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Post by mnkdmorelong on Jan 7, 2016 11:26:43 GMT -5
>Greg:
I suspect you have never created business models. How can you say that losses in the first year is $175 mln and then say if sales were $175 mln, losses would be small. For each script, the salesperson gets a commission. The cost structure of sales and market has fixed and variable components.
The purpose of my post was to offer up a model based on what we know already. Flailing about like what you are doing accomplishes nothing.
You want me to come up with a breakeven number of 50k users. Sorry, this is not possible.
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Post by Deleted on Jan 7, 2016 11:38:24 GMT -5
>Greg: I suspect you have never created business models. How can you say that losses in the first year is $175 mln and then say if sales were $175 mln, losses would be small. For each script, the salesperson gets a commission. The cost structure of sales and market has fixed and variable components. The purpose of my post was to offer up a model based on what we know already. Flailing about like what you are doing accomplishes nothing. You want me to come up with a breakeven number of 50k users. Sorry, this is not possible. can u post rough draft of that $500 mil?
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Post by greg on Jan 7, 2016 11:45:53 GMT -5
>Greg: I suspect you have never created business models. How can you say that losses in the first year is $175 mln and then say if sales were $175 mln, losses would be small. For each script, the salesperson gets a commission. The cost structure of sales and market has fixed and variable components. The purpose of my post was to offer up a model based on what we know already. Flailing about like what you are doing accomplishes nothing. You want me to come up with a breakeven number of 50k users. Sorry, this is not possible. Just for the record, I've "created business models" almost daily for the better part of three decades. Anyway, moving on from the many gratuitous shots you were able to inject into your short comment.... For simplicity's sake, let's say sales were $10 million last year and the venture lost $175 million. That means expenses were $185 million. Right?? Now if sales were $175 million, meaning that SNY's efforts were a lot more productive than they actually were last year, overall costs would largely go up the increase in COGS. What do you thing gross margins are for drugs in general? The answer, as I'm sure you know, is in the neighborhood of 90%. Okay, to be conservative, we'll say the gross margin is only 80%. That means overall costs increase by $35 million. So, with sales of $175 million, the loss would approximate $45 million. If you factor in the huge operating leverage inherent in the pharmaceutical industry, we wouldn't need a huge increase in revs to get to breakeven. You may want to complicate the picture of clinical trial costs, but, then, you also have to subtract all the costs associated with launching a new product, samples, for example, and all of the introductory activities. As to coming up with a breakeven number for 50k users, I don't recall asking for one. I do recall saying we have toooo little information to come up with a meaningful estimate.
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Post by mnkdmorelong on Jan 7, 2016 11:49:25 GMT -5
>Greg: I suspect you have never created business models. How can you say that losses in the first year is $175 mln and then say if sales were $175 mln, losses would be small. For each script, the salesperson gets a commission. The cost structure of sales and market has fixed and variable components. The purpose of my post was to offer up a model based on what we know already. Flailing about like what you are doing accomplishes nothing. You want me to come up with a breakeven number of 50k users. Sorry, this is not possible. can u post rough draft of that $500 mil? I posted it last night. You can find it. In my first pass, I estimated MNKD needed $300 mln/yr to breakeven. After mulling it over, I thought it was too low and raised it to $500 mln. The post solicits ideas from others on this Board. Obviously hating on a model because it does not return the number you like makes no sense.
