FDA Approval Already Priced-In

[ezrasfund]

The $200M order is taking on the character of an urban legend. In 2010 before the 1st CRL Al Mann said that he had been talking to health officials in a "middle eastern country" who said they would like to place an order for Afrezza, which could be $200M per year. This was an off the cuff remark by Al, made only once and never referred to again. It probably related to a visit to Israel (there is an Al Mann Institute at the Technion) and was just Al reporting on a casual conversation. Why this one remark has taken on a life of its own is a good study in how rumors are born and sometimes never die. It also points out why Al is seldom the presenter in public forums, as he sometimes goes off script and makes casual (but not necessarily untrue) remarks. It did cost them $16M one time, however.

[babaoriley]

Well said, Ezra. No $200 million orders waiting. But give it some time...

Shares and warrants very strong today, very pleased!

[alcc]

Jun 22, 2014 5:33:39 GMT -5 milachka63 said:

Not sure if this was already addressed, but I just had a look at the RBC analysis and they anticipate these Afrezza royalties in the US and in Europe (millions):

2015 9.3
2016 30.3
2017 61.6 14.0
2018 115.3 33.9
2019 170.9 67.9
2020 310.0 125.3
2021 357.6 183.0
2022 406.8 327.2
2023 457.6 371.8

Seems like a really slow ramp up to me. I'd expect sales to be better in the early years. Opinions?

The ramp is actually incredibly steep. Afrezza is selling into an established market so it has to take share away from established RAAs. 

Okay, I wasn't going to do this, but here goes. This RBC report is useless. But nevertheless troubling (too optimistic). 

1) Revenue side:

The biggest problem is total available market (TAM). This is not modelled in this useless report. Their upside scenario assumes basically a ~40% peak mkt share, which they value at $14B. That implies a TAM of ~$32B. Their downside scenario assumes a ~10% share, valued at $4B. That implies a TAM of ~$40B. So, let's say an avg TAM of $35B. That's a BIG number! In what time frame? 10 years out? Really? What is it today?

The latest data I can find on Novolog and Humalog shows total global sales of each at ~$3B. That's ~$6B, far short of $35B. Apidra sales is quite low and does not make much difference. So, where does their TAM come from? Are they counting on substantial sales into T2 population? Where's the model for that? Their mid-point royalty revenue number is ~$7B (to support the $16 price target). That's a very reasonable 20% of their implied $35B TAM. But >100% of current sales for the two top RAAs! 

Their model shows a substantial 30-40% "other" revenue. Not sure what that is. Direct sales?

2) Expense side:

Model shows a steady state 42% COGS. Pick one year, 2018. Royalty revenue is $150M. Other revenue is $118M. Assume other revenue is direct revenue. Royalty is 20% so equivalent (sell-through) revenue $750M (150 x5). So total "street" revenue is $870M. COGS is modelled at $112. That's only 13%, which is optimistically low. More to the point, if COGS is closer to industry norm of ~20%, a royalty rate of 20% would mean zero profit! Imo 20% is too low for MNKD. But 30% may be too high for partner. Not much margin for negotiating errors.

I note, this ridiculous model assumes MNKD retains manufacturing responsibilities but shows zero depreciation/amortization, i.e. zero expansion, zero capital expenditures!? Also, is ~$35M SGA reasonable? In 2023 the "other" revenue is $650M. A 5% SGA? 

Bottom line, the model in this report is pathetically useless but its assumptions and omissions biases it in the optimistic direction, imo. 

[mannmade]

After the last shareholder meeting I went up to Hakan and asked him about the 3rd world country out there waiting on approval for Afrezza in the US before placing an order and he told me they were still in the conversation but would likely take at least six months after approval for anything to happen with it if moved forward.