Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included in this Annual Report on Form 10-K.
A discussion of changes in our results of operations during the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 26, 2025, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Overview
We are a biopharmaceutical company dedicated to transforming chronic disease care through innovative, patient-centric solutions. Focused on cardiometabolic and orphan lung diseases, we develop and commercialize treatments that address serious unmet medical needs, including diabetes, pulmonary hypertension, and fluid overload in heart failure and chronic kidney disease. With deep expertise in drug-device combinations, we aim to deliver therapies designed to fit seamlessly into daily life.
Our cardiometabolic business is currently comprised of three commercial products: Afrezza (insulin human) Inhalation Powder; Furoscix (furosemide injection); and the V-Go wearable insulin delivery device:
Afrezza is an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes. Afrezza was developed by us and consists of a dry powder formulation of human insulin delivered from a small portable inhaler. Administered at the beginning of a meal, Afrezza dissolves rapidly upon inhalation to the lung and delivers insulin quickly to the bloodstream.
Furoscix is a novel formulation of furosemide that delivers an 80 mg dose via an on-body infusor over a five-hour period. Furoscix is indicated for the treatment of edema in pediatric patients who weigh at least 43 kg and adult patients with chronic heart failure or chronic kidney disease. Furoscix is the first FDA-approved subcutaneous loop diuretic that delivers intravenous-equivalent diuresis at home as opposed to a hospital setting. Furoscix was developed by scPharma, which we acquired in October 2025. See Note 3 - Business Combinations in the Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
V-Go is a mechanical basal-bolus insulin delivery system that is worn like a patch and can eliminate the need for taking multiple daily injections. V-Go administers a continuous preset basal rate of insulin over 24 hours and provides discreet on-demand bolus dosing at mealtimes. V-Go received 510(k) clearance by the FDA in 2010 and has been available commercially since 2012. In May 2022, we acquired V-Go from Zealand.
We anticipate two potential milestones for our cardiometabolic business in 2026 based on regulatory submissions that we made in 2025. The FDA is currently reviewing a sBLA pursuant to which we are seeking approval for Afrezza in children and adolescents living with type 1 or type 2 diabetes. The sBLA has been assigned a PDUFA target action date of May 29, 2026. The FDA is also reviewing a sNDA pursuant to which we are seeking approval for Furoscix ReadyFlow Autoinjector, a high-concentration formulation of furosemide that is delivered subcutaneously in under ten seconds. The sNDA has been assigned a PDUFA target action date of July 26, 2026.
In the United States, we are solely responsible for the commercialization of Afrezza, Furoscix and V-Go. Outside of the U.S., our strategy has been to establish regional partnerships in foreign jurisdictions where there are commercial opportunities, subject to the receipt of necessary foreign regulatory approvals. In December 2025, we supplied our partner in India, Cipla, with an initial shipment of Afrezza to support their launch of Afrezza in India.
The proprietary formulation and inhaler technologies used in Afrezza have also been deployed in our efforts to develop products to treat orphan lung diseases. Our first product to address an orphan lung disease, Tyvaso DPI (treprostinil) inhalation powder, received FDA approval in May 2022 for the treatment of PAH and PH-ILD. Our development and marketing partner, United Therapeutics, began commercializing Tyvaso DPI in June 2022 and is obligated to pay us a royalty on net sales of the product. We also receive revenue for the supply of Tyvaso DPI that we manufacture for UT. In August 2025, we announced the expansion of our collaboration, pursuant to which we will formulate MNKD-1501, a second investigational molecule using our proprietary technologies, and United Therapeutics will conduct preclinical and clinical development activities. Per the agreement, we received an upfront payment and are eligible to receive milestone payments upon achievement of specified development milestones as well as royalties on net sales of MNKD-1501, if approved.
The other major program in our pipeline that will potentially address an orphan lung disease is MNKD-201, a dry-powder formulation of nintedanib for the treatment of IPF. An oral dosage form of nintedanib has been available for more than a decade. However, a fairly large oral dose is required in order to achieve sufficient drug levels in lung tissue. High systemic levels of nintedanib are often associated with
undesirable side effects. Our goal with an inhaled formulation is to deliver a therapeutic amount of nintedanib to the lungs while avoiding high levels of the drug in other tissues. In 2024, we conducted a Phase 1 clinical study of MNKD-201, which met its primary objective of demonstrating positive safety results and good tolerability in healthy volunteers. We are currently conducting a Phase 1b study of MNKD-201 in the United States, top line data expected in early 2H 2026, as well as a global Phase 2 study to assess the potential safety and efficacy of this investigational product in patients with IPF, in which we expect the first patient to be enrolled in in Q2 2026.