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Post by Deleted on Jan 7, 2016 11:52:49 GMT -5
can u post rough draft of that $500 mil? I posted it last night. You can find it. In my first pass, I estimated MNKD needed $300 mln/yr to breakeven. After mulling it over, I thought it was too low and raised it to $500 mln. The post solicits ideas from others on this Board. Obviously hating on a model because it does not return the number you like makes no sense. this? There are many on this Board who know the sales numbers quite well. I need your help. What is underway now at MNKD is number crunching. Maybe we can peek into their world. The follow scenario is predicated on MNKD going alone in marketing Afrezza. If a partner was found, they would share the profits and generally make it more difficult for MNKD to attain cash flow neutrality. The current run rate of Afrezza sales is about $20 mln/yr. MNKD's loss for year 1 (9 months) was about $15 mln; implying a full year total loss of $57 mln for the enterprise. This loss included large training costs, typical RA costs, very little DTC, and nothing for the long term safety study. If MNKD lowers Afrezza prices by half, naturally losses would be greater if sales do not rise materially above $20 mln/yr. How much would sales have to rise for Afrezza to be cash flow positive? It seems to me that sales need to be $150 mln to make Afrezza work with lower prices. We must then bring in Corporate MNKD who is burning cash at $60-80 mln per year. What would Afrezza sales have to be to cover these expenses also? My estimate is $300 mln/yr. Is $300 mln/yr Afrezza sales possible? A year ago, this was a $1 bln/yr opportunity so the answer is yes. The final and biggest question is how long will it take to ramp up to $300 mln/yr and now much cash does MNKD need to get to that point? My guess is 3 years and $200 mln. What are your guesses? Read more: mnkd.proboards.com/user/2180/recent#ixzz3wZuuy7dO
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Post by mnkdmorelong on Jan 7, 2016 12:01:39 GMT -5
>Greg: I suspect you have never created business models. How can you say that losses in the first year is $175 mln and then say if sales were $175 mln, losses would be small. For each script, the salesperson gets a commission. The cost structure of sales and market has fixed and variable components. The purpose of my post was to offer up a model based on what we know already. Flailing about like what you are doing accomplishes nothing. You want me to come up with a breakeven number of 50k users. Sorry, this is not possible. Just for the record, I've "created business models" almost daily for the better part of three decades. Anyway, moving on from the many gratuitous shots you were able to inject into your short comment.... For simplicity's sake, let's say sales were $10 million last year and the venture lost $175 million. That means expenses were $185 million. Right?? Now if sales were $175 million, meaning that SNY's efforts were a lot more productive than they actually were last year, overall costs would largely go up the increase in COGS. What do you thing gross margins are for drugs in general? The answer, as I'm sure you know, is in the neighborhood of 90%. Okay, to be conservative, we'll say the gross margin is only 80%. That means overall costs increase by $35 million. So, with sales of $175 million, the loss would approximate $45 million. If you factor in the huge operating leverage inherent in the pharmaceutical industry, we wouldn't need a huge increase in revs to get to breakeven. You may want to complicate the picture of clinical trial costs, but, then, you also have to subtract all the costs associated with launching a new product, samples, for example, and all of the introductory activities. As to coming up with a breakeven number for 50k users, I don't recall asking for one. I do recall saying we have toooo little information to come up with a meaningful estimate. Losses in the first year was about $50 mln. We know this from MNKD's losses. Afrezza prices will go down; we know this; meaning gross margins go down. Inhaled insulin cost more to make then injectables; we know this. MNKD is burning $90 mln/yr. Danbury is not right sized to benefit from operating leverage. Given all this, what would your estimate of breakeven be? I came up with $500 mln.
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Post by mnkdmorelong on Jan 7, 2016 12:03:02 GMT -5
Yes.
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Post by greg on Jan 7, 2016 12:16:01 GMT -5
"Losses in the first year was about $50 mln. We know this from MNKD's losses. Afrezza prices will go down; we know this; meaning gross margins go down. Inhaled insulin cost more to make then injectables; we know this. MNKD is burning $90 mln/yr. Danbury is not right sized to benefit from operating leverage. Given all this, what would your estimate of breakeven be? I came up with $500 mln."
First of all, your starting point is just plain wrong. MNKD's share of losses in the first nine months were approximately $45 million, I don't recall the exact number and it doesn't really matter. Given the 65/35 distribution, the $175 million figure is far more reasonable for Afrezza-related losses than $50 million.
Second, your comment about gross margins going down is also wrong. If sales increase from $10 million to $175 million, the margin will undoubtedly increase, even with the price cuts, factoring in the fixed production costs that would be spread over more units sold.
Third, I don't understand your comment about Danbury not being right sized to benefit from operating leverage. Will rent, insurance, heating, and myriad other operating costs increase if sales increase from $10 million to $175 million. Some might but many many won't. So, obviously MNKD would benefit from operating leverage.
Fourth, as I've said many times, given the many many unknowns, trying to generate a breakeven estimate is almost an exercise in futility. The fact that you moved so quickly from $300 million to $500 million is testament to that. In 20 minutes, you might come up with $750 million. How much value do any of these numbers have. That said, I believe the numbers I provided in the previous post strongly suggest that a breakeven is far lower than $500 million, even though my numbers should obviously be given a wide berth.
