MANNKIND CORP

Previous wording

The lead program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease. We believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form of this drug. In April 2024, the FDA cleared our investigational new drug application (IND) for MNKD-101, enabling us to initiate a Phase 3 study that will investigate its potential to treat NTM lung disease and granted Fast Track designation to our development program. This designation supplements earlier designations from the FDA granting MNKD-101 status as an orphan drug and as a qualified infectious disease product for the treatment of pulmonary NTM infections

Current wording

The lead program in our pipeline of potential treatments for orphan lung diseases is MNKD-101, a nebulized formulation of clofazimine, for the treatment of severe chronic and recurrent pulmonary infections, including nontuberculous mycobacterial (NTM) lung disease. We believe an orally inhaled formulation of clofazimine could potentially provide several clinical advantages over the current solid oral dosage form, including directly targeting the site of the infection while lowering the systemic exposure of patients to the drug. The FDA has granted MNKD-101 status as an orphan drug and as a qualified infectious disease product for the treatment of pulmonary NTM infections. It has also granted Fast Track designation to our development program. In June 2024, we initiated a Phase 3 study that will investigate the potential of MNKD-101 to treat NTM lung disease. We expect enrollment to commence in the third quarter of 2024.

Previous wording

The next most advanced program in our pipeline is MNKD-201, a dry-powder formulation of nintedanib, for the treatment of idiopathic pulmonary fibrosis (IPF). An oral dosage form of nintedanib was approved for IPF by the FDA in 2014. However, a fairly large oral dose is required in order to achieve sufficient drug levels in lung tissue. Our goal with an inhaled formulation is to deliver a therapeutic amount of nintedanib to the lungs while avoiding high levels of the drug in other tissues, where it is associated with undesirable side effects. In April 2024, the FDA cleared MNKD-201 to proceed with a first-in-human Phase 1 study of MNKD-201 for pulmonary fibrotic diseases, including IPF.

Current wording

The next most advanced program in our pipeline is MNKD-201, a dry-powder formulation of nintedanib, for the treatment of idiopathic pulmonary fibrosis (IPF). An oral dosage form of nintedanib was approved for IPF by the FDA in 2014. However, a fairly large oral dose is required in order to achieve sufficient drug levels in lung tissue. Our goal with an inhaled formulation is to deliver a therapeutic amount of nintedanib to the lungs while avoiding high levels of the drug in other tissues, where it is associated with undesirable side effects. In June 2024, we initiated a first-in-human Phase 1 study of MNKD-201 for pulmonary fibrotic diseases, including IPF. A data readout is expected in the fourth quarter of 2024.

Previous wording

As of March 31, 2024, we had an accumulated deficit of $3.2 billion and a stockholders’ deficit of $230.0 million. We had net income of $10.6 million for the three months ended March 31, 2024 and net loss of $9.8 million for the three months ended March 31, 2023. To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT and from the sale of a portion of future royalties that we receive from UT.

Current wording

As of June 30, 2024, we had an accumulated deficit of $3.2 billion and a stockholders’ deficit of $225.8 million. We had net loss of $2.0 million and net income of $8.6 million for the three and six months ended June 30, 2024, respectively. To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT and from the sale of a portion of future royalties that we receive from UT.

Previous wording

The following table provides a comparison of the revenue categories for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table provides a comparison of the revenue categories for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Afrezza— Gross revenue from sales of Afrezza increased by $0.9 million, or 4% for the three months ended March 31, 2024 compared to the same period in the prior year. The increase was driven by higher price. The gross-to-net adjustment was 31% of gross revenue, or $6.4 million, for the three months ended March 31, 2024, compared to 38% of gross revenue or $7.5 million, for the three months ended March 31, 2023. The decrease in the gross-to-net percentage was primarily attributable to a decrease in anticipated product returns (as a percentage of gross sales). As a result, net revenue from sales of Afrezza increased by $2.0 million, or 16%, for the three months ended March 31, 2024 compared to the same period in the prior year.

