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Post by james on Jan 8, 2016 22:56:08 GMT -5
I started this thought in the script data thread, but I will add to it here. Lately I have been looking more at reported revenue ($$), which has been growing faster than TRx.
$$ sold for total Q4 (13 weeks) comes up with $4.10M per Sym data; or $16.4M annualized. Actually, across the last 5 weeks (excluding Christmas week) suggests the pace is closer to $18M annualized. $$ sold for total Q3 comes up with $3.46M; or $13.84M annualized.
Growth rate quarter over quarter is a little less than 19%Read more: mnkd.proboards.com/thread/2679/symphony-script-data?page=31#ixzz3wiLxL0lCIn other words, you may or may not call it sluggish or anemic, but suggestions that there has been no sales growth is greatly exaggerated. In fact, I would interpret that patients are purchasing more with each TRx, simply to go to the pharmacy counter less often and because they are deciding to stay on the product long term. The plateau in script count then is hiding that the patient population continues to climb in spite of difficulties in insurance, physician resistance, etc. Simply carrying this rate of growth forward for a couple of years, with an expectation of a considerable reduction in growth in following years would close in on $200M in sales in 2020. Working up some healthy numbers for expenses (based on the reported JV costs - which actually seem high to me, but oh well), plus a sizable allowance for the mandated safety study easily yield NPV calculations that are positive. It does take a little longer than I would like to reach breakeven (based largely on those reported JV costs), but the product looks likely to be profitable on US activity alone, and without any sort of 'tectonic shift' in thinking. I decline from putting out my actual numbers here because there are so many variations on what can happen and the ease with which assumptions can be criticized. Projections of this kind are complete speculation. However, in my base model, I actually only barely exceed $500M in sales 10 years out, which seems perfectly attainable and represents fairly low market share. If you have any experience doing this type of activity, it is a mostly encouraging exercise as I see it.
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Post by mnkdmorelong on Jan 9, 2016 10:37:50 GMT -5
I started this thought in the script data thread, but I will add to it here. Lately I have been looking more at reported revenue ($$), which has been growing faster than TRx.
$$ sold for total Q4 (13 weeks) comes up with $4.10M per Sym data; or $16.4M annualized. Actually, across the last 5 weeks (excluding Christmas week) suggests the pace is closer to $18M annualized. $$ sold for total Q3 comes up with $3.46M; or $13.84M annualized.
Growth rate quarter over quarter is a little less than 19%Read more: mnkd.proboards.com/thread/2679/symphony-script-data?page=31#ixzz3wiLxL0lCIn other words, you may or may not call it sluggish or anemic, but suggestions that there has been no sales growth is greatly exaggerated. In fact, I would interpret that patients are purchasing more with each TRx, simply to go to the pharmacy counter less often and because they are deciding to stay on the product long term. The plateau in script count then is hiding that the patient population continues to climb in spite of difficulties in insurance, physician resistance, etc. Simply carrying this rate of growth forward for a couple of years, with an expectation of a considerable reduction in growth in following years would close in on $200M in sales in 2020. Working up some healthy numbers for expenses (based on the reported JV costs - which actually seem high to me, but oh well), plus a sizable allowance for the mandated safety study easily yield NPV calculations that are positive. It does take a little longer than I would like to reach breakeven (based largely on those reported JV costs), but the product looks likely to be profitable on US activity alone, and without any sort of 'tectonic shift' in thinking. I decline from putting out my actual numbers here because there are so many variations on what can happen and the ease with which assumptions can be criticized. Projections of this kind are complete speculation. However, in my base model, I actually only barely exceed $500M in sales 10 years out, which seems perfectly attainable and represents fairly low market share. If you have any experience doing this type of activity, it is a mostly encouraging exercise as I see it. Most likely the increase in sales $$$ is due to lowered promotional support by SNY. They just gave up. NPV valuations are good for de novo investment evaluations. For MNKD, cash flow analysis is more to the point. If MNKD goes belly up in 12 months, positive NPV in a five year horizon is moot. If you want to make your NPV valuation more accurate, put in an estimate for investment needed in 2016 and beyond. So long as MNKD is not cash flow positive, it will need cash. And of course there is the safety study. If new investors believe a lowered ASP yields positive NPV in 5 years; MNKD will get the money. If not, Afrezza becomes a niche product.
