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Post by jpg on Aug 20, 2014 23:01:16 GMT -5
Dream,
I agree with what you and Derek are saying especially if we call this the 'first or 2nd year sales model'.
Mathematically my objections to most models I have seen is that I think the wrong denominator is being used. I would use ALL oral and injected agents as a denominator and go from there. Afrezza capturing x% of all diabetic medications seems a lot more realistic as a starting point then Afrezza captures x% of the prandial insulin market. It might not change your end conclusions but it does makes the mathematical model fit clinical realities as I see them. It also makes higher sales of Afrezza modelable without being an easy target for the expert blind bashers (AF, the usual rude Yahoo crowd etc).
I say that this type of model might be a better fit to reality because from the perspective of many or most patients inhaled Afrezza is much closer to pills and very unrelated to 'whatever' type of injections. Patients, not investors or MDs, take these things: strangely it is easy to forget that 'detail'... Again there is a reason why so many pills are used when we intuitively know that starting insulin earlier is probably better.
Can Afrezza get 1% of ALL the diabetic medication market in the first year? 2%? 10% in the 3 year etc... from that perspective the numbers end up looking much different.
JPG
PS: thank you Derek for calling me bullish...
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Post by BD on Aug 20, 2014 23:10:01 GMT -5
jpg, I think a lot of us that are actually very bullish on one stock or another, on occasion feel as if we've been "pumping"...especially when we KNOW the stock is going up, only to see it tank. Sound familiar? (Maybe a bit too familiar right now...)
On the bright side, no one I've ever felt the need to apologize to for "pumping the stock" ever agreed to let me take the blame...I'll use that as my barometer that I'm simply being honest with my bullishness and that they recognize the fact.
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Post by babaoriley on Aug 20, 2014 23:58:38 GMT -5
I'll say this, Derek, "crow" has been served a plenty on this board over time, no question, the most popular meal here! Many have felt they were about to sit down to steak and lobster, only to be served steamed crow.
We'll get to those higher share price values, intuitively, this can't miss, unless the unexpected occurs. Can't always run scared from the boogie man though, sometimes, you just need to accept whatever risk is left and go forward.
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Post by hammer on Aug 21, 2014 7:21:30 GMT -5
Dream, I agree with what you and Derek are saying especially if we call this the 'first or 2nd year sales model'. Mathematically my objections to most models I have seen is that I think the wrong denominator is being used. I would use ALL oral and injected agents as a denominator and go from there. Afrezza capturing x% of all diabetic medications seems a lot more realistic as a starting point then Afrezza captures x% of the prandial insulin market. It might not change your end conclusions but it does makes the mathematical model fit clinical realities as I see them. It also makes higher sales of Afrezza modelable without being an easy target for the expert blind bashers (AF, the usual rude Yahoo crowd etc). I say that this type of model might be a better fit to reality because from the perspective of many or most patients inhaled Afrezza is much closer to pills and very unrelated to 'whatever' type of injections. Patients, not investors or MDs, take these things: strangely it is easy to forget that 'detail'... Again there is a reason why so many pills are used when we intuitively know that starting insulin earlier is probably better. Can Afrezza get 1% of ALL the diabetic medication market in the first year? 2%? 10% in the 3 year etc... from that perspective the numbers end up looking much different. JPG PS: thank you Derek for calling me bullish... First of all, Derek great work. I think we are all here in some respect to view others analysis in order to back up our own D&D. JPG, I whole heartedly agree with your assumptions. Time and time again I think that board members under estimate the impact in the type 2 market. Management in presenting their own figures have tried to reiterate this fact. I can only assume in the search for a partner, SNY as well anticipate the impact in this under or inappropriately treated population.
I agree that these are 1-2 year projections and only based on US sales. With anticipation of EU and Japanese sales along with ROW sales mostly contingent on US FDA approval, 3rd year sales take a dramatic bump since early EU sales will overlap US sales. Even with very modest US growth sales will double from end of year 2 to year 4.
Listen to Al when he said this is a 4 billion opportunity in the US, so ultimately close to 8 billion in both US & EU. Watch closely for filling machine orders since Danbury capacity should be reached end of year 4. I would anticipate plans for a new facility rather quickly after initial sales are registered.
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Post by otherottawaguy on Aug 21, 2014 7:41:39 GMT -5
Hammer:
I sent off last week an email to Matt on the subject of capacity and the potential for expanding next year. I knew about the three lines for this year, just wondered if there might be more planned for 2015. No response yet.
This might be a tell for expected sales levels going forward.
OOG
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Post by hammer on Aug 21, 2014 8:24:53 GMT -5
OOW, Please keep us informed if you get a response. In my past experience, Matt is very beneficial in clearing up statements but very careful not to answer any questions which may not be already publically disclosed.
I have a sense that he has recently received quite a few email. Lianne may want to consider a separate folder specifically for shareholder correspondence if people are willing to share their interactions with Matt etal.
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Post by derek2 on Aug 21, 2014 8:46:05 GMT -5
I updated the model based upon thread feedback - thank you, folks. It didn't lead to huge differences, but it better reflects the deal structure. (note - I posted this at the same time over on Freeforums due to a bunch of interest. I won't typically do that, since I think people can just go from forum to forum, and you can browse the Proboards MNKD board without having an account. I just want to be up front abt that.) Earnings are determined by: 1. SNY sales are pegged at $700M, $1.5B, $3B and given a standard deviation of abt 15%. This leads to +- 30% being used in the 10000 trials. On the $3B target, that would actually outstrip the max capacity at Danbury (high end of the CI = $3.9B vs $3.5B capacity) 2. SNY profit is calculated based on (but not exactly) the inference that was mentioned of 71% SNY margin. I put it at 61% with a 7% SD, so 95% CI = 47% - 75%. Gives some allowance that we might be too optimistic on that, but it does allow for that possibility (and allows for even higher at the edge of the CI. 3. MNKD revenue is based on the $35% profit share (easy peasey) 4. MNKD profit is based on 65% with a sd of 7%, so the 95% CI is 51% - 79%. Gosh that seems high, but their major cost - the manufacturing - is being covered, so it makes sense. 5. Does not take into account any non-Afrezza revenue, nor does it take into account any milestone payments to MNKD or from MNKD to Deerfield 6. I use a fully diluted share count of 450M and a PE of 30 The calculation goes PROFITmnkd = SALESsny*MARGINsny*35%*MARGINmnkd with sales and margin variables varying based on the parameters I list above. For those wanting to really geek out, an example of an Excel formula for $700M sales would be: =NORMINV(RAND(),.7,.1)*0.35*NORMINV(RAND(),.61,.07)*NORMINV(RAND(),.65,.07)*1000 Gives a result in $Millions. then you copy & past to 10,000 cells, get an average for your result and plot a histogram. The histogram is the fun part, because it shows the upper & lower effect of the variability built in to the model. So that said (since some folks wanted some background, and to show how I've tuned it) Sanofi Sales Mean ($B) 0.7 Sanofi Sales sd 0.1 Mannkind EBIT Mean 65% Mannkind EBIT sd 7% Sanofi EBIT Mean 61% Sanifi EBIT sd 7% Average MNKD Profit $97,095,004.41 MNKD Shares 450000000 PE 30 Share Price $6.47 Attachment DeletedSanofi Sales Mean ($B) 1.5 Sanofi Sales sd 0.2 Mannkind EBIT Mean 65% Mannkind EBIT sd 7% Sanofi EBIT Mean 61% Sanifi EBIT sd 7% Average MNKD Profit $207,143,948.61 MNKD Shares 450000000 PE 30 Share Price $13.81 Attachment DeletedSanofi Sales Mean ($B) 3 Sanofi Sales sd 0.4 Mannkind EBIT Mean 65% Mannkind EBIT sd 7% Sanofi EBIT Mean 61% Sanifi EBIT sd 7% Average MNKD Profit $417,016,426.90 MNKD Shares 450000000 PE 30 Share Price $27.80 Attachment Deleted
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Post by engineer4life on Aug 21, 2014 9:20:13 GMT -5
Awesome works, now I get it. Thx for sharing.
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Post by dreamboatcruise on Aug 21, 2014 17:42:14 GMT -5
=NORMINV(RAND(),.7,.1)*0.35*NORMINV(RAND(),.61,.07)*NORMINV(RAND(),.65,.07)*1000 Gives a result in $Millions. then you copy & past to 10,000 cells, get an average for your result and plot a histogram. Getting a bit off topic but if anyone wants to go wild with these sorts of Monte Carlo simulations there is a free add-on for Excel called MCSim that automatically does this sort of thing even with complex spreadsheets. You tell it which cells to vary and which ones to record and it evaluates the spreadsheet for how many every runs you want it to do.
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Post by 4Balance on Aug 22, 2014 18:03:30 GMT -5
Who knows what the future holds, but I'm perking up. Derek, if you're perking up, I am too....!
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Post by derek2 on Aug 23, 2014 8:46:34 GMT -5
Who knows what the future holds, but I'm perking up. Derek, if you're perking up, I am too....! Your persistent questioning helped bring me back in "balance". Putting my valuation assumption into an Excel model, and seeing that the 95% confidence interval of the models always showed profitability, with almost all valuation exceeding my assumption, made me give my head a shake. Trial risk - resolved FDA risk - resolved Dilution risk - resolved ($500M in financial resources / lines of credit) Partner risk - resolved (SNY) Key Man risk (Al's health) - resolved since SNY's sales efforts do not depend on Al What's left? Commercialization, and who better than SNY to do that. Loaded 1/2 my max value with shares and will buy an equal value in Jan 2017 calls Those calls become available Nov 17, 2014, [EDIT] October 13 2014, since MNKD is a Cycle 2 expiry stock (http://www.cboe.com/TradTool/Symbols/SymbolEquity.aspx?sid=M). By Jan 2017, there will have been 6-7 quarters of sales. Jan-Mar 2015 will be rollout, with Q2-Q3 probably showing losses from marketing expenses, but the sales metric will be the number to watch. The story will be well told in Q4 2015 - Q3 2016, with Dec earnings release falling 3 - 4 weeks before options expiry. My biggest challenge will be turning off my trading screen, not getting too fancy and just letting the sales story play out.
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