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What changed in MANNKIND CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MANNKIND CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+394 added−337 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-23)

Top changes in MANNKIND CORP's 2023 10-K

394 paragraphs added · 337 removed · 287 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

60 edited+25 added−6 removed109 unchanged
Biggest changeWe believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form of this drug. The FDA has designated MNKD-101 as both an orphan drug and a qualified infectious disease product for the treatment of pulmonary NTM infections.
Biggest changeThe lead program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease. We believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form of this drug.
Our Total Rewards program is offered to each employee and currently consists of the seven components : • Base salary – We offer a market-competitive base salary. • Annual bonus program – We offer quarterly sales incentive bonuses to our sales force and annual bonuses to the remainder of our employees. • Annual equity program – We offer a new hire and annual equity awards that consist of time- and, in some cases, performance-based restricted stock units and non-qualified stock options. • Health and wellness program – A variety of insurance plans that allow employees to select among different options, including a health maintenance organization, a preferred provider organization and a high-deductible health plan, as well as flexible spending and health savings accounts. • Paid time off program – In addition to the paid time off that is accrued throughout the year, we offer paid holidays, including two week-long company shutdowns in July and December. • Retirement savings program – A 401(k) retirement plan pursuant to which we match 50% of employee contributions up to a specified limit on their annual eligible earnings. • Employee stock purchase plan (“ESPP”) program – The ESPP provides the opportunity to purchase shares of our common stock through payroll deductions every six months at a 15% discount to the market price at the beginning or end of each offering period, whichever is lower. • Employee Recognition Program – We provide a company-wide Spot and Peer to Peer Recognition Program to more directly reward performance and behaviors and drive cultural improvement.
Our Total Rewards program is offered to each employee and currently consists of the seven components: • Base salary – We offer a market-competitive base salary. • Annual bonus program – We offer quarterly sales incentive bonuses to our sales force and annual bonuses to the remainder of our employees. • Annual equity program – We offer a new hire and annual equity awards that consist of time- and, in some cases, performance-based restricted stock units and non-qualified stock options. 14 • Health and wellness program – A variety of insurance plans that allow employees to select among different options, including a health maintenance organization, a preferred provider organization and a high-deductible health plan, as well as flexible spending and health savings accounts. • Paid time off program – In addition to the paid time off that is accrued throughout the year, we offer paid holidays, including two week-long company shutdowns in July and December. • Retirement savings program – A 401(k) retirement plan pursuant to which we match 50% of employee contributions up to a specified limit on their annual eligible earnings. • Employee stock purchase plan (“ESPP”) program – The ESPP provides the opportunity to purchase shares of our common stock through payroll deductions every six months at a 15% discount to the market price at the beginning or end of each offering period, whichever is lower. • Employee Recognition Program – We provide a company-wide Spot and Peer to Peer Recognition Program to more directly reward performance and behaviors and drive cultural improvement.
The Physician Payments Sunshine Act within PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to (i) report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and 10 nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and (ii) report annually certain ownership and investment interests held by physicians and their immediate family members.
The Physician Payments Sunshine Act within PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to (i) report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and (ii) report annually certain ownership and investment interests held by physicians and their immediate family members.
Singh worked in various leadership roles at Cipla Ltd (2000 – 2007, 2008-2011), Glenmark Pharma (2007-2008), Nicholas Piramal India Ltd (1992-2000) and Cadila Laboratories (1990-1991). Mr. Singh has been associated with the Parenteral Drug Association (PDA) and was the founding president of the PDA, India chapter before moving to the US in 2015. Mr. Singh received an M.
Singh worked in various leadership roles at Cipla Ltd (2000 – 2007, 2008-2011), Glenmark Pharma (2007-2008), Nicholas Piramal India Ltd (1992-2000) and Cadila Laboratories (1990-1991). Mr. Singh has been associated with the Parenteral Drug Association (PDA) and was the founding president of the PDA, India chapter before 16 moving to the US in 2015. Mr. Singh received an M.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions.
HITECH also increased the civil and criminal penalties that may be imposed against 11 covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions.
In all cases, interactions with patients and patient groups may only be conducted in settings that are suitable for patient education and separate from the usual place(s) of clinical business of healthcare providers or institutions. In addition, our sponsorship of such events, if any, must be clearly disclosed through prominent signage.
In all cases, interactions with patients and patient groups may only 12 be conducted in settings that are suitable for patient education and separate from the usual place(s) of clinical business of healthcare providers or institutions. In addition, our sponsorship of such events, if any, must be clearly disclosed through prominent signage.
We intend to continue our internal training programs and oversight over collaborators on anti-bribery, anti-corruption and other unethical practices in order to reduce these risks. Bribing healthcare professionals to use or recommend our products can create adverse publicity and damage our ability to use a critical channel of influence.
We intend to continue our internal training programs and oversight over collaborators on anti-bribery, anti-corruption and other unethical practices in order to reduce these risks. 13 Bribing healthcare professionals to use or recommend our products can create adverse publicity and damage our ability to use a critical channel of influence.
Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries usually must be obtained prior to the marketing of the product in those countries. The approval process varies from jurisdiction to jurisdiction and the time required may be longer or shorter than that required for FDA approval.
Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries usually must be obtained prior to the marketing of the product in those countries. The 9 approval process varies from jurisdiction to jurisdiction and the time required may be longer or shorter than that required for FDA approval.
Our policy is to disclose the basic results of all clinical trials that we conduct to test the effectiveness of investigational drugs intended to treat serious or life-threatening diseases or conditions (i.e., phase 2-4 clinical studies). Additionally, we may voluntarily disclose the results of 12 initial safety studies (i.e., phase 1 clinical studies).
Our policy is to disclose the basic results of all clinical trials that we conduct to test the effectiveness of investigational drugs intended to treat serious or life-threatening diseases or conditions (i.e., phase 2-4 clinical studies). Additionally, we may voluntarily disclose the results of initial safety studies (i.e., phase 1 clinical studies).
Our scientific advisors are consulted regularly to assess, among other things: • our research and development programs; • the design and implementation of our clinical programs; • our patent and publication strategies; • market opportunities from a clinical perspective; 14 • new technologies relevant to our research and development programs; and • specific scientific and technical issues relevant to our business.
Our scientific advisors are consulted regularly to assess, among other things: • our research and development programs; • the design and implementation of our clinical programs; • our patent and publication strategies; • market opportunities from a clinical perspective; • new technologies relevant to our research and development programs; and • specific scientific and technical issues relevant to our business.
We compete with companies, including major global pharmaceutical companies, and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products.
We compete with companies, including major global pharmaceutical companies, and other institutions that have 8 substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products.
We strive to conduct employee surveys approximately every six months. 13 We offer our employees a portfolio of rewards (our “Total Rewards Program”) to recruit and retain a high level of talent across the Company.
We strive to conduct employee surveys approximately every six months. We offer our employees a portfolio of rewards (our “Total Rewards Program”) to recruit and retain a high level of talent across the Company.
We then assemble the inhalers from the individual components at our Connecticut facility. The quality management systems of our Connecticut facility have been certified to be in conformance with the ISO 13485:2016 standard.
We assemble the inhalers from the individual components at our Connecticut facility. The quality management systems of our Connecticut facility have been certified to be in conformance with the ISO 13485:2016 standard.
We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design to address any concerns. As a manufacturer of multiple therapeutic products, including Tyvaso DPI, our Connecticut facility is subject to federal registration and listing requirements and, if applicable, to state licensing requirements.
We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design or registry to address any concerns. As a manufacturer of multiple therapeutic products, including Tyvaso DPI, our Connecticut facility is subject to federal registration and listing requirements and, if applicable, to state licensing requirements.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates” — independent contractors or agents of covered entities, which include certain healthcare providers, health plans, and healthcare clearinghouses, that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates” — independent contractors or agents of covered entities, which include certain healthcare providers, health plans, and healthcare clearinghouses, that receive or obtain protected health information in connection with providing a service on behalf of a covered entity, and their covered subcontractors.
For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminated the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
The BluHale apparatus medical device provides real-time data regarding patient usage and delivery system performance that is transmitted to a user interface, such as a smartphone application. During 2020, we released a BluHale Professional version of the apparatus for use as a training tool in certain physician’s offices.
The BluHale apparatus medical device provides real-time data regarding patient usage and delivery system performance that is transmitted to a user interface, such as a smartphone application. During 2020, we released a BluHale Professional version of the apparatus for use as a training tool in certain physicians' offices.
Item 1. Business Unless the context requires otherwise, the words “MannKind,” “we,” “Company,” “us” and “our” refer to MannKind Corporation and its subsidiaries. We are a biopharmaceutical company focused on the development and commercialization of innovative therapeutic products and devices to address serious unmet medical needs for those living with endocrine and orphan lung diseases.
Item 1. B usiness Unless the context requires otherwise, the words “MannKind,” “we,” “Company,” “us” and “our” refer to MannKind Corporation and its subsidiaries. We are a biopharmaceutical company focused on the development and commercialization of innovative therapeutic products and devices to address serious unmet medical needs for those living with endocrine and orphan lung diseases.
Drug delivery is a crowded field and a substantial number of patents have been issued to innovators in this space. In addition, because patent positions can be highly uncertain and frequently involve complex legal and factual questions, the breadth of claims obtained in any application or the enforceability of issued patents cannot be confidently predicted.
Drug delivery is a crowded field and a substantial number of patents have been issued to inventors and companies in this space. In addition, because patent positions can be highly uncertain and frequently involve complex legal and factual questions, the breadth of claims obtained in any application or the enforceability of issued patents cannot be confidently predicted.
Castagna, Pharm.D. has been our Chief Executive Officer since May 2017 and was our Chief Commercial Officer from March 2016 until May 2017. From November 2012 until he joined us, Dr. Castagna was at Amgen, Inc., where he initially served as Vice President, Global Lifecycle Management and was most recently Vice President, Global Commercial Lead for Amgen’s Biosimilar Business Unit.
Castagna, Pharm.D. has been our Chief Executive Officer since May 2017 and was our Chief Commercial Officer from March 2016 until May 2017. From November 2012 until he joined us, Dr. Castagna was at Amgen, Inc., where he initially served as Vice President, Global Lifecycle Management, and subsequently, Vice President, Global Commercial Lead for Amgen’s Biosimilar Business Unit.
A partial listing of our current scientific advisors is maintained on our corporate website at www.mannkindcorp.com . Information about our Executive Officers The following table sets forth our current executive officers and their ages: Name Age Position(s) Michael E. Castagna, Pharm.D. 46 Chief Executive Officer Steven B.
A partial listing of our current scientific advisors is maintained on our corporate website at www.mannkindcorp.com . 15 Information about our Executive Officers The following table sets forth our current executive officers and their ages: Name Age Position(s) Michael E. Castagna, Pharm.D. 47 Chief Executive Officer Steven B.
In the years since the PPACA was enacted, t here have been a number of executive, judicial and congressional challenges to certain aspects of PPACA . While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain provisions of the PPACA have been signed into law.
In the years since the PPACA was enacted, there have been a number of executive, judicial and congressional challenges to certain aspects of PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain provisions of the PPACA have been signed into law.
We use trademarks and service marks to protect our corporate brand as well as the branding associated with Afrezza, V-Go, our Technosphere formulation technology, our device platform and the product support programs that we have developed. Our current portfolio consists of approximately 240 registered trademarks and 55 applications in the U.S. and selected foreign jurisdictions.
We use trademarks and service marks to protect our corporate brand as well as the branding associated with Afrezza, V-Go, our Technosphere formulation technology, our device platform and the product support programs that we have developed. Our current portfolio consists of approximately 265 registered trademarks and 35 applications in the U.S. and selected foreign jurisdictions.
Thomson obtained his B.S., M Sc. and Ph.D. degrees from Queens University and obtained his J.D. degree from the University of Toronto. 15
Thomson obtained his B.S., M Sc. and Ph.D. degrees from Queens University and obtained his J.D. degree from the University of Toronto. 17
The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. In addition, the IRA, among other things, (1) directs the U.S.
The IRA also eliminated the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. In addition, the IRA, among other things, (1) directed the U.S.
The regulatory approval process is generally lengthy, expensive and uncertain. 8 Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on us, including warning letters, hold letters on clinical research, product recalls or seizures, total or partial suspension of production or injunctions, refusals to permit products to be imported into or exported out of the United States, refusals of the FDA to grant approval of drugs or to allow us to enter into government supply contracts, withdrawals of previously approved marketing applications , civil or criminal fines or other penalties.
Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on us, including warning letters, hold letters on clinical research, product recalls or seizures, total or partial suspension of production or injunctions, refusals to permit products to be imported into or exported out of the United States, refusals of the FDA to grant approval of drugs or to allow us to enter into government supply contracts, withdrawals of previously approved marketing applications, civil or criminal fines or other penalties.
The CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which become effective in 2023.
The CPRA established a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which became effective in 2023.
However, i n the future, there are likely to be additional proposals relating to the reform of the U.S. health care system, some of which could further limit the prices we are able to charge for our products, or the amounts of reimbursement available for our products.
In the future, there are likely to be additional proposals relating to the reform of the U.S. health care system, some of which could further limit the prices we are able to charge for our products, or the amounts of reimbursement available for our products.
