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Post by hammer on Aug 21, 2014 19:42:26 GMT -5
The numbers game:
If management could just give us a peek at internals we would not have to do all this! Well, were all here for the same thing. We constantly write, re-write, amend our D&D based on every new piece of information we can get our hands on. We all come from different backgrounds so we have different assessment on the plurality of factors which ultimately lead us to differences of opinions on what this means to sales figures and ultimately the pps of “our” stock. Frankly, I don’t do this for any of my other stock holdings, at least to the extent that I do it with my sweet little addiction, Mannkind.
This time I’m not going to bore you with projections of pps, but rather bore you with what I would deem very conservative projection of numbers of people who will most likely take Afrezza. You can then decide what the resultant price of our stock may then be worth based on 35/65 profit split or 25% royalty deal that Matt said based on company internals of sales this deal reflected.
Current US figure for the diabetic market stand as such:
4.1 million Type 1 diabetics dependent on insulin for daily survival. Many of these willing to try a “better way” to treat their disease, not only health but social reasons. These patients tend to be treated by endocrinologist since management of these patients are somewhat more involved. Endo offices tend to be set up better for patient education and resources for patients than most GP practices.
1.7 million patients currently take basal insulin alone but would benefit from a prandial insulin. Its just a fact not all type 1 diabetics take a prandial insulin because the get by on basal alone or that means 3 more shots a day. Many in this population may also be type 2 diabetic in which a basal has been added to give better control.
There are 15.2 million patients who have never had insulin. Within this population subset 8.4 million are controlled. These are the patients who heeded the call from their physicians to watch their diet and exercise, and those early type 2 diabetics who have been started on an oral med but remain in control. I would not completely discount this subset to be a potential for Afrezza sales. Although insignificant percentages in this subset will use Afrezza, there are always a small percentage who will try just to see if its better. This is also the group that could experience greatest use if at anytime future studies show Afrezza should be used earlier in type 2 patients.
The other subset of 6.8 million are insulin naïve but out of control and would likely benefit from insulin. Strategically for SNY this is the largest patient population for Afrezza. This is the group who have failed oral and lifestyle changes to keep their condition under control. It is just fact that when lifestyle is not changed, type 2 diabetes is a progressive disease in which oral therapy ultimately fails. These are the patients who have been primed by their GP or Endo that insulin therapy should be started but the patient prolongs because they don’t want to start injectables.
If you’re counting that’s over 21 million Americans who possibly could use Afrezza either now or at some point in their lives. For the purpose of what I will present, keep in mind that the market in Europe is just a bit more than US figures but I will suffice it to say they are equal. So in Europe and in the US over 42 million patients may at sometime in their life benefit from Afrezza.
So here are my conservative guestimations based on yearly patient sales:
mnkd1.xlsx (8.74 KB)
As I pointed out these are guestimations of market penetration, personally I feel these are conservative in nature and not all would agree. It should be evident though that Afrezza successfully marketed by SNY is destined to be a blockbuster. There are a few problems that quickly become evident. Worldwide sales figures have been completely discounted. Frankly, those sales are generally discounted and even though may enormous in nature, as the market stands today EU/US sales are were the profit resides. Hopefully as markets in China improve the bottom line will also benefit.
Production capacity becomes a problem very fast. A single line at Danbury can produce Afrezz for about 166,000 patients. 3 lines are expected to be operational before launch providing capacity for 498,000 patients. A fourth line can extend this to 667,000 patients. Danbury can accommodate up to 12 production lines bringing capacity to 2 million patients, although MNKD has stated that at full capacity Danbury could service 4 million patients.
Danbury current capacity will be reached by the end of 2015. Maximum plant capacity will be reached by end of 2018 or early 2019. A second facility is needed soon to match capacity when sales in Europe ramp up. I believe Danbury was built for about 114 million but does not include the cost of recent filling machines. When Matt jokingly stated that their biggest dilemma was they needed more capacity, he was not joking! This is another benefit of our partnership with SNY since expansion is primarily the responsibility of SNY.
