Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Noþ

As of October 23, 2009,22, 2010, there were 112,806,245124,769,494 shares of the registrant’s common stock, $.01 par value per share, outstanding.

The accompanying unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries (the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest audited annual financial statements. The audited statements for the year ended December 31, 20082009 are included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 20082009 filed with the SEC on February 27, 2009March 16, 2010 (the “Annual Report”).

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three and nine months ended September 30, 20092010 may not be indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates or assumptions. The more significant estimates reflected in these accompanying financial statements involve accrued expenses, the valuation of stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

Business ——The Company is a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for diseases such as diabetes and cancer. The Company’s lead product candidate, AFRESA®,AFREZZA, is an ultra rapid-acting insulin. In March 2009, the Company submitted a new drug application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) requesting approval of AFRESAAFREZZA for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia. TheIn March 2010, the Company received a Complete Response letter regarding this NDA from the FDA, requesting additional information. In July 2010, the FDA accepted the Company’s NDA for filing in May 2009. AFRESAreply to the Complete Response letter and set a target action date of December 29, 2010. AFREZZA consists of the Company’s proprietary Technosphere particles onto which insulin molecules are loaded. These loaded particles are then aerosolized and inhaled deep into the lung using the Company’s AFRESAAFREZZA inhaler.

Basis of Presentation —The Company is considered to be in the development stage as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, and raising capital. Since its inception through September 30, 2009,2010, the Company has reported accumulated net losses of $1.5$1.7 billion and accumulated deficit in stockholders’ equity of $2.4 million, which include a goodwill impairment charge of $151.4 million, and cumulative negative cash flow from operations of $1.2$1.3 billion. It is costly to develop therapeutic products and conduct clinical trials for these products. At September 30, 20092010 the Company’s capital resources consisted of cash, cash equivalents, and marketable securities of $56.6$98.0 million (including a $2.0 million certificate of deposit held as collateral for foreign exchange hedging instruments) and $200.0$98.0 million of available borrowings under the loan agreement with The Mann Group LLC (“The Mann Group”), an entity controlled by the Company’s principal shareholderstockholder (see Note 11)12 — Related-party arrangements, of the Notes to the accompanying financial statements). On August 18, 2010, the Company completed a Rule 144A offering of $100.0 million aggregate principal amount of 5.75% Senior Convertible Notes due 2015 resulting in net proceeds of approximately $95.8 million. Based upon the Company’s current expectations, management believes the Company’s existing capital resources, excluding any potential proceeds to the Company from its common stock purchase agreement with Seaside 88, LP (see Note 9 — Common and preferred stock, of the Notes to the accompanying financial statements), will enable it to continue planned operations through at leastinto the endthird quarter of 2010.2011. However, the Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. Accordingly,If the Company expects that it will need to raiseis not successful in raising additional capital eitherthrough equity or debt financing or entering a business collaboration, the Company may be required to reduce expenses through the saledelay, reduction or curtailment of equity and/its projects, including AFREZZA development activities, or debt securities, the entry into a strategic business collaboration with a pharmaceutical company or the establishmentfurther reduction of other fundingcosts for facilities in orderand administration, and there will be substantial doubt about its ability to continue the development and commercialization of AFRESA and other product candidates and to support its other ongoing activities.as a going concern.

Fair Value of Financial Instruments ——The carrying amounts of financial instruments, which include cash equivalents, marketable securities and accounts payable, approximate their fair values due to their relatively short maturities. The fair value of the note payable to an entity controlled by the Company’s principal shareholderThe Mann Group cannot be reasonably estimated as the Company would not be able to obtain a similar credit arrangement in the current economic environment. The senior convertible notes due 2013 had a carrying value of $112.6

Total stock-based compensation expense recognized in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 20092010 and 20082009 was as follows (in thousands):

Property and equipment — net consist of the following (dollar amounts in thousands):

