MNKD 2017 Annual Report

exchange agreements with the four holders of all outstanding A and B Warrants, pursuant to which we agreed to issue to such holders an aggregate of 1,292,510 shares of our common stock in exchange for such warrants. The decrease of $6.1 million in the interest expense on notes for the year ended December 31, 2017 compared to the same period in the prior year was primarily due to the extinguishment of debt under the Sanofi Loan Facility in the fourth quarter of 2016 as a result of the settlement agreement with Sanofi entered into in November 2016 (the “Settlement Agreement”). The increase of $0.9 million in the interest expense on note payable to the principal stockholder for the year ended December 31, 2017 compared to the prior year was primarily due to additional borrowings and capitalization of interest under The Mann Group Loan Arrangement in the second quarter of 2017. (Loss) gain on extinguishment of debt decreased by $73.6 million. This was due to the $72.0 million gain from extinguishment of debt in 2016 as a result of the Settlement Agreement and forgiveness of the full outstanding loan balance of the Sanofi Loan Facility and $1.6 million of losses on conversions of convertible notes into common stock during the current year. Years ended December 31, 2016 and 2015 Revenues The following table provides a comparison of the expense categories for the years ended December 31, 2016 and 2015 (dollars in thousands): Year Ended December 31, 2016 2015 $ Change % Change Revenues: Net revenue - commercial product sales: Gross revenue from product sales . . . . . . . . . . . . . . . . . . . . . . $ 2,714 $— $ 2,714 100% Gross-to-Net Adjustments: . . . . . . . . . . . . . . . . . . . . . . . . . . . Wholesaler distribution fees and prompt pay discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (489) — (489) 100% Patient discount and co-pay assistance programs . . . . . . (196) — (196) 100% Rebates and chargebacks . . . . . . . . . . . . . . . . . . . . . . . . (134) — (134) 100% Net revenue - commercial product sales . . . . . . . . . . . . . . . . . . . . . 1,895 — 1,895 100% Net revenue - collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,965 — 171,965 100% Revenue - other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 — 898 100% Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $174,758 $— $174,758 100% In 2016, we derived a significant amount of revenue from our collaboration with Sanofi under which we had to perform certain obligations and we received periodic payments. During the year ended December 31, 2016, we recognized net revenue from our collaboration with Sanofi of $172.0 million. The recognized collaboration revenue relates to payments for activities from prior periods which were previously deferred as the transactions did not meet the criteria for revenue recognition until 2016. In the third quarter of 2016, due to the termination of the Sanofi License Agreement, we determined the costs related to the collaboration with Sanofi were reasonably estimable, resulting in the recognition of revenue as there were no future obligations to Sanofi. The amount of revenue recognized was the upfront payment of $150.0 million and two milestone payments of $25.0 million each, offset by $64.9 million of net loss share with Sanofi, as well as $17.5 million in sales of Afrezza and $19.4 million in sales of bulk insulin, both to Sanofi. During the year ended December 31, 2015, we did not recognize any revenues from collaboration. 55