MannKind(MNKD) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This part provides MannKind Corporation's unaudited condensed consolidated financial statements and related notes for Q2 2025 and 2024 Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of MannKind Corporation for the three and six months ended June 30, 2025 and 2024, including statements of operations, comprehensive income (loss), balance sheets, stockholders' deficit, and cash flows, along with detailed notes explaining significant accounting policies and specific financial line items Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income (loss) for the three and six months ended June 30, 2025 and 2024 | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total revenues | $76,527 | $72,386 | $154,881 | $138,649 | | Total expenses | $71,228 | $55,776 | $127,289 | $105,317 | | Income from operations| $5,299 | $16,610 | $27,592 | $33,332 | | Net income (loss) | $668 | $(2,014) | $13,826 | $8,616 | | Net income (loss) per share – basic | $0.00 | $(0.01) | $0.05 | $0.03 | | Net income (loss) per share – diluted | $0.00 | $(0.01) | $0.04 | $0.03 | - Total revenues increased by $4.1 million (6%) for the three months ended June 30, 2025, and by $16.2 million (12%) for the six months ended June 30, 2025, compared to the respective prior year periods[10] - The company reported a net income of $668 thousand for the three months ended June 30, 2025, a significant improvement from a net loss of $2.014 million in the same period of 2024. For the six months, net income increased to $13.826 million from $8.616 million[10] Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents the company's net income (loss) and other comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024 | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $668 | $(2,014) | $13,826 | $8,616 | | Unrealized gain on available-for-sale securities | $83 | $— | $148 | $— | | Comprehensive income (loss) | $751 | $(2,014) | $13,974 | $8,616 | - Comprehensive income for the three months ended June 30, 2025, was $751 thousand, up from a loss of $2.014 million in the prior year, primarily due to net income and an unrealized gain on available-for-sale securities[11] Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' deficit as of June 30, 2025, and December 31, 2024 | Metric (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total current assets | $279,027 | $268,306 | | Total assets | $411,697 | $393,843 | | Total current liabilities | $111,826 | $81,837 | | Total liabilities | $466,739 | $472,659 | | Total stockholders' deficit | $(55,042) | $(78,816) | - Total assets increased to $411.7 million as of June 30, 2025, from $393.8 million at December 31, 2024. This was driven by increases in cash and cash equivalents, accounts receivable, and long-term investments[13] - Total stockholders' deficit improved to $(55.0) million as of June 30, 2025, from $(78.8) million at December 31, 2024, reflecting a reduction in accumulated deficit[13] Condensed Consolidated Statements of Stockholders' Deficit This statement outlines changes in the company's stockholders' deficit, including common stock and accumulated deficit, for the six months ended June 30, 2025 | Metric (In thousands) | Balance, January 1, 2025 | Balance, June 30, 2025 | | :-------------------- | :----------------------- | :--------------------- | | Common Stock (Shares) | 302,960 | 306,332 | | Common Stock (Amount) | $3,029 | $3,063 | | Additional Paid-in Capital | $3,118,865 | $3,128,631 | | Accumulated Other Comprehensive Income | $1,109 | $1,257 | | Accumulated Deficit | $(3,201,819) | $(3,187,993) | | Total Stockholders' Deficit | $(78,816) | $(55,042) | - The accumulated deficit decreased by $13.826 million from January 1, 2025, to June 30, 2025, primarily due to net income[14] - Total stockholders' deficit improved by $23.774 million during the six months ended June 30, 2025, driven by net income and stock-based compensation expense[14] Condensed Consolidated Statements of Cash Flows This statement details the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $2,573 | $10,536 | | Net cash provided by (used in) investing activities | $12,218 | $(103,617) | | Net cash used in financing activities | $(4,120) | $(48,024) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $10,671 | $(141,105) | | Cash, cash equivalents and restricted cash, end of period | $57,747 | $97,375 | - Net cash provided by operating activities decreased to $2.573 million for the six months ended June 30, 2025, from $10.536 million in the prior year, primarily due to changes in operating assets and liabilities[17] - Investing activities generated $12.218 million in cash for the six months ended June 30, 2025, a significant improvement from a $103.617 million usage in the prior year, mainly due to proceeds from maturities of available-for-sale securities[17] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies and specific financial line items within the condensed consolidated financial statements 1. Description of Business and Significant Accounting Policies This note