MannKind(MNKD) - 2022 Q4 - Annual Report

PART I Business MannKind is a biopharmaceutical company focused on endocrine and orphan lung diseases, commercializing Afrezza, V-Go, and Tyvaso DPI Company Overview MannKind specializes in endocrine and orphan lung diseases, leveraging proprietary dry-powder formulations for key products - MannKind focuses on developing and commercializing therapeutic products and devices for endocrine and orphan lung diseases[14] - Proprietary technologies include Technosphere dry-powder formulations and Dreamboat inhalation devices for deep lung delivery[14] - Commercial products include Afrezza (inhaled insulin) and V-Go (wearable insulin delivery device) in the U.S[15] - Tyvaso DPI, for pulmonary arterial hypertension and interstitial lung disease, is commercialized by United Therapeutics, with MannKind receiving royalties and manufacturing margins[17] - International strategy involves regional partnerships for Afrezza, such as with Biomm S.A. in Brazil and Cipla Ltd. in India[16] Manufacturing and Supply MannKind manufactures Technosphere products in Danbury, CT, expands Tyvaso DPI capacity, and relies on sole-source suppliers - Technosphere powders (Afrezza and Tyvaso DPI) are formulated and filled at the Danbury, Connecticut facility, which is ISO 13485:2016 certified and regularly inspected by the FDA[22][24][26] - Production capacity for Tyvaso DPI is being expanded with additional filling lines and equipment, with costs borne by United Therapeutics[27] - The sole qualified source of insulin for Afrezza is Amphastar France Pharmaceuticals S.A.S., with remaining purchase commitments of $72.3 million as of December 31, 2022, through 2027[28] - V-Go is manufactured by a contract manufacturer in Southern China using MannKind-owned equipment, with components sourced from sole-source vendors managed through the global supply chain[29][31] Intellectual Property MannKind protects its Technosphere platform, Afrezza, Tyvaso DPI, and V-Go with over 1,350 patents and trade secrets - The company's worldwide intellectual property portfolio consists of approximately 1,350 issued patents and 215 pending patent applications[35] - Afrezza is protected by approximately 670 issued patents and 55 pending applications, with the longest-lived expiring in 2032[35] - Tyvaso DPI is protected by approximately 450 issued patents and 40 pending applications, with the longest-lived expiring in 2035[35] - V-Go is protected by approximately 200 issued patents and 25 pending applications, with the longest-lived expiring in 2033[35] - MannKind also relies on trade secrets and know-how for manufacturing processes and improvements, and uses trademarks for corporate and product branding (e.g., Afrezza, V-Go, Technosphere)[36][37] Competition Afrezza and V-Go face intense competition from major pharmaceutical companies' injectable insulins and GLP-1 analogs - The pharmaceutical and biotechnology industries are highly competitive, characterized by rapidly evolving technology and intense R&D efforts[38] - Afrezza's principal competitors are rapid-acting insulin analogs for mealtime injections, marketed by Eli Lilly and Company, Sanofi S.A., and Novo Nordisk A/S[39] - V-Go competes with injectable mealtime insulin products and long-acting/basal injectable insulins from companies like Novo Nordisk and Sanofi[39] - Both Afrezza and V-Go also face competition from glucagon-like peptide-1 (GLP-1) analog injection products, manufactured by companies such as AstraZeneca PLC, Novo Nordisk A/S, and Eli Lilly and Company[39] Government Regulation MannKind is subject to extensive FDA and international regulations across product lifecycle, with non-compliance leading to severe penalties - The FDA and comparable regulatory agencies impose substantial requirements on the research, clinical development, testing, manufacture, labeling, storage, shipping, approval, recordkeeping, advertising, promotion, and sale of medical devices and drug products[40][41] - Failure to comply with regulatory requirements can result in sanctions such as warning letters, product recalls, production suspension, injunctions, refusal of approvals, and civil or criminal fines[42] - As part of Afrezza's approval, the FDA required additional clinical studies, including the ongoing Phase 3 INHALE-1 study in pediatric patients (expected to complete enrollment by end of 2023) and a long-term safety study[43] - Manufacturing facilities and suppliers must comply with current good manufacturing practices (cGMPs) and quality system regulations (QSR), subject to regular inspections by the FDA and other national regulatory bodies[44] Pricing and Reimbursement Government and third-party payer policies, including the IRA, exert significant pressure on product pricing and reimbursement - Government coverage and reimbursement policies, along with third-party payers (e.g., government health authorities, private insurers), directly and indirectly affect the ability to commercialize approved products[47] - Increased emphasis on managed healthcare and governmental scrutiny of drug pricing in the U.S. and other markets lead to pressure on product pricing, reimbursement, and usage[47] - The Inflation Reduction Act (IRA), signed in August 2022, limits insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023 and directs HHS to negotiate prices for certain single-source drugs[49] Health Care Fraud and Abuse and Transparency Laws Compliance with federal and state healthcare fraud, abuse, and transparency laws is critical to avoid substantial penalties - Compliance with federal and state healthcare laws, including fraud and abuse and health information laws, is required for drug products reimbursed by Medicare, Medicaid, or other federal/state programs[50] - Key laws include the federal Anti-Kickback Statute, federal civil and criminal false claims laws (e.g., False Claims Act), and the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA)[51][52][53] - The Physician Payments Sunshine Act requires reporting of payments and transfers of value to physicians and certain other healthcare professionals and teaching hospitals[53][54][56] - Failure to comply with these laws can lead to significant criminal, civil, and administrative penalties, damages, fines, imprisonment, and exclusion from government healthcare programs[62] Privacy MannKind navigates complex and evolving global data privacy