MNKD-701 is another pipeline opportunity that we are exploring. This program is focused on bumetanide, a more potent loop diuretic than furosemide. We are currently evaluating the feasibility of formulating bumetanide as a dry-powder that can be administered via oral inhalation.
Our business is subject to significant risks, including but not limited to our ability to manufacture sufficient quantities of our products and Tyvaso DPI. Other significant risks also include the risk that our products may only achieve a limited degree of commercial success and the risks inherent in drug development, clinical trials and the regulatory approval process for our product candidates, which in some cases depends upon the efforts of our partners. Ongoing changes in tariff policy by the U.S. government may potentially raise the future cost to source the raw materials and components needed to manufacture our products. We are actively monitoring this situation and exploring strategies to mitigate the risks.
As of December 31, 2025, we had cash, cash equivalents and investments of $176.4 million, an accumulated deficit of $3.2 billion and a total stockholders’ deficit of $51.0 million. We had net income of $5.9 million in the year ended December 31, 2025, net income of $27.6 million and net loss of $11.9 million in the years ended December 31, 2024 and 2023, respectively. To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from sales of Afrezza, Furoscix and V-Go, from royalties and manufacturing revenue from UT, from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT and from the sale of a portion of future royalties that we receive from UT.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements is in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. We consider an accounting estimate to be critical to the consolidated financial statements if (i) the estimate is complex in nature or requires a high degree of judgment and (ii) different estimates and assumptions were used, the results could have a material impact on the consolidated financial statements. On an ongoing basis, we evaluate our estimates and the application of our policies. We base our estimates on historical experience, current conditions and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We consider our critical accounting policies to be those related to revenue recognition and gross-to-net adjustments, interest expense related to liability for sale of future royalties, business combinations including valuation of acquired intangible assets and contingent consideration and stock-based compensation. These critical accounting policies as well as our significant accounting policies and are more fully described in Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Revenue Recognition – Net Revenue – Commercial Product Sales — We sell products to a limited number of wholesale distributors and specialty and retail pharmacies, durable medical suppliers (“DME”), specialty distributors and direct purchasers in the U.S. and India (collectively, “Customers”). Wholesale distributors subsequently resell our products to retail pharmacies and certain medical centers or hospitals. Specialty pharmacies sell directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products.
We recognize revenue on product sales when the Customer obtains control of our product, which occurs at delivery for wholesale distributors and generally at delivery for specialty pharmacies. Product revenues are recorded net of applicable reserves including discounts, allowances, rebates, returns and other incentives. See Reserves for Variable Consideration below.
Reserves for Variable Consideration — Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, payer rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts between us and our Customers, payers, and other indirect customers relating to the sale of our products. These reserves are based on the amounts earned, or to be claimed on the related sales, and result in a reduction of accounts receivable or establishment of a current liability. Significant judgments are required in making these estimates.
Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reduce recognized revenue to our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.
The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Our analysis also contemplates application of the constraint in accordance with the guidance, under which we determined a material reversal of revenue would not occur in a future period for the estimates of gross-to-net adjustments as of December 31, 2025 and, therefore, the transaction price was not reduced further during the year ended December 31, 2025. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net revenue – commercial product sales and earnings in the period such variances become known.
Significant judgment is required in estimating gross-to-net adjustments, historical experience, payer channel mix unbilled claims, claim submission time lags and inventory levels in the distribution channel. Our reserves for variable consideration related to our commercial products are reflected in our gross-to-net adjustments which were 32% of gross product revenue, or $54.0 million, for the year ended December 31, 2025, compared to 40% of gross product revenue, or $53.8 million, for the year ended December 31, 2024.
These reserves are further detailed under Reserves for Variable Consideration in Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Revenue Recognition – Collaborations and Services — We enter into licensing, research or other agreements under which we license certain rights to our product candidates to third parties, conduct research or provide other services to third parties. The terms of these arrangements may include but are not limited to payment to us of one or more of the following: up-front license fees; development, regulatory, and commercial milestone payments; payments for commercial manufacturing and clinical supply services we provide; and royalties on net sales of licensed products and sublicenses of the rights. As part of the accounting for these arrangements, we must develop assumptions that require significant judgment such as determining the performance obligation in the contract and determining the stand-alone selling price for each performance obligation identified in the contract.
If an arrangement has multiple performance obligations, the allocation of the transaction price is determined from observable market inputs, if available, and we use key assumptions to determine the stand-alone selling price, which may include development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success. Revenue is recognized based on the measurement of progress as the performance obligation is satisfied and consideration received that does not meet the requirements to satisfy the revenue recognition criteria is recorded as deferred revenue.
With respect to our significant collaboration and service agreement with UT, which was entered into in December 2022 and includes a long-term commercial supply agreement (as amended, the "CSA"), if there is a 10% difference in (i) the estimates used to determine the transaction price for the CSA or (ii) the related allocation of the transaction price between performance obligations, the difference between the estimates for accruals and the actual liability for deferred revenue and revenue recognized for collaborations and services would be $5.5 million for the year ended December 31, 2025.
