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:
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.