describes MannKind's biopharmaceutical business and outlines its key accounting policies, including revenue recognition and segment reporting - MannKind is a biopharmaceutical company focused on developing and commercializing therapeutic products and devices for endocrine and orphan lung diseases, utilizing Technosphere dry-powder formulations and Dreamboat inhalation devices[23] - Key commercial products include Afrezza (inhaled insulin) and the V-Go wearable insulin delivery device. The company also partners with United Therapeutics for Tyvaso DPI (treprostinil) inhalation powder for pulmonary hypertension, receiving royalties and manufacturing margins[23] Segment Revenues (In thousands) | Revenues | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Afrezza | $18,329 | $16,289 | $33,216 | $30,727 | | V-Go | $4,125 | $4,491 | $8,211 | $8,817 | | Collaborations and services | $22,845 | $26,014 | $52,221 | $50,862 | | Royalties | $31,228 | $25,592 | $61,233 | $48,243 | | Total revenues | $76,527 | $72,386 | $154,881 | $138,649 | 2. Investments This note details the company's investment portfolio, primarily available-for-sale securities, and their fair value as of June 30, 2025 Available-for-Sale Investments Portfolio (In thousands) | Maturity | June 30, 2025 (Amortized Cost) | June 30, 2025 (Fair Value) | December 31, 2024 (Amortized Cost) | December 31, 2024 (Fair Value) | | :------------------------ | :----------------------------- | :------------------------- | :--------------------------------- | :----------------------------- | | Due in one year or less | $144,549 | $144,531 | $165,466 | $165,662 | | Due after one year through five years | $22,234 | $22,240 | $5,498 | $5,482 | | Total | $166,783 | $166,771 | $170,964 | $171,144 | - The company's investment portfolio primarily consists of highly liquid money market funds, commercial bonds, and U.S. Treasury securities, classified as available-for-sale[92] - The fair value of the Thirona convertible notes, classified as an available-for-sale investment, was $6.6 million as of June 30, 2025, up from $6.3 million at December 31, 2024. The maturity date was extended to June 30, 2026, with an increased interest rate of 10% per annum[96][97] 3. Accounts Receivable This note provides a breakdown of the company's net accounts receivable, distinguishing between commercial and collaboration balances Accounts Receivable, Net (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accounts receivable – commercial, net | $4,451 | $9,835 | | Accounts receivable – collaborations and services | $22,691 | $1,969 | | Total accounts receivable, net | $27,142 | $11,804 | - Total accounts receivable, net, significantly increased to $27.142 million as of June 30, 2025, from $11.804 million at December 31, 2024, primarily driven by a substantial increase in collaborations and services accounts receivable[98] - As of June 30, 2025, three wholesale distributors accounted for approximately 86% of commercial accounts receivable, and United Therapeutics comprised 98% of collaboration and services net accounts receivable[99][100] 4. Inventories This note details the composition of the company's inventory, including raw materials, work-in-process, and finished goods Inventories (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $7,306 | $6,184 | | Work-in-process | $12,278 | $10,661 | | Finished goods | $8,907 | $11,041 | | Total inventory | $28,491 | $27,886 | - Total inventory increased slightly to $28.491 million as of June 30, 2025, from $27.886 million at December 31, 2024, with increases in raw materials and work-in-process, partially offset by a decrease in finished goods[101] - Inventory write-offs for the six months ended June 30, 2025, were $5.1 million, significantly higher than $1.6 million for the same period in 2024, due to obsolescence assessments[102] 5. Property and Equipment This note presents the net book value of the company's property and equipment and related depreciation expense Property and Equipment, Net (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Total property and equipment, net | $82,965 | $85,365 | - Net property and equipment decreased to $82.965 million as of June 30, 2025, from $85.365 million at December 31, 2024[103] - Depreciation expense increased to $4.097 million for the six months ended June 30, 2025, from $3.052 million in the prior year[103] 6. Goodwill and Other Intangible Assets This note details the company's goodwill and other intangible assets, including developed technology and licenses Other Intangible Assets, Net Book Value (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Developed technology | $869 | $965 | | iSPERSE License – IPR&D | $4,300 | $4,300 | | Total | $5,169 | $5,265 | - Goodwill remained constant at $1.9 million, resulting from the V-Go acquisition in May 2022[104] - The iSPERSE License – IPR&D, acquired from Pulmatrix in July 2024, is an indefinite-lived intangible asset of $4.3 million, not amortized but tested for impairment[105][106] 7. Accrued Expenses and Other Current Liabilities This note provides a breakdown of the