Yahoo would not accept this post.

[hammer]

    I have lurked here many times and I am a regular on YMB as well as long on MNKD for 9 years or so. I tried to post this on the YMB, nothing earth shattering, but the YMB Nazi would not allow the complete post. Its just my opinion on how the final deal may look.

    Since I personally think we are very, very close to an announcement of a deal, I will now post what I think the final deal will look like. Like many of you I only spend about 3 minutes a day thinking about this (yea right). From the start let me give my disclaimer that this is my opinion only based a few pieces of the total puzzle, so flame away if you like. And if Sierra has been right all along, oh well.
    I will predicate the following with my first choice of partner was JNJ, as I felt they had no real competing product and stand to lose in the consumable and diagnostic diabetes arena with the approval of Afrezza and partnering with another competitor. Although I still think they would be a great partner I have changed my opinion.
    As far as what MNKD is actually worth, I have posted in the past that MNKD will be valued at 20 billion for the American market, 20 billion for the European market based on potential Afrezza sales and Technosphere will also garnish another 20 billion in market cap for a total market cap of 60 Billion. Keep in mind this is based on my expectations of a fully matured product in a standalone company. I expect Afrezza to capture 35% worldwide sales of both type1 and type2 markets and this equates to about 14billion in sales. Technosphere should easily add another 6 billion in market cap with a 15% market penetration in other uses outlined by MNKD.
    That’s a total of 20billion in worldwide sales potential for MNKD. Without a partner and with their own sales force and by placing a 10x multiple (conservative), and assuming profit at 35% it places a market cap of MNKD at 70 billion or fully diluted share price of 130. This assumes shares at 550 million, prudent if MNKD had their own sales force.
In a nut shell I don’t think that the crap that Karp was trying to sell holds any water. With an approved product and Technosphere validated, BP understands well that MNKD is worth big bucks. So what will the deal look like?
    The offer will be from SNY. They will purchase outright the rights to Afrezza and all diabetic orientated technosphere products. That means SNY will purchase exclusive rights to Afrezza and the inhaled GLP-1, for 20 billion. I predict an all stock transaction based on the ADR SNY filed with the SEC at the end of last year. Shareholders can expect to receive 1.25 shares of SNY in exchange for each share of MNKD which they hold. This will support the immediate decrease in SNY share price on dilution of 500 million shares sold by SNY. Sanofi will also continue to pay royalty based upon actual sales to holders of the new company stock of Mannkind Technologies (MNKDT). Expect this royalty to be no more than 5% of sales. For instance if Afrezza reaches 10 billion in sales, MNKDT shareholders will receive 500 mil to distribute which is about $1.25 for every share you own paid as a dividend. This obviously fluctuates on a yearly basis, based entirely on sales. This may be termed and capped at 10 years.
    In addition to the rights acquired, they will also get the Danbury plant, the insulin stockpile and insulin manufacturing license. In essence Mannkind Corp will become a fully owned subsidiary of Sanofi. The rights to Technosphere will be retained by Mannkind Technologies. All other technosphere licensing outside of the diabetes market will be retained.
Mannkind Technolgies (MNKDT) will be located in Danbury, that’s why they are looking for land since the current infrastructure will be owned by SNY. Ownership of MNKDT will remain with current shareholders with each shareholder receiving 1 share of MNKDT for every 1 share of MNKD which they owned. Mr Mann could have taken this entity private, but I don’t believe he will, since part of the deal was royalty based to shareholders of the original Mannkind.
I know this is quite long and I have not hit every nuance of the agreement, however, It coincides with my dictum of a fair deal. It’s a fair deal when both parties feel like they both got (sc)rewed. In this case SNY pays 20billion for an approved but not market proven product and MNKD shareholders get 20 billion in SNY stock far below potential value. If sales are good MNKD shareholders appreciate by royalty and SNY stock. If sales are good SNY will be happy to pay the yearly royalty.
Best of luck to the longs on the board. Now I will wait and see the deal that Al finally secures.

Lianne and the rest of the board thanks for letting me post my protest yahoo post!

[joeypotsandpans]

Hammer's in the house!! Thanks for posting, as you can see...no issues getting it posted

[4Balance]

Very interesting speculation. SNY does seem to be a strong contender.

You have already mentioned the downward pressure on PPS if SNY issues us 1.25 shares for every share of MNKD that we own. Any idea what the SNY PPS might be?

And I think you're suggesting we'd keep all of our MNKD shares, which would then be converted to MNKDT shares. (Although, I don't know why the conversion would be required, since MNKD would continue to manufacture Afrezza and research other Technosphere applications.) How would you expect the PPS of MNKDT to compare with the PPS of MNKD?

[liane]

Hammer,

Welcome, and thank you for the post. It makes a tremendous amount of sense. I don't see why it would not have got posted on YMB. Their loss, our gain! 

[babaoriley]

Hammer (or should I say "Al Mann"), thanks for you post, which I've taken the liberty to repost using some spaces between paragraphs - I was having a devil of a time trying to read it as it displayed.

