What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-12 · 181 added, 65 removed, 78 unchanged (76% of the section changed)

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In April 2021, United Therapeutics submitted an NDA for Tyvaso DPI to the FDA.

United Therapeutics has applied a priority review voucher to the NDA that could provide for an FDA decision by December 2021.

The FDA must first accept the application for review and issue a formal review goal date in accordance with the Prescription Drug User Fee Act.

United Therapeutics has applied a priority review voucher to the NDA.

The FDA has accepted the application for review and is expected to complete their review in October 2021.

Our business is subject to significant risks, including but not limited to our ability to commercialize Afrezza successfully, our ability to manufacture sufficient quantities of Afrezza and Tyvaso DPI and our potential need to raise additional capital to fund our operations.

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Our sales representatives have resumed in-person sales calls to the extent permitted by state and local public health authorities and by the policies of individual healthcare providers on their call lists.

Our offices in California and Connecticut have remained open for essential personnel and, as public health orders allow, have reopened to non-essential personnel, although many employees continue to work from home for a portion of each workweek.

Our offices in California and Connecticut have remained open for essential personnel and, as public health orders allow, have reopened to non-essential personnel.

Although our productivity has been impacted by the global pandemic, we have suitably adapted to the changed business environment that now exists.

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We will continue to monitor the COVID-19 situation closely.

As of March 31, 2021, we had an accumulated deficit of $3.1 billion and a stockholders’ deficit of $173.6 million.

We had net loss of $12.9 million for the three months ended March 31, 2021.

To date, we have funded our operations through the sale of convertible debt securities and equity, from the receipt of upfront and milestone payments from certain collaborations, and from borrowings under certain loan arrangements and also from the sale of Afrezza.

As of June 30, 2021, we had an accumulated deficit of $3.1 billion and a stockholders’ deficit of $183.6 million.

We had net loss of $35.5 million and $48.4 million for the three and six months ended June 30, 2021, respectively.

To date, we have funded our operations through the sale of convertible debt securities and equity, from the receipt of upfront and milestone payments from certain collaborations, from borrowings under certain loan arrangements and from sales of Afrezza.

CRITICAL ACCOUNTING POLICIES

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RESULTS OF OPERATIONS

Three months ended March 31, 2021 and 2020

The following tables provide a comparison of the revenue categories for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Three and six months ended June 30, 2021 and 2020

The following tables provide a comparison of the revenue categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

6 unchanged sentences

Total revenues

Gross revenue from the sales of Afrezza decreased by $0.3 million, or 2%, for the three months ended March 31, 2021 compared to the same period in the prior year.

The decrease reflects the absence of stockpiling of Afrezza during the first quarter of 2021 in contrast to the same period last year when there was a noticeable increase in prescription refills as lockdowns began to be imposed across the country in response to the emerging COVID-19 pandemic.

The gross-to-net adjustment was $5.5 million (or 40% of gross revenue) for the three months ended March 31, 2021, compared to $5.9 million (or 43% of gross revenue) for the same period in the prior year.

The decrease of $0.4 million was primarily driven by a decrease in accounting estimates for wholesaler distribution fees and prompt pay discounts as a result of the termination of our free goods program on December 31, 2020.

As a result, net revenue from the sales of Afrezza increased by $0.1 million, or 1%, for the three months ended March 31, 2021 compared to the prior year period.

Our sales force continues to have varying degrees of access to physicians due to restrictions enacted in response to the COVID-19 pandemic.

This limitation on access continued to have an impact on our commercial sales during the three months ended March 31, 2021 and may continue to negatively impact our near-term revenues from Afrezza.

Net revenue from collaborations and services increased by $1.1 million, or 13%, for the three months ended March 31, 2021 compared to the same period in the prior year.

The increase in collaborations and services revenue was primarily attributed to the UT license agreement and the Vertice Pharma Co-promotion Agreement.

Six Months Ended June 30,

Net revenue — commercial product sales:

Gross revenue from commercial product sales

Wholesaler distribution fees, rebates and chargebacks,

product returns and other discounts

Net revenue — commercial product sales

Revenue — collaborations and services

Total revenues

Gross revenue from sales of Afrezza increased by $4.7 million, or 39%, for the three months ended June 30, 2021 compared to the same period in the prior year.