In connection with the sale of common stock in the private placement which closed in August 2005, the Company concurrently issued warrants to purchase up to 3,426,000 shares of common stock at an exercise price of $12.228 per share. These warrants became exercisable in February 2006 and expire inexpired on August 5, 2010. During the nine months ended September 30, 2009,2010, no warrants were exercised. As of September 30, 2009, warrants to purchase 2,882,873 shares of common stock remained outstanding.

indebtedness under the note as described below, to provide that The Mann Group may require the Company to prepay upthe note in an amount not to exceed $200.0 million in advances that have been outstanding for at least 12 months. If(less the lender exercises this right, the Company will have until the earlieramount of 180 days after the lender providescancelled indebtedness) upon 90 days’ prior written notice or on December 31, 2012, whichever is earlier, and to limit the Company’s ability to borrow and reborrow under the note through December 31, 2011 to prepayan amount equal to $350.0 million less the amount of cancelled indebtedness. The Mann Group has agreed not to exercise its prepayment right if such advances.prepayment would require the use of working capital resources to repay the loan. In the event of a default, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at the lender’sThe Mann Group’s option, and 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. AnyAll borrowings under the loan arrangement will beare unsecured. The loan arrangement contains no financial covenants. There are no warrants associated with the loan arrangement, nor are advances convertible into the Company’s common stock.

On December 12, 2006,August 18, 2010, the Company completed ana Rule 144A offering of $115.0$100.0 million aggregate principal amount of 3.75%5.75% Senior Convertible Notes due 2013 (the “Notes”).2015. The Notes due 2015 are governed by the terms of an indenture dated as of November 1, 2006 and a First Supplemental Indenture, dated as of December 12, 2006.August 24, 2010. The Notes due 2015 bear interest at the rate of 3.75%5.75% per year on the principal amount, of the Notes, payable in cash semi-annually in arrears on JuneFebruary 15 and DecemberAugust 15 of each year, beginning JuneFebruary 15, 2007.2011. As of September 30, 2009 and December 31, 2008,2010, the Company had accrued interest of $1.3$0.4 million and $0.2 million, respectively, related to the Notes.Notes due 2015. The Notes due 2015 are general, unsecured, senior obligations of the Company and effectively rank junior in right of payment to all of the Company’s secured debt, to the extent of the value of the assets securing such debt, and to the debt and all other liabilities of the Company’s subsidiaries. The maturity date of the Notes due 2015 is DecemberAugust 15, 20132015 and payment is due in full on that date

price of approximately $22.47$6.80 per share, subject to adjustment. Except in certain circumstances, if the Company undergoes a fundamental change: (1) the Company will pay a make-whole premium on the Notes due 2015 converted in connection with a fundamental change by increasing the conversion rate on such Notes, which amount, if any, will be based on the Company’s common stock price and the effective date of the fundamental change, and (2) each holder of Notes due 2015 will have the option to require the Company to repurchase all or any portion of such holder’s Notes at a repurchase price of 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any. The Company may elect to redeem some or all of the Notes due 2015 if the closing stock price has equaled 150% of the conversion price for at least 20 of the 30 consecutive trading days ending on the trading day before the Company’s redemption notice. The redemption price will equal 100% of the principal amount of the Notes due 2013 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a make-whole payment equal to the sum of the present values of the remaining scheduled interest payments through and including August 15, 2015 (other than interest accrued up to, but excluding, the redemption date). The Company will be obligated to make the make-whole payment on all the Notes due 2015 called for redemption and converted during the period from the date the Company mailed the notice of redemption to and including the redemption date. The Company may elect to make the make-whole payment in cash or shares of its common stock, subject to certain limitations. The Company incurred approximately $4.2 million in issuance costs which are recorded as an offset to the Notes due 2015 in the accompanying condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the Notes due 2015.