Revenue Recognition – Royalties — We recognize royalty revenue for a sales-based or usage-based royalty if it is promised in exchange for an intellectual property license. The royalty revenue is recognized as the subsequent sale of the product occurs or, if later and applicable, the satisfaction or partial satisfaction of the performance obligation to which the royalty has been allocated. Our collaboration agreement with UT entitles us to receive a royalty on net sales of Tyvaso DPI for the license of our intellectual property that was considered to be interdependent with the development activities that supported the approval of Tyvaso DPI.
Interest Expense – Liability for Sale of Future Royalties — In December 2023, we sold a portion of our rights to future royalties on UT’s sale of Tyvaso DPI. The upfront proceeds received from the royalty purchaser were recorded as a royalty liability in the consolidated balance sheets. As royalty payments are earned by and remitted to the royalty purchaser, the balance of the royalty liability will be effectively repaid as it is amortized over the life of the underlying purchase agreement. To amortize the royalty liability, we estimate the total amount of future royalty payments to be made to the royalty purchaser. The excess of those future estimated royalty payments over the upfront proceeds received is recognized in the consolidated statements of operations as non-cash interest expense utilizing an imputed effective interest rate. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate may vary during the term of the agreement depending on a number of factors, including the amount and timing of forecasted royalty payments which affects the timing and ultimate amount of reductions to the liability.
The Company evaluates the effective interest rate periodically based on its forecasted royalty payments utilizing the prospective method. The Company periodically assesses the forecasted royalty payments using a combination of historical results, internal projections and forecasts from external sources. To the extent such payments, or the timing of such payments, are materially different than original estimates, the Company will prospectively adjust the effective interest rate and amortization of the royalty liability. If there is a 10% difference in the estimated future royalty payments, the impact to our interest expense with respect to our royalty liability would be $2.6 million for the year ended December 31, 2025.
Business Combinations, Including Valuation of Acquired Intangible Assets and Contingent Consideration — The accounting for business combinations requires the Company to make significant estimates and assumptions in determining the fair values of assets acquired and liabilities assumed, including identifiable intangible assets and contingent consideration obligations. These significant judgments have a material impact on the amounts recorded at the acquisition date and on subsequent earnings. As part of the acquisition of scPharma, we identified two intangible assets, each measured using valuation models that rely on Level 3 inputs and require management to make assumptions about future economic benefits. Key inputs for these valuations include the discount rate, royalty rate and estimates of future revenue and margin growth, where applicable. The fair value of contingent consideration similarly requires significant judgment in establishing the probability-weighted likelihood of achieving the performance milestones that drive future payouts and the discount rate. If there is a 10% difference in the fair value of the contingent consideration, the impact to our other expense would be $2.6 million for the year ended December 31, 2025. See Note 3 – Business Combinations of the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Stock-Based Compensation — Share-based payments to employees, including grants of restricted stock units, performance-based awards, restricted stock units with market conditions (“Market RSUs”), nonqualified stock options (“options”) and the compensatory elements of employee stock purchase plans, are recognized in the consolidated statements of operations based upon the fair value of the awards at the grant date. Restricted stock units are valued based on the market price on the grant date. We evaluate stock awards with performance conditions as to the probability that the performance conditions will be met and estimates the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period. The grant date fair value and the effect of the market conditions for the Market RSUs was estimated using a Monte Carlo valuation. We use the Black-Scholes option valuation model to estimate the grant date fair value of employee options and the compensatory elements of employee stock purchase plans.
The grant date fair value for the Market RSUs was $10.84 per unit for the Market RSUs granted during the year ended December 31, 2025, compared to $10.30 per unit for the Market RSUs granted during the year ended December 31, 2024. If there is a 10% difference in the grant date fair value of the Market RSUs, the impact to our stock-based compensation expense would be $1.1 million for the year ended December 31, 2025.
Results of Operations
Trends and Uncertainties
Our collaboration agreement with UT entitles us to receive a 10% royalty on net sales of Tyvaso DPI, subject to our sale of a 1% royalty on future net sales to a royalty purchaser (leaving us with a 9% royalty). Our royalty revenue reflects the trend in net sales of Tyvaso DPI in the marketplace. See Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Our future success is dependent on our, and our current and future collaboration partners’, ability to effectively commercialize approved products. Our future success is also dependent on our pipeline of new products. There is a high rate of failure inherent in the R&D process for new drugs. As a result, there is a high risk that the funds we invest in research programs will not generate sufficient financial returns. Products may appear promising in development but fail to reach market within the expected or optimal timeframe, or at all.
