What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 329 added, 296 removed, 525 unchanged (54% of the section changed)

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RISKS RELATED TO OUR BUSINESS

We will need to raise additional capital to fund our operations, and there is substantial doubt about our ability to continue as a going concern.

This report includes disclosures stating that our existing cash resources and our accumulated deficit raise substantial doubt about our ability to continue as a going concern.

As of December 31, 2020, we had cash and cash equivalents of $67.0 million and accumulated deficit of $3.0 billion.

We will need to raise additional capital, whether through the sale of equity or debt securities, additional strategic business collaborations, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to support our ongoing activities, including the commercialization of Afrezza and the development of our product candidates .

Afrezza may only achieve a limited degree of commercial success.

The continued commercialization and development of Afrezza will require substantial capital that we may not be able to obtain.

We have expended significant time, money and effort in the commercialization and development of Afrezza, which has been on the market since February 2015.

To date, Afrezza sales have been modest by comparison to other mealtime insulins.

If we remain on the existing growth curve, we may never generate significant revenues from Afrezza in the United States.

Successful commercialization of Afrezza is subject to many risks, including some that are outside our control.

There are numerous examples of failures to fully exploit the market potential of drug products, including by pharmaceutical companies with more experience and resources than us.

We ultimately may be unable to gain widespread market acceptance of Afrezza for a variety of reasons, including the treatment and dosage regimen, potential adverse effects, pricing and availability relative to alternative products and lack of coverage or adequate reimbursement by payers.

We may need to enhance our commercialization capabilities in order to successfully commercialize Afrezza in the United States, and we may not have sufficient resources to do so.

The market for skilled commercial personnel is highly competitive, and we may not be able to hire all of the personnel we need on a timely basis or retain them for a sufficient period.

In addition, Afrezza is a novel insulin therapy with a distinct time-action profile and non-injectable administration, and we are therefore required to expend significant time and resources to train our sales force to be credible, persuasive and compliant with applicable laws in marketing Afrezza to physicians and to ensure that a consistent and appropriate message about Afrezza is being delivered to our potential customers.

If we are unable to effectively train our sales force and equip them with effective medical and sales materials to help them inform and educate potential customers about the benefits of Afrezza and its proper administration, our efforts to successfully commercialize Afrezza could be put in jeopardy, which would negatively impact our ability to generate product revenues.

If we are unable to maintain payer coverage of, and adequate reimbursement for, Afrezza, physicians may limit how much or under what circumstances they will prescribe or administer Afrezza.

As a result, patients may decline to purchase Afrezza, which would have an adverse effect on our ability to generate revenues.

We are responsible for the NDA for Afrezza and its maintenance.

We may fail to comply with maintenance requirements, including timely submitting required reports.

Furthermore, as part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza.

These studies will require significant capital resources, some of which may not be available to us.

We have initiated one of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 4-17 year-old children and adolescents.

We have engaged a clinical research organization to assist us with conducting this study and have budgeted the projected costs of the study in our operating plans.

The other required study is a long-term safety study that was originally intended to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group.

We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design to address any concerns.

To date, we have not commenced a long-term safety study or budgeted any amount for it, but such a study in its original design would be anticipated to require substantial capital resources that we may not be able to obtain.

If we fail to achieve better commercial success with Afrezza in the United States, our prospects for generating significant revenues from this product will be materially and adversely affected.

If we fail as an effective manufacturing organization, we may be unable to support commercialization of Afrezza or Tyvaso DPI.

We use our Danbury, Connecticut facility to formulate both the Afrezza and Tyvaso DPI inhalation powders, fill plastic cartridges with the powders, and package the cartridges into secondary packaging.

We also assemble the inhalers from their individual molded parts.

These semi-finished goods are then assembled into the final kits for commercial sale by a contract packager.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up production to commercial batch sizes.

These problems include difficulties with production costs and yields and quality control and assurance.

We may experience shortages of qualified personnel, which could impact our ability to meet production schedules.

There is also a need to comply with strictly enforced federal, state and foreign regulations, including inspections.

Our facility is inspected on a regular basis by the FDA, most recently in July 2021 when the FDA conducted a pre-approval inspection related to Tyvaso DPI and a GMP inspection related to Afrezza.

The FDA made one observation during its most recent inspection, which we corrected and addressed with the FDA following the site visit.

If the FDA makes any major observations during future inspections, the corrective actions required could be

onerous and time-consuming.

Any of these factors could cause us to delay or suspend production, could entail higher costs and may result in our being unable to obtain sufficient quantities for the commercialization of drug products at the costs that we currently anticipate.

Furthermore, if we or a third-party manufacturer fail to deliver the required commercial quantities of the product or any raw material on a timely basis, and at commercially reasonable prices, sustainable compliance and acceptable quality, and we were unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and quality on a timely basis, we would likely be unable to meet demand for such drug products and we would lose potential revenues.

If our suppliers fail to deliver materials and services needed for commercial manufacturing in a timely and sufficient manner or fail to comply with applicable regulations, and if we fail to timely identify and qualify alternative suppliers, our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities could decline.

For the commercial manufacture of inhaled drug products, we need access to sufficient, reliable and affordable supplies of FDKP, the inhaler, the related cartridges and other materials.

For Afrezza, we also require a supply of insulin.

Currently, the only source of insulin that we have qualified for Afrezza is manufactured by Amphastar.

We must rely on all of our suppliers to comply with relevant regulatory and other legal requirements, including the production of insulin and FDKP in accordance with cGMP for drug products, and the production of the Afrezza/Tyvaso DPI inhaler and related cartridges in accordance with QSRs.

Although we conduct our own inspections and review and/or approve investigations of each supplier, there can be no assurance that the FDA, upon inspection, would find that the supplier substantially complies with the QSR or cGMP requirements, where applicable.

If a supplier fails to comply with these requirements or the comparable requirements in foreign countries, regulatory authorities may subject us to regulatory action, including criminal prosecutions, fines and suspension of the manufacture of our products.

If we are required to find a new or additional supplier, we will need to evaluate that supplier’s ability to provide material that meets regulatory requirements, including cGMP or QSR requirements, as well as our specifications and quality requirements, which would require significant time and expense and could delay the production of Afrezza or Tyvaso DPI.

In general, if any of our suppliers is unwilling or unable to meet its supply obligations or if we encounter delays or difficulties in our relationships with manufacturers or suppliers, and we are unable to secure an alternative supply source in a timely manner and on favorable terms, our business, financial condition, and results of operations may be harmed and the market price of our common stock and other securities may decline.

If Afrezza or any other product that we develop does not become widely accepted by physicians, patients, third-party payers and the healthcare community, we may be unable to generate significant revenue, if any.

Afrezza, and other products that we may develop in the future, may not gain market acceptance among physicians, patients, third-party payers and the healthcare community.

Failure to achieve market acceptance would limit our ability to generate revenue and would adversely affect our results of operations.

The degree of market acceptance of Afrezza and other products that we may develop in the future depends on many factors, including the following:

Approved labeling claims;

Effectiveness of efforts by us or any future marketing partner to support and educate physicians about the benefits and advantages of Afrezza or our other products, and the perceived advantages and disadvantages of competitive products;

Willingness of the healthcare community and patients to adopt new technologies;

Ability to manufacture the product in sufficient quantities with acceptable quality and cost;

Perception of patients and the healthcare community, including third-party payers, regarding the safety, efficacy and benefits compared to competing products or therapies;

Convenience and ease of administration relative to existing treatment methods;

Coverage and reimbursement, as well as pricing relative to other treatment therapeutics and methods;

Marketing and distribution support.

Because of these and other factors, Afrezza and any other product that we develop may not gain market acceptance, which would materially harm our business, financial condition and results of operations.

If third-party payers do not cover Afrezza or any of our product candidates for which we receive regulatory approval, Afrezza or such product candidates might not be prescribed, used or purchased, which would adversely affect our revenues.

In the United States and elsewhere, sales of prescription pharmaceuticals still depend in large part on the availability of coverage and adequate reimbursement to the consumer from third-party payers, such as government health administration authorities and private insurance plans.

Third-party payers are increasingly challenging the prices charged for medical products and services.

The market for Afrezza and our product candidates for which we may receive regulatory approval will depend significantly on access to third-party payers’ drug formularies, which are the lists of medications for which third-party payers provide coverage and reimbursement.

