CVR: 5:1 risk/reward
scPharmaceuticals is a commercial-stage biopharma that develops and markets treatments for edema. MannKind is acquiring the company for $5.35/share in cash plus a CVR worth up to $1.00. Closing is expected in Q4 and should be straightforward.
At current prices, the market values the CVR at just $0.17, while the $0.75 regulatory milestone due by September 2026 looks realistic. This sets up a ~5:1 risk/reward on the CVR portion, assuming the merger closes as expected. Liquidity is solid, with $5–10m in average daily trading volume.
The $1 CVR consists of two parts:
- Regulatory: contingent on FDA approval of SCP-111, a drug-device combo, essentially a reformulation of an already approved SCPH’s drug with a new dedicated delivery device. Holders will receive $0.75 if consent comes before September 2026, $0.50 if it comes by December 2026, or $0.25 if it comes by June 2027.
- Sales: holders will get $0.25 if FUROSCIX TTM sales reach $120m, or $0.10–$0.25 if sales fall between $110m and $120m (on a sliding scale) by the end of 2026.
The sales milestone looks tough to hit, which means the CVR’s real value comes down to SCP-111 approval. Fortunately, the odds here look very strong. The pivotal trials are already complete with positive results, and the FDA application should be filed within weeks. Once submitted, the review window is typically around 10 months. Barring any unexpected issues with the sNDA, that timeline points to a decision by next summer, or a couple of months ahead of the $0.75 payout deadline.
To explain why I expect FDA approval to proceed smoothly, let me begin with some background. Edema is a condition characterized by fluid buildup in different parts of the body, commonly resulting from heart failure or chronic kidney disease. For decades, the standard treatment has been furosemide, administered either intravenously in hospitals or orally at home.
In 2022, scPharmaceuticals received FDA approval for FUROSCIX, a drug–device combination that delivers furosemide subcutaneously (into the fatty tissue beneath the skin) using a small wearable pump. The key advantage is that it can be administered at home, eliminating the need for hospital visits for IV therapy, while still achieving IV-like absorption (unlike oral tablets, which often show low and inconsistent absorption). The main limitation is that administration requires about five hours, since the drug must be infused gradually under the skin in small amounts.
To address this, scPharmaceuticals has been developing SCP-111, a reformulated drug and a new dedicated delivery mechanism also known as the ReadyFlow Autoinjector. It delivers the same amount of medicine as FUROSCIX but in a single 10-second injection into fatty tissue. Since it uses the same active ingredient and the same subcutaneous route, the product does not require a full new drug approval. Instead, SCPH will file an sNDA (supplemental new drug application), essentially an amendment to the existing FUROSCIX’s approval.
As I understand, submission for a new delivery mechanism sNDA requires only a limited supporting trial, that shows acceptable absorption rates and similar effects on the body, as well as similar safety profile. scPharmaceuticals ran the trial last year, and the results were positive, with both primary and secondary endpoints met. The key endpoint, absorption rate (or bioavailability) of SCP-111 compared to IV administration, came in at 107.3%, well within the FDA’s standard bioequivalence range of 80% to 125%. Combined with much faster and more convenient administration versus both IV and FUROSCIX, the odds of approval look strong.
On timing, the FDA aims to review 90% of sNDAs within 10 months. Two comparable cases involving autoinjectors, Zembrace (2019) and Makena (2018), were each reviewed in 10 months as well. This timeline lines up with MannKind’s guidance to launch SCP-111 “as early as Q3’26,” mentioned on the merger call:
The strategic importance of this launch is reflected in our deal structure. We’ve offered up to $0.75 of the CVR to the Autoinjector’s FDA approval, a substantial portion of the total CVR value. With an sNDA submission target of Q3, ’25, will be focused on supporting a successful launch as early as Q3 ’26, if approved.
