-dollar mark for the Phase III gamble.

Investors have been going along for the ride. Over the past 6 months MannKind's stock has surged 184% as the Phase III data readout drew closer.

"We are encouraged by Deerfield's confidence in the potential of Afrezza," Mann said in a statement. "We worked with Deerfield to structure a facility that aligns with our near- and long-term strategy to achieve important development, commercial and strategic milestones while minimizing near term dilution."

- here's the SEC filing
- here's the press release

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