The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies.

Also, third-party payers may refuse to include a

particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.

Even if favorable coverage and reimbursement status is attained for Afrezza or our product candidates for which we or our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

In addition, because each third-party payer individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming and costly process.

We may be required to provide scientific and clinical support for the use of any product to each third-party payer separately with no assurance that approval would be obtained.

This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results.

Even if we succeed in bringing more products to market, we cannot be certain that any such products would be considered cost-effective or that coverage and adequate reimbursement to the consumer would be available.

Patients will be unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

The requirements governing drug pricing vary widely from country to country.

In some non-U.S.

jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed.

The European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

We may face competition for Afrezza or any of our other product candidates that receives marketing approval from lower-priced products in foreign countries that have placed price controls on pharmaceutical products.

In addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability.

If we or any future marketing partner is unable to obtain and maintain coverage of, and adequate payment levels reimbursement for, Afrezza or any of our other product candidates that receive marketing approval from third-party payers, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them.

This in turn could affect our and any future marketing partner’s ability to successfully commercialize Afrezza and our ability to successfully commercialize any of our other product candidates that receives regulatory approval and impact our profitability, results of operations, financial condition, and prospects.

Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payers to contain or reduce the costs of healthcare through various means.

In certain foreign markets the pricing of prescription pharmaceuticals is subject to direct governmental control.

In the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

We may need to raise additional capital to fund our operations.

As of December 31, 2021, we had cash and cash equivalents of $124.2 million, short-term investments of $79.9 million and long-term investments of $56.6 million, and we had $288.4 million principal amount of outstanding debt.

We may need to raise additional capital, whether through the sale of equity or debt securities, additional strategic business collaborations, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to support our ongoing activities, including the commercialization of Afrezza and the development of our product candidates .

It may be difficult for us to raise additional funds on favorable terms, or at all.

The extent of our additional funding requirements will depend on a number of factors, including:

the degree to which revenue from Afrezza exceeds or does not exceed the minimum revenue covenants under the MidCap Credit Facility;

the degree to which we are able to generate revenue from our Technosphere drug delivery platform, including through our collaborations;

the degree to which revenue from Afrezza exceeds or does not exceed the minimum revenue covenants under the MidCap credit facility, if applicable;

the degree to which we are able to generate revenue from Tyvaso DPI and our Technosphere drug delivery platform, including through collaborations;

the costs of developing and commercializing Afrezza on our own in the United States, including the costs of expanding our commercialization capabilities;

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our ability to repay or refinance existing indebtedness, and the extent to which our notes with conversion options or any other convertible debt securities we may issue are converted into or exchanged for shares of our common stock;

our ability to satisfy the milestone conditions necessary to access additional borrowing under the MidCap Credit Facility;

the rate of progress and costs of our clinical studies and research and development activities;

the costs of procuring raw materials and operating our manufacturing facility;

our obligation to make milestone payments;

our obligation to make lease payments and milestone payments;

our success in establishing additional strategic business collaborations or other sales or licensing of assets, and the timing and amount of any payments we might receive from any such transactions;

actions taken by the FDA and other regulatory authorities affecting Afrezza and our product candidates and competitive products;

actions taken by the FDA and other regulatory authorities affecting Afrezza, Tyvaso DPI and our product candidates and competitive products;

the emergence of competing technologies and products and other market developments;

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There can be no assurances, however, that we will be able to raise additional capital in the future on acceptable terms, or at all.

In addition, the COVID-19 pandemic continues to have the potential for disruption of global financial markets.

This disruption, if sustained or recurrent, could prevent us or make it more difficult for us to access capital or make it difficult to comply with the covenants contained in the MidCap Credit Facility, which could negatively affect our liquidity.

Issuances of additional debt or equity securities or the issuance of common stock upon conversion of outstanding convertible debt securities or upon the exercise of our currently outstanding warrants for shares of our common stock could impact the rights of the holders of our common stock and will dilute their ownership percentage.

In addition, the ongoing COVID-19 pandemic continues to have the potential for disruption of global financial markets.

This disruption, if sustained or recurrent, could prevent us or make it more difficult for us to access capital.

Issuances of additional debt or equity securities or the issuance of common stock upon conversion of outstanding convertible debt securities for shares of our common stock could impact the rights of the holders of our common stock and will dilute their ownership percentage.

Moreover, the establishment of other funding facilities may impose restrictions on our operations.

These restrictions could include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments.

We may also raise additional capital by

pursuing opportunities for the licensing or sale of certain intellectual property and other assets.

We may also raise additional capital by pursuing opportunities for the licensing or sale of certain intellectual property and other assets.

We cannot offer assurances, however, that any strategic collaboration , sales of securities or sales or licenses of assets will be available to us on a timely basis or on acceptable terms, if at all.

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In the event that sufficient additional funds are not obtained through strategic collaboration opportunities, sales of securities, funding facilities, licensing arrangements, borrowing arrangements and/or asset sales on a timely basis, we may be required to reduce expenses through the delay, reduction or curtailment of our projects, or further reduction of costs for facilities and administration.

Moreover, if we do not obtain such additional funds, there may continue to be substantial doubt about our ability to continue as a going concern and increased risk of insolvency and up to total loss of investment to our stockholders and other security holders.

As of the date hereof, we have not obtained a solvency opinion or otherwise conducted a valuation of our properties to determine whether our debts exceed the fair value of our property within the meaning of applicable solvency laws.

If we are or become insolvent, holders of our common stock or other securities may lose the entire value of their investment.

We cannot provide assurances that changed or unexpected circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate.

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If we are unable to raise adequate additional capital when required or in sufficient amounts or on terms acceptable to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a loss), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue an acquisition of our company at a price that may result in up to a total loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets.

We are currently dependent on the successful commercialization of our only approved product, Afrezza.

The continued commercialization and development of Afrezza will require substantial capital that we may not be able to obtain.

We have expended significant time, money and effort in the development of our only approved product, Afrezza.

We anticipate that in the near term our prospects and ability to generate significant revenues will heavily depend on our ability to successfully commercialize Afrezza in the United States.

In addition, we anticipate that revenues from our existing or future licensing arrangements for our Technosphere platform technology that involve license, milestone, royalty or other payments to us will depend on our ability to achieve the performance obligations specified in such arrangements.

Successful commercialization of Afrezza is subject to many risks, including some that are outside our control.

There are numerous examples of failures to fully exploit the market potential of drug products, including by pharmaceutical companies with more experience and resources than us.

We will need to maintain and potentially enhance our commercialization capabilities in order to successfully commercialize Afrezza in the United States, and we may not have sufficient resources to do so.

The market for skilled commercial personnel is highly competitive, and we may not be able to hire all of the personnel we need on a timely basis or retain them for a sufficient period.

If we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate potential customers about the benefits of Afrezza and its proper administration, our efforts to successfully commercialize Afrezza could be put in jeopardy, which would negatively impact our ability to generate product revenues.

If we are unable to maintain payer coverage of, and adequate reimbursement for Afrezza, physicians may limit how much or under what circumstances they will prescribe or administer Afrezza.

As a result, patients may decline to purchase Afrezza, which would have an adverse effect on our ability to generate revenues.

We are responsible for the NDA for Afrezza and its maintenance.

We may fail to comply with maintenance requirements, including timely submitting required reports.

Furthermore, we are responsible for the conduct of the remaining required post-approval trials of Afrezza.

Our financial and other resource constraints may result in delays or adversely impact the reliability and completion of these trials.

If we fail to achieve commercial success with Afrezza in the United States, our business, financial condition and results of operations will be materially and adversely affected.

If we fail as an effective manufacturing organization, we may be unable to support commercialization of Afrezza or Tyvaso DPI.

We use our Danbury, Connecticut facility to formulate both the Afrezza and Tyvaso DPI inhalation powders, fill plastic cartridges with the powders, package the cartridges in blister packs, and place the blister packs into foil pouches.

We utilize a contract packager to assemble the final kits of Afrezza foil-pouched blister packs along with inhalers and the package inserts.

The responsibility for Tyvaso DPI packaging has not yet been determined.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up production to commercial batch sizes, which is the stage of production that we have now reached with Tyvaso DPI .

These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel .

There is also a need to comply with strictly enforced federal, state and foreign regulations , including inspections.