company's accrued expenses and other current liabilities Accrued Expenses and Other Current Liabilities (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Salary and related expenses | $13,448 | $20,570 | | Discounts and allowances for commercial product sales | $7,766 | $9,393 | | Current portion of milestone rights liability | $520 | $639 | | Total accrued expenses and other current liabilities | $30,915 | $40,293 | - Accrued expenses and other current liabilities decreased to $30.915 million as of June 30, 2025, from $40.293 million at December 31, 2024, primarily due to a reduction in salary and related expenses[108] 8. Borrowings This note details the company's outstanding senior convertible notes and other debt obligations, including recent repayments Senior Convertible Notes Maturities (In thousands) | Year | Amounts | | :--- | :------ | | 2025 | $— | | 2026 | $36,319 | | Total principal payments | $36,319 | - Approximately $36.3 million in aggregate principal amount of senior convertible notes remained outstanding as of June 30, 2025, maturing on March 1, 2026[111][122] - The company fully repaid the MidCap credit facility ($28.3 million principal) and discharged the Mann Group convertible note ($8.9 million principal and interest) in April 2024, resulting in a $7.050 million loss on settlement of debt for the six months ended June 30, 2024[10][124][129] 9. Collaborations, Licensing and Other Arrangements This note describes the company's revenue-generating collaboration and licensing agreements, particularly with United Therapeutics Revenue from Collaborations and Services (In thousands) | Arrangement | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | UT CSA | $22,224 | $25,978 | $51,042 | $50,442 | | Amphastar co-promotion agreement | $500 | $— | $1,000 | $— | | Cipla License and Distribution Agreement | $37 | $36 | $73 | $73 | | Total revenue from collaborations and services | $22,845 | $26,014 | $52,221 | $50,862 | - Total revenue from United Therapeutics (UT) increased to $112.275 million for the six months ended June 30, 2025, from $99.032 million in the prior year, primarily driven by higher royalties from Tyvaso DPI sales[132] - Deferred revenue from UT was $55.4 million as of June 30, 2025, with $10.9 million classified as current, relating to pre-production activities under the CSA[139] 10. Fair Value of Financial Instruments This note provides fair value measurements for the company's financial liabilities, including convertible notes and milestone rights Fair Value of Financial Liabilities (In millions) | Financial Liabilities | June 30, 2025 (Carrying Value) | June 30, 2025 (Fair Value Level 3) | December 31, 2024 (Carrying Value) | December 31, 2024 (Fair Value Level 3) | | :------------------------------ | :----------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Senior convertible notes | $36.2 | $36.0 | $36.1 | $46.9 | | Milestone rights | $2.5 | $16.5 | $3.2 | $19.2 | | Financing liability | $103.7 | $116.8 | $103.9 | $117.4 | | Liability for sale of future royalties | $150.6 | $157.8 | $149.6 | $156.7 | - The fair value of the senior convertible notes decreased from $46.9 million at December 31, 2024, to $36.0 million at June 30, 2025, reflecting changes in hypothetical yield and volatility[151][152] - The Milestone Rights liability is valued using a Monte-Carlo Simulation Method and Geometric Brownian Motion forecasting model, sensitive to discount rates and milestone achievement timing[153][156] 11. Common and Preferred Stock This note details the company's common stock outstanding and its 'at-the-market' offering program - As of June 30, 2025, there were 306,332,133 shares of common stock issued and outstanding, an increase from 302,959,782 shares at December 31, 2024[158] - The company has an 'at-the-market' offering sales agreement with Cantor Fitzgerald & Co. for up to $200.0 million of common stock, with no sales under this agreement since 2023[159] 12. Earnings per Common Share This note outlines the computation of basic and diluted earnings per common share for the reported periods EPS Computations (In thousands, except per share amounts) | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) (numerator) | $668 | $(2,014) | $13,826 | $8,616 | | Weighted average common shares (denominator) – basic | 304,954 | 273,056 | 304,222 | 271,706 | | Net income (loss) per share – basic | $0.00 | $(0.01) | $0.05 | $0.03 | | Adjusted weighted average common shares (denominator) – diluted | 311,484 | 273,056 | 312,381 | 279,358 | | Net income (loss) per share – diluted | $0.00 | $(0.01) | $0.04 | $0.03 | - Diluted EPS for the three and six months ended June 30, 2025, was $0.00 and $0.04, respectively, compared to $(0.01) and $0.03 for the same periods in 2024[161] - Potentially dilutive securities, including RSUs, options, and convertible notes, were excluded from diluted EPS computation for periods with a net loss as they would be anti-dilutive[88][161][163][164] 13. Stock-Based Compensation Expense This note details the company's stock-based compensation expense and unrecognized compensation