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Post by figglebird on Jan 13, 2016 13:53:33 GMT -5
There is absolutely no way to know true cogs at this time nor, despite what MNKD says would it matter unless they liscenced to someone else... SNY was in charge of the supply agreement and MNKD has to my knowledge never broken down their specific cost structure w respect to this specific licencing deal. In the event they transferred their technology SNY is screwed beyond words for clear breach.
In the event MNKD goes it alone and never transfers does everything in house, I have a feeling they will be able to cut manufacturing costs - but this is just a guy sense as I have no real hard data.
I would not worry too much about it or at least I am not nor ever because we are still at the stage where MNKD ideally needs to first be recognized then valued as a TESLA - everyone else is FORD.
Also, I am fairly certain MNKD has patented dozens of insulin based formulations beyond human orgin insulin. Some of those formulations may be cheaper to manufacture.
What would really cut costs if I had to guess would be if mnkd was also able to manufacture its own brand insulin or generic insulin - but that is just wishful.
Remember, mann is boldly creative in his approach to solving all kinds of problems - we can only hope(as he gets older) that this spirit remains steadfast in the culture of the company that carries his name.
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Post by mnkdmorelong on Jan 13, 2016 15:34:51 GMT -5
"Something tells me that both SNY and MNKD went to market with a premium priced product. They had no response when they got pushback from insurance companies. The no response may be caused by the high COGS. This may be the reason why SNY did not do the EU; prices there are even lower than here."
I have to head off to a meeting (so feel free to continue - maybe other board members can better explain) but, even if I were to accept your inclusion that sales/marketing expenses are part of COGS - which is incorrect - the other problem in your statement above that the "no response" to assumed pushback from insurance companies "may be caused by the high COGS" is that License & Collaboration Agreement gave Sanofi sole power over pricing (a huge mistake in my opinion). Matt has already stated that they identified problems with Sanofi deciding to price Afrezza at a premium early in the launch.
I realize that you used the words, "may have caused" but the whole idea of Afrezza having a high COGS is ridiculous, in my opinion, and I'm convinced that MannKind has plenty of room to competitively price this product, which implies that Sanofi chose NOT to. Early on, I thought that was because Sanofi was gathering real-world data that would soon justify the high price. Now, I (and many others) think that Sanofi priced Afrezza to prevent/limit coverage by 3rd party payers.
I did not include sales and marketing expenses in COGS. That would be silly. The model I created is actually very simple. It goes like this from the perspective of MNKD: How much does Afrezza sales have to be when marketed by SNY for me to achieve cash flow break even. We know that MNKD burns $90 mln and that the shared cost of $60 must also be included for cash to start flowing. We know that the 35/65 deal is similar to a 25% royalty on sales. We also know that the ASP of Afrezza must be cut in half for any sales volume to build. It's a simple equation: Cash needed = Cash Flow from SNY. Or in numbers: $150 mln = 25% X 50% (price cut) X Sales The number when calculated is $1,200 mln. No need for COGS
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Post by figglebird on Jan 13, 2016 15:56:14 GMT -5
The continued speculation that mnkd had any influence on pricing is completely inconsistent with the limited FACTS we have.
In accordance with their obligations as stipulated in their agreed upon terms, SANOFI had the singular responsibility to make that call - furthermore, based on the clear disparity between what was stipulated and what was actually reported, it is evident Sanofi did not meet their obligations with respect to other interconnected facets of the deal, such as timely communication regarding supply and demand, manufacturing inconsistencies, lack of good faith communication, the list goes on and on.
In this context, presuming mnkd had any say as to pricing, is both contractually inaccurate and useless.
They leased their ability to control their product to an unreliable partner.
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Post by james on Jan 13, 2016 15:58:27 GMT -5
This doesn't make any sense. If you're going to include the $60M aggregate loss on the left side of the equation, why would you use a 25% royalty figure on the right? One is a cumulative number and the other is an ongoing rate. Matching the $90M annual cash burn to a 25% royalty does make sense. Also, factoring a 50% price cut I suppose is attempting to show before and after required sales. But the gross sales $$ required remains the same in either case, so I don't get including it in this kind of a cost / revenue matching equation.
How about $90M = 25% X sales. Break even sales for MNKD = $360 in that solution. It's too simple in my opinion and overstates the requirement, but its one way to look at it.
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Post by dreamboatcruise on Jan 13, 2016 16:03:29 GMT -5
The continued speculation that mnkd had any influence on pricing is completely inconsistent with the limited FACTS we have. In accordance with their obligations as stipulated in their agreed upon terms, SANOFI had the singular responsibility to make that call - furthermore, based on the clear disparity between what was stipulated and what was actually reported, it is evident Sanofi did not meet their obligations with respect to other interconnected facets of the deal, such as timely communication regarding supply and demand, manufacturing inconsistencies, lack of good faith communication, the list goes on and on. In this context, presuming mnkd had any say as to pricing, is both contractually inaccurate and useless. They leased their ability to control their product to an unreliable partner. It seemed like the JAC (equal representation of MNKD and SNY) was supposed to have control (with SNY override in case of deadlock) over most everything pertaining to Afrezza. Are you stating that you know for a fact that whatever price SNY proposed was not put before the JAC for approval? SNY may have had the singular responsibility for researching and proposing a price... and they did have the override of the JAC in case of disagreement... but I am unaware of anything that would clearly indicate MNKD didn't consent within the context of the JAC.
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Post by mnkdmorelong on Jan 13, 2016 16:10:25 GMT -5
This doesn't make any sense. If you're going to include the $60M aggregate loss on the left side of the equation, why would you use a 25% royalty figure on the right? One is a cumulative number and the other is an ongoing rate. Matching the $90M annual cash burn to a 25% royalty does make sense. Also, factoring a 50% price cut I suppose is attempting to show before and after required sales. But the gross sales $$ required remains the same in either case, so I don't get including it in this kind of a cost / revenue matching equation. How about $90M = 25% X sales. Break even sales for MNKD = $360 in that solution. It's too simple in my opinion and overstates the requirement, but its one way to look at it. The $60 mln is the aggregate loss for the first year. So everything on the left side of the equation is for one year. It must be balanced by cash flow from the right side. Obviously in year 2 we go through the same exercise. I am assuming the 25% royalty is based on a certain set of COGs and ASPs. If Afrezza's price is cut in half, I am sure the 65/35 split in profits would have moved the 25% downwards.I I made it simple and cut the royalty by 50%. Is it perfectly accurate? No. But it tells us that MNKD needs to do about 1 bln in sales to break even. This is a huge number coming from first year sales of almost nil.
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