We anticipate that our facility will need to undergo a pre-approval inspection related to Tyvaso DPI before the FDA will approve the NDA for that product.

If the FDA makes any major inspectional observations, the approval and launch of Tyvaso DPI may be delayed.

We expect that our results of operations will fluctuate for the foreseeable future, which may make it difficult to predict our future performance from period to period.

Our operating results have fluctuated in the past and are likely to do so in future periods.

Some of the factors that could cause our operating results to fluctuate from period to period include the factors that will affect our funding requirements described above under “Risk Factors — We will need to raise additional capital to fund our operations, and there is substantial doubt about our ability to continue as a going concern.”

Some of the factors that could cause our operating results to fluctuate from period to period include the factors that will affect our funding requirements described above under “Risk Factors — We may need to raise additional capital to fund our operations.”

We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance.

Our business, product sales, results of operations and ability to access capital could be adversely affected by the effects of health pandemics or epidemics, including the recent ongoing COVID-19 pandemic, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations.

The COVID-19 pandemic could materially affect our operations, including at our headquarters in California and at our manufacturing facility in Connecticut and with respect to our sales force and their ability to interact with health care professionals, as well as the business or operations of our suppliers, distributors or other third parties with whom we conduct business.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have business operations, and could cause significant disruption in the operations of third-party manufacturers and distributors upon whom we rely.

The ongoing COVID-19 pandemic has resulted in a number of restrictions to reduce the spread of the disease, including executive orders in California and Connecticut, and several other state and local orders across the country, which, among other things, directed individuals to shelter at their places of residence, directed schools, businesses and governmental agencies to cease non-essential operations at physical locations, prohibited certain non-essential gatherings, and ordered cessation of non-essential travel.

In some places, these orders have been lifted whereas other locations, including Los Angeles County where our headquarters is located, continue to be subject to significant restrictions.

The emergence of new variants of the SARS-CoV-2 virus raises the possibility that recurring cycles of restrictions will be imposed in the future, notwithstanding vaccination efforts.

The effects of state and local stay-at-home orders and our own work-from-home policies may negatively impact productivity, disrupt our business and delay our development programs, regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

Our business, product sales, results of operations and ability to access capital could be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have business operations, and we could experience significant disruptions in the operations of third-party manufacturers and distributors upon whom we rely.

In particular, the ongoing COVID-19 pandemic could materially affect our operations, including at our manufacturing facility in Connecticut and with respect to our sales force and their ability to interact with health care professionals, as well as the business or operations of our suppliers, distributors or other third parties with whom we conduct business.

The ongoing COVID-19 pandemic has resulted in a number of restrictions to reduce the spread of the disease, many of which have been eased or lifted in recent months.

The emergence of new variants of the SARS-CoV-2 virus raises the possibility that recurring cycles of infection and corresponding restrictions will be imposed in the future, notwithstanding vaccination and other public health efforts.

The effects of the restrictions related to the COVID-19 pandemic and our related policies addressing the pandemic, including the evolving nature of such policies, may negatively impact productivity, disrupt our business and delay our development programs, regulatory and commercialization timelines.

We may also face challenges or disruptions as employees return back to the workplace, including re-integration challenges by our employees and distractions to management related to such transition.

These and similar, and perhaps more severe, disruptions in our operations due to the COVID-19 pandemic could negatively impact our business, operating results and financial condition.

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Although we believe we have sufficient quantities of raw materials for planned manufacturing operations in 2022 , a prolonged supply interruption of certain components could adversely affect our ability to conduct commercialization activities and planned clinical trials.

In addition, we believe that the severity of the COVID-19 pandemic in Brazil has the potential to negatively impact the distribution of Afrezza by our partner in that country.

Sales and demand for Afrezza have been adversely affected by the global COVID-19 pandemic, and we expect that the COVID-19 pandemic will continue to negatively impact near-term revenues from Afrezza.

Our sales representatives have not fully returned to conducting in-person office visits with healthcare providers, which impacts their productivity.

In addition, we believe that the COVID-19 pandemic has the potential to continue to negatively impact the distribution of Afrezza by our partner in Brazil .

Sales and demand for Afrezza have been adversely affected by the COVID-19 pandemic, and we expect this trend to continue for at least the near-term.

Although our sales representatives are conducting in-person sales calls to the extent permitted by state and local public health authorities and by the policies of individual healthcare providers that they interact with, they have not fully returned to conducting in-person office visits with healthcare providers, which impacts their productivity.

Disruptions in the prescription volume of Afrezza could also occur:

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if pharmacies are closed or suffering supply chain disruptions,

if patients lose access to employer-sponsored health insurance due to period of high unemployment, or

if patients lose access to employer-sponsored health insurance due to periods of high unemployment, or

as a result of general disruptions in the operations of payers, distributors, logistics providers and other third parties that are necessary for Afrezza to be prescribed and reimbursed.

In addition, our planned clinical trials of Afrezza and those of our partner for Tyvaso DPI may be affected by the COVID-19 pandemic.

In addition, our ongoing or planned clinical trials of Afrezza or those conducted by our Cipla or our other regional partners may be affected by the COVID-19 pandemic.

Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

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While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, the pandemic continues to have the potential for disruption of global financial markets.

This disruption, if sustained or recurrent, could make it more difficult for us to access capital or to comply with the covenants contained in the MidCap Credit Facility, which could negatively affect our liquidity.

This disruption, if sustained or recurrent, could make it more difficult for us to access capital, which could negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

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If we do not obtain regulatory approval of Afrezza in foreign jurisdictions, we will not be able to market Afrezza in such jurisdictions, which could limit our commercial revenues.

We may not continue to be successful in establishing or maintaining regional partnerships or other arrangements with third parties for the commercialization of Afrezza outside of the United States.

We may not be able to establish additional regional partnerships or other arrangements with third parties for the commercialization of Afrezza outside of the United States.

Although Afrezza has been approved in the United States by the FDA and in Brazil by ANVISA, we have not yet obtained approval in any other jurisdiction.

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This will require additional time, expertise and expense, including the potential need to conduct additional studies or development work for other jurisdictions beyond the work that we have conducted to support the approval of Afrezza in the United States.

Our current strategy for the future commercialization of Afrezza outside of the United States, subject to receipt of the necessary regulatory approvals, is to seek and establish regional partnerships in foreign jurisdictions where there are commercial opportunities.

Our current strategy for the future commercialization of Afrezza outside of the United States, subject to receipt of the necessary regulatory approvals, is to seek, establish and maintain regional partnerships in foreign jurisdictions where there are commercial opportunities.

It may be difficult to find or maintain collaboration partners that are able and willing to devote the time and resources necessary to successfully commercialize Afrezza.

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We may not be successful in our efforts to develop and commercialize our product candidates.

We have sought to develop our product candidates through our internal research programs.

Other than Tyvaso DPI, which UT is expected to be submitted for regulatory approval in April 2021 according to disclosures from United Therapeutics, all of our product candidates will require additional research and development and, in some cases, significant preclinical, clinical and other testing prior to seeking regulatory approval to market them.

Other than Tyvaso DPI, which we licensed to UT in September 2018 after we conducted a Phase 1 clinical study, we have sought to develop our product candidates through our internal research programs.

All of our product candidates will require additional research and development and, in some cases, significant preclinical, clinical and other testing prior to seeking regulatory approval to market them.

Accordingly, these product candidates will not be commercially available for a number of years, if at all.

Further research and development on these programs will require significant financial resources.

Given our limited financial resources, our need to support the regulatory submission and launch preparations of Tyvaso DPI and our ongoing attention on the development and commercialization of Afrezza, we will likely not be able to advance these programs into clinical development unless we are able to obtain specific funding for these programs or enter into collaborations with third parties.

Even if our research programs identify product candidates that initially show promise, these candidates may fail to progress to clinical development for any number of reasons, including discovery upon further research that these candidates have adverse effects or other characteristics that indicate they are unlikely to be effective.

Given our limited financial resources, our need to support the launch preparations of Tyvaso DPI and our ongoing attention on the development and commercialization of Afrezza, we may not be able to advance these programs into clinical development unless we are able to obtain specific funding for these programs or enter into collaborations with third parties.

Even if our research programs identify product candidates that initially show promise, these candidates may fail to progress through clinical development for any number of reasons, including discovery upon further research that these candidates have adverse effects or other characteristics that indicate they are unlikely to be effective.