for various equity awards Stock-Based Compensation Expense (In thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | RSUs and options | $7,357 | $6,248 | $12,569 | $9,947 | | Employee stock purchase plan | $163 | $180 | $336 | $366 | | Total | $7,520 | $6,428 | $12,905 | $10,313 | - Total stock-based compensation expense increased to $12.905 million for the six months ended June 30, 2025, from $10.313 million in the prior year[168] - As of June 30, 2025, unrecognized stock-based compensation expense totaled $30.1 million for RSUs, $34.9 million for Market RSUs, and $3.8 million for Performance RSUs, expected to be recognized over weighted average periods of 2.84, 2.15, and 2.71 years, respectively[167] 14. Commitments and Contingencies This note describes the company's contractual commitments, including milestone rights and insulin supply agreements, and potential liabilities - The company has $45.0 million remaining payable on Milestone Rights as of June 30, 2025, with a $5.0 million payment triggered by an Afrezza net sales milestone during the six months ended June 30, 2025[174][176] - A $150.0 million liability for sale of future royalties was recorded in December 2023 for a 1% royalty on Tyvaso DPI sales, with an effective interest rate of 8.8%[179][183] Insulin Supply Agreement Commitments (In millions) | Year | Remaining Purchase Commitments (€) | Estimated Capacity Fees (€) | | :--- | :------------------------------- | :-------------------------- | | 2025 (Remaining) | — | 0.8 | | 2026 | 4.1 | 2.0 | | 2027 | 6.0 | 1.0 | | 2028 | 6.0 | 1.0 | | 2029 | 5.8 | 1.0 | | 2030 | 5.8 | 1.0 | | 2031 | 7.8 | 0.5 | | 2032 | 7.7 | 0.5 | | 2033 | 7.7 | 0.5 | | 2034 | 4.3 | 0.5 | | Total | 55.2 | 8.8 | 15. Income Taxes This note details the company's income tax expense, deferred tax assets, and the potential impact of new tax legislation - Income tax expense for the three and six months ended June 30, 2025, was $0.3 million and $0.7 million, respectively, primarily related to state taxes[201] - The company has fully reserved its net deferred tax assets with a valuation allowance, indicating uncertainty about their future realization[202] - New legislation, such as the One Big Beautiful Bill Act (OBBB) and California Senate Bills 167 and 175, may impact the company's effective tax rate and deferred tax assets in future periods, with specific financial effects currently under evaluation[204][205] 16. Subsequent Events This note discloses significant events occurring after the reporting period, including a new senior secured term loan agreement - On August 6, 2025, the company entered into a senior secured term loan agreement (Blackstone Credit Facility) for up to $500 million, including an initial $75 million term loan[206] - The Blackstone Credit Facility matures on the fifth anniversary of the closing date, bears interest at SOFR plus a margin of 4.75% (subject to increase), and is secured by substantially all company assets[207][209] - The facility includes a financial covenant requiring the company to maintain liquidity of at least $40 million at the end of each fiscal quarter[210] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting key revenue drivers, expense trends, and liquidity position for the three and six months ended June 30, 2025 and 2024. It also includes a reconciliation of GAAP to non-GAAP financial measures - MannKind is a biopharmaceutical company focused on endocrine and orphan lung diseases, commercializing Afrezza and V-Go, and partnering with United Therapeutics for Tyvaso DPI[212][213][214] Revenue Comparison (In thousands) | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net revenue from commercial product sales | $22,454 | $20,780 | $41,427 | $39,544 | | Collaborations and services | $22,845 | $26,014 | $52,221 | $50,862 | | Royalties | $31,228 | $25,592 | $61,233 | $48,243 | | Total revenues | $76,527 | $72,386 | $154,881 | $138,649 | - Afrezza net revenue increased by 13% for the three months and 8% for the six months ended June 30, 2025, driven by increased price and demand, and a decrease in gross-to-net adjustments due to lower rebates[222][223] - V-Go net revenue decreased by 8% for the three months and 7% for the six months ended June 30, 2025, due to lower demand, despite an improved gross-to-net percentage from reduced rebates[224][225] - Royalty revenue from UT increased by 22% and 27% for the three and six months ended June 30, 2025, respectively, reflecting increased net sales of Tyvaso DPI[226] Expense Comparison (In thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Cost of goods sold – commercial | $4,607 | $5,605 | $8,375 | $9,424 | | Cost of revenue – collaborations and services | $15,961 | $14,772 | $29,709 | $29,551 | | Research and development | $13,675 | $11,816 | $24,697 | $21,829 | | Selling, general and administrative | $31,622 | $24,112 | $56,636 | $46,441 | | Loss (gain) on foreign currency transaction | $5,363 | $(529) | $7,872 | $(1,928) | | Total expenses | $71,228 | $55,776 | $127,289 | $105,317 | - R&D expenses increased by 16% and 13% for the three and six months ended