laws, with non-compliance posing significant regulatory and business risks - The company is subject to data privacy and security regulation by both federal and state governments in the U.S., including HIPAA (as amended by HITECH), CCPA, and CPRA (effective January 1, 2023)[58][59] - Foreign data privacy and security laws, such as the EU GDPR, UK GDPR, and Brazil's LGPD, impose significant and complex compliance obligations, with higher sanctions and extra-territoriality measures[60] - Compliance efforts are complicated by the differing and evolving nature of these laws across jurisdictions[59][60] - Actual or perceived failure to comply could lead to regulatory investigations, actions, litigation, fines, penalties, business disruptions, reputational harm, and loss of revenue or customers[10][214] Other Regulation MannKind adheres to diverse federal, state, and local regulations on operations, environment, and safety, with non-compliance risking penalties - MannKind is subject to numerous federal, state, and local laws related to laboratory practices, experimental use of animals, hazardous substances, working conditions, manufacturing practices, environmental protection, and fire hazard control[61] - Non-compliance with these laws can result in significant criminal, civil, and administrative penalties, damages, fines, imprisonment, and operational restructuring[62] Ethical Business Practices and Sustainability MannKind upholds ethical marketing, drug safety, and clinical trial participant safety through its Code of Conduct and industry standards - Employees are required to abide by the Code of Business Conduct and Ethics and a policy on interactions with healthcare professionals and patients, promoting products fairly, truthfully, accurately, and on-label[63][64] - Off-label promotion and sales activities that interfere with independent medical judgment are explicitly prohibited[64] - The company is committed to protecting patient health by ensuring medically sound knowledge of product benefits and risks is communicated accurately[63] Drug Safety MannKind ensures product safety through cGMPs, serialization, and mandatory adverse event reporting from clinical trials to disposal - Approved and investigational products are manufactured in accordance with applicable cGMPs, QSR, and other regulatory requirements[66] - All sales packs are serialized according to the Drug Quality and Security Act to improve detection and removal of counterfeit or harmful drugs from the supply chain[66] - Employees and third-party call centers are required to capture and report adverse events, safety information, and product complaints to regulatory authorities[67] Safety of Clinical Trial Participants MannKind prioritizes clinical trial participant safety, adhering to ethical standards, ICH Guidelines, and mandatory informed consent - The company is committed to conducting clinical trials according to uniformly high ethical standards, applicable laws, International Council for Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) Guidelines, and the Declaration of Helsinki[68] - Informed consent is required in all trials to ensure participants understand risks, benefits, data collection, and voluntary participation[69] - Clinical trials are monitored through internal audits and inspections by the company and engaged Clinical Research Organizations (CROs) to verify adherence to policies, good clinical practices, and laws[69] - The company's policy is to disclose basic results of all Phase 2-4 clinical trials and may voluntarily disclose Phase 1 results, including serious adverse events and non-serious adverse events with a frequency of at least five percent[71][72] Corruption and Bribery MannKind enforces strict anti-bribery and anti-corruption policies through its Code of Conduct, training, and oversight - The Code of Business Conduct and Ethics and a separate anti-corruption policy provide clear guidelines on anti-bribery and anti-corruption practices[73] - All new employees receive training on the Code, and existing employees are required to annually acknowledge their familiarity with its policies[73] - The company has adopted and implemented PhRMA's Code on Interactions with Healthcare Professionals to limit unethical interactions[74] Long-Lived Assets MannKind's long-lived assets, valued at $53.0 million in 2022, are primarily located in the U.S. and China Long-Lived Assets (in millions) | Year | Amount | | :--- | :----- | | 2022 | $53.0 | | 2021 | $38.9 | - Long-lived assets are located in the United States and China[75] Employees and Human Capital MannKind focuses on attracting and retaining talent through its Total Rewards Program, diversity, and performance monitoring - As of December 31, 2022, MannKind had 395 total at-will employees, with 391 full-time[77] Workforce Distribution by Gender and Ethnic Minority (as of Dec 31, 2022) | 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% | - The Total Rewards Program includes base salary, annual bonus, annual equity awards, health and wellness, paid time off, 401(k) retirement plan with company match, Employee Stock Purchase Plan (ESPP), and an Employee Recognition Program[80] - The company monitors human capital measures such as performance against corporate objectives, churn rate, regrettable losses, and responses to periodic employee surveys[78] Occupational Health and Safety MannKind maintains strong occupational health and safety, with 2022 injury rates significantly below industry averages - Established procedures and employee training are in place to comply with governmental regulations regarding workplace safety and minimize injuries, illnesses, and environmental impact[81] Occupational Health and Safety Performance (2022 vs. 2021 Industry Average) | Metric | Company Rate (per 100 employees) | 2021 Industry Average | | :--------------------------------------- | :------------------------------- | :-------------------- | | Total illness and injury incidence rate | 0.3 | 1.6 | | DART (days away/restricted or job transfer) incident rate | 0.3 | 1.2 | Corporate Information MannKind Corporation, incorporated in Delaware in 1991, has executive offices in Danbury, CT, with SEC filings online - MannKind Corporation was incorporated in the State of Delaware on February 14, 1991[82] - Principal executive offices are located at 1 Casper Street, Danbury, Connecticut 