On December 12, 2006, the Company completed a registered offering of $115.0 million aggregate principal amount of 3.75% Senior Convertible Notes due 2013. The Notes due 2013 are governed by the terms of an indenture dated as of November 1, 2006 and a First Supplemental Indenture, dated as of December 12, 2006. The Notes due 2013 bear interest at the rate of 3.75% per year on the principal amount, payable in cash semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2007. As of September 30, 2010 and December 31, 2009, the Company had accrued interest of $1.5 million and $0.2 million, respectively, related to the Notes due 2013. The Notes due 2013 are general, unsecured, senior obligations of the Company and effectively rank junior in right of payment to all of the Company’s secured debt, to the extent of the value of the assets securing such debt, and to the debt and all other liabilities of the Company’s subsidiaries. The maturity date of the Notes due 2013 is December 15, 2013 and payment is due in full on that date for unconverted securities. Holders of the Notes due 2013 may convert, at any time prior to the close of business on the business day immediately preceding the stated maturity date, any outstanding principal into shares of the Company’s common stock at an initial conversion rate of 44.5002 shares per $1,000 principal amount, which is equal to a conversion price of approximately $22.47 per share, subject to adjustment. Except in certain circumstances, if the Company undergoes a fundamental change: (1) the Company will pay a make-whole premium on the Notes due 2013 converted in connection with a fundamental change by increasing the conversion rate on such Notes, which amount, if any, will be based on the Company’s common stock price and the effective date of the fundamental change, and (2) each holder of Notes due 2013 will have the option to require the Company to repurchase all or any portion of such holder’s Notes at a repurchase price of 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any. The Company incurred approximately $3.7 million in issuance costs which are recorded as an offset to the Notes due 2013 in the accompanying condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the Notes.Notes due 2013.

Amortization of debt issuance expense in connection with the Notes offerings during the three and nine months ended September 30, 20092010 and 20082009 was as follows (in thousands):

As discussed in Note 14 to the financial statements in the Company’s Annual Report, management of the Company has concluded, in accordance with applicable accounting standards, that it is more likely than not that the Company may not realize the benefit of its deferred tax assets. Accordingly, net deferred tax assets have been fully reserved.

In July 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109or ASC 740-10-25 (“FIN 48”), which Income Taxes Recognitionclarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48This guidance seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company was subject to the provisions of FIN 48 as of January 1, 2007. 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 reserves for uncertain income tax positions have been recorded pursuant to FIN 48. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The Company did not record a cumulative effect adjustment related to the adoption of FIN 48.this guidance. Tax years since 19921993 remain subject to examination by the major tax jurisdictions in which the Company is subject to tax.

On August 5, 2009,October 20, 2010, the Company issued and sold 8.4 million700,000 shares of common stock comprisedto Seaside for net proceeds of 1.0$4.3 million in accordance with the Company’s common stock purchase agreement with Seaside. Concurrently with the Seaside closing, the Company issued and sold 700,000 shares to itsThe Mann Group for a total purchase price of $5.0 million, which was paid by the cancellation of outstanding principal stockholder at a price per shareunder the Company’s loan agreement with The Mann Group. As of $8.11October 20, 2010, the principal amount remaining under the loan agreement was $247.0 million, and 7.4 million shares to other investors at a price per share of $7.07. The sale of common stock resulted in aggregate net proceeds to the Company had $98.0 million of approximately $59.7 million after deducting offering expenses.available borrowings under the loan arrangement.

We are a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for diseases such as diabetes and cancer. Our lead product candidate, AFRESA,AFREZZA^® (insulin human [rDNA origin]) Inhalation Powder, is an ultra rapid-acting insulin.insulin that has completed Phase 3 clinical trials that evaluated its safety and efficacy in the treatment of diabetes. In March 2009, we submitted ana new drug application, or NDA, to the U.S. Food and Drug Administration, or FDA, requesting approval of AFRESAAFREZZA for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia. TheIn March 2010, we received a Complete Response letter regarding this NDA from the FDA, seeking additional information about AFREZZA. In July 2010, the FDA accepted our NDAreply to the Complete Response letter and set a target action date of December 29, 2010. Our focus until then will be to work closely with the FDA as it evaluates our next-generation delivery system and the other information that we provided in our resubmission. We will also initiate the validation of equipment recently installed in our Danbury, Connecticut manufacturing facility for filingfilling the cartridges used in May 2009.our next-generation inhaler. We believeexpect that these activities will continue into the performance characteristics, unique kinetics, convenience and easethird quarter of use of AFRESA may have the potential to change the way diabetes is treated.2011.

We are a development stage enterprise and have incurred significant losses since our inception in 1991. As of September 30, 2009,2010, we have incurred a cumulative net loss of $1.5$1.7 billion and accumulateda stockholders’ deficit in stockholders’ equity of $2.4$181.4 million. To date, we have not generated any product revenues and have funded our operations primarily through the sale of equity securities and convertible debt securities.securities and borrowings under a related party loan. As discussed below in “Liquidity and Capital Resources,” if we are unable to obtain additional funding in the future, there willwould be substantial doubt about our ability to continue as a going concern.

We have held extensive discussions with a number of pharmaceutical companies concerning a potential strategic business collaborationcollaborations for AFRESA. On October 6, 2009, we announced that we do not expect to complete a partnership until after we receive a response from the FDA regardingAFREZZA as well as our NDA for AFRESA. We cannot predict when, if ever, we could conclude an agreement with a partner.cancer immunotherapy and cancer drug programs. There can be no assurance that any such collaboration will be available to us on a timely basis or on acceptable terms, if at all.

We do not expect to record sales of any product prior to regulatory approval and commercialization of AFRESA.AFREZZA. We currently do not have the required approvals to market any of our product candidates, and we may not receive such approvals. We may not be profitable even if we succeed in commercializing any of our product candidates. There can be no assurance that we will obtain approval of AFREZZA by the FDA’s target date or that we will complete the installation and validation of equipment in our manufacturing facility on our anticipated timeline. We expect to make substantial expenditures and to incur additional operating losses for at least the next several years as we:

Our business is subject to significant risks, including but not limited to the risks inherent in our ongoing clinical trials and the regulatory approval process, our potential inability to enter into sales and marketing collaborations, to commercialize our lead product candidate in a timely manner, the results of our research and development efforts, competition from other products and technologies and uncertainties associated with obtaining and enforcing patent rights.

Our research and development expenses consist mainly of costs associated with the clinical trials of our product candidates that have not yet received regulatory approval for marketing and for which no alternative future use has been identified. This includes the salaries, benefits and stock-based compensation of research and development personnel, raw materials, such as insulin purchases, laboratory supplies and materials, facility costs, costs for consultants and related contract research, licensing fees, and depreciation of laboratory equipment. We track research and development costs by the type of cost incurred. We partially offset research and development expenses with the recognition of estimated amounts receivable from the State of Connecticut pursuant to a program under which we can exchange qualified research and development income tax credits for cash. Included in research and development expenses for the quarter ended September 30, 20092010 were purchases of insulin totaling $2.6$7.9 million.

Our research and development staff conducts our internal research and development activities, which include research, product development, clinical development, manufacturing and related activities. This staff is located in our facilities in Valencia, California; Paramus, New Jersey; and Danbury, Connecticut. We expense ourthe majority of research and development costs as we incur them.

Clinical development timelines, likelihood of success and total costs vary widely. We are focused primarily on advancing AFRESAAFREZZA through regulatory filings. Based on the results of preclinical studies, we plan to develop additional applications of our Technosphere technology. Additionally, we anticipate that we will continue to determine which research and development projects to pursue, and how much funding to direct to each project, on an ongoing basis, in response to the scientific and clinical success of each product candidate. We cannot be certain when or if any revenues from the commercialization of our products will commence.

At this time, due to the risks inherent in the clinical trial process and given the early stage of development of our product candidates other than AFRESA,AFREZZA, we are unable to estimate with any certainty the costs that we will incur in the continued development of our product candidates for commercialization. The costs required to complete the development of AFRESAAFREZZA will be largely dependent on the cost and efficiency of our manufacturing process and additionaldiscussions with the FDA requirements, if any.regarding its requirements.

Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for administrative, finance, business development, human resources, legal and information systems support personnel. In addition, general and administrative expenses include professional service fees and business insurance costs.

There have been no material changes to our critical accounting policies as described in Item 7 of our Annual Report.

During the three months ended September 30, 2009 and 2008,2010 we did not recognize any revenue. We recognized no revenue, and during the nine months ended September 30, 2009. During the nine months ended September 30, 2008,2010 we recognized $20,000 in revenue of $93,000 under a license agreement. We did not recognize any revenue during the same periods in 2009. We do not anticipate sales of any product prior to regulatory approval and commercialization of AFRESA.AFREZZA.

The following table providestables provide a comparison of the research and development expense categories for the three and nine months ended September 30, 20092010 and 20082009 (dollars in thousands):

Interest expense for the three and nine months ended September 30, 20092010 increased by $2.8$1.8 million and $6.6$4.6 million, respectively, as compared to the same period in the prior year primarily due to theincreased interest expense related to the greater amounts outstanding under the borrowing arrangement with an entity controlled by our principal stockholder (See Note 11 — Related-party loan arrangement,The Mann Group and the issuance of the Notes to the accompanying financial statements) and a decreasesenior convertible notes outstanding due 2015 in capitalized interest related to the completion of the Danbury, Connecticut plant expansion.August 2010.

We have funded our operations primarily through the sale of equity securities and convertible debt securities.securities and borrowings under a related party note.

In October 2007, we entered into a loan arrangement with our principal stockholder allowing us to borrow up to a total of $350.0 million Onmillion. In February 26, 2009, as a result of our principal stockholder being licensed as a finance lender under the California Finance Lenders Law, the promissory note underlying the loan arrangement was revised to reflect the lender as The Mann Group LLC, an entity controlled by our principal stockholder.Group. Interest will accrueaccrues on each outstanding advance at a fixed rate equal to the one-year LIBOR rate as reported by theWall Street Journalon the date of such advance plus 3% per annum and will beis payable quarterly in arrears. Principal repayment is due on December 31, 2011. At any time after January 1,On August 10, 2010, the lender can require usCompany amended and restated the promissory note to prepay up to $200.0 million in advances that have been outstanding for at least 12 months. Ifextend the lender exercises this right, we will have until the earlier of 180 days after the lender provides written notice ormaturity date from December 31, 2011 to December 31, 2012, to provide for the cancellation of indebtedness under the note as described below, to provide that The Mann Group may require the Company to prepay the note in an amount not to exceed $200.0 million (less the amount of cancelled indebtedness) upon 90 days’ prior written notice or on December 31, 2012, whichever is earlier, and to limit the Company’s ability to borrow and reborrow under the note through December 31, 2011 to an amount equal to $350.0 million less the amount of cancelled indebtedness. The Mann Group has agreed not to exercise its prepayment right if such advances.prepayment would require the use of working capital resources to repay the loan. In the event of a default, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at the lender’s option, and 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. AnyAll borrowings under the loan arrangement will beare unsecured. The loan arrangement contains no financial covenants. There are no warrants associated with the loan arrangement, nor are advances convertible into our common stock.arrangement. As of September 30, 2009,2010, the amount borrowed and outstanding under the arrangement was $150.0$252.0 million.

During the nine months ended September 30, 2009,2010, we used $146.7$109.7 million of cash for our operations compared to using $201.0$146.7 million for our operations in the nine months ended September 30, 2008.2009. We had a net loss of $160.6$132.3 million for the nine months ended September 30, 2009,2010, of which $32.0$24.3 million consisted of non-cash charges such as depreciation and amortization, and stock-based compensation. We expect our negative operating cash flow to continue at least until we obtain regulatory approval and achieve commercialization of AFRESA.AFREZZA.

We used $0.9$3.6 million of cash infor investing activities during the nine months ended September 30, 2009,2010, compared to $135.9using $0.9 million of cash for investing activities for the nine months ended September 30, 2008.2009. For the nine months ended September 30, 2010 and 2009, and 2008, $16.7$5.6 million and $72.3$16.7 million, respectively, were used to purchase machinery and equipment to expand our manufacturing operations and our quality systems that support clinical trials for AFRESA.AFREZZA.

Our financing activities generated $173.9$181.2 million of cash for the nine months ended September 30, 2009,2010, compared to $0.2$173.9 million for the same period in 2008.2009. For the nine months ended September 30, 2009,2010, cash from financing activities was primarily from the common stock offering completed in August 2009,of 5.75% Senior Convertible Notes due 2015 and related party borrowings, received, as well as the exercise of stock options.

As of September 30, 2009,2010, we had $56.6$98.0 million in cash, cash equivalents, and marketable securities. Although we believe our existing cash resources, including the $200.0$98.0 million remaining available under our loan arrangement with an entity controlled by our principal stockholder,The Mann Group but excluding any proceeds to us from the Seaside purchase agreement, will be sufficient to fund our anticipated cash requirements through at leastinto the endthird quarter of 2010,2011, we will require significant additional financing in the future to fund our operations and if we are unable to do so, there willwould be substantial doubt about our ability to continue as a going concern. Accordingly, we expect that we will need to raise additional capital,funds, either through the sale of equity and/or debt securities, the entry into a strategic business collaboration with a pharmaceutical or biotechnology company or the establishment of other funding facilities, in order to continue the development and commercialization of AFRESAAFREZZA and other product candidates and to support our other ongoing activities. However, we cannot provide assurances that we will be able to continue to raise funds on favorable terms, if at all. As of September 30, 2010, we had a stockholders’ deficit of $181.4 million which may raise concerns about our solvency and affect our ability to raise additional funds. Also, we have reserved substantially all of our authorized but unissued shares of common stock for future issuance pursuant to outstanding equity awards, our equity plans, our convertible notes, the Seaside purchase agreement and the Mann purchase agreement. As a result, our ability to issue shares of common stock, or debt securities convertible into shares of common stock, other than pursuant to existing arrangements will be limited until such time, if ever, that we are able to amend our certificate of incorporation to further increase our authorized shares of common stock or shares currently reserved for issuance otherwise become available (for example, due to the termination of the underlying agreement to issue the shares).

We intend to use our capital resources to continue the development and commercialization of AFRESA,AFREZZA, if approved, and to develop additional applications for our proprietary Technosphere platform technology. In addition, portions of our capital resources will be devoted to expanding our other product development programs for the treatment of different types of cancers. We are expending a portion of our capital to scale up our manufacturing capabilities in our Danbury facilities. We also intend to use our capital resources for general corporate purposes, which may include in-licensing or acquiring additional technologies.

We have held extensive discussions with a number of pharmaceutical companies concerning a potential strategic business collaboration for AFRESA. On October 6, 2009, we announced that we do not expect to complete a partnership until after we receive a response from the FDA regarding our NDA for AFRESA.AFREZZA. We cannot predict when, if ever, we could conclude an agreement with a partner. There can be no assurance that any such collaboration will be available to us on a timely basis or on acceptable terms, if at all.

If we enter into a strategic business collaboration with a pharmaceutical or biotechnology company, we would expect, as part of the transaction, to receive additional capital. In addition, we expect to pursue the sale of equity and/or debt securities, or the establishment of other funding facilities. Issuances of debt or additional equity could impact the rights of our existing stockholders, dilute the ownership percentages of our existing stockholders and may impose restrictions on our operations. These restrictions could include limitations on additional borrowing, specific restrictions on the use of our assets as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. We also may seek to raise additional capitalfunds by pursuing opportunities for the licensing, sale or divestiture of certain intellectual property and other assets, including our Technosphere technology platform.assets. There can be no assurance, however, that any strategic collaboration, sale of securities or sale or license of assets will be available to us on a timely basis or on acceptable terms, if at all. If we are unable to raise additional capital,funds, we may be required to enter into agreements with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such agreements may not be on terms as commercially favorable to us.

However, we cannot provide assurances that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. If planned operating results are not achieved or we are not successful in raising additional equity financing or entering a business collaboration,funds, we may be required to reduce expenses through the delay, reduction or curtailment of our projects, including AFRESAAFREZZA development activities, or further reduction of costs for facilities and administration, and there will be substantial doubt about our ability to continue as a going concern.

As of September 30, 20092010 we did not have any off-balance sheet arrangements.

The only material change to our contractual obligations disclosed in Item 7 of our Annual Report was the additional borrowing of $120.0$87.0 million from an entity controlled by our principal stockholderThe Mann Group during the nine months ended September 30, 2009.2010. (See Note 1112 — Related-party loan arrangementarrangements of the Notes to the accompanying financial statements.)

On JuneApril 29, 2009,2010, the FASBFinancial Accounting Standards Board issued FASB StatementAccounting Standards Update, or ASU, No. 168,2010-17,“FASB Accounting Statement on Codification and HierarchyMilestone Method of Generally Accepted Accounting Principles-Revenue Recognition,which establishes a replacementrevenue recognition model for contingent consideration that is payable upon the achievement of FASB Statement No. 162,”or ASC 105-10,an uncertain future event, referred to as a milestone, which will becomerequires an entity to record the source of authoritative GAAP recognized bymilestone payment in its entirety in the FASBperiod received if the milestone meets all the necessary criteria to be applied by all nongovernmental agencies.considered substantive. The statementscope of the ASU is limited to research and development arrangements. The ASU is effective for financial statements issued forfiscal years beginning on or after June 15, 2010, and interim and annual periods ending after September 15, 2009. The adoptionwithin those years. Early application is permitted. Adoption of this standard did notguidance is expected to have a material impactsignificant effect on our results of operations,how certain future revenue arrangements are reflected in the financial position, cash flows or financial statement disclosures.statements.

We are exposed to market risk related to changes in interest rates impacting our short-term investment portfolio as well as the interest rate on our credit facility with an entity controlled by our principal stockholder.The Mann Group. The interest rate on our credit facility with an entity controlled by our principal stockholderThe Mann Group is a fixed rate equal to the one-year LIBOR rate as reported by theWall Street Journalon the date of such advance plus 3% per annum. Our current policy requires us to maintain a highly liquid short-term investment portfolio consisting mainly of U.S. money market funds and investment-grade corporate, government and municipal debt. None of these investments is entered into for trading purposes. Our cash is deposited in and invested through highly rated financial institutions in North America. Our short-term investmentsinvestment at September 30, 2009 are comprised mainly of a certificate of deposit and2010 is a common stock investment. We have entered into a foreign exchange derivative hedging transaction as part of our risk management program. We continue to utilize our $350.0 million credit facility to fund operations. As of September 30, 2010, the amount borrowed and outstanding under the credit facility was $252.0 million. The interest rate is fixed at the time of the draw. If interest rates were to increase from levels at September 30, 20092010 we could experience a higher level of interest expense than assumed in our current operating plan.

To date, we have not commercialized any product candidates. In March 2009, we submitted an NDA to the FDA requesting approval of AFRESAAFREZZA for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia. TheIn March 2010, we received a Complete Response letter regarding this NDA from the FDA. A Complete Response letter is issued by the FDA’s Center for Drug Evaluation and Research when the review of a submitted file is completed and questions remain that preclude the approval of the NDA in its current form. In July 2010, the FDA accepted our NDA for filing in May 2009, meaningreply to the Complete Response letter and set a target action date of December 29, 2010. There can be no assurance that the FDA determinedwill find our proposed approach for addressing its questions acceptable. The FDA could also request that our submission is sufficiently completewe conduct additional clinical trials to permitprovide sufficient data for approval of the NDA. There can be no assurance that we will obtain approval of the NDA in a substantive review.timely manner or at all.

Our other product candidates are generally in early clinical or preclinical development. We anticipate that in the near term, our ability to generate revenues will depend solely on the successful development and commercialization of AFRESA.AFREZZA.