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Post by james on Jan 9, 2016 11:49:56 GMT -5
The question being considered here is whether an Afrezza venture is viable with current assumptions about sales growth and expenses. In that regard, the NPV calculation is how an outside party ('the 'de novo' investment) might view the prospect of partnering or purchasing Afrezza rights. Is it generally positive or generally negative?
In my model, I do add components to account for working capital and the safety study. Also, how do we factor the effect of a lowered ASP? We can see that growth was 20% Q on Q without lowering price. My analysis was simply carrying on as is and seeing if the result would be positive. If demand is fairly elastic (which seems likely) than lowering ASP could certainly improve the result.
I don't understand your point about how lowered promotional support leads to an increase in sales $$$. That sounds confused, though I do agree they were not working very hard at it; certainly given the apparent expenditure.
Your point about cash flow analysis needs to consider what future working capital requirements would be for MNKD (with and in addition to US Afrezza efforts) and that can't be determined without still more assumptions. We are missing a lot of inputs that management sees and we do not in that area. I'm not ignoring this for a MNKD investment question, but narrowing the analysis for the moment to evaluate Afrezza survival as a first question.
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Post by u1682002 on Jan 9, 2016 13:50:02 GMT -5
James, you seem ti me very knowledgeable about corporate affairs so i like to ask you the following questions: 1. Based mnkd current debt structure, how much control(##%?) Will Al have if Al decides to file chapter11?
2. SNY seems still need to share the cost till july 4th, so the cash burn rate is easy to estimate. The question is how to estimate the burn rate for this company after july 4th. Can the safety study be delayed 6 to 8 month? Can MNKD pile up more raw material now (say 12 month worth raw material) before July 4? Since the line are already paid for, the only thing need to pay is the electrical and water bills plus the salary. If Mnkd can get FDA approve its stored insulin by the enr of this year, then i will say Al may be able to find enough money for this company to run at least a couple of years. I would like to hear your thoughts about this. Thanks.
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Post by james on Jan 9, 2016 15:05:42 GMT -5
James, you seem ti me very knowledgeable about corporate affairs so i like to ask you the following questions: 1. Based mnkd current debt structure, how much control(##%?) Will Al have if Al decides to file chapter11? 2. SNY seems still need to share the cost till july 4th, so the cash burn rate is easy to estimate. The question is how to estimate the burn rate for this company after july 4th. Can the safety study be delayed 6 to 8 month? Can MNKD pile up more raw material now (say 12 month worth raw material) before July 4? Since the line are already paid for, the only thing need to pay is the electrical and water bills plus the salary. If Mnkd can get FDA approve its stored insulin by the enr of this year, then i will say Al may be able to find enough money for this company to run at least a couple of years. I would like to hear your thoughts about this. Thanks. At this point, Al holds around $50M of $210M of MNKD debt. There are probably also covenants in those liabilities that may dictate their pecking order. Going strictly on size of the liabilities, Deerfield would have principle control of the assets at the moment. But I am not sure as that debt is secured by the production facilities (IIRC), so that may be their limit of control. There's some stuff in there about the debt seniority that I haven't looked into in detail, but I definitely expect that as long as Al (and his trust) has available cash that it will be floated to MNKD as an increase in the line of credit to ensure his wishes for the company can be carried on in any circumstance. For a stock holder, increasing the credit line is near term good and long term mixed. In the near term, it would certainly buoy confidence and likely reflect positively for equity. Longer term, the more debt they take on, the greater the cash burn to interest expense. I say long term mixed because it offers new strategic leverage for negotiations, improves the probable success for equity dilution, and of course interest paid to Al can be directed right back to MNKD if he so wishes. For your second point, I think you'd have to add a minimum of $4 or 5M per month to the current cash burn if MNKD were to attempt carrying on alone with Afrezza after July. That's assuming they take a skeleton approach to sales and distribution as well as somehow deferring the study; the Sanofi effort was more in the neighborhood of $10M. It would be very dicey to say the least. Can they get a delay on the study? There is certainly is a case to be made on three fronts: First off, is it reasonable to attempt enrollment of 5,000 patients when there may only be 8-10,000 total users at present? Second, the partner who should have been responsible for this just bailed, so there is a clear administrate grounds for 6 months or more. Lastly, there is compassionate use to consider; if MNKD would be unduly burdened by this requirement and cannot continue, then the patients would loose access to a valuable medication. All in all, I think a delay of a year would be rational; but we're dealing with the FDA, so there's that. MNKD could choose to ignore it for a while, and likely get away with it for 3-6 months, but that probably wouldn't end well. I do think they can find the money to keep MNKD going through 2017 at least, but the circumstances of that will be important to the eventual disposition of equity. Irrespective to what happens to MNKD, Afrezza should find a champion to continue it based on what I've seen so far.