Years ended December 31, 2025 and 2024
Revenues
The following table provides a comparison of the revenue categories for the years ended December 31, 2025 and 2024 (dollars in thousands):
Year Ended December 31,
$ Change
% Change
Revenues
Commercial product sales:
Gross revenue from commercial product sales
Less: Wholesaler distribution fees, rebates and
chargebacks, product returns and other
discounts
Commercial product sales
Gross-to-net revenue adjustment percentage
Collaborations and services
Royalties
Total revenues
Afrezza — Gross revenue from sales of Afrezza increased by $10.6 million, or 11%, for the year ended December 31, 2025 compared to the prior year, primarily driven by increased price and higher demand. The gross-to-net adjustment was 32% of gross revenue, or $34.9 million, for the year ended December 31, 2025 compared to 35% of gross revenue, or $34.9 million, for the prior year. The decreased gross-to-net percentage was primarily attributable to a decrease in rebates in accordance with contractual arrangements. As a result, net revenue from sales of Afrezza increased by $10.5 million, or 16%, for the year ended December 31, 2025 compared to the prior year.
Furoscix — Gross revenue from sales of Furoscix was $32.4 million for the period from the October 7, 2025 acquisition date of scPharma to December 31, 2025. The gross to net adjustment was 28% resulting in net revenue of $23.2 million for the year ended December 31, 2025.
V-Go — Gross revenue from sales of V-Go decreased by $11.0 million, or 30%, for the year ended December 31, 2025 compared to the prior year and was primarily a result of lower demand partially offset by lower gross to net deductions. The gross-to-net adjustment was 38% of gross revenue, or $9.8 million, for the year ended December 31, 2025 compared to 51% of gross revenue, or $18.9 million, for the prior year. The improved gross-to-net percentage was primarily attributable to a decrease in rebates related to a reduction in active contracts. As a result, net revenue from sales of V-Go decreased by $1.9 million, or 10%, for the year ended December 31, 2025 compared to the prior year.
Collaborations and Services and Royalties — Net revenue from collaborations and services increased by $5.9 million, or 6%, for the year ended December 31, 2025 compared to the prior year. The increase in revenue was primarily attributable to increased manufacturing volume for product sold to UT. Royalty revenue from UT increased by $25.8 million, or 25%, for the year ended December 31, 2025 compared to the prior year due to UT's increase in net revenue from sales of Tyvaso DPI.
See Note 11 – Collaborations, Licensing and Other Arrangements to the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Commercial product gross profit
The following table provides a comparison of the commercial product gross profit categories for the years ended December 31, 2025 and 2024 (dollars in thousands):
Year Ended December 31,
$ Change
% Change
Commercial product gross profit:
Commercial product sales
Less: Cost of goods sold, excluding amortization of acquired intangible assets
Less: Amortization of acquired intangible assets
Commercial product gross profit:
Gross margin
* Not meaningful
Commercial product gross profit increased by $18.5 million, or 28%, for the year ended December 31, 2025 compared to the prior year. The increase in gross profit was primarily attributable to the recognition of sales of Furoscix beginning in the fourth quarter of 2025, as well as an increase in Afrezza net revenue due to increased sales and improved gross-to-net adjustments. Of the 6% decrease in gross margin, 4% is attributable to the amortization of the acquired intangible assets.
Expenses
The following table provides a comparison of the expense categories for the years ended December 31, 2025 and 2024 (dollars in thousands):
Year
Ended December 31,
$ Change
% Change
Expenses:
Cost of goods sold – commercial, excluding amortization of acquired intangible assets
Cost of revenue – collaborations and services
Research and development
Selling, general and administrative
Amortization of acquired intangible assets
Loss (gain) on foreign currency transaction
Total expenses
* Not meaningful
Cost of revenue — collaborations and services increased by $2.0 million, or 3%, for the year ended December 31, 2025 compared to the prior year. The increases were primarily attributable to an increase in production related inventory write-offs for the period in addition to increase in costs of sales associated with an increase in the number of blisters sold, which was partially offset by decreases in cost per blister due to increased efficiencies in manufacturing activities in our Danbury, CT facility.
Research and development expenses increased by $20.5 million, or 45%, for the year ended December 31, 2025 compared to the prior year. The increase was primarily attributable to the ICoN-1 clinical study for MNKD-101, which was discontinued in the fourth quarter of 2025, clinical production scale-up for MNKD-201, personnel costs, primarily due to a full-year of costs associated with the third quarter of 2024 Pulmatrix transaction, which bolstered our research capabilities and capacity, and expenses related to Furoscix ReadyFlow. These increases were partially offset by the completion of INHALE-3, the Phase 1 clinical study and the toxicology studies for MNKD-201 in 2024, and lower costs for INHALE-1, as the study was closed out in the second quarter of 2025.