The increase reflects higher prescription demand, the negative effects of the COVID-19 pandemic on Afrezza sales volumes during the second quarter of 2020 when our sales force had limited access to physicians as a result of the stay-at-home orders implemented around the country, a more favorable mix of Afrezza cartridges, and price.

The gross-to-net adjustment was 39.8% of gross revenue, or $6.6 million, for the three months ended June 30, 2021, compared to 41.3% of gross revenue, or $4.9 million, for the same period in the prior year.

The decrease in the gross-to-net percentage was primarily driven by a decrease in accounting estimates for wholesaler distribution fees, prompt pay discounts and government rebates as a result of the termination of our free goods program on December 31, 2020, partially offset by an increase in co-pay discounts.

As a result, net revenue from sales of Afrezza increased by $3.0 million, or 43%, for the three months ended June 30, 2021 compared to the prior year period.

Net revenue from collaborations and services increased by $5.2 million, or 64%, for the three months ended June 30, 2021 compared to the same period in the prior year.

The increase in collaborations and services revenue was primarily attributed to our collaboration with UT.

See Note 7 – Collaboration, Licensing and Other Arrangements .

Gross revenue from sales of Afrezza increased by $4.4 million, or 17%, for the six months ended June 30, 2021 compared to the same period in the prior year.

The increase reflects higher product demand in the first half of 2021 as a result of increased promotional activity in addition to the negative impact that the COVID-19 pandemic had on the demand of Afrezza prescriptions in 2020.

The gross-to-net adjustment was 40.1% of gross revenue, or $12.1 million, for the six months ended June 30, 2021, compared to 42.0% of gross revenue, or $10.8 million, for the same period in the prior year.

The decrease in the gross-to-net percentage was primarily driven by a decrease in accounting estimates for wholesaler distribution fees and government rebates as a result of the termination of our free goods program on December 31, 2020, partially offset by an increase in co-pay discounts.

As a result, net revenue from sales of Afrezza increased by $3.1 million, or 21%, for the six months ended June 30, 2021 compared to the prior year period.

Net revenue from collaborations and services increased by $6.3 million, or 38%, for the six months ended June 30, 2021 compared to the same period in the prior year.

The increase in collaborations and services revenue was primarily attributed to our collaboration with UT.

See Note 7 – Collaboration, Licensing and Other Arrangements .

Commercial product gross profit

The following tables provide a comparison of the commercial product gross profit categories for the three months ended March 31, 2021 and 2020 (dollars in thousands):

The following tables provide a comparison of the commercial product gross profit categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

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Commercial product gross profit

Commercial product gross profit for the three months ended March 31, 2021 decreased by $0.1 million, or 1%, compared to the same period in the prior year.

Gross margin for the three months ended March 31, 2021 was 47% compared to 48% for the same period in the prior year.

The decrease in gross profit and gross margin was attributable to an increase in cost of goods sold.

Cost of goods sold in creased by $0.2 million, or 4%, for the three months ended March 31, 2021 compared to the same period in the prior year, primarily due to $1.2 million of decreased manufacturing activities, which resulted in a reduced amount of costs capitalized to inventory, partially offset by $0.5 million of inventory write-offs and $0.4 million of costs associated with lower product sales, of which $0.2 million is associated with the impact of the termination of the free goods program on December 31, 2020.

The following tables provide a comparison of the expense categories for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Non-GAAP gross margin (1)

Six Months Ended June 30,

Commercial product gross profit:

Net revenue — commercial product sales

cost of goods sold

Commercial product gross profit

Non-GAAP gross margin (1)

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See the reconciliation of gross margin to non-GAAP gross margin under Non-GAAP Measures below.

Commercial product gross profit for the three months ended June 30, 2021 increased by $2.3 million, or 68%, compared to the same period in the prior year.

Gross margin for the three months ended June 30, 2021 was 56% compared to 47% for the same period in the prior year.