06810[82] - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments are available free of charge on the company's website (http://www.mannkindcorp.com)[82](index=82&type=chunk) Scientific Advisors MannKind consults leading scientists and physicians for R&D, clinical, patent, and market strategy advice - MannKind seeks advice from leading scientists and physicians on scientific, technical, and medical matters in endocrinology, pulmonology, and other areas[83] - Advisors are consulted regularly to assess R&D programs, clinical program design and implementation, patent and publication strategies, market opportunities, and new technologies[83][84] Information about our Executive Officers This section details biographical information for MannKind's key executive officers, including CEO, CFO, and other EVPs - Michael E. Castagna, Pharm.D. serves as Chief Executive Officer since May 2017[85] - Steven B. Binder serves as Chief Financial Officer since July 2017[86] - Sanjay Singh, M Pharm, MBA serves as Executive Vice President, Technical Operations since October 2022[87] - Stuart A. Tross, Ph.D. serves as Chief People and Workplace Officer since December 2016[88] - David B. Thomson, Ph.D., J.D. serves as General Counsel and Corporate Secretary since January 2002[89] Risk Factors This section details material risks to MannKind's common stock, covering business, regulatory, stock, and general market conditions - An investment in MannKind's common stock is speculative or risky due to various material factors[7][90] - Key risk categories include those related to the company's business, government regulation, common stock, and general market, economic, and geopolitical conditions[7][8][9][11][12] Risks Related to Our Business Business risks include limited product success, manufacturing issues, supply chain disruptions, capital needs, and substantial debt - Commercial success of products (Afrezza, V-Go, Tyvaso DPI) may be limited due to factors like market acceptance, manufacturing capacity, pricing, and competition[91] - Manufacturing risks, including difficulties in production, capacity, yields, and compliance with regulations, may adversely affect the ability to manufacture products and Tyvaso DPI, potentially reducing gross margin and profitability[97][99] - Reliance on single-source suppliers for critical materials (e.g., insulin, FDKP) and contract manufacturers (e.g., for V-Go in China) poses risks of timely and sufficient delivery, compliance, and potential business harm if alternative suppliers cannot be qualified[102][104][107] - The company has a history of operating losses (accumulated deficit of $3.2 billion as of Dec 31, 2022) and expects to incur future losses, requiring additional capital to fund operations[119][112] - Substantial debt ($278.8 million principal outstanding as of Dec 31, 2022) and associated covenants may limit operations and pose risks if payments cannot be made[121][122][126] - Health pandemics or epidemics (e.g., COVID-19) could adversely affect business, product sales, clinical trials, and access to capital[127][128][129] Risks Related to Government Regulation Regulatory risks include costly approvals, compliance burdens, healthcare legislation impacts, and penalties for non-compliance - Product candidates require costly and time-consuming nonclinical and clinical testing and regulatory approval in each jurisdiction, with uncertain outcomes and potential for delays or rejections[183][185] - Approved products are subject to stringent, ongoing government regulation concerning manufacturing, labeling, advertising, and adverse event reporting; non-compliance can lead to fines, product removal, or criminal prosecution[189][191][192] - Healthcare legislation, such as the PPACA and the Inflation Reduction Act (IRA), may limit product prices, reduce reimbursement, and increase compliance costs, adversely affecting revenues[200][202] - Failure to comply with federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act) and stringent data privacy and security laws (e.g., HIPAA, GDPR, CCPA) could result in substantial penalties, investigations, litigation, and business disruptions[203][206][208][214] Risks Related to Our Common Stock Common stock risks include debt servicing, price volatility, potential delisting, anti-takeover provisions, and future share sales - The company may not generate sufficient cash to service its indebtedness and commitments, potentially leading to financial failure[243] - The trading price of common stock is volatile, influenced by factors such as product sales, regulatory approvals, clinical study results, economic conditions, and competitor announcements[244] - Failure to meet Nasdaq Global Market listing requirements could result in delisting, adversely impacting liquidity and market price[249] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and prevent attempts to replace current management[250] - No cash dividends are expected in the foreseeable future; investors must rely on stock appreciation for any return on investment[256] - Future sales of common stock (e.g., from equity/debt issuances, conversions) or the perception of such sales may depress the stock price[257][258] General Risk Factors General risks include adverse impacts from unstable market, economic, and geopolitical conditions on business and stock price - Unstable market, economic, and geopolitical conditions (e.g., volatility, inflation, conflicts like the Russia-Ukraine war) may have serious adverse consequences on the business, financial condition, and stock price[261][262] - Such disruptions could make debt or equity financing more difficult and costly, adversely impact the investment portfolio, and affect the ability of service providers and partners to survive economic downturns[261] Unresolved Staff Comments The company has no unresolved staff comments - There are no unresolved staff comments[264] Properties MannKind's main Danbury, CT facility supports R&D and manufacturing, supplemented by leased offices in CA and MA - The Danbury, Connecticut facility, acquired in 2001 and expanded in 2008 to approximately 328,000 square feet, houses R&D, manufacturing, and administrative functions, with sufficient space for anticipated commercial demand for Afrezza and Tyvaso DPI[264] - In November 2021, a portion of the Danbury facility was sold for $102.3 million and subsequently leased back under a 20-year agreement[265] - The company