Current wording

Afrezza— Gross revenue from sales of Afrezza increased by $3.8 million, or 17%, for the three months ended June 30, 2024 compared to the same period in the prior year. The increase was driven primarily by price and higher demand. The gross-to-net adjustment was 37% of gross revenue, or $9.8 million, for the three months ended June 30, 2024 compared to 39% of gross revenue, or $8.7 million, for the same period in the prior year. The decrease in the gross-to-net percentage was primarily attributable to a decrease in rebates and anticipated product returns (as a percentage of gross sales). As a result, net revenue from sales of Afrezza increased by $2.8 million, or 20%, for the three months ended June 30, 2024 compared to the same period in the prior year.

Previous wording

V-Go — Gross revenue from sales of V-Go decreased by $1.3 million, or 12%, for the three months ended March 31, 2024 compared to the same period in the prior year was primarily a result of lower demand. The gross-to-net adjustment was 53% of gross revenue, or $4.9 million, for the three months ended March 31, 2024 compared to 51% of gross revenue, or $5.4 million, for the same period in the prior year. As a result, net revenue from sales of V-Go decreased by $0.8 million, or 16%, for the three months ended March 31, 2024 compared to the same period in the prior year.

Current wording

V-Go — Gross revenue from sales of V-Go decreased by $1.3 million, or 12%, for the three months ended June 30, 2024 compared to the same period in the prior year and was primarily a result of lower demand partially offset by increased price. The gross-to-net adjustment was 53% of gross revenue, or $5.1 million, for the three months ended June 30, 2024 compared to 56% of gross revenue, or $6.2 million, for the same period in the prior year. As a result, net revenue from sales of V-Go decreased by $0.3 million, or 7%, for the three months ended June 30, 2024 compared to the same period in the prior year.

Previous wording

Collaborations and Services — Net revenue from collaborations and services increased by $13.5 million, or 118%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase in revenue was primarily attributable to increased manufacturing volume and related production activity for product sold to UT. Royalty revenue from UT increased by $11.0 million, or 94%, for the three months ended March 31, 2024 due to increased patient demand for Tyvaso DPI. See Note 9 –Collaboration, Licensing and Other Arrangements.

Current wording

Collaborations and Services — Net revenue from collaborations and services increased by $14.8 million, or 132%, for the three months ended June 30, 2024 compared to the same period in the prior year. The increase in revenue was primarily attributable to increased manufacturing volume and related production activity for product sold to UT. Royalty revenue from UT increased by $6.5 million, or 34%, for the three months ended June 30, 2024 due to UT's increase in net revenue from sales of Tyvaso DPI. See Note 9 –Collaboration, Licensing and Other Arrangements.

Previous wording

The following table provides a comparison of the commercial product gross profit categories for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table provides a comparison of the commercial product gross profit categories for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Commercial product gross profit increased by $2.9 million, or 24%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase in gross profit and gross margin was primarily attributable to an increase in Afrezza net revenue.

Current wording

Commercial product gross profit increased by $2.1 million, or 16%, for the three months ended June 30, 2024 compared to the same period in the prior year and $5.0 million, or 20%, for the six months ended June 30, 2024 compared to the same period in the prior year. The increase in gross profit and gross margin was primarily attributable to an increase in Afrezza net revenue.

Previous wording

The following table provides a comparison of the expense categories for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table provides a comparison of the expense categories for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Cost of revenue – collaborations and services increased by $4.1 million, or 38%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase was primarily attributable to increased manufacturing volume and activities. Higher manufacturing volumes resulted in efficiencies which contributed to a lower effective cost per unit.

Current wording

Cost of revenue – collaborations and services increased by $5.8 million, or 64%, for the three months ended June 30, 2024 compared to the same period in the prior year and $9.9 million, or 50%, for the six months ended June 30, 2024 compared to the same period in the prior year. The increases were primarily attributable to increased manufacturing volume and activities for Tyvaso DPI. Higher manufacturing volumes resulted in efficiencies which contributed to a lower effective cost per unit.