The increase in gross profit and gross margin was attributable to an increase in Afrezza sales partially offset by an increase in cost of goods sold.

Cost of goods sold in creased by $0.7 million, or 20%, for the three months ended June 30, 2021 compared to the same period in the prior year, primarily due to a $2.0 million fee for the amendment of the Insulin Supply Agreement, partially offset by $1.1 million of increased manufacturing activities, which resulted in a higher amount of costs capitalized to inventory.

On a non-GAAP basis, which excludes the $2.0 million insulin supply amendment fee, gross margin was 76% for the second quarter of 2021 compared to 47% for the same period in 2020.

See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below.

Commercial product gross profit for the six months ended June 30, 2021 increased by $2.2 million, or 31%, compared to the same period in the prior year.

Gross margin for the six months ended June 30, 2021 was 52% compared to 48% for the same period in the prior year.

The increase in gross profit and gross margin was attributable to an increase in Afrezza sales, partially offset by an increase in cost of goods sold.

Cost of goods sold in creased by $0.9 million, or 11%, for the six months ended June 30, 2021 compared to the same period in the prior year, primarily due to a $2.0 million fee for the amendment of the Insulin Supply Agreement, partially offset by $0.8 million of costs associated with lower cost per unit and the termination of the free goods program in December 31, 2020, in addition to $0.5 million of inventory write-offs in 2020.

On a non-GAAP basis, which excludes the $2.0 million insulin supply amendment fee, gross margin was 63% for the six months ended June 30, 2021 compared to 48% for the same period in 2020.

See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below.

The following tables provide a comparison of the expense categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

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Asset impairment

Gain on foreign currency translation

Loss on foreign currency translation

Loss on purchase commitments

Total expenses

Cost of revenue — collaborations and services decreased by $0.1 million, or 2%, for the three months ended March 31, 2021 compared to the same period in the prior year.

The decrease was attributable to costs incurred in the prior year period for the Cipla distribution agreement that were not incurred in the current period, partially offset by an increase in costs for the UT License agreement and the Vertice Pharma Co-promotion Agreement.

Research and development expenses increased by $0.7 million, or 39%, for the three months ended March 31, 2021 compared to the same period in the prior year.

The increase was attributable to personnel costs primarily related to increased headcount for research and development, regulatory and medical affairs.

Selling expenses increased by $1.5 million, or 18%, for the three months ended March 31, 2021 compared to the same period in the prior year .

The increase was primarily attributable to a $0.8 million increase in personnel costs primarily related to increased headcount for our Afrezza commercial team, $0.3 million in patient support services and $0.3 million in promotional and marketing activities.

General and administrative expenses increased by $ 1.6 million, or 26%, for the three months ended March 31, 2021 compared to the same period in the prior year .

This increase was primarily attributable to personnel-related costs .

An impairment of $1.5 million was recognized for the three months ended March 31, 2020 for a commitment asset related to the future funding commitments of the MidCap credit facility.

There were no asset impairments for the three months ended March 31, 2021.

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* Not meaningful

Six Months Ended

Cost of goods sold

Cost of revenue — collaborations and services

Research and development

General and administrative

Asset impairment

(Gain) loss on foreign currency translation

Loss on purchase commitments

Total expenses

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Cost of revenue — collaborations and services increased by $3.5 million, or 178%, for the three months ended June 30, 2021 and $3.5 million, or 65%, for the six months ended June 30, 2021 compared to the respective periods in the prior year.

The increases were attributable to an increase in costs for the UT License agreement and pre-commercial activities and the allocation of selling expenses related to the Vertice Pharma Co-Promotion Agreement.

Research and development expenses increased by $ 0.9 million, or 5 9 %, for the three months ended June 30 , 2021 and $ 1.6 million, or 48 %, for the six months ended June 30, 2021 compared to the respective period s in the prior year.

The in crease s w ere attributable to personnel costs primarily related to increased headcount for research and development, regulatory and medical affairs in addition to costs incurred for clinical studies and pipeline research.