We expect to be able to qualify an additional vendor of packaging services, if warranted by demand. V-Go is manufactured for us by a contract manufacturer (“CMO”) in Southern China using MannKind-owned, custom-designed, semi-automated manufacturing equipment and production lines that can be brought online and/or staffed up as demand increases.
If warranted by demand, we expect to be able to qualify additional packaging service providers. V-Go is manufactured for us by a contract manufacturer (“CMO”) in Southern China using MannKind-owned, custom-designed, semi-automated manufacturing equipment and production lines that can be brought online and/or staffed up as demand increases.
Sixteen of these employees had a Ph.D. degree and/or M.D. degree and were engaged in activities relating to research and development, manufacturing, quality assurance or business development.
Twenty-one of these employees had a Ph.D. degree and/or M.D. degree and were engaged in activities relating to research and development, manufacturing, quality assurance or business development.
In 2022, our total illness and injury incidence rate was 0.3 per 100 employees compared to the 2021 industry average of 1.6, as reported by the U.S. Department of Labor, and our DART (days away/restricted or job transfer) incident rate was 0.3 per 100 employees compared to the 2021 industry average of 1.2.
In 2023, our total illness and injury incidence rate was 0.8 per 100 employees compared to the 2022 industry average of 1.6, as reported by the U.S. Department of Labor, and our DART (days away/restricted or job transfer) incident rate was 0.4 per 100 employees compared to the 2022 industry average of 1.2.
Long-Lived Assets Our long-lived assets are located in the United States and China and totaled $53.0 million and $38.9 million as of December 31, 2022 and 2021, respectively. Employees and Human Capital Our human capital helps us develop and commercialize new products, conduct clinical trials and navigate government regulations.
Long-Lived Assets Our long-lived assets are located in the United States and China and totaled $90.0 million and $53.0 million as of December 31, 2023 and 2022, respectively. Employees and Human Capital Our human capital helps us develop and commercialize new products, conduct clinical trials and navigate government regulations.
This study, known as the INHALE-1 study, is expected to complete enrollment by the end of 2023. When Afrezza was approved, the FDA also required us to conduct an additional long-term safety study that was originally intended to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group.
This study, known as the INHALE-1 study, is expected to complete enrollment in the first quarter of 2024. When Afrezza was approved, the FDA also required us to conduct an additional long-term safety study that was originally intended to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group.
More recently, the Inflation Reduction Act (the “IRA”), which was signed into law in August 2022, limits insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023 and extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.
The Inflation Reduction Act (the “IRA”), which was signed into law in August 2022, limited insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023 and extended enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.
In our Danbury, Connecticut facility, we can develop novel Technosphere formulations of different pharmaceutical ingredients and manufacture clinical and commercial supplies of 6 these powders. In this facility, we currently formulate both the Afrezza and T yvaso DPI inhalation powders at commercial scale , fill plastic cartridges with the powders and package the cartridges in to blister packs.
In our Danbury, Connecticut facility, we can develop novel Technosphere formulations of different pharmaceutical ingredients and manufacture clinical and commercial supplies of these powders. In this facility, we currently formulate both the Afrezza and Tyvaso DPI inhalation powders at commercial scale, fill plastic cartridges with the powders and package the cartridges into blister packs.
Pharma. degree in Pharmaceutical Chemistry from LM College of Pharmacy, Ahmedabad, India and an MBA degree from Institute of Management Studies, Indore, India. Stuart A. Tross, Ph.D. has been our Chief People and Workplace Officer since December 2016, with responsibilities for human resources, information technology, corporate communications and west coast facilities.
Pharma. degree in Pharmaceutical Chemistry from LM College of Pharmacy, Ahmedabad, India and an MBA degree from Institute of Management Studies, Indore, India. Stuart A. Tross, Ph.D. has been our Executive Vice President, Human Resources since December 2016, with responsibilities for human resources, information technology, corporate communications and west coast facilities.
Overall, Afrezza is protected by approximately 670 issued patents and 55 pending patent applications in the United States and selected jurisdictions around the world, the longest-lived of which will expire in 2032. Similarly, Tyvaso DPI is protected by approximately 450 issued patents in the United States and elsewhere and an additional 40 pending patent applications.
Overall, Afrezza is protected by approximately 630 issued patents and 40 pending patent applications in the United States and selected jurisdictions around the world, the longest-lived of which will expire in 2032. Similarly, Tyvaso DPI is protected by approximately 400 issued patents in the United States and elsewhere and an additional 45 pending patent applications.
The longest-lived patent protection for Tyvaso DPI will expire in 2035. Various features of the commercial V-Go device are protected by a portfolio of approximately 200 issued patents and another 25 pending patent applications, the longest-lived of which will expire in 2033.
Currently, the longest-lived patent protection for Tyvaso DPI in our portfolio will expire in 2035. Various features of the commercial V-Go device are protected by a portfolio of approximately 110 issued patents and another 18 pending patent applications, the longest-lived of which will expire in 2033.
In our endocrine business unit, we currently commercialize two products: Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, and the V-Go wearable insulin delivery device, which provides continuous subcutaneous infusion of insulin in adults that require insulin. Afrezza was developed by us and received approval from the U.S.
In our endocrine business unit, we currently commercialize two products: Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, and the V-Go wearable insulin delivery device, which provides continuous subcutaneous infusion of insulin in adults that require insulin.
Additional patents and patent applications are expected to provide protection for MNKD-101, our BluHale inhalation-profiling apparatus and various development tools. Our entire worldwide portfolio consists of approximately 1,350 issued patents and approximately 215 pending patent applications We expect to file further patent applications as our research and development efforts continue.
Additional patents and patent applications are expected to provide protection for products in our pipeline, including MNKD-101, MNKD-201, our BluHale inhalation-profiling apparatus and various development tools. Our entire worldwide portfolio consists of approximately 1,200 issued patents and approximately 200 pending patent applications We expect to file further patent applications as our research and development efforts continue.
In April 2014, we entered into a supply agreement with Amphastar (as amended, the “Insulin Supply Agreement”) to purchase certain annual minimum quantities with an aggregate purchase commitment of €120.1 million over a term that currently extends through December 31, 2027. As of December 31, 2022, there was $72.3 million remaining in aggregate purchase commitments under this agreement.
In April 2014, we entered into a supply agreement with Amphastar (as amended, the “Insulin Supply Agreement”) to purchase certain annual minimum quantities with an aggregate purchase commitment of €120.1 million over a term that currently extends through at least December 31, 2034. As of December 31, 2023, there was €59.5 million remaining in aggregate purchase commitments under this agreement.
We believe that, if necessary, alternative sources of supply would, in most cases, be available in a relatively short period of time and on commercially reasonable terms. The BluHale device is assembled for us by a CMO using components that are sourced from multiple vendors.
We believe that, if necessary, alternative sources of supply for such components would be available in a relatively short period of time and on commercially reasonable terms once such alternate suppliers have the appropriate tooling in place. The BluHale device is assembled for us by a CMO using components that are sourced from multiple vendors.
If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including significant criminal, civil and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion from government healthcare programs, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. 11 Ethical Business Practices and Sustainability Ethical Marketing We require that our employees abide by our Code of Business Conduct and Ethics, our policy on interactions with healthcare professionals and patients, U.S. federal and state laws and applicable foreign laws.
If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including significant criminal, civil and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion from government healthcare programs, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Department of Health and Human Services (“HHS”) to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.
Department of Health and Human Services (“HHS”) to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposed rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions took effect progressively starting in fiscal year 2023.
Before BMS, he worked for Deloitte & Touche LLP in a series of auditing roles with increasing responsibility over an eight-year period beginning in 1984. Mr. Binder received a B.S. degree in Accounting and Business Administration from Muhlenberg College and is a Certified Public Accountant. Sanjay Singh has been our Executive Vice President, Technical Operations since October 2022.
Before BMS, he worked for Deloitte & Touche LLP in a series of auditing roles with increasing responsibility over an eight-year period beginning in 1984. Mr. Binder received a B.S. degree in Accounting and Business Administration from Muhlenberg College and is a Certified Public Accountant.
Food and Drug Administration (“FDA”) in June 2014. Afrezza consists of a dry powder formulation of human insulin delivered from a small portable inhaler. Administered at the beginning of a meal, Afrezza dissolves rapidly upon inhalation to the lung and delivers insulin quickly to the bloodstream.
Afrezza was developed by us and received approval from the FDA in June 2014. Afrezza consists of a dry powder formulation of human insulin delivered from a small portable inhaler. Administered at the beginning of a meal, Afrezza dissolves rapidly upon inhalation to the lung and delivers insulin quickly to the bloodstream.
In addition, to the extent that our products are marketed abroad, they are also subject to export requirements and to regulation by foreign governments.
In addition, to the extent that our products are marketed abroad, they are also subject to export requirements and to regulation by foreign governments. The regulatory approval process is generally lengthy, expensive and uncertain.
Our collaboration partner, United Therapeutics Corporation (“United Therapeutics” or “UT”) began commercializing Tyvaso DPI in June 2022. UT pays us a royalty on net sales of Tyvaso DPI as well as a margin on supplies of Tyvaso DPI that we manufacture for UT.
Our development and marketing partner (sometimes referred to as our collaboration partner), United Therapeutics Corporation (“United Therapeutics” or “UT”) began commercializing Tyvaso DPI in June 2022 and is obligated to pay us a royalty on net sales of the product. We also receive a margin on supplies of Tyvaso DPI that we manufacture for UT.
(“Cipla”), is currently conducting a clinical study of Afrezza in order to meet the requirements for a regulatory submission to the Drug Controller General of India. The proprietary formulation and inhaler technologies used in Afrezza have also been deployed in our efforts to develop products to treat orphan lung diseases.
(“Cipla”), recently submitted a marketing authorization application to the Drug Controller General of India. The proprietary formulation and inhaler technologies used in Afrezza have also been deployed in our efforts to develop products to treat orphan lung diseases.
As of December 31, 2022, we had 395 total at-will employees, of which 391 were full-time. Of our full-time employees, 210 were engaged in manufacturing, 25 in research and development, 55 in general and administrative and 101 in selling and marketing.
As of December 31, 2023, we had 414 total at-will employees, of which 411 were full-time. Of our full-time employees, 227 were engaged in manufacturing, 32 in research and development, 58 in general and administrative and 94 in selling and marketing.
Privacy We are subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act (“HITECH”), and their respective implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information.
For example, HIPAA, as amended by the Health Information Technology and Clinical Health Act (“HITECH”), and their respective implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information.
Binder 60 Chief Financial Officer Sanjay Singh, M Pharm, MBA 56 Executive Vice President, Technical Operations Stuart A. Tross, Ph.D. 56 Chief People and Workplace Officer David B. Thomson, Ph.D., J.D. 56 General Counsel and Secretary Michael E.
Binder 61 Chief Financial Officer Burkhard Blank 69 Executive Vice President, Research and Development, and Chief Medical Officer Lauren Sabella 63 Chief Operating Officer Sanjay Singh, M Pharm, MBA 57 Executive Vice President, Technical Operations Stuart A. Tross, Ph.D. 57 Executive Vice President, Human Resources David B. Thomson, Ph.D., J.D. 57 General Counsel and Secretary Michael E.
As of December 31, 2022, our workforce was distributed along genders and ethnic minorities as follows: Grade Levels Number Female (%) Ethnic minority (%) Vice President and above 17 18% 24% Executive Director, Director and Senior Manager 115 48% 25% Managers and below 263 41% 44% All employees 395 42% 37% None of our employees are subject to a collective bargaining agreement.
As of December 31, 2023, our workforce was distributed among gender and ethnic minorities as follows: Grade Levels Number Female (%) Ethnic minority (%) Vice President and above 20 25% 25% Executive Director, Director and Senior Manager 114 46% 28% Managers and below 280 41% 45% All employees 414 41% 40% None of our employees are subject to a collective bargaining agreement.
We maintain a team of product and process engineers, supply chain and quality personnel who provide product and production line support for V-Go. We also employ a full-time dedicated contractor based in China. Some of the parts and components of V-Go are purchased from sole-source vendors, and we manage any single-source components and suppliers through our global supply chain operation.
We maintain a team of 7 product and process engineers, supply chain and quality personnel who provide product and production line support for V-Go. We also utilize a full-time dedicated contractor based in China.
Pricing pressures can arise from rules and practices of managed care organizations, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, healthcare reform, pharmaceutical reimbursement policies and pricing in general. 9 The United States and some foreign jurisdictions have enacted or are considering a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.
The United States and some foreign jurisdictions have enacted or are considering a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.
A consumer version of the apparatus, with additional features, is planned for release in 2023. Manufacturing and Supply Technosphere powders are based on our proprietary excipient, fumaryl diketopiperazine (“FDKP”), which is a pH-sensitive organic molecule that self-assembles into small particles under acidic conditions.
Manufacturing and Supply Technosphere powders are based on our proprietary excipient, fumaryl diketopiperazine (“FDKP”), which is a pH-sensitive organic molecule that self-assembles into small particles under acidic conditions. Certain drugs can be loaded onto these particles by combining a solution of the drug with a solution or suspension of Technosphere material, which is then dried to powder form.