"I have lurked here many times and I am a regular on YMB as well as long on MNKD for 9 years or so. I tried to post this on the YMB, nothing earth shattering, but the YMB Nazi would not allow the complete post. Its just my opinion on how the final deal may look.

Since I personally think we are very, very close to an announcement of a deal, I will now post what I think the final deal will look like. Like many of you I only spend about 3 minutes a day thinking about this (yea right). From the start let me give my disclaimer that this is my opinion only based a few pieces of the total puzzle, so flame away if you like. And if Sierra has been right all along, oh well.

I will predicate the following with my first choice of partner was JNJ, as I felt they had no real competing product and stand to lose in the consumable and diagnostic diabetes arena with the approval of Afrezza and partnering with another competitor. Although I still think they would be a great partner I have changed my opinion.

As far as what MNKD is actually worth, I have posted in the past that MNKD will be valued at 20 billion for the American market, 20 billion for the European market based on potential Afrezza sales and Technosphere will also garnish another 20 billion in market cap for a total market cap of 60 Billion. Keep in mind this is based on my expectations of a fully matured product in a standalone company. I expect Afrezza to capture 35% worldwide sales of both type1 and type2 markets and this equates to about 14billion in sales. Technosphere should easily add another 6 billion in market cap with a 15% market penetration in other uses outlined by MNKD.

That’s a total of 20billion in worldwide sales potential for MNKD. Without a partner and with their own sales force and by placing a 10x multiple (conservative), and assuming profit at 35% it places a market cap of MNKD at 70 billion or fully diluted share price of 130. This assumes shares at 550 million, prudent if MNKD had their own sales force.
In a nut shell I don’t think that the crap that Karp was trying to sell holds any water. With an approved product and Technosphere validated, BP understands well that MNKD is worth big bucks. So what will the deal look like?

The offer will be from SNY. They will purchase outright the rights to Afrezza and all diabetic orientated technosphere products. That means SNY will purchase exclusive rights to Afrezza and the inhaled GLP-1, for 20 billion. I predict an all stock transaction based on the ADR SNY filed with the SEC at the end of last year. Shareholders can expect to receive 1.25 shares of SNY in exchange for each share of MNKD which they hold. This will support the immediate decrease in SNY share price on dilution of 500 million shares sold by SNY. Sanofi will also continue to pay royalty based upon actual sales to holders of the new company stock of Mannkind Technologies (MNKDT). Expect this royalty to be no more than 5% of sales. For instance if Afrezza reaches 10 billion in sales, MNKDT shareholders will receive 500 mil to distribute which is about $1.25 for every share you own paid as a dividend. This obviously fluctuates on a yearly basis, based entirely on sales. This may be termed and capped at 10 years.

In addition to the rights acquired, they will also get the Danbury plant, the insulin stockpile and insulin manufacturing license. In essence Mannkind Corp will become a fully owned subsidiary of Sanofi. The rights to Technosphere will be retained by Mannkind Technologies. All other technosphere licensing outside of the diabetes market will be retained.

Mannkind Technolgies (MNKDT) will be located in Danbury, that’s why they are looking for land since the current infrastructure will be owned by SNY. Ownership of MNKDT will remain with current shareholders with each shareholder receiving 1 share of MNKDT for every 1 share of MNKD which they owned. Mr Mann could have taken this entity private, but I don’t believe he will, since part of the deal was royalty based to shareholders of the original Mannkind.

I know this is quite long and I have not hit every nuance of the agreement, however, It coincides with my dictum of a fair deal. It’s a fair deal when both parties feel like they both got (sc)rewed. In this case SNY pays 20billion for an approved but not market proven product and MNKD shareholders get 20 billion in SNY stock far below potential value. If sales are good MNKD shareholders appreciate by royalty and SNY stock. If sales are good SNY will be happy to pay the yearly royalty.

Best of luck to the longs on the board. Now I will wait and see the deal that Al finally secures.


Lianne and the rest of the board thanks for letting me post my protest yahoo post!"

[babaoriley]

Okay, I can read it all now! Very detailed, and well thought out, and fun to read (it's a dream like scenario, but dreams occasionally come true)! The only thing I would disagree with is I can't see SNY or anyone else (except you and Spiro) paying $20 billion for, as you put it a "not market proven product." I hope I'm way off base with that comment!

[hammer]

Outstanding shares of SNY are currently 2.64billion. 500 million shares were authorized in the ADR. That dilutes SNY by roughly 19%. At current pricing for SNY it depresses the pps from the current 52 to 42/share.

It will be a sale for property rights and real property. A true sale for stock. The physical plant and production of Afrezza will no longer be under the control of MNKD. In this scenario the business must be split. I chose 1:1 for simplicity. If its less than the royalty conversion is still simple to do. Since I believe that technosphere itself is worth 20bil in market cap it maintains its full share structure on par with the 20billion sale of afrezza.

