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Post by mnholdem on Jan 10, 2015 15:49:45 GMT -5
It's just speculation on my part, but my guess is that the $50 million was because MNKD was able to produce "X" amount of cartridges for the launch which will be later this month. SNY presents at JP Morgan on Monday. The hope is that they enlighten us as to the launch details. There was an overlooked provision in an obscure and redacted footnote to the agreement with Sanofi: "fn22: Sanofi agrees to promptly pay MannKind the sum of $25 million if a member of that annoying MannKind ProBoards Message Board actually makes the effort to visit the Danbury plant, and an additional $25 million if that member takes photos of the plant and posts them on that ridiculous board. The parties agree, however, that should that member be one "Spiro," no such payment shall be due, as he is known to be, at times, slightly deranged and beyond obsessive. The foregoing notwithstanding, Sanofi will pay MannKind the sum of $10 million, if this "Spiro" is apprehended within 100 yards of the main gate to the facility. Sanofi specifically disclaims any responsibility for the actions of this man, and MannKind hereby waives any right to seek indemnification from Sanofi as the result of any loss or damage occasioned by his attempted entry or entry into the plant." With the advent and popularity of stock message boards, these type of clauses are becoming more common; fortunately, I was able to obtain an unredacted copy of the agreement. Baba,
That was absolutely the funniest post I've heard all year... um, even though we're only 10 days into the New Year.
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Post by dreamboatcruise on Jan 10, 2015 16:19:56 GMT -5
There's also some redacted stuff in the 10-Q that is kind of interesting: "(e) Launch Conditions. Recognizing that Sanofi's obligations to launch Product are ultimately determined by application of a standard of Commercially Reasonable Efforts, the Licensors acknowledge that Sanofi does not intend to launch the Product before and until achievement or completion of [...***...] Milestone." Id say its likely this was that Milestone. I believe that the launch, itself, will be the first sales milestone and result in yet another Sanofi payment. I suspect that the $50M production milestone payment will not be deferred like the $150M upfront payment was. The CC announcing the partnership stated that the first sales milestone was $250M revenue didn't it?
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Post by bobw on Jan 10, 2015 18:24:48 GMT -5
baba, What was the name (symbol) of the biotech you cited earlier with a new type of antibiotic? ( I'm developing a distinct masochistic tendency in my old age.) Thanks. CFRX, avo, good luck, I own just a few shares. There is a thread called CFRXU in "MannKind MNKD Message Board > Home > Other BioPharma Stocks" that talks about Contrafect
mnkd.proboards.com/thread/1073/cfrxu
Edit: Novobiotic is a different company that discovered a new antibiotic, but Contrafect is about two years ahead of them and will be starting clinical trials possibly this quarter.
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Post by rak5555 on Jan 11, 2015 18:31:45 GMT -5
I can't remember if it was a 10-q cc or another conference they've attended since but I remember reading it somewhere Edit: Ok it was the 3rd quarter Q&a. He expects 2/3rds of the r&d expenses to land in cogs. In the 3Q, r&d was roughly 19 mil, so based on that it should drop to 7mil going forward. As for G&a, that was also $20 mil (total cash draw was $36mil), but almost half of it was in professional feels dealing with the licensing agreement. With salaries and stock based compensation (gotta keep padumbo full on shares) in the $10mil/quarter range G&A should drop from 19 mil to 10 mil going forward. That would bring total cash drain from the $36mil it was in 3Q down to $17 mil in subsequent quarters. Put another way, the $200mil in milestones should provide enough funding for 10 more quarters of cash burn, keeping them cash positive until 1Q 17. Obviously, they should earn more milestones over that time (read: should reach most of them by then). This also assumes they don't dump cash into something else (convertible note, debt payback, etc) With only $17 mil in expenses per quarter, I'd expect them to show positive EPS by 1Q with modest afrezza launch sales Be careful here. Just because it is not expense on income statement, does not mean MNKD will not have to fund it. In other words, the cost to produce all that Afrezza inventory that MNKD is producing for the partnership is being paid by MNKD. They get paid back as the inventory is sold.
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Post by ezrasfund on Jan 11, 2015 21:42:35 GMT -5
"Be careful here. Just because it is not expense on income statement, does not mean MNKD will not have to fund it. In other words, the cost to produce all that Afrezza inventory that MNKD is producing for the partnership is being paid by MNKD. They get paid back as the inventory is sold."