Previous wording

R&D expenses increased by $4.4 million, or 79%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase was primarily attributable to increased development activities for clofazimine inhaled suspension (MNKD-101), costs for an Afrezza post-marketing clinical study (INHALE-3) which commenced in the second quarter of 2023 and personnel expenses due to increased headcount.

Current wording

R&D expenses increased by $9.8 million, or 81%, for the six months ended June 30, 2024 compared to the same period in the prior year. The increase was primarily attributable to increased costs for development activities for the MNKD-101 study, including expenditures for the Phase 3 clinical trial, the INHALE-1 study, the INHALE-3 study which commenced in the second quarter of 2023, personnel expenses due to increased headcount, and initiation of the MNKD-201 study.

Previous wording

Selling expenses decreased by $1.7 million, or 13%, for the three months ended March 31, 2024 compared to the same period in the prior year. The decrease was primarily attributable to reduced personnel and travel expenses related to sales force restructuring activities completed during the quarter.

Current wording

Selling expenses decreased by $4.2 million, or 15%, for the six months ended June 30, 2024 compared to the same period in the prior year. The decrease was primarily attributable to reduced personnel and travel expenses related to sales force restructuring activities completed during the first quarter of 2024.

Previous wording

General and administrative expenses increased by $0.2 million, or 2%, for the three months ended March 31, 2024 compared to the same period in the prior year. This increase was primarily attributable to a loss of $1.2 million related to estimated returns associated with sales of V-Go that pre-date our acquisition of the product, partially offset by reduced personnel costs.

Current wording

General and administrative expenses increased by $0.9 million, or 4%, for the six months ended June 30, 2024 compared to the same period in the prior year. The increase was primarily attributable to a loss of $1.4 million for estimated returns associated with sales of V-Go that pre-date our acquisition of the product, partially offset by reduced personnel costs.

Previous wording

Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros. We are required to record the foreign currency transaction impact of the U.S. dollar to Euro exchange rate associated with the recognized gain or loss on purchase commitments. The foreign currency transaction gain was $1.4 million for the three months ended March 31, 2024 compared to a loss of $1.0 million for the same period in the prior year due to the conversion of Euro to U.S. dollar exchange rates.

Current wording

Under the Insulin Supply Agreement, payment obligations are denominated in Euros. We are required to record the foreign currency transaction impact of the U.S. dollar to Euro exchange rate associated with the recognized gain or loss on purchase commitments. The foreign currency transaction gain was $0.5 million for the three months ended June 30, 2024 compared to a loss of $0.3 million for the same period in the prior year and a gain of $1.9 million for the six months ended June 30, 2024 compared to a loss of $1.2 million for the same period in the prior year due to the conversion of Euro to U.S. dollar exchange rates.

Previous wording

The following table provides a comparison of the other income (expense) categories for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table provides a comparison of the other income (expense) categories for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Interest income, net, consisting of interest and accretion on investments net of amortization, increased by $2.1 million for the three months ended March 31, 2024 compared to the same period in the prior year primarily due to higher yields on our securities portfolio as well as an increase in the underlying investments from the proceeds of the sale of 1% of our Tyvaso DPI royalties in December 2023.

Current wording

Interest income, net, consisting of interest and accretion on investments net of amortization, increased by $1.6 million for the three months ended June 30, 2024 and $3.8 million for the six months ended June 30, 2024 compared to the same periods in the prior year primarily due to higher yields on our securities portfolio and an increase in the underlying investments from the proceeds of the sale of 1% of our Tyvaso DPI royalties in December 2023.

Previous wording

Interest expense on financing liability was $2.4 million for each of the three months ended March 31, 2024 and 2023 and represented interest incurred on the sale lease-back transaction for our manufacturing facility in Danbury, CT.

Current wording

Interest expense on financing liability was $2.4 million for each of the three months ended June 30, 2024 and 2023 and $4.9 million for each of the six months ended June 30, 2024 and 2023 and represented interest incurred on the sale lease-back transaction for our manufacturing facility in Danbury, CT.