[liane]

Jul 30, 2014 13:49:51 GMT -5 babaoriley said:

Okay, I can read it all now! Very detailed, and well thought out, and fun to read (it's a dream like scenario, but dreams occasionally come true)! The only thing I would disagree with is I can't see SNY or anyone else (except you and Spiro) paying $20 billion for, as you put it a "not market proven product." I hope I'm way off base with that comment!

I keep reminding people that Pharmasset went for $11 B with a drug only through Ph II clinical trials.

[sr71]

Hammer -

I followed you here from the YB (where I NEVER desired to be a registered user).  You've always shared useful information and opinions over there, and you're off to a great start here as well.  Welcome to this site, which I believe is rapidly becoming the premier destination for serious posters.  We're on the cusp of a paradigm shift with MNKD that will truly improve the quality of life for a significant portion of the world's population.

sr

[zieg]

Thanks Hammer!!  Very well thought out!! 

[dubylvs]

Nice post. .. Rather exciting times aren't they? I found out about this over on the LVS Pro board and so glad I did. Learning on the fly here about this company (MNKD) and like what I see for sure... Thank you to all the informed posters who provide details that I wouldn't otherwise be able to view with my workload and all. In my opinion, longs will prevail on this one just as we did with LVS.. Both ceo's older but brilliant and with great vision and damn well know how to run a company and thats one of my biggest decision getting into a stock..Duby

[daduke38]

Hammer, 1st of all welcome over!  Not as much posting here, but what is here is much more constructive and civil.
If you read my post under the heading of Greenhill, I think we are very much in the same camp.  IF you could look back to the missing Matese poll, you would see I had SNY!
Although you put valuations and expressed it much better than I did, we have come to the same conclusion!
We could be dead wrong and I guess if Sierra guesses on enough companies, she will eventually stumle on to a correct prediction. Your scenario provides maximum shareholder value and leaves Al to finish out with Technosphere.
No matter how this comes out, Al will do what is best and won't leave a nickle on the table.
GREAT ARTICULATED POST!

[cp]

It appears to me that SNY may be the likely buyer of Afrezza with a potential price of $7B to $8.5B.

(1) SNY dominates the long acting segment in the US insulin market (SNY 65%; NVO 25%; LLY 10%). However, SNY has nearly no market share in fast acting segment (NVO 57%; LLY 41%; SNY - 2%). For SNY, Afrezza is a natural product to grow in the fact acting segment. For MNKD, no competition but strong sales force already in place. The recent SNY-MDT collaboration (06/16/14) is also an indication of SNY's ambition in diabetes market.

(2) A recent Reuters news (04/29/14) - "Sanofi SA is looking to sell a portfolio of mature drugs that could fetch between $7B and $8B, according to people familiar with the matter, yet another example of drug makers trying to shed non-core assets and focus on high-growth areas. ..." A more recent article (07/25/14) indicates "Sanofi SA wishes to divest its portfolio of old drugs ..., which is valued at $8.5B, ...". If it were a partnership deal, why would need a sudden divesture with $7B-$8.5?
 
(3) Is $8.5B a fair buyout for Afrezza? Let's just look at the existing market sales appropriate for Afrezza (prefilled-deviec and fact acting segment). In 2013, the global insulin sales finished at $20.9B, with an expected CAGR of 12.4% for the next six years. The fact acting segment is 35% with 2% CAGR, while the prefilled-device segment is 40% with 8% CAGR. The $8.5B valuation implies a peak penetration of 36% in the global fact acting and prefilled-device segment or 80% in the US fact acting and prefilled-device segment. 

Point #1 is purely speculation. Point #2 is known public information. Point #3 is scenario analysis. 


  

[mnkd2014]

Hammer,

First, welcome on board!

I wonder whether you have any inside info leading you to such a conclusion or it is just your dream-up idea?

Again, thanks for sharing your thought.

[mannmade]

Jul 30, 2014 14:00:44 GMT -5 liane said:

Jul 30, 2014 13:49:51 GMT -5 babaoriley said:

Okay, I can read it all now! Very detailed, and well thought out, and fun to read (it's a dream like scenario, but dreams occasionally come true)! The only thing I would disagree with is I can't see SNY or anyone else (except you and Spiro) paying $20 billion for, as you put it a "not market proven product." I hope I'm way off base with that comment!

I keep reminding people that Pharmasset went for $11 B with a drug only through Ph II clinical trials.

And more recently Idenix was sold to Merck for 3.8B.  They have a Hep C Drug in Phase 2 trials.  This is for a Hep C market with limited patent population (170m worldwide).  And for Hep C the market is already controlled by Gilead's Sovaldi with a 75% share of prescriptions, and Gilead's drug, Sovaldi has few if any side effects. In fact prescriptions shot up for Hep C a few hundred percent from year ago totals in May since Solvadi went on the market this year.   And also remember that this is for drug that is a cure for Hep C (as good as it gets for patients) so for investors/Merck there is no reoccurring revenue stream as a business... And yet Merck paid 3.8B two months ago.