Certain drugs can be loaded onto these particles by combining a solution of the drug with a solution or suspension of Technosphere material, which is then dried to powder form. The resulting powder has a consistent and narrow range of particle sizes with good aerodynamic properties that enable efficient delivery deep into the lungs.
The resulting powder has a consistent and 6 narrow range of particle sizes with good aerodynamic properties that enable efficient delivery deep into the lungs.
Our quality and manufacturing personnel conduct 7 extensive inspections to qualify new vendors and periodic GMP audits of their operations on an ongoing basis. O ur CMO facilities and the facilities of our critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign agencies.
Our CMO facilities and the facilities of our critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign agencies.
Currently, we purchase FDKP, the primary component of our Technosphere powders, from a major chemical manufacturer with facilities in Europe and North America. We also have an agreement with the contractor that performs the final packaging of Afrezza and Tyvaso DPI overwraps, inhalers and printed material into patient kits.
We also have an agreement with the contractor that performs the final packaging of Afrezza and Tyvaso DPI overwraps, inhalers and printed material into patient kits. In 2024, we expect that we will package some of the Tyvaso DPI stock-keeping units in our Danbury facility, which will supplement our revenue from collaborations and services.
Similarly, the clofazimine inhalation solution being evaluated in the MNKD-101 program is manufactured for us by a CMO. In general, our suppliers and contract manufacturers are sophisticated and mature organizations, often with multinational operations, that have significant experience with pharmaceutical and medical device manufacturing.
In general, our suppliers and contract manufacturers are sophisticated and mature organizations, often with multinational operations, that have significant experience with pharmaceutical and medical device manufacturing. Our quality and manufacturing personnel conduct extensive inspections to qualify new vendors and conduct periodic GMP audits of their operations on an ongoing basis.
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The next most advanced program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease.
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The FDA has designated MNKD-101 as both an orphan drug and a qualified infectious disease product for the treatment of pulmonary NTM infections. We plan to initiate a Phase 2/3 registrational study of MNKD-101 in the United States in the second quarter of 2024.
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We recently completed an initial clinical study of MNKD 101 in Australia and we plan to initiate a Phase 2/3 clinical study in the United States in 2023. In connection with the development of MNKD-101, we are also evaluating the feasibility of developing a dry-powder formulation of clofazimine using our Technosphere formulation technology.
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The next most advanced program in our pipeline is MNKD-201, a dry-powder formulation of nintedanib, for the treatment of idiopathic pulmonary fibrosis (IPF). An oral dosage form of nintedanib was approved for IPF by the FDA in 2014. However, a fairly large oral dose is required in order to achieve sufficient drug levels in lung tissue.
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We have formulated other drugs and biologics for the treatment of orphan lung disease and plan to continue their development as dictated by the results achieved in preclinical studies and by resource requirements.
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Our goal with an inhaled formulation is to deliver a therapeutic amount of nintedanib to the lungs while avoiding high levels of the drug in other tissues, where it is associated with undesirable side effects. We plan to initiate a Phase 1 clinical study of MNKD-201 in the second quarter of 2024.
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We have also partnered with several third parties that have proprietary rights to certain compounds in order to evaluate the feasibility of developing dry-powder formulations of such compounds. We may seek to convert certain of these exploratory programs into full development programs funded by the external parties.
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A consumer version of the apparatus, with additional features, was used as part of a clinical study of Afrezza (the INHALE-3 study) in 2023. The learnings from this study will help guide future releases of the apparatus and its corresponding smartphone application.
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For example, l egislation enacted in 2017, informally titled the Tax Cuts and Jobs Act of 2017 (“Tax Act”), includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.
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In the past, we purchased FDKP, the primary component of Technosphere powders, from a major chemical manufacturer with facilities in Europe and North America. We subsequently developed a more efficient process for manufacturing FDKP and transferred the new process to a different European chemical manufacturer.
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Subsequently , a Texas U.S. District Court Judge ruled in December 2018 that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Ultimately, in June 2021 the Supreme Court dismissed this challenge to the constitutionality of the PPACA, so it remains in effect in its current form.
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We are currently evaluating the comparability of powders made with the two different sources of FDKP. If testing is successful, we plan to include the additional source of FDKP in a future update to our drug master file.
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Some of the parts and components of V-Go are purchased from single-source vendors, and we manage any single-source components and suppliers through our global supply chain operation.
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We manufacture both the clofazimine inhalation solution being evaluated in the MNKD-101 program and the nintedanib dry powder formulation being evaluated in the MNKD-201 program in our Danbury facility. We purchase clofazimine and nintedanib from suppliers of generic drug substances.
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Pricing pressures can arise from rules and practices of managed care organizations, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, healthcare reform, pharmaceutical reimbursement policies and pricing in general.
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On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
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Further, in response to the Biden administration's October 2022 executive order, on February 14, 2022, HHS released a report outlining three new models for testing by the CMS Innovation Center which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care.
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It is unclear whether the models will be utilized in any health reform measures in the future. On December 7, 2023, the Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act.
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On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights.
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While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNatural disasters or other catastrophic events, including interruptions in the supply of natural resources, political and governmental changes, severe weather conditions, public health pandemics or epidemics, wars, conflicts (including the current Russia-Ukraine conflict), wildfires and other fires, explosions, actions of animal rights activists, terrorist attacks, volcanic eruptions, earthquakes and wars could disrupt our operations or those of our collaborators, contractors and vendors.
Biggest changeNatural disasters, such as interruptions in the supply of natural resources, public health pandemics or epidemics, earthquakes and extreme weather conditions, including, but not limited to, hurricanes, floods, tornados, wildfires, and winter storms, or other catastrophic events, including political and governmental changes, conflicts (including the current Russia-Ukraine war, the state of war between Israel and Hamas and attacks on commercial marine vessels in the Red Sea by Houthi rebels), explosions, actions of animal rights activists, terrorist attacks and wars, could disrupt our operations or those of our collaborators, contractors and vendors.
We or our current or any future collaboration partner may need to enhance our/their commercialization capabilities in order to successfully commercialize such products in the United States or any other jurisdiction in which the product is approved for commercial sale, and we or the collaboration partner may not have sufficient resources to do so.
We and our current or any future collaboration partner may need to enhance our/their commercialization capabilities in order to successfully commercialize such products in the United States or any other jurisdiction in which such product is approved for commercial sale, and we or the collaboration partner may not have sufficient resources to do so.
Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payers to contain or reduce the costs of healthcare through various means.
Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payers to contain or reduce the costs of healthcare through various means.
Moreover, the SEC has recently proposed, and may continue to propose, certain mandated ESG reporting requirements, such as the SEC’s proposed rules designed to enhance and standardize climate-related disclosures, which, if finally approved, would significantly increase our compliance and reporting costs and may also result in disclosures that certain investors or other stakeholders deem to negatively impact our reputation and/or that harm our stock price.
Moreover, the SEC has recently proposed, and may continue to propose, certain mandated ESG reporting requirements, such as the SEC’s proposed rules designed to enhance and standardize climate-related disclosures, which, if finally approved, would significantly increase our compliance and reporting costs and may also result in disclosures that certain investors or other stakeholders deem to impact our reputation negatively and/or that harm our stock price.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Our stock price is volatile. The trading price of our common stock has been and is likely to continue to be volatile. The volatility of pharmaceutical and biotechnology stocks often does not relate to the operating performance of the companies represented by the stock.
The trading price of our common stock has been and is likely to continue to be volatile. The volatility of pharmaceutical and biotechnology stocks often does not relate to the operating performance of the companies represented by the stock.
Our amended and restated bylaws provide that, to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative action or proceeding brought on our behalf; • any action or proceeding asserting a breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and certificate of incorporation or amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; 38 • any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and • any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.
Our amended and restated bylaws provide that, to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative action or proceeding brought on our behalf; • any action or proceeding asserting a breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and certificate of incorporation or amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; • any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and • any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.
It may be difficult to find or maintain collaboration partners that are able and willing to devote the time and resources necessary to successfully commercialize our products. Collaborations with third parties may require us to relinquish material rights, including revenue from commercialization, agree to unfavorable terms or assume material ongoing development obligations that we would have to fund.
It may be difficult to find or maintain collaboration partners that are able and willing to devote the time and resources necessary to successfully 25 commercialize our products. Collaborations with third parties may require us to relinquish material rights, including revenue from commercialization, agree to unfavorable terms or assume material ongoing development obligations that we would have to fund.
Replacing key employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experience required to develop, gain regulatory approval of and commercialize products successfully. 24 We have relationships with scientific advisors at academic and other institutions to conduct research or assist us in formulating our research, development or clinical strategy.
Replacing key employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experience required to develop, gain regulatory approval of and commercialize products successfully. We have relationships with scientific advisors at academic and other institutions to conduct research or assist us in formulating our research, development or clinical strategy.
A patent owner may claim that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court to stop us from engaging in such activities. Such litigation is not uncommon in our industry. Patent lawsuits can be expensive and would consume time and other resources.
A patent owner may claim that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court to stop us from engaging in such activities. Such litigation is not uncommon in our industry. 40 Patent lawsuits can be expensive and would consume time and other resources.
In particular, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services.
In particular, supply-chain attacks have increased in frequency and severity, and we 22 cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services.
Additional contract manufacturers in China perform release testing, sterilization, inspection and packaging functions. These facilities and the specialized manufacturing equipment we use at them would be costly to replace and could require substantial lead-time to repair or replace. We depend on our facilities and on collaborators, contractors and vendors for the continued operation of our business.
Additional 30 contract manufacturers in China perform release testing, sterilization, inspection and packaging functions. These facilities and the specialized manufacturing equipment we use at them would be costly to replace and could require substantial lead-time to repair or replace. We depend on our facilities and on collaborators, contractors and vendors for the continued operation of our business.
In addition, the Office of Inspector General of the HHS and other Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to the methodologies used by manufacturers to calculate AMP and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program.
In addition, the Office of Inspector General of the HHS and other Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to the methodologies used by manufacturers to calculate 38 AMP and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program.
In the United States and elsewhere, sales of prescription pharmaceuticals still depend in large part on the availability of coverage and adequate reimbursement to the consumer from third-party payers, such as government health administration authorities and private insurance plans. Third-party payers are increasingly challenging the prices charged for medical products and services.
In the United States and elsewhere, sales of prescription pharmaceuticals depend in large part on the availability of coverage and adequate reimbursement to the consumer from third-party payers, such as government health administration authorities and private insurance plans. Third-party payers are increasingly challenging the prices charged for medical products and services.
Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations. We may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations. We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
Potential difficulties that may be encountered in the integration process include the following: • unanticipated liabilities related to acquired assets, companies or joint ventures; • integrating personnel, operations and systems, while maintaining focus on producing and delivering consistent, high quality products; • coordinating geographically dispersed organizations; • diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges; • retention of key employees; 23 • increases in our expenses and reductions in our cash available for operations and other uses; • retaining existing customers and attracting new customers; • managing inefficiencies associated with integrating the operations of our company; and • possible write-offs or impairment charges relating to acquired assets, businesses or joint ventures.
Potential difficulties that may be encountered in the integration process include the following: • unanticipated liabilities related to acquired assets, companies or joint ventures; • integrating personnel, operations and systems, while maintaining focus on producing and delivering consistent, high quality products; • coordinating geographically dispersed organizations; 27 • diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges; • retention of key employees; • increases in our expenses and reductions in our cash available for operations and other uses; • retaining existing customers and attracting new customers; • managing inefficiencies associated with integrating the operations of our company; and • possible write-offs or impairment charges relating to acquired assets, businesses or joint ventures.
Unless the United States Department of the Treasury issues regulations that narrow the application of this provision to a smaller subset of our research and development expenses or the provision is deferred, modified, or repealed by Congress, it could harm our future operating results by effectively increasing our future tax obligations.
Unless the United States Department of the Treasury issues 29 regulations that narrow the application of this provision to a smaller subset of our research and development expenses or the provision is deferred, modified, or repealed by Congress, it could harm our future operating results by effectively increasing our future tax obligations.
As a result of the Company's initial public offering, an ownership change within the meaning of IRC Section 382 occurred in August 2004. As a result, federal net operating loss and credit carryforwards of approximately $105.8 million are subject to an annual use limitation of approximately $13.0 million.
As a result of the Company's initial public offering, an ownership change within the meaning of Section 382 occurred in August 2004. As a result, federal net operating loss and credit carryforwards of approximately $105.8 million are subject to an annual use limitation of approximately $13.0 million.
In the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.
In the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to 20 product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.
In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, the holders of secured indebtedness will be entitled to receive payment in full from the proceeds of the collateral securing our secured indebtedness before the holders of other indebtedness or our common stock will be entitled to receive any distribution with respect thereto.
In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, the holders of secured indebtedness will be entitled to receive 24 payment in full from the proceeds of the collateral securing our secured indebtedness before the holders of other indebtedness or our common stock will be entitled to receive any distribution with respect thereto.
Our business, including our 27 ability to manufacture drug products and conduct clinical trials, therefore depends on the continuous, effective, reliable and secure operation of our information technology resources and those of third parties acting on our behalf, including computer hardware, software, networks, Internet servers and related infrastructure.