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Post by mnholdem on Aug 21, 2014 23:05:55 GMT -5
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Post by jpg on Aug 22, 2014 0:51:31 GMT -5
Well done. This way of looking at the market would seem, to me anyway, to be a much more robust and clinically realistic way of looking at different diabetic groups of potential customers. Even with the very low numbers you plug in we still do very well. I think we don't know enough about how Sanofi wants to do the role out to make anything but wild guesses for how sales will go in the first 6 months to a year. I would nevertheless be surprised if your 'pessimistic' (to me anyway) numbers are not giving us an significant margin of safety as far as sales go.
JPG
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Post by hammer on Aug 22, 2014 4:39:19 GMT -5
JPG
As you noted, I specifically took low market numbers to show 2 points. First that even by these numbers Afrezza is a blockbuster. Secondly, That even with slow numbers that demand will outpace production in short order. A European plant should be on the table within the first few quarters of sales or along with EU filing. In this same time period in Danbury you would also expect production of other technosphere products which need lines as well. We already see hints of this expension with purchase of Brownfield Land in Danbury. Perhaps we will see site preparation or land purchase by SNY soon in Europe.
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Post by mnholdem on Aug 22, 2014 7:06:33 GMT -5
I just noticed your 166k is PER FINISH FILL LINE, or 498k patients with three lines a capacity. Unfortunately, that means that according to Matt's projection of 375M cartridges per year with 3 lines, this would result in only 2 cartridges per day per patient, so I think your number of patients that can be treated based on a 3-line facility is too high. Even considering the higher dose cartridges, I think the 3-line capacity would be less than half that number of patients, perhaps even a third, so I'm thinking that wherever you got your information about 166k that it's for the number of patients that can be supplied with Afrezza with three lines running. The point is that production capacity needs to be addressed by MannKind/Sanofi ASAP and it's likely Sanofi is being given rights to the technology so that they can build/convert their plants worldwide to help meet future demand.
As far as Danbury operations, I'm going to make an assumption that the equipment needed to produce the Technosphere particles has sufficient throughput at present to supply the planned 12 lines, since Matt only mentions the need for more finish fill equipment. I'm also making a second assumption that the Technosphere insulin production (Al appears to distain the use of the word "powder") has likely been running for many months to load up inventory prior to working out the warning label with the FDA so that the packaging could be designed and ordered. MannKind has very likely produced more than enough inventory of the Afrezza Technosphere insulin to feed the fill lines as soon as they are ready and the packaging has been received.
Regardless, it quickly becomes apparent that the $150M upfront payment will need to go into purchasing and installing new finish fill lines RIGHT NOW. I think I understand now why MannKind/Sanofi are planning a 1Q 2015 launch. They simply need enough time to ensure that capacity meets demand.
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Post by hammer on Aug 22, 2014 7:28:27 GMT -5
From the 4th QTR 2012 CC Capacity discussion:
Alfred E. Mann - Founder, Chairman and Chief Executive Officer Well, initially, we certainly will handle it ourselves based on the Danbury facility. As Al mentioned, they have the capacity on a commercial basis to service up to 2 million patients. Beyond that, that certainly will be a discussion. We potentially thought as to whether they would have an infrastructure to help build out that and the structure for doing so is still open ended. But it would certainly, I would say, have probably a couple of years on the opportunity once we have a deal in place to determine which is the most efficient way of doing so.
Matthew J. Pfeffer - Chief Financial Officer, Principal Accounting Officer and Corporate Vice President Yes, just to make sure we're all on the same page. When we talk about a 2 million patient capacity at the Danbury facility, that's a fully built-out stake. We expect to launch with about 1/4 capacity. We have the footprint in place for that usage of the full amount of the 2 million capacity, but we haven't put all the equipment in because obviously, we didn't want to spend all the money before we had to. So it has a 12 full finished line capacity. We expect to launch with 3. So it's about 1/4 capacity roughly. And then we can build that out as we need it. Remember, the 2 million capacity, while we're talking about it, is not very much. It equates to somewhere in the $4 billion of sales range. So we're looking forward...Forward to starting to worry about outstripping that facility.
