|
|
Post by hammer on Sept 10, 2014 12:15:27 GMT -5
This is a follow up on my initial post The Numbers Game, which can be found on the board. In that post I put forth what I believed to be conservative numbers for market projection. I have attached the basic spreadsheet exemplifying those numbers for simplicity sake. I still stand by those numbers and projections since they are conservative in nature. I want to expand that though based upon some research I have done pertaining to wholesale costs and the SNY deal as it has been presented. Initially, I stated penetration numbers but today based on current research I will try to put potential stock prices on the projections. mnkd1.xlsx (8.74 KB)
Before I start, I want to point out a few givens:
-These are projections based solely upon Afrezza.
-At the most recent conference Matt stated for the second time, milestones aside, that the 65/35% split with SNY equates to roughly a mid 20’s (23-27) royalty rate. I will use 25% for simplicity sake. Since MNKD is reimbursed for all cost of production when Afrezza is sold to SNY then the 25% royalty figure is assumed to be MNKD income.
-Previously, on most of my projections, I have considered the wholesale cost of RRA pens to be roughly $1800 per patient/year. Due to my most recent research I feel that this figure is in error and is actually higher. I have always used the $1800 figure based upon the work of others postings on various sites.
-There is a difference between Average Wholesale Cost of insulin AWC and Direct Wholesale Acquisition cost of Insulin (DWAC). These figures are not easily found on the internet. The AWC of RRA pens is approximately 20% more that DWAC, which is the actual cost that a manufacturer would sell to a wholesaler. The difference accounts for incentives that may be given to the wholesaler.
-The AWC of a Novolog flex pen Is 85.70 per pen. Each pen holds 300units of RRA. All diabetics are not created equal and their dosage varies as well. Each dose of a flex pen results in loss of 1-2 units during the priming of the pen. Inherently the pen is inefficient since roughly 30-60 units are lost in a pen that last 10 days (30 dose x 1-2 unit loss). This loss is not seen in patients who administer by pump, but may be an Afrezza advantage that can be capitalized in marketing.
-I was able to find a resource through the State of Texas Drug Code index formulary that specifically lists the DWAC of Novolog Flex pens at $71.40 per pen. I used this source to help confirm the DWAC. 71.4 + 20%=85.68. Certainly, close enough for me.
-Again, it is very difficult to translate average cost per patient based on DWAC, but I did my best. Basing pen use without loss, a single pen would last 12.5 days using 24units per day. Throughout the year 365/12.5 days a patient may require 29.2 pens per year. This would equate to a DWAC of $2084.88. Again this is lossless administration, if one accounts for injection loss it could increase pens needed by 6 and DWAC increases by over $400. Since some patients insulin needs may be more or less than I have presented I will stick with the initial lossless scenario. I would appreciate input by physicians and patients as well on current projections of daily units needed to confirm that 24units/day is reasonable usage of RRA.
-I have confirmed with management, without being given any specifics, that DWAC for RRA pens hover at about $2000/pt/year, confirming my own research on AWC and DWAC. My confidence in these numbers surpass 95%, for what its worth.
-Finally based upon a 25% royalty for every patient receiving Afrezza, Mannkind should receive $500 per patient per year. (GWAC 2000*25%= 500)
Now using the my prior penetration analysis based on number of patients treated from my previous post I come up with this spreadsheet for income from Afrezza years 1 through years 5. A couple of notes, I start with a multiple of 30 which for a product that is rapidly accepted as SNY and MNKD believe in a market that shows rapid growth. I decrease this multiple as the product matures. The first year I assume no dilution and place outstanding shares at 405 million. For years 2-5 I expect full dilution at 450 shares.
mnkd2.xlsx (9.1 KB)
Comments are always appreciated, GLTA!
|
|
|
|
Post by otherottawaguy on Sept 10, 2014 13:04:42 GMT -5
Hammer:
Number of $500 per patient seems to be inline with my calculations as well. You seem to figure that we are going to capture 6.2M of the 60-70M diabetics in USA and Europe or approx. 10%. You might want to expand you worldwide numbers to include Canada (30M), Australia(23M), UK(64M), Japan(127M) and a few others to get higher potential market. If you take just the specific ones that I have mentioned that is 244M * 10% (rate of diabetes * 10% = 2.4M increase in market share. Add to this all of the other potential markets and I could see you 6.2 being closer to 10M at the end of the game.
10M * $500 = $5Billion Profit
$5B / 450M (share count) * 18 (PE) = $200 pps in 2020
$5B / 450M (share count) * 30 (PE) = $333 pps in 2020
But hey, most of will be happy with your paltry $140, I know I will.