Not exactly, as I understand it. MNKD anticipates significant expenses building inventory and capacity as Afrezza comes to market. They have the $175 million loan facility from Sanofi to cover any cash burn beyond what is generated by milestones and early sales. But MNKD will not bear the expenses themselves , but instead through the Joint Venture where they will be responsible for 35% vs Sanofi's 65%. Of course the same 35/65 split will apply to Sanofi's marketing expenses, which could be a much bigger number. I have to wonder whether any of that $175 million will be needed if things go smoothly with the roll out. Remember that Al's guiding principle here is to figure out how much money you think you will need and then triple it.
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Post by brentie on Jan 12, 2015 9:18:49 GMT -5
"Be careful here. Just because it is not expense on income statement, does not mean MNKD will not have to fund it. In other words, the cost to produce all that Afrezza inventory that MNKD is producing for the partnership is being paid by MNKD. They get paid back as the inventory is sold." Not exactly, as I understand it. MNKD anticipates significant expenses building inventory and capacity as Afrezza comes to market. They have the $175 million loan facility from Sanofi to cover any cash burn beyond what is generated by milestones and early sales. But MNKD will not bear the expenses themselves , but instead through the Joint Venture where they will be responsible for 35% vs Sanofi's 65%. Of course the same 35/65 split will apply to Sanofi's marketing expenses, which could be a much bigger number. I have to wonder whether any of that $175 million will be needed if things go smoothly with the roll out. Remember that Al's guiding principle here is to figure out how much money you think you will need and then triple it. Steve Byrne - BofA Merrill Lynch And is it also the case on your – the activities regarding the expansion at Danbury and bringing the three fill lines on stream, is that essentially your cost until your post launch when you would capitalize it? Matthew Pfeffer Yeah it would be our cost it would be capitalized as we incur those types of expenses and then the depreciation of those cost would be absorbed into the product and we’d be reimbursed as we sell the product Sanofi. seekingalpha.com/article/2661685-mannkinds-mnkd-ceo-alfred-mann-on-q3-2014-results-earnings-call-transcript?find=expense&all=false
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Post by trenddiver on Jan 12, 2015 10:53:36 GMT -5
I'm wondering why MNKD would be fronting the partnership capital expenditures and then being reimbursed on some differed basis as product is sold as opposed to be reimbursed by the partnership on an ongoing basis as money is spent. Do we know how they are amortizing these capital expenditures and how long it will take to get reimbursed? Is Matt correct that MNKD is selling the product to Sanofi as opposed to the partnership? Will there be any manufacturing profit to MNKD built into the price or is MNKD doing this free?
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Post by rak5555 on Jan 12, 2015 10:55:38 GMT -5
My point exactly. MNKD incurs the costs. All the $ spent to manufacture A will be paid by MNKD and then capitalized and recovered later when there are sales. But make no mistake, MNKD will have heavy cash outflow starting in Q4 and extending until there are sales at which point they get their costs back. The milestones combined w/ the $175 million loan are expected to cover these costs until they are recovered. We will have to pay close attention to the cash flow statement in their quarterly financials to see how much cash they are going through.
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Post by Deleted on Jan 12, 2015 12:45:11 GMT -5
Maybe I'm wrong, but I don't agree rak.
On the contrary, based on what Matt has said, they may show cash positive near term.
Sales in your post aren't sales of afrezza to the world, they are sales of the product (at cog) to SNY.
If I'm wrong, please show me where and how you've interpreted this as.
Thanks
I'd add that sales to sny for the most part should occur within the same quarter so I don't expect a large gap of time like you're suggesting
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Post by BlueCat on Jan 12, 2015 12:46:28 GMT -5
If they did decide to use the loan facility, I would think that they could submit loan interest to the JV for reimbursement. But I would imagine the milestone payments would shore up the balance sheet on this. But we'll see how they juggle it - or well, hopefully we'll see.
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Post by rak5555 on Jan 13, 2015 11:47:16 GMT -5
Maybe I'm wrong, but I don't agree rak. On the contrary, based on what Matt has said, they may show cash positive near term. Sales in your post aren't sales of afrezza to the world, they are sales of the product (at cog) to SNY. If I'm wrong, please show me where and how you've interpreted this as. Thanks I'd add that sales to sny for the most part should occur within the same quarter so I don't expect a large gap of time like you're suggesting I may not have communicated it clearly, but the purpose of my post was to advise folks on this board not to assume that just because Afrezza production cost will no longer be reported as expense that cash flow will be reduced by a like amount. It seems your questions are taking it a step further which requires a deeper understanding of the partnership agreement.