June 30, 2025, respectively, due to continued patient enrollment in the MNKD-101 clinical study, MNKD-201 clinical production scale-up, and increased personnel costs from the Pulmatrix transaction[233][234] - Selling, general and administrative expenses rose by 31% and 22% for the three and six months ended June 30, 2025, respectively, driven by higher headcount, personnel-related costs, and Afrezza promotional activities[235][236] - The company reported a foreign currency transaction loss of $5.4 million and $7.9 million for the three and six months ended June 30, 2025, respectively, compared to gains in the prior year, due to U.S. dollar to Euro exchange rate fluctuations impacting insulin supply obligations[237] Non-GAAP Adjusted Net Income (In thousands except per share data) | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | GAAP reported net income | $668 | $(2,014) | $13,826 | $8,616 | | Non-GAAP adjusted net income | $13,901 | $14,309 | $35,530 | $29,408 | | Non-GAAP adjusted basic EPS | $0.05 | $0.05 | $0.12 | $0.11 | - The company generated $2.6 million in cash from operating activities for the six months ended June 30, 2025, and believes its current liquidity and revenue sources will meet its needs for at least the next 12 months[256][262] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, specifically interest rate risk and foreign currency exchange risk, and their potential impact on financial condition and results of operations - The company's senior convertible notes have a fixed interest rate of 2.50%, limiting exposure to changes in market interest rates[265] - Foreign currency exchange risk arises from Euro-denominated insulin supply obligations, leading to a $7.9 million currency loss for the six months ended June 30, 2025, due to U.S. dollar to Euro exchange rate fluctuations impacting insulin supply obligations[266] - A 10% change in the U.S. dollar to Euro exchange rate would result in an approximate $6.6 million impact on pre-tax income[267] Item 4. Controls and Procedures This section confirms that management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective. No material changes in internal control over financial reporting were identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[269] - No material changes in internal control over financial reporting occurred during the latest fiscal quarter[270] PART II: OTHER INFORMATION This part provides additional information on legal proceedings, risk factors, equity sales, defaults, and other disclosures Item 1. Legal Proceedings The company is involved in legal proceedings and claims in the ordinary course of business but does not anticipate that their final disposition will have a material adverse effect on its financial position, results of operations, or cash flows - The company not expect legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flows[272] - Liability insurance coverage is maintained to protect assets from losses associated with ongoing business operations[272] Item 1A. Risk Factors This section outlines the principal factors that make an investment in the company's common stock speculative or risky, covering risks related to business operations, government regulation, common stock, and general market conditions RISKS RELATED TO OUR BUSINESS This section details various risks impacting the company's operations, including product commercialization, manufacturing, supply chain, and financial stability - Commercial success of products (Afrezza, V-Go, Tyvaso DPI) is uncertain and depends on market acceptance, effective commercialization efforts, and competition[279][280][281] - Manufacturing risks, including scaling production, complying with regulations (FDA inspections), and potential shortages of qualified personnel, could delay production and impact profitability[285][286][287] - Reliance on a limited number of suppliers for raw materials (FDKP, insulin from Amphastar) and V-Go components (manufactured in China) exposes the company to supply chain disruptions, pricing issues, and regulatory compliance risks[292][293][294] - International trade policies, including tariffs, particularly affecting U.S.-China trade relations and pharmaceutical products, could increase manufacturing and R&D costs, reduce profitability, and delay development timelines[298][299][300][303] - The company may need to raise additional capital through equity, debt, or collaborations to fund operations, and failure to do so on favorable terms could lead to delays, curtailment of programs, or cessation of operations[309][310][315] - Cybersecurity threats and security incidents affecting the company's or third-party IT systems could lead to regulatory actions, litigation, business disruptions, reputational harm, and financial losses[316][317][318][323] - Operating results are expected to fluctuate due to various factors, including funding requirements, market conditions, and development progress, making future performance difficult to predict[325][326] - The Blackstone Credit Facility contains restrictive covenants and a liquidity requirement ($40 million), and a default could materially and adversely affect the company's financial position, potentially leading to asset seizure or bankruptcy[327][328][329][330] - The company may not generate positive or sufficient cash flow from operations in the future, impacting working capital, assets, stockholders' equity, and ability to service debt and commitments[332] - Health pandemics or epidemics could disrupt business operations, supply chains, clinical trials, and financial markets, adversely affecting product sales and liquidity[335][336][337] - Failure to obtain foreign regulatory approvals or establish regional partnerships could limit commercial revenues outside the U.S.