A few more notes on the timeline for sNDA submission/approval:
- SCPH initially aimed to file the supplemental NDA in late 2024, but the timeline slipped after “observed variability during shelf-life testing in one lot of the SCP-111 Combination Product.” Management has not disclosed further details, but the issue appears to be resolved. In May, they reported that SCP-111 “continues to demonstrate a stable shelf-life profile in accelerated aging experiments required for the autoinjector’s future sNDA filing” and guided to a Q3 submission. The same timeline was reaffirmed in August and during the recent merger call.
- There is a risk that the FDA might reject SCPH’s sNDA on the first attempt. Even in this scenario, there would still be a chance to achieve CVR payout (but probably a lower one) as resubmissions are reviewed faster, in 4-6 months.
- SCPH estimates that the new device would cut COGS of FUROSCIX by roughly 70% due to much less equipment required. SCP-111 is just a spring-powered injector and has no pump, battery, electronics, etc. The cost savings should significantly improve profitability, giving MannKind every reason to get it approved and launched quickly.
Sales milestone
I don’t put much weight on this part of the CVR and view it more as optionality. FUROSCIX was approved for edema related to Class II/III chronic heart failure in 2022 and launched commercially in 2023. The label was later expanded to edema related to Class IV heart failure in August 2024 and chronic kidney disease in March 2025. Revenue has started to pick up lately, reaching $16m in Q2’25 versus $12m in Q1’25 and $36m for the whole of FY24. Still, the current run-rate remains well below the $110m threshold and would require extraordinary growth over the next year. SCP-111 is unlikely to move the needle here as its earliest likely launch in Q3’26 would be too late to contribute meaningfully.
Hitting the milestone will therefore depend almost entirely on MannKind’s ability to boost sales through its broader distribution network. That makes the sales milestone target look not only stretched, but also poorly aligned.
The merger should close smoothly
Closing conditions, including shareholder and regulatory approvals, are very likely to be satisfied. 11.5% of equity holders are already in support, including the largest shareholder, Orbimed, and the company’s CEO. As for the remaining shareholders, while the offer price represents only a small premium to pre-announcement levels, any pushback seems unlikely. SCPH has been consistently burning cash in recent years and lacks the scale to achieve profitability. Without a buyout, the company would likely need to raise equity within a year.
Regulatory risks are minimal as MannKind doesn’t own any edema drugs.
The buyer currently markets Afrezza, which treats diabetes, as well as a wearable insulin delivery device, V-Go. It sees some synergies with SCPH given that a substantial portion of patients with conditions that cause edema also have diabetes (see the quote below).
In terms of the overlap, I think when you look at the patients living with heart failure and CKD (chronic kidney disease), that are having fluid overload challenges, a lot of them do live with diabetes, and there is a large overlap. These are probably the sickest patients. They’re probably on insulin. And especially if we look at like the nephrology launch, there’s a large synergy in terms of where those centers are located, where our diabetes centers are located. So we believe scPharmaceuticals has done an amazing job to get to where they are today. But we’re bringing more sales efforts, and more marketing will help grow this product faster, especially as the subcu can potentially come to market next year. So that was a lot of the work there.
Now I’d like to discuss the significant unmet need that exists for patients living with CHF (congestive heart failure) and CKD. Fluid overload is a hallmark of CHF and CKD. While oral diabetics are commonly used in stable patients, their effectiveness becomes highly variable when fluid retention worsens. Nearly 60% of heart failure missions are directly linked to this issue, yet the current treatment paradigm often fall short with 25% to 30% of patients readmitted to the hospitals in 30 days. FUROSCIX offers a way to interrupt this cycle, helping patients keep their symptoms in check, and potentially avoid unnecessary hospital emissions.
does it make sense to wait for the final trading day?
The risk will be probably be lower on the final trading day as by that time closing of the merger will be a sure thing, but it is not clear if the CVR will still be available at the current price levels.
How are CVR payments treated for tax purposes? And what if you’re a foreign holder?