Selling expenses increased by $4.3 million, or 59%, for the three months ended June 30, 2021 compared to the same period in the prior year as we expanded our investment behind Afrezza and lowered expenses in the prior year period when we voluntarily reduced compensation and field force activities in response to the onset of the COVID-19 pandemic.

As we continued to re-engage our selling activities behind Afrezza, we increased promotional and marketing expenses by $1.8 million and patient support services by $0.6 million during the three months ended June 30, 2021.

Personnel expenses increased $3.1 million due to the favorable impact of lower spending during the COVID-19 pandemic as well as increased headcount and stock compensation to support Afrezza growth.

The increases in selling expenses were partially offset by a reduction related to the co-promotional cost for Thyquidity which was recognized as cost of revenue — collaboration and services.

Selling expenses increased by $5.7 million, or 37%, for the six months ended June 30, 2021 compared to the same period in the prior year as we expanded our investment behind Afrezza and lowered expenses in the prior year period when we voluntarily reduced compensation and field force activities in response to the onset of the COVID-19 pandemic.

As we continued to re-engage our selling activities behind Afrezza, we increased promotional and marketing expenses by $2.4 million and patient support services by $0.9 million during the six months ended June 30, 2021.

Personnel expenses increased $3.8 million due to the favorable impact of lower spending during the COVID-19 pandemic as well as increased headcount and stock compensation to support Afrezza growth.

The increases in selling expenses were partially offset by a reduction related to the co-promotional cost for Thyquidity which was recognized as cost of revenue — collaboration and services.

General and administrative expenses increased by $2.1 million, or 33%, for the three months ended June 30, 2021 compared to the same period in the prior year .

This increase was primarily attributable to personnel-related costs, including higher stock-based compensation and bonus, as well as lower salaries in the prior year period related to the onset of the COVID-19 pandemic.

Additional increases in general and administrative expenses consisted of UT pre-commercial preparations and professional fees .

General and administrative expenses increased by $3 .7 million, or 29%, for the six months ended June 30, 2021 compared to the same period in the prior year .

Additional increases in general and administrative expenses consisted of UT pre-commercial preparations, professional fees and business development expenses .

An impairment of $0.4 million and $1.9 million was recognized for the three and six months ended June 30, 2020 for a commitment asset related to the future funding commitments of the MidCap credit facility.

There were no asset impairments for the three and six months ended June 30, 2021.

Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros.

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dollar to Euro exchange rate associated with the recognized gain or loss on purchase commitments.

The foreign currency translation gain increased $2.0 million for the three months ended March 31, 2021 compared to the same period in the prior year.

The foreign currency translation loss decreased $1.0 million for the three months ended June 30, 2021 compared to the same period in the prior year.

The foreign currency translation gain was $2.9 million for the six months ended June 30, 2021 compared to a $0.1 million loss for the same period in the prior year.

Other Income (Expense)

The following tables provide a comparison of the other income (expense) categories for the three months ended March 31, 2021 and 2020 (dollars in thousands):

The following tables provide a comparison of the other income (expense) categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

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Interest expense on Mann Group promissory notes

Other expense

Loss on extinguishment of debt

Total other expense

Six Months Ended

Interest income

Interest expense on notes

Interest expense on Mann Group promissory notes

Loss on extinguishment of debt

Other (expense) income

Total other expense

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* Not meaningful

Interest income de creased by $ 0.

1 million , or 9 8 % for the three months ended March 31, 2021 compared to the same period in the prior year, due to lower short-term interest rates .

Interest expense increased by $4.4 million for the three months ended March 31, 2021 compared to the same period in the prior year.

The increase was primarily due to a $3.7 million milestone obligation that was achieved during the quarter and interest expense from the Senior convertible notes and the MidCap credit facility.

Other expense consisted of a loss associated with a foreign currency hedging transaction for the three months ended March 31, 2021 which was entered to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement.

There was no hedging transaction for the same period in the prior year.

Interest expense increased by $1.7 million, or 159%, for the three months ended June 30, 2021 compared to the same period in the prior year.

The increase was primarily due to the interest expense from the Senior convertible notes.