leases approximately 24,475 square feet of office space in Westlake Village, California, with a lease expiring in July 2028[265] - MannKind also assumed a lease for approximately 20,000 square feet of building space in Marlborough, Massachusetts, expiring in February 2026, as part of the May 2022 V-Go acquisition[266] Legal Proceedings Information on legal proceedings is incorporated by reference from Note 16 to the consolidated financial statements - Information regarding legal proceedings is provided in Note 16 – Commitments and Contingencies to the consolidated financial statements[267] Mine Safety Disclosures This item is not applicable to MannKind Corporation - This item is not applicable[267] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities MannKind's common stock trades on Nasdaq (MNKD), with no cash dividends paid or anticipated, retaining earnings for growth - MannKind's common stock has been traded on The Nasdaq Global Market under the symbol "MNKD" since July 28, 2004[270] - As of February 10, 2023, there were 263,923,726 shares of common stock outstanding and 104 registered holders[1][270] - The company has never declared or paid any cash dividends on its common stock and intends to retain all available funds and future earnings for business operations and expansion[273] Common Stock Market MannKind's common stock is listed on The Nasdaq Global Market under the symbol "MNKD" since July 28, 2004 - Common stock is traded on The Nasdaq Global Market[270] - Trading symbol is "MNKD"[270] - Listed since July 28, 2004[270] Stock Performance Graph This graph compares MannKind's common stock cumulative total return against Nasdaq Composite and Biotechnology indices - The graph illustrates a comparison of the cumulative total stockholder return of MannKind's common stock with The Nasdaq Composite Index and The Nasdaq Biotechnology Index[271] - The comparison assumes a $100 investment on December 31, 2017[271] Dividend Policy MannKind has never paid cash dividends and plans to retain all future earnings for business development and growth - The company has never declared or paid any cash dividends on its common stock[273] - Current intent is to retain all available funds and future earnings for business operation and expansion[273] - Any future determination to pay dividends will be at the discretion of the board of directors and is restricted under the terms of the MidCap Credit Facility[273] Recent Sales of Unregistered Securities In 2022, MannKind issued 75,487 common shares to The Mann Group for interest payments under a convertible note - During the year ended December 31, 2022, MannKind issued an aggregate of 75,487 shares of common stock to The Mann Group for quarterly interest payments under the Mann Group convertible note[274] - The issuance relied on an exemption from registration provided by Section 3(a)(9) or 4(a)(2) of the Securities Act of 1933, as amended[275] Reserved This item is reserved and contains no information - This item is reserved and contains no information[276] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses MannKind's financial condition, operations, liquidity, and critical accounting policies for FY2022 - This discussion covers MannKind's financial condition and results of operations for the fiscal year ended December 31, 2022[276] - Key areas of discussion include revenues, expenses, liquidity, and critical accounting policies and estimates[276][281] Overview MannKind, a biopharmaceutical company with historical losses, funds operations through product sales, collaborations, and financing - MannKind is a biopharmaceutical company focused on developing and commercializing innovative therapeutic products and devices for endocrine and orphan lung diseases[277] - Commercial products include Afrezza and V-Go, and Tyvaso DPI is commercialized through a partnership with United Therapeutics[277] Key Financial Status (as of December 31, 2022, in millions) | Metric | Amount | | :-------------------- | :----------- | | Accumulated Deficit | $3,200.0 | | Stockholders' Deficit | $250.5 | | Net Loss (2022) | $87.4 | | Net Loss (2021) | $80.9 | | Net Loss (2020) | $57.2 | - Operations are funded primarily through equity and convertible debt securities sales, upfront and milestone payments from collaborations, borrowings, sales of Afrezza and V-Go, royalties and manufacturing revenue from UT, and proceeds from a sale-leaseback transaction[279] Critical Accounting Policies and Estimates Financial statement preparation requires significant judgment and estimates for revenue, inventory, asset impairment, and compensation - The preparation of consolidated financial statements requires management to make estimates and judgments that affect reported amounts of assets, liabilities, revenues, and expenses[280] - Critical accounting policies include revenue recognition and gross-to-net adjustments, inventory costing and recoverability, recognized loss on purchase commitments, impairment of long-lived assets, milestone rights liability, clinical trial expenses, stock-based compensation, and accounting for income taxes[281] - Different estimates and assumptions could have a material impact on the consolidated financial statements[280] Revenue Recognition – Net Revenue – Commercial Product Sales Commercial product revenue is recognized net of variable consideration, with complex, probability-weighted estimates for reserves - Revenue on product sales is recognized when the customer obtains control of the product, typically at delivery for wholesale distributors and specialty pharmacies, and when dispensed to patients for retail pharmacies[285] - Product revenues are recorded net of applicable reserves for variable consideration, including trade discounts, allowances, product returns, provider chargebacks, government rebates, payer rebates, and patient assistance[286] - The gross-to-net adjustment was 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 prior year[289] - A 10% difference in the estimates for accruals would result in a $2.0 million impact to commercial product sales revenue for the year ended December 31, 2022[289] Reserves for Variable Consideration Variable consideration reserves are established using probability-weighted estimates for discounts, returns, and rebates, impacting net revenue - Reserves for variable consideration are established for trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, payer