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Post by dudley on Jan 9, 2016 15:58:33 GMT -5
Looking at the Q3 transcript, MNKD's loan facility with Sanofi had a balance of $43.7 Million as of 9/30. That is MNKD's 35% share of the loss so far. Extrapolating the other 65% the TOTAL loss is roughly $125 million since the agreement was signed. So the gigantic question is what in the hell did Sanofi spend the money on? My best guess is a major part of it would be salaries for sales reps. NO WAY they spent anywhere near that amount on tangible marketing campaigns since all we have seen are a few mediocre magazine ads. I presume the clinical trial expense for the clamp studies and whatever they may have spent on the pediatric trial would be in there as well. The actual product cost has to be pretty minimal at this point given the sales levels.
The partnership loss (using MNKD's published numbers and extrapolating the other 65% for Sanofi) was $44 Million for Q1, $37 Million for Q2, and $44 million for Q3. One would have expected a larger loss in Q1 with all the sample product, ramping up costs etc. But they were fully ramped with all 3 lines by the end of Q2 or shortly thereafter. It is baffling that $44 million was spent in Q3 and with minimal results. Sanofi appears to have spent money like a drunken sailor, and again it almost had to be on salaries since there is no marketing to be seen anywhere and actual product cost must be modest in line with the modest sales.
I would think a well-designed website (sorry, I am not impressed with the current Afrezza website) and "webinars" showing how to use the product most effectively, combined with a dedicated insurance team could do as well as Sanofi was doing with their sales force at a fraction of the cost. If MNKD gets the massive stockpile of Pfizer insulin certified they have enough for $10 billion in sales. The lines are up and running so that cost is done so free insulin plus packaging costs should allow a very significant price reduction. I'm unsure of what the actual distribution costs may be to physically get the product out to pharmacies.
Just thinking out loud - mainly I am trying to understand how Sanofi could spend that much money and all we ever heard from them about Afrezza were the tiniest snippets here and there, almost like they were not even involved. It is a deep and dark mystery.
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Post by spiro on Jan 9, 2016 16:20:59 GMT -5
Great discussion here. Spiro believes that MNKD should take several immediate steps to prolong survival.
A. Reduce the manufacturing staff to the smallest number possible to reduce production of new product to a trickle, thus preventing recertification of the lines.
B. Cut the price of Afrezza 50% to attract new users and increase insurance coverage. Hopefully, cutting the price will not only attract new users, but also get some ex-users back who quit, because of the high cost of Afrezza.
Spiro believes the price cut alone will increase Afrezza sales substantially.
Now, here comes the strategy. MNKD should hire away from SNY 12-15 reps who were totally onboard with Afrezza. MNKD should then target a specific area within a state, say South Forida or LA ( more expensive ) as their sales target. These reps should target both Endo's and PCP's. MNKD should have enough money for a small TV ad program in the area along with mailings. MNKD needs to listen to the suggestions and strategies that these ex Sanofi reps will offer them. I'm sure Sanofi cared less about their opinions. If MNKD can substantially increase Afrezza sales in this small area within 6 month's using an adequate sales force with some good marketing, it is Spiro's opinion that securing a new partner will come quickly. The data from this test area should be very convincing. It will also be a much more favorable deal for MNKD and it's investors.
Spiro here, How the heck did Afrezza achieve $10 million in sales with a minimal sales force and basically no marketing?
P.S. Spiro knows how to lose money, as good as anybody.