[339][340] - Product candidates require costly and time-consuming preclinical and clinical testing, with uncertain outcomes that could delay or prevent commercialization[341][342] - Failure to achieve projected development goals in expected timeframes could harm business, financial condition, and stock price[344][345] - Long-term safety and efficacy of approved products may differ from clinical studies, potentially leading to adverse health effects, reduced efficacy, regulatory actions, and reputational harm[346][347] - Future acquisitions or strategic transactions may not realize anticipated benefits and could lead to integration difficulties, increased expenses, and potential dilution[348][350][351] - Rapid technological change could render products and product candidates obsolete or noncompetitive[352] - Reports of side effects or safety concerns in related technology fields could delay regulatory approval or negatively impact public perception of products[354] - Product liability claims could result in significant liabilities, reputational damage, and decreased demand, potentially exceeding insurance coverage[355] - Loss of key employees could materially harm operations and the ability to execute business strategy[357][358] - Ineffective internal controls over financial reporting could lead to a loss of public confidence and adversely affect business and stock price[359][360] - Changes or modifications in financial accounting standards could harm results of operations and require changes in accounting policies[361] - Changes in tax laws or regulations, such as the OBBBA, could adversely affect business operations and financial performance[362] - The ability to use net operating loss carryforwards may be subject to limitations, potentially increasing future tax liability[364][365][366] - Tax authorities may disagree with tax positions, resulting in unanticipated costs, taxes, or non-realization of expected benefits[367] - Internal restructuring activities could disrupt business or materially harm results of operations or financial condition[368] - Dealing with hazardous materials requires compliance with environmental laws, which can be expensive and restrict business operations, with potential liability for damages[369][370] - Changes in funding or staffing for government agencies (FDA, SEC) could hinder their ability to perform normal functions, negatively impacting business[371][372] - Maintaining cash in balances exceeding federally insured limits at financial institutions poses a risk of loss if institutions fail[373] RISKS RELATED TO GOVERNMENT REGULATION This section outlines risks associated with regulatory approvals, compliance, healthcare legislation, and data privacy obligations - Product candidates must undergo costly and time-consuming nonclinical and clinical testing to obtain regulatory approval, with uncertain outcomes and potential delays[376][378] - Failure to comply with regulatory requirements at any stage (pre- or post-marketing) could lead to fines, product removal, criminal prosecution, or delays in marketing approval[380][381] - The company is subject to stringent, ongoing government regulation concerning manufacturing, labeling, distribution, and post-marketing requirements, with non-compliance potentially leading to severe penalties[382][384] - Healthcare legislation, such as the Inflation Reduction Act of 2022 (IRA) and the One Big Beautiful Bill Act (OBBBA), may make it more difficult to receive revenues by impacting drug pricing, reimbursement, and health insurance coverage[390][391][394] - Failure to comply with federal and state healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) could result in substantial penalties, including fines, exclusion from federal programs, and adverse effects on business operations[397][398] - The company is subject to evolving data privacy and security obligations (e.g., GDPR, CCPA), and non-compliance could lead to regulatory investigations, litigation, fines, and business disruptions[399][400][401][405] - Failure to comply with reporting and payment obligations under government pricing programs (e.g., Medicaid Drug Rebate Program) could result in additional reimbursement requirements, fines, and sanctions[407][408] - Environmental, social, and corporate governance (ESG) matters, including new climate disclosure rules, could negatively impact the company's reputation and increase compliance