In addition, the clinical results we obtain at one stage are not necessarily indicative of future testing results.

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The accumulated deficit has resulted principally from costs incurred in our research and development programs, the write-off of assets (including goodwill, inventory and property, plant and equipment) and general operating expenses.

We expect to make substantial expenditures and to incur increasing operating losses in the future in order to continue the commercialization of Afrezza.

We expect to make substantial expenditures and to incur increasing operating losses in the future in order to continue the commercialization of Afrezza and advance product candidates in our pipeline.

In addition, under our Insulin Supply Agreement with Amphastar, we agreed to purchase certain annual minimum quantities of insulin through 2027.

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As of December 31, 2021, we had $288.4 million principal amount of outstanding debt, consisting of:

$50.0 million principal amount under the MidCap Credit Facility, bearing interest at an annual rate equal to one-month LIBOR plus 6.75%, subject to a one-month LIBOR floor of 2.00%, and payable in equal monthly installments beginning in September 2022 through maturity in August 2024;

$5.0 million principal amount of 2024 convertible notes bearing interest at 5.75% per annum (“2024 convertible notes”), with interest payable in cash or equity semiannually in arrears on February 15 and August 15 of each year, and maturing in November 2024, all of which was convertible into shares of our common stock at the option of the holder at a conversion price of $3.00 per share.

The 2024 convertible notes provided that, under certain circumstances, at our option, we may elect to cause all or any portion of the 2024 convertible notes to be mandatorily converted;

$63.0 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, $28.0 million of which is convertible into shares of our common stock at the option of the 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 (“CARES Act”), all or a portion of which may be forgiven.

The Paycheck Protection Program loan (“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 the date the SBA remits the borrower’s loan forgiveness amount to the lender.

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

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.

All or a portion of the PPP Loan may be forgiven by the SBA upon application to our lender by us beginning 60 days after loan approval up to 24 weeks after the date of the loan disbursement (the “covered period”), but not later than ten months after the end of our covered period, and upon documentation of expenditures in accordance with the SBA requirements.

Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered interest and covered utilities during the 24 week period (or eight-week period at our option) beginning on the date of loan approval.

Not more than 40% of the forgiven amount may be for non-payroll costs.

The amount of the PPP Loan eligible to be forgiven will be reduced if our full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%.

We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, in accordance with the amortization schedule described above, and we cannot provide any assurance that we will be eligible for loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

Furthermore, on April 28, 2020, the Secretary of the U.S.

Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan.

The PPP Loan application required us to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations.

While we made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the PPP, the certification described above does not contain any objective criteria.

In addition, the SBA has stated that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

The lack of clarity regarding loan eligibility under the PPP has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans.

If, despite our good-faith belief that we satisfied all eligible requirements for the PPP Loan, we are found to be in violation of any of the laws or governmental regulations that apply to us in connection with the PPP Loan, including the False Claims Act, or it is otherwise determined that we were not eligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan.

In addition, our receipt of the PPP Loan may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.

If we fail to take all actions necessary and promptly file all required reporting to ensure than no less than 90% of the PPP Loan is forgiven in accordance with the loan forgiveness provisions of the PPP, we will be in violation of the consent given by MidCap with respect to such additional

indebtedness, which could lead to an event of default under the MidCap Credit Facility.

Any of these events could have a material adverse effect on our business, results of operations and financial condition.

$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.

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.

$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.

$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 pay interest in-kind or in shares.

Under the MidCap credit facility, our interest rate on borrowed amounts is dependent on one-month LIBOR, which is the basic rate of interest used in lending between banks on the London interbank market.

LIBOR is widely used as a reference for setting the interest rate on loans globally and is currently scheduled to be phased out in 2021.

Before one-month LIBOR is phased out, we may need to renegotiate the MidCap Credit Facility to replace one-month LIBOR with a new standard, which has yet to be established.

LIBOR is widely used as a reference for setting the interest rate on loans globally.

In March 2021, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that the one-month LIBOR will either cease to be provided by any administrator or no longer be representative, effective immediately after June 30, 2023.

The United States Federal Reserve has also advised banks to cease entering into new contracts that use LIBOR as a reference rate.

Before one-month LIBOR is phased out, we may need to renegotiate the MidCap credit facility to replace one-month LIBOR with a new standard, which has not yet been agreed upon.

The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

We are not able to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks.

Accordingly, the outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phase-out could cause LIBOR to perform differently than in the past or cease to exist.

The consequences of these developments cannot entirely be predicted, but could result in higher interest rates on our loans under the MidCap credit facility.

We cannot provide assurance that future interest rate changes will not have a material negative impact on our business, financial position, or operating results.

Under the MidCap Credit Facility, an advance of $25.0 million will be available to us between October 1, 2021 and March 31, 2022, subject to the satisfaction of certain milestone conditions associated with Tyvaso DPI.

Under the MidCap Credit Facility, we must comply with a minimum cash covenant of $30.0 million at all times and, if the third advance of $25.0 million is funded, we must ensure that our partner is actively marketing and (after the first commercial sale) generating revenue from Tyvaso DPI.

Furthermore, we cannot predict or quantify the time, effort and cost required to transition to the use of new benchmark rates, including with respect to negotiating and implementing any necessary changes to existing contractual agreements, and implementing changes to our systems and processes.

We cannot provide assurance that future

interest rate changes will not have a material negative impact on our business, financial position, or operating results.

Under the MidCap credit facility, we must comply with a minimum cash covenant of $10.0 million at all times prior to the approval by the FDA of Tyvaso DPI and we may be required to comply with additional covenants in the future under certain circumstances.

Further, the MidCap credit facility requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

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The restrictive covenants in the MidCap credit facility could prevent us from pursuing business opportunities that we or our stockholders may consider beneficial.

We expect that the COVID-19 pandemic will continue to negatively impact near-term revenues from Afrezza, which could also affect our compliance with a covenant relating to trailing twelve-month minimum Afrezza net revenue, tested on a monthly basis, which is set forth in the MidCap Credit Facility Agreement, as amended.

I f we fail to meet this covenant or the minimum cash covenant, any outstanding borrowings, together with accrued interest, under the MidCap Credit Facility could be declared immediately due and payable.

If our unrestricted cash and short-term investments balance falls below $90.0 million, we will be subject to a covenant relating to trailing twelve-month minimum Afrezza net revenue, tested on a monthly basis, which is set forth in the MidCap credit facility Agreement, as amended.

If we fail to meet this covenant or the minimum cash covenant, any outstanding borrowings, together with accrued interest, under the MidCap credit facility could be declared immediately due and payable.

A breach of any of these covenants could result in an event of default under the MidCap credit facility.

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While we have been able to timely make our required interest payments to date, we cannot guarantee that we will be able to do so in the future.

If we fail to pay interest on our outstanding term loan under the MidCap Credit Facility (the “MidCap Term Loan”), or if we fail to repay or repurchase the MidCap Term Loan, PPP Loan or borrowings under the Mann Group promissory notes when required, we will be in default under the instrument for such debt securities or loans, 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 pay interest on, or repay, our outstanding term loan under the MidCap credit facility or borrowings under the Mann Group promissory notes when required, we will be in default under the instrument for such debt securities or loans, 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 note holders initiating bankruptcy proceedings or causing us to cease operations altogether.

If we do not achieve our projected development goals in the timeframes we expect, our business, financial condition and results of operations will be harmed and the market price of our common stock and other securities could decline.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product

development goals, which we sometimes refer to as milestones.

We anticipate that revenues from our existing or future licensing arrangements for our Technosphere platform technology that involve license, milestone, royalty or other payments to us will depend on our ability to achieve the performance obligations specified in such arrangements.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones.

These milestones may include the commencement or completion of scientific studies and clinical studies and the submission of regulatory filings.

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These institutions are becoming increasingly aware of the commercial value of their findings and are more active in seeking patent and other proprietary rights as well as licensing revenues.

Continued testing of Afrezza or our product candidates may not yield successful results, and even if it does, we may still be unable to commercialize our product candidates.

Continued testing of Afrezza or our product candidates may not yield successful results, and even if it does, we may still be unable to successfully commercialize our product candidates.