rebates, and other incentives like voluntary patient assistance[286] - Estimates are probability-weighted using the expected value method, considering contractual/statutory requirements, market events, industry data, and customer buying patterns[287] - Variable consideration is included in the net sales price only to the extent that a significant reversal of cumulative revenue is not probable[288] - 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[289] Revenue Recognition – Collaborations and Services Collaboration and services revenue is recognized based on performance obligations, with UT collaboration having three distinct obligations - Revenue from licensing, research, or other agreements with third parties is recognized based on identified performance obligations and allocated transaction prices[291] - For the significant collaboration and service agreement with United Therapeutics (UT), three distinct performance obligations were identified: R&D Services and License, Next-Gen R&D Services, and Manufacturing Services (including a material right)[291] - Revenue is recognized based on the measurement of progress as the performance obligation is satisfied, either over time or at a point in time[292] - A 10% difference in estimates for the UT CSA transaction price allocation would result in a $0.4 million impact to collaboration and services revenue for the year ended December 31, 2022[294] Stock-Based Compensation Share-based payments, including RSUs and options, are recognized at fair value using Monte Carlo and Black-Scholes models - Share-based payments to employees, including restricted stock units (RSUs), performance-based awards, Market RSUs, nonqualified stock options (options), and employee stock purchase plans, are recognized at fair value on the grant date[295] - Market RSUs are valued using a Monte Carlo valuation model, while employee options and compensatory elements of employee stock purchase plans are valued using the Black-Scholes option valuation model[295] Market RSU Grant Date Fair Value per Unit | Year | Fair Value per Unit | | :--- | :------------------ | | 2022 | $6.10 | | 2021 | $9.30 | | 2020 | $3.77 | - A 10% difference in the grant date fair value of Market RSUs would impact stock-based compensation expense by $0.6 million for the year ended December 31, 2022[296] Results of Operations Total revenues increased by 32% to $99.8 million in 2022, but expenses rose 34%, resulting in an $87.4 million net loss Total Revenues Comparison (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :------- | :------- | :------- | :------- | | Net revenue — commercial product sales | $56,247 | $39,168 | $17,079 | 44% | | 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% | - Afrezza net revenue increased by $4.1 million (11%) in 2022 due to higher price, product demand, and favorable cartridge mix, with a consistent gross-to-net adjustment of 39%[299] - The acquisition of V-Go on May 31, 2022, contributed $25.9 million in gross revenue and $12.9 million in net revenue for the year, with a 50.2% gross-to-net adjustment[301] - Collaborations and services revenue decreased by $8.4 million (23%) in 2022, primarily due to the completion of UT R&D Services in 2021, partially offset by $24.8 million from the CSA and $15.6 million in Tyvaso DPI royalty revenue[302] Commercial Product Gross Profit Comparison (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :------- | :------- | :------- | :------- | | 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% | | | Total Expenses Comparison (in thousands) | Expense Category | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :------- | :------- | :------- | :------- | | 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% | | Total expenses | $163,880 | $122,464 | $41,416 | 34% | - Net loss for 2022 was $87.4 million, compared to $80.9 million in 2021[400] Liquidity and Capital Resources MannKind's liquidity, from cash and investments, funds operations and debt, with sufficient resources for the next 12 months - Principal sources of liquidity are cash, cash equivalents, and investments, while primary uses of cash include product pipeline development, manufacturing and marketing of Afrezza and V-Go, manufacturing Tyvaso DPI, general and administrative expenses, and interest expense[316] - Operations have been funded through equity and convertible debt securities sales, upfront and milestone payments from collaborations, borrowings, sales of Afrezza and V-Go, royalties and manufacturing revenue from UT, and proceeds from the sale-leaseback transaction[317] Material Cash Requirements (as of December 31, 2022, in thousands) | Commitment | 2023 | 2024 | 2025 | 2026-2027 | Thereafter | Total | | :-------------------------------- | :----- | :----- | :----- | :-------- | :--------- | :------ | | Senior convertible notes (interest) | $5,750 | $11,500 | $232,875 | — | — | $250,125 | | MidCap credit facility | 9,896 | 35,541 | — | — | — | 45,437 | | Mann Group convertible note | — | 9,233 | — | — | — | 9,233 | | Financing liability | 9,774 | 20,287 | 21,382 | 188,453 | — | 239,896 | | Insulin purchase agreement | 9,390 | 32,243 | 30,674 | — | — | 72,307 | | Total material cash requirements | $34,810 | $108,804 | $284,931 | $188,453 | — | $616,998 | - Net cash used in operating activities was $80.7 million in 2022, compared to $61.7 million in 2021[323] - Net cash provided by investing activities was $4.9 million in 2022, primarily due to maturity of debt securities, offset by V-Go acquisition and purchases of securities and property[324] - Net cash provided by financing activities was $21.4 million in 2022, primarily from at-the-market offering proceeds, partially offset by milestone payments[324] Future Liquidity Needs MannKind anticipates ongoing expenditures but expects current resources and projected revenues to cover liquidity needs for 12 months - The company expects to continue incurring expenditures for manufacturing operations, sales and marketing costs for its products, and development costs for product candidates[326] - As of December 31, 2022, capital resources included $69.8 million in cash and cash equivalents, $101.0 million in short-term investments, and $2.0 million in long-term investments, with total outstanding borrowings of $278.8 million[326] - Management believes current resources, projected sales of Afrezza and