Without going over the entire Facility Agreement, which is quite long, it's a little difficult to tell what exactly is going on here. However, I do think it's easy enough to get a very good sense of it all.
First, I'm not at all clear why the $18.9 million price (the milestone purchase price or "MSPP") to purchase the milestone payments was not set out in the release, seems that would have been a positive. But, anyway, in looking at the SEC filing, it seems that in exchange for the MSPP (and it's not clear to me when that MSPP is actually paid to MNKD, but I would assume now), MNKD will pay the Lender (or its affilliate) the sum of up to $90 million when and if MNKD achieves the stated milestones. Nothing wrong with that, this is a high risk business, so a big reward is warranted.
Again, from the SEC filing, it seems to me MNKD's right to prepay the Tranche 1 Notes is limited to the situation where MNKD does not qualify for Tranche 2, which of course would not be good news for MNKD. So, I don't know that the right to prepay the Tranche 1 Notes is all that much good to MNKD.
Also, it is not clear to me from just the synopsis in the SEC filing if MNKD can say no to further tranches. Whereas the lender's obligation to advance those tranches is contingent on MNKD fulfilling the milestones, I don't know that MNKD has the right to tell the lender that it no longer requires their money. I would think, actually, that the lender has the right to make advance the Tranches, as, when and if the milestones are met.
IN MY MIND, THIS TRANSACTION SAYS ABSOLUTELY NOTHING, ZERO, ZILCH, either explicitly or implicitly, about finding a partner to market the product. This company doesn't market and neither does MNKD, really, so there, nothing has changed at all, and MNKD will be looking for a big pharma partner just as if this transaction never happened, but may be able to cut a little better deal with them, given the strength this facility adds.
I like that this will cost us no more than 12 million shares, and it's not limited to a $40 million raise; if the stock were to be at $20 at conversion time (not likely, just sayin'), then the lender would have the right to convert up to $120 million of the debt (assuming they have made at least 3 tranche advances of $40 million each) into 6 million shares at $20 per share.
Without looking further, the guy on Yahoo that Deez quoted is either a short trying to spook people, or someone that is confused.
Finally, to qualify for Tranche 2 (release of "certain" results"), I wonder just what results are needed in order to meet that milestone. Maybe spelled out in that really long document which governs the Credit Facility!
