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Post by ezrasfund on Aug 14, 2014 10:44:05 GMT -5
You are right that there is no formula that must be used. But I have to again ask the question. If first, there are upfront and milestone payments; and second there is the profit sharing arrangement, what is the "there is also a retrospective aspect as well"? Also..as well? This must be something. This was part of Matt's prepared statement, not the off the cuff answer to a question.
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Post by dreamboatcruise on Aug 14, 2014 10:49:43 GMT -5
Matt said in CC "When we model the deal with our internal sales projections, which of course, we've not disclosed, but we do, do that kind of modeling routinely in these kinds of analyses, we did obviously compare it to our traditional royalty-based deal and found that to get essentially equivalent economics, the royalty terms would be somewhere in the mid-20% range, which is a pretty favorable royalty comparison." Read more: www.nasdaq.com/article/5-things-mannkind-corps-management-wants-you-to-know-cm379929#ixzz3AKuRQZXLHow does 35% of profit equate to mid 20% royalties? What Matt was alluding to is the prior period R & D reimbursement, that's how. 35% of X (profit) = 25% of Y (sales) E = expenses 0.35 X = 0.25 (X + E) 0.1 X = 0.25 E E = 0.4 X Y = 1.4 X profit margin = X / Y = 1 / 1.4 = 71% So a royalty on sales of 25% is equivalent to 35% of profits when the expenses amount to 29% of sales. Why does this math imply to you what is included in that 29% of sales? Do you find it unreasonably high that expenses would be 29% of sales without an extra billion dollars factored in for prior R&D? |
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