Whether MNKD is cash positive or not is dependent on sales revenue and 2 things for which we have no guidance: First, is MNKD reimbursed the 65% of cost of producing A at time it is delivered to SNY partnership, or is each partner responsible for their own costs until there are sales at which time the 35/65 split is applied? Second, what amount of cost will SNY be allocating to the partnership for which MNKD must cover 35%?
If you have insight to these open issues, please share. Otherwise, it is going to require financial statement forensics to answer these and other questions.
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Post by Deleted on Jan 15, 2015 8:04:04 GMT -5
I can't remember if it was a 10-q cc or another conference they've attended since but I remember reading it somewhere Edit: Ok it was the 3rd quarter Q&a. He expects 2/3rds of the r&d expenses to land in cogs. In the 3Q, r&d was roughly 19 mil, so based on that it should drop to 7mil going forward. As for G&a, that was also $20 mil (total cash draw was $36mil), but almost half of it was in professional feels dealing with the licensing agreement. With salaries and stock based compensation (gotta keep padumbo full on shares) in the $10mil/quarter range G&A should drop from 19 mil to 10 mil going forward. That would bring total cash drain from the $36mil it was in 3Q down to $17 mil in subsequent quarters. Put another way, the $200mil in milestones should provide enough funding for 10 more quarters of cash burn, keeping them cash positive until 1Q 17. Obviously, they should earn more milestones over that time (read: should reach most of them by then). This also assumes they don't dump cash into something else (convertible note, debt payback, etc) With only $17 mil in expenses per quarter, I'd expect them to show positive EPS by 1Q with modest afrezza launch sales For what it's worth, in the jpm slides yesterday there was a bullet suggesting they are ending the year at about $160mil in cash, that would make cash burn in 4Q either 12 million, or $62 million, all depending on whether the $50 mil milestone was booked in 4Q
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Post by mnholdem on Jan 15, 2015 8:14:10 GMT -5
Don't forget that Sanofi may have also reimbursed MannKind COGS (per supply agreement) for the initial stocking orders Sanofi placed that shipped to pharmacies and distribution centers during 4Q.
Payments by Sanofi to reimburse MannKind for Afrezza shipments would not be considered/reported as a material event in the same way as a performance milestone payment.
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Post by bighaus89 on Jan 15, 2015 12:13:11 GMT -5
I can't remember if it was a 10-q cc or another conference they've attended since but I remember reading it somewhere Edit: Ok it was the 3rd quarter Q&a. He expects 2/3rds of the r&d expenses to land in cogs. In the 3Q, r&d was roughly 19 mil, so based on that it should drop to 7mil going forward. As for G&a, that was also $20 mil (total cash draw was $36mil), but almost half of it was in professional feels dealing with the licensing agreement. With salaries and stock based compensation (gotta keep padumbo full on shares) in the $10mil/quarter range G&A should drop from 19 mil to 10 mil going forward. That would bring total cash drain from the $36mil it was in 3Q down to $17 mil in subsequent quarters. Put another way, the $200mil in milestones should provide enough funding for 10 more quarters of cash burn, keeping them cash positive until 1Q 17. Obviously, they should earn more milestones over that time (read: should reach most of them by then). This also assumes they don't dump cash into something else (convertible note, debt payback, etc) With only $17 mil in expenses per quarter, I'd expect them to show positive EPS by 1Q with modest afrezza launch sales For what it's worth, in the jpm slides yesterday there was a bullet suggesting they are ending the year at about $160mil in cash, that would make cash burn in 4Q either 12 million, or $62 million, all depending on whether the $50 mil milestone was booked in 4Q I don't think the $50M would be booked Q4. One of the $25M milestones was given a deadline of Jan. 23, 2015, which MNKD met 2 weeks early.
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Post by BlueCat on Jan 15, 2015 13:23:52 GMT -5
I don't think the $50M would be booked Q4. One of the $25M milestones was given a deadline of Jan. 23, 2015, which MNKD met 2 weeks early. Right - delivery would put us in January, and I doubt that SNY prepaid by Dec 31. Taxes usually looking at when the money gets deposited, not when the contract is fulfilled...
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