8Ks - Impact on Q3 books and reporting?

[dreamboatcruise]

Oct 1, 2014 15:27:24 GMT -5 mnholdem said:

Then why a separate supply agreement between Sanofi and MannKind, that is segregated from the 35/65 profit sharing arrangement in the license agreement?

I'm not sure what specific comments about "separate" or "segregation" that you are referring to.  So far there has been nothing in writing in the presentations that spells that out.

I can see from a logic standpoint that the supply portion of it could be considered a separate deal.  Imagine that MNKD and SNY decide to form a separate JV company to sell some widget with each contributing a given percent 35/65 of start up costs and then get that same percent of the future profits.  If it were some random widget that JV company might then contract with a 3rd company to produce the widget and a 4th sales/distribution company.  The fact that MNKD happens to serve the role of the producing company and SNY the role of sales/distribution doesn't change the financial split the two companies have as joint owners of the JV.  So MNKD on the account ledger gets reimbursed for its production costs (its role as company #3 in this logic exercise) and SNY for its marketing costs (company #4)...  then they are responsible for their share of the aggregate costs, inclusive of their own costs, in the 35/65 proportion that represents their stake in the JV.  So in the end MNKD is responsible for 35% of their own costs (Afrezza related development and COGS for product) and 35% of SNY costs.  MNKD has the option for borrowing against the credit line to cover these costs until the JV is profitable.

I could be wrong, but I believe the deal is structured from an accounting perspective as if there really were a separate JV entity with SNY and MNKD as the two investors and playing different rolls as supplier, R&D arm and sales/marketing channel.  The accounting becomes pretty straight forward when viewed like that.

[BlueCat]

Lizard, if I read correct - I think I'm in agreement.

Both companies effectively submit their costs to the JV - which the revenue basically refunds them for 100%. Then, the remaining profit - once all of their relevant costs are covered, is then split 35/65.

In this case, MNKD required the loan to fund their costs in preparation, before revenue can be realized to pay back those costs. This is why I was thinking that the 8.5% interest effectively becomes another expense that MNKD submits to the JV for reimbursement.

Essentially - the idea is that the costs are a zero - provided that revenue comes in, and this is why there is a joint agreement on the budget itself-  because if one or the other is too loose with the wallet - it impacts both on the profit side, or increases risk of not realizing a profit. And in this case, I would imagine that both MNKD and SNY take on the risks of losing their individual investments if the JV fails (NOT!)