Interest expense increased by $6.1 million, or 282%, for the six months ended June 30, 2021 compared to the same period in the prior year.

The increase was primarily due to a $3.7 million milestone obligation that was achieved during the first quarter of 2021 and interest expense on the Senior convertible notes issued in the first quarter of 2021.

Interest expense on Mann Group promissory notes decreased by $0.9 million, or 71%, for the three months ended June 30, 2021 and $1.1 million, or 45%, for the six months ended June 30, 2021 compared to the same periods in the prior year.

The decrease was primarily due to the repayment of $35.1 million of outstanding principal under the Mann Group non-convertible note and the reduction of the interest rate from 7.00% to 2.50% pursuant to the first amendment.

See Note 6 — Borrowings .

Loss on extinguishment of debt for the three and six months ended June 30, 2021 was $22.1 million as a result of the amendment to the Mann Group convertible note.

See Note 6 — Borrowings .

Other income or expense consists primarily of the gain or loss associated with a foreign currency hedging transaction for the three and six months ended June 30, 2021 which is entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement.

There was no hedging transaction for the same periods in the prior year.

Net Loss and Earnings Per Share (“EPS”)

The net loss for the three months ended June 30, 2021 was $35.5 million, or $0.14 per share, compared to a $10.3 million net loss in the prior year period, or $0.05 per share.

The increased net loss of $25.3 million was primarily due to a non-cash loss on extinguishment of the Mann Group convertible note of $22.1 million as well as an increase in SG&A expenses and cost of revenue from collaboration and services, partially offset by an increase in Afrezza net revenues and revenues from collaboration and services.

The net loss for the six months ended June 30, 2021 was $48.4 million, or $0.20 per share, compared to a $19.6 million net loss in the six months ended June 30, 2020, or $0.09 per share.

The increased net loss of $28.9 million was primarily due to the non-cash loss on extinguishment of the Mann Group convertible note of $22.1 million as well as an increase in SG&A expenses, cost of revenue from collaboration and services, and loss on purchase commitments, partially offset by an increase in Afrezza net revenues and revenues from collaboration and services.

Non-GAAP net loss, adjusted to exclude the $22.1 million non-cash loss on extinguishment of the Mann Group convertible note was $13.4 million, or $0.05 per share, for the three months ended June 30, 2021 compared to $10.3 million, or $0.05 per share, for the prior

year period and $26.3 million, or $0.11 per share, for the six months ended June 30, 2021 compared to $19.6 million, or $0.09 per share, for the same period in the prior year.

See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below.

Non-GAAP Measures

To supplement our unaudited condensed consolidated financial statements presented under GAAP, we are presenting certain non-GAAP financial measures.

We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating the Company’s financial performance.

We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results, including underlying trends.

The following tables reconcile our financial measure for net loss and EPS as reported in our condensed consolidated statement of operations to a non-GAAP presentation as adjusted for the $22.1 million non-cash loss on extinguishment of the Mann Group convertible note, which did not result in a change in our financial position.

Three Months Ended

(In thousands, except per share data)

GAAP to Non-GAAP Net Loss and EPS

Net loss per share - basic and diluted

Less non-cash loss on extinguishment of debt (1)

Non-GAAP net loss

Non-GAAP net loss per share - basic and diluted

Shares used to compute non-GAAP basic and diluted

net loss per share

Six Months Ended

GAAP to Non-GAAP Net Loss and EPS

Net loss per share - basic and diluted

Less non-cash loss on extinguishment of debt (1)

Non-GAAP net loss

Non-GAAP net loss per share - basic and diluted

Shares used to compute non-GAAP basic and diluted

net loss per share

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* Not meaningful

(1) There is no provision for income taxes associated with the non-cash loss on extinguishment of debt as a result of our full valuation allowance.

The following tables reconcile our gross margin financial measure as reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations to a non-GAAP presentation as adjusted for the nonrecurring amendment fee related to an amendment to our Insulin Supply Agreement.