Forecasts about the effects of the use of drugs, including Afrezza, over terms longer than the clinical studies or in much larger populations may not be consistent with the earlier clinical results.

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Any suspension or termination of our clinical studies or marketing activities may harm our business, financial condition and results of operations and the market price of our common stock and other securities may decline.

For the commercial manufacture of inhaled drug products, we need access to sufficient, reliable and affordable supplies of FDKP, the inhaler, the related cartridges and other materials.

For Afrezza, we also require a supply of insulin.

Currently, the only source of insulin that we have qualified for Afrezza is manufactured by Amphastar.

We must rely on all of our suppliers to comply with relevant regulatory and other legal requirements, including the production of insulin and FDKP in accordance with the FDA’s cGMP for drug products, and the production of the Afrezza inhaler and related cartridges in accordance with QSRs.

Afrezza, and other products that we may develop in the future, may not gain market acceptance among physicians, patients, third-party payers and the healthcare community.

Failure to achieve market acceptance would limit our ability to generate revenue and would adversely affect our results of operations.

The degree of market acceptance of Afrezza and other products that we may develop in the future depends on many factors, including the following:

Approved labeling claims;

Willingness of the healthcare community and patients to adopt new technologies;

Ability to manufacture the product in sufficient quantities with acceptable quality and cost;

Perception of patients and the healthcare community, including third-party payers, regarding the safety, efficacy and benefits compared to competing products or therapies;

Convenience and ease of administration relative to existing treatment methods;

Coverage and reimbursement, as well as pricing relative to other treatment therapeutics and methods;

Marketing and distribution support.

If third-party paye rs do not cover Afrezza or any of our product candidates for which we receive regulatory approval, Afrezza or such product candidates might not be prescribed, used or purchased, which would adversely affect our revenues.

In certain foreign markets the pricing of prescription pharmaceuticals is subject to direct governmental control.

At the federal level, the Trump administration’s budget proposal for the fiscal year 2021 included a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases.

Moreover, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers.

On July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals.

The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada.

Further, on November 20, 2020, the U.S.

Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The implementation of this rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

However, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that there will continue to be a number of federal and state proposals to implement similar and/or additional governmental controls.

We cannot be certain what legislative proposals will be adopted or what actions federal, state or private third-party payers may take in response to any drug pricing and reimbursement reform proposals or legislation.

For example, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

Such reforms may limit our ability to generate revenues from sales of Afrezza or other products that we may develop in the future and achieve profitability.

Further, to the extent that such reforms have a material adverse effect on the business, financial condition and profitability of any future marketing partner for Afrezza, and companies that are prospective collaborators for our product candidates, our ability to commercialize Afrezza and our product candidates under development may be adversely affected.

Third-party payers are increasingly challenging the prices charged for medical products and services.

The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies.

Also, third-party payers may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.

In addition, because each third-party payer individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming and costly process.

We may be required to provide scientific and clinical support for the use of any product to each third-party payer separately with no assurance that approval would be obtained.

This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results.

Patients will be unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

The requirements governing drug pricing vary widely from country to country.

In some non-U.S.

jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed.

In addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability.

under what circumstances they will prescribe or administer them and patients may decline to purchase them.

If product liability claims are brought against us, we may incur significant liabilities and suffer damage to our reputation.

The testing, manufacturing, marketing and sale of Afrezza and any clinical testing of our product candidates expose us to potential product liability claims.

The testing, manufacturing, marketing and sales of Afrezza and any clinical testing of our product candidates expose us to potential product liability claims.

A product liability claim may result in substantial judgments as well as consume significant financial and management resources and result in adverse publicity, decreased demand for a product, injury to our reputation, withdrawal of clinical studies volunteers and loss of revenues.

We currently carry worldwide product liability insurance in the amount of $10.0 million.

Our insurance coverage may not be adequate to satisfy any liability that may arise, and because insurance coverage in our industry can be very expensive and difficult to obtain, we cannot assure you that we will seek to obtain, or be able to obtain if desired, sufficient additional coverage.

We currently carry worldwide product liability insurance in the amount of $10.0 million as well as an errors and omissions policy in the amount of $10.0 million.

Our insurance coverage may not be adequate to satisfy any liability that may arise, and because

insurance coverage in our industry can be very expensive and difficult to obtain, we cannot assure you that we will seek to obtain, or be able to obtain if desired, sufficient additional coverage.

If losses from such claims exceed our liability insurance coverage, we may incur substantial liabilities that we may not have the resources to pay.

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We may be unable to attract and retain these individuals on acceptable terms, if at all.

In addition, we may be required to expand our workforce, particularly in the areas of manufacturing and sales and marketing.

In addition, we may be required to expand our workforce.

These activities will require the addition of new personnel, including management, and the development of additional expertise by existing personnel, and we cannot assure you that we will be able to attract or retain any such new personnel on acceptable terms, if at all.

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From time to time, the Financial Accounting Standards Board (“FASB”), either alone or jointly with other organizations, promulgates new accounting principles that could have an adverse impact on our financial position, results of operations and presentation or classification of cash flows.

New pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future and as a result we may be required to make chang es in our accounting policies.

Any difficulties in adopting or implementing new accounting standards, and updating or modifying our internal controls as needed on a timely basis, could result in our failure to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

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Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

For example, the Tax Act enacted many significant changes to the U.S.

Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation.

For example, the CARES Act modified certain provisions of the Tax Act.

In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation.

Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets and could increase our future U.S.

For example, the Biden administration and Congress have proposed various U.S.

federal tax law changes, which if enacted could have a material impact on our business, cash flow, financial conditions or results of operations.

In addition, it is uncertain if and to what extent various states will conform to federal tax laws.

Future tax reform legislation could have a material impact on the value of our deferred tax assets and could increase our future U.S.

Our ability to use net operating losses to offset future taxable income may be subject to limitations.

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Net operating loss carryforwards that expire unused will be unavailable to offset future income tax liabilities.

Under the Tax Act as modified by the CARES

Act, federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal net operating losses in tax years beginning after December 31, 2020, is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

Under current law, federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal net operating losses in tax years beginning after December 31, 2020, is limited to 80% of taxable income.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

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In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

For example, California imposed limits on the usability of California state net operating losses to offset taxable income in tax years beginning after 2019 and before 2023.

As a result, if we earn net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and other tax attributes, which could potentially result in increased future tax liability to us and adversely affect our future cash flows.

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From time to time, we may undertake internal restructuring activities as we continue to evaluate and attempt to optimize our cost and operating structure in light of developments in our business strategy and long-term operating plans.

These activities may result in write-offs or

other restructuring charges.

These activities may result in write-offs or other restructuring charges.

There can be no assurance that any restructuring activities that we undertake will achieve the cost savings, operating efficiencies or other benefits that we may initially expect.

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If we undertake any internal restructuring activities and fail to achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.

We and certain of our executive officers and directors have been named as defendants in ongoing securities lawsuits that could result in substantial costs and divert management’s attention.

Following the public announcement of Sanofi’s election to terminate the Sanofi License Agreement and the subsequent decline in our stock price, two motions were submitted to the district court at Tel Aviv, Economic Department for the certification of a class action against MannKind and certain of our officers and directors.

In general, the complaints allege that MannKind and certain of our officers and directors violated Israeli and U.S.

securities laws by making materially false and misleading statements regarding the prospects for Afrezza, thereby artificially inflating the price of its common stock.

The plaintiffs are seeking monetary damages.

In November 2016, the district court dismissed one of the actions without prejudice.

In the remaining action, the district court ruled in October 2017 that U.S.

law will apply to this case.

The plaintiff appealed this ruling, and following an oral hearing before the Supreme Court of Israel, decided to withdraw his appeal.

Subsequently, in November 2018, we filed a motion to dismiss the certification motion.

In September 2019, the plaintiff brought a motion to amend his claim, which the court denied in January 2020.

The plaintiff has appealed this denial to the Supreme Court of Israel.

We will continue to vigorously defend against the claims advanced.

If we are not successful in our defense, we could be forced to make significant payments to or other settlements with our stockholders and their lawyers, and such payments or settlement arrangements could have a material adverse effect on our business, operating results or financial condition.

Even if such claims are not successful, the litigation could result in substantial costs and significant adverse impact on our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results and financial condition.

Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.

