MannKind reports $54.8 million second quarter net loss, enters into $150 million loan agreement

By Jennifer Lanning Drey

Eugene, Ore., Aug. 3 - MannKind Corp. posted a second quarter net loss of $54.8 million, or $1.10 per share, compared with a net loss of $27.2 million, or $0.83 per share, for the comparable period of 2005, according to a company news release.

The company also announced it has entered into a $150 million loan agreement with Alfred Mann, chairman and chief executive officer of MannKind.

Under the terms of the loan agreement, the company can borrow up to $150 million in one or more advances at any time during the next year that its cash balance falls below its projected cash requirements for the subsequent three-month period.

Each advance will be no less than $50 million, and MannKind initiated the first $50 million loan on Tuesday.

"My purpose in loaning money to the company was to eliminate any pressure on MannKind to enter into a financing or strategic transaction solely because of our cash position," said Mann during a company conference call held Thursday.

MannKind will be required to pay all or a portion of the principal plus accrued and unpaid interest under the note upon certain financing events, including equity or debt financing or strategic transactions with third parties in which it receives proceeds of at least $100 million.

There are no warrants associated with the loan, and the loan is not convertible into MannKind stock, Mann said.

Interest is at one-year Libor plus 300 basis points, according to MannKind's 10-Q filing with the Securities and Exchange Commission.

The company believes the financing will allow it to fund its operations through the second quarter of 2007, according to Dick Anderson, chief financial officer of MannKind.

MannKind had $50.9 million in cash, cash equivalents and marketable securities on June 30, compared to $102.6 million on March 31, according to the news release.

Second quarter, cash burn averaged $17 million per month, compared to about $14 million per month for the first quarter, said Anderson during Thursday's call.

"We anticipate our cash burn will continue to increase over the next few quarters now that all of our major phase 3 trials have been initiated," Anderson said.

MannKind is running three phase 3 clinical trials of its lead product candidate, Technosphere Insulin (TI), and is on track to file a New Drug Application for TI in late 2008, according to Mann.

TI is an inhaled insulin delivery system that consists of a proprietary dry powder formulation of insulin inhaled using the company's proprietary MedTone inhaler.

The company plans to report data from its first phase 3 clinical study of TI, Study 014, at the European Association for the Study of Diabetes in September.

MannKind also said the larger Study 102 is well underway, and enrollment has started in the 500-patient Study 103.

"[Filing an NDA in 2008] is an aggressive objective and as might be expected, our greatest risk revolves around successful execution. Based on our trials to date, we do not see any real technology risk in meeting our approval goals," said Mann.

The company also said it continues to seek a partner for TI, but provided no further information on negotiations that have taken place.

MannKind, based in Valencia, Calif., discovers, develops and commercializes therapeutic products for diseases such as diabetes and cancer.

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