Selling, general and administrative ("SG&A") expenses for the year ended December 31, 2025 increased by $49.8 million, or 53%, compared to the prior year. The increase primarily reflects the inclusion of $17.6 million of SG&A costs associated with the promotion and support of Furoscix as well as $9.7 million of transaction-related costs incurred as part of the acquisition of scPharma. The remainder of the increase was largely attributable to higher headcount and personnel-related expense as well as deploying a medical science liaison team and Afrezza promotional costs in preparation to support the potential pediatric launch of Afrezza in 2026.
Amortization of acquired intangible assets was $4.0 million for the year ended December 31, 2025 and was related to the amortization of the developed technology related to the Furoscix on-body infuser acquired through the acquisition of scPharma.
Loss on foreign currency transaction was $7.7 million for the year ended December 31, 2025 compared to a gain of $3.9 million for the prior year. These non-cash changes were due to fluctuations in U.S. dollar to Euro exchange rates. Under the Insulin Supply Agreement with Amphastar, payment obligations for future purchases are denominated in Euros. We record a gain or loss on foreign currency transaction impact of the US dollar to Euro exchange rate associated with these future purchase commitments.
Other Income (Expense)
The following table provides a comparison of the other income (expense) categories for the years ended December 31, 2025 and 2024 (dollars in thousands):
Year
Ended December 31,
$ Change
% Change
Interest income, net
Interest expense
Interest expense on liability for sale of future royalties
Interest expense on financing liability
Impairment of available-for-sale investment
Other (expense) income
Gain on bargain purchase
Loss on settlement of debt
Total other expense
* Not meaningful
Interest income, net, consisting of interest and accretion on investments net of amortization, decreased by $4.6 million compared to the prior year primarily due to lower average balances on our securities portfolio as well as lower yields.
Interest expense increased by $1.8 million for the year ended December 31, 2025 compared to the prior year. The increase was primarily due to new term loans with an aggregate principal amount of $325.0 million, which were drawn in August and October 2025. The increase was partially offset by the following principal debt reductions that occurred in 2024: (i) $28.3 million full repayment to MidCap under the MidCap credit facility in April 2024, (ii) the discharge and termination of $8.8 million of the outstanding principal balance under the Mann Group convertible note in April 2024 and (iii) the exchange of an aggregate principal amount of approximately $193.7 million of our senior convertible notes due March 2026 in December 2024. See Note 10 – Borrowings in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Interest expense on liability for sale of future royalties was $14.4 million and $16.2 million for the years ended December 31, 2025 and 2024, respectively, and was attributable to imputed interest and amortization of debt issuance costs on the liability recorded in connection with the sale of 1% of our Tyvaso DPI royalties in December 2023. See Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Interest expense on financing liability was $9.8 million for each of the years ended December 31, 2025 and 2024, and represented imputed interest incurred on the sale lease-back transaction for our manufacturing facility in Danbury, CT.
Impairment of available-for-sale investment of $6.4 million for the year ended December 31, 2025 was a result of the write-off of the Thirona investment. Impairment of available-for-sale investment for the year ended December 31, 2024 was $1.6 million as a result of a modification recorded for the Thirona investment.
Other expense for the year ended December 31, 2025 was a result of the remeasurement of the fair value of the contingent consideration liability obtained from the acquisition of scPharma. The contingent consideration will be remeasured each subsequent reporting period until the related contingencies have been resolved.
Gain on bargain purchase of $5.3 million for the year ended December 31, 2024 was the result of the excess of net assets acquired compared to consideration paid in the Pulmatrix Transaction. See Note 3 – Business Combinations in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Loss on settlement of debt for the year ended December 31, 2024 includes repayment of a portion of the senior convertible notes pursuant to private exchange agreements with certain note holders in December 2024, resulting in an inducement expense of $13.4 million. Additionally, a loss on early extinguishment of debt of $7.0 million was incurred for the year ended December 31, 2024 in connection with the repayment of
the MidCap credit facility and Mann Group convertible note in April 2024. See Note 10 – Borrowings in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Income tax (benefit) expense
Income tax benefit of $4.5 million for the year ended December 31, 2025 relates to deferred taxes established as part of the acquisition of scPharma. Income tax expense of $2.9 million for the year ended December 31, 2024 was primarily related to state income taxes.
Non-GAAP Measures
To supplement our consolidated financial statements presented under GAAP, we are presenting non-GAAP net income (loss) and non-GAAP net income per share - basic, which are non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating our financial performance. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results, including underlying trends.
These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures; should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP; have no standardized meaning prescribed by GAAP; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future there may be other items that we may exclude for purposes of our non-GAAP financial measures; and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of its adjustments to arrive at our non-GAAP financial measures. Because of the non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measures as used by us in this Annual Report on Form 10-K have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.
