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Post by anderson on Aug 9, 2016 8:37:10 GMT -5
For the tax credit you can carry it forward. So like the other tax credits it will help later when we are doing well, but doesnt help with cash flow. Research and Development (Nonincremental) Expenses Tax Credit Conn. Gen. Stat. §12-217n www.ct.gov/drs/cwp/view.asp?a=3807&q=522222Carryforward and Carryback Limitations Tax credits that are allowed but that exceed the limitation amounts may be carried forward to each successive income year until such credits are fully taken. All allowable tax credits from prior years must be carried forward and applied before the current year tax credit may be taken. No carryback is allowed.
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Post by brotherm1 on Aug 9, 2016 8:37:17 GMT -5
If you figure demand for product was very low during the first quarter and they still spent 7.5 million, what will it turn into as demand increases? Just an educated guess, but a lot of manufacturing cost at low volume is absorption of fixed cost. There are variable costs, like materials and labor, and there are fixed costs like depreciation. In a pharma plant there are calibrations and quality procedures that have to be done on a cycle that varies with the calendar rather than the volume produced. If your three month inspection is due then it has to be done whether you make 1 unit or 1 million units. Then there are other "semi-variable" costs that move in a step function where you have to add resources in chunks. For example, if you need one supervisor to oversee production of 1 million units, and two supervisors to oversee 2 million units, then you also need two supervisors to oversee 1.1 million units. Overall, it is very hard to determine what the manufacturing cost ledger relationships look like from just the quarterly financials. On the cash side, I think management is putting a bit of spin on that that may be misleading some shareholders. Yes, Sanofi had the insulin put for $9 million but I believe the partnership agreement allows them to offset that against anything owed on the credit line so it is not a source of cash but a reduction in debt. Similarly, the tax credit may be more like a prepaid expense that is only useful if the company owes taxes; there are very few tax credits anywhere in the world that are refundable for a taxpayer that does not pay any tax. As such, neither item helps the cash challenge. I think the date for raising funds is still November (or earlier). The burn continues at a good clip and the marketing expenses won't fully hit until Q3 so you really can't go by Q2 numbers. The company is also putting some spin on the reasons for a decline in R&D spending, but either the company is dedicated to developing new products on the Technosphere platform or they aren't. If you want to fantasize about TS development and what that will bring in the future then fine, but the company can't get there by ratcheting back R&D spending. Either the R&D number needs to go up, or contributions from TS will not be happening. Which leaves the need to raise cash well before cash runs out early in 2017. When companies play chicken with the financial markets on fund raising, the markets react by very punitive pricing because they know the company is desperate, so the raise has to be done before full year 2016 numbers are available in March, and it is very hard to raise money after Thanksgiving. That leaves the two weeks after the 10Q for third quarter is published but before Thanksgiving and absent a spectacular Q3, raising money in Sept/Oct is not out of the question. All this coming from someone whom just the other day stated it is costing MNKD $10 million per month just for the contracted sales force, I think all would be better off totally ignoring your financial prognostications.
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Post by blu2waz on Aug 9, 2016 8:54:37 GMT -5
70 guys making 10 grand per month is 700K. A very generous salary plus another 300K for expenses. I don't see how you get to 15 or 20 million.
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Post by kball on Aug 9, 2016 9:13:35 GMT -5
Just an educated guess, but a lot of manufacturing cost at low volume is absorption of fixed cost. There are variable costs, like materials and labor, and there are fixed costs like depreciation. In a pharma plant there are calibrations and quality procedures that have to be done on a cycle that varies with the calendar rather than the volume produced. If your three month inspection is due then it has to be done whether you make 1 unit or 1 million units. Then there are other "semi-variable" costs that move in a step function where you have to add resources in chunks. For example, if you need one supervisor to oversee production of 1 million units, and two supervisors to oversee 2 million units, then you also need two supervisors to oversee 1.1 million units. Overall, it is very hard to determine what the manufacturing cost ledger relationships look like from just the quarterly financials. On the cash side, I think management is putting a bit of spin on that that may be misleading some shareholders. Yes, Sanofi had the insulin put for $9 million but I believe the partnership agreement allows them to offset that against anything owed on the credit line so it is not a source of cash but a reduction in debt. Similarly, the tax credit may be more like a prepaid expense that is only useful if the company owes taxes; there are very few tax credits anywhere in the world that are refundable for a taxpayer that does not pay any tax. As such, neither item helps the cash challenge. I think the date for raising funds is still November (or earlier). The burn continues at a good clip and the marketing expenses won't fully hit until Q3 so you really can't go by Q2 numbers. The company is also putting some spin on the reasons for a decline in R&D spending, but either the company is dedicated to developing new products on the Technosphere platform or they aren't. If you want to fantasize about TS development and what that will bring in the future then fine, but the company can't get there by ratcheting back R&D spending. Either the R&D number needs to go up, or contributions from TS will not be happening. Which leaves the need to raise cash well before cash runs out early in 2017. When companies play chicken with the financial markets on fund raising, the markets react by very punitive pricing because they know the company is desperate, so the raise has to be done before full year 2016 numbers are available in March, and it is very hard to raise money after Thanksgiving. That leaves the two weeks after the 10Q for third quarter is published but before Thanksgiving and absent a spectacular Q3, raising money in Sept/Oct is not out of the question. All this coming from someone whom just the other day stated it is costing MNKD $10 million per month just for the contracted sales force, I think all would be better off totally ignoring your financial prognostications.Forgive me, but we'd be better off listening to who then?
