This is put into the initial cog or cost of goods. which is balance sheeted as a negative figure. As money comes in lets say the 1st billion. it is all, less marketing cost from sny, paid to mnkd. MNKD then has that cash. Basically all sales are paid to mnkd until apx 2 billion dollars is reached. then of couse milestones are paid to mnkd as well. then mnkd get 35% of profits. so in a few years mnkd has their initial investment back and the cash. No taxes until the cogs are returned. its a great idea to transfer it to cog.
It is a deal of confidence, they believe sales will be very remarkable and move the value higher.
wall st. disagrees and is very rarely forward looking without a track record. mnkd has no track record and thus we sit here. are we dead money? if someone get wind of sales orders then we will see what happens.
Could you call Mannkind IR and have them answer that question definitively? That would be so helpful to us all on this board. Thank you for opening up the conversation thread though.
Sentiment: Strong Buy
Jeff Eiseman clarified on SA:
"To sum up, I was partly right and partly wrong. I was wrong that any R&D could be included and I was also wrong, as I indicated above, that all of the eligible past costs would be reimbursed before declaring any profit. On the second point, I realized that the past costs will be reimbursed more slowly as Sanofi procures more and more Afrezza. But I was right that they will get fully reimbursed for some prior costs, including "all the cost associated with the plant and equipment."
The plant & equipment is in the books at $183.5M, with another $30M or so to come in build out.
Also: from the proboards forum: (not my post)
"I spoke to Matt yesterday. He clarified the sell at cost issue. They will be able to include all the cost associated with the plant and equipment into the " cost" of the product. He also reminded me that besides the frozen insulin they have quite a bit of insulin from the Orgegon contract that they were previously contracted to buy. That cost of insulin, even thou expensed will be part of the cost.
They will not be including any cost to develop the product.
Still the plant and equipment is north of a quarter billion dollars, I memory serves me. One thing that stood out was that Sanofi wanted them to secure their insulin contract before they would sign, because even with all the insulin previously purchased, Sanofi wanted to make sure they had enough product..."
antimatter. Here is how I understood the issue and some have disagreed saying the r & d was expensed already. However expensed again what? My position remains the same that all expenses can be deducted against income. In regards to the question asked to matt during the call the question was asked, what expense are NOT included in the cost of. this implied to me that it is understood to all past expenses once there is a product the expenses move to the cogs, Cost Of Goods Sold. His answer was the factory is mostly for afrezza production so it will be depreciated.
This is not a resurrection because they have been on the balance sheet and not deducted because there was no product to deduct against, i.e. no profit.
It is like this, my business has creation expenses such as vehicles fuel ect. these are overhead. When I build something I purchase items pay for vendors ect. these are put into the cogs. And debited against the gross sale of the project. what is left is profit.
MNKD never has seen a Profit so all the expenses go againt what?
They will either go againt their 35% or will be put against the initial cost of afrezza.
We really need to get an understanding on this because it is critical to the value of mnkd.
millsproperty, this is what happens when people unqualified to render an opinion just writes articles. Jeff Eismen is a smart guy but he is no accountant and his knowledge of finance is questionable. He should stick to his area of expertise. You cannot ressurrect R&D that has already been expensed. That is basic accounting. You can charge the R&D for the year and Sanofi can accept that. But the $2B R&D is gone and now sitting in accumulated loss. It can never be charged to COGS. Ask any accountant. Even a freshman in college knows this.
R&D expenses NYU Stern School of Business.
The movement of R&D from the operating expense to the capital expenditure
column can have profound implications for profitability measures and for projections of
cash flows into the future.
The Effect on Assets and Capital
When we treat R&D expenses as capital expenditures, we have to maintain
consistency and treat cumulated R&D expenses as an asset. The simplest way to do this is
to cumulate the after-tax research and development expenses1 over time and create a
research asset. This asset will then be amortized over time, with both the length of the
amortization period and the amortization schedule being determined by the nature of the
research expenses, and the estimated time until there is a payoff to the investment. Thus,
for pharmaceutical companies where FDA approval can take as long as a decade, the
research asset will be amortized over an extended period. In contrast, for high technology
firms where the payoff is much sooner, the research asset will have to be amortized over
a shorter period.
1 The reason we cumulate after-tax research and development expenses is because R&D expenses are tax
deductible. Amortizing the entire R&D expense will generate amortization that is too large, relative to the
capital investment from R&D.
i see it time and time again... someone says something stupid... and here we go, a ton of upvotes... that doesn't scare any of you?... you're on the same side as this stupid herd.... i'd be questioning every decision i ever made
where do you get the number 2 billion. Is it the 2.5 bil nol tax loss forward allowed mnkd for the next 20 years or until used up. There is no 2 bil out there as a cogs debt. For one thing mankd has not and did not sell anything nor has it a standing inventory of afrezza cooling in the warehouse.
The 2.5 bill tax loss cary forward is for Net Operating Loss, not cost of goods sold.
At this point, I can't be certain what the "fine details" of the agreement are. I have to refer to, "In Reply to the question by Jason Butler from JMP Securities about what part of the costs not covered in the agreement and accounting, Matt said, "Remember that Danbury for most part is dedicated to the manufacture of Afrezza, and all costs associated with that manufacture cost and would be absorbed into the product and put on balance sheet initially as inventory and eventually once sold will end up in COGS. We expect our financial statements to change fairly dramatically once embarked on this agreement, costs which has been R&D historically would come out of there and would be absorbed into product. The costs not absorbed would be certain type of administrative overheads and anything which is obviously not connected with Afrezza would not be included .....development of certain products not connected with Afrezza.....not be absorbed into the product and end up in COGS and would not be passed along to Sanofi"
So what do we conclude from this roughly transcripted answer to the accounting part about Danbury and the costs covered or not in the agreement?"