V-Go, and projected royalties and manufacturing revenue from Tyvaso DPI will be sufficient to fund operations for the next twelve months[327] Recent Accounting Pronouncements This section refers to Note 2 for information on accounting standards adopted in 2022 and new standards not yet effective - Information regarding accounting standards adopted in 2022 and other new accounting standards not yet effective is provided in Note 2 – Summary of Significant Accounting Policies[328] Quantitative and Qualitative Disclosures About Market Risk MannKind faces interest rate risk on its variable-rate credit facility and foreign currency risk from Euro-denominated insulin purchases - Interest on borrowings under the MidCap credit facility accrues at a variable annual rate equal to one-month SOFR plus 6.25% (subject to a 1.00% floor and 8.25% cap), exposing the company to interest rate risk[329] - A hypothetical 10% change in the one-month SOFR interest rates on December 31, 2022, would not have a material effect on the company's annual interest payment obligation[330] - The company is exposed to foreign currency exchange risk due to Euro-denominated insulin supply obligations under the Insulin Supply Agreement with Amphastar[331] - A 10% change in the U.S. dollar to Euro exchange rate on December 31, 2022, would have resulted in a foreign currency impact to pre-tax loss of approximately $7.2 million[332] Interest Rate Risk MannKind's variable-rate MidCap credit facility exposes it to interest rate risk, though a 10% SOFR change is immaterial - Interest on borrowings under the MidCap credit facility is at a variable annual rate equal to one-month SOFR plus 6.25% (with a 1.00% SOFR floor and 8.25% cap)[329] - All other debt (Senior convertible notes, Mann Group promissory notes) has fixed interest rates[329] - A hypothetical 10% change in the one-month SOFR interest rates on December 31, 2022, would not have a material effect on the annual interest payment obligation[330] Foreign Currency Exchange Risk MannKind faces foreign currency risk from Euro-denominated insulin purchases, with a 10% USD-Euro change impacting pre-tax loss - The company incurs significant expenditures for insulin supply obligations under its Insulin Supply Agreement with Amphastar, which are denominated in Euros[331] - Foreign currency hedging transactions were entered into in July and October 2022 to mitigate exposure to short-term currency fluctuations for the current year's purchase obligation, resulting in a $0.1 million loss in 2022[331] - A 10% change in the U.S. dollar to Euro exchange rate on December 31, 2022, would have resulted in a foreign currency impact to pre-tax loss of approximately $7.2 million[332] Financial Statements and Supplementary Data This item incorporates audited consolidated financial statements, including balance sheets, statements of operations, and cash flows - 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[333] - Financial statements include Consolidated Balance Sheets, Statements of Operations, Comprehensive Loss, Stockholders' Deficit, Cash Flows, and Notes to Consolidated Financial Statements[367][384] Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on MannKind's financial statements and internal controls for 2022 - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements as of and for the year ended December 31, 2022[342][387] - An unqualified opinion was also expressed on the effectiveness of the company's internal control over financial reporting as of December 31, 2022, based on COSO (2013) criteria[342][388] - A critical audit matter identified was the estimation of government rebates within net revenue from commercial product sales, due to the complexity of assumptions and judgments involved[391][392] Consolidated Balance Sheets The consolidated balance sheets present MannKind's financial position as of December 31, 2022, and 2021, showing total assets, liabilities, and stockholders' deficit Consolidated Balance Sheet Highlights (as of December 31, in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | ASSETS | | | | Cash and cash equivalents | $69,767 | $124,184 | | Short-term investments | 101,079 | 79,932 | | Accounts receivable, net | 16,801 | 4,739 | | Inventory | 21,772 | 7,152 | | Prepaid expenses and other current assets | 25,477 | 3,482 | | Total current assets | 234,896 | 219,489 | | Property and equipment, net | 45,126 | 36,612 | | Goodwill | 2,428 | — | | Other intangible asset | 1,153 | — | | Long-term investments | 1,961 | 56,619 | | Other assets | 9,718 | 8,441 | | Total assets | $295,282 | $321,161 | | LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | Accounts payable | $11,052 | $6,956 | | Accrued expenses and other current liabilities | 35,553 | 27,419 | | Financing liability — current | 9,565 | 6,977 | | Deferred revenue — current | 1,733 | 827 | | Recognized loss on purchase commitments — current | 9,393 | 6,170 | | Total current liabilities | 67,296 | 48,349 | | Promissory notes | 8,829 | 18,425 | | Accrued interest — promissory notes | 55 | 404 | | Financing liability — long term | 94,512 | 93,525 | | Midcap credit facility | 39,264 | 38,833 | | Senior convertible notes | 225,397 | 223,944 | | Recognized loss on purchase commitments — long term | 62,916 | 76,659 | | Operating lease liability | 5,343 | 1,040 | | Deferred revenue — long term | 37,684 | 19,543 | | Milestone liabilities | 4,524 | 4,838 | | Deposits from customer | — | 4,950 | | Total liabilities | 545,820 | 530,510 | | Common stock | 2,638 | 2,515 | | Additional paid-in capital | 2,964,293 | 2,918,205 | | Accumulated deficit | (3,217,469) | (3,130,069) | | Total stockholders' deficit | (250,538) | (209,349) | | Total liabilities and stockholders' deficit | $295,282 | $321,161 | Consolidated Statements of Operations The consolidated statements of operations detail MannKind's revenues, expenses, and net loss for the years ended December 31, 2022, 2021, and 2020 Consolidated Statements of Operations Highlights (for the years ended December 31, in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------------- | :------- | :------- | :------- | | Net revenue — commercial product sales | $56,247 | $39,168 | $32,324 | | Revenue — collaborations and services | 27,924 | 36,274 | 32,820 | | Royalties — collaborations | 15,599 | — | — | | Total revenues | 99,770 | 75,442 | 65,144 | | Cost of goods sold | 16,003 | 16,833 | 15,084 | | Cost of revenue — collaborations and services | 41,494 | 22,024 | 9,557 | | In-process research and development | — | — | 13,233 | | Research and development | 19,721 | 12,312 | 6,248 | | Selling | 53,753 | 45,528 | 34,365 | | General and administrative | 37,720 | 31,889 | 24,675 | | Asset impairment | — | 106 | 1,889 | | (Gain) loss on foreign currency translation | (4,811) | (6,567) | 8,006 | | Loss on purchase commitments | — | 339 | — | | Total expenses | 163,880 | 122,464 | 113,057 | | Loss from operations | (64,110) | (47,022) | (47,913) | | Interest income, net | 2,513 | 112 | 167 | | Interest expense on financing liability | (9,758) | (1,373) | — | | Interest expense on notes | (15,011) | (15,204) | (9,471) | | Loss on available-for-sale securities | (932) | — | — | | Loss on extinguishment of debt | — | (17,200) | (264) | | Other (expense) income | (102) | (239) | 23 | | Total other expense | (23,290) | (33,904) | (9,545) | | Loss before income tax expense | (87,400) | (80,926) | (57,458) | | Benefit from income taxes | — | — | 218 | | Net loss | $(87,400) | $(80,926) | $(57,240) | | Net loss per share — basic and diluted | $(0.34) | $(0.32) | $(0.26) | | Shares used to compute net loss per share — basic and diluted | 257,092 | 249,244 | 222,585 | Consolidated Statements of Comprehensive Loss The consolidated statements of comprehensive loss present MannKind's net loss and other comprehensive loss components for the years ended December 31, 2022, 2021, and 2020 Consolidated Statements of Comprehensive Loss Highlights (for the years ended December 31, in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------------- | :------- | :------- | :------- | | Net loss | $(87,400) | $(80,926) | $(57,240) | | Other comprehensive loss: Cumulative translation loss | — | — | (19) | | Comprehensive loss | $(87,400) | $(80,926) | $(57,259) | Consolidated Statements of Stockholders' Deficit This statement details changes in equity accounts, including common stock, paid-in capital, and accumulated deficit Consolidated Statements of Stockholders' Deficit Highlights (as of December 31, in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------------- | :------- | :------- | :------- | | Common Shares | 263,793 | 251,478 | 242,118 | | Common Stock Amount | $2,638 | $2,515 | $2,421 | | Additional Paid-in Capital | $2,964,293 | $2,918,205 | $2,866,303 | | Accumulated Deficit | $(3,217,469) | $(3,130,069) | $(3,049,143) | | Total Stockholders' Deficit | $(250,538) | $(209,349) | $(180,419) | Consolidated Statements of Cash Flows The consolidated statements of cash flows present the cash inflows and outflows from operating, investing, and financing activities for the years ended December 31, 2022, 2021, and 2020 Consolidated Statements of Cash Flows Highlights (for the years ended December 31, in thousands) | Activity | 2022 | 2021 | 2020 | | :-------------------------------- | :------- | :------- | :------- | | Net cash used in operating activities | $(80,679) | $(61,709) | $(28,128) | | Net cash provided by (used in) investing activities | 4,874 | (151,537) | 15,216 | | Net cash provided by financing activities | 21,388 | 270,267 | 49,853 | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $(54,417) | $57,021 | $36,941 | | CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $69,767 | $124,184 | $67,163 | Supplemental Cash Flow Disclosures (for the years ended December 31, in thousands) | Item | 2022 | 2021 | 2020 | | :-------------------------------- | :------- | :------- | :------- | | Interest paid in cash | $8,852 | $11,268 | $3,558 | | Payments on debt and interest through common stock issuance | 10,270 | 15,143 | 15,549 | | Forgiveness of PPP loan | — | (4,873) | — | Notes to Consolidated Financial Statements This section provides detailed disclosures for financial statement amounts, covering policies, acquisitions, debt, and equity - The notes provide detailed disclosures and explanations for the amounts presented in the consolidated financial statements[413] - Topics covered include business description, summary of significant accounting policies, acquisitions, investments, accounts receivable, inventories, property and equipment, goodwill and other intangible assets, accrued expenses and other current liabilities, borrowings, collaboration, licensing and other arrangements, fair value of financial instruments, common and preferred stock, earnings per common share, stock award plans, commitments and contingencies, employee benefit plans, and income taxes[414][417][483][495][501][504][509][512][515][518][551][588][596][604][608][628][646][649] Description of Business MannKind is a biopharmaceutical company focused on endocrine and orphan lung diseases, operating as a single segment in the U.S - MannKind is a biopharmaceutical company focused on developing and commercializing innovative therapeutic products and devices for endocrine and orphan lung diseases[414] - Current commercial products include Afrezza (inhaled insulin) and V-Go (wearable insulin delivery device); Tyvaso DPI is commercialized by United Therapeutics[414] - Consolidated financial statements are prepared in accordance with GAAP and include the accounts of the company and its wholly-owned subsidiaries[415] - The company views its operations and manages its business as one segment operating in the United States of America[416] Summary of Significant Accounting Policies This note details MannKind's significant accounting policies and estimates, requiring substantial management judgment across key financial areas - Significant estimates and judgments are required for revenue recognition (including gross-to-net adjustments), inventory costing and recoverability, recognized loss on purchase commitments, impairment of long-lived assets, milestone rights liability, clinical trial expenses, stock-based compensation, and income taxes[417] - Revenue recognition follows ASC Topic 606, involving a five-step model to identify contracts, performance obligations, transaction price, allocation, and recognition[418][419] - Commercial product sales revenue is recorded net of variable consideration (discounts, rebates, returns), with estimates based on probability-weighted outcomes[423][424][425] - Collaboration and services revenue is recognized from licensing, research, and other services, with transaction price allocated to distinct performance obligations based