Previous wording

Interest expense on liability for sale of future royalties was $4.2 million for the three months ended March 31, 2024 due to imputed interest and amortization of debt issuance costs on the liability recorded in connection with the sale of 1% of our Tyvaso DPI royalties in December 2023. See Note 14 –Commitments and Contingencies.

Current wording

Interest expense on liability for sale of future royalties was $4.4 million and $8.6 million for the three and six months ended June 30, 2024, respectively, and was attributable to imputed interest and amortization of debt issuance costs on the liability recorded in connection with the sale of 1% of our Tyvaso DPI royalties in December 2023. See Note 14 –Commitments and Contingencies.

Previous wording

Other income for the three months ended March 31, 2023 consisted primarily of a gain associated with a foreign currency hedging transaction which was entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement with Amphastar.

Current wording

Other expense for the three and six months ended June 30, 2023 consisted primarily of losses associated with foreign currency hedging transactions which were entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement.

Previous wording

The following table reconciles our financial measures as reported in our condensed consolidated statements of operations to a non-GAAP presentation as adjusted for the following select non-cash items: revenue from the 1% portion of sold royalties and interest expense on the related liability, stock-based compensation expense and gain on foreign currency transaction for the periods presented:

Current wording

The following table reconciles our financial measures for net income (loss) and net income (loss) per share ("EPS") for diluted weighted average shares as reported in our condensed consolidated statements of operations to a non-GAAP presentation.

Previous wording

Represents the non-cash portion of the 1% royalty on net sales of Tyvaso DPI earned during the three months ended March 31, 2024 which is remitted to the royalty purchaser and recognized as royalties from collaborations in our condensed consolidated statements of operations. Our revenues from royalties from collaborations during the three months ended March 31, 2024 totaled $22.7 million, of which $2.3 million will be remitted to the royalty purchaser.

Current wording

Represents the non-cash portion of the 1% royalty on net sales of Tyvaso DPI earned during the three and six months ended June 30, 2024 which is remitted to the royalty purchaser by UT and recognized as royalties – collaboration in our condensed consolidated statements of operations. Our royalties – collaboration during the three and six months ended June 30, 2024 totaled $25.6 million and $48.2 million, respectively, of which $2.6 million and $4.8 million, respectively, was non-cash revenue attributed to the royalty purchaser.

Previous wording

$230.0 million aggregate principal amount of Senior convertible notes bearing interest at 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021 and maturing on March 1, 2026, unless earlier converted, redeemed or repurchased by us. The Senior convertible notes are convertible at an initial conversion price of approximately $5.21 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

Current wording

As of June 30, 2024, we had $60.2 million in insulin purchase commitments and $230.0 million principal amount of outstanding Senior convertible notes bearing interest at 2.50% and maturing on March 1, 2026, unless earlier converted, redeemed or repurchased by us. The Senior convertible notes are convertible at an initial conversion price of approximately $5.21 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

Previous wording

With the repayment of the MidCap credit facility and the Mann Group convertible note subsequent to March 31, 2024, our Senior convertible notes are our only remaining notes outstanding. To date, we have been able to timely make our required interest payments, but we cannot guarantee that we will be able to do so in the future. If we fail to repay, repurchase or redeem our outstanding notes when required, we will be in default under the applicable instrument for such indebtedness. Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the noteholders initiating bankruptcy proceedings or causing us to cease operations altogether. We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.

Current wording

With the repayment of the MidCap credit facility and the Mann Group convertible note in April 2024, our Senior convertible notes are our only remaining notes outstanding. To date, we have been able to timely make our required interest payments, but we cannot guarantee that we will be able to do so in the future. If we fail to repay, convert, repurchase or redeem our outstanding notes when required, we will be in default under the applicable instrument for such indebtedness. Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the noteholders initiating bankruptcy proceedings or causing us to cease operations altogether. We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.

Previous wording

During the three months ended March 31, 2024, we generated $6.7 million of cash for our operating activities, which primarily consisted of $55.5 million in cash receipts from customers, in addition to non-cash revenue consisting of $3.5 million net recognition of revenue that was previously deferred and $2.3 million of revenue for the 1% sold portion of our royalties, partially offset by $16.8 million of cost of goods sold, $9.8 million of selling expenses, $7.8 million of costs for research and development, $6.7 million of general and administrative expenses, and $5.8 million of net cash paid for interest.

Current wording

During the six months ended June 30, 2024, we generated $10.5 million of cash from our operating activities, which consisted primarily of $121.2 million in cash receipts from customers (net of $12.1 million of non-cash revenue that was previously deferred and $4.8 million of non-cash revenue for the 1% sold portion of our royalties), partially offset by $39.0 million of cost of goods sold, $28.0 million of selling expenses, $22.7 million of costs for research and development, $20.2 million of general and administrative expenses, and $2.3 million of net cash paid for interest.

Previous wording

During the three months ended March 31, 2023, we generated $1.2 million of cash from our operating activities, which consisted of $45.6 million of revenue, partially offset by $17.1 million of selling, general and administrative expenses, $19.4 million of cost of goods sold, $7.3 million of costs for research and development and $3.7 million of net cash paid for interest.

Current wording

During the six months ended June 30, 2023, we generated $3.8 million of cash from our operating activities, which consisted primarily of $98.6 million of revenue, partially offset by $39.5 million of cost of goods sold, $25.0 million of selling expenses, $14.2 million of general and administrative expenses, $13.1 million of R&D costs and $4.3 million of cash paid for interest.

Previous wording

Cash used in investing activities of $48.4 million for the three months ended March 31, 2024 was primarily due to the purchase of $68.4 million of debt securities and $2.4 million of property and equipment, partially offset by the maturity of $22.0 million of debt securities.

Current wording

Cash used in investing activities of $103.6 million for the six months ended June 30, 2024 was primarily due to the purchase of $187.4 million of debt securities and $5.4 million of property and equipment, partially offset by the maturity of $88.8 million of debt securities.

Previous wording

Cash provided by investing activities of $13.8 million for the three months ended March 31, 2023 was primarily due to $22.1 million of proceeds from debt securities partially offset by $8.3 million for the purchase of property and equipment.

Current wording

Cash provided by investing activities of $17.5 million for the six months ended June 30, 2023 was primarily due to $69.1 million of proceeds received from the maturities of debt securities, partially offset by the purchase of debt securities of $26.4 million and by $25.2 million for the purchase of property and equipment.

Previous wording

Cash used in financing activities of $3.5 million for the three months ended March 31, 2024 was primarily due to principal payments on the MidCap credit facility of $5.0 million partially offset by $1.4 million in proceeds from the market price stock purchase plan.

Current wording

Cash used in financing activities of $4.8 million for the six months ended June 30, 2023 was primarily due to $8.5 million of payments to taxing authorities from equity withheld upon vesting of RSUs and stock options, partially offset by $3.7 million in proceeds from at-the-market offerings.

Previous wording

We believe we will be able to meet our near-term liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza and V-Go, and royalties and manufacturing revenue from the production and sale of Tyvaso DPI as well as through debt or equity financing, if necessary, for our long-term liquidity needs. Although we generated a net income of $10.6 million and net cash provided by operating activities reflected in our condensed consolidated statements of cash flows was $6.7 million during the three months ended March 31, 2024, we have not generated a net income or cash flows from operating activities on a consistent basis. In addition, we expect to continue to incur expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline. As of March 31, 2024, we had capital resources comprised of $193.3 million in cash and cash equivalents, $107.5 million in short-term investments and $3.7 million in long-term investments, and total principal amount of outstanding borrowings of $267.1 million.

Current wording

Although we have not generated net income or cash flows from operating activities on a consistent basis, we believe we will be able to meet our near-term liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza and V-Go, and royalties and manufacturing revenue from the production and sale of Tyvaso DPI as well as through debt or equity financing, if necessary, for our long-term liquidity needs. We expect to continue to incur expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline. As of June 30, 2024, we had capital resources comprised of $96.6 million in cash and cash equivalents, $151.1 million in short-term investments and $13.4 million in long-term investments, and total principal amount of outstanding borrowings of $230.0 million.