|
Post by mnkdmorelong on Jan 11, 2016 16:11:53 GMT -5
Not trying to sound negative- but is this all speculation? This is worse than speculation. It's not practical. MDT uses mechanical devices to infuse insulin into the body. Afrezza is inhaled. Where is the connection?
|
|
|
Post by mnkdmorelong on Jan 11, 2016 15:51:26 GMT -5
Yes, the price now is $0.67 ps. If we get up to $5, a lot of longs are even. It's the creeping up of the price to a level that is better for longs based on nothing except hope. This will be a distressed merchandise sale. Nothing in MNKD is producing a profit. For profits to flow, the new owner must invest heavily. The backdrop shows two other companies (SNY and PFE) who poured 8 figures each and failed to profit from inhaled insulin. Not that it really matters but PFE spent more than $3,000,000,000 and about a decade on its inhaled insulin, and that's $3 billion with a B. What has SNY put into its inhaled insulin? About 15 months and $400 million, that's it. Putting them into the same boat is rather silly. As to "distressed merchandise sale," things aren't that clean cut. MannKind may be strapped and not have many options. But this may not be all that relevant if several, or even just two, potential acquirers decide the company's various asset are attractive. You may have concluded that Afrezza is spoiled merchandise, many would disagree. I chose the simplicity of "8 figures" for sales and marketing alone to get my message across. I think you get the idea. The circumstances surrounding Afrezza is distressed. MNKD must sell or else the BK court will sell the assets. Maybe we will hear something about TS this Wednesday. But otherwise the potential for TS is limited to Afrezza. The entire deal has warts.
|
|
|
Post by mnkdmorelong on Jan 11, 2016 15:03:49 GMT -5
Yes, the price now is $0.67 ps. If we get up to $5, a lot of longs are even. It's the creeping up of the price to a level that is better for longs based on nothing except hope. This will be a distressed merchandise sale. Nothing in MNKD is producing a profit. For profits to flow, the new owner must invest heavily. The backdrop shows two other companies (SNY and PFE) who poured 8 figures cash each and failed to profit from inhaled insulin.
|
|
|
Post by mnkdmorelong on Jan 11, 2016 14:49:39 GMT -5
Totally agree with this target. Selling all of MNKD IP (Afrezza, etc) + property will equate to only $5 PPS or $4.50. Anyone that thinks selling MNKD for over $5 PPS is out of their mind. At this point $5 would be great. Even $4.50 is a great number, I just don't know how to get there. It's just what others are willing to pay with blood in the water. Generosity doesn't tend to coincide with the pharma industry. Na na na! I see buyout creep here. Now you are up to $5.00 ps. As a reminder, Afrezza is a flop and TS has only one application and it is a flop. The earlier inhaled product (Exubera) was also a flop. It's one big flophouse. The ultimate BO price will be closer to a flophouse price rather than prime real estate.
|
|
|
Post by mnkdmorelong on Jan 11, 2016 14:11:34 GMT -5
Could be Matts job is to follow the plan DeSisto had written up until Duane is able to come back in sept. The "only" thing that's changed is Duane isn't working at Mnkd now. Why? That is the question why. Bailed or No compete? Really hard to wrap my head around the fact they they didn't know sny would bail and that Duane didn't know he would take this to market without sny so why would he bail? It probably is due to legal reasons. Cash position is still the same as it was and just got a little better not having to pay Duane as CEO. If they had a plan to commercialize this themselves nothing much has changed with this announcement. If the plan was to sell off the company in pieces of whole that has t changed either. I really wish we could have heard his plan before he left, but I expect us to hear something in the next week or two as far as a plan or major announcement. Do you really think Desisto developed a plan after 2-3 days on the job? He didn't have the time to learn the first names of everyone he would be working with.
|
|
|
Post by mnkdmorelong on Jan 11, 2016 10:41:20 GMT -5
I am stunned from the Desisto withdrawal of this morning. Why announce a CEO appointment if an important contingency is not waived?
Very significant is that Al Mann was not re-appointed as CEO. He may be too feeble to take on the tasks that lie ahead.
I can't see an 8 figure deal being done to save MNKD as an operating entity. This leaves selling off the assets: Afrezza, TS and the buildings. From the selling price, the first $200 mln go to bondholders. The rest go to us longs. The speculation is the sale price. Given that today's price is up, the market thinks equity will get more than $0.67 /ps.