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Post by Deleted on Jan 9, 2016 16:30:28 GMT -5
Great discussion here. Spiro believes that MNKD should take several immediate steps to prolong survival. A. Reduce the manufacturing staff to the smallest number possible to reduce production of new product to a trickle, thus preventing recertification of the lines. B. Cut the price of Afrezza 50% to attract new users and increase insurance coverage. Hopefully, cutting the price will not only attract new users, but also get some ex-users back who quit, because of the high cost of Afrezza. Spiro believes the price cut alone will increase Afrezza sales substantially. Now, here comes the strategy. MNKD should hire away from SNY 12-15 reps who were totally onboard with Afrezza. MNKD should then target a specific area within a state, say South Forida or LA ( more expensive ) as their sales target. These reps should target both Endo's and PCP's. MNKD should have enough money for a small TV ad program in the area along with mailings. MNKD needs to listen to the suggestions and strategies that these ex Sanofi reps will offer them. I'm sure Sanofi cared less about their opinions. If MNKD can substantially increase Afrezza sales in this small area within 6 month's using an adequate sales force with some good marketing, it is Spiro's opinion that securing a new partner will come quickly. The data from this test area should be very convincing. It will also be a much more favorable deal for MNKD and it's investors. Spiro here, How the heck did Afrezza achieve $10 million in sales with a minimal sales force and basically no marketing? P.S. Spiro knows how to lose money, as good as anybody. Advantages : 1. Tier 2 insurance 2.Insurance will force insulin users to consider Afrezza. Will let them know of cheaper options - Free advertising 3.Out of pocket paying patients - Lots of them international and domestic that are aware of Afrezza and Mannking doesnt need go through regulatory bodies.. Individual patients can order from sites like internationalpharmacy.com Cut the price 50% and you are a national sensation - for the good....Al basically rewrites history again
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Post by dreamboatcruise on Jan 9, 2016 16:31:05 GMT -5
James, you seem ti me very knowledgeable about corporate affairs so i like to ask you the following questions: 1. Based mnkd current debt structure, how much control(##%?) Will Al have if Al decides to file chapter11? 2. SNY seems still need to share the cost till july 4th, so the cash burn rate is easy to estimate. The question is how to estimate the burn rate for this company after july 4th. Can the safety study be delayed 6 to 8 month? Can MNKD pile up more raw material now (say 12 month worth raw material) before July 4? Since the line are already paid for, the only thing need to pay is the electrical and water bills plus the salary. If Mnkd can get FDA approve its stored insulin by the enr of this year, then i will say Al may be able to find enough money for this company to run at least a couple of years. I would like to hear your thoughts about this. Thanks. I don't believe SNY contributes to cost of Afrezza they don't take possession of. As for approval of stored insulin, we're already on the hook to buy more insulin from the approved source than will be needed for a LONG time to come. Would it be wise to waste precious resources on getting the stored stuff approved. Not saying it wouldn't... perhaps that adds value to a potential acquisition of MNKD if it reduces doubt about the value of the stored insulin... perhaps not. Buying that insulin is now a very non-trivial expense for MNKD. Sure wish that had somehow been an obligation of SNY, not MNKD... but alas.
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Post by kball on Jan 9, 2016 18:42:29 GMT -5
I might be 1. Working to renegotiate insulin purchasing contract 2. Contacting several high prescribers to gather data 3. Working any BP pharma contact list for partnerships, licensing deals, possible new high level employees 4. Begin yet another round of layoffs-(remember when some people here spun the previous ones as a good thing) 5. In addition to all the work w SNY that needs to happen which won't be easy or fun or without many problems
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Post by mnkdmorelong on Jan 10, 2016 8:50:11 GMT -5
The question being considered here is whether an Afrezza venture is viable with current assumptions about sales growth and expenses. In that regard, the NPV calculation is how an outside party ('the 'de novo' investment) might view the prospect of partnering or purchasing Afrezza rights. Is it generally positive or generally negative? In my model, I do add components to account for working capital and the safety study. Also, how do we factor the effect of a lowered ASP? We can see that growth was 20% Q on Q without lowering price. My analysis was simply carrying on as is and seeing if the result would be positive. If demand is fairly elastic (which seems likely) than lowering ASP could certainly improve the result. I don't understand your point about how lowered promotional support leads to an increase in sales $$$. That sounds confused, though I do agree they were not working very hard at it; certainly given the apparent expenditure. Your point about cash flow analysis needs to consider what future working capital requirements would be for MNKD (with and in addition to US Afrezza efforts) and that can't be determined without still more assumptions. We are missing a lot of inputs that management sees and we do not in that area. I'm not ignoring this for a MNKD investment question, but narrowing the analysis for the moment to evaluate Afrezza survival as a first question. You mentioned that sales growth in December rose strongly. This is probably due to the elimination or reduction of discount coupons by SNY which raised ASPs for existing Afrezza users. This is the basis for my promotional comment. An NPV analysis must be positive for the venture to be viable. Sell side analysts create financial models of of companies and use NPV (aka discounted cash flow) to make their share price estimate. NPV analysis is fundamentally a cash flow model that incorporates the time value of money, desired rate of return and variability in cash flow estimates. How quickly Afrezza sales will grow in response to a material reduction in ASP is the pivotal input to MNKD's NPV model. If it is slow as represented by your $500 mln sales estimate by 2026 requires huge investments that would drive NPV negative. An easier model to understand and use is the breakeven model. There is enough data available on MNKD's financial performance to estimate the break even point. I came up with $500 mln sales minimum to keep MNKD alive and this must be achieved within 3 years.