The following table reconciles our financial measures for net income (loss) and net income (loss) per share ("EPS") for basic weighted average shares as reported in our consolidated statement of operations to a non-GAAP presentation:
Years ended December 31,
Net Income
Basic EPS
Net Income
Basic EPS
Net Income
Basic EPS
GAAP reported net income (loss)
Non-GAAP adjustments:
Stock compensation
Interest expense on liability for sale of future royalties
Sold portion of royalty revenue (1)
Acquisition-related expenses (2)
Loss (gain) on foreign currency transaction
Impairment loss on available-for-sale investment
Amortization of intangible assets acquired
Gain on bargain purchase
Loss on settlement of debt
Non-GAAP adjusted net income
Weighted average shares used to compute net income
per share – basic
Represents the non-cash portion of the 1% royalty on net sales of Tyvaso DPI earned during the years ended December 31, 2025 and 2024 which is remitted to the royalty purchaser and recognized as royalties from collaborations in our consolidated statements of operations. Our revenues from royalties from collaborations during the years ended December 31, 2025 and 2024 and fourth quarter of 2023 totaled $128.1 million, $102.3 million and $21.0 million, respectively, of which $12.8 million, $10.2 million, and $2.1 million, respectively, is remitted to the royalty purchaser.
Represents transaction fees incurred during the year ended December 31, 2025 associated with the acquisition of scPharma.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash, cash equivalents, and investments. Our primary uses of cash include the development of our product pipeline, the manufacturing and marketing of Afrezza, Furoscix and V-Go, manufacturing Tyvaso DPI, selling, general and administrative expenses, and principal and interest payments on our financing liability and debt.
We fund our operations primarily through sales of Afrezza, Furoscix and V-Go, and royalties and manufacturing revenue from UT. Historically, we have funded our operations primarily through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from collaborations, from borrowings, from proceeds from the sale of certain assets and the sale of a portion of our future royalties that we receive from UT. In combination with our cash, cash equivalents and investments on hand, we believe that these sources of revenue, as well as the potential financing sources currently available to us, will allow us to meet our liquidity needs over the next 12 months and in the longer term.
The following table presents our material cash requirements as of December 31, 2025 associated with contractual commitments for future periods (in thousands, except footnotes):
Thereafter
Total
Financing liability (1)
Senior convertible notes (2)
Insulin purchase agreement (3)
Insulin purchase capacity fees (3)
Bedford, MA facility operating lease (4)
Blackstone term loan (5)
Blackstone term loan interest (5)
Total material cash requirements
$103.4 million principal amount of indebtedness under the Sale-Leaseback Transaction, plus $104.2 million of imputed interest and $2.3 million in unamortized debt issuance costs. On November 8, 2021, we sold a portion of our manufacturing facility located in Danbury, CT to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $102.3 million. We leased the property from the Purchaser for an initial term of 20 years, with four renewal options of five years each. The total annual rent under the lease started at approximately $9.5 million per year, subject to a 50% rent abatement during the first year of the lease, and increases annually by (i) 2.5% in the second through fifth year of the lease and (ii) 3% in the sixth and each subsequent year of the lease, including any renewal term. We are responsible for payment of operating expenses, property taxes and insurance for the leased property. Pursuant to the terms of the lease, we have four options to repurchase the property, in 2026, 2031, 2036 and 2041, for the greater of (i) $102.3 million or (ii) the fair market value of the leased property. Interest expense is calculated using an incremental borrowing rate of approximately 9.0%.
$36.3 million aggregate principal amount of senior convertible notes and a remaining interest payment obligation of $0.5 million in 2026 as a result of the principal amount bearing interest at 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021 and maturing on March 1, 2026, unless earlier converted, redeemed or repurchased by us. The senior convertible notes are convertible at an initial conversion price of approximately $5.21 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.
The July 2014 Insulin Supply Agreement with Amphastar to manufacture and supply us certain quantities of recombinant human insulin for use in Afrezza was amended in May 2021 and again on December 22, 2023 to purchase certain minimum quantities over a term that currently extends through at least December 31, 2034. Unless terminated earlier, the agreement can be renewed for additional, successive two-year terms upon 12 months’ written notice given prior to the end of the initial term or any additional two-year term.
$11.9 million remaining lease payments under an operating lease of a building located in Bedford, Massachusetts (the "Bedford Lease"). In July 2024, the Company assumed the Bedford Lease in connection with the Pulmatrix Transaction. The monthly base rent payments of $101,282 are subject to 3% annual increases, plus the estimated cost of maintaining the property and common areas by the landlord. The Company also assumed from Pulmatrix a $0.7 million obligation to repay landlord-funded tenant improvements at a rate of $6,000 per month through the end of the lease term in November 2033. The Company has the right to extend the lease term for an additional five-year term. Interest expense is calculated using an incremental borrowing rate of approximately 7.3%.
$325.0 million in aggregate principal amount of term loans bearing interest at a rate per annum equal to, (i) in the case of a Base Rate Loan, the greatest of (a) the prime rate in effect on such day, (b) the federal funds rate in effect on such day plus 0.5%, (c) Adjusted Term SOFR (defined below) for a one-month’s tenor in effect on such day plus 1%, and (d) 3.0% plus a margin of 3.75%, or (ii) in the case of a SOFR Loan, the one, three or six month term SOFR (at the Company’s election), subject to a 2.00% floor (the “Adjusted Term SOFR”), plus a margin of 4.75%. In addition, upon the occurrence and continuation of an event of default under the Amended Credit Agreement, interest on the term loans accrues at the applicable rate plus 2.00% per annum. Interest is paid quarterly or, if the Company elects 1-month SOFR, monthly. The interest rate margin increases to 4.00% in the case of a Base Rate Loan and 5.00% in the case of a SOFR Loan at any time the Company’s ratio of indebtedness to adjusted EBITDA (measured on a trailing four quarter basis) is greater than or equal to 5.00:1.00 as of the most recent fiscal quarter for which the Company has delivered financial statements. Future material cash requirements for interest payments are based on the interest rate as of December 31, 2025, which was 8.53%. The Blackstone Credit Facility requires us to maintain at least $40.0 million of liquidity, tested quarterly, with liquidity defined as our unrestricted cash and cash equivalents held in collateral accounts of the lenders.
To date, we have been able to timely make our required interest payments on our indebtedness. If we fail to repay, repurchase or redeem our outstanding notes and term loans when required, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time. Any of these events could have an adverse effect on our business, results of operations and financial condition. We may from time to time seek to retire or purchase our outstanding debt, including the remaining senior convertible notes and our term loans, through cash purchases and/or exchanges for equity
securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
In July 2013, we issued the Milestone Rights pursuant to the Milestone Rights Agreement to the Original Milestone Purchasers. The Milestone Rights were subsequently assigned the Milestone Purchasers. The Milestone Rights provide the Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and sales milestones, $45.0 million of which remain payable as of December 31, 2025. See Note 9 – Accrued Expenses and Other Current Liabilities and Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data for further information related to the Milestone Rights.
In addition to the above, we also expect to have material cash requirements relating to paying our employees and consultants, professional services fees, marketing expenses, manufacturing expenditures, and clinical trial expenses. In addition, we make substantial and often long-term investments in our supply chain in order to ensure we have enough inventory and drug product to meet current and future revenue forecasts, as well as clinical trial needs.
In February 2018, we entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), as sales agent, pursuant to which we may offer and sell, from time to time, through Cantor Fitzgerald, shares of our common stock, which was amended and restated in February 2025 (as amended, the “CF Sales Agreement”). Under the CF Sales Agreement, Cantor Fitzgerald may sell shares by any method deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. On February 26, 2025, we filed a sales agreement prospectus under a registration statement on Form S-3, which became effective upon filing, covering the sale of up to $200.0 million of our common stock through Cantor Fitzgerald under the CF Sales Agreement, of which $200.0 million remained available as of December 31, 2025.
During the year ended December 31, 2025, we generated $18.3 million of cash from our operating activities. Cash generated from operating activities consisted of net income of $5.9 million offset by non-cash adjustments of $58.3 million and a net decrease in cash flows from operating assets and liabilities of $45.9 million. Non-cash items primarily included stock-based compensation of $24.2 million, interest on liability for sale of future royalties of $14.4 million, depreciation and amortization of $12.3 million, and write-off of inventory of $10.4 million. These charges were partially offset by the sold portion of royalty revenue of $12.8 million. The net decrease in cash flows from operating assets and liabilities was primarily due to a decrease of $16.7 million in accounts payable, decrease of $10.0 million in prepaid expenses and other current assets, and a decrease of $8.3 million in deferred revenue. These decreases were partially offset by an increase of $3.3 million in accrued expenses and other current liabilities.
During the year ended December 31, 2024, we generated $42.5 million of cash from our operating activities. Cash generated from operating activities consisted of net income of $27.6 million offset by non-cash adjustments of $51.4 million and a net decrease in cash flows from operating assets and liabilities of $36.5 million. Non-cash items primarily included stock-based compensation of $21.4 million, interest on liability for sale of future royalties of $16.2 million, loss on settlement of debt of $20.4 million and depreciation and amortization of $7.4 million. These charges were partially offset by the sold portion of royalty revenue of $10.2 million and a gain on bargain purchase of $5.3 million. The net decrease in cash flows from operating assets and liabilities was primarily due to a decrease of $15.3 million in deferred revenue and decrease of $6.6 million in prepaid expenses and other current assets. These decreases were partially offset by an increase of $2.7 million in accounts receivable, net.
