An idiosyncratic analysis of MNKD’s potential

[BIGWIG]

An idiosyncratic analysis of MNKD’s potential (looking only at Afrezza & only in USA)


Hello all,

This is my first post after maybe 18 months of silent viewing. I found this board after spending way too much time feeling disgusted & abused by the dialogue on the Yahoo board. March 23^rd marks my 2nd anniversary as a MNKD investor- it was one of my first stock purchases, and I feel lucky to have found this company. Despite their flaws, I appreciate that Seeking Alpha gave me a first look at MNKD; through that site George Rho provides an analysis that appears rational and non-manipulative. Thanks to spiro, babaoriley, ashiwi, jpg, liane, savzak, mnholdem, otherottawaguy, seanismorris and ALL THOSE WHO ENGAGE IN CIVIL & INTELLIGENT DISCOURSE ON THIS BOARD!

I've been looking at the stock's swings in exasperation. I have seen the stock go up and down repeatedly, and have kicked myself for not acting on the obvious pattern of movement up & down to take profits and buy more at lower prices. But I decided to hold through ups and downs in an effort (probably foolish) to support this company. Then again, maybe it was really greed (and fear of losing out on more gains) that kept me holding when I saw the price reach $11.48 and countless other temporary highs.  I'M CONFLICTED, damn it! Anyway, it's just amazing to me where the stock is currently valued...

I don't feel all that qualified to provide input to this board, but what the heck! I appreciate any good criticism....

MNKD $5.51 (3/13/15)


Doesn’t the current share price vastly discount the intrinsic value of MNKD?!
It looks to me like the "wise" market thinks that over the next few years Afrezza will capture only around 2% of the US population of diagnosed diabetics who are not restricted by label from using it (or about 1% of the combined future US/EU market), with Technosphere receiving no consideration! My analysis is below:

Projections for USA using CDC baseline data for 2012


Diabetics- 29,100,000… 21,000,000 diagnosed (72% of all diabetics); 8.1 million undiagnosed
(28%)
Type 1 Diabetics- 5% of diabetics / Type 2 Diabetics- 95% of diabetics

1,700,000 new cases per year with 1,225,000 of these “diagnosed” (assume yearly increase stays constant)
1,164,000 new cases DIAGNOSED per year are Type 2 diabetics (of these. 56.9% now use oral only- see bottom)


Will use George Rho’s Price/Share prediction of $34.53 for 2,000,000 Afrezza users (20 P/E)

325,000,000 Americans (will assume this constant through 2020)

200,000 primary care physicians (not considering the 4,000 endocrinologists in US)

1,625 persons per primary care doc (simply dividing US population by number of primary docs)

Diagnosed diabetics comprise 6.5% of the US population
6.5% of 1625 =106 diabetics per US primary care doc

There will be overlap, but for simplicity: 4% COPD + 18% Smokers + 8% Asthma + 2% other= 32%, so…

32% of patients restricted from using Afrezza (my guess) & 68% will possibly use Afrezza (unrestricted)

68% of 106= 72 potential Afrezza-using diabetics per US primary care doc


Percentages, populations, and pps #'s below refer to diagnosed diabetics in US not restricted by Afrezza label


5% of diagnosed, unrestricted diabetics using Afrezza x 72= 3.6 diabetics/ primary doc

2012 baseline: 200,000 (number docs) times 3.6= 720,000 Afrezza users

5% extrapolating out:

MY GUESS: 888,000 Afrezza users through 2016: $15/share @ 20 P/E & $45/share @ 60 P/E

972,000 Afrezza users through 2018: $16.75/share @ 20 P/E & $50.25/share @ 60/E

1,056,000 Afrezza users through 2020: $18.20/share @ 20 P/E & $54.60/share @ 60 P/E


10% of diagnosed, unrestricted diabetics using Afrezza x 72= 7.2 diabetics/ primary doc

2012 baseline: 200,000 (number docs) times 7.2= 1,440,000 Afrezza users

10% extrapolating out:

MY GUESS: 1,944,000 Afrezza users through 2018: $33.50/share @ 20 P/E & $100.50/share @ 60 P/E