OOG
|
|
|
|
Post by dreamboatcruise on Sept 10, 2014 13:31:02 GMT -5
Some of us would be thrilled with $25
|
|
|
|
Post by dreamboatcruise on Sept 10, 2014 13:42:29 GMT -5
$5B / 450M (share count) * 30 (PE) = $333 pps in 2020 That works out to be very close to what the market cap of SNY is today... and their revenue is $46B. |
|
|
|
Post by ashiwi on Sept 10, 2014 13:50:44 GMT -5
Can we please get back over $7 first?
|
|
|
|
Post by hammer on Sept 10, 2014 14:31:56 GMT -5
OOG, Not that I disagree with you, but I wanted to be very conservative on the numbers. Prior to partnership it was difficult to know what the future held. Most would have been happy with a buyout in the 20's. Partnership with SNY has solidified my belief that buyout price for Afrezza will be closer to the 78 range. If Afrezza is never bought I will be very happy to chose my selling price going forward. If SNY is smart as I believe they are, an early offer in the 55 dollar range makes a lot of sense. |
|
|
|
Post by gamblerjag on Sept 10, 2014 18:38:07 GMT -5
early offer as in 2016?
|
|
|
|
Post by babaoriley on Sept 10, 2014 22:38:48 GMT -5
OOG, Not that I disagree with you, but I wanted to be very conservative on the numbers. Prior to partnership it was difficult to know what the future held. Most would have been happy with a buyout in the 20's. Partnership with SNY has solidified my belief that buyout price for Afrezza will be closer to the 78 range. If Afrezza is never bought I will be very happy to chose my selling price going forward. If SNY is smart as I believe they are, an early offer in the 55 dollar range makes a lot of sense. To get an offer of $55, I believe our stock would have to be at least $25, and probably closer to $30-$35. And if we get there, I could see Sanofi buying us, we'd be worth it! I really hope your (Matt's) equivalency of 35% partner/25% royalty is correct, I think that would be fantastic! I would be very happy with 20% royalty, frankly. |
|
|
|
Post by hammer on Sept 11, 2014 7:17:06 GMT -5
I think Matt is on record not twice but three times repeating the same thing. In the last conference he went as far to call it a "little clue". It would be hard not to interpret that the mid 20's royalty is anything but. That's how a royalty works, payment for every sale of product and not tied to overhead. If MNKD is selling to SNY at cost then it stands to reason its pure income. I think the street will be shocked at the margins of this product, its been hinted as such by Matt previously. On SNY end the marketing, distribution and sales team is already in place. As far as the DWAC, I'm extremely confident that the number is correct, unless SNY undercuts the competition.
Combine this with management statements like:
We are very pleased to have a partner such as SNY...
SNY expects very, very rapid uptake of the product.
It will be very interesting to see what pre-orders of Afrezza look like, if we even see those figures. I know Danbury will be producing 24/7 with about 3 months of commercial product prior to launch and you can probably add another month of validation product to that mix. That is a very good sign!
In regards to the stock price, those things can change in a minute. You have to admit the ability of SNY and MNKD not to leak any information during partnership discussions was phenomenal. Sure its speculation to think something is being held back, but what what would happen to the stock price if we recieved a filing showing that SNY or MDT has been purchasing 10% of the stock?
Clearly by MNKD's own comments that certain details of this deal will be finalized after HSR.
|
|
|
|
Post by otherottawaguy on Sept 11, 2014 9:13:18 GMT -5
I think another big tell will be what they do with the milestones after paying off the upcoming debt.
At 8-10M per line, sounds like the second payment will allow for complete build out to 12 lines from the current 3, if demand warrants.
Be interested to see if they expect to expand production capacity in 2015 or if it will wait to 2016 (or later (hope not)).
OOG
|
|
|
|
Post by bradleysbest on Sept 11, 2014 10:37:57 GMT -5
When will the HSR be complete?
|
|
|
|
Post by dreamboatcruise on Sept 11, 2014 11:26:26 GMT -5
At 8-10M per line, sounds like the second payment will allow for complete build out to 12 lines from the current 3, if demand warrants. Seems as if that could also be done with money from the line of credit from SNY. |
|
|
|
Post by otherottawaguy on Sept 11, 2014 13:43:28 GMT -5
Credit line was intended for covering potential initial operating losses, but if the demand exceeds current production capacity, then expansion would be my bet as well.
Adding to that, if expansion is required, they are probably meeting production and sales goals, so milestone payments should be avail as well.
OOG |
|