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Post by petech on Aug 9, 2016 10:33:38 GMT -5
For the tax credit you can carry it forward. So like the other tax credits it will help later when we are doing well, but doesnt help with cash flow. Research and Development (Nonincremental) Expenses Tax Credit Conn. Gen. Stat. §12-217n www.ct.gov/drs/cwp/view.asp?a=3807&q=522222Carryforward and Carryback Limitations Tax credits that are allowed but that exceed the limitation amounts may be carried forward to each successive income year until such credits are fully taken. All allowable tax credits from prior years must be carried forward and applied before the current year tax credit may be taken. No carryback is allowed. Well I guess that answers that. They're displaying it as impacting cash flow....but that has to be a typo. There's no way they could convert their R&D to cash...could they? Maybe if they say had less than $70M in revenue? Perhaps sell it to the state....for...CASH?? Nah. Then that would be a cash flow item. www.ct.gov/drs/cwp/view.asp?a=3807&q=522222Exchange of Tax Credit for Refund A qualified small business that cannot take this tax credit in a taxable year in which it could otherwise be taken, as a result of having no tax liability, may exchange the tax credit with the State of Connecticut for a tax credit refund equal to 65% of the value of the tax credit or may elect to carry the tax credit forward as indicated above.
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Post by petech on Aug 9, 2016 10:36:56 GMT -5
All this coming from someone whom just the other day stated it is costing MNKD $10 million per month just for the contracted sales force, I think all would be better off totally ignoring your financial prognostications.Forgive me, but we'd be better off listening to who then? I can't answer for brotherm1, but for me, the person I listen to is the one that got me into MNKD (and every other stock in my life). Me. I make my own decisions. I do the thinking to get to those decisions. And I do the thinking to revisit whether those decisions still make sense in light of new information. Outsourcing either has never worked out well for me.
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Post by mnholdem on Aug 9, 2016 10:40:23 GMT -5
Whether one agrees with matt's analysis (above) or not, it's prudent to consider that every company typically puts a bit of a spin on their projections. However, that's not to say that MannKind officers are attempting to mislead. It's just that the projections made by Pfeffer and others reflect the path that their model implies is likely to occur.
That said, I think that it's important for shareholders to pay attention to those statements that may be quantified, such as this statement by Rose Alinaya:
"In addition to the foregoing cash inflows, we received $9.2 million from Sanofi for the sale of insulin inventory in connection with the insulin put option we exercised following termination. We expect additional receipts from Sanofi under the terms of this agreement later in the year and for some time to come."
Also, not specifically mentioned during the earnings call was the financial impact to MannKind related to the inventory transfer of Afrezza, which occurred the last week of July. This transfer took place during the 3rd Quarter so we should expect hear more about the financial implications of the inventory, as well as the additional Sanofi receipts, at the next earnings call.
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There are still a lot of moving parts. MannKind's CEO has stated that he believes the cash runway will extend into 2017 based on his knowledge that there are costs that can be managed with few surprises. As a shareholder, I consider the financial information that was presented to be a conservative baseline. Therefore, if any surprises do occur over the remainder of the year, they will result in additional cash. In the case of additional receipts from Sanofi, it could be a little (payment of 35% of their final sales ) or a lot (i.e. agreement settlement payment). Today, the only negative surprise I can see going forward would be if Afrezza does not sell. Frankly, I don't see that scenario happening.
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