2,112,000 Afrezza users through 2020: $36.43/share @ 20 P/E & $109.30/share @ 60 P/E


15% of diagnosed, unrestricted diabetics using Afrezza x 72= 10.8 diabetics/ primary doc
2012 baseline: 200,000 (number docs) times 10.8= 2,160,000 afrezza users

15% extrapolating out: 
MY GUESS: 3,169,000 Afrezza users through 2020: $55/share @ 20 P/E & $165/share @ 60 P/E

___________________________________________________________________________

2012 CDC Data on Treatments:

Insulin Only- 2,900,000 (14%)

Insulin and Oral- 3,100,000 (14.7%)... 3,823,000 in 2016; 4,185,000 in 2018; & 4,548,000 in 2020

Oral Only- 11,900,000 (56.9%)
... 24,673,000 in 2016; 16,065,000 in 2018; & 17,457,000 in 2020

Neither- 3,000,000 (14.4%)



KEY to good growth in Afrezza use: moving those prandials to inhalers!

KEY to massive growth in Afrezza use: moving those orals to inhalers!

[liane]

splendid -

Great 1st post. I think you'll fit in quite well here. It's all about the numbers; the number of potential users. I can wait. I know what I hold.

[tigiron]

Not "all diagnosed, unrestricted diabetics" are using insulin --- I don't see how you adequately factor in this aspect.
Insulin Only- 2,900,000 (14%)
Insulin and Oral- 3,100,000 (14.7%)

[babaoriley]

Splendid, you did yourself proud! Hope you decide to stick around. The numbers plus common sense make this a mega-blockbuster, no question at all. All we need is more time, and no Black Swan to cross MNKD's path in the next five years or so. I believe the stock market could correct significantly, or even go into a bear mode, and we'd still be okay.

Based on this being your first stock investment, you sound fairly young, although I realize that's not necessarily true. If you are relatively young, then what you learn from this investment will serve you well for many, many years.

As for intelligent discourse on this board, thanks for including me - but those others you mention, between you and me - not so much.  

Best of luck to you, Splendid!  And the Avatar is what?  Is it a standard Avatar, and if so, the question still stands!

Baba, CIC (Clown in Chief)

[Deleted]

That was beautiful! And just think, these numbers you have supplied are for US only. I live in Japan. And let me tell you, the few diabetics that I know hate needles. Afrezza would be like wild fire. Not to mention Europe and possibly those with the means in China. Great post, keep them coming.

[kball]

It's fun to run numbers and we've seen them all over the map from various sources.

I'd add that its not critical to get them exactly right.
Being early and kind of right should be good enough for investors.

First drug, First country now.
First drug, More countries soon.
More drugs, more countries later.

I like that math

[mnholdem]

You have amazing discipline if you have read this board for 18 months and managed to remain silent. But now that you have finally broken your silence, I'm reminded of the sage words of a good friend of mine:

"Better late than pregnant..." (chuckle)

Nice post for your first at bat.

Apologies for sports cliché, I'm just eager for baseball season.

[esstan2001]

C'mon Baba, That title belongs to el Jefe, our very own pro tour golfer, a.k.a the deliberator (in more ways than one).
You can't take that away from him!

[BIGWIG]

Baba,

Thanks for the reply. I'd call that avatar "non-standard", as would my grandsons, age 5 & 8. I created the wackiest image I could using the "Avatar Maker" last summer while the boys were visiting- they HATED it. Since they were SO ADAMANT and almost always get there way, I kept it. Nice to know I seem relatively young- in "Al Mann world" guess I am; the high school kids I teach think I'm older than dirt.

Splendid

[robsacher]

splendid,

Thank you for a great post.  I have written a number of comments at SA and often suggest that investors in MannKind reserve a small part of their investment, say 10% or 15%, and use 5% on the downturns (say when the p/s goes down 5%, for example) and then sell when the p/s recovers.

That way you maintain your long position in MannKind but make yourself feel real good on the downturns. Every single downturn has eventually returned to a high p/s with the exception of the peak for a few weeks after the FDA approval. I counted more than 25 other times in the last year and a half when the p/s was sent down and then back up. I keep a daily record of the stock movement.

Welcome to this board.

Best wishes,
RS