From the Webinar:
Transfer PriceTransfer price refers to the price at which divisions of a company transact with each other, such as selling goods or services internally.
- Range: Transfer prices can range from cost-plus a small margin (5-10%) to a significant markup (20-30%), depending on the internal policies and tax strategies of the company.
- Factors Influencing Transfer Price:
- Cost Structure: The cost of raw materials, labor, and overheads.
- Market Price: The prevailing market prices for similar diagnostic products.
- Regulatory Environment: Tax regulations and international transfer pricing rules.
- Internal Strategy: Goals related to profit centers and performance evaluation.
Manufacturing Margin
Manufacturing margin is the difference between the manufacturing cost and the selling price of a product.
- Range: Typical manufacturing margins in the diagnostics industry can range from 20% to 50%.
- Factors Influencing Manufacturing Margin:
- Cost Efficiency: Lower manufacturing costs due to economies of scale or efficient processes can lead to higher margins.
- Product Differentiation: High-value, innovative diagnostics often command higher margins.
- Competition: More competition can drive margins down, while niche products with fewer competitors can maintain higher margins.
- Pricing Strategy: Premium pricing for specialized diagnostics vs. competitive pricing for common tests.
Example
For a typical diagnostic test kit:
- Cost of Production: $10
- Transfer Price: $12 (20% markup)
- Selling Price: $20
- Manufacturing Margin: 50% (Selling Price - Cost of Production) / Selling Price
These figures can fluctuate based on the specific market, regulatory environment, and individual company strategies.
The annuity discussed previously around the FFN tests came down to the margin above. I thought it good to find out an example of this for people so we can understand more closely how the ongoing revenue from the tests translate to LDX.Pauls comments around Viradx stated that they are already off to a robust start of Viradx orders for the upcoming season throughout the month of July. He said they normally stock up now and then reorder in December. I would hazard a guess that the next quarterly will provide good guidance on the sales of the product in the US for the full season.After rewatching, not too happy with Barrie's commentary on the question on stripping the Hologic payment and half a million cash burn. It seemed like a pretty easy question to answer. Remove the $5M and where do we stand? He seemed to brush it aside which was odd.FFN was repeated as a 60 day timeframe for phase 2 complete, so we can expect an announcement on that by end September?
Further:
