7187500
0.1
12.00
4312500
12.00
11.28
937500
0
24.25
110000000
85734188
1800000
0.05
85734188
0
3955845
22.70
10000000
0.01
360924
-2863229000
62371000
476741000
126412000
2634000
-20000
15599000
-350329000
3028000
49521000
615000
4287000
2508633000
119513000
931000
3028000
238000
74582000
483000
268319000
962623000
27613000
7929000
76654000
52484000
48755000
48749000
59074000
721588000
23000
13539000
73646000
16941000
55800000
168262000
126412000
962623000
0
7186000
0
1009000
4018000
5872000
24084000
53692000
6400000
17503000
3242000
743000
12475000
8574000
140000
140231000
6380000
8845000
251000
350000
20000000
14400000
8900000
14400000
8900000
17900000
48800000
36500000
21300000
78400000
150600000
17500000
30100000
62400000
13500000
60000000
36500000
44500000
660000
27690000
27613000
737000
21300000
27600000
80000000
74582000
5418000
78400000
74600000
2508633000
-20000
85735000
4287000
-2863229000
150600000
155600000
189200000
21590000
586000
68434000
60584000
3435000
9519000
4114000
3028000
7.50
44700000
2427184
7281553
13.05
0
8.40
16.35
140000000
95680831
3840587
5399777
0.05
95680831
0
3414586
22.50
5530256
16.10
10000000
0.01
737966
-2737565000
116200000
290656000
107063000
3814000
7381000
3419000
-24000
3263000
-183593000
1376000
8900000
49521000
619000
4784000
2549212000
99575000
875000
1376000
11600000
15500000
20000000
15500000
2700000
71339000
355000
35000000
20000000
92051000
914498000
27635000
7937000
77488000
1300000000
45310000
2120000
28927000
0
16730000
22895000
712124000
2331000
2000
302000
30557000
1900000000
77998000
17331000
20500000
128502000
107063000
914498000
0
7380000
0
211000
648000
309000
4364000
2000
8.60
144000
5117000
629424
36775000
95942000
9300000
3242000
246000
5093000
8781000
0.02
754000
1000000
19400000
9281000
8845000
440000
19400000
4000000
4800000
350000
0.0875
20000000
25000000
25000000
18400000
18400000
8900000
8900000
28700000
18400000
8900000
16700000
22900000
74500000
123200000
7400000
53000000
38500000
445782
97574
2052345
14203
3743013
3399245
723763
78666
30100000
0.0584
30100000
49500000
175000000
150000000
25000000
1000000
0.0975
55000000
100000
3700000
426000
27690000
27635000
481000
22900000
27600000
75000000
71339000
3661000
74500000
71300000
2549212000
-24000
95681000
4784000
-2737565000
900000
123200000
7400000
115200000
7400000
7400000
7400000
1600000
17389000
202000
62992000
34957000
875000
8531000
3556000
1167000
209000
1500000
0
300000
0
0
100697
95776246
400000
4300000
12500
5000000
12800000
216000000
800000
3200000
13100000
90000000
1400000
0.0575
34.00
700000
27700000
110.00
0.0575
32100000
0.085
175000000
1800000
13.05
31860
372097776
700000000
10000000
-30713000
70790000
18400000
2261996000
-4000
73878000
3697000
-2296402000
-73770000
120841000
816000
140000
100000000
2416967000
-14000
81212000
4061000
-2494784000
140000000
80600000
Each unit consisting of one share of common stock and a warrant to purchase 0.1 of a share of common stock
P4Y
2016-04-04
1.00
P30Y
P180Y
2017-03-13
1000000
17300000
-564000
16700000
624000
1.00
0.00
0.10
0.95
0.0076
P2Y
7900000
9300000
120100000
56900000
P30D
1.00
29
20
1.30
1000
1000000
32200000
32100000
0.0115
500000
72000000
0.97
0.145
0.05
17900000
17300000
0.2
380000
8000000
9708737
50000000
P30M
2017-05
P2Y
155
0.18
1500000
0.01
140000
0.10
13000000
350000000
370000000
30600000
2770487
1432000
34710000
5946249
-4.54
0.350
-0.340
-57232000
0.7184
81233000
81233000
0.00
0.6976
0.0161
P5Y2M19D
12.80
-4.54
-0.010
0.0186
64245
0.00
80100000
10285000
-6000
-50413000
-1049000
-2697000
-1856000
7926000
887000
64287000
548000
-344655000
-368445000
59337000
13355000
-150000
26434000
13539000
-368451000
8725000
1858000
831000
40000
18000
3258000
27843000
8253000
1366000
-23790000
-13481000
-368445000
-140582000
-2697000
202000
8725000
109512000
-80118000
-29394000
11000000
140412000
0
950000
-12467000
8413000
-10203000
28392000
36104000
82000
2894000
8725000
0
0
0
80118000
593000
13276000
39300000
1652000
40000
29674000
1587000
40960000
344655000
39373000
33000
21231000
5668000
426000
10123000
6200000
5200000
-61767000
64745000
0
0
3300000
140400000
100000
6040000
3012000
5500000
0
109000
17067000
169000
-66167000
10123000
160000
4146000
18000
4219000
2894000
600000
93000
0
-140412000
57700000
44500000
1700000
1553000
35000
86000
-7000
-1856000
7907000
884000
8725000
40000
3241000
27754000
202000
109000
90000
169000
10081000
160000
34571000
-6000
375000
144000
54000
340000
1788000
7000
19000
3000
17000
89000
1800000
843000
-90000
8000
42000
2771000
139000
-368445000
1600000
8407000
318000
0
814561
3955845
360924
814919
1432000
34710000
36142000
5696000
3300000
1400000
3029000
1300000
138600000
P5Y10M10D
P5Y9M15D
198
0.26
6040000
3012000
10292667
-2.57
0.350
-0.318
4086000
0.8485
77045000
77045000
0.00
0.7398
0.0164
P2Y11M5D
23.80
-2.57
-0.041
0.0211
61015
0.00
65500000
-26908000
24097000
-10000
50436000
10000
93500000
1768000
1363000
-179627000
-198382000
3034000
11218000
615000
9670000
-198392000
22962000
25660000
26908000
9000
10978000
1679000
-18755000
14734000
-198382000
-97000
48622000
57873000
-65504000
7631000
9800000
0
0
200436000
2276000
3622000
-24097000
2894000
48622000
0
0
0
65504000
623000
18575000
100244000
3556000
79383000
179627000
75827000
21000
17549000
70062000
737000
27779000
14900000
62700000
50051000
0
0
11000000
800000
40000000
20000000
36400000
0
1753000
363000
1800000
93501000
0.009
27779000
12341000
79000
3150000
2894000
0.05
40000000
2200000
20000000
1200000
33500000
3000000
1900000
5000000
900000
0
3464616
93500000
6400000
7550000
326000
-26946000
1361000
22962000
25660000
10943000
93327000
27664000
-10000
799000
65000
650000
38000
2000
35000
2315000
3505000
174000
115000
-198382000
48622000
1400000
3464616
4308332
522144
1997575
26265000
22357000
P6Y1M2D
P5Y9M7D
175000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>5. Accrued Expenses and Other Current Liabilities</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accrued expenses and other current liabilities are comprised of the
following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="76%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Salary and related expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,814</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,634</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Restructuring</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,376</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Sales and marketing services</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">144</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Professional fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">875</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">931</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Discounts and allowances for commercial product sales</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">754</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrued interest</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">619</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">615</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">355</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">483</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Construction in progress</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">238</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrued expenses and other current liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,937</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,929</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
16788281
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Cash and Cash Equivalents</i> — The Company considers all
highly liquid investments with original or remaining maturities of
90 days or less at the time of purchase, that are readily
convertible into cash to be cash equivalents. As of
December 31, 2016 and 2015, cash equivalents were comprised of
money market accounts with maturities less than 90 days from the
date of purchase.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<b>8. Collaboration Arrangements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Receptor Collaboration and License Agreement</i> — On January 20,
2016, the Company entered into a Collaboration and License
Agreement (the “CLA”) with Receptor Life Sciences, Inc.
(“Receptor”) pursuant to which the Company performed
initial formulation studies on compounds identified by Receptor.
Following successful completion of the studies, Receptor obtained
the option to acquire an exclusive license to develop, manufacture
and commercialize certain products that use MannKind’s
technology to deliver the compounds via oral inhalation.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company received $0.4 million in nonrefundable payments in
2016 prior to Receptor exercising the option. On December 30,
2016, Receptor exercised the option and paid the Company a
$1.0 million nonrefundable option exercise and license fee.
Under the CLA, the Company may receive the following additional
payments:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr style="break-inside: avoid">
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Nonrefundable milestone payments upon
the completion of certain technology transfer activities and the
achievement of specified sales targets.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr style="break-inside: avoid">
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Royalties upon Receptor’s and
its sublicensee’s sale of the product.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr style="break-inside: avoid">
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Milestones upon total worldwide sales
reaching certain agreed upon levels.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company evaluated the accounting for the payments received in
2016 under the multiple element accounting guidance and determined
that the $0.4 million in payments received prior to Receptor
exercising its option are separable from the other elements of the
agreement and represented payments to offset costs incurred.
Therefore, those payments reduced the Company’s research and
development expense in 2016. The $1.0 million license fee
received in 2016 does not have standalone value from
the <font style="WHITE-SPACE: nowrap">follow-on</font> transfer of technology.
Therefore, the license fee was recorded in deferred payments from
collaboration at December 31, 2016 and will be recognized in
net revenue — collaboration over four years. See Note 2
— Summary of Significant Accounting Policies for additional
information on the Company’s accounting for multiple element
arrangements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Sanofi License Agreement and Sanofi Supply Agreement and Loan
Facility</i> — On August 11,
2014, the Company executed a license and collaboration agreement
(the “Sanofi License Agreement”) with Sanofi-Aventis
Deutschland GmbH (which subsequently assigned its rights and
obligations under the agreement to Sanofi-Aventis U.S. LLC
(Sanofi)), pursuant to which Sanofi was responsible for global
commercial, regulatory and development activities for Afrezza. The
Company manufactured Afrezza at its manufacturing facility in
Danbury, Connecticut to supply Sanofi’s demand for the
product pursuant to a supply agreement dated August 11, 2014
(the “Sanofi Supply Agreement”).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
During the term of the Sanofi License Agreement, worldwide profits
and losses were determined based on the difference between the net
sales of Afrezza and the costs and expenses incurred by the Company
and Sanofi that were specifically attributable or related to the
development, regulatory filings, manufacturing, or
commercialization of Afrezza. These profits and losses were shared
65% by Sanofi and 35% by the Company. On January 4, 2016 the
Company received a <font style="WHITE-SPACE: nowrap">90-day</font> notification from Sanofi of
its election to terminate in its entirety the Sanofi License
Agreement. The effective date of termination (the
“Termination Date”) was April 4, 2016. On
April 5, 2016 the Company assumed responsibility for the
worldwide development and commercialization of Afrezza from Sanofi.
Under the terms of the transition agreement, Sanofi continued to
fulfill orders for Afrezza in the United States until the Company
began distributing MannKind-branded Afrezza product to major
wholesalers during the week of July 25, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company analyzed the agreements entered into with Sanofi at
their inception to determine whether the consideration, paid or
payable to the Company, or a portion thereof, could be recognized
as revenue.<i> </i>Under the terms of the
Sanofi License Agreement, the Sanofi Supply Agreement and the
Sanofi Loan Facility, the Company determined that the arrangement
contained significant deliverables including (i) licenses to
develop and commercialize Afrezza and to use the Company’s
trademarks, (ii) development activities, and
(iii) manufacture and supply services for Afrezza. Due to the
proprietary nature of the manufacturing services to be provided by
the Company, the Company determined that all of the significant
deliverables should be combined into a single unit of accounting.
The Company believed that the manufacturing services are
proprietary due to the fact that since the late 1990’s, the
Company has developed proprietary knowledge and patented equipment
and tools that are used in the manufacturing process of Afrezza.
Due to the complexities of particle formulation and the specialized
knowledge and equipment needed to handle the Afrezza powder,
neither Sanofi nor, to the Company’s knowledge, any
third-party contract manufacturing organization currently possesses
the capability of manufacturing Afrezza.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
In order for revenue to be recognized, the seller’s price to
the buyer must be fixed or determinable. Prior to December 31,
2015, because the Company did not have the ability to estimate the
amount of costs that would potentially be incurred under the loss
share provision related to the Sanofi License Agreement and the
Sanofi Supply Agreement, the Company believed this requirement for
revenue recognition had not been met. Therefore, the Company had
recorded the $150.0 million <font style="WHITE-SPACE: nowrap">up-front</font> payment and the two milestone
payments of $25.0 million each as deferred payments from
collaboration. In addition, as of December 31, 2015 the
Company had recorded $17.5 million in Afrezza product
shipments to Sanofi as deferred sales from collaboration and
recorded $13.5 million as deferred costs from collaboration.
Deferred costs from collaboration represented the costs of product
manufactured and shipped to Sanofi, as well as certain direct costs
associated with a firm purchase commitment entered into in
connection with the collaboration with Sanofi.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
In the first and second quarters of 2016, after the Company
received notice of termination from Sanofi, the Company evaluated
whether the revenue recognition criteria had been met. The Company
determined that the requirement had not been met because Sanofi had
not finalized necessary adjustments to the profit and loss share
provision statements and Sanofi had not yet transferred all of the
information to enable the Company to commercialize Afrezza on its
own. Therefore, the Company was still unable to estimate the costs
to be incurred under the agreement with Sanofi. During the three
months ended September 30, 2016, Sanofi provided enough
information to the Company to enable it to reasonably estimate the
remaining costs under the Sanofi License Agreement and the Sanofi
Supply Agreement. Accordingly, the fixed or determinable fee
requirement for revenue recognition was met and there were no
future obligations to Sanofi. Therefore, the Company recognized
$172.0 million of net revenue — collaboration for the
year ended December 31, 2016. The revenue recognized includes
the upfront payment of $150.0 million and the two milestone
payments of $25.0 million each, net of $64.9 million of
net loss share with Sanofi, as well as $17.5 million in sales
of Afrezza and $19.4 million from sales of bulk insulin, both
to Sanofi. These payments and sales were made pursuant to the
contractual terms of the agreements with Sanofi.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Sanofi Loan Facility</i> — On September 23,
2014, the Company entered into the Sanofi Loan Facility, consisting
of a senior secured revolving promissory note and a guaranty and
security agreement (the “Security Agreement”) with an
affiliate of Sanofi, which provided the Company with a secured loan
facility of up to $175.0 million to fund the Company’s
share of net losses under the Sanofi License Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The obligations of the Company under the Sanofi Loan Facility were
guaranteed by the Company’s wholly-owned subsidiary, MannKind
LLC, and were secured by a first priority security interest in
certain insulin inventory located in the United States and any
contractual rights and obligations pursuant to which the Company
purchases or has purchased such insulin, and a second priority
security interest in the Company’s assets that secure the
Company’s obligations under the Facility Agreement, as
amended. In addition, the Company granted to Sanofi, as additional
security for the obligations under the Sanofi Loan Facility, a
first priority mortgage on the Company’s facility in
Valencia, California, which had a carrying value of
$17.9 million as of December 31, 2015.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Advances under the Sanofi Loan Facility bore interest at a rate of
8.5% per annum and were payable <font style="WHITE-SPACE: nowrap">in-kind</font> and compounded quarterly and
added to the outstanding principal balance under the Sanofi Loan
Facility. The Company was required to make mandatory prepayments on
the outstanding loans under the Sanofi Loan Facility from its share
of any profits (as defined in the Sanofi License Agreement) under
the Sanofi License Agreement within 30 days of receipt of its share
of any such profits.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company’s total portion of the loss sharing was
$57.7 million for the year ended December 31, 2015, of
which $44.5 million was borrowed under the Sanofi Loan
Facility as of December 31, 2015. Subsequent to
December 31, 2015, the Company borrowed $17.9 million
under the Sanofi Loan Facility to finance the portion of the
Company’s loss for the quarter ended December 31, 2015.
The total amount owed to Sanofi at December 31, 2015 was
$62.4 million, which includes $1.7 million of <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">paid-in-kind</font></font> interest.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On November 9, 2016, the Company entered into a settlement
agreement with Sanofi (the “Settlement Agreement”).
Under the terms of the Settlement Agreement, the promissory note
between the Company and Aventisub LLC (“Aventisub”), a
Sanofi affiliate, was terminated, with Aventisub agreeing to
forgive the full outstanding loan balance of $72.0 million.
Sanofi also agreed to purchase $10.2 million of insulin from
the Company in December 2016 under an existing insulin put option
as well as make a cash payment of $30.6 million to the Company
in early January 2017 as acceleration and in replacement of all
other payments that Sanofi would otherwise have been required to
make in the future pursuant to the insulin put option, without the
Company being required to deliver any insulin for such payment. The
Company was also relieved of its obligation to pay Sanofi
$0.5 million in previously uncharged costs pursuant to the
Sanofi License Agreement. The Company and Sanofi also agreed to a
general release of potential claims against each other.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The forgiveness of the full outstanding loan balance on the Sanofi
Loan Facility and the previously uncharged costs related to the
collaboration were accounted for in (gain) loss on extinguishment
of debt in the accompanying consolidated statements of operations.
The $10.2 million sale of insulin was accounted for as net
revenue — collaboration, consistent with the Company’
sales of insulin to Sanofi in the third quarter of 2016 (see Note 2
— Summary of Significant Accounting Policies
— <i>Revenue
Recognition — Net Revenue — Collaboration</i>). The
$30.6 million accelerated put option payment was recognized as
a receivable from Sanofi at December 31, 2016 and an increase
in the recognized loss on purchase commitments as the purchase
commitment obligation had previously been reduced to reflect the
Company’s expectation that amounts associated with purchases
of insulin were recoverable (see Note 2 — Summary of
Significant Accounting Policies — <i>Inventories</i>).</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<b>13. Commitments and Contingencies</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Operating Leases</i> — The Company leases its
executive offices in Valencia, California and certain equipment
under various operating leases, which expire at various dates
through 2017 and beyond. Future payments are insignificant.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Rent expense under all operating leases, including office space and
equipment, for the years ended December 31, 2016, 2015 and
2014 was approximately $373,000, $426,000 and $737,000,
respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Guarantees and Indemnifications</i> — In the ordinary course
of its business, the Company makes certain indemnities, commitments
and guarantees under which it may be required to make payments in
relation to certain transactions. The Company, as permitted under
Delaware law and in accordance with its Bylaws, indemnifies its
officers and directors for certain events or occurrences, subject
to certain limits, while the officer or director is or was serving
at the Company’s request in such capacity. The term of the
indemnification period is for the officer’s or
director’s lifetime. The maximum amount of potential future
indemnification is unlimited; however, the Company has a director
and officer insurance policy that may enable it to recover a
portion of any future amounts paid. The Company believes the fair
value of these indemnification agreements is minimal. The Company
has not recorded any liability for these indemnities in the
accompanying consolidated balance sheets. However, the Company
accrues for losses for any known contingent liability, including
those that may arise from indemnification provisions, when future
payment is probable and the amount can be reasonably estimated. No
such losses have been recorded to date.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Litigation</i> — The Company is subject
to legal proceedings and claims which arise in the ordinary course
of its business. As of December 31, 2016, the Company believes
that the final disposition of such matters will not have a material
adverse effect on the consolidated financial position, results of
operations or cash flows of the Company and no accrual has been
recorded. The Company maintains liability insurance coverage to
protect the Company’s assets from losses arising out of or
involving activities associated with ongoing and normal business
operations. The Company records a provision for a liability when it
is both probable that a liability has been incurred and the amount
of the loss can be reasonably estimated. The Company’s policy
is to accrue for legal expenses in connection with legal proceeding
and claims as they are incurred.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Following the public announcement of Sanofi’s election to
terminate the Sanofi License Agreement and the subsequent decline
of the price of its common stock, several complaints were filed in
the U.S. District Court for the Central District of California
against the Company and certain of its officers and directors on
behalf of certain purchasers of its common stock, which were
consolidated into a single action. The amended complaint alleged
that the Company and certain of its officers and directors violated
federal securities laws by making materially false and misleading
statements regarding the prospects for Afrezza, thereby
artificially inflating the price of its common stock. The Company
and the named defendants brought a motion to dismiss the class
action that was pending against them, which the District Court
granted in August 2016 without leave to amend the complaint. The
lead plaintiff appealed that decision to the Ninth Circuit Court of
Appeals. On March 2, 2017, the lead plaintiff filed a
voluntary motion to dismiss his appeal, which the Court of Appeals
granted on March 9, 2017.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Following the public announcement of Sanofi’s election to
terminate the Sanofi License Agreement and the subsequent decline
of the price of its common stock, two motions were submitted to the
District Court at Tel Aviv, Economic Department for the
certification of a class action against the Company and certain of
its officers and directors. In general, the complaints allege that
the Company and certain of its 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, a hearing is scheduled for May 2017 to
determine whether Israeli or U.S. law is applicable before the case
can be certified as a class action. The Company will vigorously
defend against these claims.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Subsequent to the filing of the federal securities class action
against the Company, two shareholder derivative complaints were
filed in the Superior Court for the State of California, County of
Los Angeles against certain of the Company’s directors and
officers. The complaints allege breaches of fiduciary duties by the
defendants and other violations of law. Among other allegations,
the complaints allege that the defendants caused the Company to
make false and misleading statements or omissions of material fact
regarding the Company’s business and the prospects for sales
of Afrezza, thereby artificially inflating the price of the
Company’s common stock. Following the dismissal of the
federal securities class action, each derivative complaint was
voluntarily dismissed by its plaintiff.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Contingencies —</i> In connection with the
Facility Agreement, on July 1, 2013 the Company also entered
into a Milestone Rights Purchase Agreement (the “Milestone
Agreement”) with Deerfield Private Design Fund and Horizon
Santé FLML SÁRL (collectively, the “Milestone
Purchasers”), pursuant to which the Company sold the
Milestone Purchasers the Milestone Rights to receive payments up to
$90.0 million upon the occurrence of specified strategic and
sales milestones, including the first commercial sale of an Afrezza
product in the United States and the achievement of specified net
sales figures (see Note 7 — Borrowings).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Commitment —</i> On July 31, 2014, the
Company entered into a supply agreement (the “Insulin Supply
Agreement”) with Amphastar France Pharmaceuticals S.A.S., a
French corporation (Amphastar), pursuant to which Amphastar will
manufacture for and supply to the Company certain quantities of
recombinant human insulin for use in Afrezza. Under the terms of
the Insulin Supply Agreement, Amphastar will be responsible for
manufacturing the insulin in accordance with the Company’s
specifications and agreed-upon quality standards. The Company had
agreed to purchase annual minimum quantities of insulin for
calendar years 2015 through 2019 under the Insulin Supply Agreement
of an aggregate total of approximately €120.1 million.
The Company could have requested to purchase additional quantities
of insulin over such annual minimum quantities with a cancellation
fee.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On November 9, 2016, the supply agreement with Amphastar was
amended to extend the term over which the Company is required to
purchase insulin, without reducing the total amount of insulin to
be purchased. Under the amendment, annual minimum quantities of
insulin to be purchased for calendar years 2017 through 2023 total
an aggregate purchase price of €93.0 million at
December 31, 2016. The Insulin Supply Agreement specifies that
Amphastar will be deemed to have satisfied its obligations with
respect to quantity, if the actual quantity supplied is within plus
or minus ten percent (+/- 10%) of the quantity set forth in the
applicable purchase order. In addition, the aggregate cancellation
fees that the Company would incur in the event that the above
insulin quantities are not purchased was lowered from
$5.3 million for the period October 1, 2016 through 2018
to $3.4 million over the same period. The annual purchase
requirements under the contract are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="77%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">2.7 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2018</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">8.9 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2019</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">11.6 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2020</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">15.5 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2021</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">15.5 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2022</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">19.4 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2023</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">19.4 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Unless earlier terminated, the term of the Insulin Supply Agreement
expires on December 31, 2023 and 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. The Company and Amphastar each have normal and
customary termination rights, including termination for material
breach that is not cured within a specific time frame or in the
event of liquidation, bankruptcy or insolvency of the other party.
In addition, the Company may terminate the Insulin Supply Agreement
upon two years’ prior written notice to Amphastar without
cause or upon 30 days’ prior written notice to Amphastar if a
controlling regulatory authority withdraws approval for Afrezza,
provided, however, in the event of a termination pursuant to either
of the latter two scenarios, the provisions of the Insulin Supply
Agreement require the Company to pay the full amount of all unpaid
purchase commitments due over the initial term within 60 calendar
days of the effective date of such termination.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company also has another firm commitment with another supplier
for an aggregate of $0.9 million.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<b>12. Stock Award Plans</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On March 1, 2017, the Company effected a 1-for-5 reverse stock
split of the Company’s outstanding common stock. As a result,
all common stock share amounts included in these consolidated
financial statements have been retroactively reduced by a factor of
five, and all common stock per share amounts have been increased by
a factor of five, with the exception of the Company’s common
stock par value. See Note 1 — Description of Business.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On May 23, 2013, the Company adopted the 2013 Equity Incentive
Plan (the “2013 Plan”) as the successor to and
continuation of the 2004 Equity Incentive Plan (the “2004
Plan”). The 2013 Plan consists of 4.3 million additional
shares and the number of unallocated shares remaining available for
grant for new awards under the 2004 Plan. The 2013 Plan provides
for the granting of stock awards including stock options and
restricted stock units, to employees, directors and consultants.
The 2013 Plan also provides for the automatic, <font style="WHITE-SPACE: nowrap">non-discretionary</font> grant of options to the
Company’s <font style="WHITE-SPACE: nowrap">non-employee</font> directors. No additional
awards will be granted under the 2004 Plan or under the
2004 <font style="WHITE-SPACE: nowrap">Non-Employee</font> Directors’ Stock Option
Plan (the “NED Plan”) as all future awards will be made
out of the 2013 Plan.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The following table summarizes information about the
Company’s stock-based award plans as of December 31,
2016:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="60%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Outstanding<br />
Options</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Outstanding<br />
Restricted<br />
Stock Units</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Shares Available<br />
for Future<br />
Issuance</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2004 Equity Incentive Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,052,345</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14,203</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">97,574</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2013 Equity Incentive Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,399,245</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">723,763</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,743,013</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2004 <font style="WHITE-SPACE: nowrap">Non-Employee</font> Directors’ Stock Option
Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78,666</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">737,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,840,587</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
In March 2004, as part of the 2004 Plan, the Company’s board
of directors approved the Employee Stock Purchase Plan
(“ESPP”), which became effective upon the closing of
the Company’s initial public offering. Initially, the
aggregate number of shares that could be sold under the 2004 Plan
was 400,000 shares of common stock. On January 1 of each year,
for a period of ten years beginning January 1, 2005, the share
reserve automatically increased by the lesser of: 140,000 shares,
1% of the total number of shares of common stock outstanding on
that date, or an amount as may be determined by the board of
directors. However, under no event can the annual increase cause
the total number of shares reserved under the ESPP to exceed 10% of
the total number of shares of capital stock outstanding on
December 31 of the prior year. On January 1, 2013 and
2014 the ESPP share reserve was increased each year by 140,000
shares. There was no ESPP share reserve increases during 2015 or
2016. As of December 31, 2016, 445,782 shares were available
for issuance under the ESPP. For the years ended December 31,
2016, 2015 and 2014, the Company sold 104,758, 64,245 and 61,015
shares, respectively, of its common stock to employees
participating in the ESPP. The ESPP purchase of 43,672 shares for
the period ending December 31, 2016 was initiated prior
to <font style="WHITE-SPACE: nowrap">year-end</font> but did not settle until
January 5, 2017. As a result, the shares sold are reflected in
the ESPP share reserves but are excluded from common stock
outstanding as of December 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company’s board of directors determines eligibility,
vesting schedules and criteria and exercise prices for stock awards
granted under the 2013 Plan. Options and restricted stock unit
awards under the 2013 Plan expire not more than ten years from the
date of the grant and are exercisable upon vesting. Stock options
that vest over time generally vest over four years. Current
time-based vesting stock option grants vest and become exercisable
at the rate of 25% after one year and ratably on a monthly basis
over a period of 36 months thereafter. Restricted stock units with
time-based vesting generally vest at a rate of 25% per year
over four years with consideration satisfied by service to the
Company. The Company also issues stock awards with performance
conditions. The 2013 Plan provides for full acceleration of vesting
if an employee is terminated within three months of a change in
control, as defined in the 2013 Plan.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Share-based payment transactions are recognized as compensation
cost based on the fair value of the instrument on the date of
grant. The Company accounts for <font style="WHITE-SPACE: nowrap">non-employee</font> stock-based compensation
expense based on the estimated fair value of the options, which is
determined using the Black-Scholes option valuation model and
amortizes such expense on a straight-line basis over the service
period for time-based awards and over the expected dates of
achievement for performance-based awards. These awards are subject
to <font style="WHITE-SPACE: nowrap">re-measurement</font> until service is complete. As
of December 31, 2016, there were options to purchase 100,697
shares of common stock outstanding to consultants.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
During the years ended December 31, 2016, 2015 and 2014 the
Company recorded stock-based compensation expense of
$5.1 million, $8.7 million and $48.6 million,
respectively.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Total stock-based compensation expense recognized in the
accompanying consolidated statements of operations is as follows
(in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Employee-related</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,407</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Consultant-related</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">318</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,725</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Total stock-based compensation expense recognized in the
accompanying consolidated statements of operations is included in
the following categories (in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Cost of goods sold</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">695</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Research and development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,309</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,029</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,357</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Selling, general and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,131</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,696</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,265</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,725</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company uses the Black-Scholes option valuation model to
estimate the grant date fair value of employee stock options. The
expected term of an option granted is based on combining historical
exercise data with expected weighted time outstanding. Expected
weighted time outstanding is calculated by assuming the settlement
of outstanding awards is at the midpoint between the remaining
weighted average vesting date and the expiration date.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The expected volatility assumption is based on an assessment of the
historical volatility, with consideration of implied volatility,
derived from an analysis of historical trade activity. The Company
has selected risk-free interest rates based on U.S. Treasury
securities with an equivalent expected term in effect on the date
the options were granted. Additionally, the Company uses historical
data and management judgment to estimate stock option exercise
behavior and employee turnover rates to estimate the number of
stock option awards that will eventually vest. The Company
calculated the fair value of employee stock options granted during
the years ended December 31, 2016, 2015 and 2014 using the
following assumptions:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="31%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="5" align="center">Year Ended December 31,</td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" align="center">2016</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" align="center">2015</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" align="center">2014</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free interest rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
1.18% — 1.80%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">1.61%
—1.86%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
1.64% — 2.11%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected lives</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.13 — 5.82 years</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.79 — 5.86 years</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.77 — 6.09 years</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
77.57% — 82.75%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
69.76% — 71.84%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
73.98% — 84.85%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Dividends</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The following table summarizes information about stock options
outstanding:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="60%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Number of<br />
Shares</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br />
Average Exercise<br />
Price per Share</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Aggregate<br />
Intrinsic<br />
Value ($000)</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,955,845</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.70</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,236,693</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercised</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(55,231</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.45</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeited</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(407,161</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expired</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(199,890</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">23.65</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.10</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested and expected to vest at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,399,777</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.35</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercisable at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,414,586</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The weighted average grant date fair value of the stock options
granted during the years ended December 31, 2016, 2015 and
2014 was $3.05, $12.80 and $23.80 per option, respectively. The
total intrinsic value of options exercised during the years ended
December 31, 2016, 2015 and 2014 was $0.1 million,
$6.2 million and $14.9 million, respectively. Intrinsic
value is measured using the fair market value at the date of
exercise for options exercised or at December 31 for
outstanding options, less the applicable exercise price.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Cash received from the exercise of options during the years ended
December 31, 2016, 2015 and 2014 was approximately
$0.5 million, $3.3 million and $11.0 million,
respectively. The weighted-average remaining contractual terms for
options outstanding, vested and expected to vest and exercisable at
December 31, 2016 was 5.31 years, 5.22 years and 2.93 years,
respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
A summary of restricted stock unit activity for the year ended
December 31, 2016 is presented below:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Number of<br />
Shares</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br />
Average<br />
Grant Date<br />
Fair Value<br />
per Share</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">360,924</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">800,530</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(131,000</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21.70</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeited</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(292,488</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">11.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">737,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8.40</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The total restricted stock units expected to vest as of
December 31, 2016 was 629,424 with a weighted average grant
date fair value of $8.60 per share. The total intrinsic value of
restricted stock units expected to vest as of December 31,
2016 was $2.0 million. Intrinsic value of restricted stock
units expected to vest is measured using the closing share price at
December 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Total intrinsic value of restricted stock units vested during the
years ended December 31, 2016, 2015 and 2014 was
$0.6 million, $5.2 million and $62.7 million,
respectively. Intrinsic value of restricted stock units vested is
measured using the closing share price on the day prior to the vest
date. The total grant date fair value of restricted stock units
vested during the years ended December 31, 2016, 2015 and 2014
was $2.6 million, $5.5 million and $36.4 million,
respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
As of December 31, 2016, there was $4.0 million and
$4.8 million of unrecognized compensation expense related to
options and restricted stock units with performance conditions,
respectively, which is expected to be recognized over the weighted
average vesting period of 2.9 years. The Company evaluates stock
awards with performance conditions as to the probability that the
performance conditions will be met and uses that information to
estimate the date at which those performance conditions will be met
in order to properly recognize stock-based compensation expense
over the requisite service period.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
As of December 31, 2016, the Company reviewed the probability
of achieving the performance conditions for each of the four
vesting tranches of the performance-based stock options and
determined that it was probable that the Company would achieve the
first vesting tranche in December 2017. Therefore, the Company
recorded a <font style="WHITE-SPACE: nowrap">non-material</font> cumulative catchup of the
expense from the grant date through December 31, 2016 and will
record the unrecognized compensation cost related to the first
tranche in the amount of $0.3 million through
December 31, 2017. The Company further determined that no
compensation costs would be recognized for the second, third and
fourth vesting tranches as it had not been determined that it was
probable that the performance conditions related to these tranches
would be achieved.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
During the year ended December 31, 2015, there was
$1.6 million of stock compensation expense related to certain
executives who entered into severance agreements which resulted in
a modification to the terms of their awards. The severance
agreements generally allowed for the separated executives to
continue to vest under their original award terms for a stated
period of time without providing substantive services. There were
no modifications in 2016.</p>
</div>
FY
2016
10-K
1.36
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Net Income (Loss) Per Share of Common Stock</i> — Basic
net income (loss) per share excludes dilution for potentially
dilutive securities and is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share reflects the
potential dilution under the treasury method that could occur if
securities or other contracts to issue common stock were exercised
or converted into common stock. For periods where the Company has
presented a net loss, potentially dilutive securities are excluded
from the computation of diluted net loss per share as they would be
antidilutive.</p>
</div>
0.350
-0.340
0000899460
No
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Fair Value of Financial Instruments</i> — The Company
utilizes fair value measurement guidance to value its financial
instruments. The guidance includes a definition of fair value,
prescribes methods for measuring fair value, establishes a fair
value hierarchy based on the inputs used to measure fair value and
expands disclosures about the use of fair value measurements. The
valuation techniques utilized are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect
internal market assumptions. These two types of inputs create the
following fair value hierarchy:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 1 — Quoted prices for identical instruments
in active markets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 2 — Quoted prices for similar instruments in
active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations whose
inputs are observable or whose significant value drivers are
observable.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 3 — Significant inputs to the valuation model
are unobservable.</p>
</div>
32000
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>3. Inventories</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Inventories consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="79%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style="margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Raw materials</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<font style="white-space:nowrap"><font style="white-space:nowrap">Work-in-process</font></font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,120</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Finished goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">211</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total Inventory</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,331</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As of December 31, 2015, the Company recorded a write-off of all of
its inventory. There were no raw materials as of December 31, 2016
because purchases of raw materials in 2016 were recorded at zero
value because they had been accrued at December 31, 2015 through
the loss on purchase commitment. Work-in-process and finished goods
as of December 31, 2016 include conversion costs but not materials
cost because the materials used in its production were previously
written off.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Inventories</i> — Inventories are stated at the lower of
cost or net realizable value. The Company determines the cost of
inventory using the <font style="white-space:nowrap">first-in,</font> <font style="white-space:nowrap">first-out,</font> or FIFO, method. The Company
capitalizes inventory costs associated with the Company’s
products based on management’s judgment that future economic
benefits are expected to be realized; otherwise, such costs are
expensed as cost of goods sold. The Company periodically analyzes
its inventory levels to identify inventory that may expire or has a
cost basis in excess of its estimated realizable value, and writes
down such inventories as appropriate. In addition, the
Company’s products are subject to strict quality control and
monitoring which the Company performs throughout the manufacturing
process. If certain batches or units of product no longer meet
quality specifications or become obsolete due to expiration, the
Company will record a charge to write down such unmarketable
inventory to its estimated net realizable value.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company analyzed its inventory levels to identify inventory
that may expire or has a cost basis in excess of its estimated
realizable value. The Company performed an assessment of projected
sales and evaluated the lower of cost or net realizable value and
the potential excess inventory on hand at December 31, 2016
and 2015. As a result of these assessments, the Company recorded a
$0.2 million charge at December 31, 2016 to <font style="white-space:nowrap">write-off</font> inventory that will expire
prior to sale. At December 31, 2015, the Company recorded a
charge of $39.3 million to record the inventory raw materials
on hand at the lower of cost or net realizable value, inventory
expiry and <font style="white-space:nowrap">write-off</font> other
inventory related assets.</p>
</div>
-78090000
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Reclassifications</i> — Certain amounts from previous
periods have been reclassified to conform to the 2016 presentation.
Specifically, accrued interest — note payable to principal
stockholder has been reclassified from the previously reported
classification of other liabilities in the accompanying
consolidated balance sheets. Additionally, the remaining balance
from the previously reported classification of other liabilities is
now identified as milestone rights liability, and is disclosed as a
separate line item on the consolidated statements of cash flows.
Additionally, on the consolidated statement of operations, product
manufacturing has been renamed to cost of goods sold. The Company
also reclassified (gain) loss on foreign currency translation from
the previously reported classification of product manufacturing in
the accompanying consolidated statements of operations.
Additionally, certain balances from prepaid expenses and other
current assets were reclassed to (gain) loss on foreign currency
translation in the consolidated statements of cash flows.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Potentially dilutive securities outstanding that are considered
antidilutive are summarized as follows (in shares):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercise of common stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,955,845</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,308,332</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion of senior convertible notes into common stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,464,616</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercise of common stock warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">9,740,597</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,919</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,997,575</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vesting of restricted stock units</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">702,867</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">360,924</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">522,144</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">16,788,281</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,946,249</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">10,292,667</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The provision for income taxes consists of the following (in
thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="63%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Current</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. federal</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. state</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-U.S.</font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total current</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deferred</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. federal</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(43,814</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">109,512</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">57,873</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. state</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4,311</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(29,394</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,631</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-U.S.</font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total deferred</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(48,125</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">80,118</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65,504</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">48,125</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(80,118</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(65,504</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following tables set forth the fair value of the
Company’s financial instruments (in millions):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="18" align="center">As of December 31, 2016</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Carrying Value</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Financial liabilities:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Senior convertible notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Facility Financing Obligation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">71.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">18.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">18.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Warrant liability (at recurring fair values)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total financial liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">115.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">123.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">123.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="18" align="center">As of December 31, 2015</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Carrying Value</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Financial liabilities:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Senior convertible notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">21.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">21.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Facility Financing Obligation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Sanofi Loan Facility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">44.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total financial liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">155.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">150.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">150.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
A summary of restricted stock unit activity for the year ended
December 31, 2016 is presented below:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number of<br />
Shares</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br />
Average<br />
Grant Date<br />
Fair Value<br />
per Share</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">360,924</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">24.25</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">800,530</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(131,000</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21.70</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeited</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(292,488</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">11.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">737,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8.40</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
0.8275
199890
8.45
23.65
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>2. Summary of Significant Accounting Policies</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Financial Statement Estimates</i> — The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America (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. Management
considers many factors in selecting appropriate financial
accounting policies, and in developing the estimates and
assumptions that are used in the preparation of the financial
statements. Management must apply significant judgment in this
process. The more significant estimates reflected in these
accompanying consolidated financial statements include revenue
recognition, assessing long-lived assets for impairment, accrued
expenses, including clinical study expenses, inventory
recoverability, valuation of the facility financing obligation,
loss on purchase commitment, warrant liability, milestone rights,
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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Reclassifications</i> — Certain amounts from previous
periods have been reclassified to conform to the 2016 presentation.
Specifically, accrued interest — note payable to principal
stockholder has been reclassified from the previously reported
classification of other liabilities in the accompanying
consolidated balance sheets. Additionally, the remaining balance
from the previously reported classification of other liabilities is
now identified as milestone rights liability, and is disclosed as a
separate line item on the consolidated statements of cash flows.
Additionally, on the consolidated statement of operations, product
manufacturing has been renamed to cost of goods sold. The Company
also reclassified (gain) loss on foreign currency translation from
the previously reported classification of product manufacturing in
the accompanying consolidated statements of operations.
Additionally, certain balances from prepaid expenses and other
current assets were reclassed to (gain) loss on foreign currency
translation in the consolidated statements of cash flows.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Revenue Recognition</i> — Revenue is recognized when the
four basic criteria of revenue recognition are met: (1) persuasive
evidence that an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the fee is fixed or determinable;
and (4) collectability is reasonably assured. When the accounting
requirements for revenue recognition are not met, the Company
defers the recognition of revenue by recording deferred revenue on
the consolidated balance sheets until such time that all criteria
are met. To date, the Company has had revenue from collaborations,
commercial sales of Afrezza, and from sales of bulk insulin, which
are described more fully below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Revenue Recognition — Net Revenue — Collaborations
—</i> The Company enters into collaborations under which we
must perform certain obligations and we receive periodic payments.
We evaluate the collaborations under the multiple element revenue
recognition accounting guidance. Revenue arrangements with multiple
elements are divided into separate units of accounting if certain
criteria are met, including whether the delivered elements have
stand-alone value to the customer. When deliverables are separable,
consideration received is allocated to the separate units of
accounting based on the relative selling price of each deliverable
and the appropriate revenue recognition principles are applied to
each unit.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The assessment of multiple element arrangements requires judgment
in order to determine the appropriate units of accounting and the
points in time that, or periods over which, revenue should be
recognized. The terms of and the accounting for the Company’s
collaborations are described more fully in Note 8 —
Collaboration Arrangements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Revenue Recognition — Net Revenue — Commercial
Product Sales —</i> Between July 1, 2016 and
December 15, 2016, the Company sold Afrezza to Integrated
Commercialization Solutions Direct (ICS) and title and risk of loss
transferred to ICS upon shipment. After December 15, 2016, ICS
became a third party logistics provider and stopped taking title
and risk of loss upon shipment of Afrezza to ICS. The Company sells
Afrezza in the United States to wholesale pharmaceutical
distributors through ICS, and ultimately to retail pharmacies,
which are collectively referred to as “customers”.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
The Company provides the right of return to ICS (through
December 15, 2016) and its wholesale distributors and, through
them, to its retail pharmacy customers for unopened product for a
period beginning six months prior to and ending twelve months after
its expiration date. Once the product has been prescribed and
dispensed to the patient, any right of return ceases to exist.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Given the Company’s limited sales history for Afrezza, the
Company cannot reliably estimate expected returns of the product at
the time of shipment into the distribution channel. Accordingly,
the Company defers recognition of revenue on Afrezza product
shipments until the right of return no longer exists, which occurs
at the earlier of the time Afrezza is dispensed from pharmacies to
patients or expiration of the right of return. The Company
recognizes revenue based on Afrezza patient prescriptions dispensed
as estimated by syndicated data provided by a third party. The
Company also analyzes additional data points to ensure that such
third-party data is reasonable including data related to inventory
movements within the channel and ongoing prescription demand.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
For the year ended December 31, 2016, net revenue from
commercial product sales consisted of $1.9 million of net
sales of Afrezza dispensed to patients. As of December 31,
2016, the Company recorded $3.4 million in deferred revenue on
its consolidated balance sheet, of which $1.6 million (net of
estimated <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">gross-to-net</font></font> adjustments)
represents product shipped to the Company’s third-party
logistics provider and wholesale distributors, but not yet
dispensed to patients. The difference represents deferred revenue
from bulk insulin sales, which is described more fully under the
heading <i>Revenue Recognition — Revenue — Bulk Insulin
Sales</i> below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i><font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">Gross-to-net</font></font> Adjustments
—</i> Estimated <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">gross-to-net</font></font>
adjustments for Afrezza include wholesaler distribution fees,
prompt pay discounts, estimated rebates and patient discount and
<font style="WHITE-SPACE: nowrap">co-pay</font> assistance
programs, and are based on estimated amounts owed or to be claimed
on the related sales. These estimates take into consideration the
terms of the Company’s agreements with its customers and the
levels of inventory within the distribution and retail channels
that may result in future rebates or discounts taken. In certain
cases, such as patient support programs, the Company recognizes the
cost of patient discounts as a reduction of revenue based on
estimated utilization. If actual future results vary, the Company
may need to adjust these estimates, which could have an effect on
product revenue in the period of adjustment. The Company records
product sales deductions in the consolidated statements of
operations at the time product revenue is recognized. At
December 31, 2016, year to date total <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">gross-to-net</font></font> adjustments were
approximately $0.8 million, which represents 30% of gross
revenue from product sales.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Wholesaler Distribution Fees —</i> The Company pays
distribution fees to certain wholesale distributors based on
contractually determined rates. The Company accrues the
distribution fees on shipment to the respective wholesale
distributors and recognizes the distribution fees as a reduction of
revenue in the same period the related revenue is recognized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Prompt Pay Discounts —</i> The Company offers cash
discounts to its customers, generally 2% of the sales price, as an
incentive for prompt payment. The Company accounts for cash
discounts by reducing accounts receivable by the prompt pay
discount amount and recognizes the discount as a reduction of
revenue in the same period the related revenue is recognized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Rebates —</i> The Company participates in federal and
state government-managed Medicare and Medicaid rebate programs and
intends to pursue participation in certain other qualifying federal
and state government programs whereby discounts and rebates are
provided to participating federal and state government entities.
Rebates provided through these other qualifying programs are
included in the Medicaid and Medicare rebate accrual. The Company
accounts for these rebates by establishing an accrual equal to the
estimate of rebate claims attributable to a sale and determines its
estimate of the rebates accrual based on historical payor data
provided by a third-party vendor along with additional data
including a forecasted participation rate for Medicare and
Medicaid. From that data, as well as input received from
MannKind’s commercial team, an estimated participation rate
for Medicare and Medicaid is determined and applied at the mandated
rate for those sales. Any new information regarding changes in the
programs’ regulations and guidelines or any changes in the
Company’s government price reporting calculations that would
impact the amount of the rebates will also be taken into account in
determining or modifying the appropriate reserve. The time period
between the date the product is sold into the channel and the date
such rebates are paid ranges from approximately six to nine months.
As such, continuous monitoring of these estimates are performed on
a periodic basis and if necessary, adjusted to reflect new facts
and circumstances. Rebates are recognized as a reduction of revenue
in the period the related revenue is recognized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Patient Discount and <font style="WHITE-SPACE: nowrap">Co-Pay</font> Assistance Programs —</i>
The Company offers discount card programs to patients for Afrezza
in which patients receive discounts on their prescriptions or a
reduction in their <font style="WHITE-SPACE: nowrap">co-pay</font>
amounts that are reimbursed by the Company. The Company estimates
the total amount that will be redeemed based on levels of inventory
in the distribution and retail channels and recognizes the discount
as a reduction of revenue in the same period the related revenue is
recognized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Product Returns —</i> The Company does not provide a
reserve for product returns of sales of Afrezza due to its revenue
recognition policy of deferring recognition of revenue on product
shipments of Afrezza until the right of return no longer
exists.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Revenue Recognition — Revenue — Bulk Insulin Sales
—</i> In 2016, revenue from bulk insulin sales was recognized
after delivery and customer acceptance of the bulk insulin. When
the accounting requirements for revenue recognition of bulk insulin
sales are not met, the Company defers recognition of revenue by
recording deferred revenue on the balance sheet until such time
that all criteria are met.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Deferred revenue includes $1.8 million received from a sale of
surplus bulk insulin to a third party that was delivered prior to,
but accepted after, December 31, 2016. No deferred cost was
recognized related to this sale because the inventory was written
off on December 31, 2015.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Deferred Costs from Collaboration —</i> Deferred costs
from collaboration represents the costs of product manufactured and
sold to Sanofi, as well as certain direct costs associated with a
firm purchase commitment entered into in connection with the
collaboration with Sanofi. During the third quarter of 2016, the
costs related to the Sanofi product sales were recognized as costs
of revenue — collaboration in the consolidated statements of
operations, as related revenue was recognized at that time.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Deferred Costs from Commercial Product Sales —</i>
Deferred costs from commercial product sales represents the cost of
product (including labor, overhead and costs to ship to third party
logistics) shipped to ICS and wholesale distributors, but not yet
dispensed by pharmacies to patients.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Cost of Goods Sold —</i> Cost of goods sold includes the
costs related to Afrezza product dispensed by pharmacies to
patients as well as under-absorbed labor and overhead and inventory
write-offs, which are recorded as expenses in the period in which
they are incurred, rather than as a portion of the inventory
cost.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Cash and Cash Equivalents</i> — The Company considers all
highly liquid investments with original or remaining maturities of
90 days or less at the time of purchase, that are readily
convertible into cash to be cash equivalents. As of
December 31, 2016 and 2015, cash equivalents were comprised of
money market accounts with maturities less than 90 days from the
date of purchase.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Concentration of Credit Risk</i> — Financial instruments
which potentially subject the Company to concentration of credit
risk consist of cash and cash equivalents. Cash and cash
equivalents are held in high credit quality institutions. Cash
equivalents consist of interest-bearing money market accounts,
which are regularly monitored by management.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Accounts Receivable and Allowance for Doubtful Accounts</i>
— Accounts receivable are recorded at the invoiced amount and
are not interest bearing. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. The Company makes
ongoing assumptions relating to the collectability of its accounts
receivable in its calculation of the allowance for doubtful
accounts. As of December 31, 2016 and 2015, there was no
allowance for doubtful accounts.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Inventories</i> — Inventories are stated at the lower of
cost or net realizable value. The Company determines the cost of
inventory using the <font style="WHITE-SPACE: nowrap">first-in,</font> <font style="WHITE-SPACE: nowrap">first-out,</font> or FIFO, method. The
Company capitalizes inventory costs associated with the
Company’s products based on management’s judgment that
future economic benefits are expected to be realized; otherwise,
such costs are expensed as cost of goods sold. The Company
periodically analyzes its inventory levels to identify inventory
that may expire or has a cost basis in excess of its estimated
realizable value, and writes down such inventories as appropriate.
In addition, the Company’s products are subject to strict
quality control and monitoring which the Company performs
throughout the manufacturing process. If certain batches or units
of product no longer meet quality specifications or become obsolete
due to expiration, the Company will record a charge to write down
such unmarketable inventory to its estimated net realizable
value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company analyzed its inventory levels to identify inventory
that may expire or has a cost basis in excess of its estimated
realizable value. The Company performed an assessment of projected
sales and evaluated the lower of cost or net realizable value and
the potential excess inventory on hand at December 31, 2016
and 2015. As a result of these assessments, the Company recorded a
$0.2 million charge at December 31, 2016 to <font style="WHITE-SPACE: nowrap">write-off</font> inventory that will expire
prior to sale. At December 31, 2015, the Company recorded a
charge of $39.3 million to record the inventory raw materials
on hand at the lower of cost or net realizable value, inventory
expiry and <font style="WHITE-SPACE: nowrap">write-off</font> other
inventory related assets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>State Research and Development Credit Exchange Receivable</i>
— The State of Connecticut provides certain companies with
the opportunity to exchange certain research and development income
tax credit carryforwards for cash in exchange for foregoing the
carryforward of the research and development credits. The program
provides for an exchange of research and development income tax
credits for cash equal to 65% of the value of corporation tax
credit available for exchange. Estimated amounts receivable under
the program are recorded as a reduction of research and development
expenses. These amounts are included in prepaid expenses and other
current assets on the consolidated balance sheets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Prepaid Expenses and Other Current Assets —</i> As of
December 31, 2016 and 2015, prepaid expenses and other current
assets primarily consist of prepaid expenses for goods and services
to be received and includes a certificate of deposit for $350,000
as collateral as required by an agreement with the bank.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Sale of intellectual property —</i> On July 18, 2014,
the Company entered into an assignment agreement with a third party
whereby the third party acquired all proprietary rights, technology
and <font style="WHITE-SPACE: nowrap">know-how</font> that related
to a small molecule inhibitor compound and all <font style="WHITE-SPACE: nowrap">pre-clinical</font> data and results related
thereto. Under the terms of the assignment agreement, the Company
received total consideration of $9.3 million and accrued
$1.4 million in expense for a net amount of $7.9 million
recorded as other income. In 2015, the Company recorded other
income of $1.4 million related to the relief of the
$1.4 million accrual for expenses associated with the sale of
intellectual property related to oncology in 2014, which was
subsequently resolved without payment.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Assets Held for Sale —</i> The Company classifies
long-lived assets anticipated to be sold within one year as held
for sale at the lower of their carrying value or fair value less
estimated selling costs.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Property and Equipment</i> — Property and equipment are
depreciated using the straight-line method over the estimated
useful lives of the related assets. Leasehold improvements are
amortized over the term of the lease or the service lives of the
improvements, whichever is shorter. Maintenance and repairs are
expensed as incurred. Assets under construction are not depreciated
until placed into service.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Impairment of Long-Lived Assets</i> — The Company
evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an
asset may not be recoverable. Assets are considered to be impaired
if the carrying value may not be recoverable.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
If the Company believes an asset to be impaired, the impairment
recognized is the amount by which the carrying value of the asset
exceeds the fair value of the asset. Fair value is determined using
the market, income or cost approaches as appropriate for the asset.
Any write-downs are treated as permanent reductions in the carrying
amount of the asset and an operating loss would be recognized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company recorded an asset impairment of $1.3 million and $140.4
million for the years ended December 31, 2016 and 2015,
respectively. No asset impairment was recognized during the year
ended December 31, 2014 (see Note 4 — Property and Equipment
and Note 20 <i>—</i> Subsequent Events).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Recognized Loss on Purchase Commitments —</i> The Company
assesses whether losses on long term purchase commitments should be
accrued. Losses that are expected to arise from firm, <font style="WHITE-SPACE: nowrap">non-cancellable,</font> commitments for the
future purchases of inventory items are recognized unless
recoverable. The recognized loss on purchase commitments is reduced
as inventory items are purchased. Changes in estimates are recorded
in the relevant period in (gain) loss on purchase commitments.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During the year ended December 31, 2015, the Company recorded
a loss on purchase commitments amounting to $116.2 million
offset by $50 million expected to be recovered from Sanofi,
primarily due to a long term purchase commitment for insulin raw
materials. During the year ended December 31, 2016, the
balance was adjusted for the recovery received from Sanofi, current
purchases on the contracts and a reduction in the recognized loss
related to amendments to purchase contracts. No new contracts were
identified in 2016 requiring a new loss on purchase commitment
accrual.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Milestone Rights Liability</i> — On July 1, 2013, in
conjunction with the execution of the Facility Agreement, the
Company issued Milestone Rights to Deerfield whereby the Company
agreed to provide Deerfield with <font style="WHITE-SPACE: nowrap">pre-specified</font> Milestone Payments upon
the achievement of 13 specific Milestone Events related to the
commercial release and future cumulative net sales of Afrezza. The
Company analyzed the Milestone Rights and determined that the
agreement does not meet the definition of a freestanding
derivative. Since the Company has not elected to apply the fair
value option to the Milestone Rights Purchase Agreement, the
Company recorded the Milestone Rights at their estimated initial
fair value and accounted for the Milestone Rights as a
liability.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The initial fair value estimate of the Milestone Rights was
calculated using the income approach in which the cash flows
associated with the specified contractual payments were adjusted
for both the expected timing and the probability of achieving the
milestones and discounted to present value using a selected market
discount rate. The expected timing and probability of achieving the
milestones was developed with consideration given to both internal
data, such as progress made to date and assessment of criteria
required for achievement, and external data, such as market
research studies. The discount rate was selected based on an
estimation of required rate of returns for similar investment
opportunities using available market data. The Milestone Rights
liability will be remeasured as the specified milestone events are
achieved. Specifically, as each milestone event is achieved, the
portion of the initially recorded Milestone Rights liability that
pertains to the milestone event being achieved, will be remeasured
to the amount of the specified related milestone payment. The
resulting change in the balance of the Milestone Rights liability
due to remeasurement will be recorded in the Company’s
consolidated statements of operations as interest expense.
Furthermore, the Milestone Rights liability will be reduced upon
the settlement of each milestone payment. As a result, each
milestone payment would be effectively allocated between a
reduction of the recorded Milestone Rights liability and an expense
representing a return on a portion of the Milestone Rights
liability paid to the investor for the achievement of the related
milestone event (see Note 7 — Borrowings). As of
December 31, 2016, the remaining liability balance is
$8.9 million.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Fair Value of Financial Instruments</i> — The Company
utilizes fair value measurement guidance to value its financial
instruments. The guidance includes a definition of fair value,
prescribes methods for measuring fair value, establishes a fair
value hierarchy based on the inputs used to measure fair value and
expands disclosures about the use of fair value measurements. The
valuation techniques utilized are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect
internal market assumptions. These two types of inputs create the
following fair value hierarchy:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 1 — Quoted prices for identical instruments
in active markets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 2 — Quoted prices for similar instruments in
active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations whose
inputs are observable or whose significant value drivers are
observable.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt">
Level 3 — Significant inputs to the valuation model
are unobservable.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Income Taxes</i> — The provisions for federal, foreign,
state and local income taxes are calculated on <font style="WHITE-SPACE: nowrap">pre-tax</font> income based on current tax
law and include the cumulative effect of any changes in tax rates
from those used previously in determining deferred tax assets and
liabilities. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which the temporary differences are expected
to be recovered or settled. A valuation allowance is recorded to
reduce net deferred income tax assets to amounts that are more
likely than not to be realized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Income tax positions are considered for uncertainty. The Company
believes that its income tax filing positions and deductions will
be sustained on audit and does not anticipate any adjustments that
will result in a material change to its financial position.
Therefore, no liabilities for uncertain income tax positions have
been recorded. If a tax position does not meet the minimum
statutory threshold to avoid payment of penalties, the Company
recognizes an expense for the amount of the penalty in the period
the tax position is claimed in the tax return of the Company. The
Company recognizes interest accrued related to unrecognized tax
benefits in income tax expense, if any. Penalties, if probable and
reasonably estimable, are recognized as a component of income tax
expense.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Significant management judgment is involved in determining the
provision for income taxes, deferred tax assets, deferred tax
liabilities, and any valuation allowance recorded against deferred
tax assets. Due to uncertainties related to the realization of the
Company’s deferred tax assets as a result of its history of
operating losses, a full valuation allowance has been established
against the total deferred tax asset balance. The valuation
allowance is based on management’s estimates of taxable
income by jurisdiction in which the Company operates and the period
over which deferred tax assets will be recoverable. In the event
that actual results differ from these estimates or the Company
adjusts these estimates in future periods, a change in the
valuation allowance may be needed.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Contingencies</i> — The Company records a loss contingency
for a liability when it is both probable that a liability has been
incurred and the amount of the loss can be reasonably estimated.
These accruals represent management’s best estimate of
probable loss. Disclosure also is provided when it is reasonably
possible that a loss will be incurred or when it is reasonably
possible that the amount of a loss will exceed the recorded
provision. On a quarterly basis, the Company reviews the status of
each significant matter and assesses its potential financial
exposure. Significant judgment is required in both the
determination of probability and the determination as to whether an
exposure is reasonably estimable. Because of uncertainties related
to these matters, accruals are based only on the best information
available at the time. As additional information becomes available,
the Company reassesses the potential liability related to pending
claims and litigation and may revise its estimates.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Stock-Based Compensation</i> — As of December 31,
2016, the Company had three active stock-based compensation plans,
which are described more fully in Note 12 — Stock Award
Plans. The Company accounts for all share-based payments to
employees, including grants of stock awards and the compensatory
elements of the employee stock purchase plan. All share-based
payments to employees, including grants of stock options,
restricted stock units, performance-based awards 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. The Company uses
the Black-Scholes option valuation model to estimate the grant date
fair value of employee stock options and the compensatory elements
of employee stock purchase plans. Option valuation models require
the input of assumptions, including the expected life of the
stock-based awards, the estimated stock price volatility, the
risk-free interest rate and the expected dividend yield. The
expected volatility assumption is based on an assessment of the
historical volatility, with consideration of implied volatility,
derived from an analysis of historical trade activity. Restricted
stock units are valued based on the market price on the grant date.
The Company evaluates 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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Warrants</i> — The Company has issued warrants to purchase
shares of its common stock. The Company accounts for its warrants
as either equity or liabilities based upon the characteristics and
provisions of each instrument and evaluation of sufficient
authorized shares available to satisfy the obligations. Warrants
classified as derivative liabilities are recorded on the
Company’s consolidated balance sheets at their fair value on
the date of issuance and are revalued at each subsequent balance
sheet date, with fair value changes recognized in the consolidated
statements of operations. The Company estimates the fair value of
its derivative liabilities using a third party valuation analysis
that utilizes a Monte Carlo pricing valuation model and assumptions
that are based on the individual characteristics of the warrants or
instruments on the valuation date, as well as expected volatility,
expected life, yield and a risk-free interest rate. The expected
volatility assumption is primarily based on an assessment of the
historical volatility, with consideration of implied volatility,
derived from an analysis of historical trade activity. Warrants
classified as equity are recorded within additional paid in capital
at the issuance date and are not <font style="WHITE-SPACE: nowrap">re-measured</font> in subsequent periods,
unless the underlying assumptions change to trigger liability
accounting.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Comprehensive Income (Loss)</i> — Other comprehensive
income (loss) requires that all components of comprehensive income
(loss) to be reported in the financial statements in the period in
which they are recognized. Other comprehensive income (loss)
includes certain changes in stockholders’ equity that are
excluded from net income (loss). Specifically, the Company includes
unrealized gains and losses on foreign exchange translation in
accumulated other comprehensive loss on the consolidated balance
sheets.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Research and Development Expenses</i> — Research and
development expenses consist of costs associated with the clinical
trials of the Company’s product candidates, manufacturing
supplies and other development materials, compensation and other
expenses for research and development personnel, costs for
consultants and related contract research, facility costs, and
depreciation. Research and development costs, which are net of any
tax credit exchange recognized for the Connecticut state research
and development credit exchange program, are expensed as incurred.
The Company began commercial manufacturing in the latter part of
the fourth quarter of 2014. Commercial manufacturing costs incurred
in the fourth quarter of 2014 were included in research and
development expense and were immaterial for the year ended
December 31, 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>State Research and Development Credit Exchange Receivable</i>
— The State of Connecticut provides certain companies with
the opportunity to exchange certain research and development income
tax credit carryforwards for cash in exchange for forgoing the
carryforward of the research and development income tax credits.
The program provides for an exchange of research and development
income tax credits for cash equal to 65% of the value of
corporation tax credit available for exchange. Estimated amounts
receivable under the program are recorded as a reduction of
research and development expenses. During the years ended
December 31, 2016, 2015 and 2014, research and development
expenses were offset by research and development tax credits of
$246,000, $743,000 and $816,000, respectively.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Clinical Trial Expenses</i> — Clinical trial expenses,
which are reflected in research and development expenses in the
accompanying consolidated statements of operations, result from
obligations under contracts with vendors, consultants and clinical
site agreements in connection with conducting clinical trials. The
financial terms of these contracts are subject to negotiations
which vary from contract to contract and may result in payment
flows that do not match the periods over which materials or
services are provided to the Company under such contracts. The
appropriate level of trial expenses are reflected in the
Company’s consolidated financial statements by matching
period expenses with period services and efforts expended. These
expenses are recorded according to the progress of the trial as
measured by patient progression and the timing of various aspects
of the trial. Clinical trial accrual estimates are determined
through discussions with internal clinical personnel and outside
service providers as to the progress or state of completion of
trials, or the services completed. Service provider status is then
compared to the contractually obligated fee to be paid for such
services. During the course of a clinical trial, the Company may
adjust the rate of clinical expense recognized if actual results
differ from management’s estimates.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Interest Expense</i> — Interest costs are expensed as
incurred, except to the extent such interest is related to
construction in progress, in which case interest is capitalized.
Interest cost capitalized for the years ended December 31,
2015 and 2014 was $0.1 million and $0.8 million,
respectively. There were no capitalized interest costs for the year
ended December 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Net Income (Loss) Per Share of Common Stock</i> — Basic
net income (loss) per share excludes dilution for potentially
dilutive securities and is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share reflects the
potential dilution under the treasury method that could occur if
securities or other contracts to issue common stock were exercised
or converted into common stock. For periods where the Company has
presented a net loss, potentially dilutive securities are excluded
from the computation of diluted net loss per share as they would be
antidilutive.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Recently Issued Accounting Standards</i> — From time to
time, new accounting pronouncements are issued by the Financial
Accounting Standards Board (FASB) or other standard setting bodies
that are adopted by the Company as of the specified effective date.
Unless otherwise discussed, the Company believes that the impact of
recently issued standards that are not yet effective will not have
a material impact on the Company’s consolidated financial
position or results of operations upon adoption.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In May 2014, the FASB issued Accounting Standards Update (ASU)
<font style="WHITE-SPACE: nowrap">No. 2014-09,</font>
<i>Revenue from Contracts with Customers (Topic 606)</i>, which
requires an entity to recognize the amount of revenue when promised
goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for
those goods or services. This new guidance supersedes previous
revenue recognition requirements, along with most existing
industry-specific guidance. In August 2015, the FASB issued ASU
<font style="WHITE-SPACE: nowrap">2015-14,</font> <i>Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective
Date</i>, which delayed the effective date of the new standard from
January 1, 2017 to January 1, 2018. The FASB also agreed
to allow entities to choose to adopt the standard as of the
original effective date. In 2016 the FASB has issued additional
ASUs which clarify certain aspects of the new guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company will adopt the new guidance for the year beginning
January 1, 2018. The Company has the option to either apply
the new guidance retrospectively for all prior reporting periods
presented (full retrospective) or retrospectively with the
cumulative effect of initially applying the guidance recognized at
the date of initial application (modified retrospective). The
Company currently anticipates it will apply the new guidance using
the modified retrospective approach with the cumulative effect of
initial application recognized as of January 1, 2018. The
Company plans to continue analyzing the potential impacts of the
application throughout 2017 and, depending on factors that may
impact the results, could elect to apply the new guidance on a full
retrospective basis.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Currently, for commercial sales of Afrezza, the Company has limited
sales and returns history, and as such, is unable to reliably
estimate expected returns of the product at the time of shipment
into the distribution channel. Accordingly, the Company defers
recognition of revenue on Afrezza product shipments until the right
of return no longer exists, which occurs at the earlier of the time
Afrezza is dispensed from pharmacies to patients or expiration of
the right of return. The Company recognizes revenue based on
Afrezza patient prescriptions dispensed, a sell-through model, as
estimated by syndicated data provided by a third party. The Company
also analyzes additional data points to ensure that such
third-party data is reasonable, including data related to inventory
movements within the channel and ongoing prescription demand.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
Upon adoption of the new guidance, the Company expects that it will
move from its current sell-through model to a <font style="WHITE-SPACE: nowrap">sell-to</font> model for revenue related to
commercial sales of Afrezza and will record revenue at the time
title and risk of loss passes to its distributors (generally at
shipment or delivery to the distributors) along with an estimate of
potential returns as variable consideration. The Company also
anticipates that its ability to estimate potential returns will
improve with an additional 12 months of sales history that it will
have obtained by January 1, 2018.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In addition, the Company has historically entered into
collaborative agreements with third-parties under which periodic
payments have been received. Revenue recognition for certain
payments received has been deferred until the price is fixed and
determinable. Further, revenue for certain payments to be received
in the future has been prohibited from recognition until received.
The Company expects that some of these amounts will be considered
variable consideration and may be able to be recognized earlier
under the new guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company has begun its evaluation of the impact of adoption and
plans to continue its evaluation throughout 2017. The financial
impact upon adoption will be dependent upon a number of factors
including; the amount of revenue that has been deferred under the
sell-through model for Afrezza, the amount of the revenue deferred
under collaborative arrangements and the Company’s estimates
of variable consideration at the date of adoption. At this time,
the Company has not completed its evaluation of the inputs,
assumptions and methodologies that will be used to recognize
revenue related to variable consideration under the new
guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In July 2015, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2015-11,</font> <i>Inventory (Topic
330): Simplifying the Measurement of Inventory.</i> Topic 330
currently requires an entity to measure inventory at the lower of
cost or market. Market could be replacement cost, net realizable
value, or net realizable value less an approximately normal profit
margin. The amendments indicate that after adoption an entity
should measure inventory within the scope of this ASU at the lower
of cost or net realizable value. The amendments are effective for
fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years. The amendments should be
applied prospectively with earlier application permitted as of the
beginning of an interim or annual reporting period. The adoption of
ASU <font style="WHITE-SPACE: nowrap">No. 2015-11</font> will
have no impact on the Company’s annual consolidated financial
statements because the Company currently measures inventory at the
lower of cost or net realizable value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In August 2014, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2014-15,</font> <i>Presentation of
Financial Statements — Going Concern</i>, which requires
management of an entity to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt
about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are
issued or available to be issued. This update was effective for
annual periods ending after December 15, 2016. The adoption of
this standard did not have a material impact on its consolidated
financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In January 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-01,</font> <i>Financial
Instruments — Overall (Subtopic <font style="WHITE-SPACE: nowrap">825-10):</font> Recognition and Measurement
of Financial Assets and Financial Liabilities.</i> The update is
intended to improve the recognition and measurement of financial
instruments. The update is effective for fiscal years beginning
after December 15, 2017, including interim periods within
those fiscal years. The Company is evaluating the impact the
adoption of ASU <font style="WHITE-SPACE: nowrap">2016-01</font>
will have on its consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In February 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-02,</font> <i>Leases (Topic
842)</i>. The new standard requires that a lessee recognize the
assets and liabilities that arise from operating leases. A lessee
should recognize in the statement of financial position a liability
to make lease payments (the lease liability) and a <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">right-of-use</font></font> asset representing
its right to use the underlying asset for the lease term. For
leases with a term of 12 months or less, a lessee is permitted to
make an accounting policy election by class of underlying asset not
to recognize lease assets and lease liabilities. In transition,
lessees and lessors are required to recognize and measure leases at
the beginning of the earliest period presented using a modified
retrospective approach. The new standard will be effective on
January 1, 2019. The Company is evaluating the impact the
adoption of ASU <font style="WHITE-SPACE: nowrap">No. 2016-02</font> will have on its
consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
In March 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-09,</font> <i>Compensation
— Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting</i>. The new standard involves
several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification
of awards as either equity or liabilities and classification on the
statement of cash flows. For public business entities, the
amendments in this standard are effective for annual periods
beginning after December 15, 2016, and interim periods within
those annual periods. The Company has evaluated the effect that
this guidance will have on its consolidated financial statements
and related disclosures and has determined it will not result in a
material impact.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In August 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-15,</font> <i>Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments</i>. The new standard seeks to reduce diversity in
practice related to the classification of certain transactions in
the statement of cash flows. For public business entities, the
amendments in this standard are effective for annual periods
beginning after December 15, 2017, and interim periods within
those annual periods. The amendments should be applied using a
retrospective transition method to each period presented. If it is
impracticable to apply the amendments retrospectively for some of
the issues, the amendments for those issues would be applied
prospectively as of the earliest date practicable. The Company is
evaluating the impact the adoption of ASU <font style="WHITE-SPACE: nowrap">No. 2016-15</font> will have on its
consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In November 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-18,</font> <i>Statement of Cash
Flows (Topic 230): Restricted Cash.</i> This ASU requires that the
reconciliation of the <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">beginning-of-period</font></font>
and <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">end-of-period</font></font> amounts shown in
the statement of cash flows include cash and restricted cash
equivalents. ASU <font style="WHITE-SPACE: nowrap">2016-08</font>
is effective for fiscal years beginning after December 15,
2018, including interim periods within those periods, using a
retrospective transition method to each period presented. The
Company has evaluated the effect that this guidance will have on
its consolidated financial statements and related disclosures and
has determined it will not result in a material impact.</p>
</div>
MNKD
92085000
92053000
false
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Contingencies</i> — The Company records a loss contingency
for a liability when it is both probable that a liability has been
incurred and the amount of the loss can be reasonably estimated.
These accruals represent management’s best estimate of
probable loss. Disclosure also is provided when it is reasonably
possible that a loss will be incurred or when it is reasonably
possible that the amount of a loss will exceed the recorded
provision. On a quarterly basis, the Company reviews the status of
each significant matter and assesses its potential financial
exposure. Significant judgment is required in both the
determination of probability and the determination as to whether an
exposure is reasonably estimable. Because of uncertainties related
to these matters, accruals are based only on the best information
available at the time. As additional information becomes available,
the Company reassesses the potential liability related to pending
claims and litigation and may revise its estimates.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Concentration of Credit Risk</i> — Financial instruments
which potentially subject the Company to concentration of credit
risk consist of cash and cash equivalents. Cash and cash
equivalents are held in high credit quality institutions. Cash
equivalents consist of interest-bearing money market accounts,
which are regularly monitored by management.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Principles of Consolidation</i> — The consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany balances and transactions
have been eliminated.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
The following table provides a roll forward of the fair values of
financial assets and liabilities that are carried at fair value (in
millions):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="70%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Warrants</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Assets Held for<br />
Sale</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, January 1, 2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Additions</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Changes in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, December 31, 2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Additions</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">12.8</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Changes in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(5.4</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(0.6</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.7</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<b>15. Income Taxes</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
At December 31, 2016, the Company has concluded that it is
more likely than not that the Company may not realize the benefit
of its deferred tax assets due to its history of losses. There is
no provision for income taxes in 2015 or 2014 because the Company
had incurred operating losses since inception. Accordingly, the net
deferred tax assets have been fully reserved. The provision for
income taxes consists of the following (in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="63%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Current</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. federal</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. state</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-U.S.</font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total current</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deferred</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. federal</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(43,814</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">109,512</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">57,873</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
U.S. state</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4,311</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(29,394</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,631</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-U.S.</font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total deferred</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(48,125</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">80,118</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65,504</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">48,125</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(80,118</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(65,504</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting and income tax purposes. A valuation
allowance is established when uncertainty exists as to whether all
or a portion of the net deferred tax assets will be realized.
Components of the net deferred tax assets as of December 31,
2016 and 2015, are as follows (in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deferred tax assets:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net operating loss carryforwards</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">712,124</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">721,588</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Research and development credits</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,998</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">73,646</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Capitalized research</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,117</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,872</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments from collaboration</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">52,484</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,242</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,242</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">440</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">251</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loss on purchase commitment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36,775</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,084</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-qualified</font> stock option expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17,331</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">16,941</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Capitalized patent costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,781</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,574</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,380</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,186</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,310</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">48,755</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total net deferred tax assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">914,498</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">962,623</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(914,498</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(962,623</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net deferred tax assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The table of deferred tax assets and liabilities does not include
certain deferred tax assets as of December 31, 2016, that
arose directly from tax deductions related to equity compensation
which are greater than the compensation recognized for financial
reporting. Equity would be increased by $11.6 million if and
when such deferred tax assets are ultimately realized. The Company
considers certain realization requirements when excess tax benefits
have been realized.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company’s effective income tax rate differs from the
statutory federal income tax rate as follows for the years ended
December 31, 2016, 2015 and 2014:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="75%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="10" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Federal tax benefit rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Permanent items</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1.9</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Intercompany transfer of intellectual property</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4.1</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(34.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(34.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(31.8</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Effective income tax rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Management of the Company has evaluated the positive and negative
evidence bearing upon the realizability of its deferred tax assets.
Management has concluded, in accordance with the applicable
accounting standards, that it is more likely than not that the
Company may not realize the benefit of its deferred tax assets.
Accordingly, the net deferred tax assets have been fully reserved.
Management reevaluates the positive and negative evidence on an
annual basis. During the years ended December 31, 2016, 2015
and 2014, the change in the valuation allowance was
$(48.1) million, $80.1 million and $65.5 million,
respectively, for income taxes.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
At December 31, 2016, the Company had federal and state net
operating loss carryforwards of approximately $1.9 billion and
$1.3 billion available, respectively, to reduce future taxable
income. The federal net operating loss carryforwards will expire at
various dates beginning in 2018 and the state net operating loss
carryforwards have started expiring, starting in the current year
through various future dates. As a result of the Company’s
initial public offering, an ownership change within the meaning of
Internal Revenue Code Section 382 occurred in August 2004. As
a result, federal net operating loss and credit carry forwards of
approximately $216.0 million are subject to an annual use
limitation of approximately $13.0 million. The annual
limitation is cumulative and therefore, if not fully utilized in a
year can be utilized in future years in addition to the
Section 382 limitation for those years. The federal net
operating losses generated subsequent to the Company’s
initial public offering in August 2004 are currently not subject to
any such limitation as there have been no ownership changes since
August 2004 within the meaning of Internal Revenue Code
Section 382. At December 31, 2016, the Company had
research and development credits of $53.0 million and
$38.5 million for federal and state purposes, respectively.
The federal credits begin to expire in 2024, and the state credits
may be carried forward indefinitely.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
The Company has evaluated the impact of uncertainty related to
income taxes on its consolidated financial statements. The
evaluation of an uncertain tax position is a <font style="WHITE-SPACE: nowrap">two-step</font> process. The first step is
recognition: the enterprise determines whether it is <font style="WHITE-SPACE: nowrap">more-likely-than-not</font> that a tax position will be
sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of
the position. In evaluating whether a tax position has met
the <font style="WHITE-SPACE: nowrap">more-likely-than-not</font> recognition threshold, the
enterprise should presume that the position will be examined by the
appropriate taxing authority that would have full knowledge of all
relevant information. The second step is measurement: a tax
position that meets the <font style="WHITE-SPACE: nowrap">more-likely-than-not</font> recognition threshold is
measured to determine the amount of benefit to recognize in the
financial statements. The tax position is measured at the largest
amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement. Tax positions that
previously failed to meet the <font style="WHITE-SPACE: nowrap">more-likely-than-not</font> recognition threshold should
be recognized in the first subsequent financial reporting period in
which that threshold is met. Previously recognized tax positions
that no longer meet the <font style="WHITE-SPACE: nowrap">more-likely-than-not</font> recognition threshold should
be derecognized in the first subsequent financial reporting period
in which that threshold is no longer met. The Company believes that
its income tax filing positions and deductions will be sustained on
audit and does not anticipate any adjustments that will result in a
material change to its consolidated financial position. Therefore,
no liabilities for uncertain income tax positions have been
recorded. Tax years since 2012 remain subject to examination by the
major tax jurisdictions in which the Company is subject to tax.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The annual purchase requirements under the contract are as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="77%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">2.7 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2018</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">8.9 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2019</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">11.6 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2020</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">15.5 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2021</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">15.5 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2022</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">19.4 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2023</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">€</td>
<td valign="bottom" align="right">19.4 million</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>1. Description of Business</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Business</i> — MannKind Corporation and subsidiaries (the
“Company”) is a biopharmaceutical company focused on
the discovery and development of therapeutic products for diseases
such as diabetes. The Company’s only approved product,
Afrezza, (insulin human [rDNA origin]) inhalation powder, is a
rapid-acting inhaled insulin that was approved by the U.S. Food and
Drug Administration (the “FDA”) on June 27, 2014
to improve glycemic control in adult patients with diabetes.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Basis of Presentation</i> — On August 11, 2014, the
Company entered into a license and collaboration agreement (the
“Sanofi License Agreement”) with Sanofi-Aventis
Deutschland GmbH (which subsequently assigned its rights and
obligations under the agreement to Sanofi-Aventis U.S. LLC
(“Sanofi”)), pursuant to which Sanofi was responsible
for Afrezza global commercial, regulatory and development
activities for Afrezza.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On January 4, 2016, the Company received written notification
from Sanofi of its election to terminate in its entirety the Sanofi
License Agreement. The effective date of termination (the
“Termination Date”) was April 4, 2016, which was
when the Company assumed responsibility for worldwide development
and commercialization of Afrezza. Under terms of a transition
agreement, Sanofi continued to fulfill orders for Afrezza in the
United States until the Company began distributing MannKind-branded
Afrezza product to major wholesalers in late July 2016. The Company
began recognizing commercial product sales revenue when
MannKind-branded Afrezza was dispensed from pharmacies to patients
in August 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On November 9, 2016, the Company entered into a settlement
agreement with Sanofi (the “Settlement Agreement”).
Under the terms of the Settlement Agreement, the promissory note
(the “Sanofi Loan Facility”) between the Company and
Aventisub LLC (“Aventisub”), a Sanofi affiliate, was
terminated, with Aventisub agreeing to forgive the full outstanding
loan balance of $72.0 million, which includes
$0.5 million of previously uncharged costs pursuant to the
Sanofi License Agreement. Sanofi also agreed to purchase
$10.2 million of insulin from the Company in December 2016
under an existing insulin put option as well as make a cash payment
of $30.6 million to the Company in early January 2017 as
acceleration and in replacement of all other payments that Sanofi
would otherwise have been required to make in the future pursuant
to the insulin put option, without the Company being required to
deliver any insulin for such payment. The Company and Sanofi also
agreed to a general release of potential claims against each
other.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During their initial transition of the commercial responsibilities
from Sanofi, the Company utilized a contract sales organization to
promote Afrezza while the Company focused its internal resources on
establishing a channel strategy, entering into distribution
agreements and developing <font style="WHITE-SPACE: nowrap">co-pay</font> assistance programs, a voucher
program, data agreements and payor relationships. In early 2017,
the Company recruited their own sales force, which included some of
the sales reps that previously were employed by the contract sales
organization. The Company intend to continue the commercialization
of Afrezza in the United States through their own commercial
organization. The Company’s current strategy for the future
commercialization of Afrezza outside of the United States, subject
to receipt of the necessary foreign regulatory approvals, is to
seek and establish regional partnerships in foreign jurisdictions
where there are appropriate commercial opportunities.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
It has been costly to develop our therapeutic product, conduct
clinical studies, and market and sell Afrezza. As of and for the
year ended December 31, 2016, the Company has reported an
accumulated deficit of $2.7 billion and has reported negative
cash flow from operations for each year since inception, except for
2014, when the Company received the $150.0 million upfront
payment from Sanofi.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
At December 31, 2016, the Company’s capital resources
consisted of cash and cash equivalents of $22.9 million. The
Company expects to continue to incur significant expenditures to
support commercial manufacturing and sales and marketing of Afrezza
and the development of other product candidates. The 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”) and the First Amendment to Facility
Agreement and Registration Rights Agreement (the “First
Amendment”) that resulted in additional sales of an
additional tranche of notes (the “Tranche B notes”)
(see Note 7 — Borrowings) requires the Company to maintain at
least $25.0 million, which can be comprised of cash and cash
equivalents and available borrowings under the loan arrangement,
dated as of October 2, 2007, between the Company and The Mann
Group LLC (as amended, restated, or otherwise modified as of the
date hereof, “the Mann Group Loan Arrangement”), as of
the last day of each fiscal quarter.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Additional funding sources that are, or in certain circumstances
may be available to the Company, include approximately
$30.1 million principal amount of available borrowings under
The Mann Group Loan Arrangement. A portion of these available
borrowings may be used to capitalize accrued interest into
principal, upon mutual agreement of the parties, as it becomes due
and payable under The Mann Group Loan Arrangement (see Note 6
— Related-party Arrangements). 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 a 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 commercialization of Afrezza and development
of other product candidates and to support its other ongoing
activities. The Company cannot provide assurances that such
additional capital will be available on acceptable terms or at all.
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
this uncertainty.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On September 14, 2016, the Company received notice from the
Listing Qualifications Department of the NASDAQ Stock Market
indicating that, for the previous 30 consecutive business days, the
bid price for the common stock closed below the minimum $1.00 per
share required for continued inclusion on The NASDAQ Global Market.
The notification letter stated that the Company would be afforded
180 calendar days, or until March 13, 2017, to regain
compliance with the minimum bid price requirement. In order to
regain compliance, shares of the Company’s common stock must
maintain a minimum bid closing price of at least $1.00 per share
for a minimum of 10 consecutive business days.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Reverse Stock Split</i> — On March 1, 2017, following
stockholder approval, the Company’s board of directors
approved a reverse stock split ratio of <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5. On</font></font> March 1,
2017, the Company filed with the Secretary of State of the State of
Delaware a Certificate of Amendment of the Company’s Amended
and Restated Certificate of Incorporation to effect the
<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5</font></font> reverse stock split of
the Company’s outstanding common stock and to reduce the
authorized number of shares of the Company’s common stock
from 700,000,000 to 140,000,000 shares. The Company’s
common stock began trading on The NASDAQ Global Market on a
split-adjusted basis when the market opened on March 3,
2017. See Note 20 — Subsequent Events for further
information. As a result, all common stock share amounts included
in these consolidated financial statements have been retroactively
reduced by a factor of five, and all common stock per share amounts
have been increased by a factor of five, with the exception of the
Company’s common stock par value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Principles of Consolidation</i> — The consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany balances and transactions
have been eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Segment Information</i> — Operating segments are
identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the
chief operating decision-maker in making decisions regarding
resource allocation and assessing performance. To date, the Company
has viewed its operations and manages its business as one segment
operating in the United States of America.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Property and equipment consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="60%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" rowspan="2" align="center" style="border-bottom:1.00pt solid #000000">Estimated<br />
Useful Life<br />
(Years)</td>
<td valign="bottom" rowspan="2"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Land</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="center">—</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">875</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,435</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Buildings</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">39-40</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17,389</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,590</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Building improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">5-40</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34,957</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,584</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Machinery and equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">3-15</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">62,992</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">68,434</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Furniture, fixtures and office equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">5-10</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,556</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,114</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Computer equipment and software</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center">3</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,531</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">9,519</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Construction in progress</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">586</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">128,502</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">168,262</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Less accumulated depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(99,575</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(119,513</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total property and equipment, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">28,927</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,749</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>State Research and Development Credit Exchange Receivable</i>
— The State of Connecticut provides certain companies with
the opportunity to exchange certain research and development income
tax credit carryforwards for cash in exchange for forgoing the
carryforward of the research and development income tax credits.
The program provides for an exchange of research and development
income tax credits for cash equal to 65% of the value of
corporation tax credit available for exchange. Estimated amounts
receivable under the program are recorded as a reduction of
research and development expenses. During the years ended
December 31, 2016, 2015 and 2014, research and development
expenses were offset by research and development tax credits of
$246,000, $743,000 and $816,000, respectively.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Revenue Recognition</i> — Revenue is recognized when the
four basic criteria of revenue recognition are met: (1) persuasive
evidence that an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the fee is fixed or determinable;
and (4) collectability is reasonably assured. When the accounting
requirements for revenue recognition are not met, the Company
defers the recognition of revenue by recording deferred revenue on
the consolidated balance sheets until such time that all criteria
are met. To date, the Company has had revenue from collaborations,
commercial sales of Afrezza, and from sales of bulk insulin, which
are described more fully below.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Borrowings consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="77%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style="margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Facility Financing Obligation (2019 Notes)</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Principal amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">75,000</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">80,000</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unamortized debt discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,661</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(5,418</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net carrying amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">71,339</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">74,582</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Senior Convertible Notes (2018 Notes)</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Principal amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,690</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,690</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unamortized premium</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">426</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">660</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unaccreted debt issuance costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(481</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(737</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net carrying amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,635</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,613</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Note payable to principal stockholder — net carrying
amount</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,521</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,521</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
Components of the net deferred tax assets as of December 31,
2016 and 2015, are as follows (in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Deferred tax assets:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net operating loss carryforwards</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">712,124</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">721,588</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Research and development credits</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,998</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">73,646</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Capitalized research</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,117</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,872</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments from collaboration</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">52,484</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,242</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,242</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">440</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">251</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Loss on purchase commitment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36,775</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">24,084</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<font style="WHITE-SPACE: nowrap">Non-qualified</font> stock option expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17,331</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">16,941</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Capitalized patent costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,781</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,574</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,380</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7,186</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">45,310</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">48,755</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total net deferred tax assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">914,498</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">962,623</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(914,498</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(962,623</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net deferred tax assets</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<br class="Apple-interchange-newline" />
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following tables summarize the components of the basic and
diluted net income (loss) per common share computations:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center">(In thousands,
except per share data)</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<b>Basic EPS:</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) (numerator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">125,664</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(368,445</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(198,382</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average common shares (denominator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.37</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(4.54</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(2.57</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<b>Diluted EPS:</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) (numerator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">125,664</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(368,445</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(198,382</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average common shares</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Effect of dilutive securities — common shares issuable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">32</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Adjusted weighted average common shares (denominator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,085</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.36</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(4.54</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(2.57</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Inventories consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="79%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style="margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Raw materials</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<font style="white-space:nowrap"><font style="white-space:nowrap">Work-in-process</font></font></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,120</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Finished goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">211</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total Inventory</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,331</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company calculated the fair value of employee stock options
granted during the years ended December 31, 2016, 2015 and
2014 using the following assumptions:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="31%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="5" align="center">Year Ended December 31,</td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" align="center">2016</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" align="center">2015</td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" align="center">2014</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free interest rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
1.18% — 1.80%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">1.61%
—1.86%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
1.64% — 2.11%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected lives</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.13 — 5.82 years</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.79 — 5.86 years</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
5.77 — 6.09 years</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
77.57% — 82.75%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
69.76% — 71.84%</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
73.98% — 84.85%</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Dividends</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
—  </td>
</tr>
</table>
</div>
292488
0.00
0.7757
0.0118
P5Y3M22D
407161
3.05
13.60
4.50
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Comprehensive Income (Loss)</i> — Other comprehensive
income (loss) requires that all components of comprehensive income
(loss) to be reported in the financial statements in the period in
which they are recognized. Other comprehensive income (loss)
includes certain changes in stockholders’ equity that are
excluded from net income (loss). Specifically, the Company includes
unrealized gains and losses on foreign exchange translation in
accumulated other comprehensive loss on the consolidated balance
sheets.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Cost of Goods Sold —</i> Cost of goods sold includes the
costs related to Afrezza product dispensed by pharmacies to
patients as well as under-absorbed labor and overhead and inventory
write-offs, which are recorded as expenses in the period in which
they are incurred, rather than as a portion of the inventory
cost.</p>
</div>
--12-31
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>7. Borrowings</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Borrowings consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="77%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style="margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Facility Financing Obligation (2019 Notes)</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Principal amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">75,000</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">80,000</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unamortized debt discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,661</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(5,418</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net carrying amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">71,339</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">74,582</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Senior Convertible Notes (2018 Notes)</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Principal amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,690</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,690</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unamortized premium</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">426</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">660</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Unaccreted debt issuance costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(481</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(737</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net carrying amount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,635</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27,613</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>Note payable to principal stockholder — net carrying
amount</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,521</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49,521</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Facility Financing Obligation (2019 Notes)</i> — As of
December 31, 2016, there were $55.0 million principal
amount of 2019 notes and $20.0 million principal amount of
Tranche B notes outstanding. As of December 31, 2015, there
were $60.0 million principal amount of 2019 notes and
$20.0 million principal amount of Tranche B notes outstanding.
The 2019 notes accrue interest at annual rate of 9.75% and the
Tranche B notes accrue interest at an annual rate of 8.75%.
Interest is paid quarterly in arrears on the last day of each
March, June, September and December. The Facility Financing
Obligation principal repayment schedule is comprised of annual
payments beginning on July 1, 2016 and ending December 9,
2019. Future principal payments for the years ended
December 31, 2017, 2018 and 2019 are $20.0 million,
$20.0 million and $35.0 million, respectively.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In conjunction with the Facility Agreement, the Company entered
into a Milestone Rights Agreement with Deerfield which requires the
Company to make contingent payments to Deerfield, totaling up to
$90.0 million, upon the Company achieving specified
commercialization milestones. The Milestone Rights were initially
recorded as a short-term liability equal to $3.2 million
included in accrued expenses and other current liabilities in the
accompanying consolidated balance sheets and a long-term liability
equal to $13.1 million included in other liabilities. During
the first quarter of 2015, a milestone triggering event was
achieved following the Company’s product launch on
February 3, 2015, which resulted in a $5.8 million
incremental charge to interest expense due to the increase in
carrying value of the liability to the required $10.0 million
payment made in February of 2015. During the year ended
December 31, 2014, the first milestone triggering event was
achieved following the Company’s entry into the Sanofi
License Agreement, which resulted in a $1.9 million
incremental charge to interest expense due to the increase in
carrying value of the liability to the required $5.0 million
payment, which was paid to Deerfield pursuant to the terms of the
Milestone Agreement. As of December 31, 2016 and 2015, the
remaining liability balance of $8.9 million is classified as a
long-term liability.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As of December 31, 2016, the unamortized debt discount and
debt issuance costs were $3.7 million and $0.1 million,
respectively.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accretion of debt issuance cost and debt discount in connection
with the Deerfield financing during the years ended
December 31, 2016, 2015 and 2014 are as follows (in
thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2014</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accretion expense — debt issuance cost</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">326</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accretion expense — debt discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,722</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,553</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,550</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
</table>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Facility Agreement includes customary representations,
warranties and covenants, including, a restriction on the
incurrence of additional indebtedness, and a financial covenant
which requires the Company’s cash and cash equivalents, which
includes available borrowings on the note payable to principal
stockholder, on the last day of each fiscal quarter to not be less
than $25.0 million. As discussed in Note 1 — Description
of Business, the Company will need to raise additional capital to
support its current operating plans. Due to the uncertainties
related to maintaining sufficient resources to comply with the
aforementioned covenant, the 2019 notes and the Tranche B notes
have been classified as current liabilities in the accompanying
consolidated balance sheets as of December 31, 2016 and 2015.
In the event of <font style="white-space:nowrap">non-compliance,</font> Deerfield may declare
all or any portion of the 2019 notes and/or Tranche B notes to be
immediately due and payable.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Milestone Rights</i> — The Milestone Agreement includes
customary representations and warranties and covenants by the
Company, including restrictions on transfers of intellectual
property related to Afrezza. The Milestone Rights are subject to
acceleration in the event the Company transfers its intellectual
property related to Afrezza in violation of the terms of the
Milestone Agreement. The Company has initially recorded the
Milestone Rights at their estimated fair value — See Note 2
— Summary of Significant Accounting Policies under Milestone
Rights Liability.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In determining the fair value of the Milestone Rights, the 13
individual milestone payments were adjusted for both (i) the
expected timing and (ii) the probability of achieving the
milestones, and then discounted to present value using a discount
rate of 14.5%. Once the initial valuation of each specified
milestone payment was determined, the individual milestone payments
were then aggregated to arrive at a total fair value of
$18.4 million. The discount rate was based on the estimated
cost of equity which was derived using the capital asset pricing
model. In addition, a 5% risk premium was added to the computation
of the cost of equity to adjust for <font style="white-space:nowrap">non-systemic</font> risk factors, such as the
Company’s lack of product diversification and history of
financial losses, which were not captured in other model
inputs.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Security Agreement</i> — In connection with the Facility
Agreement, the Company and its subsidiary, MannKind LLC, entered
into a Guaranty and Security Agreement (the “Security
Agreement”) with Deerfield and Horizon Sante FLML SA’RL
(collectively, the “Purchasers”), pursuant to which the
Company and MannKind LLC each granted the Purchasers a security
interest in substantially all of their respective assets, including
respective intellectual property, accounts, receivables, equipment,
general intangibles, inventory and investment property, and all of
the proceeds and products of the foregoing. The Security Agreement
includes customary covenants by the Company and MannKind LLC,
remedies of the Purchasers and representations and warranties by
the Company and MannKind LLC. The security interests granted by the
Company and MannKind LLC will terminate upon repayment of the 2019
notes and Tranche B notes, if applicable, in full. The
Company’s obligations under the Facility Agreement and the
Milestone Agreement are also secured by the mortgage on the
Company’s facilities in Danbury, Connecticut, which has a
carrying value of $28.7 million.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Embedded Derivatives</i> — The Company identified and
evaluated a number of embedded features in the notes issued under
the Facility Agreement to determine if they represented embedded
derivatives that are required to be separated from the notes and
accounted for as freestanding instruments. In 2014, the Company
analyzed the Tranche B notes and identified embedded
derivatives which required separate accounting. However, all of the
embedded derivatives were determined to have a <i>de minimis</i>
value at December 31, 2016 and 2015.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Conversion Option —</i> During 2014, Deerfield elected to
convert a total of $93.5 million of principal, which consisted
of $20.0 million, $33.5 million, and $40.0 million
of Tranche 1 notes, Tranche 2 notes, and Tranche 3 notes,
respectively, into an aggregate 3,464,616 shares of common stock.
In conjunction with the conversion by Deerfield, we recorded an
aggregate expense of $6.4 million for the difference between
the principal amount of the notes converted and their carrying
amount (which included unamortized discount and debt issuance
costs) which consisted of $1.2 million, $3.0 million, and
$2.2 million related to the Tranche 1 notes, Tranche 2 notes,
and Tranche 3 notes, respectively. Further, upon Deerfield
converting $40.0 million of Tranche 3 notes and
$20.0 million of Tranche 1 notes, Deerfield has reached the
conversion limits (i.e., “Applicable Limits”) with
respect to the Facility Agreement and therefore, no additional
amount of the 2019 notes is convertible.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Issuance of new 5.75% Convertible Senior Subordinated Exchange
Notes Due 2018 in Exchange for 2015 Notes</i> — On
July 28, 2015, the Company entered into privately-negotiated
exchange agreements (the “Note Exchange Agreements”)
with a select holder of the Company’s 5.75% Senior
Convertible Notes due 2015 (the “2015 notes”), pursuant
to which the Company agreed to issue $27.7 million aggregate
principal amount of new 5.75% Convertible Senior Subordinated
Exchange Notes due 2018 (the “2018 notes”) to such
holders in exchange for the delivery to the Company of the same
principal amount of 2015 notes. The 2018 notes were issued at the
closing of the exchange on August 10, 2015. The Company
analyzed this exchange and concluded that the exchange represents
an extinguishment of the 2015 notes and a new issuance of 2018
notes and recorded such notes at fair value, which resulted in a
premium of $0.7 million.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The 2018 notes are the Company’s general, unsecured, senior
obligations, except that the 2018 notes were subordinated to the
Sanofi Loan facility prior to the extinguishment of the facility on
November 9, 2016. The 2018 notes rank equally in right of
payment with the Company’s other unsecured senior debt. The
2018 notes bear interest at the rate of 5.75% per year on the
principal amount, payable semiannually in arrears in cash on
February 15 and August 15 of each year, beginning
February 15, 2016, with interest accruing from August 15,
2015. The 2018 notes mature on August 15, 2018. Accrued
interest related to these notes is recorded in accrued expenses and
other current liabilities on the accompanying consolidated balance
sheets.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The 2018 notes are convertible, at the option of the holder, at any
time on or prior to the close of business on the business day
immediately preceding the stated maturity date, into shares of the
Company’s common stock at an initial conversion rate of 29
shares per $1,000 principal amount of the 2018 notes, which is
equal to a conversion price of approximately $34.00 per share, the
same conversion price as that of the 2015 notes on the date of
exchange. The conversion rate is subject to adjustment under
certain circumstances described in an indenture governing the 2018
notes dated August 10, 2015 with Wells Fargo, National
Association, including in connection with a make-whole fundamental
change.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
If certain fundamental changes occur, the Company will be obligated
to pay a fundamental change make-whole premium on any 2018 notes
converted in connection with such fundamental change by increasing
the conversion rate on such 2018 notes. In such instances, the
amount of the fundamental change make-whole premium will be based
on the Company’s common stock price and the effective date of
the applicable fundamental change. If the Company undergoes certain
fundamental changes, except in certain circumstances, each holder
of 2018 notes will have the option to require the Company to
repurchase all or any portion of that holder’s 2018 notes.
The fundamental change repurchase price will be 100% of the
principal amount of the 2018 notes to be repurchased plus accrued
and unpaid interest, if any.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
On or after the date that is one year following the original issue
date of the 2018 notes, the Company will have the right to redeem
for cash all or part of the 2018 notes if the last reported sale
price of its common stock exceeds 130% of the conversion price then
in effect for 20 or more trading days during the 30 consecutive
trading day period ending on the trading day immediately prior to
the date of the redemption notice. The redemption price will equal
the sum of 100% of the principal amount of the 2018 notes to be
redeemed, plus accrued and unpaid interest. Under the terms of the
2018 Note Indenture, the conversion option can be <font style="white-space:nowrap">net-share</font> settled and the maximum
number of shares that could be required to be delivered under the
indenture, including the make-whole shares, is fixed and less than
the number of authorized and unissued shares less the maximum
number of shares that could be required to be delivered during the
term of the 2018 notes under existing commitments. Applying the
Company’s sequencing policy, the Company performed an
analysis at the time of the offering of the 2018 notes and each
reporting date since and has concluded that the number of available
authorized shares at the time of the offering and each subsequent
reporting date was sufficient to deliver the number of shares that
could be required to be delivered during the term of the 2018 notes
under existing commitments.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The 2018 notes provide that upon an acceleration of certain
indebtedness, including the 9.75% Senior Convertible Notes due in
2019 (the “2019 notes”) and the 8.75% Senior
Convertible Notes due in 2019 (the “Tranche B notes”)
issued to Deerfield pursuant to the Facility Agreement, the holders
may elect to accelerate the Company’s repayment obligations
under the notes if such acceleration is not cured, waived,
rescinded or annulled. There can be no assurance that the holders
would not choose to exercise these rights in the event such events
were to occur.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company incurred approximately $0.8 million in issuance
costs, which are recorded as an offset to the 2018 notes in the
accompanying consolidated balance sheets. These costs are being
accreted to interest expense using the effective interest method
over the term of the 2018 notes.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accretion of debt issuance expense in connection with the 2018
notes during the years ended December 31, 2016 and 2015 was
$257,000 and $93,000, respectively. Amortization of the 2018 notes
premium during the years ended December 31, 2016 and 2015 was
$234,000 and $86,000, respectively.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Issuance of Common Stock in Exchange for the 2015 Notes</i>
— On July 28, 2015, the Company entered into separate,
privately-negotiated exchange agreements (the <font style="white-space:nowrap"><font style="white-space:nowrap">“Stock-for-Note</font></font> Exchange
Agreements”) with certain holders of the 2015 notes pursuant
to which the Company agreed to issue shares of its common stock to
such holders in exchange for the delivery to the Company of up to
$56.9 million aggregate principal amount of the 2015
notes.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Pursuant to the <font style="white-space:nowrap"><font style="white-space:nowrap">Stock-for-Note</font></font> Exchange
Agreements, the parties agreed to price the exchange transactions
over a 10 trading day period spanning from July 29, 2015 to
and including August 11, 2015. Between July 28, 2015 and
August 10, 2015, the Company issued an aggregate of 380,000
shares of common stock to such holders in exchange for such
holders’ delivery to the Company of $8.0 million
aggregate principal amount of the 2015 notes, resulting in a
weighted-average exchange price of $110.00 per share.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Issuance of New 5.75% Convertible Senior Subordinated Exchange
Notes Due 2015 in Exchange for the 2015 Notes</i> — On
August 14, 2015, the Company exchanged $32.1 million
aggregate principal amount of newly issued, 5.75% Convertible
Senior Subordinated Exchange Notes due 2015 (the “Exchange
Notes”) for the same principal amount of the Company’s
previously outstanding 2015 notes. The Exchange Notes, payable at
maturity on September 30, 2015, were convertible, at the
option of each holder thereof, at any time on or prior to the close
of business on the business day immediately preceding the stated
maturity date. The holders of the Exchange Notes did not elect to
convert any of the outstanding principal amount of the Exchange
Notes into shares of the Company’s common stock. As a result,
on September 30, 2015, the Company paid $32.1 million to
settle the Exchange Notes.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Settlement of 2015 Notes and Exchange Notes</i> — On
August 17, 2015, the Company paid $32.2 million to settle
the remaining 2015 notes. As of September 30, 2015, all 2015
notes, including the Exchange Notes, have been settled resulting in
a total loss on extinguishment of debt equal to $1.0 million.
The loss on extinguishment of debt resulted from the <font style="white-space:nowrap">write-off</font> of debt discount and debt
issuance costs associated with the 2015 notes and Exchange Notes
and the difference between the principal amounts being exchanged
for shares of the Company’s common stock, pursuant to the
various <font style="white-space:nowrap"><font style="white-space:nowrap">Stock-for-Note</font></font> Exchange
Agreements, and the fair market value of the Company’s common
stock issued in exchange for such reduction in principal.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accretion of debt issuance costs in connection with the 2015 notes
during the years ended December 31, 2015 and 2014 was
$0.6 million and $0.9 million, respectively.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Refer to Note 6 — Related-Party Arrangements for information
regarding the Note payable to principal stockholder.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Milestone Rights Liability</i> — On July 1, 2013, in
conjunction with the execution of the Facility Agreement, the
Company issued Milestone Rights to Deerfield whereby the Company
agreed to provide Deerfield with <font style="white-space:nowrap">pre-specified</font> Milestone Payments upon
the achievement of 13 specific Milestone Events related to the
commercial release and future cumulative net sales of Afrezza. The
Company analyzed the Milestone Rights and determined that the
agreement does not meet the definition of a freestanding
derivative. Since the Company has not elected to apply the fair
value option to the Milestone Rights Purchase Agreement, the
Company recorded the Milestone Rights at their estimated initial
fair value and accounted for the Milestone Rights as a
liability.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The initial fair value estimate of the Milestone Rights was
calculated using the income approach in which the cash flows
associated with the specified contractual payments were adjusted
for both the expected timing and the probability of achieving the
milestones and discounted to present value using a selected market
discount rate. The expected timing and probability of achieving the
milestones was developed with consideration given to both internal
data, such as progress made to date and assessment of criteria
required for achievement, and external data, such as market
research studies. The discount rate was selected based on an
estimation of required rate of returns for similar investment
opportunities using available market data. The Milestone Rights
liability will be remeasured as the specified milestone events are
achieved. Specifically, as each milestone event is achieved, the
portion of the initially recorded Milestone Rights liability that
pertains to the milestone event being achieved, will be remeasured
to the amount of the specified related milestone payment. The
resulting change in the balance of the Milestone Rights liability
due to remeasurement will be recorded in the Company’s
consolidated statements of operations as interest expense.
Furthermore, the Milestone Rights liability will be reduced upon
the settlement of each milestone payment. As a result, each
milestone payment would be effectively allocated between a
reduction of the recorded Milestone Rights liability and an expense
representing a return on a portion of the Milestone Rights
liability paid to the investor for the achievement of the related
milestone event (see Note 7 — Borrowings). As of
December 31, 2016, the remaining liability balance is
$8.9 million.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
The following table summarizes information about the
Company’s stock-based award plans as of December 31,
2016:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="60%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Outstanding<br />
Options</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Outstanding<br />
Restricted<br />
Stock Units</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Shares Available<br />
for Future<br />
Issuance</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2004 Equity Incentive Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,052,345</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14,203</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">97,574</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2013 Equity Incentive Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,399,245</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">723,763</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,743,013</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
2004 <font style="WHITE-SPACE: nowrap">Non-Employee</font>
Directors’ Stock Option Plan</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78,666</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">737,966</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,840,587</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
2016-12-31
1.37
0.009
Yes
Accelerated Filer
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Interest Expense</i> — Interest costs are expensed as
incurred, except to the extent such interest is related to
construction in progress, in which case interest is capitalized.
Interest cost capitalized for the years ended December 31,
2015 and 2014 was $0.1 million and $0.8 million,
respectively. There were no capitalized interest costs for the year
ended December 31, 2016.</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>14. Employee Benefit Plans</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company administers a 401(k) savings retirement plan (the
“MannKind Retirement Plan”) for its employees. For the
years ended December 31, 2016, 2015 and 2014, the Company
contributed $418,000, $593,000 and $623,000, respectively, to the
MannKind Retirement Plan.</p>
</div>
<div>
<p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>4. Property and Equipment</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Property and equipment consist of the following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="60%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" rowspan="2" align="center" style="border-bottom:1.00pt solid #000000">Estimated<br />
Useful Life<br />
(Years)</td>
<td valign="bottom" rowspan="2"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Land</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="center">—</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">875</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,435</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Buildings</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">39-40</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17,389</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">21,590</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Building improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">5-40</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34,957</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60,584</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Machinery and equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">3-15</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">62,992</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">68,434</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Furniture, fixtures and office equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center"><font style="white-space:nowrap">5-10</font></td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,556</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,114</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Computer equipment and software</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="center">3</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8,531</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">9,519</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Construction in progress</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">202</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">586</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">128,502</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">168,262</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Less accumulated depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(99,575</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(119,513</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total property and equipment, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">28,927</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,749</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Depreciation and amortization expense related to property and
equipment for the years ended December 31, 2016, 2015 and
2014, was $2.4 million, $11.0 million and
$9.8 million, respectively.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The December 31, 2016 amounts do not include the Valencia
property because it is classified as held for sale as of that
date.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In connection with the Company’s quarterly assessment of
impairment indicators, the Company evaluated the continued lower
than expected sales of Afrezza as reported by Sanofi throughout the
fourth quarter of 2015, revised forecasts for sales of Afrezza
provided by Sanofi in the fourth quarter of 2015 and level of
commercial production in the fourth quarter of 2015, as well as the
uncertainty associated with Sanofi’s announcement during the
fourth quarter of their intent to reorganize their diabetes
business. These factors indicated potentially significant changes
in the timing and extent of cash flows, and the Company therefore
determined that an impairment indicator existed in the fourth
quarter of 2015 and recorded an impairment for the year ended
December 31, 2015. No such indications were identified in the
current year ended December 31, 2016.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company identified two primary asset groups to be evaluated for
impairment: the Danbury manufacturing facility, which currently
performs all the manufacturing of Afrezza, and the Valencia
facility, which was previously the Company’s corporate
headquarters. The Danbury manufacturing facility was the primary
asset group that was impacted by the impairment indicators noted
above but the Company also evaluated the Valencia facility for
potential impairment given the circumstances and identified an
impairment charge of $1.8 million based on a valuation
utilizing a combination of market, income and cost approaches.
Within the Danbury manufacturing facility, the Company identified
the machinery and equipment as the primary assets within the asset
group as they are associated with the production of Afrezza. As
such, the Company performed the fixed asset impairment test and
performed the first step to test for recoverability of the Danbury
manufacturing facility by utilizing two undiscounted cash flow
projections and applying a probability weighted average to those
cash flow projections. The first undiscounted cash flow projection
was developed under a scenario assuming Sanofi would continue to
sell and market Afrezza as the termination of the arrangement by
Sanofi was not known as of the balance sheet date. The second
undiscounted cash flow projection assumed Sanofi would terminate
the Sanofi License Agreement and that the Company would
manufacture, sell and market Afrezza independently.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Based on the evaluation performed, the probabilities assigned to
the two undiscounted cash flows were not significant to the
evaluation due to the projected negative cash flows over the
estimation period, and it was determined that the probability
weighted undiscounted cash flows were not sufficient to recover the
carrying value of the Danbury manufacturing facility. As such, the
Company was required to determine the fair value of the Danbury
manufacturing facility to recognize an impairment loss if the
carrying amount exceeds its fair value. The Company determined the
fair value of the Danbury manufacturing facility by applying the
highest and best use valuation concept and utilizing the market
approach valuation technique to value the machinery and equipment
and a combination of the market approach and cost approach in
valuing the land, buildings and building improvements. As a result
of this assessment, the Company recorded, as of December 31,
2015, an impairment charge of $138.6 million for the Danbury
manufacturing facility.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The December 31, 2015 balances have been reclassified to the
current year presentation by allocating an impairment of
$140.4 million, which was previously disclosed in total, to
the individual asset groups. An additional impairment of
$0.7 million was charged to the individual asset groups for
the year ended December 31, 2016, which is included in
property and equipment impairment in the accompany consolidated
statements of operations, additionally with a $0.6 million
impairment charge related to assets held for sale.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>State Research and Development Credit Exchange Receivable</i>
— The State of Connecticut provides certain companies with
the opportunity to exchange certain research and development income
tax credit carryforwards for cash in exchange for foregoing the
carryforward of the research and development credits. The program
provides for an exchange of research and development income tax
credits for cash equal to 65% of the value of corporation tax
credit available for exchange. Estimated amounts receivable under
the program are recorded as a reduction of research and development
expenses. These amounts are included in prepaid expenses and other
current assets on the consolidated balance sheets.</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>18. Restructuring Charges</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In September 2016, the Company initiated a restructuring of
its organization in order to conserve resources for commercial
sales and marketing of Afrezza and to align cost of goods sold in
support of these commercial efforts (2016 Restructuring). In
connection with the 2016 Restructuring, the Company reduced its
total workforce by approximately 18% to 155 employees. The Company
recorded charges of approximately $1.5 million, primarily for
employee severance as well as other related termination benefits.
The $1.5 million of costs associated with the 2016
Restructuring are included in cost of goods sold, research and
development and selling, general and administrative in the
consolidated statements of operations as $0.4 million,
$0.7 million and $0.4 million, respectively, for the year
ended December 31, 2016. The Company substantially paid out
the obligation for the 2016 Restructuring in the fourth quarter of
2016, resulting in a remaining accrual balance for the 2016
Restructuring of $0.2 million at December 31, 2016. The
Company expects to substantially pay out the remainder of this
obligation by the first quarter of 2017.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In 2015, the Company initiated a restructuring of the organization
as a result of its shift to commercial production of Afrezza
(“2015 Restructuring”). In connection with the 2015
Restructuring, the Company reduced its total workforce by
approximately 26% to 198 employees. The Company recorded charges of
approximately $6.0 million, primarily for employee severance
as well as other related termination benefits. The
$6.0 million of costs associated with the 2015 Restructuring
are included in operating expenses for cost of goods sold, research
and development and selling, general and administrative in the
consolidated statements of operations as $1.4 million,
$1.3 million and $3.3 million, respectively, for the year
ended December 31, 2015. As of December 31, 2016 and
2015, the Company had a remaining accrual balance for the 2015
Restructuring of $1.2 million and $3.0 million,
respectively. Certain of the severance arrangements for executives
in the 2015 Restructuring were long-term, which the Company expects
to substantially pay out the remainder of this obligation by the
third quarter of 2017.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
A reconciliation of beginning and ending liability balances for the
2016 and 2015 Restructuring charges, which is included in accrued
expenses and other current liabilities, is as follows (in
thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="59%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom" nowrap="nowrap">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:37.25pt; font-size:8pt; font-family:Times New Roman">
Description</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016<br />
Restructuring</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015<br />
Restructuring</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Total</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — January 1, 2015</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs incurred and charged to expense</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,040</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,040</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs paid or settled</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,012</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,012</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — December 31, 2015</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs incurred and charged to expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,475</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">560</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,035</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs paid or settled</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1,266</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,421</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,687</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">209</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,167</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,376</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Research and Development Expenses</i> — Research and
development expenses consist of costs associated with the clinical
trials of the Company’s product candidates, manufacturing
supplies and other development materials, compensation and other
expenses for research and development personnel, costs for
consultants and related contract research, facility costs, and
depreciation. Research and development costs, which are net of any
tax credit exchange recognized for the Connecticut state research
and development credit exchange program, are expensed as incurred.
The Company began commercial manufacturing in the latter part of
the fourth quarter of 2014. Commercial manufacturing costs incurred
in the fourth quarter of 2014 were included in research and
development expense and were immaterial for the year ended
December 31, 2014.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Deferred Costs from Collaboration —</i> Deferred costs
from collaboration represents the costs of product manufactured and
sold to Sanofi, as well as certain direct costs associated with a
firm purchase commitment entered into in connection with the
collaboration with Sanofi. During the third quarter of 2016, the
costs related to the Sanofi product sales were recognized as costs
of revenue — collaboration in the consolidated statements of
operations, as related revenue was recognized at that time.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Deferred Costs from Commercial Product Sales —</i>
Deferred costs from commercial product sales represents the cost of
product (including labor, overhead and costs to ship to third party
logistics) shipped to ICS and wholesale distributors, but not yet
dispensed by pharmacies to patients.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:8%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Prompt Pay Discounts —</i> The Company offers cash
discounts to its customers, generally 2% of the sales price, as an
incentive for prompt payment. The Company accounts for cash
discounts by reducing accounts receivable by the prompt pay
discount amount and recognizes the discount as a reduction of
revenue in the same period the related revenue is recognized.</p>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:8%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Rebates —</i> The Company participates in federal and
state government-managed Medicare and Medicaid rebate programs and
intends to pursue participation in certain other qualifying federal
and state government programs whereby discounts and rebates are
provided to participating federal and state government entities.
Rebates provided through these other qualifying programs are
included in the Medicaid and Medicare rebate accrual. The Company
accounts for these rebates by establishing an accrual equal to the
estimate of rebate claims attributable to a sale and determines its
estimate of the rebates accrual based on historical payor data
provided by a third-party vendor along with additional data
including a forecasted participation rate for Medicare and
Medicaid. From that data, as well as input received from
MannKind’s commercial team, an estimated participation rate
for Medicare and Medicaid is determined and applied at the mandated
rate for those sales. Any new information regarding changes in the
programs’ regulations and guidelines or any changes in the
Company’s government price reporting calculations that would
impact the amount of the rebates will also be taken into account in
determining or modifying the appropriate reserve. The time period
between the date the product is sold into the channel and the date
such rebates are paid ranges from approximately six to nine months.
As such, continuous monitoring of these estimates are performed on
a periodic basis and if necessary, adjusted to reflect new facts
and circumstances. Rebates are recognized as a reduction of revenue
in the period the related revenue is recognized.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Revenue Recognition — Net Revenue — Collaborations
—</i> The Company enters into collaborations under which we
must perform certain obligations and we receive periodic payments.
We evaluate the collaborations under the multiple element revenue
recognition accounting guidance. Revenue arrangements with multiple
elements are divided into separate units of accounting if certain
criteria are met, including whether the delivered elements have
stand-alone value to the customer. When deliverables are separable,
consideration received is allocated to the separate units of
accounting based on the relative selling price of each deliverable
and the appropriate revenue recognition principles are applied to
each unit.</p>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The assessment of multiple element arrangements requires judgment
in order to determine the appropriate units of accounting and the
points in time that, or periods over which, revenue should be
recognized. The terms of and the accounting for the Company’s
collaborations are described more fully in Note 8 —
Collaboration Arrangements.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company’s effective income tax rate differs from the
statutory federal income tax rate as follows for the years ended
December 31, 2016, 2015 and 2014:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="75%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Federal tax benefit rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">35.0</td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Permanent items</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1.9</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Intercompany transfer of intellectual property</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">0.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(4.1</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Valuation allowance</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(34.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(34.0</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(31.8</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Effective income tax rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">% </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accretion of debt issuance cost and debt discount in connection
with the Deerfield financing during the years ended
December 31, 2016, 2015 and 2014 are as follows (in
thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2014</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accretion expense — debt issuance cost</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">35</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">326</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accretion expense — debt discount</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,722</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,553</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,550</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
A reconciliation of beginning and ending liability balances for the
2016 and 2015 Restructuring charges, which is included in accrued
expenses and other current liabilities, is as follows (in
thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="59%"></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom" nowrap="nowrap">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:37.25pt; font-size:8pt; font-family:Times New Roman">
Description</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016<br />
Restructuring</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015<br />
Restructuring</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Total</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — January 1, 2015</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs incurred and charged to expense</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,040</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,040</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs paid or settled</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,012</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,012</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — December 31, 2015</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs incurred and charged to expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,475</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">560</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,035</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Costs paid or settled</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(1,266</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,421</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(3,687</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrual — December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">209</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,167</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,376</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
Total stock-based compensation expense recognized in the
accompanying consolidated statements of operations is as follows
(in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Employee-related</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,407</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Consultant-related</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">318</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,725</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following table summarizes information about stock options
outstanding:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="60%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number of<br />
Shares</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br />
Average Exercise<br />
Price per Share</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Aggregate<br />
Intrinsic<br />
Value ($000)</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,955,845</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.70</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,236,693</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercised</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(55,231</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.45</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeited</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(407,161</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13.60</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expired</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(199,890</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">23.65</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.10</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested and expected to vest at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,399,777</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.35</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercisable at December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,414,586</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.50</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Segment Information</i> — Operating segments are
identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the
chief operating decision-maker in making decisions regarding
resource allocation and assessing performance. To date, the Company
has viewed its operations and manages its business as one segment
operating in the United States of America.</p>
</div>
2236693
11.60
4.50
0.0180
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>16. Warrants</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In May 2016, the Company sold in a registered offering an aggregate
of 9,708,737 shares of common stock together with A Warrants
exercisable for up to an aggregate of 7,281,553 shares of common
stock and B Warrants exercisable for up to an aggregate of
2,427,184 shares of common stock with a total fair value of
$44.7 million. Each of the warrants has an exercise price of
$7.50 per share. The A Warrants became exercisable upon issuance
and will expire two years thereafter. The B Warrants will become
exercisable beginning in May 2017 and will expire 30 months after
the date of issuance. The shares of common stock and the warrants
are immediately separable and issued separately. There have been no
warrants exercised as of December 31, 2016.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company determined that the A Warrants require liability
classification primarily due to a price-protection clause that
applies in the event of certain dilutive financings. The fair value
of the A Warrants was recorded as warrant liability in the
consolidated balance sheet at issuance and is adjusted to fair
value at each reporting period until exercise or expiration. The
Company determined that the B Warrants met the criteria for equity
classification and has accounted for such warrants in additional
paid in capital.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As of December 31, 2016 and May 12, 2016, the fair value
of the A Warrants liability was $7.4 million and
$12.8 million, respectively. As of May 12, 2016, the fair
value of the B Warrants at issuance was $5.0 million. The fair
value of the A Warrants liability as of December 31, 2016 was
estimated using a Monte Carlo valuation pricing model with the
following underlying assumptions: (a) a risk-free interest
rate of 1.1%; (b) an assumed dividend yield of zero percent;
(c) an expected term of 1.4 years; and (d) an expected
volatility of 118%. The fair value of the A Warrants liability as
of May 12, 2016, was estimated using a Monte Carlo valuation
pricing model with the following underlying assumptions: (a) a
risk-free interest rate of 0.76%; (b) an assumed dividend yield of
zero percent; (c) an expected term of 2.0 years; and
(d) an expected volatility of 95%. The Company assumed a
probability of a dilutive financing event or an equity event, as
defined in the agreement, of 10% for the each of the measurement
periods.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
For the year ended December 31, 2016, the Company recognized a
change in fair value of warrant liability of $5.4 million in
the consolidated statements of operations to reflect the fair value
adjustments of the A Warrant liability from the date of
issuance.</p>
</div>
104758
55231
43672
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Financial Statement Estimates</i> — The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America (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. Management
considers many factors in selecting appropriate financial
accounting policies, and in developing the estimates and
assumptions that are used in the preparation of the financial
statements. Management must apply significant judgment in this
process. The more significant estimates reflected in these
accompanying consolidated financial statements include revenue
recognition, assessing long-lived assets for impairment, accrued
expenses, including clinical study expenses, inventory
recoverability, valuation of the facility financing obligation,
loss on purchase commitment, warrant liability, milestone rights,
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.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Stock-Based Compensation</i> — As of December 31,
2016, the Company had three active stock-based compensation plans,
which are described more fully in Note 12 — Stock Award
Plans. The Company accounts for all share-based payments to
employees, including grants of stock awards and the compensatory
elements of the employee stock purchase plan. All share-based
payments to employees, including grants of stock options,
restricted stock units, performance-based awards 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. The Company uses
the Black-Scholes option valuation model to estimate the grant date
fair value of employee stock options and the compensatory elements
of employee stock purchase plans. Option valuation models require
the input of assumptions, including the expected life of the
stock-based awards, the estimated stock price volatility, the
risk-free interest rate and the expected dividend yield. The
expected volatility assumption is based on an assessment of the
historical volatility, with consideration of implied volatility,
derived from an analysis of historical trade activity. Restricted
stock units are valued based on the market price on the grant date.
The Company evaluates 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.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>11. Net Income (Loss) per Common Share</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
On March 1, 2017, the Company effected a 1-for-5 reverse stock
split of the Company’s outstanding common stock. As a result,
all common stock share amounts included in these consolidated
financial statements have been retroactively reduced by a factor of
five, and all common stock per share amounts have been increased by
a factor of five, with the exception of the Company’s common
stock par value. See Note 1 — Description of Business.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Basic net income (loss) per share excludes dilution for potentially
dilutive securities and is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share reflects the
potential dilution under the treasury method that could occur if
securities or other contracts to issue common stock were exercised
or converted into common stock. For periods where the Company has
presented a net loss, potentially dilutive securities are excluded
from the computation of diluted net loss per share as they would be
antidilutive. During 2015, 1,800,000 shares of the Company’s
common stock, which were loaned to Bank of America pursuant to the
terms of a share lending agreement, were issued and outstanding,
with the holder of the borrowed shares having all the rights of a
holder of the Company’s common stock. As the share borrower
was required to return all borrowed shares to the Company, the
borrowed shares were not considered outstanding for the purpose of
computing and reporting basic or diluted loss per share during the
period presented for 2015. These shares were returned to the
Company in the third quarter of 2015.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following tables summarize the components of the basic and
diluted net income (loss) per common share computations:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center">(In thousands,
except per share data)</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<b>Basic EPS:</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) (numerator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">125,664</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(368,445</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(198,382</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average common shares (denominator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.37</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(4.54</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(2.57</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
<b>Diluted EPS:</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) (numerator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">125,664</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(368,445</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(198,382</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average common shares</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,053</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Effect of dilutive securities — common shares issuable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">32</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Adjusted weighted average common shares (denominator)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">92,085</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,233</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">77,045</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Net income (loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.36</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(4.54</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(2.57</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Common shares issuable represents incremental shares of common
stock which consist of stock options, restricted stock units,
warrants, and shares that could be issued upon conversion of the
senior convertible notes.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Potentially dilutive securities outstanding that are considered
antidilutive are summarized as follows (in shares):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercise of common stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,530,256</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,955,845</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,308,332</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Conversion of senior convertible notes into common stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,561</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,464,616</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercise of common stock warrants</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">9,740,597</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">814,919</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,997,575</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vesting of restricted stock units</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">702,867</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">360,924</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">522,144</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">16,788,281</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,946,249</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">10,292,667</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
0.00
MANNKIND CORP
No
P2Y10M24D
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>9. Fair Value of Financial Instruments</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The carrying amounts reported in the accompanying consolidated
financial statements for cash, accounts receivable, accounts
payable and accrued expenses and other current liabilities
approximate their fair value due to their relatively short
maturities. The fair value of the cash equivalents, note
payable to principal stockholder, senior convertible notes,
the Facility Financing Obligation (as defined below), the Milestone
Rights (as defined below) and warrant liability are discussed
below.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Cash Equivalents</i> — As of December 31, 2016 and
2015, the Company held $20.5 million and $55.8 million,
respectively, of cash equivalents, consisting of money market
funds. The fair value of these money market funds was determined by
using quoted prices for identical investments in an active market
(Level 1 in the fair value hierarchy).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Note Payable to Principal Stockholder</i> — The fair value
of the note payable to the Company’s principal stockholder
cannot be reasonably estimated as the Company would not be able to
obtain a similar credit arrangement in the current economic
environment. Therefore, the fair value is based upon carrying
value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Financial Liabilities</i> — The following tables set forth
the fair value of the Company’s financial instruments (in
millions):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="18" align="center">As of December 31, 2016</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Carrying Value</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Total</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Financial liabilities:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Senior convertible notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Facility Financing Obligation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">71.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">18.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">18.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Warrant liability (at recurring fair values)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total financial liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">115.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">123.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">123.2</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0">
<tr>
<td width="62%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="18" align="center">As of December 31, 2015</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Carrying Value</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Total</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Financial liabilities:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Senior convertible notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">27.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">21.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">21.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Facility Financing Obligation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">74.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Milestone Rights</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">8.9</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">14.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Sanofi Loan Facility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">44.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">36.5</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total financial liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">155.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">150.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">150.6</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
The following table provides a roll forward of the fair values of
financial assets and liabilities that are carried at fair value (in
millions):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="70%"></td>
<td valign="bottom" width="12%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Warrants</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Assets Held for<br />
Sale</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, January 1, 2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Additions</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Changes in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, December 31, 2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Additions</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">12.8</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">17.3</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Changes in fair value</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(5.4</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(0.6</td>
<td valign="bottom" nowrap="nowrap">) </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Payments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Fair value, December 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7.4</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">16.7</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Senior Convertible Notes</i> — The estimated fair value of
the 2018 notes was calculated based on model-derived valuations
where inputs were observable, such as the Company’s stock
price and yields on U.S. Treasury notes and actively traded bonds,
and <font style="WHITE-SPACE: nowrap">non-observable,</font> such
as the Company’s longer-term historical volatility, and
estimated yields implied from any available market trades of the
Company’s issued debt instruments. As there is no current
active and observable market for the 2018 notes, the Company
determined the estimated fair value using a convertible bond
valuation model within a lattice framework. The convertible bond
valuation model combined expected cash flows based on terms of the
notes with market-based assumptions regarding risk-free rate,
risk-adjusted yields (20%), stock price volatility (111%) and
recent price quotes and trading information regarding Company
issued debt instruments and shares of common stock into which the
notes are convertible.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Facility Financing Obligation</i> — As discussed in Note 7
— Borrowings, in connection with the Facility Agreement, the
Company issued 2019 notes and subsequently issued Tranche B notes
(the “Facility Financing Obligation”). As there is no
current observable market for the Facility Financing Obligation,
the Company determined the estimated fair value using a bond
valuation model based on a discounted cash flow methodology. The
bond valuation model combined expected cash flows associated with
principal repayment and interest based on the contractual terms of
the debt agreement discounted to present value using a selected
market discount rate. On December 31, 2016 the market discount
rate was recalculated at 12.0% for the Facility Financing
Obligation. Under the terms of the Facility Agreement, the Company
is restricted from distributing any of its assets or declaring and
distributing a dividend to its stockholders.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Milestone Rights Liability</i> — In addition to the
Facility Financing Obligation, the Company also issued certain
rights to receive payments of up to $90.0 million upon
occurrence of specified strategic and sales milestones (the
“Milestone Rights”). These rights are not reflected in
the Facility Financing Obligation. The estimated fair value of the
Milestone Rights was calculated using the income approach in which
the cash flows associated with the specified contractual payments
were adjusted for both the expected timing and the probability of
achieving the milestones discounted to present value using a
selected market discount rate (Level 3 in the fair value
hierarchy). The expected timing and probability of achieving the
milestones, starting in 2014, was developed with consideration
given to both internal data, such as the Company’s forecast,
progress made to date towards meeting the milestones, and
assessment of criteria required for achievement, and external data,
such as market research studies. The discount rate (14.5%) was
selected based on an estimation of required rate of returns for
similar investment opportunities using available market data. As of
December 31, 2016, the carrying value of the Milestone Rights
is $8.9 million, classified as a long-term liability and the
fair value is estimated at $18.4 million.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Warrant Liability</i> — Warrant liabilities are measured
at fair value using a Monte Carlo pricing valuation model and
various assumptions. The significant unobservable input used in
measuring the fair value of the common stock warrant liabilities is
the expected volatility. Significant increases in volatility would
result in a higher fair value measurement (Level 3 in the fair
value hierarchy). See Note 16 — Warrants for further
discussion of the valuation technique and inputs used in the fair
value measurement.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
<i>Sanofi Loan Facility</i> — As discussed in Note 8 —
Collaboration Arrangements, the Sanofi Loan Facility consisted of a
senior secured revolving promissory note and a guaranty and
security agreement with an affiliate of Sanofi which provided the
Company with a secured loan facility of up to $175.0 million
to fund the Company’s share of net losses under the Sanofi
License Agreement. The estimated fair value was determined using a
discounted cash flow model where time outstanding and discount rate
were primary variables. This method considered the key elements of
the contractual terms of the Sanofi Loan Facility, market-based
estimated cost of capital, and time value of money, namely the
amount of time to settlement and the estimated discount rate
(11%) appropriate for the liability (Level 3 in the fair value
hierarchy). The Sanofi Loan Facility was forgiven on
November 9, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
There were no transfers of assets or liabilities between the fair
value measurement levels during the twelve months ended
December 31, 2016, 2015 and 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Assets and Liabilities Measured at Fair Value on a <font style="WHITE-SPACE: nowrap">Non-recurring</font> Basis</i> — Land,
buildings, and machinery and equipment, with a carrying amount of
$189.2 million, were written down to a fair value of
$48.8 million, resulting in an impairment charge of
$140.4 million, which is included in our consolidated
statements of operations for the year ended December 31, 2015.
See Note <font style="WHITE-SPACE: nowrap">4-</font> Property and
Equipment for further discussion of the valuation technique and
inputs used in the fair value measurement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
An additional impairment of $0.7 million was charged for the
year ended December 31, 2016. At that time, an analysis of the
lower of carrying value to fair value, which was deemed to be the
sales price of the property, less selling costs determined a loss
of $0.6 million, which is included in property and equipment
impairment on the consolidated statement of operations for
2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Our assessment of the real property includes Level 3 inputs,
and was based on a combination of the income, market and cost
approaches and the market approach was used for machinery and
equipment which required Level 3 inputs.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Embedded Derivatives</i> — The Company identified and
evaluated a number of embedded features in the notes issued under
the Facility Agreement to determine if they represented embedded
derivatives that are required to be separated from the notes and
accounted for as freestanding instruments. The Company analyzed the
Tranche B notes and identified embedded derivatives, which required
separate accounting. However, all of the embedded derivatives were
determined to have a <i>de minimis</i> value at December 31,
2016 and 2015.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Income Taxes</i> — The provisions for federal, foreign,
state and local income taxes are calculated on <font style="white-space:nowrap">pre-tax</font> income based on current tax law
and include the cumulative effect of any changes in tax rates from
those used previously in determining deferred tax assets and
liabilities. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which the temporary differences are expected
to be recovered or settled. A valuation allowance is recorded to
reduce net deferred income tax assets to amounts that are more
likely than not to be realized.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Income tax positions are considered for uncertainty. The Company
believes that its income tax filing positions and deductions will
be sustained on audit and does not anticipate any adjustments that
will result in a material change to its financial position.
Therefore, no liabilities for uncertain income tax positions have
been recorded. If a tax position does not meet the minimum
statutory threshold to avoid payment of penalties, the Company
recognizes an expense for the amount of the penalty in the period
the tax position is claimed in the tax return of the Company. The
Company recognizes interest accrued related to unrecognized tax
benefits in income tax expense, if any. Penalties, if probable and
reasonably estimable, are recognized as a component of income tax
expense.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Significant management judgment is involved in determining the
provision for income taxes, deferred tax assets, deferred tax
liabilities, and any valuation allowance recorded against deferred
tax assets. Due to uncertainties related to the realization of the
Company’s deferred tax assets as a result of its history of
operating losses, a full valuation allowance has been established
against the total deferred tax asset balance. The valuation
allowance is based on management’s estimates of taxable
income by jurisdiction in which the Company operates and the period
over which deferred tax assets will be recoverable. In the event
that actual results differ from these estimates or the Company
adjusts these estimates in future periods, a change in the
valuation allowance may be needed.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Property and Equipment</i> — Property and equipment are
depreciated using the straight-line method over the estimated
useful lives of the related assets. Leasehold improvements are
amortized over the term of the lease or the service lives of the
improvements, whichever is shorter. Maintenance and repairs are
expensed as incurred. Assets under construction are not depreciated
until placed into service.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Impairment of Long-Lived Assets</i> — The Company
evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an
asset may not be recoverable. Assets are considered to be impaired
if the carrying value may not be recoverable.</p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
If the Company believes an asset to be impaired, the impairment
recognized is the amount by which the carrying value of the asset
exceeds the fair value of the asset. Fair value is determined using
the market, income or cost approaches as appropriate for the asset.
Any write-downs are treated as permanent reductions in the carrying
amount of the asset and an operating loss would be recognized.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company recorded an asset impairment of $1.3 million and $140.4
million for the years ended December 31, 2016 and 2015,
respectively. No asset impairment was recognized during the year
ended December 31, 2014 (see Note 4 — Property and Equipment
and Note 20 <i>—</i> Subsequent Events).</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>19. Selected quarterly financial data (unaudited)</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Summarized quarterly financial data for the years ended
December 31, 2016 and 2015, are set forth in the following
tables:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="100%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="61%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">March 31</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">June 30</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">September 30</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">December 31</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="14" align="center"><b>(In thousands,
except per share data)</b></td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>2016</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net revenues</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">162,354</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12,404</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(24,873</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(29,959</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">126,520</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53,976</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss) per share — basic</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.29</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.33</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.32</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.56</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss) per share — diluted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.29</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.33</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.31</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.56</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute basic net income
(loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85,771</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91,061</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">95,627</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">95,676</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute diluted net income
(loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85,771</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91,061</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">96,548</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">96,510</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>2015</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net loss</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(30,658</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(28,910</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(31,857</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(277,020</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net loss per share — basic and diluted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.38</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.36</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.39</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(3.30</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute basic and diluted
net loss per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">79,783</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">80,203</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,039</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">83,862</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Impairment charges of $242.7 million were recorded in the
fourth quarter of 2015 related to long-lived assets, inventory and
loss on purchase commitments.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In the third quarter of 2016, the Company recognized net
revenue-collaboration of $161.8 million attributable to
collaboration with Sanofi (See Note 8 — Collaboration
Arrangements).</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In the fourth quarter of 2016, the Company recognized net
revenue-collaboration of $10.2 million attributable to
collaboration with Sanofi and $72.0 million gain on
extinguishment of debt (See Note 8 — Collaboration
Arrangements)</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>6. Related-Party Arrangements</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In October 2007, the Company entered into The Mann Group Loan
Arrangement, which has been amended from time to time. On
October 31, 2013, the promissory note underlying The Mann
Group Loan Arrangement was amended to, among other things, extend
the maturity date of the loan to January 5, 2020, extend the
date through which the Company can borrow under The Mann Group Loan
Arrangement to December 31, 2019, increase the aggregate
borrowing amount under The Mann Group Loan Arrangement from
$350.0 million to $370.0 million and provide that
repayments or cancellations of principal under The Mann Group Loan
Arrangement will not be available for reborrowing.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As of December 31, 2016, the total principal amount
outstanding under The Mann Group Loan Arrangement was
$49.5 million, and the amount available for future borrowings
is $30.1 million. Interest, at a fixed rate of 5.84%, is due
and payable quarterly in arrears on the first day of each calendar
quarter for the preceding quarter, or at such other time as the
Company and The Mann Group mutually agree. All or any portion of
accrued and unpaid interest that becomes due and payable may be
<font style="white-space:nowrap"><font style="white-space:nowrap">paid-in-kind</font></font> and capitalized as
additional borrowings at any time upon mutual agreement of the
parties, and has been classified as <font style="white-space:nowrap">non-current.</font> The Mann Group can require
the Company to prepay up to $200.0 million in advances that
have been outstanding for at least 12 months, less approximately
$105.0 million aggregate principal amount that has been
cancelled in connection with two common stock purchase agreements.
If The Mann Group exercises this right, the Company will have 90
days after The Mann Group provides written notice, or the number of
days to maturity of the note if less than 90 days, to prepay such
advances. However, pursuant to a letter agreement entered into in
August 2010, The Mann Group has agreed to not require the Company
to prepay amounts outstanding under the amended and restated
promissory note if the prepayment would require the Company to use
its working capital resources. In addition, The Mann Group entered
into a subordination agreement with Deerfield pursuant to which The
Mann Group agreed with Deerfield not to demand or accept any
payment under The Mann Group Loan Arrangement until the
Company’s payment obligations to Deerfield under the Facility
Agreement have been satisfied in full. Subject to the foregoing, in
the event of a default under The Mann Group Loan Arrangement, all
unpaid principal and interest either becomes immediately due and
payable or may be accelerated at The Mann Group LLC’s option,
and the interest rate will increase to the <font style="white-space:nowrap">one-year</font> LIBOR rate calculated on the
date of the initial advance or in effect on the date of default,
whichever is greater, plus 5% per annum. All borrowings under
The Mann Group Loan Arrangement are unsecured. The Mann Group Loan
Arrangement contains no financial covenants.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As of December 31, 2016 and 2015, the Company had accrued and
unpaid interest related to the above note of $9.3 million and
$6.4 million, respectively, and had $30.1 million of
available borrowings. Interest expense on the Company’s note
payable to the Company’s principal stockholder for each of
the years ended December 31, 2016, 2015 and 2014 was
$2.9 million.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In May 2015, the Company entered into a sublease agreement with the
Alfred Mann Foundation for Scientific Research (the “Mann
Foundation”), a California <font style="white-space:nowrap"><font style="white-space:nowrap">Not-For-Profit</font></font> Corporation. The
lease is for approximately 12,500 square feet of office space in
Valencia, California and expires in April 2017. The office space
contains the Company’s principal executive offices. Lease
payments to the Mann Foundation for the year ended
December 31, 2016 and 2015 were $268,000 and $175,000,
respectively. There were no lease payments to the Mann Foundation
for the year ended December 31, 2014.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
In connection with certain meetings of the Company’s board of
directors and on other occasions when the Company’s business
necessitated air travel for the Company’s principal
stockholder and other Company employees, the Company utilized the
principal stockholder’s private aircraft, and the Company
paid the charter company that manages the aircraft on behalf of the
Company’s principal stockholder approximately $18,000 and
$79,000 for the years ended December 31, 2015 and 2014,
respectively, on the basis of the corresponding cost of commercial
airfare. There were no payments to the principal stockholder
related to the usage of the aircraft during the year ended
December 31, 2016.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company has entered into indemnification agreements with each
of its directors and executive officers, in addition to the
indemnification provided for in its amended and restated
certificate of incorporation and amended and restated bylaws (see
Note 13 — Commitments and Contingencies).</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Accrued expenses and other current liabilities are comprised of the
following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="76%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Salary and related expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,814</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,634</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Restructuring</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,376</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,028</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Sales and marketing services</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">144</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Professional fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">875</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">931</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Discounts and allowances for commercial product sales</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">754</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrued interest</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">619</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">615</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">355</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">483</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Construction in progress</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">238</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Accrued expenses and other current liabilities</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,937</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,929</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Revenue Recognition — Net Revenue — Commercial
Product Sales —</i> Between July 1, 2016 and
December 15, 2016, the Company sold Afrezza to Integrated
Commercialization Solutions Direct (ICS) and title and risk of loss
transferred to ICS upon shipment. After December 15, 2016, ICS
became a third party logistics provider and stopped taking title
and risk of loss upon shipment of Afrezza to ICS. The Company sells
Afrezza in the United States to wholesale pharmaceutical
distributors through ICS, and ultimately to retail pharmacies,
which are collectively referred to as “customers”.</p>
<p style="font-size:1px;margin-top:6px;margin-bottom:0px">
 </p>
<p style="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company provides the right of return to ICS (through
December 15, 2016) and its wholesale distributors and, through
them, to its retail pharmacy customers for unopened product for a
period beginning six months prior to and ending twelve months after
its expiration date. Once the product has been prescribed and
dispensed to the patient, any right of return ceases to exist.</p>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Given the Company’s limited sales history for Afrezza, the
Company cannot reliably estimate expected returns of the product at
the time of shipment into the distribution channel. Accordingly,
the Company defers recognition of revenue on Afrezza product
shipments until the right of return no longer exists, which occurs
at the earlier of the time Afrezza is dispensed from pharmacies to
patients or expiration of the right of return. The Company
recognizes revenue based on Afrezza patient prescriptions dispensed
as estimated by syndicated data provided by a third party. The
Company also analyzes additional data points to ensure that such
third-party data is reasonable including data related to inventory
movements within the channel and ongoing prescription demand.</p>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
For the year ended December 31, 2016, net revenue from
commercial product sales consisted of $1.9 million of net
sales of Afrezza dispensed to patients. As of December 31,
2016, the Company recorded $3.4 million in deferred revenue on
its consolidated balance sheet, of which $1.6 million (net of
estimated <font style="white-space:nowrap"><font style="white-space:nowrap">gross-to-net</font></font> adjustments)
represents product shipped to the Company’s third-party
logistics provider and wholesale distributors, but not yet
dispensed to patients. The difference represents deferred revenue
from bulk insulin sales, which is described more fully under the
heading <i>Revenue Recognition — Revenue — Bulk Insulin
Sales</i> below.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Summarized quarterly financial data for the years ended
December 31, 2016 and 2015, are set forth in the following
tables:</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="100%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="61%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">March 31</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">June 30</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">September 30</td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">December 31</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="14" align="center"><b>(In thousands,
except per share data)</b></td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>2016</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net revenues</p>
</td>
<td valign="bottom">  </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td nowrap="nowrap" valign="bottom">$</td>
<td nowrap="nowrap" valign="bottom" align="right">
—  </td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">162,354</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">12,404</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss)</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(24,873</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(29,959</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">126,520</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53,976</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss) per share — basic</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.29</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.33</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.32</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.56</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net income (loss) per share — diluted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.29</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.33</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1.31</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.56</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute basic net income
(loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85,771</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91,061</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">95,627</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">95,676</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute diluted net income
(loss) per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">85,771</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">91,061</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">96,548</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">96,510</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
<b>2015</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net loss</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(30,658</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(28,910</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(31,857</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(277,020</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Net loss per share — basic and diluted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.38</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.36</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(0.39</td>
<td nowrap="nowrap" valign="bottom">) </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">(3.30</td>
<td nowrap="nowrap" valign="bottom">) </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Weighted average common shares used to compute basic and diluted
net loss per share</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">79,783</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">80,203</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">81,039</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">83,862</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
P4Y
21.70
800530
131000
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:8%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Product Returns —</i> The Company does not provide a
reserve for product returns of sales of Afrezza due to its revenue
recognition policy of deferring recognition of revenue on product
shipments of Afrezza until the right of return no longer
exists.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<b>20. Subsequent Events</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Reverse Stock Split</i> — On September 14,
2016, NASDAQ notified the Company that the bid price of the
Company’s common stock had closed below the required $1.00
per share for 30 consecutive trading days, and, accordingly, the
Company did not comply with the applicable NASDAQ minimum bid price
requirement. The Company was provided 180 calendar days by NASDAQ,
or until March 13, 2017, to regain compliance with this
requirement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On March 1, 2017, the Company held a Special Meeting of
Stockholders at which the Company’s stockholders approved a
proposal to amend the Company’s Amended and Restated
Certificate of Incorporation to effect a reverse stock split of the
Company’s outstanding common stock at a ratio to be
determined in the discretion of the Company’s board of
directors and with such reverse stock split to be effected at such
time and date as determined by the Company’s board of
directors in its sole discretion, and to reduce the number of
authorized shares of the Company’s common stock in a
corresponding proportion to the reverse stock split, rounded to the
nearest whole share.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
On March 1, 2017, following stockholder approval of the
reverse split proposal, the Company’s board of directors
approved a reverse stock split ratio of <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5. On</font></font> March 1, 2017, the
Company filed with the Secretary of State of the State of Delaware
a Certificate of Amendment of the Company’s Amended and
Restated Certificate of Incorporation to effect the <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5</font></font> reverse stock split of the
Company’s outstanding common stock and to reduce the
authorized number of shares of the Company’s common stock
from 700,000,000 to 140,000,000 shares. The Company’s
common stock began trading on The NASDAQ Global Market on a
split-adjusted basis when the market opened on March 3,
2017.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
As of the date of this filing, the shares of the Company’s
common stock have maintained a minimum bid closing price of at
least $1.00 per share for 10 consecutive business days.
Accordingly, the Company expects to receive a notice from the
Listing Qualifications Department of the NASDAQ Stock Market
indicating that the Company has regained compliance with the
minimum closing bid price requirement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">
<i>Sale of Valencia Facility</i> — On January 6,
2017, the Company and Rexford Industrial Realty, L.P.
(“Rexford”) entered into an Agreement of Purchase and
Sale and Joint Escrow Instructions (the “Purchase
Agreement”), pursuant to which the Company agreed to sell and
Rexford agreed to purchase certain parcels of real estate owned by
the Company in Valencia, California and certain related
improvements, personal property, equipment, supplies and fixtures
(collectively, the “Property”) for $17.3 million.
The sale and purchase of the aforementioned Property for
$17.3 million pursuant to the terms of the Purchase Agreement,
as amended, was completed on February 17, 2017. Net proceeds
were approximately $16.7 million after deducting
broker’s commission and other fees of approximately $624,000
paid by the Company. In the fourth quarter of 2016 the
property met the requirements for reclassification from property
and equipment, net to asset held for sale when it became probable
that the property would be sold within one year. At that time, an
analysis of the lower of carrying value which was deemed to be the
sales price of the property, to fair value less selling costs
determined a loss of $564,000, which was recorded as a property and
equipment impairment on the consolidated statement of operations
for 2016. At December, 31 2016, this property had a carrying
value of $16.7 million and was classified as held for sale.
The sale of this property will be reflected in the consolidated
financial statements for the quarter ended March 31, 2017.</p>
</div>
-48100000
174758000
1144000
2690000
-4000
72024000
-600000
3433000
588000
-165000
426000
1895000
67260000
125664000
93000000
5174000
8991000
-361000
2331000
-13539000
302000
125660000
5135000
165000
85000
30534000
467000
-597000
-19000
58404000
346000
125664000
-1259000
3433000
12750000
5135000
-43814000
48125000
-4311000
2400000
1259000
0
-134056000
348000
-12118000
-1127000
17000
2901000
5135000
0
0
0
-48125000
418000
4158000
3419000
200000
4478000
50000000
14917000
19854000
46928000
107498000
27074000
15576000
43038000
373000
0
-5000000
100000
600000
-36179000
17121000
0
0
500000
0
2035000
3687000
2600000
0
P2Y
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Total stock-based compensation expense recognized in the
accompanying consolidated statements of operations is included in
the following categories (in thousands):</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="69%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">Year Ended December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">2014</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Cost of goods sold</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">695</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Research and development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,309</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,029</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">22,357</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Selling, general and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,131</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,696</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">26,265</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">5,135</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">8,725</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">48,622</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
11600000
-17503000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Basis of Presentation</i> — On August 11, 2014, the
Company entered into a license and collaboration agreement (the
“Sanofi License Agreement”) with Sanofi-Aventis
Deutschland GmbH (which subsequently assigned its rights and
obligations under the agreement to Sanofi-Aventis U.S. LLC
(“Sanofi”)), pursuant to which Sanofi was responsible
for Afrezza global commercial, regulatory and development
activities for Afrezza.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On January 4, 2016, the Company received written notification
from Sanofi of its election to terminate in its entirety the Sanofi
License Agreement. The effective date of termination (the
“Termination Date”) was April 4, 2016, which was
when the Company assumed responsibility for worldwide development
and commercialization of Afrezza. Under terms of a transition
agreement, Sanofi continued to fulfill orders for Afrezza in the
United States until the Company began distributing MannKind-branded
Afrezza product to major wholesalers in late July 2016. The Company
began recognizing commercial product sales revenue when
MannKind-branded Afrezza was dispensed from pharmacies to patients
in August 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On November 9, 2016, the Company entered into a settlement
agreement with Sanofi (the “Settlement Agreement”).
Under the terms of the Settlement Agreement, the promissory note
(the “Sanofi Loan Facility”) between the Company and
Aventisub LLC (“Aventisub”), a Sanofi affiliate, was
terminated, with Aventisub agreeing to forgive the full outstanding
loan balance of $72.0 million, which includes
$0.5 million of previously uncharged costs pursuant to the
Sanofi License Agreement. Sanofi also agreed to purchase
$10.2 million of insulin from the Company in December 2016
under an existing insulin put option as well as make a cash payment
of $30.6 million to the Company in early January 2017 as
acceleration and in replacement of all other payments that Sanofi
would otherwise have been required to make in the future pursuant
to the insulin put option, without the Company being required to
deliver any insulin for such payment. The Company and Sanofi also
agreed to a general release of potential claims against each
other.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During their initial transition of the commercial responsibilities
from Sanofi, the Company utilized a contract sales organization to
promote Afrezza while the Company focused its internal resources on
establishing a channel strategy, entering into distribution
agreements and developing <font style="WHITE-SPACE: nowrap">co-pay</font> assistance programs, a voucher
program, data agreements and payor relationships. In early 2017,
the Company recruited their own sales force, which included some of
the sales reps that previously were employed by the contract sales
organization. The Company intend to continue the commercialization
of Afrezza in the United States through their own commercial
organization. The Company’s current strategy for the future
commercialization of Afrezza outside of the United States, subject
to receipt of the necessary foreign regulatory approvals, is to
seek and establish regional partnerships in foreign jurisdictions
where there are appropriate commercial opportunities.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
It has been costly to develop our therapeutic product, conduct
clinical studies, and market and sell Afrezza. As of and for the
year ended December 31, 2016, the Company has reported an
accumulated deficit of $2.7 billion and has reported negative
cash flow from operations for each year since inception, except for
2014, when the Company received the $150.0 million upfront
payment from Sanofi.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
At December 31, 2016, the Company’s capital resources
consisted of cash and cash equivalents of $22.9 million. The
Company expects to continue to incur significant expenditures to
support commercial manufacturing and sales and marketing of Afrezza
and the development of other product candidates. The 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”) and the First Amendment to Facility
Agreement and Registration Rights Agreement (the “First
Amendment”) that resulted in additional sales of an
additional tranche of notes (the “Tranche B notes”)
(see Note 7 — Borrowings) requires the Company to maintain at
least $25.0 million, which can be comprised of cash and cash
equivalents and available borrowings under the loan arrangement,
dated as of October 2, 2007, between the Company and The Mann
Group LLC (as amended, restated, or otherwise modified as of the
date hereof, “the Mann Group Loan Arrangement”), as of
the last day of each fiscal quarter.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Additional funding sources that are, or in certain circumstances
may be available to the Company, include approximately
$30.1 million principal amount of available borrowings under
The Mann Group Loan Arrangement. A portion of these available
borrowings may be used to capitalize accrued interest into
principal, upon mutual agreement of the parties, as it becomes due
and payable under The Mann Group Loan Arrangement (see Note 6
— Related-party Arrangements). 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 a 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 commercialization of Afrezza and development
of other product candidates and to support its other ongoing
activities. The Company cannot provide assurances that such
additional capital will be available on acceptable terms or at all.
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
this uncertainty.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On September 14, 2016, the Company received notice from the
Listing Qualifications Department of the NASDAQ Stock Market
indicating that, for the previous 30 consecutive business days, the
bid price for the common stock closed below the minimum $1.00 per
share required for continued inclusion on The NASDAQ Global Market.
The notification letter stated that the Company would be afforded
180 calendar days, or until March 13, 2017, to regain
compliance with the minimum bid price requirement. In order to
regain compliance, shares of the Company’s common stock must
maintain a minimum bid closing price of at least $1.00 per share
for a minimum of 10 consecutive business days.</p>
</div>
2016-02-08
<div>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Selling, general and administrative expenses consist of the
following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center" style="border-bottom:1.00pt solid #000000">Year Ended
December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2014</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Selling and marketing</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">19,854</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,587</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,556</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
General and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27,074</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">39,373</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">75,827</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total selling, general and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">46,928</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40,960</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">79,383</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
0
90 days or less at the time of purchase
2000000
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Sale of intellectual property —</i> On July 18, 2014,
the Company entered into an assignment agreement with a third party
whereby the third party acquired all proprietary rights, technology
and <font style="white-space:nowrap">know-how</font> that related
to a small molecule inhibitor compound and all <font style="white-space:nowrap">pre-clinical</font> data and results related
thereto. Under the terms of the assignment agreement, the Company
received total consideration of $9.3 million and accrued
$1.4 million in expense for a net amount of $7.9 million
recorded as other income. In 2015, the Company recorded other
income of $1.4 million related to the relief of the
$1.4 million accrual for expenses associated with the sale of
intellectual property related to oncology in 2014, which was
subsequently resolved without payment.</p>
</div>
-2037000
0.65
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
<i>Business</i> — MannKind Corporation and subsidiaries (the
“Company”) is a biopharmaceutical company focused on
the discovery and development of therapeutic products for diseases
such as diabetes. The Company’s only approved product,
Afrezza, (insulin human [rDNA origin]) inhalation powder, is a
rapid-acting inhaled insulin that was approved by the U.S. Food and
Drug Administration (the “FDA”) on June 27, 2014
to improve glycemic control in adult patients with diabetes.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Warrants</i> — The Company has issued warrants to purchase
shares of its common stock. The Company accounts for its warrants
as either equity or liabilities based upon the characteristics and
provisions of each instrument and evaluation of sufficient
authorized shares available to satisfy the obligations. Warrants
classified as derivative liabilities are recorded on the
Company’s consolidated balance sheets at their fair value on
the date of issuance and are revalued at each subsequent balance
sheet date, with fair value changes recognized in the consolidated
statements of operations. The Company estimates the fair value of
its derivative liabilities using a third party valuation analysis
that utilizes a Monte Carlo pricing valuation model and assumptions
that are based on the individual characteristics of the warrants or
instruments on the valuation date, as well as expected volatility,
expected life, yield and a risk-free interest rate. The expected
volatility assumption is primarily based on an assessment of the
historical volatility, with consideration of implied volatility,
derived from an analysis of historical trade activity. Warrants
classified as equity are recorded within additional paid in capital
at the issuance date and are not <font style="WHITE-SPACE: nowrap">re-measured</font> in subsequent periods,
unless the underlying assumptions change to trigger liability
accounting.</p>
</div>
2023-12-31
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>10. Common and Preferred Stock</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
On March 1, 2017, the Company effected a 1-for-5 reverse stock
split of the Company’s outstanding common stock. As a result,
all common stock share amounts included in these consolidated
financial statements have been retroactively reduced by a factor of
five, and all common stock per share amounts have been increased by
a factor of five, with the exception of the Company’s common
stock par value. See Note 1 — Description of Business.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company is authorized to issue 140,000,000 shares of common
stock, par value $0.05 per share, and 10,000,000 shares of
undesignated preferred stock, par value $0.01 per share, issuable
in one or more series as designated by the Company’s board of
directors. No other class of capital stock is authorized. As of
December 31, 2016 and 2015, 95,680,831 and 85,734,188 shares
of common stock, respectively, were issued and outstanding and no
shares of preferred stock were outstanding.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
As more fully described in Note 16 — Warrants, in May 2016,
the Company sold in a registered offering an aggregate of 9,708,737
shares of common stock together with certain warrants exercisable
for up to an aggregate of 7,281,553 shares of common stock
(“A Warrants”) and certain warrants exercisable for up
to an aggregate of 2,427,184 shares of common stock (“B
Warrants”) in a direct offering for proceeds of
$50.0 million.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
On November 9, 2015, the Company entered into a series of
stock purchase agreements to sell up to an aggregate of 10,000,000
shares of its common stock in a registered direct offering to
selected investment funds in Israel that hold securities included
within certain stock indexes of the Tel Aviv Stock Exchange (the
“TASE”). Pursuant to the agreements, the shares of
common stock were sold at a price per share equal to 97% of the
closing price of the Company’s common stock on the TASE on
November 12, 2015. During November 2015, the Company sold
2,770,487 shares of common stock for an aggregate price of
approximately $34,710,000, or $13.05 per share, which is net of
$1,432,000 of issuance costs.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company engaged Sunrise Securities Corporation as its exclusive
placement agent in connection with the offering of the 10,000,000
shares. In connection with the services provided, the Company
issued to Sunrise Securities Corporation, or its designee,
restricted warrants to purchase a number of shares of the
Company’s common stock in an aggregate equal to 1.15% of the
aggregate shares sold in the offering, which totaled 31,860 shares
on November 16, 2015. The warrants are exercisable for a five
year period at an exercise price of $13.05, the price paid per
share in connection with the offering. The Company had an
obligation to register the common stock that may be issued pursuant
to the exercise of the warrants, which resulted in their initial
classification as liability and were deemed immaterial. On
December 15, 2015 the warrants were reclassified to equity as
the Company registered the common stock pursuant to a registration
statement and continue to be classified in equity as of
December 31, 2016.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Included in the common stock outstanding as of December 31,
2014 is 1,800,000 shares of common stock loaned to Bank of America
under a share lending agreement in connection with the offering of
the $100.0 million aggregate principal amount of the 2015
notes. Bank of America was obligated to return the borrowed shares
(or, in certain circumstances, the cash value thereof) to the
Company on or about the 45th business day following the date as of
which the entire principal amount of the 2015 notes ceases to be
outstanding, subject to extension or acceleration in certain
circumstances or early termination at Bank of America’s
option. On October 23, 2015, the 1,800,000 shares of common
stock loaned to Bank of America were returned, as the Company
settled all payments and deliveries in respect of such convertible
notes on August 17, 2015. The Company did not receive any
proceeds from the sale of the borrowed shares by Bank of America,
but the Company did receive a nominal lending fee of $0.05 per
share from Bank of America for the use of borrowed shares.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
On February 8, 2012, the Company sold 7,187,500 units in an
underwritten public offering, including 937,500 units sold pursuant
to the full exercise of an over-allotment option granted to the
underwriters, with each unit consisting of one share of common
stock and a warrant to purchase 0.1 of a share of common stock. All
of the securities were offered by the Company at a combined price
to the public of $12.00 per unit and the underwriters purchased the
units at a price of $11.28 per unit. Net proceeds from this
offering were approximately $80.6 million, excluding any
warrant exercises. The 4,312,500 shares of common stock underlying
the warrants are exercisable at $12.00 per share and expire four
years from the date of the issuance.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
For the years ended December 31, 2015 and 2014, the Company
received $10.1 million and $27.8 million in proceeds,
respectively, from the exercise of the February 2012 public
offering warrants. There were no warrant exercises during the year
ended December 31, 2016 and any unexercised February 2012
public offering warrants expired on February 8, 2016.</p>
</div>
5369000
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Assets Held for Sale —</i> The Company classifies
long-lived assets anticipated to be sold within one year as held
for sale at the lower of their carrying value or fair value less
estimated selling costs.</p>
</div>
-0.019
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Clinical Trial Expenses</i> — Clinical trial expenses,
which are reflected in research and development expenses in the
accompanying consolidated statements of operations, result from
obligations under contracts with vendors, consultants and clinical
site agreements in connection with conducting clinical trials. The
financial terms of these contracts are subject to negotiations
which vary from contract to contract and may result in payment
flows that do not match the periods over which materials or
services are provided to the Company under such contracts. The
appropriate level of trial expenses are reflected in the
Company’s consolidated financial statements by matching
period expenses with period services and efforts expended. These
expenses are recorded according to the progress of the trial as
measured by patient progression and the timing of various aspects
of the trial. Clinical trial accrual estimates are determined
through discussions with internal clinical personnel and outside
service providers as to the progress or state of completion of
trials, or the services completed. Service provider status is then
compared to the contractually obligated fee to be paid for such
services. During the course of a clinical trial, the Company may
adjust the rate of clinical expense recognized if actual results
differ from management’s estimates.</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>17. Selling, General and Administrative Expenses</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
Selling, general and administrative expenses consist of the
following (in thousands):</p>
<p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt">
 </p>
<table cellspacing="0" cellpadding="0" width="84%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="10" align="center" style="border-bottom:1.00pt solid #000000">Year Ended
December 31,</td>
<td valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2016</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2015</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">2014</td>
<td valign="bottom"> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Selling and marketing</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">19,854</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">1,587</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">3,556</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
General and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">27,074</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">39,373</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">75,827</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">
 </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<td valign="top">
<p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">
Total selling, general and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">46,928</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">40,960</td>
<td nowrap="nowrap" valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">79,383</td>
<td nowrap="nowrap" valign="bottom"> </td>
</tr>
<tr style="font-size:1px;">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td valign="bottom">
<p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Reverse Stock Split</i> — On March 1, 2017, following
stockholder approval, the Company’s board of directors
approved a reverse stock split ratio of <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5. On</font></font> March 1,
2017, the Company filed with the Secretary of State of the State of
Delaware a Certificate of Amendment of the Company’s Amended
and Restated Certificate of Incorporation to effect the
<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">1-for-5</font></font> reverse stock split of
the Company’s outstanding common stock and to reduce the
authorized number of shares of the Company’s common stock
from 700,000,000 to 140,000,000 shares. The Company’s
common stock began trading on The NASDAQ Global Market on a
split-adjusted basis when the market opened on March 3,
2017. See Note 20 — Subsequent Events for further
information. As a result, all common stock share amounts included
in these consolidated financial statements have been retroactively
reduced by a factor of five, and all common stock per share amounts
have been increased by a factor of five, with the exception of the
Company’s common stock par value.</p>
</div>
2265000
P5Y
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Recently Issued Accounting Standards</i> — From time to
time, new accounting pronouncements are issued by the Financial
Accounting Standards Board (FASB) or other standard setting bodies
that are adopted by the Company as of the specified effective date.
Unless otherwise discussed, the Company believes that the impact of
recently issued standards that are not yet effective will not have
a material impact on the Company’s consolidated financial
position or results of operations upon adoption.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In May 2014, the FASB issued Accounting Standards Update (ASU)
<font style="WHITE-SPACE: nowrap">No. 2014-09,</font>
<i>Revenue from Contracts with Customers (Topic 606)</i>, which
requires an entity to recognize the amount of revenue when promised
goods or services are transferred to customers in an amount that
reflects the consideration that is expected to be received for
those goods or services. This new guidance supersedes previous
revenue recognition requirements, along with most existing
industry-specific guidance. In August 2015, the FASB issued ASU
<font style="WHITE-SPACE: nowrap">2015-14,</font> <i>Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective
Date</i>, which delayed the effective date of the new standard from
January 1, 2017 to January 1, 2018. The FASB also agreed
to allow entities to choose to adopt the standard as of the
original effective date. In 2016 the FASB has issued additional
ASUs which clarify certain aspects of the new guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company will adopt the new guidance for the year beginning
January 1, 2018. The Company has the option to either apply
the new guidance retrospectively for all prior reporting periods
presented (full retrospective) or retrospectively with the
cumulative effect of initially applying the guidance recognized at
the date of initial application (modified retrospective). The
Company currently anticipates it will apply the new guidance using
the modified retrospective approach with the cumulative effect of
initial application recognized as of January 1, 2018. The
Company plans to continue analyzing the potential impacts of the
application throughout 2017 and, depending on factors that may
impact the results, could elect to apply the new guidance on a full
retrospective basis.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Currently, for commercial sales of Afrezza, the Company has limited
sales and returns history, and as such, is unable to reliably
estimate expected returns of the product at the time of shipment
into the distribution channel. Accordingly, the Company defers
recognition of revenue on Afrezza product shipments until the right
of return no longer exists, which occurs at the earlier of the time
Afrezza is dispensed from pharmacies to patients or expiration of
the right of return. The Company recognizes revenue based on
Afrezza patient prescriptions dispensed, a sell-through model, as
estimated by syndicated data provided by a third party. The Company
also analyzes additional data points to ensure that such
third-party data is reasonable, including data related to inventory
movements within the channel and ongoing prescription demand.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
Upon adoption of the new guidance, the Company expects that it will
move from its current sell-through model to a <font style="WHITE-SPACE: nowrap">sell-to</font> model for revenue related to
commercial sales of Afrezza and will record revenue at the time
title and risk of loss passes to its distributors (generally at
shipment or delivery to the distributors) along with an estimate of
potential returns as variable consideration. The Company also
anticipates that its ability to estimate potential returns will
improve with an additional 12 months of sales history that it will
have obtained by January 1, 2018.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In addition, the Company has historically entered into
collaborative agreements with third-parties under which periodic
payments have been received. Revenue recognition for certain
payments received has been deferred until the price is fixed and
determinable. Further, revenue for certain payments to be received
in the future has been prohibited from recognition until received.
The Company expects that some of these amounts will be considered
variable consideration and may be able to be recognized earlier
under the new guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company has begun its evaluation of the impact of adoption and
plans to continue its evaluation throughout 2017. The financial
impact upon adoption will be dependent upon a number of factors
including; the amount of revenue that has been deferred under the
sell-through model for Afrezza, the amount of the revenue deferred
under collaborative arrangements and the Company’s estimates
of variable consideration at the date of adoption. At this time,
the Company has not completed its evaluation of the inputs,
assumptions and methodologies that will be used to recognize
revenue related to variable consideration under the new
guidance.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In July 2015, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2015-11,</font> <i>Inventory (Topic
330): Simplifying the Measurement of Inventory.</i> Topic 330
currently requires an entity to measure inventory at the lower of
cost or market. Market could be replacement cost, net realizable
value, or net realizable value less an approximately normal profit
margin. The amendments indicate that after adoption an entity
should measure inventory within the scope of this ASU at the lower
of cost or net realizable value. The amendments are effective for
fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years. The amendments should be
applied prospectively with earlier application permitted as of the
beginning of an interim or annual reporting period. The adoption of
ASU <font style="WHITE-SPACE: nowrap">No. 2015-11</font> will
have no impact on the Company’s annual consolidated financial
statements because the Company currently measures inventory at the
lower of cost or net realizable value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In August 2014, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2014-15,</font> <i>Presentation of
Financial Statements — Going Concern</i>, which requires
management of an entity to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt
about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are
issued or available to be issued. This update was effective for
annual periods ending after December 15, 2016. The adoption of
this standard did not have a material impact on its consolidated
financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In January 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-01,</font> <i>Financial
Instruments — Overall (Subtopic <font style="WHITE-SPACE: nowrap">825-10):</font> Recognition and Measurement
of Financial Assets and Financial Liabilities.</i> The update is
intended to improve the recognition and measurement of financial
instruments. The update is effective for fiscal years beginning
after December 15, 2017, including interim periods within
those fiscal years. The Company is evaluating the impact the
adoption of ASU <font style="WHITE-SPACE: nowrap">2016-01</font>
will have on its consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In February 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-02,</font> <i>Leases (Topic
842)</i>. The new standard requires that a lessee recognize the
assets and liabilities that arise from operating leases. A lessee
should recognize in the statement of financial position a liability
to make lease payments (the lease liability) and a <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">right-of-use</font></font> asset representing
its right to use the underlying asset for the lease term. For
leases with a term of 12 months or less, a lessee is permitted to
make an accounting policy election by class of underlying asset not
to recognize lease assets and lease liabilities. In transition,
lessees and lessors are required to recognize and measure leases at
the beginning of the earliest period presented using a modified
retrospective approach. The new standard will be effective on
January 1, 2019. The Company is evaluating the impact the
adoption of ASU <font style="WHITE-SPACE: nowrap">No. 2016-02</font> will have on its
consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
In March 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-09,</font> <i>Compensation
— Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting</i>. The new standard involves
several aspects of the accounting for share-based payment
transactions, including the income tax consequences, classification
of awards as either equity or liabilities and classification on the
statement of cash flows. For public business entities, the
amendments in this standard are effective for annual periods
beginning after December 15, 2016, and interim periods within
those annual periods. The Company has evaluated the effect that
this guidance will have on its consolidated financial statements
and related disclosures and has determined it will not result in a
material impact.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In August 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-15,</font> <i>Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments</i>. The new standard seeks to reduce diversity in
practice related to the classification of certain transactions in
the statement of cash flows. For public business entities, the
amendments in this standard are effective for annual periods
beginning after December 15, 2017, and interim periods within
those annual periods. The amendments should be applied using a
retrospective transition method to each period presented. If it is
impracticable to apply the amendments retrospectively for some of
the issues, the amendments for those issues would be applied
prospectively as of the earliest date practicable. The Company is
evaluating the impact the adoption of ASU <font style="WHITE-SPACE: nowrap">No. 2016-15</font> will have on its
consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
In November 2016, the FASB issued ASU <font style="WHITE-SPACE: nowrap">No. 2016-18,</font> <i>Statement of Cash
Flows (Topic 230): Restricted Cash.</i> This ASU requires that the
reconciliation of the <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">beginning-of-period</font></font>
and <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">end-of-period</font></font> amounts shown in
the statement of cash flows include cash and restricted cash
equivalents. ASU <font style="WHITE-SPACE: nowrap">2016-08</font>
is effective for fiscal years beginning after December 15,
2018, including interim periods within those periods, using a
retrospective transition method to each period presented. The
Company has evaluated the effect that this guidance will have on
its consolidated financial statements and related disclosures and
has determined it will not result in a material impact.</p>
</div>
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Prepaid Expenses and Other Current Assets —</i> As of
December 31, 2016 and 2015, prepaid expenses and other current
assets primarily consist of prepaid expenses for goods and services
to be received and includes a certificate of deposit for $350,000
as collateral as required by an agreement with the bank.</p>
</div>
0.25
2
893000
0
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Recognized Loss on Purchase Commitments —</i> The Company
assesses whether losses on long term purchase commitments should be
accrued. Losses that are expected to arise from firm, <font style="WHITE-SPACE: nowrap">non-cancellable,</font> commitments for the
future purchases of inventory items are recognized unless
recoverable. The recognized loss on purchase commitments is reduced
as inventory items are purchased. Changes in estimates are recorded
in the relevant period in (gain) loss on purchase commitments.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During the year ended December 31, 2015, the Company recorded
a loss on purchase commitments amounting to $116.2 million
offset by $50 million expected to be recovered from Sanofi,
primarily due to a long term purchase commitment for insulin raw
materials. During the year ended December 31, 2016, the
balance was adjusted for the recovery received from Sanofi, current
purchases on the contracts and a reduction in the recognized loss
related to amendments to purchase contracts. No new contracts were
identified in 2016 requiring a new loss on purchase commitment
accrual.</p>
</div>
653000
2901000
171965000
309000
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:8%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Wholesaler Distribution Fees —</i> The Company pays
distribution fees to certain wholesale distributors based on
contractually determined rates. The Company accrues the
distribution fees on shipment to the respective wholesale
distributors and recognizes the distribution fees as a reduction of
revenue in the same period the related revenue is recognized.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i><font style="white-space:nowrap"><font style="white-space:nowrap">Gross-to-net</font></font> Adjustments
—</i> Estimated <font style="white-space:nowrap"><font style="white-space:nowrap">gross-to-net</font></font> adjustments for
Afrezza include wholesaler distribution fees, prompt pay discounts,
estimated rebates and patient discount and <font style="white-space:nowrap">co-pay</font> assistance programs, and are
based on estimated amounts owed or to be claimed on the related
sales. These estimates take into consideration the terms of the
Company’s agreements with its customers and the levels of
inventory within the distribution and retail channels that may
result in future rebates or discounts taken. In certain cases, such
as patient support programs, the Company recognizes the cost of
patient discounts as a reduction of revenue based on estimated
utilization. If actual future results vary, the Company may need to
adjust these estimates, which could have an effect on product
revenue in the period of adjustment. The Company records product
sales deductions in the consolidated statements of operations at
the time product revenue is recognized. At December 31, 2016,
year to date total <font style="white-space:nowrap"><font style="white-space:nowrap">gross-to-net</font></font> adjustments were
approximately $0.8 million, which represents 30% of gross
revenue from product sales.</p>
</div>
<div>
<p style="margin-top:6pt; margin-bottom:0pt; margin-left:8%; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Patient Discount and <font style="white-space:nowrap">Co-Pay</font> Assistance Programs —</i>
The Company offers discount card programs to patients for Afrezza
in which patients receive discounts on their prescriptions or a
reduction in their <font style="white-space:nowrap">co-pay</font>
amounts that are reimbursed by the Company. The Company estimates
the total amount that will be redeemed based on levels of inventory
in the distribution and retail channels and recognizes the discount
as a reduction of revenue in the same period the related revenue is
recognized.</p>
</div>
40566000
17294000
0
1800000
<div>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
<i>Accounts Receivable and Allowance for Doubtful Accounts</i>
— Accounts receivable are recorded at the invoiced amount and
are not interest bearing. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. The Company makes
ongoing assumptions relating to the collectability of its accounts
receivable in its calculation of the allowance for doubtful
accounts. As of December 31, 2016 and 2015, there was no
allowance for doubtful accounts.</p>
</div>
50000000
898000
32971000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
<i>Revenue Recognition — Revenue — Bulk Insulin Sales
—</i> In 2016, revenue from bulk insulin sales was recognized
after delivery and customer acceptance of the bulk insulin. When
the accounting requirements for revenue recognition of bulk insulin
sales are not met, the Company defers recognition of revenue by
recording deferred revenue on the balance sheet until such time
that all criteria are met.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Deferred revenue includes $1.8 million received from a sale of
surplus bulk insulin to a third party that was delivered prior to,
but accepted after, December 31, 2016. No deferred cost was
recognized related to this sale because the inventory was written
off on December 31, 2015.</p>
</div>
P36M
P4Y
0.145
257000
600000
17300000
0
700000
0.11
0.120
1.11
0.20
2024
2018
800000
0.30
17500000
P12M
P6M
10200000
19400000
25000000
25000000
150000000
2020-01-05
The interest rate will increase to the one-year LIBOR rate calculated on the date of the initial advance or in effect on the date of default, whichever is greater, plus 5% per annum.
0.05
268000
2017-04
P90D
105000000
200000000
P12M
0.35
-64900000
0.65
150000000
172000000
400000
400000
P4Y
2016-07-01
1722000
35000
2019-12-09
50000000
2016-11-09
On or after the date that is one year following the original issue date of the 2018 notes, the Company will have the right to redeem for cash all or part of the 2018 notes if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for 20 or more trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date of the redemption notice. The redemption price will equal the sum of 100% of the principal amount of the 2018 notes to be redeemed, plus accrued and unpaid interest.
2018-08-15
234000
1800000
-7000
-165000
424000
5135000
464000
12750000
-2037000
49515000
-4000
131000
51000
55000
7000
2000
3000
485000
9709000
125664000
5135000
12800000
0
-5400000
814561
5530256
702867
9740597
0.00
0.10
1.18
0.0110
Monte Carlo valuation pricing model
P1Y4M24D
5400000
3131000
400000
695000
400000
1309000
700000
700000
600000
P40Y
P39Y
P15Y
P3Y
P40Y
P5Y
P3Y
P10Y
P5Y
P10Y
P5Y9M26D
P5Y1M17D
560000
2421000
1475000
1266000
0.25
2017-12
3400000
5300000
79783000
-0.38
-30658000
5800000
10000000
80203000
-0.36
-28910000
-0.29
85771000
85771000
-0.29
-24873000
-0.33
91061000
91061000
-0.33
-29959000
83862000
-3.30
-277020000
242700000
0.56
96510000
95676000
0.56
12404000
53976000
72000000
10200000
81039000
-0.39
-31857000
1.31
96548000
95627000
1.32
162354000
126520000
161800000
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2016-07-01
2016-09-30
0000899460
2016-07-01
2016-09-30
0000899460
2015-07-01
2015-09-30
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2016-10-01
2016-12-31
0000899460
2016-10-01
2016-12-31
0000899460
2015-10-01
2015-12-31
0000899460
2016-04-01
2016-06-30
0000899460
2016-01-01
2016-03-31
0000899460
2015-04-01
2015-06-30
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2015-01-01
2015-03-31
0000899460
2015-01-01
2015-03-31
0000899460
mnkd:BeforeAmendmentMemberus-gaap:ScenarioForecastMember
2016-10-01
2018-10-01
0000899460
us-gaap:ScenarioForecastMember
2016-10-01
2018-10-01
0000899460
us-gaap:ShareBasedCompensationAwardTrancheOneMember
2016-01-01
2016-12-31
0000899460
mnkd:TwentySixteenRestructuringPlanMember
2016-01-01
2016-12-31
0000899460
mnkd:TwentyFifteenRestructuringPlanMember
2016-01-01
2016-12-31
0000899460
us-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
us-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
mnkd:FurnitureFixturesAndOfficeEquipmentMemberus-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
mnkd:FurnitureFixturesAndOfficeEquipmentMemberus-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
mnkd:ComputerEquipmentAndSoftwareMember
2016-01-01
2016-12-31
0000899460
us-gaap:BuildingImprovementsMemberus-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
us-gaap:BuildingImprovementsMemberus-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
us-gaap:MachineryAndEquipmentMemberus-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
us-gaap:MachineryAndEquipmentMemberus-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
us-gaap:BuildingMemberus-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
us-gaap:BuildingMemberus-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
mnkd:AssetHeldForSaleMember
2016-01-01
2016-12-31
0000899460
mnkd:PropertyAndEquipmentImpairmentMember
2016-01-01
2016-12-31
0000899460
us-gaap:ResearchAndDevelopmentExpenseMembermnkd:TwentySixteenRestructuringPlanMember
2016-01-01
2016-12-31
0000899460
us-gaap:ResearchAndDevelopmentExpenseMember
2016-01-01
2016-12-31
0000899460
us-gaap:CostOfSalesMembermnkd:TwentySixteenRestructuringPlanMember
2016-01-01
2016-12-31
0000899460
us-gaap:CostOfSalesMember
2016-01-01
2016-12-31
0000899460
us-gaap:SellingGeneralAndAdministrativeExpensesMembermnkd:TwentySixteenRestructuringPlanMember
2016-01-01
2016-12-31
0000899460
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2016-01-01
2016-12-31
0000899460
mnkd:ClassAWarrantsMember
2016-01-01
2016-12-31
0000899460
us-gaap:WarrantMember
2016-01-01
2016-12-31
0000899460
us-gaap:RestrictedStockMember
2016-01-01
2016-12-31
0000899460
us-gaap:EmployeeStockOptionMember
2016-01-01
2016-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMember
2016-01-01
2016-12-31
0000899460
mnkd:WarrantLiabilityMember
2016-01-01
2016-12-31
0000899460
mnkd:EmployeeMember
2016-01-01
2016-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2016-01-01
2016-12-31
0000899460
us-gaap:CommonStockMember
2016-01-01
2016-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2016-01-01
2016-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2016-01-01
2016-12-31
0000899460
mnkd:ValenciaMember
2016-01-01
2016-12-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMember
2016-01-01
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMember
2016-01-01
2016-12-31
0000899460
mnkd:ReceptorLifeScienceIncMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:OperatingLossSharingMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
us-gaap:MinimumMembermnkd:LoanArrangementMemberus-gaap:PrincipalOwnerMember
2016-01-01
2016-12-31
0000899460
us-gaap:MaximumMembermnkd:LoanArrangementMemberus-gaap:PrincipalOwnerMember
2016-01-01
2016-12-31
0000899460
mnkd:LoanArrangementMemberus-gaap:PrincipalOwnerMember
2016-01-01
2016-12-31
0000899460
mnkd:SubleaseAgreementMembermnkd:AlfredMannFoundationMember
2016-01-01
2016-12-31
0000899460
mnkd:LetterOfAgreementMembermnkd:RelatedPartyDebtMemberus-gaap:LondonInterbankOfferedRateLIBORMember
2016-01-01
2016-12-31
0000899460
mnkd:LetterOfAgreementMembermnkd:RelatedPartyDebtMember
2016-01-01
2016-12-31
0000899460
mnkd:AmendedAgreementMemberus-gaap:PrincipalOwnerMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:UpFrontPaymentMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:MilestonePaymentOneMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:MilestonePaymentTwoMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:InsulinMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
mnkd:InsulinMember
2016-01-01
2016-12-31
0000899460
us-gaap:ProductMemberus-gaap:MinimumMember
2016-01-01
2016-12-31
0000899460
us-gaap:ProductMemberus-gaap:MaximumMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:ProductMembermnkd:CollaborationAndLicenseAgreementMember
2016-01-01
2016-12-31
0000899460
us-gaap:ProductMember
2016-01-01
2016-12-31
0000899460
us-gaap:InternalRevenueServiceIRSMember
2016-01-01
2016-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Membermnkd:SeniorConvertibleNotesDueTwoThousandEighteenMemberus-gaap:MarketApproachValuationTechniqueMember
2016-01-01
2016-12-31
0000899460
us-gaap:FairValueInputsLevel3Membermnkd:TwoThousandNineteenNotesMemberus-gaap:IncomeApproachValuationTechniqueMember
2016-01-01
2016-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:FairValueInputsLevel3Memberus-gaap:IncomeApproachValuationTechniqueMember
2016-01-01
2016-12-31
0000899460
us-gaap:FairValueInputsLevel3Member
2016-01-01
2016-12-31
0000899460
us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember
2016-01-01
2016-12-31
0000899460
mnkd:TwoThousandEighteenNotesMember
2016-01-01
2016-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:IncomeApproachValuationTechniqueMember
2016-01-01
2016-12-31
0000899460
us-gaap:RestrictedStockMember
2016-01-01
2016-12-31
0000899460
us-gaap:EmployeeStockOptionMember
2016-01-01
2016-12-31
0000899460
2016-01-01
2016-12-31
0000899460
mnkd:SubleaseAgreementMembermnkd:AlfredMannFoundationMember
2014-02-01
2015-01-31
0000899460
us-gaap:MinimumMember
2014-01-01
2014-12-31
0000899460
us-gaap:MaximumMember
2014-01-01
2014-12-31
0000899460
us-gaap:ResearchAndDevelopmentExpenseMember
2014-01-01
2014-12-31
0000899460
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2014-01-01
2014-12-31
0000899460
us-gaap:WarrantMember
2014-01-01
2014-12-31
0000899460
us-gaap:RestrictedStockMember
2014-01-01
2014-12-31
0000899460
us-gaap:EmployeeStockOptionMember
2014-01-01
2014-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMember
2014-01-01
2014-12-31
0000899460
us-gaap:IntellectualPropertyMember
2014-01-01
2014-12-31
0000899460
mnkd:EmployeeMember
2014-01-01
2014-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2014-01-01
2014-12-31
0000899460
us-gaap:CommonStockMember
2014-01-01
2014-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2014-01-01
2014-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2014-01-01
2014-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMember
2014-01-01
2014-12-31
0000899460
mnkd:SubleaseAgreementMembermnkd:AlfredMannFoundationMember
2014-01-01
2014-12-31
0000899460
mnkd:TwoThousandFifteenNotesMember
2014-01-01
2014-12-31
0000899460
mnkd:SanofiAventisMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2014-01-01
2014-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheTwoMember
2014-01-01
2014-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheOneMember
2014-01-01
2014-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheThreeMember
2014-01-01
2014-12-31
0000899460
2014-01-01
2014-12-31
0000899460
mnkd:TwentyFifteenRestructuringPlanMember
2015-01-01
2015-12-31
0000899460
us-gaap:MinimumMember
2015-01-01
2015-12-31
0000899460
us-gaap:MaximumMember
2015-01-01
2015-12-31
0000899460
mnkd:DanburyFacilityMember
2015-01-01
2015-12-31
0000899460
us-gaap:ResearchAndDevelopmentExpenseMembermnkd:TwentyFifteenRestructuringPlanMember
2015-01-01
2015-12-31
0000899460
us-gaap:ResearchAndDevelopmentExpenseMember
2015-01-01
2015-12-31
0000899460
us-gaap:CostOfSalesMembermnkd:TwentyFifteenRestructuringPlanMember
2015-01-01
2015-12-31
0000899460
us-gaap:SellingGeneralAndAdministrativeExpensesMembermnkd:TwentyFifteenRestructuringPlanMember
2015-01-01
2015-12-31
0000899460
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2015-01-01
2015-12-31
0000899460
exch:XTAE
2015-01-01
2015-12-31
0000899460
us-gaap:WarrantMember
2015-01-01
2015-12-31
0000899460
us-gaap:RestrictedStockMember
2015-01-01
2015-12-31
0000899460
us-gaap:EmployeeStockOptionMember
2015-01-01
2015-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMember
2015-01-01
2015-12-31
0000899460
mnkd:WarrantLiabilityMember
2015-01-01
2015-12-31
0000899460
mnkd:ConsultantMember
2015-01-01
2015-12-31
0000899460
mnkd:EmployeeMember
2015-01-01
2015-12-31
0000899460
us-gaap:EmployeeSeveranceMemberus-gaap:ExecutiveOfficerMember
2015-01-01
2015-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2015-01-01
2015-12-31
0000899460
exch:XTAEus-gaap:CommonStockMember
2015-01-01
2015-12-31
0000899460
us-gaap:CommonStockMember
2015-01-01
2015-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2015-01-01
2015-12-31
0000899460
exch:XTAEus-gaap:AdditionalPaidInCapitalMember
2015-01-01
2015-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2015-01-01
2015-12-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2015-01-01
2015-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMember
2015-01-01
2015-12-31
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2015-01-01
2015-12-31
0000899460
mnkd:SanofiAventisMembermnkd:OperatingLossSharingMembermnkd:CollaborationAndLicenseAgreementMember
2015-01-01
2015-12-31
0000899460
us-gaap:FairValueInputsLevel3Member
2015-01-01
2015-12-31
0000899460
us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember
2015-01-01
2015-12-31
0000899460
mnkd:TwoThousandEighteenNotesMember
2015-01-01
2015-12-31
0000899460
mnkd:TwoThousandFifteenNotesMember
2015-01-01
2015-12-31
0000899460
2015-01-01
2015-12-31
0000899460
exch:XTAE
2015-10-01
2015-11-01
0000899460
mnkd:SanofiAventisMemberus-gaap:PutOptionMemberus-gaap:SubsequentEventMember
2017-01-01
2017-01-31
0000899460
us-gaap:PrincipalOwnerMember
2013-10-01
2013-10-31
0000899460
us-gaap:PrincipalOwnerMember
2007-10-01
2007-10-31
0000899460
2004-08-01
2004-08-31
0000899460
us-gaap:MaximumMember
2004-03-01
2004-03-31
0000899460
mnkd:EmployeeStockPurchasePlansMember
2004-03-01
2004-03-31
0000899460
2004-03-01
2004-03-31
0000899460
mnkd:TwentySixteenRestructuringPlanMember
2016-09-01
2016-09-30
0000899460
mnkd:ClassAWarrantsMember
2016-05-03
2016-05-31
0000899460
mnkd:ClassBWarrantsMember
2016-05-03
2016-05-31
0000899460
mnkd:DirectOfferingMember
2016-05-03
2016-05-31
0000899460
mnkd:RegisteredOfferingMember
2016-05-03
2016-05-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-07-29
2015-08-10
0000899460
us-gaap:SubsequentEventMember
2017-03-01
2017-03-01
0000899460
us-gaap:LandBuildingsAndImprovementsMemberstpr:CAus-gaap:SubsequentEventMember
2017-02-17
2017-02-17
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2016-02-10
2016-02-10
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2013-12-31
2013-12-31
0000899460
exch:XTAE
2016-11-09
2016-11-09
0000899460
mnkd:AventisubLlcMember
2016-11-09
2016-11-09
0000899460
mnkd:CollaborationAndLicenseAgreementMember
2016-11-09
2016-11-09
0000899460
2015-11-16
2015-11-16
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-09-30
2015-09-30
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-08-17
2015-08-17
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2015-08-10
2015-08-10
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-07-28
2015-07-28
0000899460
mnkd:BeforeAmendmentMember
2014-07-31
2014-07-31
0000899460
us-gaap:IntellectualPropertyMember
2014-07-18
2014-07-18
0000899460
mnkd:ClassAWarrantsMember
2016-05-12
2016-05-12
0000899460
us-gaap:SubsequentEventMember
2017-03-16
2017-03-16
0000899460
us-gaap:LandBuildingsAndImprovementsMemberstpr:CAus-gaap:SubsequentEventMember
2017-01-06
2017-01-06
0000899460
mnkd:ReceptorLifeScienceIncMember
2016-12-30
2016-12-30
0000899460
mnkd:NasdaqStockMarketMember
2016-09-14
2016-09-14
0000899460
mnkd:CollaborationAndLicenseAgreementMember
2016-01-04
2016-01-04
0000899460
mnkd:WarrantLiabilityMember
2012-02-08
2012-02-08
0000899460
mnkd:RelatedPartyMember
2012-02-08
2012-02-08
0000899460
2012-02-08
2012-02-08
0000899460
us-gaap:SubsequentEventMember
2017-03-01
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2014-12-31
0000899460
us-gaap:CommonStockMember
2014-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2014-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2014-12-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2014-12-31
0000899460
2014-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2013-12-31
0000899460
us-gaap:CommonStockMember
2013-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2013-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2013-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2013-12-31
0000899460
2013-12-31
0000899460
exch:XTAE
2016-11-09
0000899460
2016-09-30
0000899460
2016-06-30
0000899460
2015-11-16
0000899460
exch:XTAE
2015-11-01
0000899460
2015-10-23
0000899460
mnkd:CollaborationAndLicenseAgreementMember
2014-09-23
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-08-14
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandFifteenMember
2015-08-10
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2015-08-10
0000899460
us-gaap:IntellectualPropertyMember
2014-07-18
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMemberus-gaap:MaximumMember
2013-07-01
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2013-07-01
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2010-08-18
0000899460
2004-08-31
0000899460
mnkd:ClassAWarrantsMember
2016-05-12
0000899460
mnkd:ClassBWarrantsMember
2016-05-12
0000899460
mnkd:SubleaseAgreementMembermnkd:AlfredMannFoundationMember
2015-05-31
0000899460
mnkd:EquityIncentivePlanTwentyThirteenMember
2013-05-23
0000899460
mnkd:EmployeeStockPurchasePlansMember
2004-03-31
0000899460
2017-03-10
0000899460
mnkd:ConsultantMember
2016-12-31
0000899460
mnkd:ShareBasedCompensationAwardTrancheFourMember
2016-12-31
0000899460
us-gaap:ShareBasedCompensationAwardTrancheTwoMember
2016-12-31
0000899460
us-gaap:ShareBasedCompensationAwardTrancheOneMember
2016-12-31
0000899460
us-gaap:ShareBasedCompensationAwardTrancheThreeMember
2016-12-31
0000899460
mnkd:TwentySixteenRestructuringPlanMember
2016-12-31
0000899460
mnkd:TwentyFifteenRestructuringPlanMember
2016-12-31
0000899460
mnkd:FurnitureFixturesAndOfficeEquipmentMember
2016-12-31
0000899460
mnkd:ComputerEquipmentAndSoftwareMember
2016-12-31
0000899460
us-gaap:LandMember
2016-12-31
0000899460
us-gaap:BuildingImprovementsMember
2016-12-31
0000899460
us-gaap:MachineryAndEquipmentMember
2016-12-31
0000899460
us-gaap:ConstructionInProgressMember
2016-12-31
0000899460
us-gaap:BuildingMember
2016-12-31
0000899460
mnkd:ThirdPartyLogisticsMember
2016-12-31
0000899460
mnkd:ClassAWarrantsMember
2016-12-31
0000899460
mnkd:WarrantLiabilityMember
2016-12-31
0000899460
us-gaap:CarryingReportedAmountFairValueDisclosureMembermnkd:WarrantLiabilityMember
2016-12-31
0000899460
us-gaap:CarryingReportedAmountFairValueDisclosureMember
2016-12-31
0000899460
us-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:WarrantLiabilityMember
2016-12-31
0000899460
us-gaap:EstimateOfFairValueFairValueDisclosureMember
2016-12-31
0000899460
us-gaap:SupplyCommitmentMember
2016-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2016-12-31
0000899460
us-gaap:CommonStockMember
2016-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2016-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2016-12-31
0000899460
us-gaap:CarryingReportedAmountFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2016-12-31
0000899460
us-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2016-12-31
0000899460
mnkd:TwoThousandNineteenNotesMember
2016-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2016-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2016-12-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:FacilityAgreementMembermnkd:TwoThousandNineteenNotesMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TwoThousandNineteenNotesMember
2016-12-31
0000899460
mnkd:ReceptorLifeScienceIncMember
2016-12-31
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2016-12-31
0000899460
mnkd:LoanArrangementMemberus-gaap:PrincipalOwnerMember
2016-12-31
0000899460
mnkd:LoanArrangementMember
2016-12-31
0000899460
mnkd:TwoThousandFourNonEmployeeDirectorsStockOptionPlanMember
2016-12-31
0000899460
mnkd:EquityIncentivePlanTwentyThirteenMember
2016-12-31
0000899460
mnkd:TwoThousandFourEquityIncentivePlanMember
2016-12-31
0000899460
mnkd:EmployeeStockPurchasePlansMember
2016-12-31
0000899460
us-gaap:StateAndLocalJurisdictionMember
2016-12-31
0000899460
us-gaap:InternalRevenueServiceIRSMember
2016-12-31
0000899460
us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:WarrantLiabilityMember
2016-12-31
0000899460
us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2016-12-31
0000899460
us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2016-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2016-12-31
0000899460
us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember
2016-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember
2016-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMembermnkd:DanburyFacilityMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMember
2016-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2016-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:FairValueInputsLevel3Member
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:FacilityAgreementMembermnkd:TrancheBMembermnkd:TwoThousandNineteenNotesMemberus-gaap:MinimumMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheBMembermnkd:TwoThousandNineteenNotesMemberus-gaap:MinimumMember
2016-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheBMembermnkd:TwoThousandNineteenNotesMember
2016-12-31
0000899460
us-gaap:CertificatesOfDepositMember
2016-12-31
0000899460
us-gaap:RestrictedStockUnitsRSUMember
2016-12-31
0000899460
us-gaap:EmployeeStockOptionMember
2016-12-31
0000899460
2016-12-31
0000899460
mnkd:ClassAWarrantsMemberus-gaap:MaximumMember
2016-05-31
0000899460
mnkd:ClassBWarrantsMemberus-gaap:MaximumMember
2016-05-31
0000899460
2016-05-31
0000899460
mnkd:TwentyFifteenRestructuringPlanMember
2015-12-31
0000899460
mnkd:FurnitureFixturesAndOfficeEquipmentMember
2015-12-31
0000899460
mnkd:ComputerEquipmentAndSoftwareMember
2015-12-31
0000899460
us-gaap:LandMember
2015-12-31
0000899460
us-gaap:BuildingImprovementsMember
2015-12-31
0000899460
us-gaap:MachineryAndEquipmentMember
2015-12-31
0000899460
us-gaap:ConstructionInProgressMember
2015-12-31
0000899460
us-gaap:BuildingMember
2015-12-31
0000899460
us-gaap:CarryingReportedAmountFairValueDisclosureMember
2015-12-31
0000899460
us-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
mnkd:DeficitAccumulatedDuringDevelopmentStageMember
2015-12-31
0000899460
us-gaap:CommonStockMember
2015-12-31
0000899460
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2015-12-31
0000899460
us-gaap:AdditionalPaidInCapitalMember
2015-12-31
0000899460
us-gaap:CarryingReportedAmountFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2015-12-31
0000899460
us-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2015-12-31
0000899460
mnkd:TwoThousandNineteenNotesMember
2015-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2015-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2015-12-31
0000899460
mnkd:SeniorConvertibleNotesDueTwoThousandEighteenMember
2015-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember
2015-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TwoThousandNineteenNotesMember
2015-12-31
0000899460
mnkd:SanofiAventisMembermnkd:CollaborationAndLicenseAgreementMember
2015-12-31
0000899460
mnkd:LoanArrangementMember
2015-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:ProductMembermnkd:CollaborationAndLicenseAgreementMember
2015-12-31
0000899460
us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:FacilityFinancingObligationMember
2015-12-31
0000899460
us-gaap:ConvertibleDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMembermnkd:SeniorConvertibleNotesMember
2015-12-31
0000899460
mnkd:SanofiAventisMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
us-gaap:FairValueInputsLevel3Member
2015-12-31
0000899460
mnkd:SanofiAventisMembermnkd:MortgageLoanMember
2015-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember
2015-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:MilestoneRightsLiabilityMembermnkd:TwoThousandNineteenNotesMember
2015-12-31
0000899460
mnkd:MilestoneRightsLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember
2015-12-31
0000899460
mnkd:DeerfieldManagementCompanyLpMembermnkd:TrancheBMembermnkd:TwoThousandNineteenNotesMember
2015-12-31
0000899460
us-gaap:CertificatesOfDepositMember
2015-12-31
0000899460
2015-12-31
0000899460
mnkd:UnderwritersMember
2012-02-08
0000899460
mnkd:PublicMember
2012-02-08
0000899460
mnkd:WarrantLiabilityMember
2012-02-08
0000899460
2012-02-08
shares
iso4217:USD
mnkd:Right
iso4217:USD
shares
iso4217:USD
iso4217:EUR
pure
utr:sqft
utr:D
mnkd:Employee
mnkd:asset_group