Post by ronw77077 on Aug 9, 2022 19:40:04 GMT -5
Observations and analysis from the Q2 10-Q. I will be referring to the Notes to the Condensed Consolidated Financial Statements. In particular, the following discussion addresses “Section 10. Collaboration, Licensing and Other Arrangements”.
Admittedly, Section 10 is difficult to understand, but certain parts are easier to follow, and when we combine what we know from UT we can draw some conclusions. I welcome all comments that may clarify what I am reading into the 10-Q.
Section 10 deals with the CSA, being the Commercial Supply Agreement with UT. The CSA continues until December 31, 2031 (i.e., for 9.5 years). For simplicity, in my math below I will assume the data is for a 10-year period.
Let me start with the easy part. See the third table, the first line of which says:
Total Anticipated cash flow (2) - $463.5 million.
Note (2) to the third table states:
“The total anticipated cash flow includes a transaction price of $64.3 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $399.2 million for future supply of Tyvaso DPI over the remaining term of the CSA. The Next-Gen R&D services is a small amount and I will ignore it for our purposes.
I read Note (2) to say that the 10-Q posits future revenue from supplying DPI to UT over 10 years at $399.2 million and that the “transaction price” of $64.3 million is the assumed cost markup. If that is correct, then the table is assuming a cost markup of 16% (64.3/399.2). Am I correct? As a point of reference, UT’s Q2 10-Q reveals that its cost of Tyvaso product sales, its largest revenue stream of $201 million, is 3.2%, but its cost on smaller product revenue streams is higher (e.g., Orenitram and Unituxin at 8% and for the much smaller Adcirca revenue its 45%). And of course, MNKD is a third-party manufacturer, so 16% seems to be a reasonable assumption. So, this dialogue draws me to a conclusion that MNKD’s conservative assumption for revenues from UT over 10 years is an average of $46.3 million.
How does this square with UT’s projected revenue streams, of which we have rather limited data. Taking $200 million per quarter and rounding up for the projected doubling of UT’s Tyvaso users this year to 6,000 users, I’ll assume $1 billion in Tyvaso/Tyvaso DPI sales. UT expressed that it assumes the split will be 50-50, so $500 million in annual Tyvaso DPI sales. Projecting the $500 million to increase at only 10% per year for ten years we get $8 billion; at $463 million we get an average cost of 5.8% so maybe, just maybe, these numbers align.
Finally, many of you may recall the table that Mike had at one presentation labeled “A Peek Into the Future - Tyvaso DPI Potential per latest Oppenheimer & Co Research.” It showed DPI revenue of $1.2 billion in 2023 and $1.5 billion in 2024 – so we can all hope that the conservative accounting projections in Section 10 are just that.
Admittedly, Section 10 is difficult to understand, but certain parts are easier to follow, and when we combine what we know from UT we can draw some conclusions. I welcome all comments that may clarify what I am reading into the 10-Q.
Section 10 deals with the CSA, being the Commercial Supply Agreement with UT. The CSA continues until December 31, 2031 (i.e., for 9.5 years). For simplicity, in my math below I will assume the data is for a 10-year period.
Let me start with the easy part. See the third table, the first line of which says:
Total Anticipated cash flow (2) - $463.5 million.
Note (2) to the third table states:
“The total anticipated cash flow includes a transaction price of $64.3 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $399.2 million for future supply of Tyvaso DPI over the remaining term of the CSA. The Next-Gen R&D services is a small amount and I will ignore it for our purposes.
I read Note (2) to say that the 10-Q posits future revenue from supplying DPI to UT over 10 years at $399.2 million and that the “transaction price” of $64.3 million is the assumed cost markup. If that is correct, then the table is assuming a cost markup of 16% (64.3/399.2). Am I correct? As a point of reference, UT’s Q2 10-Q reveals that its cost of Tyvaso product sales, its largest revenue stream of $201 million, is 3.2%, but its cost on smaller product revenue streams is higher (e.g., Orenitram and Unituxin at 8% and for the much smaller Adcirca revenue its 45%). And of course, MNKD is a third-party manufacturer, so 16% seems to be a reasonable assumption. So, this dialogue draws me to a conclusion that MNKD’s conservative assumption for revenues from UT over 10 years is an average of $46.3 million.
How does this square with UT’s projected revenue streams, of which we have rather limited data. Taking $200 million per quarter and rounding up for the projected doubling of UT’s Tyvaso users this year to 6,000 users, I’ll assume $1 billion in Tyvaso/Tyvaso DPI sales. UT expressed that it assumes the split will be 50-50, so $500 million in annual Tyvaso DPI sales. Projecting the $500 million to increase at only 10% per year for ten years we get $8 billion; at $463 million we get an average cost of 5.8% so maybe, just maybe, these numbers align.
Finally, many of you may recall the table that Mike had at one presentation labeled “A Peek Into the Future - Tyvaso DPI Potential per latest Oppenheimer & Co Research.” It showed DPI revenue of $1.2 billion in 2023 and $1.5 billion in 2024 – so we can all hope that the conservative accounting projections in Section 10 are just that.