costs[409] - The company's investment securities portfolio may require registration as an 'investment company' under the '40 Act, leading to significant changes in business operations and increased administrative costs[410] RISKS RELATED TO INTELLECTUAL PROPERTY This section discusses risks concerning the protection and enforcement of the company's intellectual property rights, including patents and trademarks - Inability to protect proprietary rights through patents, trade secrets, and confidentiality agreements could hinder competitive effectiveness and profitability, with patent validity and enforceability subject to challenges[411][412][415][416] - Lawsuits to protect or enforce patents are expensive, time-consuming, and may result in patents being invalidated or narrowed, or require substantial resources to defend[417][418] - Conflicts with proprietary rights of others could lead to substantial litigation costs, monetary damages, and preclude commercialization of products, potentially requiring licenses or product redesigns[420][422][426] - Failure to obtain trademark registrations for potential trade names or FDA approval of trademarks could limit competitive advantage and marketability[429][430] RISKS RELATED TO OUR COMMON STOCK This section addresses risks related to the company's stock price volatility, Nasdaq listing, anti-takeover provisions, and future equity sales - The company's stock price is volatile and influenced by various factors, including product sales estimates, clinical study results, economic conditions, and geopolitical events[431][432] - Failure to meet Nasdaq listing requirements could lead to delisting, adversely impacting liquidity and market price of common stock[434] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and prevent stockholder attempts to replace management[435] - Exclusive forum provisions in bylaws may limit stockholders' ability to choose a favorable judicial forum for disputes, potentially increasing costs[436][437][439] - The company does not expect to pay dividends in the foreseeable future, requiring reliance on stock appreciation for investment returns[440] - Future sales of common stock, including from equity offerings or convertible debt conversions, or the perception of such sales, may depress the stock price[441][442][443] - Problems in the biotechnology and biopharmaceutical industries or general securities markets could adversely affect the company's stock price, regardless of operating performance[444] GENERAL RISK FACTORS This section covers broad risks such as market instability, natural disasters, financial services industry disruptions, and their potential impact on the company - Unstable market, economic, and geopolitical conditions (e.g., inflation, trade wars, international conflicts) may have serious adverse consequences on business, financial condition, and stock price, potentially hindering access to capital and disrupting supply chains[446][447][448] - Operations might be interrupted by natural disasters or other catastrophic events, as manufacturing facilities are sole locations for key products, leading to potential losses exceeding insurance coverage[449] - Adverse developments affecting the financial services industry, such as bank failures, could impair access to cash and liquidity, impacting business operations and financial condition[450][451][453] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported[455] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[456] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[457] Item 5. Other Information This section provides disclosures regarding Rule 10b5-1 trading arrangements and further details on the Blackstone Credit Facility, which was entered into subsequent to the reporting period Rule 10b5-1 Trading Arrangement Disclosure | Name and Position | Type of Trading Arrangement | Adoption Date | Rule 10b5-1 | Total Shares of Common Stock to be Sold | Expiration Date | | :---------------------------- | :-------------------------- | :------------ | :---------- | :-------------------------------------- | :-------------- | | Stuart Tross, Chief People and Workplace Officer | Adoption | June 17, 2025 | X | 507,575 | December 31, 2026 | - On August 6, 2025, the company entered into a senior secured term loan agreement (Blackstone Credit Facility) for up to $500 million, with an initial $75 million term loan funded on the closing date[460] - The Blackstone Credit Facility includes delayed draw term loan commitments of $125 million and uncommitted delayed draw term loans of up to $300 million, maturing on the fifth anniversary of the closing date[460][462][463] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, debt agreements, and certifications - The exhibits include various corporate documents such as the Amended and Restated Certificate of Incorporation and Bylaws, as well as debt agreements like the Indenture for Senior Convertible Notes and the Loan Agreement for the Blackstone Credit Facility[469] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Securities Exchange Act of 1934 are also included[469]