Cash used in investing activities of $304.8 million for the year ended December 31, 2025 was primarily due to the $357.7 million of cash used in the acquisition of scPharma, net of cash acquired, and inclusive of the $10.0 million bridge loan provided to scPharma prior the acquisition. There was also the purchase of $157.8 million of debt securities. The cash used was partially offset by the maturity of $215.3 million of debt securities.
Cash used in investing activities of $96.6 million for the year ended December 31, 2024 was primarily due to the purchase of $273.8 million of held-to-maturity securities, $9.7 million of property and equipment and $7.0 million of available-for-sale securities, partially offset by the maturity of $135.3 million of held-to-maturity debt securities and $58.1 million of available-for-sale securities.
Cash provided by financing activities of $315.1 million for the year ended December 31, 2025 was primarily due to proceeds from a term loan of $325.0 million under the Blackstone Credit Facility, partially offset by $7.3 million of loan issuance costs.
Cash provided by financing activities of $137.3 million for the year ended December 31, 2024 was primarily due to principal and early extinguishment payments on the senior convertible notes of $87.7 million, MidCap credit facility of $36.6 million, and Mann Group convertible note of $8.9 million and $6.1 million of payments to taxing authorities from equity withheld upon vesting of RSUs and stock options, partially offset by $3.1 million in proceeds from the market price stock purchase plan ("MPSPP") and ESPP.
We believe we will be able to meet our near-term liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza, Furoscix and V-Go, and royalties and manufacturing revenue from the production and sale of Tyvaso DPI as well as through debt or equity financing, if necessary, for our long-term liquidity needs. We expect to continue to incur expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline. As of December 31, 2025, we had cash, cash equivalents and investments of $176.4 million, which was comprised of capital resources of $74.9 million in cash and cash equivalents, $96.5 million in short-term investments and $5.0 million in long-term investments, and total principal amount of outstanding borrowings of $361.3 million.
We believe our resources will be sufficient to fund our operations for the next 12 months from the date of issuance of our Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data.
Recent Accounting Pronouncements
See Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data for information regarding new accounting standards that have been issued by the FASB but are not effective until after December 31, 2025.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk
Interest Rate Risk
The senior convertible notes have a fixed interest rate of 2.50%, and therefore the interest expense associated with such debt is not exposed to changes in market interest rates. Interest on borrowings under the Blackstone Credit Facility accrue interest at a rate per annum equal to (i) in the case of a Base Rate Loan, the greatest of (a) the prime rate in effect on such day, (b) the federal funds rate in effect on such day plus 0.5%, (c) Adjusted Term SOFR for a one-month’s tenor in effect on such day plus 1%, and (d) 3.0% plus a margin of 3.75%, or (ii) in the case of a SOFR Loan, one, three or six month Adjusted Term SOFR (at our election), plus a margin of 4.75%. The interest rate margin increases to 4.00% in the case of a Base Rate Loan and 5.00% in the case of a SOFR Loan at any time the Company’s ratio of indebtedness to adjusted EBITDA (measured on a trailing four quarter basis) is greater than or equal to 5.00:1.00 as of the most recent fiscal quarter for which the Company has delivered financial statements. Accordingly, our interest expense under the Blackstone Credit Facility is subject to changes in the various market interest rates. If a hypothetical 10% change in the SOFR interest rates on December 31, 2025 were to have occurred, this change would not have had a material effect on our annual interest payment obligation on the borrowings under the Blackstone Credit Facility, which as of December 31, 2025, are SOFR Loans. See Note 10 – Borrowings in the Notes to Consolidated Financial Statements included in Part II, Item 8 – Financial Statements and Supplementary Data for information about the principal amount of outstanding debt.
Foreign Currency Exchange Risk
We incur and will continue to incur significant expenditures for insulin supply obligations under our Insulin Supply Agreement. Such obligations are denominated in Euros. At the end of each reporting period, the recognized gain or loss on purchase commitment is converted to U.S. dollars at the then-applicable foreign exchange rate. As a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and the Euro. For the year ended December 31, 2025, we realized a $7.7 million currency loss, which was reflected as a loss on foreign currency transaction in the consolidated statements of operations.
Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows. If a change in the U.S. dollar to Euro exchange rate equal to 10% of the U.S. dollar to Euro exchange rate on December 31, 2025 were to have occurred, this change would have resulted in a foreign currency impact to our pre-tax income of approximately $6.6 million.
Item 8. Financial Statemen ts and Supplementary Data
The information required by this Item is included in Items 15(a) (1) and (2) of Part IV of this Annual Report on Form 10-K.