You would need to check for specific regulations in your jurisdiction, but my understanding that usually taxable gain is recognized only on the cash portion of the merger (which would be zero in this case) and then the cost basis of the CVR is equivalent to the difference between the stock purchase price and cash consideration received. Any gains on CVR are later calculated only if the CVR pays out.
Hi @DT, what is the reason for not considering this as a portfolio idea?
I simply mark all CVR setups that I post on SSI as quick pitches.
Is the CVR transferable ? After major litigation in GCVRZ and BMY, buyers have made CVRs non transferable to keep funds from acquiring for litigation if they monkey around with the milestones, which is common.
No, SCPH CVR will not be transferable, so one has to own SCPH share before the merger closes to invest in the CVR.
It always bugs me (on a philosophical level) that there’s no mechanism to wager on the CVR without exposure to deal-break risk and essentially being “levered” involuntarily. Like if I want to put $100k on the CVR at 25 cents, I need to tie up $2.2 million at the current $5.50 share price and pray for no breakage. (And I’m still tying up my money.)
Even if I’m willing to pay a premium on the CVR of 30 or 35 cents, there’s no way to do that, no one willing to offer the trade on the other side. I suppose if I was an institutional investor, a bank would happily write me some individualized swaps contract and let me offload the risk to them for a premium…but I’m just a nobody.
End of rant, sorry.
Actually I guess I could buy the underlying and a Feb ’26 put, but eyeballing the liquidity and the premium, the math doesn’t really pencil.
@dt may disagree, but it’s been my personal observation that CVRs are typically still available at 10-30% of max payout during the last several trading days before delisting, i.e., when the deal break risk is minimal.
Of course, it’s separate question whether 10-30% of max payout is cheap or expensive for a certain CVR.
That’s why it is cheap. If you were an institutional investor, do you think Goldman would let you buy the CVR for a $0.05 premium to the market price while they take on the financing and deal risk of the merger?
Tender offer document has been released. The background section shows that two other parties had made formal bids, but those came in at lower levels compared to MNKD’s final offer. One undisclosed party submitted its best offer of $3.62/share upfront (cash + stock) and $0.87/share in CVR, while another offer was $5.16/share with no CVR attached.
Regarding the CVR negotiations between MNKD and SCPH, the CVR portion payable upon SCP-111 FDA approval was increased from $0.25 to $0.50 and eventually to $0.75, while the FUROSCIX sales-dependent portion was reduced from $0.50 to $0.25. This could be a hint that SCPH’s management sees a decent chance of SCP-111 approval.
https://www.bamsec.com/filing/119312525198383?cik=1604950
It’s interesting how confident management is at the probability of achieving the $0.75 CVR milestone. 85% probability sounds good to me!
Leerink Partners conducted an analysis of the Offer Price. For purposes of its analysis, Leerink Partners assumed, at the Company’ direction, an 85% probability of success that Milestone 1 set forth in the CVR Agreement will be achieved by September 30, 2026 and a payout date for Milestone 1 of the CVR of November 15, 2026. Applying the midpoint of a range of discount rates from 14.00% to 15.50%, Leerink Partners calculated an illustrative net present value for Milestone 1 of the CVR at September 30, 2025 of approximately $0.55.
that’s like super interesting, about 8% in a year!
though considering the source is the company, and the first furoscix was delayed by several years, and this one is already delayed by about a year, they may be wrong.
If the deal closes and we receive the upfront $5.35 before Christmas, the IRR is much higher.
Consider it will be easier to understand spending 5% ( 5.62-5.35) now to earn 8% ( 6.10 – 5.62) in a year.
namaste
The tender closes October 6 already announced. It’s actually the fastest possible (20 business days from the official start of tender date)
sorry I understand the cash will be paid after the settlement date, a few days after the expiration date of 6 October, why are you thinking Christmas?
Management wants the deal to go through. There’s zero culpability if their estimate is way too positive, as there won’t be anyone to hold them accountable. Not saying this is a big deal, but in these kinds of analyses based on management expectations, the probability of success is usually crazy high.