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Post by figglebird on Jan 10, 2016 9:34:51 GMT -5
Debt - 191m
Debt servicing/interest incured 2016 - 12.9m
Debt + Principal due on trancheb 7/17 - 17.9m
Greenfield owns most of the senior secured febt thru the following: 2018 notes - 27.7m 5.75% 2019 notes - 60m 9.75% Tranche B notes - 20m 8.75% Mann Group - 43.7m unsecured(plyable) Sanofi loan facility - 43.7m 8.5% see agreement and 10q to determine seniority capacity.
Eod - debt is manageable - no payments have ever been missed - 25m must remain in cash at each qrt end
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Post by figglebird on Jan 10, 2016 9:35:58 GMT -5
Tranche b principal pmnt due on 7/16
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Post by figglebird on Jan 10, 2016 9:40:56 GMT -5
I believe deerfield is owner of first 3 notes. The senority differences between the first two notes and sanofis loan facility are unclear and potentially in conflict.
There is also a MILESTONE ARRANGEMENT that was made w Deerfield that may or may not trigger money owed - this is by far the least understood insturment on my end.
But deerfield is likely the biggest debtor as mann group transferred his majority debt to stock shRes yrs ago.
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Post by daduke38 on Jan 10, 2016 11:01:28 GMT -5
Great discussion here. Spiro believes that MNKD should take several immediate steps to prolong survival. A. Reduce the manufacturing staff to the smallest number possible to reduce production of new product to a trickle, thus preventing recertification of the lines. B. Cut the price of Afrezza 50% to attract new users and increase insurance coverage. Hopefully, cutting the price will not only attract new users, but also get some ex-users back who quit, because of the high cost of Afrezza. Spiro believes the price cut alone will increase Afrezza sales substantially. Now, here comes the strategy. MNKD should hire away from SNY 12-15 reps who were totally onboard with Afrezza. MNKD should then target a specific area within a state, say South Forida or LA ( more expensive ) as their sales target. These reps should target both Endo's and PCP's. MNKD should have enough money for a small TV ad program in the area along with mailings. MNKD needs to listen to the suggestions and strategies that these ex Sanofi reps will offer them. I'm sure Sanofi cared less about their opinions. If MNKD can substantially increase Afrezza sales in this small area within 6 month's using an adequate sales force with some good marketing, it is Spiro's opinion that securing a new partner will come quickly. The data from this test area should be very convincing. It will also be a much more favorable deal for MNKD and it's investors. Spiro here, How the heck did Afrezza achieve $10 million in sales with a minimal sales force and basically no marketing? P.S. Spiro knows how to lose money, as good as anybody. Always enjoy your posts and have learned a lot from you about the use of Afrezza. I don't know if 50% is the magic %, but couldn't agree more that it is way too expensive. Wonder how many users we have lost in the past year due to cost and poor insurance coverage? Probably a lot more than we realize. At a lower price, Tier 2 is much more likely. I have read posts on other boards where people have tried it, loved it, but simply couldn't afford it. Here is where I see the challenge. MNKD does not have the $ or expertise to market this alone. Add a new partner, and we may be back in the same over priced boat. A good idea on targeting areas, but as word spreads, where does MNKD come up with the $? I'm not the smartest guy in the world, but with a year of positive results from users, why wouldn't someone step in and buy this? You know as well as anyone what a great med. this is!
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