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Mannkind to Lend 8M Shares to Help Get Financing

From Associated Press (August 16, 2010)

VALENCIA, Calif. -- Biotechnology company MannKind Corp. is lending 8 million shares of its stock to help get up to $115 million in financing while it awaits government approval of a diabetes drug.

Under a plan outlined Monday, MannKind will lend the 8 million shares to Bank of America, whose Merrill Lynch brokerage will then sell the borrowed stock. Investors sell borrowed shares -- a tactic known as "shorting" -- because they believe they will be able to repay the loan by buying the stock at a lower price in the future.

Merrill Lynch will use its short position in MannKind’s stock to help offset the risks facing institutional investors who buy up to $115 million in convertible notes that the biotech company will have to repay in 2015.

MannKind, based in Valencia, has accumulated $1.7 billion in losses since its 1991 inception. The company is hoping to start making money from its development of a diabetes drug called "Afrezza." The U.S. Food and Drug Administration is expected to take the next step in the drug’s approval process in late December, according to MannKind.

The proceeds from the notes offering will be used to pay for MannKind’s clinical trials, research and other operations.

Besides lending the 8 million shares, Mannkind has agreed to sell up to 36.4 million shares to a limited partnership called Seaside and its CEO, Alfred Mann. Those stock sales are scheduled to be made during a 50-week period beginning Sept. 22.

MannKind shares plunged 47 cents, or 6.9 percent, in Monday’s extended trading after finishing the regular session at $6.82, up 29 cents.


Posted: August 2010