Antitrust clearance from the FTC has been received.
Smooth sailing to Oct 6
Obviously the sNDA to be filed by the end of September, has not yet been filed.
Yes. I hope it’s them making sure all the t’s are crossed and i’s dotted before submitting.
They said FUROSCIX ReadyFlow Autoinjector on track for Q3 2025 sNDA submission back when they announced Mannkind acquiring them on Aug 25.
Considering the importance of the auto injector, and the near-term close date of the acquisition, I could understand if MannKind wanted to wait until after the close so it would have complete control of the process, but they announced by the end of September.
Enbumyst by Costasis Therapeutics was approved in September. Nasal bumetanide. Approved for edema in heart, kidney, and liver disease. All based on a single Phase 1 trial. Contrast with Furoscix which only this year is approved for kidney and is not approved for liver. I think it demonstrates management ineptitude.
From IR: “Typically SCPH only announces when the submission has been accepted for filing. With a new NDA this is typically 60 days from the time of submission.”
So assuming they submitted on 9/30 and its accepted for filing in 60 days the 10 month review gives no real time buffer for the $.75 milestone. That said I still like the CVR, but we have to take the company at their word on the submission timeline.
Are you saying they told you this recently?
It is untrue, both with the current sNDA and historically.
From the May 2024 10Q “We submitted a sNDA in early May of 2024 seeking to expand the indication of FUROSCIX to include the treatment of edema due to fluid overload in adult patients with CKD. The anticipated Prescription Drug User Fee Act (PDUFA) date for edema in patients with CKD is the first quarter of 2025.”
This was shortly after the filing and well before the sNDA was accepted.
That is their response. I asked “In the Aug 25 acquisition announcement, management guided to a Q3 2025 sNDA submission for the FUROSCIX ReadyFlow Autoinjector. Can you confirm if it’s been submitted, and if not whether scPharmaceuticals Inc. plans to announce once it has been via press release or 8-K?”
I hope we hear soon that the sNDA has been accepted. They’ve been guiding to a Q3 submission and know the CVR deadline so they’d be crazy to miss it.
Everyone is aligned here including MannKind to get the autoinjector approved asap
That’s quite a stretch. MannKind can save $25m if approval takes three months longer than anticipated. They would probably rather see that the company takes a few weeks longer to submit a thoroughly vetted package than that they rush things.
Acquisition complete this morning. They also confirmed they’ve submitted the sNDA in Q3.
I will give a small prayer that everything goes smoothly for the autoinjector to be approved on time in 2026 for the full CVR value.
“Additionally, the FUROSCIX ReadyFlow™ Autoinjector supplemental New Drug Application (sNDA) filing was submitted as planned in Q3 2025.”
Mannkind put out a press release saying FDA accepted the autoinjector sNDA with PDUFA date of July 26, 2026. Right on track.
Good luck everyone holding the CVR!
https://investors.mannkindcorp.com/news-releases/news-release-details/mannkind-announces-us-fda-accepts-review-its-supplemental-new
MannKind reported only $ 15.5 million 1Q 2026 Furoscix sales, about 20% below Q4 2025.
Yet during the conference call “we remain on track to meet our full year 2026 FUROSCIX revenue target of $110 million to $120 million.” This would entitle to a small contingent payment.
On a related note, the nasal competitor Enbumyst was acquired by Esperion in 2026, and Esperion is now being acquired. So there will be some new competition. I think Enbumyst was not commercialized during 2025 despite its approval.
MannKind Announces FDA Approval of Furoscix ReadyFlow™, the First and Only Autoinjector Delivering IV-Equivalent Diuretic Therapy for the Treatment of Edema in Adults with Heart Failure or Chronic Kidney Disease
Congrats everyone!
https://www.empr.com/news/fda-approves-furoscix-readyflow-autoinjector-edema-hf-ckd/
Approved -that’s 0.75 coming in around early Sep 26 !