If you want to know cartridge production capabilities of Danbury, if I recall correctly Hakan gave those figures during the last shareholders meeting. This is available as a youtube video. But in answer to your question each line services 166k patients. The need for increased production capacity is always welcome as long as it outpaces actual need.
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Post by mdcenter61 on Aug 22, 2014 8:59:02 GMT -5
I just noticed your 166k is PER FINISH FILL LINE, or 498k patients with three lines a capacity. Unfortunately, that means that according to Matt's projection of 375M cartridges per year with 3 lines, this would result in only 2 cartridges per day per patient, so I think your number of patients that can be treated based on a 3-line facility is too high. Even considering the higher dose cartridges, I think the 3-line capacity would be less than half that number of patients, perhaps even a third, so I'm thinking that wherever you got your information about 166k that it's for the number of patients that can be supplied with Afrezza with three lines running. The point is that production capacity needs to be addressed by MannKind/Sanofi ASAP and it's likely Sanofi is being given rights to the technology so that they can build/convert their plants worldwide to help meet future demand. As far as Danbury operations, I'm going to make an assumption that the equipment needed to produce the Technosphere particles has sufficient throughput at present to supply the planned 12 lines, since Matt only mentions the need for more finish fill equipment. I'm also making a second assumption that the Technosphere insulin production (Al appears to distain the use of the word "powder") has likely been running for many months to load up inventory prior to working out the warning label with the FDA so that the packaging could be designed and ordered. MannKind has very likely produced more than enough inventory of the Afrezza Technosphere insulin to feed the fill lines as soon as they are ready and the packaging has been received. Regardless, it quickly becomes apparent that the $150M upfront payment will need to go into purchasing and installing new finish fill lines RIGHT NOW. I think I understand now why MannKind/Sanofi are planning a 1Q 2015 launch. They simply need enough time to ensure that capacity meets demand. I also tend to think that the $175mm debt facility as part of the deal will be utilized to fund equipment expansion and will be paid back through COGS reimbursement.
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Post by otherottawaguy on Aug 22, 2014 9:09:37 GMT -5
Hate to point this out, but the 40M received from Deerfield sounds to me like they accepted this to make the purchases of the equipment back in June just after approval.
Why else would you take money that you knew looking forward you wouldn't need due to the impending Sanofi partnership?
Think we were told that each line runs about 10M to install. Could they maybe looking at additional lines in 2015?
OOG
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Post by beardawg on Aug 23, 2014 10:58:27 GMT -5
From the 4th QTR 2012 CC Capacity discussion:
Matthew J. Pfeffer - Chief Financial Officer, Principal Accounting Officer and Corporate Vice President Remember, the 2 million capacity, while we're talking about it, is not very much. It equates to somewhere in the $4 billion of sales range. So we're looking forward...Forward to starting to worry about outstripping that facility. Maybe it's just me, but does this strike anyone as extremely good news? If this is what they expect as far as production, that is huge. They are saying that $4 Billion in sales a year is not very much. That means that we are talking at least $8 Billion a year in sales, but likely more than that.
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Post by hammer on Aug 23, 2014 12:14:42 GMT -5
Beardawg, Although we are not privy to management details of internal sales figures, Both Al and Matt have given little clues. I fully believe that the envision 4-5 billion in sales here in the US and another 4-5 billion sales in EU. This figure does not include ROW. Combine this with the details recently posted "conversations with Matt" and the implications of having a very robust insulin supply, it appears SNY feels the same way. We will not have to wait very long. By my simplistic calculations that puts PPS north of 85, but SNY will not wait that long to make an offer. Those SNY shares were not set a aside for no reason.
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Post by dreamboatcruise on Aug 23, 2014 13:43:19 GMT -5
Why else would you take money that you knew looking forward you wouldn't need due to the impending Sanofi partnership? If one were going to be negotiating over final terms with a partner, you'd probably want some cash in the bank. It's tougher to negotiate if you're headed towards a cash cliff.