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Post by mnkdmorelong on Jan 7, 2016 12:30:39 GMT -5
"Losses in the first year was about $50 mln. We know this from MNKD's losses. Afrezza prices will go down; we know this; meaning gross margins go down. Inhaled insulin cost more to make then injectables; we know this. MNKD is burning $90 mln/yr. Danbury is not right sized to benefit from operating leverage. Given all this, what would your estimate of breakeven be? I came up with $500 mln." First of all, your starting point is just plain wrong. MNKD's share of losses in the first nine months were approximately $45 million, I don't recall the exact number and it doesn't really matter. Given the 65/35 distribution, the $175 million figure is far more reasonable for Afrezza-related losses than $50 million. Second, your comment about gross margins going down is also wrong. If sales increase from $10 million to $175 million, the margin will undoubtedly increase, even with the price cuts, factoring in the fixed production costs that would be spread over more units sold. Third, I don't understand your comment about Danbury not being right sized to benefit from operating leverage. Will rent, insurance, heating, and myriad other operating costs increase if sales increase from $10 million to $175 million. Some might but many many won't. So, obviously MNKD would benefit from operating leverage. Fourth, as I've said many times, given the many many unknowns, trying to generate a breakeven estimate is almost an exercise in futility. The fact that you moved so quickly from $300 million to $500 million is testament to that. In 20 minutes, you might come up with $750 million. How much value do any of these numbers have. That said, I believe the numbers I provided in the previous post strongly suggest that a breakeven is far lower than $500 million, even though my numbers should obviously be given a wide berth. I thought MNKD reported gross losses through Q3 of $14 mL? If it was $45 mLn, it makes it worse. It means total losses abut $135 mln. Your estimate of $175 is better. There is no way that cutting ASP by over 50% will yield an increase in gross margin. I thought you had experience with business models? The purpose of this thread was to estimate breakeven point. It may be difficult and have a large error. But some people want to know. By knowing the magnitude, we have some insight into what MNKD is thinking now. Given all this, I think my estimate of $500 mln is still better than your $175 mln. Keep in mind Danbury burns $90 mln/yr regardless of how much Afrezza is sold.
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Post by Deleted on Jan 7, 2016 12:34:44 GMT -5
"Losses in the first year was about $50 mln. We know this from MNKD's losses. Afrezza prices will go down; we know this; meaning gross margins go down. Inhaled insulin cost more to make then injectables; we know this. MNKD is burning $90 mln/yr. Danbury is not right sized to benefit from operating leverage. Given all this, what would your estimate of breakeven be? I came up with $500 mln." First of all, your starting point is just plain wrong. MNKD's share of losses in the first nine months were approximately $45 million, I don't recall the exact number and it doesn't really matter. Given the 65/35 distribution, the $175 million figure is far more reasonable for Afrezza-related losses than $50 million. Second, your comment about gross margins going down is also wrong. If sales increase from $10 million to $175 million, the margin will undoubtedly increase, even with the price cuts, factoring in the fixed production costs that would be spread over more units sold. Third, I don't understand your comment about Danbury not being right sized to benefit from operating leverage. Will rent, insurance, heating, and myriad other operating costs increase if sales increase from $10 million to $175 million. Some might but many many won't. So, obviously MNKD would benefit from operating leverage. Fourth, as I've said many times, given the many many unknowns, trying to generate a breakeven estimate is almost an exercise in futility. The fact that you moved so quickly from $300 million to $500 million is testament to that. In 20 minutes, you might come up with $750 million. How much value do any of these numbers have. That said, I believe the numbers I provided in the previous post strongly suggest that a breakeven is far lower than $500 million, even though my numbers should obviously be given a wide berth. I thought MNKD reported gross losses through Q3 of $14 mL? If it was $45 mLn, it makes it worse. It means total losses abut $135 mln. Your estimate of $175 is better. There is no way that cutting ASP by over 50% will yield an increase in gross margin. I thought you had experience with business models? The purpose of this thread was to estimate breakeven point. It may be difficult and have a large error. But some people want to know. By knowing the magnitude, we have some insight into what MNKD is thinking now. Given all this, I think my estimate of $500 mln is still better than your $175 mln. Keep in mind Danbury burns $90 mln/yr regardless of how much Afrezza is sold. can you tell me if Danbury costs of $90 mil includes Afrezza production cost included factory running costs?
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Post by mnkdmorelong on Jan 7, 2016 12:41:33 GMT -5
Danbury is comprised of two building. I suspect cost for the manufacturing building is captured in Afrezza COGS. But not all of it as some R&D goes on in that building.
The $90 mln is the other building, staff, and Corporate in California.
