Description of business and basis of presentation	3 Months Ended
Mar. 31, 2014
Description of business and basis of presentation	1. Description of business and basis of presentation The accompanying unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries ( “MannKind” or the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on March 3, 2014 (the “Annual Report”). In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months ended March 31, 2014 may not be indicative of the results that may be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates or assumptions. The more significant estimates reflected in these accompanying financial statements involve assessing long-lived assets for impairment, accrued expenses, including clinical study expenses, valuation of forward purchase contracts, valuation of the facility financing obligation, commitment asset, milestone rights, valuation of stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements. *Business —* The Company is a biopharmaceutical company focused on the discovery and development of therapeutic products for diseases such as diabetes. The Company’s lead product candidate, AFREZZA (insulin human [rDNA origin]) inhalation powder, is an ultra rapid-acting insulin therapy that is in late-stage clinical investigation for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia. Last October, the Company resubmitted a New Drug Application (“NDA”) for AFREZZA to the U.S. Food and Drug Administration (“FDA”), which included data from two completed Phase 3 studies 171 and 175, both of which met their primary efficacy endpoints and safety objectives. On April 1, 2014 the Endocrinologic and Metabolic Drugs Advisory Committee (“EMDA”) of the FDA voted 13 to 1 to recommend that AFREZZA inhalation powder be granted approval by the FDA to improve glycemic control in adults with type 1 diabetes and voted 14 to 0 to recommend that AFREZZA be granted approval by the FDA to improve glycemic control in adults with type 2 diabetes. Subsequent to the EMDA meeting, the FDA extended the Prescription Drug User Fee Act (“PDUFA”) date for AFREZZA by three months from April 15, 2014 to July 15, 2014 in order to provide time for a full review of information submitted by the Company in response to the FDA’s requests. *Basis of Presentation —* The Company is considered to be in the development stage as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, and raising capital. It is costly to develop therapeutic products and conduct clinical studies for these products. From its inception through March 31, 2014, the Company has reported accumulated net losses of $2.3 billion, which include a goodwill impairment charge of $151.4 million and cumulative negative cash flow from operations of $1.8 billion. At March 31, 2014, the Company’s capital resources consisted of cash and cash equivalents of $35.8 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. As of March 31, 2014, the Company had $30.1 million principal amount of available borrowings under its loan arrangement (the “Loan Arrangement”) with The Mann Group LLC (“The Mann Group”) although the Company anticipates using a portion of these available borrowings to capitalize accrued interest into principal as it becomes due and payable under the Loan Arrangement, upon mutual agreement of the parties. As of March 31, 2014, the Company had accrued $1.3 million of interest related to the Loan Arrangement. On July 1, 2013, the Company entered into a facility agreement (the “Facility Agreement”) with Deerfield Private Design Fund II, L.P. (“Deerfield Private Design Fund”) and Deerfield Private Design International II, L.P. (collectively, “Deerfield”), providing for the sale of up to $160.0 million of Senior Convertible Notes due 2019 (the “2019 notes”) to Deerfield in four equal tranches of $40.0 million principal amount. As of March 31, 2014, Deerfield had purchased the first three tranches of 2019 notes in the aggregate principal amount of $120.0 million; therefore, only $40.0 million remain unsold. Deerfield’s obligation to purchase the fourth tranche of 2019 notes is subject to the receipt of marketing approval of AFREZZA by the FDA and the shares of common stock issuable upon conversion of all previously sold 2019 notes being freely tradable pursuant to an effective registration statement filed with the SEC or pursuant to Rule 144 under the Securities Act. On February 28, 2014, the Company entered into a First Amendment to Facility Agreement and Registration Rights Agreement (the “Amendment”). The Amendment modified the terms of the Facility Agreement that was entered into on July 1, 2013 with Deerfield to provide for the issuance of an additional tranche of notes (the “Tranche B notes”) to Deerfield in a maximum principal amount equal to (x) if the FDA approves the NDA for AFREZZA and Deerfield purchased the fourth tranche of 2019 notes, 150% of the aggregate principal amount of the 2019 notes that Deerfield has converted into the Company’s common stock on and after the effective date of the Amendment, up to $90.0 million, and (y) otherwise, 33.33% of the aggregate principal amount of the 2019 notes that Deerfield has converted into the Company’s common stock on and after the effective date of the Amendment, up to $20.0 million, in each case subject to the satisfaction of certain other conditions. The Facility Agreement contains a financial covenant that requires the Company’s cash and cash equivalents, which include available borrowings under the Loan Arrangement, on the last day of each fiscal quarter to not be less than $25 million. Based on its current expectations, the Company believes that its existing capital resources will enable it to continue planned operations at least into the third quarter of 2014. However, the Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. The Company will need to raise additional capital, whether through the sale of equity or debt securities, a strategic business collaboration with a pharmaceutical company, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to continue the development of and to commercialize AFREZZA and other product candidates and to support its other ongoing activities. However, the Company cannot provide assurances that such additional capital will be available on favorable terms, or at all. Capital resources potentially available to the Company include proceeds from the exercise of warrants issued in its February 2012 public offering, the Company’s at-the-market issuance sales agreements, and issuance of additional 2019 notes and/or Tranche B notes to Deerfield (see Note 11 – Facility financing agreement). *Fair Value of Financial Instruments —* The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, accounts payable and accrued liabilities approximate their fair value due to their relatively short maturities. The fair value of the cash equivalents, note payable to related party, senior convertible notes, and the Facility Agreement are discussed in Note 13, “Fair Value Measurements.” *Recently Issued Accounting Standards —* In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU provide guidance on the financial statements presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of the new requirement did not have a significant impact on the Company’s consolidated financial statements.

1. Description of business and basis of presentation

The accompanying unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries ( “MannKind” or the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on March 3, 2014 (the “Annual Report”).

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months ended March 31, 2014 may not be indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates or assumptions. The more significant estimates reflected in these accompanying financial statements involve assessing long-lived assets for impairment, accrued expenses, including clinical study expenses, valuation of forward purchase contracts, valuation of the facility financing obligation, commitment asset, milestone rights, valuation of stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements.

Business — The Company is a biopharmaceutical company focused on the discovery and development of therapeutic products for diseases such as diabetes. The Company’s lead product candidate, AFREZZA (insulin human [rDNA origin]) inhalation powder, is an ultra rapid-acting insulin therapy that is in late-stage clinical investigation for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia.

Last October, the Company resubmitted a New Drug Application (“NDA”) for AFREZZA to the U.S. Food and Drug Administration (“FDA”), which included data from two completed Phase 3 studies 171 and 175, both of which met their primary efficacy endpoints and safety objectives. On April 1, 2014 the Endocrinologic and Metabolic Drugs Advisory Committee (“EMDA”) of the FDA voted 13 to 1 to recommend that AFREZZA inhalation powder be granted approval by the FDA to improve glycemic control in adults with type 1 diabetes and voted 14 to 0 to recommend that AFREZZA be granted approval by the FDA to improve glycemic control in adults with type 2 diabetes.

Subsequent to the EMDA meeting, the FDA extended the Prescription Drug User Fee Act (“PDUFA”) date for AFREZZA by three months from April 15, 2014 to July 15, 2014 in order to provide time for a full review of information submitted by the Company in response to the FDA’s requests.

Basis of Presentation — The Company is considered to be in the development stage as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, and raising capital. It is costly to develop therapeutic products and conduct clinical studies for these products. From its inception through March 31, 2014, the Company has reported accumulated net losses of $2.3 billion, which include a goodwill impairment charge of $151.4 million and cumulative negative cash flow from operations of $1.8 billion. At March 31, 2014, the Company’s capital resources consisted of cash and cash equivalents of $35.8 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

As of March 31, 2014, the Company had $30.1 million principal amount of available borrowings under its loan arrangement (the “Loan Arrangement”) with The Mann Group LLC (“The Mann Group”) although the Company anticipates using a portion of these available borrowings to capitalize accrued interest into principal as it becomes due and payable under the Loan Arrangement, upon mutual agreement of the parties. As of March 31, 2014, the Company had accrued $1.3 million of interest related to the Loan Arrangement.

On July 1, 2013, the Company entered into a facility agreement (the “Facility Agreement”) with Deerfield Private Design Fund II, L.P. (“Deerfield Private Design Fund”) and Deerfield Private Design International II, L.P. (collectively, “Deerfield”), providing for the sale of up to $160.0 million of Senior Convertible Notes due 2019 (the “2019 notes”) to Deerfield in four equal tranches of $40.0 million principal amount. As of March 31, 2014, Deerfield had purchased the first three tranches of 2019 notes in the aggregate principal amount of $120.0 million; therefore, only $40.0 million remain unsold. Deerfield’s obligation to purchase the fourth tranche of 2019 notes is subject to the receipt of marketing approval of AFREZZA by the FDA and the shares of common stock issuable upon conversion of all previously sold 2019 notes being freely tradable pursuant to an effective registration statement filed with the SEC or pursuant to Rule 144 under the Securities Act. On February 28, 2014, the Company entered into a First Amendment to Facility Agreement and Registration Rights Agreement (the “Amendment”). The Amendment modified the terms of the Facility Agreement that was entered into on July 1, 2013 with Deerfield to provide for the issuance of an additional tranche of notes (the “Tranche B notes”) to Deerfield in a maximum principal amount equal to (x) if the FDA approves the NDA for AFREZZA and Deerfield purchased the fourth tranche of 2019 notes, 150% of the aggregate principal amount of the 2019 notes that Deerfield has converted into the Company’s common stock on and after the effective date of the Amendment, up to $90.0 million, and (y) otherwise, 33.33% of the aggregate principal amount of the 2019 notes that Deerfield has converted into the Company’s common stock on and after the effective date of the Amendment, up to $20.0 million, in each case subject to the satisfaction of certain other conditions. The Facility Agreement contains a financial covenant that requires the Company’s cash and cash equivalents, which include available borrowings under the Loan Arrangement, on the last day of each fiscal quarter to not be less than $25 million. Based on its current expectations, the Company believes that its existing capital resources will enable it to continue planned operations at least into the third quarter of 2014. However, the Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. The Company will need to raise additional capital, whether through the sale of equity or debt securities, a strategic business collaboration with a pharmaceutical company, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to continue the development of and to commercialize AFREZZA and other product candidates and to support its other ongoing activities. However, the Company cannot provide assurances that such additional capital will be available on favorable terms, or at all.

Capital resources potentially available to the Company include proceeds from the exercise of warrants issued in its February 2012 public offering, the Company’s at-the-market issuance sales agreements, and issuance of additional 2019 notes and/or Tranche B notes to Deerfield (see Note 11 – Facility financing agreement).

Fair Value of Financial Instruments — The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, accounts payable and accrued liabilities approximate their fair value due to their relatively short maturities. The fair value of the cash equivalents, note payable to related party, senior convertible notes, and the Facility Agreement are discussed in Note 13, “Fair Value Measurements.”

Recently Issued Accounting Standards — In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU provide guidance on the financial statements presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of the new requirement did not have a significant impact on the Company’s consolidated financial statements.