Thanks for your feedback Baba and Lia, it is much appreciated
I was travelling over the weekend and did not have a chance to reply until now.
Baba, I understand that valuing a company like Mannkind may be more of an art than a science and I agree that you cannot make any kind of precise valuation, but making the attempt does provide an indication of the range of possible values.
I made a post on 8/23/2012 that compared Mannkind and Afrezza to Amylin and Bydureon.
http://agoracom.com/ir/Mannkind/forums/discussion/topics/542986-valuation-based-on-amln-sale/?message_id=1712198#message_1712198
Since Afrezza seems to me to have more potential than Bydureon, I would expect that a sale of Mannkind should be made at a higher valuation than the $5 billion that was paid for Amylin. So, based on Amylin, I assume that $5 billion is a floor on the valuation after FDA approval.
If I use your estimate of a 33 to 50% market penetration for Afrezza, my model will produce much higher valuations.
Lia, if I use your recommendations, I get a valuation of $39.15 per share based on US sales only.
I think that you are correct that the cost to all patients will be $2,000 per annum, with the possible exception being the pre-diabetic patients. They don't necessarily have to use Afrezza with all meals. There is also another group of patients that I have not counted, those that stay on injected RAAs, but occasionally use Afrezza when it is not convenient to inject.
You are probably correct that the adoption rate will be faster than I had in my assumptions, so I tend to agree with your estimate of 5 years.
Your assumptions on pre-diabetes usage makes a large difference in the valuation, so we have to be careful here. I personally do not know how to estimate this segment of the population since they currently are not treated.
Why do you think that 10% of the T2 segment that is currently on no medication will adopt Afrezza? I have been assuming that they could not afford treatment or that their reasons for not treating themselves would also apply to Afrezza.
If we really want to be optimistic, we could raise the 25% market share assumption.
My summary is that my initial conservative estimates put the value of US sales at $8.95 per share, and your estimates put the value of US sales at $39.15. I have been thinking that US sales are roughly worth about the same amount as sales to the rest of the world, so the global value is twice the US value. My point is that no matter how I look at this, the value is always much more that $2.50 per share.