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Post by greg on Jan 7, 2016 12:47:13 GMT -5
"There is no way that cutting ASP by over 50% will yield an increase in gross margin. I thought you had experience with business models?
The purpose of this thread was to estimate breakeven point. It may be difficult and have a large error. But some people want to know. By knowing the magnitude, we have some insight into what MNKD is thinking now.
Given all this, I think my estimate of $500 mln is still better than your $175 mln. Keep in mind Danbury burns $90 mln/yr regardless of how much Afrezza is sold."
mnkdmorelong,
I'm starting to realize this back and forth, too, is proving to be an exercise in futility. This will be my final response on this thread.
1. What do you think gross margins were on $10 million on sales? Is it even a meaningful figure? The more important point is that gross profits will increase massively when sales rise to $175 million from $10 million, even with a sharp reduction in the price.
2. I don't think it takes a lot of experience with business models to know that your starting point has to be reasonable accurate numbers to get anywhere meaningful. Your starting point was a loss of $50 million, rather than the far more accurate $175 million. The latter is close to being one of the only real numbers to work with, and you were off here by a magnitude of 250%.
3. Your starting point is so far off and then you conclude $300 million initially and within minutes move to $500 million. Given this, what insight have you added??? So, please, enough with the shots.
4. Perhaps you should rework your "business model" with $175 million and come up with another number. And just to make you happy, I'll concede right now that whatever you come up with is better than my number.
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Post by esstan2001 on Jan 7, 2016 13:03:24 GMT -5
"There is no way that cutting ASP by over 50% will yield an increase in gross margin. I thought you had experience with business models? The purpose of this thread was to estimate breakeven point. It may be difficult and have a large error. But some people want to know. By knowing the magnitude, we have some insight into what MNKD is thinking now. Given all this, I think my estimate of $500 mln is still better than your $175 mln. Keep in mind Danbury burns $90 mln/yr regardless of how much Afrezza is sold." mnkdmorelong, I'm starting to realize this back and forth, too, is proving to be an exercise in futility. This will be my final response on this thread. 1. What do you think gross margins were on $10 million on sales? Is it even a meaningful figure? The more important point is that gross profits will increase massively when sales rise to $175 million from $10 million, even with a sharp reduction in the price. 2. I don't think it takes a lot of experience with business models to know that your starting point has to be reasonable accurate numbers to get anywhere meaningful. Your starting point was a loss of $50 million, rather than the far more accurate $175 million. The latter is close to being one of the only real numbers to work with, and you were off here by a magnitude of 250%. 3. Your starting point is so far off and then you conclude $300 million initially and within minutes move to $500 million. Given this, what insight have you added??? So, please, enough with the shots. 4. Perhaps you should rework your "business model" with $175 million and come up with another number. And just to make you happy, I'll concede right now that whatever you come up with is better than my number. Not that I am all that interested in getting into the middle of all this but: It is probably not appropriate to use the JV expense of $175M- this predominantly factors in Sanofi's bureaucracy and cost structure; which targets support to many different drugs, devices, etc. The true estimate is going to be somewhere in between, and my WAG is about 1/2 to 2/3 of this. Certainly not the full amount.
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Post by greg on Jan 7, 2016 13:13:09 GMT -5
"It is probably not appropriate to use the JV expense of $175M- this predominantly factors in Sanofi's bureaucracy and cost structure; which targets support to many different drugs, devices, etc. The true estimate is going to be somewhere in between, and my WAG is about 1/2 to 2/3 of this. Certainly not the full amount. "
estan2001,
Deciding which SNY expense to allocate to the Afrezza joint venture was always going to be a little tricky, but if MNKD allowed Sanofi to charge the venture 1/3 to 1/2 of costs that are attributable to its own products, I would be extremely upset.
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Post by Deleted on Jan 7, 2016 13:16:32 GMT -5
"It is probably not appropriate to use the JV expense of $175M- this predominantly factors in Sanofi's bureaucracy and cost structure; which targets support to many different drugs, devices, etc. The true estimate is going to be somewhere in between, and my WAG is about 1/2 to 2/3 of this. Certainly not the full amount. " estan2001, Deciding which SNY expense to allocate to the Afrezza joint venture was always going to be a little tricky, but if MNKD allowed Sanofi to charge the venture 1/3 to 1/2 of costs that are attributable to its own products, I would be extremely upset. dont take it that way.... but the size of expenses - las vegas launch party - flights/room for x reps, pay scale of directors/VP/US head of Afrezza team
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