We have expended significant time, money and effort in the development of our lead product candidate, AFRESA,AFREZZA, which has not yet received regulatory approval and which may not be approved by the FDA in a timely manner, or at all. We must receive the necessary approvals from the FDA and similar foreign regulatory agencies before AFRESAAFREZZA can be marketed and sold in the United States or elsewhere. Even if we were to receive regulatory approval, we ultimately may be unable to gain market acceptance of AFRESAAFREZZA for a variety of reasons, including the treatment and dosage regimen, potential adverse effects, the availability of alternative treatments and cost effectiveness. If we fail to commercialize AFRESA,AFREZZA, our business, financial condition and results of operations will be materially and adversely affected.

We are seeking to develop and expand our portfolio of product candidates through our internal research programs and through licensing or otherwise acquiring the rights to therapeutics in the areas of cancer and other indications. All of these product candidates will require additional research and development and significant preclinical, clinical and other testing prior to seeking regulatory approval to market them. Accordingly, these product candidates will not be commercially available for a number of years, if at all.

A significant portion of the research that we are conducting involves new and unproven compounds and technologies, including AFRESA,AFREZZA, Technosphere platform technology and immunotherapy product candidates. Research programs to identify new product candidates require substantial technical, financial and human resources. Even if our research programs identify candidates that initially show promise, these candidates may fail to progress to clinical development for any number of reasons, including discovery upon further research that these candidates have adverse effects or other characteristics that indicate they are unlikely to be effective. In addition, the clinical results we obtain at one stage are not necessarily indicative of future testing results. If we fail to successfully complete the development and commercialization of AFRESAAFREZZA or develop or expand our other product candidates, or are significantly delayed in doing so, our business and results of operations will be harmed and the value of our stock could decline.

approvals and market our product candidates including AFRESA.AFREZZA. This accumulated deficitcumulative net loss may increase significantly as we continue development and clinical trial efforts.

Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity. As of September 30, 2009,2010, we had an accumulateda stockholders’ deficit in stockholders’ equity of $2.4$181.4 million. Our ability to achieve and sustain profitability depends upon obtaining regulatory approvals for and successfully commercializing AFRESA,AFREZZA, either alone or with third parties. We do not currently have the required approvals to market any of our product candidates and we may not receive them. We may not be profitable even if we succeed in commercializing any of our product candidates. As a result, we cannot be sure when we will become profitable, if at all.

It is costly to develop therapeutic product candidates and conduct clinical trials for these product candidates. Although we are currently focusing on AFRESAAFREZZA as our lead product candidate, we have begun to conduct clinical trials for additional product candidates. Our existing capital resources will not be sufficient to support the expense of fully commercializing AFRESAAFREZZA or completely developing any of our product candidates.

Based upon our current expectations, we believe that our existing capital resources, including the loan arrangement with an entity controlled by our principal stockholder,The Mann Group but excluding any proceeds to us from the Seaside purchase agreement, will enable us to continue planned operations through at leastinto the endthird quarter of 2010.2011. However, we cannot assure you that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. Accordingly, we plan tomay raise additional capital, eitherfunds through the sale of equity and/or debt securities, the entry into a strategic business collaboration, orcollaborations, the establishment of other funding facilities, licensing arrangements and/or asset sales, in order to continue the development and commercialization of AFRESAAFREZZA and other product candidates and to support our other ongoing activities. However, it may be difficult for us to raise additional capitalfunds through the sale of equity and/or debt securities. As of September 30, 2009,2010, we had an accumulateda stockholders’ deficit in stockholders’ equity of $2.4$181.4 million which may raise concerns about our solvency and affect our ability to raise additional capital. funds. Also, we have reserved substantially all of our authorized but unissued shares of common stock for future issuance pursuant to outstanding equity awards, our equity plans, our convertible notes, the Seaside purchase agreement and the Mann purchase agreement. As a result, our ability to issue shares of common stock, or debt securities convertible into shares of common stock, other than pursuant to existing arrangements will be limited until such time, if ever, that we are able to amend our certificate of incorporation to further increase our authorized shares of common stock or shares currently reserved for issuance otherwise become available (for example, due to the termination of the underlying agreement to issue the shares).

The amount of additional funds we need will depend on a number of factors, including: