Profit to MNKD on a the sale of a 90 unit (8u60,4u30) box

[otherottawaguy]

Had a quick discussion with another member on the boards and thought that I would seek some "peer review" and any other additional input that the community could provide.

I have taken it from the numbers acknowledged by Matt but have had it also suggested by a reputable source (from his source) that manufacturing costs of a box could actually lower.

If the numbers received from the sale then amount to the mid 20s given to mnkd as their cut (extracted numbers confirmed by Matt), I am assuming 35/25 = 1.4 or about 40% of the of the cost to the retail outlet (not the retail price to the consumer).

My breakdown of the sales price goes like this for 12 boxes (assuming 1 box per month X 12 X $287 (retail price):

Retail = 3334
Wholesale = 3334 / 120% = 2780
COGS (includes selling costs) = 2780 * 40% = 1112 (cost to manuf, cost of samples, reps and exec perks)
Profit to Partnership = 2780 * 60% = 1668
Split to Mannkind = 1668 * 35% = 583
MNKD profit per box = 583/12 = 45.65 USD.

Historically, I have used estimates of 25% cut to MNKD based upon 2200 wholesale pricing so I am still in the ball park of $500/subscriber to the Afrezza Channel.

Interesting to look at it from the 45.65/ box perspective, considering what we have seen in the average cost per script filled showing on the Symphony numbers.

I would be interested to know if anyone has better intel on what percentage the COGS make up of the either the wholesale or retail price.

Would also like comments as to the retail mark up percentage.

Thanks in Advance,

OOG

[Deleted]

Me and another member have been working on some of what you touched on, but from the angle of what insulin is costing MNKD.

[otherottawaguy]

Fuga:

From what I am told, its not going to be the manufacturing costs drive this COGS. Its going to be the delivery process and marketing. This is why Matt conceded that the actual profit to MNKD was in the mid 20% during a previous call when a caller brought out how it could be calculated from data they had released but not redacted.

I think you guys must be looking at it from the AMPH perspective for the amounts of Insulin? Be interested to see what you think is the ballpark on the pure manuf costs.

OOG

[Deleted]

Exactly, we pulled some of the numbers from amph. We have rough estimates in for other manuf costs+ marketing , etc. I think it worked out to like 25 MNKD profit / 25 SNY profit, 25 Manuf , 25 marketing, etc.

It was just to give us something to start with

[Deleted]

Not much of a help .. but found this

He looks to be from NY , and not in the mountains.. so not sure what he means by backorder... not in the pharmacy but can get in a day or back ordered at the distributor...

Attachments:

[otherottawaguy]

The copay would mean the amount his insurance does not cover. Additionally there are the coupons for the first box and those pesky but very useful sample cost to calculate.

OOG

[Deleted]

Apr 1, 2015 8:47:41 GMT -5 otherottawaguy said:

The copay would mean the amount his insurance does not cover. Additionally there are the coupons for the first box and those pesky but very useful sample cost to calculate.

OOG

my thoughts were around the back order thing..  I wasnt looking at the copay amount as we know insurance will be paying the other part to the pharmacy
( Total cost in his case = copay (45) + Amount insurance has to pay to pharmacy )

[benh]

My interpretation is the following: (Please ignore $ accuracy as it's to serve as broadstroke illustration ).


(1) $200 for Box of 90 Carts (Wholesale Cost. Money going into SNY MNKD collaboration pot)
Comprising of
(2) $25 Raw materials cost (Goes to MNKD)
(3) $25 Manufacturing overhead costs (Go to MNKD)
(4) $50 Sales and Marketing Costs (Goes to SNY)
(5) $100 Margin - Split 35/65.

Let's say this happens 1000 times.

Collaboration receives:
$200,000 Revenues into SNY's "collaborative account".


MNKD bill - $50,000 for manufacturing, raw material and plant.
SNY bill - $50,000 for marketing and sales costs.

Leaves $100,000 Profit. $65k for SNY and $35k for MNKD.


But, to get this, 1000 Sample boxes were needed and these cost $15.00 each. ($7.50 Raw material. $3.75 for plant and machinery and $3.75 toward labour etc.)

Total cost for samples is $15,000

Leaves $85,000 profit to be split 35 and 65%.

BUT - MNKD don't have plant and machinery costs (already paid for). Which is 1/4 of the manufacturing costs. So, for each sample box MNKD manufacturer, they "make" $3.75 and for each 90cart box “make” ~$12.50

So.

MNKD receives from the collaboration:
(2) $25,000 (Raw Material) +
(3) $25,000 (Man Cost) +
$10,000 (65% of the sample costs ($15k) from SNY) +
$29,750 (35% share of collaboration profit) =

Total Rev - $89,750


MNKD's total costs:

(2) $25,000 (Raw material) +
(3) $12,500 (Non-plant and machinery costs) +
$10,000 (35% share of sample costs) =

Total Costs $47,500


Ergo:
Total Profit - $42,250


The above is why 35% is very misleading when discussing “the deal”. I believe it is actually a very good deal (for both parties) and more like 50-50 after all things considered.

The SNY loan. During the launch there will be a discrepancy between the collaboration account and Mannkinds actual accounts. The collaboration will show a greater loss than MNKD's because of the way the manufacturing will be paid for. So SNY have a loan for MNKD (in effect a collaboration overdraft) that will pay debts in the collaboration account, allowing MNKD to not be out of pocket during the launch. Another reason as to why MNKD's cash position will be better than what some are expecting.

[Deleted]

Thanks benh, great data. I cant remember where I saw it, but Matt, Hakan or Al once remarked that when you throw in the 1bln in milestones, that the deal is roughly 50-50.