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Post by daduke38 on Aug 23, 2014 17:14:29 GMT -5
I just noticed your 166k is PER FINISH FILL LINE, or 498k patients with three lines a capacity. Unfortunately, that means that according to Matt's projection of 375M cartridges per year with 3 lines, this would result in only 2 cartridges per day per patient, so I think your number of patients that can be treated based on a 3-line facility is too high. Even considering the higher dose cartridges, I think the 3-line capacity would be less than half that number of patients, perhaps even a third, so I'm thinking that wherever you got your information about 166k that it's for the number of patients that can be supplied with Afrezza with three lines running. The point is that production capacity needs to be addressed by MannKind/Sanofi ASAP and it's likely Sanofi is being given rights to the technology so that they can build/convert their plants worldwide to help meet future demand. As far as Danbury operations, I'm going to make an assumption that the equipment needed to produce the Technosphere particles has sufficient throughput at present to supply the planned 12 lines, since Matt only mentions the need for more finish fill equipment. I'm also making a second assumption that the Technosphere insulin production (Al appears to distain the use of the word "powder") has likely been running for many months to load up inventory prior to working out the warning label with the FDA so that the packaging could be designed and ordered. MannKind has very likely produced more than enough inventory of the Afrezza Technosphere insulin to feed the fill lines as soon as they are ready and the packaging has been received. Regardless, it quickly becomes apparent that the $150M upfront payment will need to go into purchasing and installing new finish fill lines RIGHT NOW. I think I understand now why MannKind/Sanofi are planning a 1Q 2015 launch. They simply need enough time to ensure that capacity meets demand. As to your Danbury assumption, I think you are spot on. I have mentioned several times that as of June 28, there were 180+ employees at Danbury. You don't train 180 people all at once. So we have no idea how long they have been producing. And it would be 100% safe to assume that they have been producing ever since approval, possibly 24/7. And if my memory serves me correctly, the 3rd line was almost complete acording to Matt at the conference call. So assuming a Jan. rollout (I believe sooner) we have 4 more months+ to get ahead on inventory. And remember, none is being sold. I would argue based on what Mnholdem states and I agree, we could possibly have enough product to last us months just based on present inventory and on going production. I also seem to recall Matt stating that adding new lines is not a long involved process. Finally, the 3 week early approval moves up the time line. Matt has alluded to a possible 4th quarter roll out for some time, and I think it is likely and possible. To sum it up, we have more product ready to go than is realized, in my opinion. Now are my Jan Calls affecting this thought process? it's possible !
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Post by mannmade on Aug 23, 2014 18:32:49 GMT -5
In order to produce the product they would need to have the packing (for the cartridges at least) finalized by all sides. This could have happened during negotiations... but would require Sanofi and mnkd TM, plus FDA review, etc so not sure when and/or if this was/has been done. Just my two cents
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Post by daduke38 on Aug 23, 2014 19:38:57 GMT -5
In order to produce the product they would need to have the packing (for the cartridges at least) finalized by all sides. This could have happened during negations... but would require Sanofi and mnkd TM, etc so not sure when and/or if this was/has been done. Just my two cents And I see what you are saying and am i 100% sure? Nope! But what were 180 employees doing on June 26th and before? I am sure they were brought in in groups and trained. Plus we were seeing hiring going on since April, I believe. They probably just used the same supplier that the used for trials. I may be totally wrong, but 180 people are a lot of people to just be sitting around. If you think about it, we don't know if the supplier for the cartridges has been finalized by both sides or not. The cartridges are so cheap, I doubt SNY cares where MNKD is getting them. Trouble with this whole investment is we are tolsd so little, that So Much is speculation and Conjecture. I think we know half the details at best. The one thing I do know, is we have a great partner and this will see the market place! Hopefully sooner than later! It's thoses darn Jan 2015 calls, again!
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Post by mannmade on Aug 23, 2014 20:17:13 GMT -5
daduke, agree with you but just wondering if all the marketing materials, most importantly including cartridge labels/packaging (which would need to be ready for filling cartridges) would have been ready in time for producing product at this stage. Am sure once packaging labels etc are designed and printed, when they flip the switch, it will be a "simple" process to fill cartridges with produced product as everyone will have been training for quite some time as you suggest... Just not sure they would have any product ready to go just yet... Cheers!
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