At least for the foreseeable future, we expect that our manufacturing facility in Danbury, Connecticut will be the sole location for the manufacturing of Afrezza and Tyvaso DPI.

At least for the foreseeable future, we expect that our manufacturing facility in Connecticut will be the sole location for the manufacturing of Afrezza and Tyvaso DPI.

This facility and the manufacturing equipment we use would be costly to replace and could require substantial lead-time to repair or replace.

We depend on our facilities and on collaborators, contractors and vendors for the continued operation of our business, some of whom are located in other countries.

We depend on our facilities and on collaborators, contractors and vendors for the continued operation

of our business, some of whom are located in other countries.

Natural disasters or other catastrophic events, including interruptions in the supply of natural resources, political and governmental changes, severe weather conditions, public health pandemics or epidemics (including, for example, the ongoing COVID-19 pandemic), wildfires and other fires, explosions, actions of animal rights activists, terrorist attacks, volcanic eruptions, earthquakes and wars could disrupt our operations or those of our collaborators, contractors and vendors.

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Our research and development work involves the controlled storage and use of hazardous materials, including chemical and biological materials.

In addition, our manufacturing operations involve the use of a chemical that may form an explosive mixture under certain conditions.

Our operations also produce hazardous waste products.

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Finally, current or future environmental laws and regulations may impair our research, development or production efforts or have an adverse impact on our business, results of operations and financial condition.

When we purchased the facilities located in Danbury, Connecticut in 2001, a soil and groundwater investigation and remediation was being conducted by a former site operator (the responsible party) under the oversight of the Connecticut Department of Environmental Protection, which is not completed.

The responsible party will make all filings necessary to achieve closure for the environmental remediation conducted at the site, and has agreed to indemnify us for any future costs and expenses we may incur that are directly related to the final closure.

When we purchased our facility in Connecticut in 2001, a soil and groundwater investigation and remediation was being conducted by a former site operator (a responsible party) under the oversight of the Connecticut Department of Energy & Environmental Protection (formerly the Connecticut Department of Environmental Protection), which investigation and remediation is ongoing.

The former site operator and responsible party will make further filings necessary to achieve closure for the environmental investigation and remediation it has conducted at the site, and has agreed to indemnify us for any future costs and expenses we may incur that are directly related to its prior operations at the facility.

If we are unable to collect these future costs and expenses, if any, from the responsible party, our business, financial condition and results of operations may be harmed.

We are increasingly dependent on information technology systems, in frastructure and data security.

We are increasingly dependent upon information technology systems, infrastructure and data security.

Our business requires manipulating, analyzing and storing large amounts of data.

When we sold a portion of the property upon which our facility is located to the entity that is now our landlord, we became an additional responsible party for any environmental investigation and remediation on that portion of the property, including with respect to investigation or remediation that may be required as a result of our activities since 2001.

To date, we have not identified any material environmental investigation or remediation activities that we are required to perform.

If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse consequences.

We, and third parties acting on our behalf, employ and are increasingly dependent upon information technology systems, infrastructure, applications, websites and other resources.

Our business requires collecting, manipulating, analyzing, storing and otherwise processing large amounts of data, including proprietary data, sensitive data, personal data and other confidential information.

In addition, we rely on an enterprise software system to operate and manage our business.

Our business therefore depends on the continuous, effective, reliable and secure operation of our computer hardware, software, networks, Internet servers and related infrastructure.

The multitude and complexity of our computer systems and the potential value of our data make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack.

Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data including intellectual property, trade secrets or personal information belonging to us or our customers or other business partners may be exposed to unauthorized persons or to the public.

Our systems are also potentially subject to cyber-attacks, which can be highly sophisticated and may be difficult to detect.

Such attacks are often carried out by motivated, well-resourced, skilled and persistent actors including nation states, organized crime groups and “hacktivists.” Cyber-attacks could include the deployment of harmful malware and key loggers, a denial-of-service attack, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our information technology systems, infrastructure and data.

Our key business partners face similar risks and any security breach of their systems could adversely affect our security status.

Additionally, natural disasters, public health pandemics or epidemics ( including, for example, the COVID-19 pandemic ), terrorism, war and telecommunication and electrical failures may result in damage to or the interruption or impairment of key business processes, or the loss or corruption of confidential information, including intellectual property, proprietary business information and personal information.

While we continue to invest in the protection of our critical or sensitive data and information technology, there can be no assurance that our efforts will prevent or detect service interruptions or breaches in our systems that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us.

Our business, including our ability to manufacture drug products and conduct clinical trials, therefore depends on the continuous, effective, reliable and secure operation of our information technology resources and those of third parties acting on our behalf, including computer hardware, software, networks, Internet servers and related infrastructure.

Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase.

These threats are becoming increasingly difficult to detect.

These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors.

We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.

Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services.

The COVID-19 pandemic and our remote workforce poses increased risks to our information technology systems and data, as more of our employees work from home, utilizing network connections outside our premises.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,

as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Any of the previously identified or similar threats could cause a security incident or other interruption.

A security incident or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information.

A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products.

We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents.

Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standards or reasonable security measures to protect our information technology systems and sensitive information.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

We have not always been able in the past and may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred.

For example, like many companies, we use SolarWinds to help manage our information technology systems.

A cyberattack on SolarWinds was discovered in December 2020 and widely exploited by threat actors.

Upon learning of this vulnerability, we applied the software patch provided by SolarWinds and remediated the incident.

The incident did not appear to have any negative impact on our operations or the sensitive information we may process.

In addition, a ransomware attack on Ultimate Kronos Group’s (“UKG”) Kronos Private Cloud service was discovered in December 2021.

We use UKG Pro, a product offered through UKG that is not in the Kronos Private Cloud, for human capital management.

UKG is not aware of an impact on UKG Pro and the incident did not appear to have any negative impact on our operations or the sensitive information we may process.

Thus, despite our efforts to identify and remediate vulnerabilities, if any, in our information technology systems, our efforts may not be successful.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents.

Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences.

If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences.

These consequences may include:

government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

additional reporting requirements and/or oversight;

restrictions on processing sensitive information (including personal data);

litigation (including class claims);

indemnification obligations;

negative publicity;

reputational harm;

monetary fund diversions;

interruptions in our operations (including availability of data);

financial loss;

and other similar harms.

Security incidents and attendant consequences may cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.

Additionally, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We cannot be sure that our cybersecurity insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

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Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom or the European Union and restrict our ability to generate revenue and achieve and sustain profitability.

While the Trade and Cooperation Agreement provides for the tariff-free trade of medicinal products between the UK and the EU there may be additional non-tariff costs to such trade which did not exist prior to the end of the Transition Period.

While the Trade and Cooperation Agreement provides for the tariff-free trade of medicinal products between the United Kingdom (“UK”) and the EU there may be additional non-tariff costs to such trade which did not exist prior to the end of the Transition Period.

Further, should the UK diverge from the EU from a regulatory perspective in relation to medicinal products, tariffs could be put into place in the future.

We could therefore, both now and in the future, face significant additional expenses (when compared to the position prior to the end of the Transition Period) to

operate our business, which could significantly and materially harm or delay our ability to generate revenues or achieve profitability of our business.

We could therefore, both now and in the future, face significant additional expenses (when compared to the position prior to the end of the Transition Period) to operate our business, which could significantly and materially harm or delay our ability to generate revenues or achieve profitability of our business.

Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us.

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The results of this testing or issues that develop in the review and approval by a regulatory agency may subject us to unanticipated delays or prevent us from marketing any products.

Our research and development activities, as well as the manufacturing and marketing of Afrezza and our product candidates, are subject to regulation, including regulation for safety, efficacy and quality, by the FDA in the United States and comparable authorities in other countries.

Our research and development activities for product candidates, as well as the manufacturing and marketing of approved products, are subject to regulation, including regulation for safety, efficacy and quality, by the FDA in the United States and comparable authorities in other countries.

FDA regulations and the regulations of comparable foreign regulatory authorities are wide-ranging and govern, among other things:

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product sales and distribution.

The requirements governing the conduct of clinical studies and manufacturing and marketing of Afrezza and our product candidates outside the United States vary widely from country to country.

The requirements governing the conduct of clinical studies as well as the manufacturing and marketing of drug products outside the United States vary widely from country to country.

Foreign approvals may take longer to obtain than FDA approvals and can require, among other things, additional testing and different clinical study designs.