Our business, including our ability to manufacture drug products and conduct clinical trials, therefore depends on the continuous, effective, reliable and secure operation of our information technology resources and those of third parties acting on our behalf, including computer hardware, software, networks, Internet servers and related infrastructure.
If successful, a citizen petition can significantly delay, or even prevent, the approval of a drug product. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
If successful, a citizen petition can significantly delay, or even prevent, the approval of a drug product. 34 We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
We may be required to enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such relationships may not be on terms as commercially favorable to us as might otherwise be the case.
We may be required to enter into relationships with 21 third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such relationships may not be on terms as commercially favorable to us as might otherwise be the case.
Moreover, the integration of any acquired business, product or other assets into our company may be complex and time-consuming and, if such businesses, products or assets are not successfully integrated, we may not achieve the anticipated benefits, cost-savings or growth opportunities.
The integration of any acquired business, product or other assets into our company may be complex and time-consuming and, if such businesses, products or assets are not successfully integrated, we may not achieve the anticipated benefits, cost-savings or growth opportunities.
This in turn could affect our or any collaboration or marketing partner’s ability to successfully commercialize such products and would impact our profitability, results of operations, financial condition, and prospects. 18 We may need to raise additional capital to fund our operations.
This in turn could affect our or any collaboration or marketing partner’s ability to successfully commercialize such products and would impact our profitability, results of operations, financial condition, and prospects. We may need to raise additional capital to fund our operations.
The MidCap credit facility requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things: • dispose of assets; • complete mergers or acquisitions; • incur indebtedness or modify existing debt agreements; • amend or modify certain material agreements; • engage in additional lines of business; • encumber assets; • pay dividends or make other distributions to holders of our capital stock; • make specified investments; 20 • change certain key management personnel or organizational documents; and • engage in transactions with our affiliates.
In addition, the MidCap credit facility requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things: • dispose of assets; • complete mergers or acquisitions; • incur indebtedness or modify existing debt agreements; • amend or modify certain material agreements; • engage in additional lines of business; • encumber assets; • pay dividends or make other distributions to holders of our capital stock; • make specified investments; • change certain key management personnel or organizational documents; and • engage in transactions with our affiliates.
FDA regulations and the regulations of comparable foreign regulatory authorities are wide-ranging and govern, among other things: • product design, development, manufacture and testing; • product labeling; • product storage and shipping; • pre-market clearance or approval; • advertising and promotion; and • product sales and distribution.
FDA regulations and the regulations of comparable foreign regulatory authorities are wide-ranging and govern, among other things: 32 • product design, development, manufacture and testing; • product labeling; • product storage and shipping; • pre-market clearance or approval; • advertising and promotion; and • product sales and distribution.
If we are slow or unable to adapt to changes in existing requirements or the 30 adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be denied marketing approval or lose any marketing approval that we have already obtained.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be denied marketing approval or lose any marketing approval that we have already obtained.
For example, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025, eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program, and caps the out-of-pocket cost of insulin (including Afrezza) at $35 per month for Medicare recipients beginning in 2023.
For example, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025, eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program, and capped the out-of-pocket cost of insulin (including Afrezza) at $35 per month for Medicare recipients beginning in 2023.
Our anti-takeover provisions include provisions such as a prohibition on stockholder actions by written consent, the authority of our board of directors to issue preferred stock without stockholder approval, and supermajority voting requirements for specified actions.
Our anti-takeover provisions include provisions such as a prohibition on 42 stockholder actions by written consent, the authority of our board of directors to issue preferred stock without stockholder approval, and supermajority voting requirements for specified actions.
The number and scope of these laws, regulations and industry standards are 31 changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with each other, making compliance difficult.
The number and scope of these laws, regulations and industry standards are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with each other, making compliance difficult.
The actual timing of the achievement of these milestones can vary dramatically from our estimates, in many cases for reasons beyond our control, depending on numerous factors, including: • the rate of progress, costs and results of our clinical studies and preclinical research and development activities; • our ability to identify and enroll patients who meet clinical study eligibility criteria; • our ability to access sufficient, reliable and affordable supplies of components used in the manufacture of our product candidates; • the costs of expanding and maintaining manufacturing operations, as necessary; • the extent to which our clinical studies compete for clinical sites and eligible subjects with clinical studies sponsored by other companies; • actions by regulators; and • disruptions caused by geopolitical conflicts, man-made or natural disasters or public health pandemics or epidemics or other business interruptions.
The actual timing of the achievement of these milestones can vary dramatically from our estimates, in many cases for reasons beyond our control, depending on numerous factors, including: • the rate of progress, costs and results of our clinical studies and preclinical research and development activities; • our ability to identify and enroll patients who meet clinical study eligibility criteria; • our ability to access sufficient, reliable and affordable supplies of components used in the manufacture of our product candidates or to source clinical supplies from contract manufacturers; • the costs of expanding and maintaining manufacturing operations, as necessary; • the extent to which our clinical studies compete for clinical sites and eligible subjects with clinical studies sponsored by other companies; • actions by regulators; and • disruptions caused by geopolitical conflicts, man-made or natural disasters or public health pandemics or epidemics or other business interruptions.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical government employees and stop critical activities.
If our cash flows and capital resources are insufficient to fund our obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness and lease obligations.
If our cash flows and capital resources are insufficient to fund our obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our lease obligations.
Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.
Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.
If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
Our business requires collecting, receiving, manipulating, analyzing, storing, processing, generating, using, disclosing, protecting, securing, transmitting, sharing, disposing of, and making accessible (collectively “processing”) large amounts of data, including proprietary, confidential and sensitive data (such as personal or health-related data), intellectual property, and trade secrets (collectively, “sensitive information”).
Our business requires collecting, receiving, manipulating, analyzing, storing, processing, generating, using, disclosing, protecting, securing, transmitting, sharing, disposing of, and making accessible (collectively “process”) large amounts of data, including proprietary, confidential and sensitive data (such as personal or health-related data), intellectual property, and trade secrets (collectively, “sensitive information”).
We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance. We have a history of operating losses. We expect to incur losses in the future and we may not generate positive cash flow from operations in the future.
We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance. 23 We have a history of operating losses. We may incur losses and may not generate positive cash flow from operations in the future.
The products, including products that we commercialize ourselves and any future, products that we may develop or acquire in the future and the product that is commercialized by our collaboration partner and future products that may be commercialized by a collaboration partner, may not gain market acceptance among physicians, patients, third-party payers and the healthcare community.
Products that we commercialize ourselves (including any products that we may develop or acquire in the future) and the product that is commercialized by our current collaboration partner (including future products that may be commercialized by our collaboration partner) may not gain market acceptance among physicians, patients, third-party payers and the healthcare community.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
There is a risk that changes in ownership may occur in tax years after December 31, 2022. If a change in ownership were to occur, our net operating loss carryforwards and other tax attributes could be further limited or restricted.
There is a risk that changes in ownership may occur in tax years after December 31, 2023. If a change in ownership were to occur, our net operating loss carryforwards and other tax attributes could be further limited or restricted.
Because we do not have long-standing relationships with our suppliers, we may not be able to convince them to continue to make components available to us unless there is demand for such components from their other customers.
Because we do not have long-standing relationships with all of our suppliers, we may not be able to convince them to continue to make components available to us unless there is demand for such components from their other customers.
The extent of our additional funding requirements will depend on a number of factors, including: • the degree to which we are able to generate revenue from products that we or a collaboration partner commercialize; • the costs of developing Afrezza and of commercializing Afrezza and V-Go on our own in the United States; • the degree to which revenue from Afrezza exceeds or does not exceed the minimum revenue covenants under our credit and security agreement with MidCap Financial Trust (the “MidCap credit facility”), if applicable; • the demand by any or all of the holders of our debt instruments to require us to repay or repurchase such debt securities if and when required; • our ability to repay or refinance existing indebtedness, and the extent to which our notes with conversion options or any other convertible debt securities we may issue are converted into or exchanged for shares of our common stock; • the rate of progress and costs of our clinical studies and research and development activities; • the costs of procuring raw materials and operating our manufacturing facility; • our obligation to make lease payments and milestone payments; • our success in establishing additional strategic business collaborations or other sales or licensing of assets, and the timing and amount of any payments we might receive from any such transactions; • actions taken by the FDA and other regulatory authorities affecting Afrezza, V-Go, Tyvaso DPI, our product candidates or competitive products; • the emergence of competing technologies and products and other market developments; • the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights or defending against claims of infringement by others; • the level of our legal and litigation expenses; and • the costs of discontinuing projects and technologies, and/or decommissioning existing facilities, if we undertake any such activities.
The extent of our additional funding requirements will depend on a number of factors, including: • the degree to which we are able to generate revenue from products that we or a collaboration partner commercialize; • the costs of developing Afrezza and of commercializing Afrezza and V-Go on our own in the United States; • the degree to which revenue from Afrezza exceeds or not the minimum revenue covenants under our credit and security agreement with MidCap Financial Trust (the “MidCap credit facility”), if applicable; • the demand by any or all of the holders of our debt instruments to require us to repay or repurchase such debt securities if and when required; • our ability to repay or refinance existing indebtedness, and the extent to which our notes with conversion options or any other convertible debt securities we may issue are converted into or exchanged for shares of our common stock; • the rate of progress and costs of our clinical studies and R&D activities; • the costs of procuring raw materials and operating our manufacturing facility; • our success in establishing additional strategic business collaborations or other sales or licensing of assets, and the timing and amount of any payments we might receive from any such transactions; • actions taken by the FDA and other regulatory authorities affecting Afrezza, V-Go, Tyvaso DPI, our product candidates or competitive products; • the emergence of competing technologies and products and other market developments; • the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights or defending against claims of infringement by others; • the level of our legal and litigation expenses; and • the costs of discontinuing projects and technologies, and/or decommissioning existing facilities, if we undertake any such activities.
Our business and the market price of our common stock may be influenced by a large variety of factors, including: • our ability to obtain marketing approval for our products outside of the United States and to find collaboration partners for the commercialization of our products in foreign jurisdictions; • future estimates of product sales, royalties, prescriptions or other operating metrics; • our ability to successfully commercialize other products based on our Technosphere drug delivery platform; • the progress and results of preclinical and clinical studies of our product candidates and of post-approval studies of approved products that are required by the FDA; • general economic, political or stock market conditions, especially for emerging growth and pharmaceutical market sectors; • geopolitical events, such as the current Russia-Ukraine conflict; • legislative developments; • disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions; • changes in the structure of the healthcare payment systems; • announcements by us, our collaborators, or our competitors concerning clinical study results, acquisitions, strategic alliances, technological innovations, newly approved commercial products, product discontinuations, or other developments; • the availability of critical materials used in developing and manufacturing our products and product candidates; • developments or disputes concerning our relationship with any of our current or future collaborators or third party manufacturers; 37 • developments or disputes concerning our patents or proprietary rights; • the expense and time associated with, and the extent of our ultimate success in, securing regulatory approvals; • announcements by us concerning our financial condition or operating performance; • changes in securities analysts’ estimates of our financial condition or operating performance; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • the trades of short sellers; • our ability, or the perception of investors of our ability, to continue to meet all applicable requirements for continued listing of our common stock on The Nasdaq Global Market, and the possible delisting of our common stock if we are unable to do so; • the status of any legal proceedings or regulatory matters against or involving us or any of our executive officers and directors; and • discussion of our products, competitors’ products, or our stock price by the financial and scientific press, the healthcare community and online investor communities such as chat rooms.
Our business and the market price of our 41 common stock may be influenced by a large variety of factors, including: • our ability to obtain marketing approval for our products outside of the United States and to find collaboration partners for the commercialization of our products in foreign jurisdictions; • future estimates of product sales, royalties, prescriptions or other operating metrics; • our ability to successfully commercialize other products based on our Technosphere drug delivery platform; • the progress and results of preclinical and clinical studies of our product candidates and of post-approval studies of approved products that are required by the FDA; • general economic, political or stock market conditions, especially for emerging growth and pharmaceutical market sectors; • geopolitical events, such as the current Russia-Ukraine and Israel-Hamas conflicts and Houthis rebel attacks on commercial marine vessels in the Red Sea; • legislative developments; • disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions; • changes in the structure of the healthcare payment systems; • announcements by us, our collaborators, or our competitors concerning clinical study results, acquisitions, strategic alliances, technological innovations, newly approved commercial products, product discontinuations, or other developments; • the availability of critical materials used in developing and manufacturing our products and product candidates; • developments or disputes concerning our relationship with any of our current or future collaborators or third party manufacturers; • developments or disputes concerning our patents or proprietary rights; • the expense and time associated with, and the extent of our ultimate success in, securing regulatory approvals; • announcements by us concerning our financial condition or operating performance; • changes in securities analysts’ estimates of our financial condition or operating performance; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • the trades of short sellers; • our ability, or the perception of investors of our ability, to continue to meet all applicable requirements for continued listing of our common stock on The Nasdaq Global Market, and the possible delisting of our common stock if we are unable to do so; • the status of any legal proceedings or regulatory matters against or involving us or any of our executive officers and directors; and • discussion of our products, competitors’ products, or our stock price by the financial and scientific press, the healthcare community and online investor communities such as chat rooms.
We have raised capital in the past through the sale of equity and debt securities and we may in the future pursue the sale of additional equity and/or debt securities, or the establishment of other funding facilities including asset-based borrowings.
We have raised capital in the past through the sale of equity and debt securities and the sale of certain assets. In the future, we may pursue the sale of additional equity, debt securities and/or assets, or the establishment of other funding facilities including asset-based borrowings.
The market for our approved products will depend significantly on access to third-party payers’ formularies, which are the lists of medications and devices for which third-party payers provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical and device companies.
The market for our approved products depends significantly on access to third-party payers’ formularies, which are the lists of medications and devices for which third-party payers provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical and device companies.
We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design to address any concerns.
We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design or registry to address any concerns.
Likewise, the issuance of additional shares of our common stock upon the exchange or conversion of the Mann Group promissory notes, or the Senior convertible notes, could adversely affect the market price of our common stock and other securities.
Likewise, the issuance of additional shares of our common stock upon the exchange or conversion of the Mann Group convertible note, or the Senior convertible notes, could adversely affect the market price of our common stock and other securities.
Item 1A. Risk Factors You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report before you decide to buy or maintain an investment in our common stock.
Item 1A. Risk Fa ctors You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report before you decide to buy or maintain an investment in our common stock.
In particular, our contract manufacturers in China could be impacted by that country’s recent policy of strict lockdowns in order to reduce the spread of disease.
In addition, our contract manufacturers in China could be impacted by that country’s recent policy of strict lockdowns in order to reduce the spread of disease.
Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly. 32 We are subject to stringent and changing U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.
Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly. We are subject to stringent and changing U.S. and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to 33 destroy or not use personal data; and imprisonment of company officials.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials.
Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the note holders initiating bankruptcy proceedings or causing us to cease operations altogether.
Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the noteholders initiating bankruptcy proceedings or causing us to cease operations altogether.
From time to time, we publicly announce the expected timing of some of 22 these milestones. All of these milestones are based on a variety of assumptions.
From time to time, we publicly announce the expected timing of some of these 26 milestones. All of these milestones are based on a variety of assumptions.
While we cannot predict the broader consequences, the conflict and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may increase our costs, disrupt our supply chain, impair our ability to raise or access additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations. 40 Item 1B.
While we cannot predict the broader consequences, these conflicts and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global 44 economy, which in turn may increase our costs, disrupt our supply chain, impair our ability to raise or access additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations. 45 Item 1B.
Cyberattacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
Cyber-attacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
Pursuant to IRC Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.
Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.
For example, sales and demand for Afrezza were previously adversely affected by the global COVID-19 pandemic, and a resurgence of the COVID-19 pandemic or future pandemics or epidemics could adversely affect the demand for and sales of our products in the future.
For example, sales and demand for Afrezza were adversely affected by the global COVID-19 pandemic, and future pandemics or epidemics could adversely affect the demand for and sales of our products in the future.
With Afrezza approved in Brazil and as we pursue additional international approvals, we will be subject to similar foreign laws and regulations.
With Afrezza approved in Brazil and as our partners 36 pursue additional international approvals, we will be subject to similar foreign laws and regulations.
As part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza. We have initiated one of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 4-17 year-old children and adolescents.
As part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza. One of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 4-17 year-old children and adolescents, is ongoing.
For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million euros or 4% of annual global revenue, whichever is greater; or private litigation related to the processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater; or private litigation related to the processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s AMP, for single source and innovator multiple source drugs, beginning January 1, 2024.
For example, in March 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s AMP, for single source and innovator multiple source drugs, which became effective January 1, 2024.
We have completed a Section 382 analysis beginning from the date of our initial public offering through December 31, 2022, to determine whether additional limitations may be placed on the net operating loss carryforwards and other tax attributes, and no additional changes in ownership that met Section 382 study ownership change threshold has been identified through December 31, 2022.
We have completed a Section 382 analysis beginning from the date of our initial public offering through December 31, 2023, to determine whether additional limitations apply to the net operating loss carryforwards and other tax attributes, and no additional changes in ownership that met Section 382 study ownership change threshold has been identified through December 31, 2023.
For instance, in February 2022, Russia initiated military action against Ukraine. In response, the United States and certain other countries imposed significant sanctions and trade actions against Russia and could impose further sanctions, trade restrictions, and other retaliatory actions.
For instance, in February 2022, Russia initiated military action against Ukraine and the two countries are now at war. In response, the United States and certain other countries imposed significant sanctions and trade actions against Russia and could impose further sanctions, trade restrictions, and other retaliatory actions.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credentials harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credentials harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by artificial intelligence, and other similar threats.
If we are unable to raise adequate additional capital when required or in sufficient amounts or on terms acceptable to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a loss), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue an acquisition of our company at a price that may result in up to a total loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets. 19 We expect that our results of operations will fluctuate for the foreseeable future, which may make it difficult to predict our future performance from period to period.
If we are unable to raise adequate additional capital when required or in sufficient amounts or on terms acceptable to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a loss), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue an acquisition of our company at a price that may result in up to a total loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets.
For example, the General Data Protection Regulation (“GDPR”) and, the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and Australia’s Privacy Act 1988 impose strict requirements for processing personal data.
For example, the European Union's General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”) (EU GDPR and UK GDPR, collectively “GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and Australia’s Privacy Act impose strict requirements for processing personal data.
As of December 31, 2022, the Company had federal and state net operating loss carryforwards of approximately $2.2 billion and $1.7 billion available, respectively, to reduce future taxable income. $499.6 million of the federal losses do not expire and the remaining federal losses have started expiring, beginning in the current year through various future dates.
As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $2.0 billion and $1.3 billion available, respectively, to reduce future taxable income. $494.0 million of the federal losses do not expire and the remaining federal losses have started expiring, beginning in the current year through various future dates.
In addition, we rely on our contract manufacturers in Southern China to manufacture V-Go. Our contract manufacturer uses MannKind-owned custom-designed, semi-automated manufacturing equipment and production lines to meet our quality requirements. Separate contract manufacturers in China perform release testing, sterilization, inspection and packaging functions.
In addition, we may be unable to support commercialization of Tyvaso DPI. In addition, we rely on our contract manufacturers in Southern China to manufacture V-Go. Our contract manufacturer uses MannKind-owned custom-designed, semi-automated manufacturing equipment and production lines to meet our quality requirements. Separate contract manufacturers in China perform release testing, sterilization, inspection and packaging functions.
As a result of any of these events, we, any collaborator, the FDA, or any other regulatory authorities, may suspend or terminate clinical studies or marketing of the drug at any time.
As a result of any of these events, we, any collaborator, the FDA, or any other regulatory authorities may suspend or terminate clinical studies or marketing of any of our products or product candidates at any time.
In addition, clinical trials of our products previously experienced delays as a result of the COVID-19 pandemic and may be affected by a resurgence in the COVID-19 pandemic or a future health pandemic or epidemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the health pandemic or epidemic.
Clinical trials of our products were delayed as a result of the COVID-19 pandemic and may be affected by a future health pandemic or epidemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the health pandemic or epidemic.
In addition, pursuant to the MidCap credit facility, we are subject to contractual restrictions on the payment of dividends. There is no guarantee that our common stock will appreciate or maintain its current price. You could lose the entire value of any investment in our common stock.
In addition, pursuant to the MidCap credit facility, we are subject to contractual restrictions on the payment of dividends. There is no guarantee that our common stock will appreciate or maintain its current price.
These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we conduct post-approval. 29 Later discovery of previously unknown problems, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls; • revisions to the approved labeling to add new safety information; • fines, warning letters or holds on clinical trials; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals; • product seizure or detention, or refusal to permit the import or export of our product candidates; and • injunctions or the imposition of civil or criminal penalties.
Later discovery of previously unknown problems, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls; • revisions to the approved labeling to add new safety information; • fines, warning letters or holds on clinical trials; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals; • product seizure or detention, or refusal to permit the import or export of our product candidates; and • injunctions or the imposition of civil or criminal penalties.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.
Our portfolio of corporate and government bonds could also be adversely impacted. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in fiscal year 2023.
We may not realize the benefit of our recent acquisition of V-Go or any future acquisition or strategic transaction; we may be unable to successfully integrate new products or businesses we may acquire. We periodically evaluate and pursue acquisition of therapeutic products.
We may not realize the anticipated benefits of any future acquisition or strategic transaction; we may be unable to successfully integrate new products or businesses we may acquire. We periodically evaluate and pursue acquisition of therapeutic products.
We expect that PPACA, the IRA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues.
We expect that the IRA, as well as other healthcare reform measures that may be adopted in the future, are likely to have a significant effect on the pharmaceutical industry, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues.
We may be required to comply with additional covenants in the future under certain circumstances. The restrictive covenants in the MidCap credit facility could prevent us from pursuing business opportunities that we or our stockholders may consider beneficial.
We may be required to comply with additional covenants in the future under certain circumstances. The restrictive covenants in the MidCap credit facility could prevent us from pursuing business opportunities that we or our stockholders may consider beneficial. A breach of any of these covenants could result in an event of default under the MidCap credit facility.
If our suppliers fail to deliver materials and services needed for commercial manufacturing in a timely and sufficient manner or fail to comply with applicable regulations, and if we fail to timely identify and qualify alternative suppliers, our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities could decline.
These risks are likely to be exacerbated by our limited experience with V-Go and its manufacturing processes. 19 If our suppliers fail to deliver materials and services needed for commercial manufacturing in a timely and sufficient manner or fail to comply with applicable regulations, and if we fail to timely identify and qualify alternative suppliers, our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities could decline.
We might suffer losses as a result of business interruptions that exceed the coverage available under our and our contractors’ insurance policies or for which we or our contractors do not have coverage. For example, we are not insured against a terrorist attack.
Such conditions may be further exacerbated by the effects of climate change. We might suffer losses as a result of business interruptions that exceed the coverage available under our and our contractors’ insurance policies or for which we or our contractors do not have coverage. For example, we are not insured against a terrorist attack.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022, we leased a total of approximately 24,475 square feet of office space in Westlake Village, California pursuant to a lease that expires in July 2028.
Biggest changeAs of December 31, 2023, we leased a total of approximately 24,475 square feet of office space in Westlake Village, California pursuant to a lease that expires in July 2028. See Note 16 – Commitments and Contingencies in the consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
As of December 31, 2022, we leased a total of approximately 20,000 square feet of building space pursuant to a lease that expires in February 28, 2026. See Note 16 – Commitments and Contingencies in the consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
As of December 31, 2023, we leased a total of approximately 20,000 square feet of building space pursuant to a lease that expires in February 28, 2026. See Note 16 – Commitments and Contingencies in the consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Item 2. Properties In 2001, we acquired a facility in Danbury, Connecticut that included two buildings comprised of approximately 190,000 square feet on 17.5 acres.
Item 2. P roperties In 2001, we acquired a facility in Danbury, Connecticut that included two buildings comprised of approximately 190,000 square feet on 17.5 acres.
On November 8, 2021, we sold a portion of the Danbury facility to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $102.3 million and entered into a 20-year lease agreement with the Purchaser, with four renewal options of five years each.
Our obligations under the MidCap Credit Facility are secured by a portion of the facility in Danbury and other assets. 47 On November 8, 2021, we sold a portion of the Danbury facility to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $102.3 million and entered into a 20-year lease agreement with the Purchaser, with four renewal options of five years each.
We believe the Danbury facility has sufficient space, including unimproved manufacturing space, to satisfy anticipated commercial demand for Afrezza and Tyvaso DPI. Our obligations under the MidCap Credit Facility are secured by a portion of the facility in Danbury and other assets.
We believe the Danbury facility has sufficient space, including unimproved manufacturing space, to satisfy anticipated commercial demand for Afrezza and Tyvaso DPI.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. Accordingly, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors.
Biggest changeWe do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors.
The graph assumes a $100 investment, on December 31, 2017, in (i) our common stock, (ii) the securities comprising The Nasdaq Composite Index and (iii) the securities comprising The Nasdaq Biotechnology Index. Dividend Policy We have never declared or paid any cash dividends on our common stock.
The graph assumes a $100 investment, on December 31, 2018, in (i) our common stock, (ii) the securities comprising The Nasdaq Composite Index and (iii) the securities comprising The Nasdaq Biotechnology Index. Dividend Policy We have never declared or paid any cash dividends on our common stock.
In addition, under the terms of the MidCap Credit Facility, we are restricted from declaring and distributing a cash dividend to our stockholders. Recent Sales of Unregistered Securities Under the Mann Group convertible note, we pay quarterly interest payments on the first day of each calendar quarter, which we may pay at our election in shares of our common stock.
In addition, under the terms of the MidCap Credit Facility, we are restricted from declaring and distributing a cash dividend to our stockholders. 49 Recent Sales of Unregistered Securities Under the Mann Group convertible note, we pay quarterly interest payments on the first day of each calendar quarter, payable at our election in shares of our common stock.
During the year ended December 31, 2022, we elected to pay our April 1 st , July 1 st and October 1 st , quarterly interest payments under the Mann Group convertible note by issuing the Mann Group an aggregate of 75,487 shares of common stock.