on stand-alone selling price[435][436] - Milestone payments are included in the transaction price if probable of achievement; otherwise, recognized when achieved[439][441] - Stock-based compensation is recognized at fair value on the grant date, using models like Monte Carlo for Market RSUs and Black-Scholes for options[478] Acquisitions MannKind acquired V-Go in 2022 for $15.3 million, recognizing goodwill and intangibles, and QrumPharma in 2020 for $13.2 million - In May 2022, MannKind acquired V-Go from Zealand Pharma for $15.3 million upfront consideration, plus potential one-time, sales-based milestone payments up to $10.0 million[483] - The V-Go acquisition was accounted for using the acquisition method, resulting in $2.4 million in goodwill and $1.2 million in developed technology intangible asset[484][486] - Net revenue and loss from operations for V-Go from the acquisition date (May 31, 2022) to December 31, 2022, were $12.9 million and $0.3 million, respectively[490] - In December 2020, MannKind acquired QrumPharma, Inc. for $13.2 million, expensing the in-process research and development (IPR&D) asset (MNKD-101) at acquisition due to its stage of development and lack of alternative future use[492][493] Investments MannKind's investments include cash, debt securities, and a convertible note, totaling $172.9 million in short-term assets Cash and Cash Equivalents (in millions) | Year | Amount | | :--- | :----- | | 2022 | $69.8 | | 2021 | $124.2 | Held-to-Maturity Investments (Amortized Cost Basis, in thousands) | Maturity | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Due in one year or less | $152,862 | $103,733 | | Due after one year through five years | 1,961 | 56,619 | | Total | $154,823 | $160,352 | - An available-for-sale convertible promissory note from Thirona Bio, Inc. (total $8.0 million purchased in 2021-2022) had a fair value of $7.1 million as of December 31, 2022, and a $0.9 million credit loss was recognized in 2022[496] - Interest income from the amortization or accretion of investments was approximately $0.7 million in 2022 and $0.5 million in 2021[497] Accounts Receivable Net accounts receivable totaled $16.8 million in 2022, with 79% from three wholesale distributors Accounts Receivable, Net (as of December 31, in thousands) | Category | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Accounts receivable – commercial, net | $12,715 | $3,446 | | Accounts receivable – collaborations and services, net | 4,086 | 1,293 | | Total accounts receivable, net | $16,801 | $4,739 | - The allowance for credit losses was de minimis as of December 31, 2022 and 2021[501] - Three wholesale distributors represented approximately 79% of accounts receivable as of December 31, 2022[501] Discounts and Allowances for Commercial Product Sales (in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Beginning balance | $4,227 | $3,688 | | Provisions | 17,471 | 11,494 | | Deductions | (15,320) | (10,874) | | Ending balance | $6,644 | $4,493 | Inventories Inventories, valued at lower of cost or net realizable value, totaled $21.8 million in 2022, with $2.2 million in write-offs - Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method[459] Inventory Composition (as of December 31, in thousands) | Category | 2022 | 2021 | | :---------------- | :------- | :------- | | Raw materials | $5,739 | $2,703 | | Work-in-process | 13,815 | 2,522 | | Finished goods | 2,218 | 1,927 | | Total inventory | $21,772 | $7,152 | - Raw materials inventory included $0.8 million of pre-launch FDKP as of December 31, 2022 and 2021, for an enhanced manufacturing process expected to receive FDA approval in 2024[504] - Inventory write-offs were $2.2 million for the year ended December 31, 2022, compared to $1.9 million in 2021 and $0.5 million in 2020[505][506] Property and Equipment Net property and equipment totaled $45.1 million in 2022, including assets from a failed Danbury facility sale-leaseback - Property and equipment are recorded at historical cost, net of accumulated depreciation, with depreciation expense recorded over the assets' useful lives on a straight-line basis[461] Property and Equipment, Net (as of December 31, in thousands) | Category | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Land | $875 | $875 | | Buildings | 17,389 | 17,389 | | Building improvements | 38,952 | 38,651 | | Machinery and equipment | 58,542 | 55,334 | | Furniture, fixtures and office equipment | 2,976 | 2,969 | | Computer equipment and software | 8,246 | 8,163 | | Construction in progress | 16,706 | 10,892 | | Less accumulated depreciation | (98,560) | (97,661) | | Total property and equipment, net | $45,126 | $36,612 | - Depreciation expense for property and equipment was $3.3 million in 2022, $2.0 million in 2021, and $1.8 million in 2020[510] - The November 2021 sale-leaseback of a portion of the Danbury facility for $102.3 million was accounted for as a failed sale-leaseback, meaning the property remains on the company's balance sheet and is depreciated[511] Goodwill and Other Intangible Asset Goodwill of $2.4 million and $1.2 million in other intangibles arose from the V-Go acquisition in 2022 - Goodwill of approximately $2.4 million was recorded as of December 31, 2022, resulting from the V-Go acquisition in May 2022[512] - Goodwill is tested for impairment annually at the beginning of the fourth fiscal quarter and between annual tests if circumstances indicate impairment[468] Other Intangible Asset (as of December 31, 2022, in thousands) | Category | Estimated Useful Life (Years) | Cost | Accumulated Amortization | Net Book Value | | :---------------- | :---------------------------- | :----- | :----------------------- | :------------- | | Developed technology | 15 | $1,200 | $(47) | $1,153 | - Estimated annual amortization expense for the other intangible asset is approximately $0.1 million per year through 2027[513] - No impairments to goodwill or other intangible assets were recorded during the year ended December 31, 2022[469] Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities increased to $35.6 million in 2022, driven by salary and sales allowances Accrued Expenses and Other Current Liabilities (as of December 31, in thousands) | Category | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Salary and related expenses | $14,906 | $14,022 | | Discounts and allowances for commercial product sales | 8,504 | 4,227 | | Retur