My guess, and it is a pure guess is $2.00 ps.
|
|
|
Post by mnkdmorelong on Jan 10, 2016 11:55:03 GMT -5
Like everyone, I am aghast at the change of events in just the last week. Various scenarios have been floated about what Mannkind should do, including bankruptcy. (It's hard for me to write that.) What are the incentives and disincentives declare BK if your goal is to make Mannkind ultimately profitable by selling Afrezza? BK "solves" a lot of problems by clearing the books of debt to allow a "fresh" start. (Btw, is MNKD's IP collateral, eg, does anyone know, to be used to satisfy debts? This is a crucial piece of information I think...) My fear is Duane shows up at JPM and says, "We need to reorganize Mannkind to fulfill Al's vision of a world without diabetes. Unfortunately, that means bankruptcy." Insofar that Al Mann owns 45% of the stock and about 25% of the bonds, there is no advantage to BK. The worse case is if Afrezza is deemed a niche product and is sold to another company.
|
|
|
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 $$$. That sounds confused, though I do agree they were not working very hard at it; certainly given the apparent expenditure. Your point about cash flow analysis needs to consider what future working capital requirements would be for MNKD (with and in addition to US Afrezza efforts) and that can't be determined without still more assumptions. We are missing a lot of inputs that management sees and we do not in that area. I'm not ignoring this for a MNKD investment question, but narrowing the analysis for the moment to evaluate Afrezza survival as a first question. You mentioned that sales growth in December rose strongly. This is probably due to the elimination or reduction of discount coupons by SNY which raised ASPs for existing Afrezza users. This is the basis for my promotional comment. An NPV analysis must be positive for the venture to be viable. Sell side analysts create financial models of of companies and use NPV (aka discounted cash flow) to make their share price estimate. NPV analysis is fundamentally a cash flow model that incorporates the time value of money, desired rate of return and variability in cash flow estimates. How quickly Afrezza sales will grow in response to a material reduction in ASP is the pivotal input to MNKD's NPV model. If it is slow as represented by your $500 mln sales estimate by 2026 requires huge investments that would drive NPV negative. An easier model to understand and use is the breakeven model. There is enough data available on MNKD's financial performance to estimate the break even point. I came up with $500 mln sales minimum to keep MNKD alive and this must be achieved within 3 years.
|
|
|
Post by mnkdmorelong on Jan 9, 2016 10:37:50 GMT -5
I started this thought in the script data thread, but I will add to it here. Lately I have been looking more at reported revenue ($$), 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.
|
|
|
Post by mnkdmorelong on Jan 8, 2016 22:49:45 GMT -5
>Greg
I have serious concerns about your reasoning abilities:
The $175 million was the loss to the Afrezza jv, not to MNKD.
If MNKD goes it alone, it is as if they are the sole JV partner.
Now, doing the simple math, lets, for argument's sake, accept the $265 million breakeven, which is based on last year's revenues of $10 million. How do you jump to the conclusion that sales of $500 million would be necessary to essentially reach breakeven as a corporation? Are you suggesting gross margins would be in the neighborhood of only 50%.
Yes, I am saying gross margins after sales commissions is about 50%! You think the number is 80%? How is this possible when we know ASP will need to drop 60% just to be competitive on price? I keep telling you that the $265 mln costs goes up as revenue rises due to salesman's commissions. And no, the lowering of COGS due to higher volume will not overwhelm the ASP reduction and salesman's commissions.
Getting back to your careless use of words, first, I have no idea what "you view $265 mln" means and second, where exactly did I say "sales need to be only $200 mln to show cash flow positive on Afrezza?" I did imply that sales of $220 million would be more reasonable to get to breakeven, and this based on the costs that derived from SNY's cost structure. I fully acknowledge this ignores MNKD's other costs, but, as I noted, getting Affrezza sales to rise meaningfully would give the company many more financing options. At this point Afrezza sales dictate everything.
Your mistake is in assuming $220 mln sales is all that is needed to get to breakeven. You completely ignore the $90 mln corporate cash burn. Who in his right mind will endorse a plan that ensures the bankruptcy of MNKD? Breakeven means cash flow neutral; nothing more nothing less. c
|
|
|
Post by mnkdmorelong on Jan 8, 2016 10:58:48 GMT -5
My original post was an estimate of breakeven point. I invited others on this Board to chime in and add knowledge. You contributed by pointing out that my estimate for MNKD losses under the SNY agreement was more like $175 mln rather than my $50 mln estimate. Let's work the simple math. If Afrezza's FY losses are $175 mln, and the corporate burn rate is $90 mln/yr in addition, it means breakeven is $265 mln. It is reasonable to estimate $500 mln as the sales needed to generate this type of cash flow. This is only breakeven on cash burn. It dos not mean MNKD shows a profit. On the other hand, you view $265 mln and say that sales need to be only $200 mln to show cash flow positive on Afrezza. And let the rest of MNKD run out of cash and go belly up. Is this reasonable? I know a lot about the Provenge story. Afrezza's FY losses are $175 mln - This can be cut down by a percentage as that 175mil includes premium as Sanofi is big pharma and costs run higher. Launch costs also higher but should be less now. they have VP's / directors / international team working on Afrezza which can be cost adjusted.. Corporate costs run 120 mil... Pharma margin in US can be more than 70% Cut the price to less than injectables - insurance will force patients to Afrezza Lets wait and see what Mannkind comes up with A single product sales force is very costly. The salesperson has only one product to earn commissions on. It is very difficult to recruit under these circumstances. Have you ever seen salespeople whine about their comp plan? A single product sales force will cost more. SNY's having many products is cheaper. Plus they are trained and have the relationships. As a rule of thumb, sales and marketing typically cost 20% of sales. A single product sales force will cost more as described above. It will not be easy.