During the year ended December 31, 2023, we elected to pay our January 1 st , April 1 st , July 1 st and October 1 st quarterly interest payments under the Mann Group convertible note by issuing the Mann Group an aggregate of 50,844 shares of common stock. See Note 10 – Borrowings .
See Note 10 – Borrowings . 42 We r elied on an exemption from registration provided by Section 3(a)(9) or 4(a)(2) of the Securities Act of 1933, as amended, for the issuance of the shares described above. Item 6. [Reserved]
We relied on an exemption from registration provided by Section 3(a)(9) or 4(a)(2) of the Securities Act of 1933, as amended, for the issuance of the shares described above. Item 6. [Re served]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Our common stock has been traded on The Nasdaq Global Market under the symbol “MNKD” since July 28, 2004.
Item 5. Market for Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Our common stock has been traded on The Nasdaq Global Market under the symbol “MNKD” since July 28, 2004. On February 16, 2024, there were 102 registered holders of record of our common stock.
Removed
The closing sales price of our common stock on The Nasdaq Global Market was $5.16 on February 10, 2023 and there were 104 registered holders of record of our common stock as of that date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

58 edited+33 added−11 removed37 unchanged
Biggest changeIn February 2022, we filed a sales agreement prospectus under a registration statement on Form S-3 (File No. 333-262981) covering the sale of up to $50.0 million of our common stock through Cantor Fitzgerald under the CF Sales Agreement. 48 During the year ended December 31 , 2022, we used $ 80.7 million of cash for our operating activities, which primarily consisted of $ 75.1 million of selling, general and administrative expenses, $ 58.5 million of cost of goods sold, $ 23.8 million of costs for research and development , $ 8.9 million of cash paid for interest on notes and $9.6 million of cash paid for interest on the financing liability , partially offset by $ 108.3 million of revenue.
Biggest changeIn February 2022, we filed a sales agreement prospectus under a registration statement on Form S-3 (File No. 333-262981) covering the sale of up to $50.0 million of our common stock through Cantor Fitzgerald under the CF Sales Agreement, of which $23.3 million remained available as of December 31, 2023.
Cash provided from investing activities of $4.9 million for the year ended December 31, 2022 was primarily due to the maturity of $107.3 million of debt securities, partially offset by the up-front consideration of $15.3 million for certain assets and assumed liabilities related to V-Go, $5.0 million purchase of available-for-sale securities, the purchase of $74.5 million of debt securities and $7.6 million purchase of property and equipment.
Cash provided by investing activities of $4.9 million for the year ended December 31, 2022 was primarily due to the maturity of $107.3 million of debt securities, partially offset by the up-front consideration of $15.3 million for certain assets and assumed liabilities related to V-Go, $5.0 million purchase of available-for-sale securities, the purchase of $74.5 million of debt securities and $7.6 million purchase of property and equipment.
Our analysis also contemplates application of the constraint in accordance with the guidance, under which we determined a material reversal of revenue would not occur in a future period for the estimates of gross-to-net adjustments as of December 31, 2022 and, therefore, the transaction price was not reduced further during the year ended December 31, 2022.
Our analysis also contemplates application of the constraint in accordance with the guidance, under which we determined a material reversal of revenue would not occur in a future period for the estimates of gross-to-net adjustments as of December 31, 2023 and, therefore, the transaction price was not reduced further during the year ended December 31, 2023.
Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in Accounting Standards Codification (“ ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.
Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.
A discussion of changes in our results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
A discussion of changes in our results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
If there is a 10% difference between the estimates for accruals and the actual liability in the reserves for variable consideration, the impact to our revenue for commercial product sales would be $2.0 million or a 4.1% change in the gross-to-net adjustment percentage for the year ended December 31, 2022.
If there is a 10% difference between the estimates for accruals and the actual liability in the reserves for variable consideration, the impact to our revenue for commercial product sales would be $2.0 million or a 1.5% change in the gross-to-net adjustment percentage for the year ended December 31, 2023.
Recent Accounting Pronouncements See Note 2 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 — Financial Statements and Supplementary Data for information regarding accounting standards we adopted in 2022 and other new accounting standards that have been issued by the FASB but are not effective until after December 31, 2022.
Recent Accounting Pronouncements See Note 2 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 — Financial Statements and Supplementary Data for information regarding new accounting standards that have been issued by the FASB but are not effective until after December 31, 2023.
(“Cantor Fitzgerald”), as sales agent, pursuant to which we may offer and sell, from time to time, through Cantor Fitzgerald, shares of our common stock. Under the Sales Agreement, Cantor Fitzgerald may sell shares by any method deemed to be an “ at-the-market offering ” as defined in Rule 415 under the Securities Act of 1933, as amended.
(“Cantor Fitzgerald”), as sales agent, pursuant to which we may offer and sell, from time to time, through Cantor Fitzgerald, shares of our common stock. Under the Sales Agreement, Cantor Fitzgerald may sell shares by any method deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of 1933, as amended.
If there is a 10% difference in the grant date fair value of the Market RSUs, the impact to our stock-based compensation expense would be $0.6 million for the year ended December 31, 2022.
If there is a 10% difference in the grant date fair value of the Market RSUs, the impact to our stock-based compensation expense would be $0.8 million for the year ended December 31, 2023.
To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT.
To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT, from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT and from the sale of a portion of future royalties that we receive from UT.
We believe our resources will be sufficient to fund our operations for the next twelve months from the date of issuance of our consolidated financial statements included in Item 8 – Financial Statements.
We believe our resources will be sufficient to fund our operations for the next twelve months from the date of issuance of our consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Cash provided by financing activities of $21.4 million for the year ended December 31, 2022 was primarily due to net proceeds from at-the-market offering of $19.8 million, partially offset by the milestone payment of $1.1 million.
Cash provided by financing activities of $21.4 million for the year ended December 31, 2022 was primarily due to net proceeds from at-the-market offering of $19.4 million and proceeds from market price stock purchase plan and employee stock purchase plan of $2.8 million, partially offset by the milestone payment of $1.1 million.
Interest expense on financing liability was $9.8 million for the year ended December 31, 2022 and represented interest incurred on the sale lease-back transaction for our manufacturing facility in Danbury, CT which was entered into in the fourth quarter of 2021. Interest expense on notes for the year ended December 31, 2022 was comparable to the prior year.
Interest expense on financing liability was $9.8 million for each of the years ended December 31, 2023 and 2022, and represented interest incurred on the sale lease-back transaction for our manufacturing facility in Danbury, CT, which was entered into in the fourth quarter of 2021.
As a result, there is a high risk that the funds we invest in research programs will not generate sufficient financial returns. Products may appear promising in development but fail to reach market within the expected or optimal timeframe, or at all.
There is a high rate of failure inherent in the R&D process for new drugs. As a result, there is a high risk that the funds we invest in research programs will not generate sufficient financial returns. Products may appear promising in development but fail to reach market within the expected or optimal timeframe, or at all.
Other expense or income for the years ended December 31, 2022 and 2021 consisted primarily of the loss associated with a foreign currency hedging transaction which was entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement with Amphastar.
Other expense for the year ended December 31, 2022 consisted of a loss associated with a foreign currency hedging transaction that was entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement with Amphastar.
The increase reflects a combination of higher price (including a more favorable gross-to-net adjustment), higher product demand and a favorable cartridge mix. The gross-to-net adjustment was 39% of gross revenue, or $27.8 million, for the year ended December 31, 2022, compared to 39% of gross revenue or $24.9 million, for the prior year.
The increase reflects a combination of higher product demand and higher price (including a more favorable gross-to-net adjustment). The gross-to-net adjustment was 38% of gross revenue, or $33.0 million, for the year ended December 31, 2023 compared to 39% of gross revenue, or $27.8 million, for the prior year.
If we fail to repurchase the Mann Group promissory notes, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time.
If we fail to repay, repurchase or redeem our outstanding notes when required, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time.
Gain on foreign currency translation was $4.8 million for the year ended December 31, 2022 compared to $6.6 million for the prior year. Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros.
Loss on foreign currency transaction was $1.9 million for the year ended December 31, 2023 compared to a gain of $4.8 million for the prior year. Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros.
See Note 10 — Borrowings . Loss on available-for-sale securities for the year ended December 31, 2022 was $0.9 million as a result of the change in the fair value of the investment that related to credit risk.
Loss on available-for-sale securities for the years ended December 31, 2023 and 2022 was $0.2 million and $0.9 million, respectively, as a result of the change in the fair value of the investment that related to credit risk.
Other significant risks also include the risk that our products may only achieve a limited degree of commercial success and the risks inherent in drug development, clinical trials and the regulatory approval process for our product candidates, which in some cases depends upon the efforts of our partners.
Other significant risks also include the risk that our products may only achieve a limited degree of commercial success and the risks inherent in drug development, clinical trials and the regulatory approval process for our product candidates, which in some cases depends upon the efforts of our partners. 50 As of December 31, 2023, we had an accumulated deficit of $3.2 billion and a stockholders’ deficit of $246.2 million.
The grant date fair value for the Market RSUs was $6.10 per unit for the Market RSUs granted during the year ended December 31, 2022, compared to $9.30 and $3.77 per unit for the Market RSUs granted during the years ended December 31, 2021 and 2020, respectively.
The grant date fair value for the Market RSUs was $9.40 per unit for the Market RSUs granted during the year ended December 31, 2023, compared to $6.10 per unit for the Market RSUs granted during the year ended December 31, 2022.
We are required to record the foreign currency translation impact of the U.S. dollar to Euro exchange rate associated with the recognized loss on purchase commitments. The decrease in year-over-year gain was due to the translation of Euro to U.S. dollar exchange rates.
We are required to record the foreign currency transaction impact of the U.S. dollar to Euro exchange rate associated with the recognized loss on purchase commitments.
We believe we will be able to meet our liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza and V-Go, royalties and manufacturing revenue from the production and sale of Tyvaso DPI.
Future Liquidity Needs We believe we will be able to meet our near-term liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza and V-Go, and royalties and manufacturing revenue from the production and sale of Tyvaso DPI as well as through debt or equity financing, if necessary, for our long-term liquidity needs.
General and administrative expenses increased by $5.8 million, or 18%, for the year ended December 31, 2022, compared to the prior year. This increase was primarily attributable to higher stock-based compensation, increased headcount, and higher professional and consulting fees.
General and administrative expenses increased by $4.8 million, or 13%, for the year ended December 31, 2023 compared to the prior year. This increase was primarily attributable to increased personnel costs, including stock-based compensation and headcount.
During the year ended December 31, 2021, we used $61.7 million of cash for our operating activities, which primarily consisted of $65.8 million of selling, general and administrative expenses, $35.5 million of cost of goods sold and cost of revenue, $11.7 million of costs for research and development and $6.5 million of cash paid for interest, partially offset by $47.6 million of revenue.
During the year ended December 31, 2022, we used $80.7 million of cash for our operating activities, which primarily consisted of $75.1 million of selling, general and administrative expenses, $58.5 million of cost of goods sold, $23.8 million of costs for research and 57 development, $8.9 million of cash paid for interest on notes and $9.6 million of cash paid for interest on the financing liability, partially offset by $108.3 million of revenue.
Future Liquidity Needs We are not currently profitable and have rarely generated positive net cash flow from operations. In addition, we expect to continue to incur expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline.
In addition, we expect to continue to incur expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline.
Reserves for Variable Consideration — Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established.
Product revenues are recorded net of applicable reserves including discounts, allowances, rebates, returns and other incentives. See Reserves for Variable Consideration below. Reserves for Variable Consideration — Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established.
Amounts that we expect will not be recognized within the next 12 months are classified as long-term deferred revenue. 44 If there is a 10% difference in the estimates used to determine the transaction price for the CSA entered into in December 202 2 with UT, the related allocation of the transaction price between performance obligations, the difference between the estimates for accruals and the actual liability for deferred revenue and revenue recognized for collaborations and services would be $0. 4 million for the year ended December 31, 202 2 .
If there is a 10% difference in the estimates used to determine the transaction price for the CSA entered into in December 2022 with UT and the related allocation of the transaction price between performance obligations, the difference between the estimates for accruals and the actual liability for deferred revenue and revenue recognized for collaborations and services would be $1.8 million for the year ended December 31, 2023.
As of December 31, 2022, we had capital resources of $69.8 million in cash and cash equivalents, $101.0 million in short-term investments and $2.0 million in long-term investments, and total principal amount of outstanding borrowings of $278.8 million.
As of December 31, 2023, we had capital resources of $238.5 million in cash and cash equivalents, $56.6 million in short-term investments and $7.2 million in long-term investments, and total principal amount of outstanding borrowings of $272.1 million.
In addition to distribution agreements with Customers, we enter into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products. 43 We recognize revenue on product sales when the Customer obtains control of our product, which occurs at delivery for wholesale distributors and generally at delivery for specialty pharmacies.
In addition to distribution agreements with Customers, we enter into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products.
(2) $40.0 million principal amount under the MidCap credit facility, bearing interest at an annual rate equal to one-month SOFR plus 6.25% (cap of 8.25%), subject to a one-month SOFR floor of 1.00%, payable in equal monthly installments beginning in September 2023 through maturity in August 2025.