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We may also be required to undertake post-marketing studies.

For example, as part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza .

We expect to initiate one of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 8-17 year-old children and adolescents, later in 2021, subject to the easing of restrictions due to COVID-19.

In addition , the FDA has required that we conduct a five-year, randomized, controlled trial in patients with type 2 diabetes, the primary objective of which is to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group.

We have an ongoing dialogue with the FDA regarding the endpoints and goals for this long-term trial and have not yet commenced this trial.

In addition, if we or other parties identify adverse effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and a reformulation of our products, additional clinical studies, changes in labeling of, or indications of use for, our products and/or additional marketing applications may be required.

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We are subject to stringent, ongoing government regulation.

The manufacture, marketing and sale of Afrezza are subject to stringent and ongoing government regulation.

The manufacture, marketing and sale of drug products is subject to stringent and ongoing government regulation.

The FDA may also withdraw product approvals if problems concerning the safety or efficacy of a product appear following approval.

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We also are required to register our establishments and list our products with the FDA and certain state agencies.

We and any third-party manufacturers or suppliers must continually adhere to federal regulations setting forth requirements, known as cGMP (for drugs) and QSR (for medical devices), and their foreign equivalents, which are enforced by the FDA and other national regulatory bodies through their facilities inspection programs.

We and any third-party manufacturers or suppliers must continually adhere to federal regulations setting forth cGMP (for drugs) and QSR (for medical devices), and their foreign equivalents, which are enforced by the FDA and other national regulatory bodies through their facilities inspection programs.

In complying with cGMP and foreign regulatory requirements, we and any of our potential third-party manufacturers or suppliers will be obligated to expend time, money and effort in production, record-keeping and quality control to ensure that our products meet applicable specifications and other requirements.

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The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates, delay the submission or review of an application or require additional expenditures by us.

In addition, interested parties (such as individuals, advocacy groups and competing pharmaceutical companies) can file a citizen petition with the FDA to request policy change or some form of administrative action on the FDA’s part, including with respect to an NDA.

For example, in July 2021, a third party submitted a citizen petition to the FDA requesting that the FDA refuse to approve Tyvaso DPI, and/or impose additional requirements in order to approve the product.

This has prompted the FDA to request additional information concerning Tyvaso DPI and to delay the review deadline for the Tyvaso DPI NDA from February 2022 to May 2022.

If successful, a citizen petition can significantly delay, or even prevent, the approval of a drug product.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be denied marketing approval or lose any marketing approval that we have already obtained.

There can be no assurance that we will be able to obtain necessary regulatory clearances or approvals on a timely basis, if at all, for any of our product candidates under development, and delays in receipt or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or failure to comply with existing or future regulatory requirements could have a material adverse effect on our business and results of operations.

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In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that could impact our ability to sell our products profitably.

For example, in March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, “PPACA”) became law in the United States.

PPACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affects the healthcare industry.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care Education and Reconciliation Act (collectively, the “PPACA”) substantially changed the way healthcare is financed by both governmental and private insurers and continues to significantly affect the healthcare industry.

Among the provisions of PPACA of importance to us are the following:

An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

An increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively;

An increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price (“AMP”) for most branded and generic drugs, respectively;

A licensure framework for follow-on biological products;

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A Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

There remain judicial and congressional challenges to certain provisions of the PPACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA.

President Trump signed Executive Orders and other directives designed to eliminate the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA.

Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA.

While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law.

The Tax Act includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.

In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax.

The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans.

In December 2018, CMS published a new final rule permitting further collections and payments to

and from certain PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment.

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are inv alid as well.

T he United States Supreme Court is currently review ing this case, but it is unknown when a decision will be reached.

Although the U nited States Supreme Court has yet ruled on the constitutionality of the PPACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the PPACA marketplace.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA .

It is unclear how the Supreme Court rule, other such litigation, the healthcare reform measures of the Biden administration will impact the PPACA and our business.

In addition, other legislative changes have been proposed and adopted since PPACA was enacted.

For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013, and, following passage of the BBA, will stay in effect through 2030 unless additional Congressional action is taken.

However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2021.

On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “ATRA”), which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

There have been executive, judicial and congressional challenges to certain provisions of the PPACA, although the constitutionality of the PPACA appears to now be settled.

It is possible that the PPACA will be subject to judicial or Congressional challenges in the future.

It is unclear how any such challenges, other litigation, and the healthcare reform measures of the current administration will impact the PPACA.

R ecently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

Specifically, there have been several recent U.S.

Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

Presidential executive orders, Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

These new laws and initiatives may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, the U.S.

Department of Health and Human Services (“HHS”) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.

No legislation or administrative actions have been finalized to implement these principles.

It is unclear whether these or similar policy initiatives will be implemented in the future.

In addition, Congress is considering additional health reform measures.

We expect that there will continue to be a number of federal and state proposals to implement similar and/or additional governmental controls.

For example, it is possible that additional governmental action will be taken in response to the COVID-19 pandemic.

Such reforms may limit our ability to generate revenues from sales of Afrezza or other products that we may develop in the future and achieve profitability.

We expect that PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues.

It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payers.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

If we or any future marketing partner fails to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

If we or any future partner fails to comply with federal and state healthcare laws, including fraud and abuse and health information laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a biopharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations, including those pertaining to fraud and abuse and patients’ rights, are and will be applicable to our business.

For example, we could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business.

The laws that may affect our ability to operate include, among others:

The number and scope of these laws, regulations and industry standards are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with each other, making compliance difficult.

The key laws that may affect our ability to operate include, among others:

The federal Anti-Kickback Statute (as amended by PPACA, which modified the intent requirement of the federal Anti-Kickback Statute so that a person or entity no longer needs to have actual knowledge of the Statute or specific intent to violate it to have committed a violation), which constrains our business activities, including our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

Federal civil and criminal false claims laws, including without limitation the False Claims Act, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other federal healthcare programs that are false or fraudulent, and knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government, and under PPACA, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal false claims laws;

HIPAA, which created new federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program or falsifying, concealing, or covering up a material fact in connection with the delivery of or payment for health care benefits;

HIPAA, as amended by HITECH, and their respective implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on entities subject to the law, such as certain healthcare providers, health plans, and healthcare clearinghouses and their respective business associates that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable health information as well as their covered subcontractors .

In addition, in May 2018, the European Union, or EU, adopted European General Data Protection Regulation, or GDPR, which contains new provisions specifically directed at the processing of health information, higher sanctions and extra-territoriality measures intended to bring non-EU companies under the regulation.

We anticipate that over time we may expand our business operations to include additional operations in the EU, including potentially conducting preclinical and clinical trials.

With such expansion, we would be subject to increased governmental regulation in the EU countries in which we might operate, including the GDPR;

The California Consumer Privacy Act (“CCPA”), which created individual privacy rights for California consumers (as that word is broadly defined in the law) and placed increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for a new cause of action for data breaches.

The CCPA will likely impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information;

The federal Physician Payments Sunshine Act under PPACA, which requires certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to CMS information related to payments and other transfers of value to physicians (defined to include defined to include doctors, dentists, optometrists, podiatrists and chiropractors), and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year ;

State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

The federal Physician Payments Sunshine Act under PPACA, which requires certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to CMS information related to payments and other transfers of value to physicians (defined to include defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members.

Other state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security and other processing of personal data (including health information) in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts certain payments that may be made to healthcare providers and entities;

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With Afrezza now available in Brazil and as we pursue additional international approvals, we will be subject to similar foreign laws and regulations.

If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion from U.S.

federal or state healthcare programs, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.

Any penalties, damages, fines, curtailment or restructuring of our operations could materially adversely affect our ability to operate our business and our financial results.

Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated.

If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, or any contractual obligations related to the same, we may be subject to governmental enforcement actions, investigations, litigation (including class action lawsuits) and other penalties, including significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, defense costs, exclusion from U.S.

federal or state healthcare programs, additional reporting requirements and/or oversight (including if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws), bans or restrictions on our processing of personal data, indemnity obligations and the curtailment or restructuring of our operations.

Any such event or consequence, including penalties, damages, fines, and curtailment or restructuring of our operations, could materially adversely affect our ability to operate our business, including our ability to run clinical trials, and our financial results and harm our reputation.

Although compliance programs can help mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be eliminated.

Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly.

We are subject to stringent and changing obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse business consequences.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, and sensitive third-party data.

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws.

For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information.

In addition, the CCPA imposes obligations on covered businesses.

These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data.

The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation).

Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data we maintain about California residents.

In addition, it is anticipated that the CPRA, effective January 1, 2023, will expand the CCPA.

Additionally, the CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement.

Other states have enacted data privacy laws.

For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which become effective in 2023.

In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.

Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.

For example, the GDPR, the United Kingdom’s GDPR (“UK GDPR”), and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

13,709/2018) impose strict requirements for processing personal data.

For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater.

Further, individuals may initiate litigation related to processing of their personal data.

Certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws, which could make it more difficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other foreign jurisdictions).

Existing mechanisms that facilitate cross-border personal data transfers may change or be invalidated.

The more reliant our business is on the ability to effectuate cross-border data transfers, the more impact we may experience in light of any changes in the legal landscape.

In addition, privacy advocates and industry groups have proposed, and may propose, standards with which we are legally or contractually bound to comply.

Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.

Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so.

Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.

For example, any failure by a third-party vendor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to or interruption in our ability to operate our business and proceedings against us by governmental entities or others.

If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences.

These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-related claims);

additional reporting requirements and/or oversight;

bans on processing personal data;

orders to destroy or not use personal data;

and imprisonment of company officials.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:

loss of customers;

interruptions or stoppages in our business operations (including, as relevant, clinical trials);

inability to process personal data or to operate in certain jurisdictions;

limited ability to develop or commercialize our products;

expenditure of time and resources to defend any claim or inquiry;

adverse publicity;

or revision or restructuring of our operations.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the United States, we could be subject to additional reimbursement requirements, fines, sanctions and exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition.

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The requirements of these programs, including, by way of example, their respective terms and scope, change frequently.

For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s AMP, for single source and innovator multiple source drugs, beginning January 1, 2024.

Responding to current and future changes may increase our costs, and the complexity of compliance will be time consuming.

Invoicing for rebates is provided in arrears, and there is frequently a time lag of up to several months between the sales to which rebate notices relate and our receipt of those notices, which further complicates our ability to accurately estimate and accrue for rebates related to the Medicaid program as implemented by individual states.

Thus, there can be no assurance that we will be able to identify all factors that may cause our discount and rebate payment

obligations to vary from period to period, and our actual results may differ significantly from our estimated allowances for discounts and rebates.

Thus, there can be no assurance that we will be able to identify all factors that may cause our discount and rebate payment obligations to vary from period to period, and our actual results may differ significantly from our estimated allowances for discounts and rebates.

Changes in estimates and assumptions may have a material adverse effect on our business, results of operations and financial condition.

In addition, the Office of Inspector General of the HHS and other Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to the methodologies used by manufacturers to calculate average manufacturer price (“AMP”) and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program.

In addition, the Office of Inspector General of the U.S.

Department of Health and Human Services and other Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to the methodologies used by manufacturers to calculate AMP and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program.

We are liable for errors associated with our submission of pricing data and for any overcharging of government payers.

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In addition, patents providing protection for our inhaler and cartridges have terms extending into 2023, 2031 or 2032.

Our method of treatment claims extend into 2026, 2029, 2030 or 2031.

Our method of treatment claims extends into 2026, 2029, 2030 or 2031.

As and when these different patents expire, Afrezza could become subject to increased competition.

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In addition, there is a risk that we would have to pay the other party damages for having violated the other party’s patents (which damages may be increased, as well as attorneys’ fees ordered paid, if infringement is found to be willful), or that we will be required to obtain a license from the other party in order to continue to commercialize the affected products, or to design our products in a manner that does not infringe a valid patent.

We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms

or at all, requiring cessation of activities that were found to infringe a valid patent.

We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms or at all, requiring cessation of activities that were found to infringe a valid patent.

We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

Moreover, certain components of Afrezza may be manufactured outside the United States and imported into the United States.

Moreover, certain components of Afrezza or our product candidates may be manufactured outside the United States and imported into the United States.

As such, third parties could file complaints under 19 U.S.C.

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We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

Although we do not believe that Afrezza infringes any third-party patents , if a plaintiff was to allege that Afrezza infringed their patent rights, we would have to establish with the court that their patents are invalid or unenforceable in order to avoid legal liability for infringement of these patents.

Although we do not believe that Afrezza or our product candidates infringe any third-party patents, if a plaintiff was to allege infringement of their patent rights, we would have to establish with the court that their patents are invalid or unenforceable in order to avoid legal liability for infringement of these patents.

However, proving patent invalidity or unenforceability can be difficult because issued patents are presumed valid.

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At the same time, some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.

An adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products or result in substantial monetary damages, which would adversely affect our business, financial condition and results of operations and cause the market price of our common stock and other securities to decline.

which would adversely affect our business, financial condition and results of operations and cause the market price of our common stock and other securities to decline.

We may not obtain trademark registrations for our potential trade names.

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RISKS RELATED TO OUR COMMON STOCK

We may not be able to generate sufficient cash to service all of our indebtedness.

We may be forced to take other actions to satisfy our obligations under our indebtedness or we may experience a financial failure.

Our ability to make scheduled payments on or to refinance our debt obligations will depend on our financial and operating performance, which is subject to the commercial success of Afrezza, the extent to which we are able to successfully develop and commercialize our Technosphere drug delivery platform and any other product candidates that we develop, prevailing economic and competitive conditions, and to certain financial, business and other factors beyond our control.

We may not be able to generate sufficient cash to service all of our indebtedness and commitments.

We may be forced to take other actions to satisfy our obligations or we may experience a financial failure.

Our ability to make scheduled payments on our lease and debt obligations will depend on our financial and operating performance, which is subject to the commercial success of Afrezza and, if approved, Tyvaso DPI, the extent to which we are able to successfully develop and commercialize our Technosphere drug delivery platform and any other product candidates that we develop, prevailing economic and competitive conditions, and to certain financial, business and other factors beyond our control.

We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.

We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our future debt agreements.

If our cash flows and capital resources are insufficient to fund our obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness and lease obligations.

We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled obligations or that these actions would be permitted under the terms of our future debt agreements.

In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations when due.

Our stock price is volatile and may affect the market price of our com mon stock and other securities.

Our stock price is volatile and may affect the market price of our common stock and other securities.

The trading price of our common stock has been and is likely to continue to be volatile.

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sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

our ability, or the perception of investors of our ability, to continue to meet all applicable requirements for continued listing of our common stock on The Nasdaq Stock Market, and the possible delisting of our common stock if we are unable to do so;

the trades of short sellers;

our ability, or the perception of investors of our ability, to continue to meet all applicable requirements for continued listing of our common stock on The Nasdaq Global Market, and the possible delisting of our common stock if we are unable to do so;

the status of any legal proceedings or regulatory matters against or involving us or any of our executive officers and directors;

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Although we regained compliance with the minimum closing bid price requirement after effecting a reverse stock split in March 2017, there can be no assurance that we will be able to meet the minimum closing bid price requirement or other listing requirements in the future.

The future sale of our common stock or the exchange or conversion of our convertible debt into, or exercise of our outstanding warrants for, common stock could negatively affect the market price of our common stock and other securities.

The future sale of our common stock or the exchange or conversion of our convertible debt into common stock could negatively affect the market price of our common stock and other securities.

As of February 11, 2022, we had 251,798,303 shares of common stock outstanding.

Substantially all of these shares are available for public sale, subject in some cases to volume and other limitations.

All of these shares are available for public sale, subject in some cases to volume and other limitations.

If our common stockholders sell substantial amounts of common stock in the public market, or the market perceives that such sales may occur, the market price of our common stock and other securities may decline.

Likewise the issuance of additional shares of our common stock upon the exchange or conversion of t he Mann Group promissory notes, or upon issuance of our outstanding warrants, could adversely affect the market price of our common stock and other securities.

Likewise, the issuance of additional shares of our common stock upon the exchange or conversion of the Mann Group promissory notes, or the Senior convertible notes, could adversely affect the market price of our common stock and other securities.

In addition, the existence of these notes may encourage short selling of our common stock by market participants, which could adversely affect the market price of our common stock and other securities.

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Any adverse determination in litigation could also subject us to significant liabilities.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors