and the interesting paragraphs with the numbers:

"Considering the onerous dynamics of developing a commercially viable new drug, the Exubera example, and the gigantic market opportunity, the upfront licensing fees to MannKind should easily total at least $2.5 billion. A marketing agreement would probably also include an arrangement that would have the company either receiving a royalty on all sales or, more likely, since it already has ample insulin supplies and a manufacturing facility, a supply agreement along the Eisai/Arena model. Marketing partner(s) would obviously facilitate a worldwide launch and accelerate a ramp-up in sales. Deferring to Mr. Mann, who understands diabetes and the diabetes market as well as almost anybody else in the world, given his long experience with MannKind and insulin pumps maker MiniMed, which he sold several years ago to Medtronic, we think $4 billion in annual sales seems well within reach. Loosely factoring in Pfizer's expectations, the uptake rate of other large-selling diabetes medications, and the market's growth rate, the level could be reached by 2018. By then, the total market value of diabetes products should approximate $55 billion, so $4 billion would represent a relatively modest 7.3% market share. Assuming the marketing partner(s) pays 35% of revenues, approximating Arena's economic arrangement with Eisai, a tax rate of 20%, and 400 million shares, this would translate into net income to MannKind of about $772 million and earnings per share of $1.93. Applying an 18 multiple would result in a stock price of $34.74, and $24.05 when discounted back to next June at a 10% rate. Throw in a strong balance sheet that could contain roughly $4 a share in cash, and the shares could be trading near the $28 mark, which is very close to the estimated price in a buyout. As a reminder: MannKind has enough insulin in inventory to generate about $10 billion in revenues; the inventory has already been expensed, so operating margins will be unusually wide in the early years; it also has $2.1 billion in cumulative losses, which will shelter some earnings from taxes. These two items provide ample cushion to our projections. In terms of valuing the shares, it should be noted that uncertainties about trial results and FDA deliberations will no longer be inhibitors by next summer. Wall Street's revenue and earnings models will also by more meaningful by then.

Going It Alone

The "going it alone" path is probably the least likely scenario as it complicates the path forward and would undoubtedly slow Afreeza's market penetration. If this were necessary, however, MannKind would probably have to raise an estimated $500 million to meet both forthcoming obligations and build a sales force. For our projection purposes, we assume the sale of 50 million additional shares and add another year before sales reach $4 billion (to 2019). Going down the income statement, we assume an operating margin of 34.2% in 2019, which is the average for Novo Nordisk's past three years, and a tax rate of 20%. The result is total income of $1.1 billion, meaning a net profit margin of 27.1%, also in line with Novo Nordisk. Factoring in a diluted stock base of 450 million shares, a price/earnings multiple of 18, and a discount rate of 10%, we arrive at an estimated price target of $27.42 for next June. The cheap cost of goods sold and the shelter earnings noted above apply here, too."