(2) $33.3 million principal amount under the MidCap credit facility, bearing interest at an annual rate equal to one-month Secured Overnight Financing Rate (“SOFR") plus 6.25% (capped at a total of 8.25%), subject to a one-month SOFR floor of 1.00%. Interest is payable monthly in arrears.
In addition to the above, we also expect to have material cash requirements relating to paying our employees and consultants, professional services fees, marketing expenses, manufacturing expenditures, and clinical trial expenses.
See Note 9 – Accrued Expenses and Other Current Liabilities , Note 10 – Borrowings and Note 16– Commitments and Contingencies for further information related to the Milestone Rights. In addition to the above, we also expect to have material cash requirements relating to paying our employees and consultants, professional services fees, marketing expenses, manufacturing expenditures, and clinical trial expenses.
Years ended December 31, 2022 and 2021 Revenues The following table provides a comparison of the revenue categories for the years ended December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 2021 $ Change % Change Net revenue — commercial product sales: Gross revenue from product sales $ 97,048 $ 64,023 $ 33,025 52 % Wholesaler distribution fees, rebates and chargebacks, product returns and other discounts (40,801 ) (24,855 ) $ 15,946 64 % Net revenue — commercial product sales 56,247 39,168 $ 17,079 44 % Gross-to-net revenue adjustment percentage (42 %) (39 %) Revenue — collaborations and services 27,924 36,274 $ (8,350 ) (23 %) Royalties — collaborations 15,599 — $ 15,599 * Total revenues $ 99,770 $ 75,442 $ 24,328 32 % _________________________ * Not meaningful Afrezza — Gross revenue from sales of Afrezza increased by $7.1 million, or 11%, for the year ended December 31, 2022 compared to the prior year.
Years ended December 31, 2023 and 2022 Revenues The following table provides a comparison of the revenue categories for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Net revenue – commercial product sales: Gross revenue from product sales $ 130,461 $ 97,048 $ 33,413 34 % Less: Wholesaler distribution fees, rebates and chargebacks, product returns and other discounts 56,432 40,801 $ 15,631 38 % Net revenue – commercial product sales $ 74,029 $ 56,247 $ 17,782 32 % Gross-to-net revenue adjustment percentage 43 % 42 % Revenue – collaborations and services 52,954 27,924 $ 25,030 90 % Royalties – collaborations 71,979 15,599 $ 56,380 361 % Total revenues $ 198,962 $ 99,770 $ 99,192 99 % Afrezza — Gross revenue from sales of Afrezza increased by $16.8 million, or 24%, for the year ended December 31, 2023 compared to the prior year.
As of December 31, 2022, we had an accumulated deficit of $3.2 billion and a stockholders’ deficit of $250.5 million. We had net loss of $87.4 million, $80.9 million and $57.2 million in the years ended December 31, 2022, 2021 and 2020, respectively.
We had net loss of $11.9 million, $87.4 million and $80.9 million in the years ended December 31, 2023, 2022 and 2021, respectively.
Other Income (Expense) The following table provides a comparison of the other income (expense) categories for the years ended December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 2021 $ Change % Change Interest income $ 2,513 $ 112 $ 2,401 * Interest expense on financing liability (9,758 ) (1,373 ) $ 8,385 * Interest expense on notes (15,011 ) (15,204 ) $ (193 ) (1 %) Loss on available-for-sale securities (932 ) — $ (932 ) * Loss on extinguishment of debt — (17,200 ) $ (17,200 ) (100 %) Other expense (102 ) (239 ) $ (137 ) (57 %) Total other expense $ (23,290 ) $ (33,904 ) $ (10,614 ) (31 %) _________________________ * Not meaningful Interest income, consisting of interest on investments net of amortization, increased by $2.4 million compared to the prior year primarily due to higher yields on our marketable securities and money market funds.
The year-over-year change was due to the conversion of Euro to U.S. dollar exchange rates. 54 Other Income (Expense) The following table provides a comparison of the other income (expense) categories for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Interest income $ 6,154 $ 2,513 $ 3,641 145 % Interest expense on financing liability (9,825 ) (9,758 ) $ 67 1 % Interest expense (15,151 ) (15,011 ) $ 140 1 % Interest expense on liability for sale of future royalties (185 ) — $ 185 * Loss on available-for-sale securities (170 ) (932 ) $ (762 ) (82 %) Other income (expense) 122 (102 ) $ (224 ) (220 %) Total other expense $ (19,055 ) $ (23,290 ) $ (4,235 ) (18 %) _________________________ * Not meaningful Interest income, consisting of interest on investments net of amortization, increased by $3.6 million compared to the prior year primarily due to higher yields on our marketable securities and money market funds.
Cash used in investing activities of $151.5 million for the year ended December 31, 2021 was primarily due to the purchase of debt securities of $196.1 million, partially offset by proceeds received from sales of debt securities of $59.1 million.
Cash used in investing activities of $2.0 million for the year ended December 31, 2023 was primarily due to the maturity of $119.2 million of debt securities, partially offset by the purchase of $79.1 million of debt securities and $42.4 million purchase of property and equipment.
The gross-to-net adjustment of 50.2% of gross revenue was mainly attributable to commercial and government rebates and product distribution fees. Collaborations and Services — Net revenue from collaborations and services decreased by $8.4 million, or 23%, for the year ended December 31, 2022 compared to the prior year.
The gross-to-net adjustment was 55% of gross revenue, or $23.4 million, for the year ended December 31, 2023 compared to 50% of gross revenue, or $13.0 million, for the prior year. The increase in gross-to-net percentage was mainly attributable to increased commercial and government rebates (as a percentage of gross sales).
Cost of goods sold decreased by $8.2 million, or 48%, for the year ended December 31, 2022 compared to the prior year.
Selling expenses decreased by $2.0 million, or 4%, for the year ended December 31, 2023, compared to the prior year.
Our primary uses of cash include the development of our product pipeline, the manufacturing and marketing of Afrezza and V-Go, manufacturing Tyvaso DPI, the funding of general and administrative expenses, and interest expense on our financing liability and debt. 47 To date, we have funded our operations primarily through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds from the s ale- l easeback transaction.
To date, we have funded our operations primarily through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds from the sale of certain assets and the sale of a portion of our future royalties that we receive from UT.
As a result, net revenue from sales of Afrezza increased by $4.1 million, or 11%, for the year ended December 31, 2022 compared to the prior year. 45 V-Go — The acquisition of V-Go on May 31, 2022 resulted in an increase in gross revenue from commercial product sales of $25.9 million and net revenue of $12.9 million for the year ended December 31, 2022.
V-Go — Gross revenue from sales of V-Go increased by $16.6 million, or 64%, for the year ended December 31, 2023 compared to the prior year. The increase was a result of a full year of sales in 2023 compared to seven months in the prior year as V-Go was acquired in May 2022.
Interest expense is calculated using an incremental borrowing rate of 9%. (5) The July 2014 Insulin Supply Agreement with Amphastar to manufacture and supply us certain quantities of recombinant human insulin for use in Afrezza was amended in May 2021 and expires on December 31, 2027.
(5) The July 2014 Insulin Supply Agreement with Amphastar to manufacture and supply us certain quantities of recombinant human insulin for use in Afrezza was amended in May 2021 and again on December 22, 2023 to purchase certain minimum quantities over a term that currently extends through at least December 31, 2034.
The following table presents our material cash requirements as of December 31, 2022 associated with contractual commitments for future periods (in thousands): 2023 2024 - 2025 2026 - 2027 Thereafter Total Senior convertible notes (1) $ 5,750 $ 11,500 $ 232,875 $ — $ 250,125 MidCap credit facility (2) 9,896 35,541 — — 45,437 Mann Group convertible note (3) — 9,233 — — 9,233 Financing liability (4) 9,774 20,287 21,382 188,453 239,896 Insulin purchase agreement (5) 9,390 32,243 30,674 — 72,307 Total material cash requirements $ 34,810 $ 108,804 $ 284,931 $ 188,453 $ 616,998 _________________________ (1) $230.0 million aggregate principal amount of Senior convertible notes bearing interest at 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021 and maturing on March 1, 2026, unless earlier converted, redeemed or repurchased.
The following table presents our material cash requirements as of December 31, 2023 associated with contractual commitments for future periods (in thousands): 2024 2025 - 2026 2027 - 2028 Thereafter Total Senior convertible notes (1) $ 5,750 $ 238,625 $ — $ — $ 244,375 MidCap credit facility (2) 21,885 13,656 — — 35,541 Mann Group convertible note (3) 223 9,057 — — 9,280 Financing liability (4) 10,018 20,802 22,023 177,278 230,121 Insulin purchase agreement (5) 3,209 4,682 13,251 44,611 65,753 Insulin purchase capacity fees (5) — 3,865 2,208 4,417 10,490 Total material cash requirements $ 41,085 $ 290,687 $ 37,482 $ 226,306 $ 595,560 56 _________________________ (1) $230.0 million aggregate principal amount of Senior convertible notes bearing interest at 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021 and maturing on March 1, 2026, unless earlier converted, redeemed or repurchased by us.
We also receive a margin on supplies of Tyvaso DPI that we manufacture for UT. Our business is subject to significant risks, including but not limited to our ability to manufacture sufficient quantities of our products and Tyvaso DPI.
We plan to initiate a Phase 1 clinical study of MNKD-201 in the second quarter of 2024. Our business is subject to significant risks, including but not limited to our ability to manufacture sufficient quantities of our products and Tyvaso DPI.
Commercial product gross profit The following table provides a comparison of the commercial product gross profit categories for the years ended December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 2021 $ Change % Change Commercial product gross profit: Net revenue — commercial product sales $ 56,247 $ 39,168 $ 17,079 44 % Less cost of goods sold (16,003 ) (16,833 ) $ (830 ) (5 %) Commercial product gross profit: $ 40,244 $ 22,335 $ 17,909 80 % Gross margin 72 % 57 % Afrezza — Commercial product gross profit for Afrezza increased by $12.3 million, or 55%, for the year ended December 31, 2022, compared to the prior year.
See Note 11 – Collaboration, Licensing and Other Arrangements in the consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data. 53 Commercial product gross profit The following table provides a comparison of the commercial product gross profit categories for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Commercial product gross profit: Net revenue – commercial product sales $ 74,029 $ 56,247 $ 17,782 32 % Less: Cost of goods sold 20,863 16,003 $ 4,860 30 % Commercial product gross profit: $ 53,166 $ 40,244 $ 12,922 32 % Gross margin 72 % 72 % Commercial product gross profit increased by $12.9 million, or 32%, for the year ended December 31, 2023 compared to the prior year.
Interest was paid-in-kind from August 2019 until the end of 2020, after which we have the option to pay interest in-kind or in shares. (4) On November 8, 2021, we sold a portion of our manufacturing facility located in Danbury, CT to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $102.3 million.
On November 8, 2021, we sold a portion of our manufacturing facility located in Danbury, CT to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $102.3 million. We leased the property from the Purchaser for an initial term of 20 years, with four renewal options of five years each.
Expenses The following table provides a comparison of the expense categories for the years ended December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 2021 $ Change % Change Expenses: Cost of goods sold $ 16,003 $ 16,833 $ (830 ) (5 %) Cost of revenue — collaborations and services 41,494 22,024 $ 19,470 88 % Research and development 19,721 12,312 $ 7,409 60 % Selling 53,753 45,528 $ 8,225 18 % General and administrative 37,720 31,889 $ 5,831 18 % Asset impairment — 106 $ (106 ) (100 %) Gain on foreign currency translation (4,811 ) (6,567 ) $ (1,756 ) (27 %) Loss on purchase commitments — 339 $ (339 ) (100 %) Total expenses $ 163,880 $ 122,464 $ 41,416 34 % Cost of revenue — collaborations and services increased by $19.5 million, or 88%, for the year ended December 31, 2022 compared to the prior year.
Expenses The following table provides a comparison of the expense categories for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 $ Change % Change Expenses: Cost of goods sold $ 20,863 $ 16,003 $ 4,860 30 % Cost of revenue — collaborations and services 41,908 41,494 $ 414 1 % Research and development 31,283 19,721 $ 11,562 59 % Selling 51,776 53,753 $ (1,977 ) (4 %) General and administrative 42,538 37,720 $ 4,818 13 % Loss (gain) on foreign currency transaction 1,916 (4,811 ) $ (6,727 ) * Total expenses $ 190,284 $ 163,880 $ 26,404 16 % _________________________ * Not meaningful Cost of revenue — collaborations and services increased by $0.4 million, or 1%, for the year ended December 31, 2023 compared to the prior year.
Our reserves for variable consideration are reflected in our gross-to-net adjustments which were 42% of gross revenue, or $40.8 million, for the year ended December 31, 2022, compared to 39% of gross revenue, or $24.9 million, for the year ended December 31, 2021.
Significant judgment is required in estimating gross-to-net adjustments, historical experience, payer channel mix unbilled claims, claim submission time lags and inventory levels in the distribution channel. 51 Our reserves for variable consideration are reflected in our gross-to-net adjustments which were 43% of gross product revenue, or $56.4 million, for the year ended December 31, 2023, compared to 42% of gross product revenue, or $40.8 million, for the year ended December 31, 2022.
The gross-to-net percentage remained consistent over the prior year and was primarily impacted by an increase in anticipated product returns, offset by a decrease in co-pay assistance and wholesaler distribution fees (as a percentage of gross sales) due to an increased mix of specialty and retail pharmacy sales.
The decrease in the gross-to-net percentage was primarily impacted by decreases in co-pay assistance and anticipated product returns partially offset by an increase in government rebates (as a percentage of gross sales). As a result, net revenue from sales of Afrezza increased by $11.6 million, or 27%, for the year ended December 31, 2023 compared to the prior year.
The increase was attributable to an increase in manufacturing activities for Tyvaso DPI product. 46 Research and development expenses increased by $ 7.4 million, or 60 %, for the year ended December 31 , 2022 compared to the prior year.
Research and development expenses increased by $11.6 million, or 59%, for the year ended December 31, 2023 compared to the prior year.
The Milestone Rights provided the Original Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and sales milestones, $60.0 million of which remains payable to Barings upon achievement of such milestones. See Note 16– Commitments and Contingencies and Note 10 – Borrowings for further information related to the Milestone Rights.
The Milestone Rights provide the Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and sales milestones, $55.0 million of which remain payable as of December 31, 2023.
Gross margin for the year ended December 31 2022 increased to 80% compared to 57% for the prior year. The increase in gross profit and gross margin was attributable to an increase in Afrezza sales as well as a decrease in cost of goods sold.
The increase in gross profit was primarily attributable to an increase in Afrezza net revenue and gross margin. The acquisition of V-Go in May 2022 contributed to the increase in commercial product sales and related cost of goods sold. As a result, gross margin remained consistent with the prior year at 72%.
Revenue associated with the CSA was deferred until we began manufacturing and subsequently selling Tyvaso DPI in the second quarter of 2022. During the year ended December 31, 2022, we recognized $24.8 million of revenue under the CSA. We also recognized royalty revenue from our collaboration with UT of $15.6 million during the year ended December 31, 2022.
The increase in revenue was primarily attributable to manufacturing revenues being deferred in the prior year period until we began commercial manufacturing in May 2022 and an increase in product sold to UT. During the year ended December 31, 2023, we recognized $52.0 million of revenue under the CSA compared to $24.8 million in the prior year.
The increase was primarily attributable to a pilot promotional effort aimed at primary care physicians that began in the fourth quarter of 2021 and ended in the third quarter of 2022, elimination of a co-promotion for third party product (which permitted some expenses associated with the sales force to be recognized as cost of revenue — collaborations and services in the same period of 2021), V-Go promotional efforts after the acquisition in the second quarter of 2022, partially offset by the net favorable impact of personnel-related costs due to Afrezza sales force restructuring.
The decrease was primarily attributable to the termination of an Afrezza pilot promotional effort with a contract sales force targeting primary care physicians, which ended in the third quarter of 2022, partially offset by increased personnel and promotional activities related to the acquisition of V-Go in May 2022.
Our future success is dependent on our, and our current and future collaboration partners’, ability to effectively commercialize our approved products. Our future success is also dependent on our pipeline of new products. There is a high rate of failure inherent in the research and development process for new drugs.
Manufacturing risks may adversely affect our ability to manufacture our products and could reduce our gross margin or impact our collaboration with UT. Our future success is dependent on our, and our current and future collaboration partners’, ability to effectively commercialize approved products. Our future success is also dependent on our pipeline of new products.
See Note 11 – Collaboration, Licensing and Other Arrangements in the consolidated financial statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
See Note 16 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 — Financial Statements and Supplementary Data. Our royalty revenue reflects the upward trend in demand for Tyvaso DPI in the marketplace.
Cash provided by financing activities of $270.3 million for the year ended December 31, 2021 was primarily due to net proceeds from the offering of Senior convertible notes of $222.7 million and net proceeds from the sale-leaseback transaction of $99.1 million, partially offset by the repayment of $35.1 million of Mann Group non-convertible notes and related unpaid accrued interest and the repayment of $10.0 million of principal and $1.0 million prepayment penalty for the MidCap credit facility.
Cash provided by financing activities of $136.6 million for the year ended December 31, 2023 was primarily due to proceeds of $150.0 million from the sale of a portion of our future royalties from net sales of Tyvaso DPI and net proceeds from at-the-market offerings of $6.8 million, partially offset by $10.2 million in payments for taxes related to net issuance of common stock associated with restricted stock units and stock options, and principal payments of $6.7 million on the MidCap credit facility.
Liquidity and Capital Resources Our principal sources of liquidity are our cash, cash equivalents, and investments.
Our revenues from royalties from collaborations during the fourth quarter of 2023 totaled $21.0 million, of which $2.1 million will be remitted to the royalty purchaser. Liquidity and Capital Resources Our principal sources of liquidity are our cash, cash equivalents, and investments.
Removed
We recognize revenue on product sales to a retail pharmac y as the product is dispensed to patient s . Product revenues are recorded net of applicable reserves i nclud ing discounts , allowances, rebates, returns and other incentives. See Reserves for Variable Consideration below.
Added
Afrezza was developed by us and received approval from the FDA in June 2014. Afrezza consists of a dry powder formulation of human insulin delivered from a small portable inhaler. V-Go received 510(k) clearance by the FDA in 2010 and has been available commercially since 2012.
Removed
Significant judgment is required in estimating gross-to-net adjustments, historical experience, payer channel mix unbilled claims, claim submission time lags and inventory levels in the distribution channel.
Added
In May 2022, we acquired V-Go from Zealand Pharma A/S and Zealand Pharma US, Inc. (together “Zealand”) and began integrating the product into our endocrine business unit. V-Go is a mechanical basal-bolus insulin delivery system that is worn like a patch and can eliminate the need for taking multiple daily shots.
Removed
Results of Operations Trends and Uncertainties We continue to maintain an elevated level of safety stock of certain raw materials due to concerns that supply chain interruptions may interfere with the manufacture of Afrezza, V-Go and Tyvaso DPI. Manufacturing risks may adversely affect our ability to manufacture our products and could reduce our gross margin.
Added
We also receive a margin on supplies of Tyvaso DPI that we manufacture for UT. The lead program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease.
Removed
The decrease in collaborations and services revenue was primarily attributable to the completion of the R&D Services performance obligation associated with our collaboration with UT during 2021. In August 2021, we entered into a commercial supply agreement with UT (the “CSA”).
Added
We believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form of this drug. The FDA has designated MNKD-101 as both an orphan drug and a qualified infectious disease product for the treatment of pulmonary NTM infections.
Removed
The decrease in cost of goods sold was primarily attributable to a $4.1 million decrease in excess capacity costs as Tyvaso DPI began commercial production a $1.6 million decrease in inventory write-offs in the current year and a $2.0 million fee incurred for the amendment of the Insulin Supply Agreement with Amphastar in the prior year.
Added
We plan to initiate a Phase 3 registrational study of MNKD-101 in the United States in the second quarter of 2024. The next most advanced program in our pipeline is MNKD-201, a dry-powder formulation of nintedanib, for the treatment of idiopathic pulmonary fibrosis (IPF). An oral dosage form of nintedanib was approved for IPF by the FDA in 2014.
Removed
V-Go — The acquisition of V-Go on May 31, 2022 resulted in an increase in commercial product gross profit of $5.6 million with a gross margin of 43% for the year ended December 31, 2022.
Added
However, a fairly large oral dose is required in order to achieve sufficient drug levels in lung tissue. Our goal with an inhaled formulation is to deliver a therapeutic amount of nintedanib to the lungs while avoiding high levels of the drug in other tissues, where it is associated with undesirable side effects.
Removed
The increase was primarily attributable to development activities for our product pipeline, increased headcount for pipeline development activities and the Afrezza pediatrics clinical study (INHALE-1). Selling expenses increased by $8.2 million, or 18%, for the year ended December 31, 2022, compared to the prior year.
Added
We recognize revenue on product sales when the Customer obtains control of our product, which occurs at delivery for wholesale distributors and generally at delivery for specialty pharmacies. We recognize revenue on product sales to a retail pharmacy as the product is dispensed to patients.
Removed
Loss on extinguishment of debt of $17.2 million for the year ended December 31, 2021 consisted of a $22.1 million loss on extinguishment of debt for the amendment to the Mann Group convertible note, which did not result in a change in our financial position, partially offset by a $4.9 million gain on extinguishment of debt as a result of the U.S.
Added
Amounts that we expect will not be recognized within the next 12 months are classified as long-term deferred revenue.
Removed
Small Business Administration’s (“SBA”) forgiveness of the Paycheck Protection Program loan (the “PPP loan”).
Added
Revenue Recognition — Royalties — We recognize royalty revenue for a sales-based or usage-based royalty if it is promised in exchange for an intellectual property license. The royalty revenue is recognized as the latter of the subsequent sale of the product occurs or if the performance obligation to which the royalty has been allocated has been satisfied or partially satisfied.
Removed
We leased the property from the Purchaser for an initial term of 20 years, with four renewal options of five years each.
Added
Our collaboration agreement with UT entitles us to receive a royalty on net sales of Tyvaso DPI for the license of our IP that was considered to be interdependent with the development activities that supported the approval of Tyvaso DPI.
Removed
In July 2013, in connection with our entry into a loan agreement (which has since been repaid) with Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. we issued certain milestone rights (the “Milestone Rights”) to Deerfield Private Design Fund II, L.P. and Horizon Santé FLML SÀRL (the “Original Milestone Purchasers”).
Added
Results of Operations 52 Trends and Uncertainties Our collaboration agreement with UT entitles us to receive a 10% royalty on net sales of Tyvaso DPI, subject to the sale by us in December 2023 of a 1% royalty on future net sales to a royalty purchaser (leaving us with a 9% royalty).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and the Euro. For the year ended December 31, 2022, we realized a $4.8 million currency gain, which was included in (gain) loss on foreign currency translation in the accompanying consolidated statements of operations.
Biggest changeFor the year ended December 31, 2023, we realized a $1.9 million currency loss, which was included in loss (gain) on foreign currency transaction in the consolidated statements of operations. Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows.
Specifically, the interest rate on amounts borrowed under the Mann Group promissory notes is fixed at 2.50% and the interest rate under the Senior convertible notes is fixed at 2.50%. See Note 10 – Borrowings for information about the principal amount of outstanding debt.
Specifically, the interest rate on the amount borrowed under the Mann Group convertible note is fixed at 2.50% and the interest rate under the Senior convertible notes is fixed at 2.50%. See Note 10 – Borrowings for information about the principal amount of outstanding debt.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Interest on borrowings under the MidCap credit facility accrues interest at an annual rate equal to the lesser of (i) 8.25% and (ii) the one-month SOFR (subject to a one-month SOFR floor of 1.00%) plus 6.25%.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk Interest Rate Risk Interest on borrowings under the MidCap credit facility accrues interest at an annual rate equal to the lesser of (i) 8.25% and (ii) the one-month SOFR (subject to a one-month SOFR floor of 1.00%) plus 6.25%.
If a change in the U.S. dollar to Euro exchange rate equal to 10% of the U.S. dollar to Euro exchange rate on December 31, 2022 were to have occurred, this change would have resulted in a foreign currency impact to our pre-tax loss of approximately $7.2 million. Item 8.
If a change in the U.S. dollar to Euro exchange rate equal to 10% of the U.S. dollar to Euro exchange rate on December 31, 2023 were to have occurred, this change would have resulted in a foreign currency impact to our pre-tax loss of approximately $6.5 million. Item 8.
Financial Statements and Supplementary Data The information required by this Item is included in Items 15(a) (1) and (2) of Part IV of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Financial Statemen ts and Supplementary Data The information required by this Item is included in Items 15(a) (1) and (2) of Part IV of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure None.
If a hypothetical 10% change in the one-month SOFR interest rates on December 31, 2022 were to have occurred, this change would not have had a material effect on our annual interest payment obligation. 49 Foreign Currency Exchange Risk In July 2022 and October 2022, we entered into two separate 90-day foreign currency hedging transactions to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement.
If a hypothetical 10% change in the one-month SOFR interest rates on December 31, 2023 were to have occurred, this change would not have had a material effect on our annual interest payment obligation. 58 Foreign Currency Exchange Risk We incur and will continue to incur significant expenditures for insulin supply obligations under our Insulin Supply Agreement with Amphastar.
We incur and will continue to incur significant expenditures for insulin supply obligations under our Insulin Supply Agreement with Amphastar. Such obligations are denominated in Euros. At the end of each reporting period, the recognized gain or loss on purchase commitment is converted to U.S. dollars at the then-applicable foreign exchange rate.
Such obligations are denominated in Euros. At the end of each reporting period, the recognized gain or loss on purchase commitment is converted to U.S. dollars at the then-applicable foreign exchange rate. As a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and the Euro.
Removed
The hedging transaction hedges against short-term currency fluctuations for the remaining current year purchase obligation under the Insulin Supply Agreement for a total of €4.0 million. We realized a $0.1 million loss during the year ended December 31, 2022. This amount is recorded in other income and expense.
Removed
Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows.

Other MNKD 10-K year-over-year comparisons