|
|
|
Post by mnkdmorelong on Jan 8, 2016 10:26:04 GMT -5
No need to repeat myself. If you have a better number, publish it with justification. mnkdmorelong, As was established on a different thread, your $500 million number was virtually meaningless. Your starting point was off by 250% and you moved from $300 to $500 in a matter of minutes. Now you use that silly number as if it means something. Before you ask others to come up with a better number, you should first generate a better number yourself, one you can justify far better than you did before. Comparing MNKD to DNDN is also rather silly. Do you really know anything about Provenge or did you just pick DNDN because it fits your negative narrative? My original post was an estimate of breakeven point. I invited others on this Board to chime in and add knowledge. You contributed by pointing out that my estimate for MNKD losses under the SNY agreement was more like $175 mln rather than my $50 mln estimate. Let's work the simple math. If Afrezza's FY losses are $175 mln, and the corporate burn rate is $90 mln/yr in addition, it means breakeven is $265 mln. It is reasonable to estimate $500 mln as the sales needed to generate this type of cash flow. This is only breakeven on cash burn. It dos not mean MNKD shows a profit. On the other hand, you view $265 mln and say that sales need to be only $200 mln to show cash flow positive on Afrezza. And let the rest of MNKD run out of cash and go belly up. Is this reasonable? I know a lot about the Provenge story.
|
|
|
Post by mnkdmorelong on Jan 8, 2016 10:03:55 GMT -5
If MNKD goes it alone, all the sales, marketing, and RA costs are borne by them. The cash burn will be much more than now. We can use DNDN as a benchmark. They went it alone with high hopes of $1bln annual sales. The best they could do was $300 mln/yr (from recollection). They needed to get to $500 mln to be profitable. Never got there. From the low sales level now ($10 mln/yr?) MNKD also needs to ramp up to at least $500 mln in sales to have a chance. BTW, DNDN went BK and the assets are now owned by VRX. If TS as an excipient does not take off at MNKD, then resources focused not these activities can be shed. It will lower the breakeven point but not by much. Obviously, MNKD will not zoom to $500 mln in one year or two years. Financing is needed to get them over the hump. How long it will take to get sales up determines the up front financing MNKD needs. If MNKD goes it alone they need to sell somebody on the concept and this somebody will write the checks. I know the cold hard market realities do not sit well with many on this Board. But this is what is underway at MNKD right now. Does anyone think that Desisto is saying: "I know, we can put on a show?" Desisto is a professional CEO and knows what he has to do? justify please --> MNKD also needs to ramp up to at least $500 mln in sales to have a chance.
Read more: mnkd.proboards.com/thread/4784/foward#ixzz3wfC3nec9No need to repeat myself. If you have a better number, publish it with justification.
|
|
|
Post by mnkdmorelong on Jan 8, 2016 9:28:26 GMT -5
If MNKD goes it alone, all the sales, marketing, and RA costs are borne by them. The cash burn will be much more than now. We can use DNDN as a benchmark. They went it alone with high hopes of $1bln annual sales. The best they could do was $300 mln/yr (from recollection). They needed to get to $500 mln to be profitable. Never got there. From the low sales level now ($10 mln/yr?) MNKD also needs to ramp up to at least $500 mln in sales to have a chance.
BTW, DNDN went BK and the assets are now owned by VRX.
If TS as an excipient does not take off at MNKD, then resources focused not these activities can be shed. It will lower the breakeven point but not by much.
Obviously, MNKD will not zoom to $500 mln in one year or two years. Financing is needed to get them over the hump. How long it will take to get sales up determines the up front financing MNKD needs.
If MNKD goes it alone they need to sell somebody on the concept and this somebody will write the checks.
I know the cold hard market realities do not sit well with many on this Board. But this is what is underway at MNKD right now. Does anyone think that Desisto is saying: "I know, we can put on a show?" Desisto is a professional CEO and knows what he has to do?
|
|
|
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.
|
|