Three Months Ended

(In thousands)

Net revenue — Afrezza

Less cost of goods sold

GAAP gross profit — Afrezza

Exclude Amphastar amendment fee

Non-GAAP gross profit — Afrezza

Non-GAAP gross margin

Six Months Ended

Net revenue — Afrezza

Less cost of goods sold

GAAP gross profit — Afrezza

Exclude Amphastar amendment fee

Non-GAAP gross profit — Afrezza

Non-GAAP gross margin

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* Not meaningful

LIQUIDITY AND CAPITAL RESOURCES

To date, we have funded our operations through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from certain collaborations, and from borrowings under certain loan arrangements and the sales of Afrezza.

As of March 31, 2021, we had $338.4 million principal amount of outstanding debt, consisting of:

To date, we have funded our operations through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from certain collaborations, from borrowings under certain loan arrangements and from sales of Afrezza.

As of June 30, 2021, we had $293.3 million principal amount of outstanding debt, consisting of:

$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 will mature on March 1, 2026, unless earlier converted, redeemed or repurchased.

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$40.0 million principal amount under the MidCap credit facility, bearing interest at an annual rate equal to one-month LIBOR plus 6.25%, subject to a one-month LIBOR floor of 1.00%, payable in equal monthly installments beginning in September 2023 through maturity in August 2025.

$53.5 million principal amount of indebtedness under the Mann Group promissory notes bearing interest at a fixed rate of 7.00% per annum compounded quarterly and maturing in November 2024, $18.4 million of which is convertible into shares of our common stock at the option of Mann Group at a conversion price of $2.50 per share.

Interest is paid-in-kind from August 2019 until the end of 2020, after which we have the option to either pay interest in-kind or in shares.

$4.9 million from a loan under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), all or a portion of which may be forgiven.

The PPP loan matures in April 2022 and bears interest at a rate of 0.98% per annum.

Principal and interest payments can be deferred up to ten months after the end of a 24-week covered period unless we are notified earlier of our loan forgiveness status.

In the event the SBA does not authorize loan forgiveness, the deferred principal and interest will be payable to the lender and we will then make equal monthly payments as required to fully amortize the remaining principal amount by April 9, 2022.

$18.4 million principal amount of indebtedness under the Mann Group convertible note bearing interest at a fixed rate of 2.50% per annum compounded quarterly and maturing in December 2025, which is convertible into shares of our common stock at the option of Mann Group at a conversion price of $2.50 per share.

Interest is paid-in-kind from August 2019 until the end of 2020, after which we have the option to either pay interest in-kind in cash or in shares.

$4.9 million principal amount under a PPP loan, all of which was forgiven by the SBA subsequent to June 30, 2021.

In February 2021, we elected to convert the $5.0 million principal amount of 2024 convertible notes into 1,666,667 shares of our common stock in accordance with the terms of the 2024 convertible notes.

There can be no assurance that we will have sufficient resources to make any required repayments of principal under the Senior Convertible Notes, the MidCap credit facility, promissory notes or unforgiven amounts of the PPP Loan.

The Senior Convertible Notes and Mann Group convertible notes are fully convertible prior to maturity as further disclosed in Note 6 – Borrowings .

There can be no assurance that we will have sufficient resources to make any required repayments of principal under the Senior convertible notes, the MidCap credit facility or the Mann Group convertible note.

The Senior convertible notes and Mann Group convertible note are fully convertible prior to maturity as further disclosed in Note 6 – Borrowings .

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 repurchase the Mann Group promissory notes or unforgiven amounts of the PPP loan, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time.

If we fail to repurchase the Mann Group promissory notes, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time.

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.

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See Note 12 – Commitments and Contingencies and Note 6 – Borrowings for further information related to the Milestone Rights.

During the three months ended March 31, 2021, we used $12.7 million of cash for our operating activities as a result of our net loss of $12.9 million.

The net change in operating asset and liabilities was primarily a result of the recognition of amortization of deferred revenue of $9.0 million, partially offset by an increase in accrued expenses and other current liabilities of $8.3 million.

During the three months ended March 31, 2020, we used $11.2 million of cash for our operating activities as a result of our net loss of $9.3 million, the increase in operating assets and liabilities of $5.3 million and non-cash charges of $3.4 million.

The increase in operating asset and liabilities was primarily a result of deferred revenue amortization of $8.2 million.

Cash used in investing activities of $31.4 million for the three months ended March 31, 2021 was primarily due to the purchase of debt securities.

Cash provided by investing activities of $19.9 million for the three months ended March 31, 2020 was primarily due to the proceeds from the sale of treasury bills.

Cash provided by financing activities of $225.0 million for the three months ended March 31, 2021 was primarily due to net proceeds from the offering of Senior convertible notes of $222.9 million.

Cash provided by financing activities of $0.3 million for the three months ended March 31, 2020 was primarily due to proceeds from at-the-market offerings of $0.7 million, partially offset by the payment of employment taxes related to vested restricted stock units of $0.3 million.

During the six months ended June 30, 2021, we used $34.2 million of cash for our operating activities as a result of our net loss of $48.4 million, partially offset by non-cash charges of $32.5 million of which $22.1 million was a loss on extinguishment of debt related to the first amendment of the Mann Group convertible note.

The net change in operating asset and liabilities was primarily a result of the amortization of deferred revenue of $21.2 million and the payment of the Mann Group promissory note interest of $4.9 million, partially offset by the receipt of $5.3 million in customer deposits from UT for expansion equipment as well as other pass through payments, and an increase in operating payables and accrued expenses.

During the six months ended June 30, 2020, we used $14.9 million of cash for our operating activities as a result of our net loss of $19.6 million, in addition to a net cash outflow from changes in balances of operating assets and liabilities of $5.3 million, partially offset by non-cash charges of $10.0 million.

The change in operating asset and liabilities was primarily a result of deferred revenue amortization of $16.4 million, partially offset by a milestone payment from UT of $12.5 million.

Cash used in investing activities of $144.0 million for the six months ended June 30, 2021 was primarily due to the purchase of $138.9 million of debt securities and $3.0 million of Thirona convertible notes that was recognized as an available-for-sale investment.

Cash provided by investing activities of $19.7 million for the six months ended June 30, 2020 was primarily due to the proceeds from the sale of treasury bills.

Cash provided by financing activities of $173.5 million for the six months ended June 30, 2021 was primarily due to net proceeds from the offering of Senior convertible notes of $222.7 million, partially offset by the repayment of $35.1 million of Mann Group non-convertible notes and related unpaid accrued interest and the repayment of $10.0 million of principal and $1.0 million prepayment penalty for the MidCap credit facility.

Cash provided by financing activities of $28.5 million for the six months ended June 30, 2020 was primarily due to the receipt of $12.6 million in gross proceeds from at-the-market offerings for an aggregate of 7,871,461 shares of our common stock under the CF Sales Agreement, the exercise of outstanding warrants to purchase shares of our common stock of $11.6 million, and proceeds from the PPP Loan of $4.9 million.

Future Liquidity Needs

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In addition, we expect to continue to incur significant expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for Afrezza, and development costs for other product candidates in our pipeline.

As of March 31, 2021, we had capital resources of $247.8 million in cash and cash equivalents, $29.0 million in short-term investments, $1.5 million in long-term investments, an accumulated deficit of $3.1 billion and total principal amount of outstanding borrowings of $338.4 million.

In March 2021, we issued $230.0 million of Senior convertible notes before offering expenses.

As of June 30, 2021, we had capital resources of $62.5 million in cash and cash equivalents, $100.0 million in short-term investments and $39.0 million in long-term investments, and we had an accumulated deficit of $3.1 billion and total principal amount of outstanding borrowings of $293.3 million.

In March 2021, we issued $230.0 million of Senior convertible notes.

In April 2021, we made a $10.0 million principal prepayment against outstanding term loans under the MidCap credit facility and repaid the entire principal amount of $35.1 million outstanding under the Mann Group non-convertible note (together with all accrued and unpaid interest thereon) as further disclosed in Note 6 – Borrowings .

2 unchanged sentences

Off-Balance Sheet Arrangements

As of March 31, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.

As of June 30, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.

Contractual Obligations

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis