6 State Route 173
Clinton, NJ 08809
(908) 238-6600
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Daniel Tassé
Chairman and Chief Executive Officer
Ikaria, Inc.
6 State Route 173
Clinton, NJ 08809
(908) 238-6600
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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 Securities Exchange Act of 1934. (Check one):

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This is an initial public offering of shares of common stock of Ikaria, Inc. We are offering shares of our common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $ and $ per share. We have applied to have our common stock listed on the NASDAQ Global Market under the symbol "IKAR".

See "Risk Factors" beginning on page 13 to read about factors you should consider before buying shares of our common stock.

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from selling stockholders at the initial public offering price less the underwriting discount. Ikaria, Inc. will not receive any proceeds from the sale of the shares by the selling stockholders.

The underwriters expect to deliver the shares against payment in New York, New York on , 2010.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Through and including , 2010 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the "Risk Factors" section and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision.

We are a fully-integrated biotherapeutics company focused on developing and commercializing innovative therapeutics and interventions designed to meet the significant unmet medical needs of critically ill patients. We believe that this focus, combined with our strengths in research and development, manufacturing, and sales and marketing, position us to be a leader in the critical care market.

We generated net sales of $274 million in 2009, as compared to $207 million in 2007, representing a compound annual growth rate, or CAGR, of approximately 15%. We had net income of $13 million in 2009. We generated adjusted EBITDA of $109 million in 2009, as compared to $92 million in 2007, and adjusted net income of $38 million in 2009, as compared to $22 million in 2007, representing a CAGR of approximately 9% and 31%, respectively. For reconciliations of adjusted EBITDA to net income and adjusted net income to net income, see the section entitled "—Summary Consolidated Financial Data."

Our net sales are generated from INOtherapy. INOtherapy is our all-inclusive offering of drug product, services and technologies. This includes INOMAX (nitric oxide) for inhalation, INOcal calibration gases, use of our proprietary U.S. Food and Drug Administration, or FDA, cleared drug-delivery system, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service. We sell INOtherapy in the United States, Puerto Rico, Canada, Australia, Mexico and Japan.

INOMAX is the only treatment approved by the FDA for hypoxic respiratory failure, or HRF, associated with pulmonary hypertension in term and near-term infants, which include infants born at a gestational age of at least 34 weeks. HRF is a potentially fatal condition that occurs when lungs are unable to deliver sufficient oxygen to the body. Our customers use INOMAX, which is typically administered at the patient's bedside through a ventilator, in a variety of critical care conditions beyond its approved indication. We believe this additional use is driven by physicians' knowledge of the underlying physiologic effects of inhaled nitric oxide, the scientific literature on the use of inhaled nitric oxide and the safety of INOMAX, and the inclusion of inhaled nitric oxide in published practice guidelines for certain conditions. In a survey we conducted, customers representing 16% of our 2008 U.S. net sales reported that, in 2008, approximately 80% of their aggregate INOMAX costs related to uses other than the treatment of HRF associated with pulmonary hypertension in term and near-term infants. Since its commercialization in 2000, we believe that approximately 360,000 patients have been treated with INOMAX worldwide.

We continue to pursue clinical studies required for approval of potential additional indications of INOMAX in the critical care setting. Notably, we are conducting a Phase 3 clinical trial in support of an indication for INOMAX for prevention of bronchopulmonary dysplasia, or BPD, a respiratory condition related to lung injury in pre-term infants, and are planning additional clinical trials for use in treating acute respiratory distress syndrome, or ARDS, a common and life-threatening condition for which there are no approved treatments. We plan to continue to grow our INOtherapy business by increasing sales for the approved indication through further penetration into our existing customer base and actively adding new U.S. customers, expanding in foreign markets, gaining additional

FDA-approved indications for INOMAX and developing next-generation technologies for our drug-delivery systems.

Our success with INOtherapy has allowed us to use cash flow from net sales to fund our research and development efforts, to make targeted product acquisitions, to grow our commercial capabilities, and to build an infrastructure that supports further growth of INOtherapy as well as our pipeline of product candidates. We have built close relationships with and gained valuable insights from critical care professionals, which help us identify potential solutions to unmet medical needs. To augment our revenue growth, leverage our existing infrastructure and further diversify our product portfolio, we intend to continue to actively pursue acquisitions and in-licensing opportunities.

Product / Product Candidate	Active Pharmaceutical Ingredient / Mechanism of Action	Primary Indication(s)	Status	Commercialization Rights

INOtherapy /INOMAX	Nitric oxide / pulmonary vasodilator	Hypoxic respiratory failure	Marketed	Worldwide, excluding the EU and specified other countries(1)
		Bronchopulmonary dysplasia	Phase 3
		Acute respiratory distress syndrome- chronic lung disease	Phase 3 in planning stage
LUCASSIN	Terlipressin / vasopressin receptor agonist	Hepatorenal Syndrome Type 1	Pivotal Phase 3 expected to commence in 2010	United States, Canada, Mexico and Australia
IK-5001	Sodium alginate and calcium gluconate / mechanical support of infarcted heart muscle	Cardiac remodeling and subsequent congestive heart failure following acute myocardial infarction	Pivotal Phase 2/3 expected to commence in 2011	Worldwide
IK-1001	Sodium sulfide	Conditions characterized by tissue ischemia	Clinical program in planning stage	Worldwide
IK-6001	Fibrinogen Bb15-42 / anti-inflammatory	Conditions characterized by vascular leakage	Preclinical	Worldwide

Critical care medicine is the multi-disciplinary healthcare specialty focused on the care of patients with acute, life-threatening illness or injury. Problems that might need critical care treatment include complications from surgery, accidents, infections and severe cardiopulmonary conditions. The Society of Critical Care Medicine, or SCCM, estimates that the total costs attributable to caring for critically ill patients exceeded $180 billion in 2006, of which we estimate over $20 billion was spent on pharmaceutical therapies. According to data from the Hospital Cost Report Information System, or HCRIS, in 2005, there were more than 3,000 hospitals in the United States with over 90,000 intensive care unit, or ICU, beds, of which we estimate that 80% are located in 1,300 of these hospitals. Based

on data from SDI Health, we estimate that, in 2008, there were approximately 16 million admissions to critical care units in the United States.

An ICU has a different operating environment than other areas in the hospital. These units operate as separate, closed spaces within the hospital with dedicated critical care professionals. The key factors that differentiate ICUs from general hospital units include: the aggressive interventions used to support critically ill patients, a decision-making process governed by the urgent and complex needs of critically ill patients, a highly trained and specialized workforce, a restricted-access environment and a compelling pharmacoeconomic rationale for the use of effective treatments.

Profitable INOtherapy Business with Significant Growth Potential—Our annual net sales have grown from 2007 to 2009 at a CAGR of approximately 15%. We have been growing INOtherapy revenues, in part, through increased market penetration for the approved indication using our established sales team. We are conducting or planning clinical trials of INOMAX for additional indications, expanding in foreign markets and developing advanced INOMAX drug-delivery systems.

Established Infrastructure and Strength in Sales and Marketing—We have an established infrastructure, including manufacturing and distribution capabilities. We have an installed base and deployable inventory of approximately 4,500 wholly-owned, proprietary drug-delivery systems and have navigated the time-consuming and complex process of establishing the compatibility of our drug-delivery systems with more than 48 models of ventilators and anesthesia devices. Under our current management, we doubled the size of our sales team and we believe we have the capability to further expand our sales and marketing infrastructure to the extent necessary to commercialize any additional products we may develop or acquire.

Sales Driven by Deep Relationships in Critical Care—INOtherapy is typically administered at the patient's bedside through a ventilator. Given our strong focus on customer satisfaction, our medical and sales professionals provide critical care professionals with clinical and technical assistance and ongoing clinical training. Our comprehensive and integrated offering provides us with meaningful access to critical care professionals and their patients.

Expertise in Critical Care and in Research and Development—We are able to identify unmet medical needs and opportunities through our extensive knowledge of the critical care market and ongoing interactions with thought leaders. We believe that our expertise in critical care and in research and development, including our emphasis on early evaluation of potential product candidates, mitigates some of the risk usually associated with new product development.

Growing Our INOtherapy Business—We are seeking to grow our revenues by increasing sales of INOtherapy for the approved indication through further penetration into existing accounts and actively

adding new customers, expanding in foreign markets, seeking approval for additional indications and improving our drug-delivery technology.

Enhancing Our INOtherapy Market Position—We are working to sustain and improve our current INOtherapy market position by focusing on customer service, developing advanced drug-delivery systems, strengthening our intellectual property and pursuing other types of exclusivity.

Pursuing Efficient and Informed Development of Product Candidates—We intend to commence a pivotal Phase 3 clinical trial of LUCASSIN in 2010 for the treatment of hepatorenal syndrome Type 1, or HRS Type 1. IK-5001 has recently completed a Phase 1/2 clinical trial in Europe, and we intend to move its development forward with a pivotal Phase 2/3 clinical trial for the prevention of cardiac remodeling following acute myocardial infarction, or AMI, which may result in congestive heart failure, or CHF.

Building Our Product Portfolio through Targeted Business Development Efforts—We intend to actively pursue acquisitions and in-licensing opportunities to augment our growth, leverage our existing infrastructure and further diversify our product and product candidate portfolios. We believe that our experience in identifying acquisition and in-licensing opportunities and consummating these transactions, industry expertise and relationships, clinical development and commercial capabilities, and available capital make us an ideal partner for such opportunities.

Focusing on Profitability While Investing to Expand Our Business—Our strong financial position allows us to invest in research and development activities and acquisition and in-licensing opportunities. We intend to continue to grow revenues and generate significant cash flow, with the goal of maintaining profitability while investing wisely in our product and product candidate pipeline.

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include the following:

Our principal shareholders are New Mountain Partners II, L.P., or New Mountain Partners, Allegheny New Mountain Partners, L.P., or Allegheny New Mountain, New Mountain Affiliated Investors II, L.P., or New Mountain Affiliated, ARCH Venture Fund VI, L.P., or ARCH, Venrock Associates IV, L.P., or Venrock IV, Venrock Partners, L.P., or Venrock Partners, Venrock Entrepreneurs

Fund IV, L.P., or Venrock Entrepreneurs, and Linde North America, Inc., an indirect wholly-owned subsidiary of Linde AG, or Linde, who we refer to collectively as the Controlling Entities.

As of April 30, 2010, the Controlling Entities collectively owned approximately 88% of our outstanding capital stock. Following the completion of this offering, these Controlling Entities will own approximately % of our outstanding capital stock (or approximately % if the underwriters exercise their option to purchase additional shares in full) and will be entitled to designate six members of our board of directors. See "Description of Capital Stock—Series C Preferred Stock."

Following completion of this offering, New Mountain Partners, Allegheny New Mountain and New Mountain Affiliated, which we refer to collectively as the New Mountain Entities, will continue to have approval rights over many corporate actions and the ability to require the current holders of our series A and series B preferred stock to sell their shares in, or vote for a sale of, our company. See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement."

In addition to being parties to the investor stockholders agreement, which includes certain voting agreements, the Controlling Entities intend to report that they hold their shares of our stock as part of a group. Upon completion of this offering, we anticipate that the Controlling Entities will continue to control a majority of our outstanding capital stock and will be able to elect a majority of our directors. As a result, we will be a "controlled company" under the rules established by The NASDAQ Global Market and will qualify for, and intend to rely on, the "controlled company" exception to the board of directors and committee composition requirements regarding independence under the rules of The NASDAQ Global Market.

We were initially incorporated in Delaware under the name ITL Holdings, Inc. on August 18, 2006. We changed our name to Ikaria Holdings, Inc. in February 2007 and changed our name to Ikaria, Inc. in May 2010. In March 2007, we acquired INO Therapeutics LLC, or INO Therapeutics, and Ikaria Research, Inc. INO Therapeutics and Ikaria Research, Inc. are now both our wholly-owned subsidiaries. INO Therapeutics was formed in July 1998 under the name INOCO, Inc. and became INO Therapeutics LLC in November 2003. Ikaria Research, Inc., was incorporated in November 2004 and changed its name from Ikaria, Inc. to Ikaria Research, Inc. in May 2010. Our principal executive offices are located at 6 State Route 173, Clinton, NJ 08809 and our telephone number is (908) 238-6600. Our website address is www.ikaria.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

In this prospectus, unless otherwise stated or the context otherwise requires, references to "Ikaria," "we," "us," "our" and similar references refer to Ikaria, Inc. and its subsidiaries on a consolidated basis. Ikaria®, the Ikaria logo, INOMAX®, INOtherapy®, INOcal®, INOflo®, and INOvent® are our registered trademarks. INOpulse^TM and INOmeter^TM are our trademarks. LUCASSIN® and the other trademarks and trade names appearing in this prospectus are the property of their respective owners.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data. This prospectus also includes data based on our own internal estimates. While we believe that our internal company research is reliable and that our internal estimates are reasonable, no independent source has verified such research or estimates.


Common stock offered by us		Shares
Common stock to be outstanding after this offering		Shares
Option to purchase additional shares offered to underwriters		The underwriters have an option to purchase a maximum of additional shares from the selling stockholders named in this prospectus. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds		We intend to use the net proceeds received by us in connection with this offering for the following purposes and in the following amounts:
		• approximately $ million will be used to repay a portion of our indebtedness, including any discounts and accrued interest on such indebtedness; and
		• the remainder will be used for general corporate purposes including, among other things, development of our product and product candidates, foreign expansion, and acquisition and in-licensing opportunities.
		We will not receive any proceeds from the sale of shares of common stock by the selling stockholders
Risk Factors		You should read the "Risk Factors" section of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.
Proposed NASDAQ Global Market symbol		"IKAR"

The number of shares of our common stock to be outstanding after this offering is based on 93,106,655 shares of our common stock outstanding as of April 30, 2010 after giving effect to the conversion of all outstanding shares of our non-voting common stock, series A convertible preferred stock, which we refer to as the series A preferred stock, and series B convertible preferred stock, which we refer to as the series B preferred stock, into common stock upon the closing of this offering and excludes:

The following summary consolidated financial data should be read together with our consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. The consolidated financial data in this section is not intended to replace our consolidated financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

The consolidated financial data for the period from January 1, 2007 through March 27, 2007 and for the years ended December 31, 2007, 2008 and 2009 have been derived from our consolidated financial statements included elsewhere in this prospectus, which have been audited by KPMG LLP, an independent registered public accounting firm.

The unaudited pro forma net income per share data for the year ended December 31, 2009 reflects:

The unaudited pro forma balance sheet data at December 31, 2009 reflects the following events as if they occurred on December 31, 2009:

The unaudited pro forma balance sheet data, as adjusted, further reflects the issuance and sale of shares of our common stock in this offering at an initial public offering price of $ per share, the midpoint of the range of the estimated initial public offering price between $ and $ as set forth on the cover page of this prospectus, our receipt of the net proceeds from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the application of $ of such net proceeds to repay a portion of our indebtedness.

From January 1, 2007 through March 27, 2007, Ikaria did not conduct any commercial operations. On March 28, 2007, we closed a private offering of our series B preferred stock, which resulted in proceeds of approximately $280 million, and secured $235.0 million in financing from a term loan. With the proceeds from the private placement and term loan and the issuance of stock, options and a warrant, we acquired the sole membership interest of INO Therapeutics and all of the outstanding equity of Ikaria Research, Inc. on March 28, 2007, referred to herein as the "Transaction."

We use the term Predecessor in this prospectus to refer to INO Therapeutics prior to March 28, 2007 and the term Successor to refer to Ikaria, Inc. and its consolidated subsidiaries. Our combined results of operations for the year ended December 31, 2007 represent the addition of the Predecessor period from January 1, 2007 through March 27, 2007 and the Successor period from January 1, 2007 through December 31, 2007. This combination is not presented in accordance with generally accepted accounting principles in the United States, or GAAP, or with the rules for pro forma presentation, but is presented because we believe it provides the most meaningful comparison of our results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" for a discussion of the presentation of our results for the year ended December 31, 2007 on a combined basis.



			Predecessor			Successor			Combined			Successor			Successor
			January 1, 2007 to March 27, 2007			Year Ended December 31, 2007(1)			Year Ended December 31, 2007			Year Ended December 31, 2008			Year Ended December 31, 2009
			(Amounts in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenues:
	Net sales		$	48,270		$	158,479		$	206,749		$	236,731		$	274,342
	Other revenue			—			2,450			2,450			63			250

		Total revenues		48,270			160,929			209,199			236,794			274,592
Operating costs and expenses:
	Cost of sales			10,566			102,753			113,319			51,572			52,380
	Selling, general and administrative			8,498			33,507			42,005			61,844			83,879
	Research and development			8,763			35,202			43,965			68,538			75,421
	Acquisition-related in-process research and development			—			271,637			271,637			—			—
	Amortization of acquired intangibles			—			22,187			22,187			30,452			30,720
	Other expenses (income), net			(57	)		(66	)		(123	)		356			(410	)

		Total operating expenses		27,770			465,220			492,990			212,762			241,990
Income (loss) from operations				20,500			(304,291	)		(283,791	)		24,032			32,602
Interest (expense) income, net:
	Interest income			63			187			250			229			385
	Interest expense			—			(14,725	)		(14,725	)		(13,378	)		(9,248	)

		Interest (expense) income, net		63			(14,538	)		(14,475	)		(13,149	)		(8,863	)
Income (loss) before income taxes				20,563			(318,829	)		(298,266	)		10,883			23,739
Income tax (expense) benefit				(8,517	)		109,105			100,588			(1,288	)		(10,760	)

		Net income (loss)	$	12,046		$	(209,724	)	$	(197,678	)	$	9,595		$	12,979

Net income (loss) per common share, basic and diluted						$	(65.28	)				$	0.10		$	0.14
Unaudited pro forma net income per common share, basic and diluted															$	0.06	(2)
Other Operating Data (Unaudited):
Adjusted EBITDA(3)									$	91,753		$	90,677		$	109,171
Adjusted net income(3)									$	22,219		$	30,951		$	38,181

	Combined			Successor		Successor

	Year ended December 31, 2007			Year ended December 31, 2008		Year ended December 31, 2009
	(Amounts in thousands)
Net income (loss)	$	(197,678	)	$	9,595	$	12,979
Expense (benefit) for income taxes		(100,588	)		1,288		10,760
Interest expense, net		14,475			13,149		8,863
Depreciation		9,048			10,526		10,316
Amortization of acquired intangibles		22,187			30,452		30,720

EBITDA		(252,556	)		65,010		73,638
Acquisition-related inventory step-up(a)		69,600			—		—
Acquisition-related in-process research and development(b)		271,637			—		—
Licensing upfront and milestone expenses(c)		—			20,527		24,250
Non-cash share-based compensation(d)		2,012			3,621		11,283
Severance and sign-on bonuses for executive management		1,060			1,519		—

Adjusted EBITDA	$	91,753		$	90,677	$	109,171

Net income (loss)	$	(197,678	)	$	9,595	$	12,979
Amortization of acquired intangibles, net of tax		13,312			18,271		18,432
Acquisition-related inventory step-up, net of tax(a)		41,760			—		—
Acquisition-related in-process research and development, net of tax(b)		162,982			—		—
Non-cash share-based compensation, net of tax(d)		1,207			2,173		6,770
Severance and sign-on bonuses for executive management, net of tax		636			912		—

Adjusted net income(e)	$	22,219		$	30,951	$	38,181

	As of December 31, 2009

	Actual			Pro Forma			Pro Forma, as Adjusted(1)
				(Unaudited)			(Unaudited)
	(Amounts in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	95,226		$	29,080		$
Working capital		115,342			39,652
Other assets		2,933			5,486
Total assets		468,205			404,612
Long-term debt, including current portion		175,721			245,000
Warrant liability		454			—
Redeemable preferred stock		388,930			1
Accumulated deficit		(187,150	)		(190,915	)
Accumulated other comprehensive income (loss)		(1,899	)		143
Total stockholders' equity (deficit)		(156,207	)		101,453

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. If any of the following risks actually occur, our business, prospects, operating results and financial condition could suffer materially. In this event, the trading price of our common stock could decline and you might lose all or part of your investment.

We derive substantially all of our revenue from INOtherapy, and our future success will depend on continued growth and acceptance of INOtherapy.

Substantially all of our total consolidated net revenues have been derived from sales of INOtherapy, including for the years ended December 31, 2007, 2008 and 2009. Our near-term prospects, including our ability to finance our company, develop our product candidates and make acquisitions of additional products and product candidates, will depend heavily on the continued successful commercialization of INOtherapy.

We cannot be certain that INOMAX, the FDA-approved drug component of INOtherapy, will continue to be accepted in its current markets and for the treatment of the indication for which it is currently approved. Specifically, the following factors, among others, could affect the level of market acceptance of this product:

Any adverse developments with respect to the sale or use of INOtherapy could significantly reduce our revenues and have a material adverse effect on our ability to generate net income and positive cash flow from operations and to achieve our business plan.

The principal U.S. patents covering INOMAX under our license agreement will expire in 2013 and, upon their expiration, we may experience a decline in our revenue and our profitability.

We depend in part upon patents to provide us with exclusive marketing rights for our product for some period of time. Upon expiration of these patents, others could introduce competitive products using the same compound and/or technology as our product. Loss of patent protection for our product

may lead to a rapid loss of sales for INOMAX, as lower priced versions of that product become available. The principal issued patents covering INOMAX will expire in 2013 and, upon expiration, others may commercialize competitive nitric oxide therapies. As a result of the introduction of such therapies, we might be forced to reduce our prices to maintain sales of INOtherapy and/or we may quickly lose a substantial portion of our INOtherapy sales, either of which would negatively impact our revenues and profitability.

We currently market INOMAX for only one indication. We will not be permitted to market INOMAX for any other indication unless we receive FDA approval for any such indication. If we do not receive approval to market INOMAX for additional uses, our ability to grow revenues and achieve our business plan may be materially adversely affected.

We do not have any product approved for marketing and sale other than INOMAX, which is approved for sale in the United States only for the treatment of HRF associated with pulmonary hypertension in term and near-term infants. One of our key objectives is to expand the indications for which INOMAX is approved by the FDA, including for the prevention of BPD in pre-term infants and the treatment of ARDS. In order to market INOMAX for these and any other indications, we will need to conduct appropriate clinical trials, obtain positive results from those trials and obtain regulatory approval for such proposed indications. Obtaining regulatory approval is uncertain, time consuming and expensive. Even well-conducted studies of effective drugs will sometimes appear to be negative. The regulatory review and approval process to obtain marketing approval for a new indication can take many years, often requires multiple clinical trials and requires the expenditure of substantial resources. This process can vary substantially based on the type, complexity, novelty and indication of the product candidate involved. The FDA and other regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that any data submitted is insufficient for approval and require additional studies or clinical trials. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a new indication for a product candidate. For example, in a trial we conducted to test the effectiveness of INOMAX in preventing BPD, we did not meet the primary endpoint due to the trial design we used. If we do not receive approval to market INOMAX for additional indications, our ability to grow revenues and achieve our business plan may be materially adversely affected.

A significant portion of our revenues are derived from unapproved or off-label uses of INOMAX. If we fail to comply or are found to have failed to comply with FDA and other regulations related to the promotion of INOMAX for off-label uses, we could be subject to criminal penalties, substantial fines or other sanctions and damage awards.

The FDA and other foreign regulatory authorities approve drugs and medical devices for the treatment of specific indications, and products may only be promoted or marketed for the indications for which they have been approved. However, the FDA does not attempt to regulate physicians' use of approved products, and physicians are free to prescribe most approved products for purposes outside the indication for which they have been approved. This practice is sometimes referred to as "off-label" use. While physicians are free to prescribe approved products for off-label uses, it is unlawful for drug and device manufacturers to market or promote a product for an off-label use. INOMAX is currently approved, and therefore we are permitted to market it in the United States, for only one use, the treatment of term and near-term infants with HRF associated with pulmonary hypertension.

In a survey we conducted, customers representing 16% of our 2008 U.S. net sales reported that, in 2008, approximately 80% of their aggregate INOMAX costs related to uses other than the treatment of HRF associated with pulmonary hypertension in term and near-term infants. Based on the information collected in this survey, we believe that sales of INOMAX for unapproved uses relate (i) primarily to cardiac surgery and other conditions for which we are not currently planning to seek FDA approval, and (ii) to ARDS, and to a lesser extent BPD, conditions for which we are currently seeking FDA

approval. We have no control over physicians' use of INOMAX for unapproved uses, we are not permitted to promote or market our product for unapproved uses and we cannot assure you that physicians will continue to prescribe INOMAX for unapproved uses at the same rate, or at all.

The regulations relating to off-label promotion are complex and subject to substantial interpretation by the FDA and other government agencies. Promotion of a product for off-label use is prohibited, however, certain activities that we and others in the pharmaceutical industry engage in are permitted by the FDA. For example, we provide medical information in response to, and otherwise address, unsolicited customer questions regarding, off-label uses of INOMAX. Following the Transaction, our management team put in place compliance and training programs designed to ensure that our sales and marketing practices comply with applicable regulations. Notwithstanding these programs, the FDA or other government agencies may allege or find that our current or prior practices constitute prohibited promotion of INOMAX for off-label uses. We also cannot be sure that our employees will comply with company policies and applicable regulations regarding off-label promotion. In addition, we cannot be certain that the activities of our predecessor prior to the Transaction were in compliance with these regulations.

Over the past several years, a significant number of pharmaceutical and biotechnology companies have been the target of inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with off-label promotion and other sales practices, including the Department of Justice and various U.S. Attorney's Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys General offices. These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the Food, Drug and Cosmetic Act, the False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with off-label promotion of products, pricing and Medicare and/or Medicaid reimbursement. Many of these investigations originate as "qui tam" actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim, or caused a false claim to be submitted, to the government for payment. The person bringing a qui tam suit is entitled to a share of any recovery or settlement. Qui tam suits, also commonly referred to as "whistleblower suits," are often brought by current or former employees. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If it declines, the individual may pursue the case alone. From time to time, employees and former employees of ours have alleged that certain of our practices were not in compliance with applicable law. In each such case, we have reviewed the allegations and concluded they were without merit. However, because qui tam suits are filed under seal, it is possible that we are the subject of qui tam actions of which we are unaware.

If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to off-label promotion in connection with past or future activities, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects and reputation.

Any inquiry or investigation into our promotion practices, even if resolved in our favor, would be costly and could divert the attention of our management, damage our reputation and have an adverse effect on our business.

Because of the broad scope and complexity of these laws and regulations, the high degree of prosecutorial resources and attention being devoted to the sales practices of pharmaceutical companies by law enforcement authorities, and the risk of potential exclusion from federal government

reimbursement programs, numerous companies have determined that it is highly advisable that they enter into settlement agreements in these matters, particularly those brought by federal authorities. Companies that have chosen to settle these alleged violations have typically paid multi-million dollar fines to the government and agreed to abide by consent decrees or corporate integrity agreements.

Any inquiry or investigation into our promotion practices, whether in the United States or by a foreign regulatory authority, even if resolved in our favor, would be costly and could divert the attention of our management, damage our reputation and have an adverse effect on our business.

We are the sole manufacturer of INOMAX and we only have one FDA inspected manufacturing facility. Our inability to continue manufacturing adequate supplies of INOMAX could result in a disruption in the supply of INOMAX to our customers.

We are the sole manufacturer of INOMAX. We develop and manufacture INOMAX at our facility in Port Allen, Louisiana, which is the only FDA inspected site for manufacturing pharmaceutical-grade nitric oxide, or NO, in the world. Our Port Allen facility is subject to the risks of a natural disaster or other business disruption. Accordingly, we have implemented business continuity measures to mitigate the risk of interruption in the supply of INOMAX, including establishing a backup production facility in Coppell, Texas, which is not yet FDA inspected. The Coppell facility, which is capable of producing INOMAX from our supply of a concentrated pre-mix, which we manufacture at our Port Allen facility, would only be capable of serving as a backup facility for as long as our supply of concentrated pre-mix lasts, which we currently estimate to be about one year. There can be no assurance that we would be able to meet our requirements for INOMAX if there were a catastrophic event or failure of our current manufacturing system. If we are required to change or add a new manufacturer or supplier, the process would likely require prior FDA and/or equivalent foreign regulatory authority approval, and would be very time consuming. In addition, because the manufacture of a pharmaceutical gas requires specialized equipment and expertise, there are few, if any, third-party manufacturers to whom we could contract this work in a short period of time. An inability to continue manufacturing adequate supplies of INOMAX at our facility in Port Allen, Louisiana and, once inspected by the FDA, our back-up facility in Coppell Texas, could result in a disruption in the supply of INOMAX to our customers.

We rely on other manufacturers for components of our drug-delivery systems and INOcal. If we experience problems or delays with these supplies, our ability to provide our customers with INOtherapy would be adversely affected.

For our drug-delivery systems, there are several components that are custom designed for our systems. We are typically dependent on a single company to supply us with these components. There is a risk that a single-source supplier could fail to deliver adequate supply, or could suffer a business interruption that could affect our supply of these components. Further, a supplier could choose to modify the design which would require focused attention and time from our engineers. Calibration gases, known as INOcal, are used to calibrate the NO and nitrogen dioxide sensors that are installed in our drug-delivery systems. We currently source all of our INOcal from a single supplier through a multi-year contractual agreement that expires in September 2011. There is a risk that this single source could experience a supply interruption which would affect our supply of INOcal. Also, if the relationship with this supplier were damaged in any way, or if we are unable to negotiate an extension of our agreement with this supplier or otherwise secure supply beyond September 2011, there could be a subsequent impact on the supply of INOtherapy to our customers. If we experience problems or delays with our supply of components for our drug-delivery systems or INOcal, our ability to provide our customers with INOtherapy would be adversely affected.

We obtain some of the components for our drug-delivery systems through individual purchase orders executed on an as needed basis rather than pursuant to long-term supply agreements. Our business, financial condition or results of operations could be adversely affected if any of our principal

third-party suppliers or manufacturers experience production problems, lack of capacity or transportation disruptions or otherwise cease producing such components.

We exclusively license patents covering INOMAX from MGH. If MGH terminates the license or fails to maintain or enforce the underlying patents, our competitive position and market share would be harmed.

We hold an exclusive license from The General Hospital Corporation, which does business as Massachusetts General Hospital, or MGH, for the two principal patents covering various aspects of INOMAX that expire in 2013. MGH may fail to maintain the INOMAX patents, may decide not to pursue litigation against third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity or unenforceability. MGH has the right to terminate its license agreement with us for an uncured material breach by us. In spite of our best efforts, MGH might conclude that we materially breached our license agreement and might therefore terminate the license agreement, thereby removing our ability to market INOMAX. If this license is terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products similar to ours. This could have a material adverse effect on our competitive business position and our business prospects.

Our future growth depends, in part, on our ability to penetrate foreign markets, where we are subject to additional regulatory burdens and other risks and uncertainties. However, we have limited experience marketing and servicing our products outside North America.

Our future profitability will depend, in part, on our ability to grow and ultimately maintain our sales in foreign markets. However, we have limited experience in marketing, servicing, and distributing our products in countries other than the United States and Canada and rely on third parties to support our foreign operations. Our foreign operations and any foreign operations we establish in the future subject us to additional risks and uncertainties, including:

Foreign sales of our products could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions, changes in tariffs, and difficulties in staffing and managing foreign operations.

Other companies may develop competitive products that could negatively affect our INOtherapy sales.

Our ability to compete successfully depends on our ability to introduce new technologies and services related to INOtherapy. As a result, we must make significant investments in research and development, manufacturing and sales and marketing. If we are unable to continue to develop and sell innovative new products with attractive margins or if other companies infringe on our intellectual property, our ability to maintain a competitive advantage could be negatively affected and our financial condition and operating results could be materially adversely affected. Our financial condition and operating results depend substantially on our ability to continually improve INOtherapy to maintain therapeutic and functional advantages. Unauthorized use of INOMAX on other companies' delivery devices may result in decreased demand for INOtherapy, and could materially adversely affect our financial condition and operating results. There can be no assurance that we will be able to continue to provide products and services that compete effectively.

INOMAX is one of many adjunctive therapies physicians prescribe for HRF, BPD, ARDS and pulmonary hypertension following cardiac surgery. For example, physicians use other drugs, such as Flolan, Ventavis, Primacor and Revatio, to treat acute pulmonary hypertension. In addition, we are aware that neonatologists, surgeons and other physicians have and may continue to experiment with these drugs, including Revatio, which recently became available in intravenous, or IV form, to treat these conditions. The use of these drugs could reduce the use of INOtherapy, particularly if physicians perceive them as being less expensive, more effective, safer or easier to use than INOtherapy. In addition, companies, such as GeNO, LLC and GeNOsys Inc., are in the early stages of developing small, mobile devices that aim to manufacture NO at the location of delivery. Air Liquide Healthcare America Corporation, or Air Liquide, currently manufactures and sells an NO mixture in a pressurized canister in the European Union. If any other therapy proves to treat any of these conditions more effectively, less expensively, more safely, or is more easily used than INOtherapy and/or is approved for sale, our business would be adversely affected.

We recently adopted a new billing model for INOtherapy, which could negatively impact our customer relationships, result in unexpected changes in customer spending and increase fluctuation in revenues during certain quarters.

In 2010, we implemented a new tier-based billing model. Under the new billing model, customers can select from a range of options. These options include: (1) one option which offers unlimited access to INOtherapy for a fixed fee, (2) three capped tier options offering increasing allocations of hours of INOMAX, and (3) a price per hour model. We determined fees and hourly usage allocations for each customer based on historical usage. In addition, we utilize a standard six-month introductory package for new customers and, for very low volume customers, we have a standard package designed to accommodate occasional use. Customers who did not sign a new billing model contract by April 1, 2010 defaulted to the price per hour model. Under the capped tier options, if hourly usage exceeds the cap during the contract period, the customer pays an hourly fee to cover the excess usage for the remainder of the contract. For the top two capped tiers, if the customer's usage is below a specified level following the eighth month of the contract, the customer typically has the option to move down one level to a lower tier. In this case, the customer will be billed an adjusted monthly fee for the remainder of the contract such that the total cost of the INOtherapy service agreement will be equal to the cost of the lower tier. As a result, we will recognize revenue for these customers as if they were contracted at the lower tier and defer the incremental revenue until the earliest to occur of (i) the customer's hours exceeding the set cap for the lower tier and, therefore, the ability to move down one tier is eliminated, (ii) the customer electing to stay at the initially selected tier, or (iii) the expiration of the time period for which the customer can move to a lower tier in the tenth month of the contract term.

The new model may not adequately address customer requests for a more streamlined billing process and increased predictability in the amounts they spend on INOtherapy annually or it may raise

new concerns that negatively impact our customer relationships. In addition, the new billing model could result in unexpected changes in customer spending, including the reduction of their use of our product. We may not know until 2011 or later, when customers begin renewing their contracts, what impact, if any, the new billing model will have on our future revenues. Furthermore, the timing of deferred revenue recognition under the new billing model may cause significant fluctuations in our revenue and operating results from quarter to quarter.

The design, development, manufacture, supply, and distribution of our products are highly regulated and technically complex.

The design, development, manufacture, supply, and distribution of pharmaceutical products and medical devices, both inside and outside the United States, are technically complex and highly regulated. We, along with our third-party providers, must comply with all applicable regulatory requirements of the FDA and foreign authorities. In addition, the facilities used to manufacture, store, and distribute our products are subject to inspection by regulatory authorities at any time to determine compliance with applicable regulations.

The manufacturing techniques and facilities used for the manufacture and supply of our products must be operated in conformity with current Good Manufacturing Practices, or cGMP, regulations promulgated by the FDA. In complying with cGMP requirements, we, along with our suppliers, must continually expend time, money and effort in production, record keeping, and quality assurance and control to ensure that our products meet applicable specifications and other requirements for safety, efficacy and quality. In addition, we, along with our suppliers, are subject to unannounced inspections by the FDA and other regulatory authorities.

Any failure to comply with regulatory and other legal requirements applicable to the manufacture, supply and distribution of our products could lead to remedial action (such as recalls), civil and criminal penalties and delays in manufacture, supply and distribution of our products. In addition, we may from time to time be forced to delay the launch of new products or carry out voluntary recalls to address unforeseen design difficulties or defects.

We must comply with federal, state and foreign laws and regulations relating to the healthcare business, and, if we do not fully comply with such laws and regulations, we could face substantial penalties and other negative impacts on our business.

We and our suppliers and customers are subject to extensive regulation by the federal government, and the governments of the states and foreign countries in which we may conduct our business. In the United States, the laws that directly or indirectly affect our ability to operate our business include the following:

Defendants determined to be liable under the False Claims Act may be required to pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. Typically, each fraudulent bill submitted by a provider is considered a separate false claim, and thus the penalties under a false claim case may be substantial. Liability arises when an entity knowingly submits, or causes to be submitted, a false claim for reimbursement to the federal government. In some cases, whistleblowers or the federal government have taken the position that companies that (i) allegedly have violated other laws, such as the prohibition of off-label promotion or the anti-kickback laws, and (ii) have submitted or caused to be submitted claims to a governmental payor during the time period in which they allegedly violated these other laws, have thereby also violated the False Claims Act.

The federal Anti-Kickback Statute is broad and prohibits many arrangements that may be lawful in other businesses outside the healthcare industry. Recognizing that the statute may technically prohibit innocuous and beneficial arrangements, Congress authorized the creation of several "safe harbors" that exempt certain practices from enforcement under the Anti-Kickback Statute. We seek to comply with such safe harbors wherever possible. However, safe harbor protection is only available for transactions that satisfy all of the applicable narrowly defined safe harbor provisions. Therefore, we may from time to time enter into arrangements that may not be afforded safe harbor protection. For example, like many healthcare companies, we have endowed professorships and fellowships at major academic medical centers to advance critical care research and enhance our corporate image. Arrangements that do not fall within a safe harbor may face increased scrutiny. While we believe we have structured our business and arrangements to comply with the federal Anti-Kickback Statute and similar state laws, it is possible that government authorities could determine that we have not.

If our operations are found to be in violation of any of the laws and regulations described above or any other law or governmental regulation to which we or our customers are or will be subject, we may be subject to civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of our operations. Similarly, if our customers are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations would adversely affect our ability to operate our business and our financial results. Any

action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation.

Failure to obtain regulatory approval in international jurisdictions would prevent us from marketing products abroad.

In addition to our foreign marketing efforts with respect to INOMAX, we may in the future seek to market some of our other products or product candidates outside the United States. In order to market our product candidates in other jurisdictions, we must submit clinical data concerning our product candidates and obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval from foreign regulators may be longer than the time required to obtain FDA approval. The regulatory approval process outside the United States may include all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product candidate be approved for reimbursement before it can be approved for sale in that country. In some cases, this may include approval of the price we intend to charge for our product, if approved.

We may not obtain approvals from regulatory authorities outside the United States on a timely basis, or at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA, but a failure or delay in obtaining regulatory approval in one country may negatively affect the regulatory process in other countries. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize any products in any market and therefore may not be able to generate sufficient revenues to support our business.

If we fail to comply with the extensive regulatory requirements to which we and our products are subject, our products could be subject to restrictions or withdrawal from the market and we could be subject to penalties.

The testing, manufacturing, labeling, safety, advertising, promotion, storage, sales, distribution, export and marketing, among other things, of our products, both before and after approval, are subject to extensive regulation by governmental authorities in the United States, Canada and elsewhere throughout the world. Both before and after approval of a product, quality control and manufacturing procedures must conform to cGMP. Regulatory authorities, including the FDA, periodically inspect manufacturing facilities to assess compliance with cGMP. Our failure or the failure of our contract manufacturers to comply with the laws administered by the FDA or other governmental authorities could result in, among other things, any of the following:

We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.

Certain aspects of our business are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage, handling, treatment and disposal of materials. For example, high-pressure gas cylinders can be regarded as hazardous materials. Although we believe our safety procedures for handling and disposing of these materials and waste products comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We do not maintain insurance for any environmental liability or toxic tort claims that may be asserted against us.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. We can make no assurance that our employees or other agents will not engage in prohibited conduct under our policies and procedures and the Foreign Corrupt Practices Act for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Governments may impose price controls, which may adversely affect our future profitability.

We intend to seek approval to market our future products in the United States and in foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions, we will be subject to rules and regulations in those jurisdictions relating to our product. In some foreign countries, particularly in the European Union, the pricing of prescription pharmaceuticals and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

Healthcare reform measures, if implemented, could hinder or prevent our commercial success.

There have been, and likely will continue to be, legislative and regulatory measures proposed by federal and state governments directed at broadening access to healthcare and containing or lowering the costs of healthcare. On March 23, 2010, President Obama signed into law the PPACA, a legislative overhaul of the U.S. healthcare system, which may have far reaching consequences for drug and device manufacturers like us. In particular, there are elements of this legislation that are aimed at promoting the greater use of comparative effectiveness research as well as various pilot and demonstration programs that have the potential to impact reimbursement and patient access for our product and product candidates, and which may materially impact aspects of our business. Additionally, the new legislation mandates fees on drug manufacturers totaling $2.5 billion in 2011, $2.8 billion in 2012 and 2013 and over $20 billion over the next 10 years. These taxes represent a significant increase in the tax burden on the drug and device industries and may have a material and adverse impact on our operations and cash flow.

We cannot predict the precise terms of the initiatives that may be adopted in the future. There will be continuing efforts by government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare that may adversely affect:

We may be unsuccessful in our efforts to develop and obtain regulatory approval for new products, which may significantly impair our growth and ability to remain profitable.

Our long-term prospects depend, in large part, on successful development, or acquisition or licensing, and commercialization of our product candidates, including LUCASSIN and IK-5001. Our product candidates are in various stages of development. We cannot be certain that we will be able to develop or acquire and commercially introduce new products in a timely manner or that new products, if developed, will be approved for the indications, and/or with the labeling, we expect or that they will achieve market acceptance. Before we commercialize any product candidate, we will need to develop the product candidate by completing successful clinical trials, submit a new drug application, or NDA; or supplemental NDA, or sNDA, that is accepted by the FDA and receive FDA approval to market the product candidate. If we fail to successfully develop a product candidate and/or the FDA delays or denies approval of any NDA or sNDA, then commercialization of our product candidates may be delayed or terminated, which could have a material adverse effect on our business. For example, after considering the NDA submitted by Orphan Therapeutics, LLC, or Orphan, the former owner of the NDA for our product candidate LUCASSIN, the FDA issued a complete response letter stating that the NDA did not contain sufficient data to support approval and requesting at least one additional well-controlled Phase 3 trial be conducted to supplement the existing data.

Clinical trials of product candidates are expensive and time consuming, and the results of these trials are uncertain.

Before we can obtain regulatory approvals to market any product for a particular indication, we will be required to complete preclinical studies and extensive clinical trials in humans to demonstrate the safety and efficacy of such product for such indication.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. Furthermore, there are few drugs that have been approved in critical care indications. It is often difficult to design and carry out clinical trials for critical care indications for a number of reasons, including ethical concerns with conducting placebo-controlled studies in critically ill patients, the difficulty in meeting endpoints tied to mortality and the heterogeneity of underlying conditions. For the foregoing reasons, we may not be able to develop clinical trials for some of our product candidates that will be acceptable to the FDA. Success in preclinical testing or early clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. An unexpected result in one or more of our clinical trials can occur at any stage of testing due to drug effect or trial design. For example, in 2008 we completed a 150 patient Phase 2 clinical trial in patients undergoing left ventricular assist device, or LVAD, insertions

designed to determine if INOMAX reduces the incidence of right ventricular failure and shortens the time needed on mechanical ventilation. However, the trial was underpowered to meet its primary endpoint. Even well-conducted studies of effective drugs will sometimes appear to be negative. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent us from receiving regulatory approval or commercializing our products, including:

The rate of completion of clinical trials depends, in part, upon the rate of enrollment of patients. Patient enrollment is a function of many factors, including the size of the patient population, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments. In particular, the patient population targeted by some of our clinical trials may be small. Delays in patient enrollment in any of our current or future clinical trials may result in increased costs and program delays.

If serious or unanticipated side effects are identified during the development of our product candidates, we may need to abandon our development of any such product candidates.

We are unable to accurately predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. If the effects of our product candidates include undesirable side effects or have characteristics that are unexpected, we may need to abandon our development of those product candidates. In the case of INOMAX, ongoing clinical trials for new indications could uncover safety concerns that impact our existing business. In connection with granting approval for a product or after discovery of previously unknown problems, the FDA also could require us to conduct costly post-marketing testing and surveillance to monitor the safety or efficacy of the product.

If we are unable to expand our sales and marketing capabilities, the commercial opportunity for our product and product candidates may be diminished.

We plan to expand our team of sales professionals as we prepare to support continued growth of INOtherapy and, over time, the expected commercial launch of other products in development, such as LUCASSIN and IK-5001, if and when such products receive required regulatory approvals.

We may not be able to attract, hire, train and retain qualified sales and marketing professionals to augment our existing capabilities in the manner or on the timeframe that we are currently planning. If we are not successful in our efforts to expand our sales team and marketing capabilities, our ability to independently market and sell INOtherapy and any product candidates that we successfully bring to market will be impaired. In such an event, we would likely need to establish a collaboration, co-promotion, distribution, or other similar arrangement to market and sell the product candidate. However, we might not be able to enter into such an arrangement on terms that are favorable to us, or at all.

Expanding our sales team and our marketing group will be expensive and time consuming and could delay a product launch. Similar to other companies such as ours, we will typically expand our sales and marketing capabilities for a product prior to its approval by the FDA so that the product can be commercialized upon approval. If the commercial launch of a product candidate for which we recruit additional sales professionals and expand our marketing capabilities is delayed as a result of FDA requirements or other reasons, we would incur the expense of the additional sales and marketing personnel prior to being able to realize any revenue from the sales of the product candidate. This may be costly, and our investment would be lost if we cannot retain our sales and marketing personnel. Even if we are able to effectively expand our sales team and marketing capabilities, our sales and marketing teams may not be successful in commercializing our products.

Failure to achieve our revenue targets or raise additional funds in the future may require us to delay, reduce the scope of, or eliminate one or more of our planned activities.

The development of INOMAX for additional indications, the development of LUCASSIN, IK-5001 and our other product candidates, as well as any acquisition and subsequent development of additional product candidates by us, will require a commitment of substantial funds. Our future funding requirements, which may be significantly greater than we expect, will depend upon many factors, including:

If our existing resources are insufficient to satisfy our liquidity requirements due to lower than anticipated sales of INOtherapy or higher than anticipated costs, if we acquire additional product candidates or businesses, or if we determine that raising additional capital would be in our interest and the interests of our stockholders, we may sell equity or debt securities or seek additional financing through other arrangements. Any sale of additional equity or debt securities may result in dilution to our stockholders, and debt financing may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. We cannot be certain that public or private financing will be available in amounts or on terms acceptable to us, if at all. If we seek to raise funds through collaboration or licensing arrangements with third parties, we may be required to relinquish rights to products, product candidates or technologies that we would not otherwise relinquish or to grant licenses on terms that may not be favorable to us. If we are unable to obtain additional financing, we may be required to delay, reduce the scope of, or eliminate one or more of our planned research, development and commercialization activities, which could harm our financial condition and operating results.

Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business.

As of April 30, 2010, (i) our wholly owned subsidiary, Ikaria Acquisition Inc., or Ikaria Acquisition, had, and Ikaria, Inc. guaranteed, $175.3 million in principal amount of secured term loan debt and $39.0 million borrowing availability under a revolving line of credit and (ii) we, including our subsidiaries, had $85.1 million in cash and cash equivalents. Ikaria Acquisition may borrow all or part of the amount available under this line of credit and incur additional indebtedness beyond such amount. The credit facility imposes, and the terms of any future indebtedness may impose, operating and other restrictions, including limits on Ikaria Acquisition's ability to distribute or dividend funds to Ikaria, Inc. as the parent company.

Our substantial debt or the terms of our debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

We are vulnerable to increases in the market rate of interest because our credit agreement debt bears interest at a variable rate, including one-, three- and six-month LIBOR loans. If the market rate of interest increases, we will have to pay additional interest on our outstanding debt, which would reduce cash available for our other business needs.

We intend to satisfy our current and future debt service obligations with cash flow from net sales, our existing cash and cash equivalents and, in the case of principal payments at maturity, funds from external sources, as needed. However, we may not have sufficient funds or may be unable to arrange

for additional financing to pay the amounts due under our existing debt facility. Funds from external sources may not be available on acceptable terms, if at all.

Our current credit facility requires us to maintain compliance with specified financial ratios, annual limits on capital expenditures as well as other non-financial covenants. While we are currently in compliance with these covenants, we cannot assure you that we will be able to maintain compliance with the financial ratio covenants, which will be affected by certain events both within and beyond our control, or the other covenants.

A failure to comply with the covenants under our existing credit facility could result in an event of default under those instruments. In the event of an acceleration of amounts due under our debt instruments as a result of an event of default or the occurrence of a mandatory prepayment event, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the lenders could seek to enforce security interests in the collateral securing such indebtedness. Because of the covenants under our existing credit facility and the pledge of our assets as collateral, we have a limited ability to obtain additional debt financing.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

As widely reported, global credit and financial markets have been experiencing extreme disruptions over the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by the recent economic downturn and volatile business environment and continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate further, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, suppliers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

At April 30, 2010, we had $85.1 million of cash and cash equivalents consisting of cash and money market deposit account balances. No assurance can be given that further deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives.

There is also a possibility that our stock price will decline following this offering, due, in part, to the volatility of the stock market and the general economic downturn.

If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements prove inaccurate, our actual results may vary from those reflected in our projections and accruals.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. However, actual results may differ significantly from these estimates.

If we fail to acquire and develop additional product candidates or approved products, it will impair our ability to grow.

We have a single product, INOMAX, approved for marketing in a single indication. In order to generate additional revenue, we have acquired rights to other product candidates, including LUCASSIN, IK-5001, IK-1001 and the IK-600X portfolio and intend to continue to acquire rights to and develop, additional product candidates or approved products. The success of this growth strategy depends upon our ability to identify, select and acquire therapeutics and interventions that meet the criteria we have established. We are largely dependent upon other healthcare companies and researchers to sell or license product candidates to us. We will be required to integrate any acquired products into our existing operations. Managing the development of a new product entails numerous financial and operational risks, including difficulties in attracting qualified employees to develop the product.

Prior to commercial sale, we will need to devote substantial development and research efforts to any product candidates we acquire, including extensive preclinical and/or clinical testing and regulatory correspondence, submissions and approvals. All product candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be safe or effective or approved by regulatory authorities.

In addition, we cannot assure you that any approved products that we develop or acquire will be:

Furthermore, proposing, negotiating and implementing an economically viable acquisition is a lengthy and complex process and properly valuing new drugs is an inexact art. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition of product candidates and approved products. We may not be able to acquire the rights to additional product candidates and approved products on terms that we find acceptable, or at all.

Our key product candidates currently in development are exclusively licensed from other companies. If the licensors terminate the licenses, or fail to maintain or enforce the underlying patents, our competitive position and market share will be harmed.

We have licensed IK-5001, IK-1001 and the IK-600X portfolio from other companies. In particular, we hold an exclusive license, in certain territories and subject to certain retained rights of the applicable licensor, from BioLineRx Ltd., or BioLine, for IK-5001, from Fred Hutchinson Cancer Research Center, or FHCRC, for IK-1001 and from Fibrex Medical, Inc., or Fibrex, for the IK-600X portfolio. We have an agreement with Orphan pursuant to which we acquired rights to LUCASSIN. In spite of our best efforts, these third parties may conclude that we materially breached our agreements and might, therefore, terminate the agreements, thereby removing our ability to obtain regulatory approval and to market products covered by these agreements. If we fail to use commercially reasonable efforts to develop, market, commercialize and sell LUCASSIN, Orphan has the right to terminate the agreement if we fail to use such efforts during the six months following notice from Orphan. Orphan also has the right to terminate the agreement after notice and a cure period. If the agreement is terminated, our exclusive rights from Orphan will terminate and Orphan will have the right to reacquire LUCASSIN from us, on pre-agreed terms. We are obligated to use commercially reasonable efforts to develop and commercialize at least one product containing IK-5001 and at least

one product containing an IK-600X compound. Both BioLine and FHCRC have the right to terminate their license agreements with us for an uncured material breach by us, upon which our exclusive licenses for the corresponding products or product candidates will terminate. Fibrex has the right to terminate the agreement related to the IK-600X portfolio for an uncured material breach by us. If Fibrex terminates the agreement for our uncured material breach, our exclusive licenses from Fibrex will terminate and Fibrex will have the right to acquire rights to any terminated product(s) from us on terms to be negotiated under specified guidelines.

We are likely to enter into additional license agreements as part of the development of our business in the future. Our licensors may not successfully prosecute certain patent applications under which we are licensed and on which our business depends. Even if patents issue from these applications, our licensors may fail to maintain these patents, may decide not to pursue litigation against third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity or unenforceability. If these in-licenses are terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products identical to ours. This could have a material adverse effect on our competitive business position and our business prospects.

We plan to consider, and may enter into, transactions in which we would acquire other companies or businesses, partner with other companies, or license intellectual property or product rights. Any such transaction may subject us to a number of different risks or result in us experiencing significant expenses that may adversely affect our business, results of operations, stock price and financial condition.

As part of our efforts to enter into transactions in which we would acquire other companies or businesses, partner with other companies, or license intellectual property or product rights, we conduct business, legal and financial due diligence with the goal of identifying and evaluating material risks involved in the transaction and also make estimates as to the value of the transaction. Despite our efforts, we may be unsuccessful in ascertaining or evaluating all such risks or making accurate estimates, and, as a result, we might not realize the expected advantages and benefits of the transaction. If we fail to realize the expected advantages and benefits from transactions we have consummated or may consummate in the future, whether as a result of unidentified risks, inaccurate estimates, integration difficulties, regulatory setbacks or other actions or events, our business, results of operations and financial condition could be adversely affected.

We may incur charges to earnings related to our efforts to consummate transactions.

We may incur charges to earnings related to our efforts to consummate transactions. For transactions that ultimately are not consummated, these charges may include fees and expenses for investment bankers, attorneys, accountants, consultants and other advisors in connection with our efforts. Even if our efforts are successful, we may incur as part of a transaction substantial charges for closing costs associated with the elimination of duplicate operations and facilities and acquired in-process research and development charges. In either case, the incurrence of these charges could adversely affect our results of operations for particular quarterly or annual periods.

We may be unable to successfully consolidate and integrate the operations of businesses, products, or rights we acquire, which may adversely affect our business, results of operations, stock price and financial condition.

We may seek to consolidate and integrate the operations of acquired businesses, products or rights with our business. Integration efforts often take a significant amount of time, place a significant strain on our managerial, operational and financial resources and could prove to be more difficult and expensive than we estimate, especially if key employees of target businesses leave with know-how that is integral to such business. The diversion of our management's attention and any delays or difficulties encountered in connection with these recent acquisitions, and any future acquisitions we may consummate, could result in the disruption of our ongoing business or inconsistencies in standards,

controls, procedures and policies that could negatively affect our ability to maintain relationships with customers, suppliers, employees and others with whom we have business dealings.

We face substantial competition, which may result in others developing or commercializing products before, or more successfully than, we do.

Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the development and commercialization of INOMAX and our other product candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability and safety.

There are other biopharmaceutical companies, such as Cubist Pharmaceuticals, Inc., The Medicines Company and Talecris Biotherapeutics, Inc., focused on developing therapies for the critical care market. There are also hospital product companies, such as Baxter Healthcare Corporation, that also have pharmaceutical divisions that could potentially develop products that compete with ours. It is possible that the number of companies seeking to develop products and therapies for the treatment of unmet needs in critical care will increase.

Many of our potential competitors have substantially greater financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial infrastructures than we have. We will not be able to compete effectively unless we successfully:

The biotechnology and pharmaceutical industry is characterized by rapid technological developments and a high degree of competition. As a result, our products could become obsolete.

Our industry is highly competitive. Potential competitors in the United States and other countries include major pharmaceutical and chemical companies, medical device companies, specialized pharmaceutical companies and biotechnology firms, and universities and other research institutions. Many of our competitors have substantially greater capital resources, research and development staffs, and facilities than we have. In addition, many of our competitors also have substantially greater experience in conducting clinical trials, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products and medical devices. These entities represent significant competition for us. Competition and innovation from these or other sources, including advances in current treatment methods, could potentially affect sales of our products negatively or make our products obsolete. Furthermore, we may be at a competitive marketing disadvantage against companies that have broader product lines and whose sales personnel are able to offer more complementary products than we can. Any failure to maintain our competitive position could adversely affect our business and results of operations. In addition, as we lose patent protection or marketing exclusivity on our products over time, we will likely have to compete with generic versions of our products.

If LUCASSIN is approved by the FDA, we expect that it will compete with a combination of midodrine, a vasopressor, and octreotide, a vasodilation inhibitor. If another therapy proves to treat HRS Type 1 better than LUCASSIN, or reduces the incidence of HRS Type 1, our business would be adversely affected.

If another therapy proves to prevent or treat cardiac remodeling or CHF following AMI better than IK-5001, or reduces the incidence of AMI, our business would be adversely affected.

If we fail to attract and retain senior management and key scientific and engineering personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical, scientific and engineering personnel. We are highly dependent upon our senior management, as well as other senior scientists and members of our management team. The loss of services of any of these individuals or one or more of our other members of senior management could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of our product candidates. We do not carry "key person" insurance covering any members of our senior management.

We need to hire and retain qualified personnel for the development, manufacture and commercialization of drugs and medical devices. We could experience problems in the future attracting and retaining qualified employees. For example, competition for qualified personnel in the biotechnology and pharmaceuticals field is intense and it is uncommon for potential employees to have capabilities relating to both drugs and medical devices. We will need to hire additional personnel as we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms who have the expertise we need to sustain and grow our business.

As the sole manufacturer and supplier of INOtherapy in the United States, we are also highly dependent on our manufacturing, engineering, equipment service and operations staff. We experience intense competition for qualified manufacturing, engineering, equipment service and operations personnel. Our future success depends, in part, on the continued service of our personnel and our ability to recruit, train and retain highly qualified manufacturing, engineering, equipment service and operations personnel. The loss in service of any of these key personnel may affect our ability to manufacture, service or distribute INOtherapy or any future products we may develop.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately, to disclose unauthorized activities to us or to comply with our Code of Business Conduct and Ethics for Officers and Employees. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, false claims, inappropriate promotion, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible for our chief compliance officer, who works to ensure that we and our employees are in compliance with applicable rules, regulations and company policies, to identify and deter employee misconduct. The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

In addition, during the course of our operations, our directors, executives and employees may have access to material, non-public information regarding our business, our results of operations or potential transactions we are considering. We may not be able to prevent a director, executive or employee from violating our insider trading policies and trading in our common stock on the basis of, or while having access to, material, non-public information. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, engineering, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and face an even greater risk with respect to our commercialized products. We may be sued if INOMAX or any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. In addition, we may be sued if our drug-delivery systems malfunction or are alleged to have malfunctioned. We have been, and may in the future be, sued if our drug-delivery systems fail to provide adequate warnings. We could also be sued if our drug-delivery systems fail to adequately monitor for nitrogen dioxide, which forms when nitric oxide mixes with oxygen in the air. Elevated levels of nitrogen dioxide can be toxic and lead to decreased pulmonary function, chronic bronchitis, chest pain and pulmonary edema. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We currently carry product liability insurance covering our product and clinical studies in the amount of $50 million in the aggregate. Any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

As our product is used commercially, unintended side effects, adverse reactions or incidents of misuse may occur that could result in additional regulatory controls, changes to product labeling, adverse publicity and reduced sales of our products.

During research and development, the use of pharmaceutical products, such as ours, is limited principally to clinical trial patients under controlled conditions and under the care of expert physicians. The widespread commercial use of INOMAX or other products that we may develop could uncover undesirable or unintended side effects that were not exhibited in our clinical trials or the commercial use as of the filing date of this prospectus. We train healthcare professionals on the proper use of our drug and drug-delivery systems. However, healthcare professionals from time to time operate our drug-delivery systems incorrectly.

In addition, an affiliate of Linde has marketing rights to INOMAX in the European Union and specified countries near the European Union. Linde's primary focus is not INOMAX, as it represents a de minimis amount of their revenue. If there were a serious adverse event or complication related to the use of INOMAX in the European Union, or any territory where Linde markets and sells INOMAX, it could have a material adverse effect on our business, financial condition and results of operations.

These events, among others, could result in adverse publicity that harms the commercial prospects of INOMAX or other products we may develop or lead to additional regulatory controls that could limit the circumstances under which the product is prescribed or used or even lead to the withdrawal of the product from the market.

Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our products profitably.

Market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for any of our product candidates and may be affected by existing and future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor's determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products.

In the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In particular, the Medicare Modernization Act of 2003 revised the payment methodology for many products under Medicare. This has resulted in lower rates of reimbursement. There have been numerous other federal and state initiatives designed to reduce payment for pharmaceuticals.

As a result of legislative proposals and the trend towards managed healthcare in the United States, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs. They may also refuse to provide any coverage of approved products for medical conditions other than those for which the FDA has granted market approvals. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs. We expect to experience pricing pressures in connection with the sale of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, additional legislative proposals, as well as national, regional or local healthcare budget limitations.

We are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory authority is satisfied that we have presented adequate evidence of safety, quality and efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing or sale of the product in those countries. The time needed to secure approval may be longer or shorter than that required for FDA approval. The regulatory approval and oversight process in other countries includes all of the risks associated with regulation by the FDA and certain state regulatory agencies as described above.

We rely on third parties for important aspects of our commercialization infrastructure for INOtherapy and failure of these third parties to fulfill these functions would disrupt our business.

We do not have, nor do we intend to establish in the near term, our own warehousing, distribution, and service centers in certain regions in North America or Canada. Accordingly, we have entered into agreements with local third-party providers. Our third-party providers may not be able to warehouse, distribute, or service our products without interruption, or may not comply with their other contractual obligations to us. Any failure of any of those third-party providers to fully and timely perform their obligations may result in an interruption in the supply of INOtherapy in the affected geographic area. Also, we may not have adequate remedies for any breach of our agreements with such

third-party providers. Furthermore, if any of our third-party distributors ceases doing business with us or materially reduces the amount of services they perform for us, and we cannot enter into agreements with replacement service providers on commercially reasonable terms, we might not be able to effectively distribute our products to all geographic locations we currently serve.

We rely on third-party manufacturers to produce clinical drug supplies for our product candidates, and we intend to rely on third parties to produce commercial supplies of any approved product candidates. Any failure by a third-party manufacturer to produce supplies for us may delay or impair our ability to complete our clinical trials or commercialize our product candidates.

We have relied upon a small number of third-party manufacturers for the manufacture of our product candidates for preclinical and clinical testing purposes and intend to continue to do so in the future. We may need to identify a third-party manufacturer capable of providing commercial quantities of drug product. If we are unable to arrange for such a third-party manufacturing source, or fail to do so on commercially reasonable terms, we may not be able to successfully produce and market our product candidates or may be delayed in doing so.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards. Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates. In addition, such failure could be the basis for action by the FDA to withdraw approvals for product candidates previously granted to us and for other regulatory action, including recall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions.

We rely on our manufacturers to purchase the materials necessary to produce our product candidates for our clinical studies from third-party suppliers. There are a small number of suppliers for certain capital equipment and raw materials that are used to manufacture our drugs. Such suppliers may not sell these raw materials to our manufacturers at the times we need them or on commercially reasonable terms. We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Any significant delay in the supply of a product candidate or the raw material components thereof for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.

Because of the complex nature of many of our other compounds, our manufacturers may not be able to manufacture such other compounds at a cost or in quantities or in a timely manner necessary to develop and commercialize other products. If we successfully commercialize any of our product candidates, we may be required to establish or access large-scale commercial manufacturing capabilities. In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates and we currently have no plans to build our own clinical or commercial scale manufacturing capabilities. To meet our projected needs for commercial manufacturing, third parties with whom we currently work will need to increase their scale of production or we will need to secure alternate suppliers.

We rely on third parties to conduct clinical trials for our product candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

We design the clinical trials for our product candidates, but we rely on contract research organizations and other third parties to assist us in managing, monitoring and otherwise carrying out many of these trials. We compete with larger companies for the resources of these third parties.

Although we rely on these third parties to conduct many of our clinical trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to as good clinical practices, for designing, conducting, monitoring, recording, analyzing, and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements.

The third parties on whom we rely generally may terminate their engagements with us at any time and having to enter into alternative arrangements would delay introduction of our product candidates to market.

If these third parties do not successfully carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our clinical trial protocols or regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates.

We may not be able to maintain adequate protection for our intellectual property and competitors may develop similar competing products, which could result in a decrease in sales, cause us to further reduce prices to compete successfully and limit our commercial success.

We place considerable importance on obtaining patent protection for new technologies, products and processes. To that end, we file applications for patents covering compositions or uses of our product candidates or our proprietary processes. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal, scientific and factual questions. Accordingly, the patents and patent applications relating to our products, product candidates and technologies may be challenged, invalidated or circumvented by third parties and might not protect us against competitors with similar products or technologies. Patent disputes in our industry are frequent, expensive and can preclude commercialization of products. If we ultimately engage in and lose any such disputes in the future, we could be subject to increased competition or significant liabilities, we could be required to enter into third-party licenses or we could be required to cease using the technology or selling the product in dispute. In addition, even if such licenses are available, the terms of any licenses requested by a third party could be unacceptable to us.

We also rely on trade secrets, know-how and continuing technological advancements to support our competitive position. Although we have entered into confidentiality and invention rights agreements with certain of our employees, consultants, advisors and collaborators, we may be unable to enforce such agreements or effectively protect our rights to our trade secrets and know-how. In addition, we may be subject to allegations of trade secret violations and other claims.

If we are unable to obtain or maintain patent protection for the intellectual property relating to our products, the value of our products could be adversely affected.

The patent positions of companies like us are generally uncertain and involve complex legal, scientific and factual issues. Our success depends significantly on our ability to:

We may not have any additional patents issued from any patent applications that we own or license. For example, we recently filed a U.S. patent application containing claims directed towards new inventions that led to amendments to the warnings and precautions section of the INOMAX prescribing information necessary for the safe and effective use of INOMAX. The U.S. Patent and Trademark Office, or the USPTO, has not taken any action with respect to this patent, and the patent may not be issued before 2013, when our existing patents relating to INOMAX expire, or may never be issued at all. If additional patents are granted, the claims allowed may not be sufficiently broad to protect our inventions. In addition, issued patents that we own or license may be challenged, narrowed, invalidated or circumvented, which could limit our ability to prevent competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that others have not filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications.

Issued patents covering one or more of our products or product candidates could be found invalid or unenforceable if challenged in court.

If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or product candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. We endeavor to conduct due diligence on patents we have exclusively in-licensed, and we believe that we conduct our patent prosecution in accordance with the duty of candor and in good faith. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one of our products or product candidates. Such a loss of patent protection could have a material adverse impact on our business.

If we infringe or are alleged to infringe intellectual property rights of third parties, it will adversely affect our business.

Our research, development and commercialization activities, as well as any products or product candidates resulting from these activities including INOMAX and any of our current or future drug-delivery systems, may infringe or be claimed to infringe upon patents or patent applications under which we do not hold licenses or other rights. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the USPTO and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Unfavorable outcomes in intellectual property litigation could limit our research and development activities and/or our ability to commercialize certain products.

If third parties successfully assert intellectual property rights against us, we might be barred from using certain aspects of our technology platform, or barred from developing and commercializing certain products. Prohibitions against using certain technologies, or prohibitions against commercializing certain products, could be imposed by a court or by a settlement agreement between us and a plaintiff. In addition, if we are unsuccessful in defending against allegations of patent infringement or misappropriation of trade secrets, we may be forced to pay substantial damage awards to the plaintiff. There is inevitable uncertainty in any litigation, including intellectual property litigation. There can be no assurance that we would prevail in any intellectual property litigation, even if the case against us is weak or flawed. If litigation leads to an outcome unfavorable to us, we may be required to obtain a license from the patent owner, in order to continue our research and development programs or to market our products. It is possible that the necessary license will not be available to us on commercially acceptable terms, or at all. This could limit our research and development activities, our ability to commercialize certain products, or both.

Most of our competitors and potential competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation

longer than we could. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into strategic partnerships that would help us bring our product candidates to market.

In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of our personnel. An adverse outcome in such litigation or proceedings may expose us or our strategic partners to loss of our proprietary position, expose us to significant liabilities, or require us to seek licenses that may not be available on commercially acceptable terms, or at all.

Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common stock to decline.

During the course of any patent litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our products, development programs, or intellectual property could be diminished. Accordingly, the market price of our common stock may decline.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.

In addition to patents, we rely on trade secrets, technical know-how, and proprietary information concerning our business strategy in order to protect our inventions and exclusivity. In the course of our research and development activities and our business activities, we often rely on confidentiality agreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors of laboratory or clinical development services or potential strategic partners. In addition, each of our employees is required to sign a confidentiality agreement upon joining our company. There can be no guarantee that an employee or an outside party will not make an unauthorized disclosure of our proprietary confidential information. This might happen intentionally or inadvertently. It is possible that a competitor will make use of such information, and that our competitive position will be compromised, despite any legal action we might take against persons making such unauthorized disclosures.

Trade secrets are difficult to protect. Our employees, consultants, advisors, contractors, or outside scientific collaborators might intentionally or inadvertently disclose our trade secret information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

Certain of our partners may have rights to publish data and other information to which we have rights. In addition, we sometimes engage individuals or entities to conduct research relevant to our business. The ability of these individuals or entities to publish or otherwise publicly disclose data and other information generated during the course of their research is subject to certain contractual limitations. These contractual provisions may be insufficient or inadequate to protect our confidential information. If we do not apply for patent protection prior to such publication, or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain. In addition, Congress may pass patent reform legislation. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

You will not have the same protections available to other shareholders of NASDAQ-listed companies because we are a "controlled company" within the meaning of The NASDAQ Global Market's standards and, as a result, will qualify for, and will rely on, exemptions from several corporate governance requirements.

Certain of our stockholders are parties to a voting agreement and intend to report that they hold their shares of our stock as part of a group. Upon completion of this offering, these stockholders, the New Mountain Entities; Linde; ARCH; and Venrock IV, Venrock Partners and Venrock Entrepreneurs, collectively the Venrock Entities, are expected to control a majority of our outstanding capital stock and will be able to elect a majority of our directors. As a result, we will be a "controlled company" within the meaning of the rules governing companies with stock quoted on The NASDAQ Global Market. Under these rules, a company as to which an individual, a group or another company holds more than 50% of the voting power is considered a "controlled company" and can choose to be exempt from the following corporate governance requirements:

Following this offering, we intend to avail ourselves of these exemptions. In addition, because we are listing our common stock in connection with an initial public offering, following this offering our audit committee will not consist entirely of independent directors. Furthermore, our lead director, Alok Singh, will not be independent and our compensation committee will not have a majority of independent directors. Accordingly, you will not have the same protections afforded to shareholders of other companies that are subject to all of The NASDAQ Global Market corporate governance requirements as long as the Controlling Entities own a majority of our outstanding capital stock.

Our stock price may be volatile, and the market price of our common stock after this offering may drop below the price you pay.

The market price of our common stock could be subject to significant fluctuations after this offering, and it may decline below the initial public offering price. Market prices for securities of healthcare companies have historically been particularly volatile. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. Some of the factors that may cause the market price of our common stock to fluctuate include:

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time after the expiration of the lock-up agreements described in the "Underwriting" section of this prospectus. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have shares of common stock outstanding based on the number of shares outstanding as of . The remaining shares, or % of our outstanding shares after this offering, are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold, subject to any applicable volume limitations under federal securities laws, in the near future as set forth below.

In addition, as of April 30, 2010, there were 9,902,298 shares subject to outstanding options that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements and Rules 144 and 701 under the Securities Act of 1933, as amended. Moreover, after this offering, holders of an aggregate of approximately 93,166,655 shares of our outstanding common stock and common stock issuable upon conversion of our outstanding warrant and series A and series B preferred stock as of April 30, 2010, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity incentive plans. Once we register and issue these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements.

Our largest stockholders will continue to have substantial control over us after this offering and could limit your ability to influence the outcome of key transactions, including any change of control.

Upon the completion of this offering, we anticipate that our largest stockholders, the New Mountain Entities, will own, in the aggregate, approximately % of our outstanding common stock ( % if the underwriters exercise their option to purchase additional shares in full). Following the completion of this offering, (i) the New Mountain Entities are entitled to elect (a) three directors, for so long as they beneficially own 15% or more of our outstanding common stock, (b) two directors, for so long as they beneficially own less than 15% but more than 5% of our outstanding common stock

and (c) one director, for so long as they own less than 5% of our outstanding common stock but more than one share of common stock and (ii) each of ARCH, the Venrock Entities and Linde, each voting as a separate class, is entitled to elect one director for so long as such holder owns 5% or more of our outstanding common stock. In addition, the right to elect one director will be transferrable by the New Mountain Entities when transferred with at least 15,822,967 shares of our common stock issued upon conversion of the series B preferred stock.

The New Mountain Entities will also retain the benefit of the rights conferred by the investor stockholders agreement. See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement." As a result, the New Mountain Entities would be able to exert significant influence over matters requiring board approval, including the compensation and hiring and firing of our senior management, business combinations, issuance of shares of our capital stock, incurrence of debt, and payment of dividends, and their consent would be required for many matters requiring approval by our stockholders. If the New Mountain Entities propose to sell at least 80% of their shares of our common stock issued upon conversion of their series B preferred stock to a third party (which would represent, together with any other shares of capital stock proposed to be transferred, more than 50% of our outstanding capital stock) or we propose to sell or otherwise transfer for value all or substantially all of our stock, assets or business to a third party, then the New Mountain Entities at their option may require (i) in the case of a sale of capital stock by the New Mountain Entities, that each person or entity that held shares of our capital stock prior to this offering, collectively our current stockholders, sell a proportionate amount of such stockholder's shares of capital stock and waive any appraisal right that it may have in connection with the transaction and (ii) in any case, if stockholder approval of the transaction is required and our stockholders are entitled to vote thereon, that that each of our current stockholders vote all of such stockholder's shares of our capital stock in favor of such transaction. These rights will terminate when the New Mountain Entities and their assignees beneficially own less than 20% of our outstanding capital stock. See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement" and "—Common Stockholders Agreement" included elsewhere in this prospectus. Upon completion of this offering, we anticipate that the New Mountain Entities together with our current stockholders will own, in the aggregate, approximately % of our outstanding common stock ( % if the underwriters exercise their option to purchase additional shares in full).

The New Mountain Entities may have interests that differ from your interests, and they may vote in a way with which you disagree and that may be adverse to your interests. The concentration of ownership of our capital stock may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and may adversely affect the market price of our common stock. See "Related Person Transactions—Investor Stockholders Agreement."

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The assumed initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $ in net tangible book value per share from the price you paid. In addition, following this offering, purchasers in the offering will have contributed % of the total consideration paid by our stockholders to purchase shares of common stock. Moreover, we issued options in the past to acquire common stock at prices significantly below the assumed initial public offering price. As of December 31, 2009, 8,826,992 shares of common stock were issuable upon exercise of outstanding stock options with a weighted average exercise price of $5.30 per share.

To the extent that these outstanding options are ultimately exercised, you will incur further dilution. For a further description of the dilution that you will experience immediately after this offering, see the "Dilution" section of this prospectus.

Our management will have broad discretion over the use of the net proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds of this offering in ways that increase the value of your investment. We expect to use the net proceeds from this offering for the repayment of indebtedness, capital expenditures and general corporate purposes and working capital, which may in the future include investments in, or acquisitions of, complementary businesses, services or technologies. The failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our ability to produce accurate financial statements and on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. We have not been subject to these requirements in the past. The internal control report must contain (i) a statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting, (ii) a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of our internal control over financial reporting, (iii) management's assessment of the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective, and (iv) a statement that our independent registered public accounting firm has issued an attestation report on internal control over financial reporting.

To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to (i) assess and document the adequacy of internal control over financial reporting, (ii) continue steps to improve control processes where appropriate, (iii) validate through testing that controls are functioning as documented, and (iv) implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, we can provide no assurance as to our, or our independent registered public accounting firm's, conclusions with respect to the effectiveness of our internal control over financial reporting under Section 404. There is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Our independent registered public accounting firm previously identified material weaknesses in our internal control over financial reporting. If we fail to achieve and maintain effective internal control over financial reporting, we could face difficulties in preparing timely and accurate financial reports, which could result in a loss of investor confidence in our reported results and a decline in our stock price.

In connection with its audit of our consolidated financial statements for the years ended December 31, 2007 and 2008, KPMG LLP, our independent registered public accounting firm, identified material weaknesses in our internal control over financial reporting. Statement on Auditing Standard No. 115 (SAS No. 115), which supersedes Statement on Auditing Standard No. 112, defines a material weakness as a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

The two material weaknesses identified during the 2007 audit related to (i) ineffective policies and procedures around purchase accounting related to the 2007 acquisitions of INO Therapeutics and Ikaria Research, Inc. and (ii) ineffective policies and procedures with respect to the preparation and management review of our consolidated financial statements. We remediated both of these material weaknesses during 2008 by adding key personnel, which resulted in enhanced expertise within the finance department, and by implementing more effective management review practices.

The material weakness identified during the 2008 audit related to ineffective policies and procedures around the calculation of our unbilled revenue estimate. This calculation involved an estimate of (i) gross revenue earned from the delivery of INOtherapy to a patient for which an invoice had not yet been issued and (ii) credits to be issued subsequent to year-end on both billed and unbilled revenue. We remediated this material weakness during 2009 by implementing more robust reviews around the estimation of net unbilled revenue and by analyzing subsequent actual invoice and credit data prior to finalizing our estimates. With the implementation of the new billing model in 2010, we will no longer need to estimate net unbilled revenue.

Our independent registered public accounting firm completed its audit of our consolidated financial statements for the year ended December 31, 2009 without identifying any ongoing or additional material weaknesses, as defined by SAS No. 115, in our internal control over financial reporting. It is possible that we or our independent registered public accounting firm may identify additional material weaknesses in our internal control over financial reporting in the future. Any failure or difficulties in implementing and maintaining these controls could cause us to fail to meet the periodic reporting obligations that we will become subject to after this offering or result in material misstatements in our consolidated financial statements. The existence of a material weakness could result in errors requiring a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations after this offering and cause investors to lose confidence in our reported financial information, which could lead to a decline in our stock price.

Anti-takeover provisions contained in our certificate of incorporation and by-laws, provisions of Delaware law and our investor stockholders agreement, could impair a takeover attempt.

Our certificate of incorporation, by-laws and Delaware law all contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.

In addition, the New Mountain Entities may require our current stockholders, who will own approximately % of our common stock following this offering, to sell their shares of our stock in connection with, and/or vote these shares in favor of, certain transactions in which the New Mountain Entities propose to sell all or any portion of their shares of our stock or in which we propose to sell or otherwise transfer for value all or substantially all of the stock, assets or business of our company. See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement" and "—Common Stockholders Agreement" included elsewhere in this prospectus.

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this prospectus include, among other things, statements about:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the "Risk Factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements.

We estimate that the net proceeds to us from our issuance and sale of shares of our common stock in this offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and offering expenses.

We intend to use the net proceeds received by us in connection with this offering for the following purposes and in the following amounts:

We expect our new term loan will mature in May 2016 and have an interest rate of LIBOR plus 5.0%, with a 2.0% LIBOR floor.

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development and commercialization efforts, the status of and results from clinical trials, as well as any collaborations that we may enter into with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We have no current understandings, agreements or commitments for any material acquisitions or licenses of any products, businesses or technologies.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

If the underwriters exercise their option to purchase additional shares, the selling stockholders may sell up to shares of their common stock. We will not receive any proceeds from the sale of shares of common stock, if any, by the selling stockholders.

In the second quarter of 2010, we expect to declare and pay a special cash dividend on shares of our capital stock from the proceeds of a new credit facility and cash on hand. The following executive officers and members of our board of directors may receive a dividend in respect of shares of capital stock they own as a result of this special cash dividend: Aldo Belloni, Matthew Bennett, James Briggs, Michael Flaherman, Michael Kennedy, Robert T. Nelsen, Bryan E. Roberts, Stephen Ross, Ralf Rosskamp, Alok Singh, Randy Thurman and Richard Wichansky.

We have not declared or paid any other cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business and, therefore, other than the special cash dividend described above, we do not intend to pay cash dividends to our stockholders in the foreseeable future.

The terms of our existing credit agreement include provisions that restrict the payment of cash dividends on our common stock. In addition, pursuant to our investor stockholders agreement, for as long as the New Mountain Entities and their assignees own at least 15% of our outstanding capital stock we may not pay or declare a dividend or distribution on any shares of our capital stock (other than dividends from a wholly owned subsidiary to its parent company) without their approval.

We anticipate that if we enter into a new credit facility, it will permit the special cash dividend described above, but otherwise restrict payment of cash dividends on our capital stock.

The following table sets forth our cash, cash equivalents and capitalization as of December 31, 2009:

You should read the information in this table together with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

			As of December 31, 2009

			Actual			Pro Forma			Pro Forma As Adjusted⁽¹⁾
			(Unaudited) (Dollars in thousands, except per share data)
Cash and cash equivalents			$	95,226		$	29,080		$

Term loan, including current portion			$	175,721		$	245,000		$
Series A preferred stock warrant				454			—
Series A convertible preferred stock, 11,421,300 shares authorized, 11,361,250 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted				32,152			—
Series B convertible preferred stock, 76,980,900 shares authorized, 76,980,811 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted				356,777			—
Series C-1 - C-4 preferred stock, 400 shares authorized, issued and outstanding, actual, pro forma and pro forma as adjusted				1			1

	Total redeemable preferred stock and warrant			389,384			1
Stockholders' (deficit) equity:
Common stock, par value $0.01 per share; 103,929,200 shares authorized, 3,733,081 shares issued and outstanding, actual; 125,000,000 shares authorized, 93,101,655 shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted				37			931
Non-voting common stock, par value $0.01 per share; 11,859,900 shares authorized, 1,026,513 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted				10			—
Common stock warrant				—			454
Additional paid-in capital				32,795			290,840
Accumulated other comprehensive income (loss)				(1,899	)		143
Accumulated deficit				(187,150	)		(190,915	)

	Total stockholders' (deficit) equity			(156,207	)		101,453

		Total capitalization	$	408,898		$	346,454		$

The outstanding share information in the table above excludes the following as of December 31, 2009:

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering.

Our historical net tangible book value as of was $ million, or $ per share of our common stock. Historical net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding.

Our pro forma net tangible book value as of was $ million, or $ per share of our common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the pro forma number of shares of our common stock outstanding after giving effect to the conversion of all outstanding shares of our series A and series B preferred stock and our non-voting common stock into an aggregate of shares of our common stock upon the closing of this offering.

After giving effect to our issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma net tangible book value as of would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value per share of $ to existing stockholders and immediate dilution of $ in pro forma net tangible book value per share to new investors purchasing common stock in this offering. Dilution per share to new investors is determined by subtracting pro forma net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) our pro forma net tangible book value by approximately $ , our pro forma net tangible book value per share by approximately $ and dilution per share to new investors by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

If any additional shares are issued in connection with outstanding options or warrants, you will experience further dilution.

The following table summarizes, on a pro forma basis as of , the total number of shares purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by new investors in this offering at an assumed initial

public offering price of $ per share, which is the midpoint of the price range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and offering expenses payable by us. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders paid.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the total consideration paid by new investors by $ million and increase (decrease) the percentage of total consideration paid by new investors by approximately %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

The table above is based on shares outstanding as of December 31, 2009 and includes 89,368,574 shares of our common stock issuable upon the conversion of all outstanding shares of our series A preferred stock and series B preferred stock and our non-voting common stock upon the closing of this offering.

If the underwriters exercise their option to purchase additional shares in full, the sale of shares of our common stock by the selling stockholders will reduce the number of shares of our common stock held by existing stockholders from to , or % of the total outstanding shares, and will increase the number of shares of our common stock held by new investors to , or % of the total shares of our common stock outstanding.

The following selected consolidated financial data should be read together with our consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. The selected consolidated financial data in this section is not intended to replace our consolidated financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

The selected consolidated financial data as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007 and for the period from January 1, 2007 through March 27, 2007 have been derived from our consolidated financial statements included elsewhere in this prospectus, which have been audited by KPMG LLP, an independent registered public accounting firm. The selected consolidated financial data as of December 31, 2007, 2006 and 2005 and for the years ended December 31, 2006 and 2005 have been derived from audited consolidated financial statements not included in this prospectus.

From January 1, 2007 through March 27, 2007, we did not conduct any commercial operations. On March 28, 2007, we closed a private offering of our series B convertible preferred stock, which resulted in proceeds of approximately $280 million, and secured $235.0 million in financing from a term loan. With the proceeds from the private placement and term loan and the issuance of stock, options and a warrant, we acquired the net assets of INO and all of the outstanding equity of Ikaria Research, Inc. on March 28, 2007, which we refer to as the "Transaction."

The term Predecessor refers to INO Therapeutics prior to March 28, 2007 and the term Successor refers to Ikaria, Inc. and its consolidated subsidiaries. Our combined results of operations for the year ended December 31, 2007 represent the addition of the Predecessor period from January 1, 2007 through March 27, 2007 and the Successor period from January 1, 2007 through December 31, 2007. This combination does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it provides the most meaningful comparison of our results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" for a discussion of the presentation of our results for the year ended December 31, 2007 on a combined basis.



			Predecessor									Successor			Combined			Successor			Successor
			Year Ended December 31, 2005			Year Ended December 31, 2006			January 1 to March 27, 2007			Year Ended December 31, 2007			Year Ended December 31, 2007			Year Ended December 31, 2008			Year Ended December 31, 2009
			(Amounts in thousands, except per share amounts)
Consolidated Statement of Operations Data:
Revenue:
	Net sales		$	142,519		$	163,536		$	48,270		$	158,479		$	206,749		$	236,731		$	274,342
	Other revenue			1,044			1,314			—			2,450			2,450			63			250

		Total revenues		143,563			164,850			48,270			160,929			209,199			236,794			274,592
Operating Costs and Expenses:
	Cost of sales			37,344			38,516			10,566			102,753			113,319			51,572			52,380
	Selling, general and administrative			39,379			37,358			8,498			33,507			42,005			61,844			83,879
	Research and development			24,779			33,051			8,763			35,202			43,965			68,538			75,421
	Acquisition-related in-process research and development			—			—			—			271,637			271,637			—			—
	Amortization of acquired intangibles			—			—			—			22,187			22,187			30,452			30,720
	Other expenses (income), net			915			1,162			(57	)		(66	)		(123	)		356			(410	)

		Total operating expenses		102,417			110,087			27,770			465,220			492,990			212,762			241,990
Income (loss) from operations				41,146			54,763			20,500			(304,291	)		(283,791	)		24,032			32,602
Interest (expense) income:
	Interest income			302			2,926			63			187			250			229			385
	Interest expense			(136	)		—			—			(14,725	)		(14,725	)		(13,378	)		(9,248	)

		Interest (expense) income, net		166			2,926			63			(14,538	)		(14,475	)		(13,149	)		(8,863	)
Income (loss) before income taxes				41,312			57,689			20,563			(318,829	)		(298,266	)		10,883			23,739
Income tax (expense) benefit				(154	)		(327	)		(8,517	)		109,105			100,588			(1,288	)		(10,760	)

		Net income (loss)	$	41,158		$	57,362		$	12,046		$	(209,724	)	$	(197,678	)	$	9,595		$	12,979

Net income (loss) per common share, basic and diluted												$	(65.28	)				$	0.10		$	0.14
Unaudited pro forma net income per common share, basic and diluted																					$	0.06	(1)

	Predecessor				Successor

	As of December 31,				As of December 31,
	2005		2006		2007			2008			2009
	(Amounts in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	364	$	236	$	3,870		$	51,651		$	95,226
Working capital		50,652		115,622		51,971			72,403			115,342
Total assets		124,822		176,947		422,522			441,569			468,205
Long-term debt, including current portion		—		—		193,513			191,563			175,721
Warrant liability		—		—		298			527			454
Redeemable preferred stock		—		—		388,930			388,930			388,930
Members' equity		96,148		153,510		—			—			—
Total stockholders' deficit		—		—		(192,336	)		(181,382	)		(156,207	)

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Risk Factors" and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

Our net sales are generated from INOtherapy, our all-inclusive offering of drug product, services and technologies, which we first commercialized in 2000. INOtherapy includes our FDA-approved drug INOMAX (nitric oxide) for inhalation, INOcal calibration gases, use of our proprietary FDA-cleared drug-delivery system, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service. INOMAX, the drug included in our INOtherapy offering, is the only treatment approved by the FDA for HRF associated with pulmonary hypertension in term and near-term infants. We sell INOtherapy in the United States, Puerto Rico, Canada, Australia, Mexico and Japan. We manufacture and package INOMAX at our facility in Louisiana and manufacture delivery systems for INOMAX at our facility in Wisconsin. The principal U.S. patents covering INOMAX, which we license from MGH, will expire on January 23, 2013.

In 2009, 2008 and 2007, INOtherapy net sales were $274.3 million, $236.7 million and $206.7 million (on a combined basis—see below), respectively, approximately 95% of which reflects sales in the United States in each of these years.

We were initially incorporated on August 18, 2006 and established for the purpose of acquiring INO Therapeutics, a specialty pharmaceutical company, and Ikaria Research, Inc., a development-stage biotechnology company. From August 18, 2006 through March 27, 2007, we did not conduct any commercial operations. On March 28, 2007, we closed a private offering of our series B preferred stock, which resulted in proceeds of approximately $280 million, and secured $235.0 million in financing from a six-year senior secured term loan, or the Term Loan. With the proceeds from the private placement and the Term Loan and the issuance of stock, stock options and a warrant, we acquired the sole membership interest of INO Therapeutics and all the outstanding equity of Ikaria Research, Inc. on March 28, 2007. This is referred to as the Transaction. In this prospectus, the term Predecessor refers to INO Therapeutics prior to March 28, 2007 and the term Successor refers to us and our consolidated subsidiaries. We have combined the statement of operations for the year ended December 31, 2007 to include the statement of operations of the Successor for the year ended December 31, 2007 (for which there was no activity through March 27, 2007) and the Predecessor for the period January 1, 2007 to March 27, 2007. This combination is not presented in accordance with GAAP or with the rules for pro forma presentation, but is presented because we believe it provides the most meaningful comparison of our results.

On May 10, 2010, our board of directors approved a new credit facility consisting of a $250.0 million term loan and a $40.0 million line of credit, at an interest rate of LIBOR plus 5.0% with a 2.0% LIBOR floor. We expect the new credit facility to close in the second quarter of 2010. Assuming consummation of the new credit facility, we expect to use a portion of the proceeds from the term loan to repay the entire outstanding balance on our existing term loan. We do not expect to draw down on the line of credit at the time the new credit facility closes. On May 10, 2010, our board of directors also declared a cash dividend of $130.0 million, in the aggregate, contingent on the closing of the new credit facility, which we expect to pay to holders of our capital stock in the second quarter of 2010. This dividend will be paid from the remaining proceeds of the new term loan in addition to cash on hand.

On March 29, 2010, Orphan and we amended and restated the terms of our prior August 29, 2008 agreement. Pursuant to this agreement, (i) we made an upfront $5.0 million payment to Orphan on signing the agreement, (ii) we agreed to make a milestone payment upon the approval of a special protocol assessment with the FDA, pursuant to which we and the FDA agree on the design of a pivotal clinical trial for LUCASSIN, (iii) the previously-agreed royalty rates payable by us to Orphan were reduced, (iv) the previously-agreed approval milestone payment to be made by us to Orphan was reduced, and (v) we agreed to assume full control of conducting a pivotal clinical trial for LUCASSIN and to be responsible for LUCASSIN's funding and future regulatory interactions with the FDA.

In March 2010, the PPACA, was signed into law. The PPACA is a legislative overhaul of the U.S. healthcare system which may have far reaching consequences for drug and medical device manufacturers. In particular, there are elements of this legislation that are aimed at reducing spending by promoting the greater use of comparative effectiveness research as well as various pilot and demonstration programs that have the potential to impact reimbursement and patient access for our products, and which may materially impact numerous aspects of our business. The legislation has the potential to significantly increase the tax burden on the drug and medical device industries and may have a material and adverse impact on our operations and cash flow. We do not yet know the full impact this new legislation will have on our business.

We derive revenue primarily from sales of INOtherapy. Historically, we offered INOtherapy at a fixed, hourly rate that was tied directly to the number of hours of INOMAX used. Each product cylinder is equipped with an INOmeter that measures the number of hours and cumulative duration of INOMAX actual usage. We estimated unbilled revenue for INOtherapy that had been used, but for which usage information was not yet available or for which we had not yet otherwise billed. In addition, we recorded INOtherapy revenue net of expected patient credits. Credits were issued, under our expense limitation program, on a per patient basis following application from the hospital for patients who exceeded certain durations.

Effective January 1, 2010, we began implementing a new tier-based billing model, which impacted the way we recognize revenue. For an explanation of the new tier-based billing model, see "Critical Accounting Policies and Significant Estimates—Revenue Recognition."

Cost of sales consists of the expenses associated with producing and distributing INOtherapy to our customers. In particular, our cost of sales includes:

Research and development expenses consist of expenses incurred in connection with the discovery and development of our product candidates. These expenses consist primarily of:

Our research and development programs are focused on developing and commercializing innovative therapies for use in the critical care market. To develop our drug candidates, we use in-house expertise and rely heavily on third-party contractors to perform many activities related to our clinical trials, including patient recruitment, monitoring services and conducting the trials. Conducting clinical trials is a complicated, lengthy and expensive process and may not always meet the intended endpoint or result in regulatory approval of new drug candidates or additional or expanded indications for existing products.

The following table summarizes our research and development expenses for the past five years directly attributable to our product candidates. It does not include the $271.6 million of in-process research and development, or IPR&D, expensed in 2007 arising from the Transaction. Development projects that have been terminated are included in "Terminated projects," and earlier-stage development projects are included in "Other projects." A significant portion of our research and development costs are not tracked by product candidate program as they benefit multiple programs. As a result, we do not allocate salaries, benefits or other indirect costs, such as administration of medical information and regulatory affairs to our development candidates but include these costs in "R&D support."

The combined data for the year ended December 31, 2007 represents the expenses of the Successor for the year ended December 31, 2007 (for which there was no activity through March 27, 2007) and the expenses of the Predecessor for the period January 1, 2007 to March 27, 2007.

		Predecessor				Combined		Successor

(000's)		Year Ended December 31, 2005		Year Ended December 31, 2006		Year Ended December 31, 2007		Year Ended December 31, 2008			Year Ended December 31, 2009			Total
INOtherapy/INOMAX:
	HRF(1)	$	479	$	779	$	227	$	246		$	59		$	1,790
	BPD		5,129		4,452		7,259		6,458			3,209			26,507
	ARDS		—		—		—		—			—			—
LUCASSIN			—		—		—		18,153	(2)		4,144			22,297
IK-5001			—		—		—		—			17,279	(3)		17,279
IK-1001			—		—		7,566		9,912			13,028			30,506
Other projects			—		—		—		—			7,311	(4)		7,311
Terminated projects			3,051		10,144		9,510		7,613			1,827			32,145
R&D support			16,120		17,676		19,403		26,156			28,564			107,919

	Total	$	24,779	$	33,051	$	43,965	$	68,538		$	75,421		$	245,754

At this time, we cannot reasonably estimate or know the nature, specific timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of our product candidates. This is due to the numerous risks associated with developing drugs, including the uncertainty of:

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization of any of our product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, as well as ongoing assessment of the product candidate's commercial potential. We plan to fund our research and development expenses with net cash flows from sales of INOtherapy; however, we may need or choose to raise additional capital in the future to fund the development and/or acquisition of other product candidates.

Selling, general and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, business development, sales and marketing, information technology, legal, quality and human resources functions. Other selling, general and administrative expenses include professional fees for legal, consulting, auditing and tax services and facility costs.

We anticipate that our selling, general and administrative expenses will continue to increase for, among others, the following reasons:

On August 29, 2008, we entered into an agreement with Orphan pursuant to which we acquired the North American rights to LUCASSIN (terlipressin for injection), a potential treatment of HRS Type 1, which is a rare and often fatal condition characterized by rapid onset of renal failure with a high mortality rate. As part of the agreement, we made an upfront cash payment of $17.5 million to Orphan in 2008, which was recorded as research and development expense on our consolidated statement of operations for 2008 since technological feasibility had not been established for LUCASSIN. Under this agreement, we were responsible for a portion of the development costs prior to regulatory approval. On March 29, 2010, Orphan and we amended and restated the terms of our prior August 29, 2008 agreement as described under "Recent Developments—LUCASSIN" above. We expect to commence a pivotal Phase 3 clinical trial of LUCASSIN for the treatment of HRS Type 1 in 2010.

On August 26, 2009, we entered into an agreement with BioLine to obtain a worldwide exclusive license to develop and commercialize a product that will be developed through the medical device pathway and is designed to prevent the structural alteration of damaged heart muscle and development of subsequent CHF caused by AMI. At the time of the agreement, the compound was in a Phase 1/2 clinical trial in Europe. In 2009, we paid a $7.0 million upfront payment and accrued a $10.0 million milestone payment for the completion of the Phase 1/2 clinical trial, which we paid in 2010. The upfront and milestone payments were recorded as research and development expense on our consolidated statement of operations for 2009. If we successfully achieve all other development, regulatory and commercialization milestones in the agreement, we will be obligated to pay BioLine, in the aggregate, an additional $265.5 million. In addition, we agreed to pay royalties to BioLine on our net sales of IK-5001 if it is approved for commercialization. We expect to commence a pivotal Phase 2/3 clinical trial of IK-5001 in 2011.

On July 17, 2009, we entered into an agreement with Fibrex to obtain the worldwide exclusive license to an investigational portfolio of compounds for use in a range of critical care conditions characterized by vascular leakage. The compounds are in various stages of development. In 2009, we made a $5.25 million upfront payment that was recorded as research and development expense in our consolidated statement of operations for 2009. We will be responsible for completing clinical development and commercialization efforts. As part of this agreement, we are required to make additional payments to Fibrex of approximately $101 million, in the aggregate, upon the achievement of various milestones associated with the development and regulatory approval of the compounds with respect to potential indications. We are also required to pay royalties based on sales should products be approved for commercialization.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We base our estimates on historical experience, current business factors and various other assumptions that we believe are necessary to form a basis for making judgments about the carrying values of assets and liabilities and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Although we believe our estimates and assumptions are reasonable, actual results could differ significantly from these estimates.

We believe the following critical accounting policies require the more significant judgments and estimates used in the preparation of our consolidated financial statements:

INOtherapy consists of multiple elements but is accounted for as a single unit of accounting, since elements are not sold separately on a stand-alone basis. Prior to adoption of our new billing model in 2010, we recognized revenue based on hours of INOMAX used by patients at established hourly rates. We estimated unbilled revenue for INOtherapy that had been used, but for which the INOmeter reading was not yet available or for which we had not yet otherwise billed. Included in accounts receivable at December 31, 2009 and 2008 are unbilled revenues of $33.4 million and $25.6 million, respectively. In addition, we recorded INOtherapy revenue net of expected patient credits. Credits were issued under our expense limitation program on a per patient basis following application from the hospital for patients that exceed certain durations. Using historical data coupled with judgments about future activity, we developed assumptions to estimate future credits on billed and unbilled usage. As of December 31, 2009 and 2008, the allowances for credits were $22.6 million and $25.2 million, respectively.

Certain factors, if they occurred, may cause our estimates to change and may cause actual results to differ from our estimates, including varying patient usage patterns and the timing of customer credit submissions. As of December 31, 2009, a 5% change in our unbilled revenue net of expected credits would impact net sales by approximately $0.5 million.

In 2010, we implemented a new tier-based billing model and eliminated the expense limitation program, which had an impact on the way we recognize revenue. Under the new billing model, customers can select from a range of options. These options include (i) one option which offers unlimited access to INOtherapy for a fixed fee, (ii) three capped tier options offering increasing allocations of hours of INOMAX, and (iii) a price per hour model. We determined fees and hourly usage allocations for each customer based on historical usage and credit activity. In addition, we utilize a standard six-month introductory package for new customers and, for very low volume customers, we have a standard package designed to accommodate occasional use. These packages include a capped tier option and a net hourly pricing option. Under the capped tier options, if hourly usage exceeds the cap during the contract period, the customer pays an hourly fee to cover the excess usage for the remainder of the contract. Customers who did not sign a new billing model contract by April 1, 2010 defaulted to the price per hour model. As of April 30, 2010, approximately 66% of our customers, representing approximately 85% of our 2009 revenue, had elected to use one of the four tiered options. For customers on the net hourly pricing option, we recognize revenue based on actual meter readings at the applicable hourly price.

For both unlimited access customers and customers who select a capped tier, we bill a fixed monthly fee. We provide our services on a continual basis and, therefore, assuming we provide the

customer with sufficient access to INOMAX, we recognize the revenue on a straight-line basis subject to the following:

The implementation of this new billing model may result in unexpected changes in customer usage patterns going forward. Additionally, the ability of certain customers to move down one level to a lower tier creates additional uncertainty related to future sales levels.

We expense research and development expenses as incurred. We expense upfront and milestone payments made to third parties in connection with research and development collaborations as incurred up to the point of regulatory approval. We capitalize and amortize payments made to third parties upon or subsequent to regulatory approval over the remaining useful life of the related product. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. These amounts are recognized as research and development expense as the related goods are delivered or the related services are performed.

In preparing our consolidated financial statements, we estimate our accrued research and development expenses. In that process, we review open contracts and purchase orders and communicate with project leaders to identify services that have been performed and the associated costs incurred that have not yet been invoiced. We make estimates of our accrued expenses as of the balance sheet date based on the facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees related to:

We record expenses based on estimates of services received and efforts expended under contracts with contract research organizations and research institutions that conduct and manage clinical studies on our behalf. The terms of these agreements vary from contract to contract and may result in uneven expenditures. Payments under some contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. If the actual timing of services provided or level of effort varies from our estimates, we adjust our accrual.

We review the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We evaluate indefinite-lived intangible assets for impairment at least annually or more frequently if an indicator of potential impairment exists. As of December 31, 2009, we completed our annual impairment test for our trademarks and trade names and concluded that no impairment existed. In performing our evaluations of impairment, we determine fair value using widely accepted valuation techniques, including discounted cash flows. These calculations contain uncertainties as they require us to make assumptions related to future cash flows, projected useful lives of assets and the appropriate discount rate to reflect the risk inherent in future cash flows. We must also make assumptions regarding industry economic factors and the profitability of future business strategies. If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to a material impairment charge.

We measure compensation expense for all stock-based awards made to employees and directors based on the estimated fair value of the award and recognize such expenses on a straight-line basis over the vesting period of the award. Stock-based compensation expense for stock options granted to non-employees is recognized over the related service periods based on the estimated fair value of the options re-measured at each reporting date until vesting has occurred. The following table presents the summary of stock options granted for the years ended December 31, 2009 and 2008:

As of December 31, 2009, there was approximately $6.2 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.4 years. Based on an assumed initial public offering price of $ per share, the intrinsic value of stock options outstanding at December 31, 2009 was $ million, of which $ million and $ million related to stock options that were vested and unvested, respectively, at that date.

We determine the fair value of our stock option awards at the date of grant using a Black-Scholes valuation model. This model requires us to make assumptions and judgments on the expected volatility of our stock, dividend yield, the risk-free interest rate, and the expected term of our option. We utilized the following weighted average assumptions for stock options granted:

Changes in these assumptions can materially affect the fair value estimates. We also estimate a forfeiture rate based on a historical analysis of option forfeitures and revise this estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The fair value of the shares of our common stock that underlie the stock options granted is determined by our board of directors. In determining the valuation of our common stock, we use a two-step methodology that first estimates the fair value of our company as a whole, and then allocates a portion of the enterprise value to our common stock. The valuation of our company as a whole is based upon valuation studies. The findings of these valuation studies are based on our business and general economic, market and other conditions that can be reasonably evaluated at that time. The analyses of the valuation studies incorporate extensive due diligence that include a review of our company, including our financial results, business agreements, intellectual property and capital structure. The valuation studies also include a thorough review of the conditions of the industry in which we operate and the markets that we serve.

The methodologies used in the valuation studies include two widely accepted valuation methodologies: the market multiple and the discounted cash flow methods. Our board of directors considers both of these valuation methodologies when establishing the fair value of our common stock. This approach is consistent with the methods outlined in the AICPA Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or Practice Aid.

The discounted cash flow method applies appropriate discount rates to estimated future cash flows that are based on forecasts of revenue and costs. These cash flow estimates are consistent with the plans and estimates that management uses to manage the business. The discount rates used are based on a risk-adjusted weighted average cost of capital, which ranged from 15.5% in December 2007 to 11.0% in December 2009. If different discount rates had been used, the valuations would have been different. The projections of future cash flow, the determination of an appropriate discount rate and the estimates of probability for success of product candidates each involve a significant degree of judgment. There is inherent uncertainty in making these estimates.

The market multiple method estimates the fair market value of a company by applying market multiples of publicly-traded companies in the same or similar lines of business to the results and projected results of the company being valued. The list of comparable companies remained largely unchanged from 2007 to 2009.

The enterprise values derived under the discounted cash flow and market multiple methods resulted in an initial estimated value of our company, to which we applied a marketability discount. The marketability discount is applied given that the lack of public information and the illiquidity of shares held by private company shareholders typically results in lower valuations for privately held companies relative to comparable public companies. This marketability discount factor was constant at 10% in the valuations from December 2007 to December 2009.

In addition, we have several series of preferred stock outstanding. It is also necessary to allocate our company's value to the various classes of stock, including a warrant and stock options. As provided in the Practice Aid, there are several approaches for allocating enterprise value of a privately-held company among the securities held in a complex capital structure. The possible methodologies include the probability-weighted expected return method, the option-pricing method and the current value method. We have historically used the option-pricing method. Under the option-pricing method, we first assign a liquidation preference to each of the preferred shares and then analyze the equity securities as an option on some portion of the remaining equity value. We consider the rights and privileges of each security, including the liquidation and conversion rights, and the manner in which each security affects the other.

Based on the foregoing, the board of directors determined the estimated fair value of our common stock from December 31, 2007 through December 31, 2009 as follows:

We record income taxes using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

We make judgments as to the amount of a required valuation allowance, if any, based on the assessed realizability of deferred tax assets on a "more likely than not" basis. The assessment of realizability is based on changing facts and circumstances, including but not limited to future projections of taxable income, tax legislation and rulings by relevant tax authorities, tax planning strategies and the progress of ongoing tax audits. We reassess the need for a valuation allowance each reporting period, and record any adjustments that would affect income.

We recognize the tax benefit from an uncertain tax position only if it is "more likely than not" that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The determination as to whether a particular tax position meets the "more likely than not" recognition threshold requires significant management judgment and requires an evaluation of applicable tax laws and regulations as well as the administrative practices and procedures of particular taxing authorities. The measurement of tax positions that meet the more-likely-than-not threshold requires significant management judgment regarding the probabilities assigned to possible outcomes with the taxing authority and may include an assessment of possible settlement outcomes, guidance received from qualified tax advisors and other available information. Although we believe that our judgments and estimates related to income taxes are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material. We will continue to re-evaluate our tax positions each reporting period as new information about recognition or measurement becomes available.

We file income tax returns in U.S. federal, state and certain international jurisdictions. For federal and certain state income tax purposes, our 2004 through 2009 tax years remain open for examination by the tax authorities under the normal statute of limitations. For certain international income tax purposes, our 2008 and 2009 tax years remain open for examination by the tax authorities under the normal statute of limitations.

Prior to January 1, 2009, when recording acquisitions, we expensed amounts related to acquired IPR&D in acquisition-related in-process research and development. IPR&D acquired after January 1, 2009, as part of a business combination, is capitalized as an identifiable intangible asset. IPR&D acquired as part of an asset acquisition is expensed as incurred.

On March 28, 2007, we acquired INO Therapeutics and Ikaria Research, Inc. for a total purchase price of $628.7 million. Because the Ikaria Research, Inc. acquisition was a non-cash exchange of equity interests, we valued the transaction using the value of equity interests given up, based on both a market and an income approach. INO Therapeutics was acquired for cash and the issuance of shares of series B preferred stock, which were valued based on the price per share paid by the investors in our private offering of series B preferred stock on the same date. We allocated the purchase price for both entities to identifiable assets and liabilities such as inventories, accounts receivable, property, plant and equipment, core developed technology, trademarks and trade names, and IPR&D based on estimated fair values for INO Therapeutics and relative fair values for Ikaria Research, Inc. In estimating fair values, we used all available information, including appraisals and discounted cash flow information. Our purchase price allocation contains uncertainties as it required us to apply judgments with regard to forecasted sales and costs, discount rates and other assumptions. We estimated the value of acquired intangible assets and IPR&D using a discounted cash flow model, which required us to make assumptions and estimates about, among other things: the time and investment that will be required to develop products and technologies, the amount of revenues that will be derived from the products and the appropriate discount rates to use in the analysis. If actual results are not consistent with our estimates of fair value used to complete the purchase price allocations, we could be exposed to material losses.

Effective internal control over financial reporting is necessary for us to provide reliable annual and quarterly financial reports and to prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results and financial condition could be materially misstated and our reputation could be significantly harmed. As a private company, we were not subject to the same standards as a public company. As a public company, we will be required to file annual and quarterly reports containing our consolidated financial statements and will be subject to the requirements and standards set by the Securities or Exchange Commission, or SEC.

The combined statement of operations for the year ended December 31, 2007 represents the statement of operations of the Successor for the year ended December 31, 2007 (for which there was no activity through March 27, 2007) and the Predecessor for the period January 1, 2007 to March 27, 2007.

The following table provides information regarding our revenues during the periods indicated:

Our net sales represent net sales of INOtherapy. Other revenue in 2009 and 2008 represent the earned portion of a $1.0 million payment received in connection with a distribution and logistics services agreement to promote and distribute INOtherapy in Japan, which is being recognized on a straight-line basis over the term of the agreement. In 2007, we recognized other revenue of $2.45 million related to the reimbursement of costs incurred for the research, manufacture and analysis of IK-1001.

The increase in net sales of $37.6 million, or 16%, in 2009 as compared to 2008 was primarily due to the following:

The increase in net sales of $30.0 million, or 15%, in 2008 as compared to 2007 was primarily due to the following:

The following table provides information regarding our cost of sales and gross margin during the periods indicated:

Our gross margin increased $36.8 million, or 20%, from 2008 to 2009. The gross margin as a percentage of net sales increased 3% from 78% in 2008 to 81% in 2009. These increases were primarily due to:

Our gross margin increased $91.7 million, or 98%, from 2007 to 2008. The gross margin as a percentage of net sales increased 33% from 45% in 2007 to 78% in 2008 due to:

This increase was partially offset by $2.1 million in charges in 2008 as discussed above.

The following table provides information in regards to our selling, general and administrative, or SG&A, expenses during the periods indicated:

The increase in SG&A expenses of $22.0 million, or 36%, in 2009 as compared to 2008 is primarily due to the following:

SG&A expenses increased $19.8 million, or 47%, in 2008 as compared to 2007 primarily due to the following:

The following table provides information in regards to our research and development expenses during the periods indicated:

Research and development expenses increased $6.9 million, or 10%, in 2009 as compared to 2008 primarily due to the following:

Research and development expenses increased $24.6 million, or 56%, in 2008 as compared to 2007 primarily due to:

The $271.6 million IPR&D charge in 2007 represents the expensing of IPR&D products as a result of the purchase price allocation from the Transaction. These products included IK-1001, inhaled carbon monoxide and potential new indications for INOMAX.

The following table provides information in regards to our amortization of intangibles during the periods indicated:

Amortization of acquired intangibles expense increased $0.3 million, or 1%, in 2009 as compared to 2008. The increase reflects the impact of a full year's amortization of future royalty interests on net sales of INOMAX in the United States and Canada.

Amortization of acquired intangibles expense increased by $8.3 million, or 37%, in 2008 as compared to 2007 primarily because of the full year's amortization of intangibles recorded from the Transaction. Amortizable intangibles acquired included core developed technology of $170.2 million and assembled workforce of $0.3 million. We also had $0.7 million of additional amortization expense during 2008 arising from the purchase of royalty obligations discussed above.

The following table provides information in regards to our other operating expense (income), net during the periods indicated:

The following table provides information in regards to our interest (expense) income, net during the periods indicated:

The decrease in interest expense, net of $4.3 million, or 33%, in 2009 as compared to 2008 was primarily due to a decrease in LIBOR and in our total debt outstanding due to principal repayments of approximately $15.8 million in 2009.

The decrease in interest expense of $1.3 million, or 9%, in 2008 as compared to 2007 was primarily due to a decrease in LIBOR, a decrease in the interest rate spread on the Term Loan from 2.50% to 2.25% due to meeting certain defined leverage ratios, and a decrease in our total debt outstanding due to principal repayments of approximately $41.5 million in 2007. These decreases were partially offset by the full year impact of interest expense on the Term Loan.

The following table provides our reconciliation of the statutory federal income tax rate to our effective tax rate during the periods indicated:

	Successor						Combined

	Year ended December 31, 2009			Year ended December 31, 2008			Year ended December 31, 2007
U.S. federal statutory rate		35.0	%		35.0	%		(35.0	)%
State and local taxes, net of federal tax effect		9.4			11.1			(3.8	)
In-process research and development		—			—			4.9
Change in tax status		—			—			2.2
Research tax credit		(11.8	)		(38.4	)		(0.1	)
Impact of tax-free flow through period		—			—			(2.2	)
License payments		3.1			—			—
Foreign tax differential		1.2			—			—
Change in valuation allowance		1.8			—			—
Incentive stock options		3.3			5.5			0.1
Other		3.3			(1.4	)		0.2

Effective Tax Rate		45.3	%		11.8	%		(33.7	)%

Orphan drug and research and development tax credits of approximately $4.4 million and $6.3 million were generated, which impacted the effective tax rate for the years ended December 31, 2009 and 2008, respectively. We engage in annual studies that support the availability of these orphan drug and research and development tax credits.

As of December 31, 2009, (i) we, including our subsidiaries, had $95.2 million in cash and cash equivalents and (ii) our wholly owned subsidiary, Ikaria Acquisition, had, and Ikaria, Inc. guaranteed, $39.2 million borrowing availability under a revolving line of credit. The outstanding principal on the Term Loan at December 31, 2009 was $175.7 million. Our cash and cash equivalents as of December 31, 2009 consisted predominantly of balances held in money market deposit accounts.

Our liquidity requirements have historically consisted of research and development expenses, sales and marketing expenses, in-licensing expenditures, capital expenditures, working capital, debt service and general corporate expenses. Historically, we have funded these requirements and the growth of our business primarily through sales of INOtherapy, convertible preferred stock sales and proceeds of the Term Loan. We now expect to fund our liquidity requirements primarily with cash generated from operations. We believe that our existing capital resources, including amounts available for borrowing under our revolving credit facility and cash flows from operations, will be sufficient to maintain and grow our current operations for at least the next twelve months.

Our longer-term liquidity and capital requirements will depend upon numerous factors including our operating performance, costs to license or acquire new products or product development candidates, to conduct clinical trials in support of development projects and to develop systems and the possible loss of sales and reduced margins if competitive products are commercially introduced upon the expiration of the principal patents covering INOMAX in 2013. Future liquidity requirements could also be impacted by potential growth in our infrastructure, and significant economic, regulatory, product supply and competitive conditions. We may choose to raise additional funds through public or private debt or equity financings or other arrangements. There can be no assurance that these arrangements will be available on terms acceptable to us, or at all, or that these arrangements will not be dilutive to our stockholders.

The following table summarizes our cash flows for the years ended December 31, 2009, 2008 and 2007. The combined cash flow data for the year ended December 31, 2007 represents the combined statement of cash flows of the Successor for the year ended December 31, 2007 (for which there was no activity through March 27, 2007) and the Predecessor for the period January 1, 2007 to March 27, 2007:

Cash flows from operating activities for the years ended December 31, 2009, 2008 and 2007 were as follows:

During 2009, 2008 and 2007, cash provided by operating activities was $71.4 million, $67.5 million and $63.1 million, respectively. The $3.9 million increase in 2009 from 2008 primarily related to the $3.4 million increase in net income. In 2009 and 2008, non-cash charges, which were largely composed of amortization and depreciation, and the net increase in cash from changes in operating assets and liabilities were relatively constant.

In 2007, the net loss of $197.7 million, the non-cash charges of $204.0 million and the increase in cash from changes in operating assets and liabilities of $56.7 million were all impacted by acquisition accounting. The $197.7 million loss in 2007 included a non-cash charge of $271.6 million related to the expensing of acquisition-related IPR&D and the effect of a $69.6 million step-up in the value of inventory upon acquisition. Cash provided by operating activities increased $4.4 million in 2008, as compared to 2007, primarily due to an increase in gross margin on net sales. Gross margin on net sales increased by $91.7 million of which $69.6 million reflected a one-time non-cash expense arising from the step-up of inventory from the Transaction. Excluding this non-cash expense, the cash flow impact from the increase in margin was $22.1 million. This increase was partially offset by a cash payment made in August of 2008 of $18.3 million to acquire the North American commercial rights to LUCASSIN and for certain start-up manufacturing costs.

During 2009 and 2008, cash used in investing activities was $12.6 million and $18.1 million, respectively. Additions to property, plant and equipment of $13.7 million and $13.9 million, respectively, primarily reflected the purchases of cylinders and the purchase and manufacture of delivery systems to support the growth of the business. In 2008, we also purchased future royalty obligations on net sales of INOMAX in the United States and Canada for which we recorded an intangible asset of $4.6 million. During 2007, cash used in investing activities of $511.7 million was primarily attributable to cash paid for the acquisition of INO Therapeutics of $505.1 million and capital expenditures of $6.8 million. Investing activities also included proceeds from the sale of property plant and equipment of $1.1 million, $0.9 million and $0.2 million in 2009, 2008 and 2007, respectively.

During the years ended December 31, 2009 and 2008, cash used in financing activities was $15.6 million and $1.7 million, respectively, and primarily reflects repayments on the Term Loan. We repaid $15.8 million and $2.0 million of the Term Loan in 2009 and 2008, respectively. Cash used in financing activities was slightly offset by proceeds of $0.3 million in both 2009 and 2008 from the

issuance of stock pursuant to the exercise of stock options granted under our equity plans. During 2007, cash provided by financing activities of $453.8 million was predominantly from proceeds from the issuance of Series B preferred stock of approximately $280 million, the borrowing under the Term Loan of $235.0 million, and proceeds from the issuance of common stock of $3.0 million, partially offset by a repayment of $41.5 million of the Term Loan, an increase in a loan to a related party of $17.2 million and payment of debt issuance costs of $5.5 million.

On March 28, 2007, we entered into a credit agreement, or the Credit Agreement, with a group of financial institutions under which our wholly-owned subsidiary, Ikaria Acquisition, borrowed $235.0 million pursuant to the Term Loan and obtained a five-year $40.0 million senior secured revolving loan facility, both of which Ikaria, Inc. guaranteed. The proceeds from the Term Loan were used to pay cash consideration for the purchase of INO Therapeutics, to pay transaction costs, and to provide up to $2.0 million in cash on hand. As of December 31, 2009 and 2008, our total debt outstanding consisted of the amounts set forth in the following table:

The Term Loan bears interest, at our election, at (i) LIBOR plus an increment of 2.25% to 2.50% or (ii) the Alternate Base Rate, or ABR, plus an increment of 1.25% to 1.50%. Both increments are based upon a leverage ratio as of the relevant date of determination defined in the Credit Agreement. The ABR is the greater of the Prime Rate and the Federal Funds Effective rate plus 0.5%.

The Term Loan matures quarterly in amounts equal to 1% annually of the beginning principal amount in each year of the loan term with the remainder maturing on March 28, 2013. The facility also requires mandatory payments of 25% of excess cash flow, or ECF, if our leverage ratio is greater than 2.0 but less than 2.75 and 50% of ECF if the leverage ratio is equal to or greater than 2.75. ECF payments are not required if the leverage ratio is less than 2.0. The leverage ratio is defined in the Credit Agreement. The ECF payments are net of any voluntary prepayments made during such fiscal year. We made an ECF payment for 2008 of $14.0 million in March of 2009. No ECF payments were required in 2008 for 2007 because of principal payments of $41.5 million made in 2007. No ECF payments will be required in 2010 for 2009.

Under the terms of the Credit Agreement, we have an incremental Term Loan feature that allows us to request commitments from the existing or other lenders to borrow up to an additional $100 million without having to get the consent of the existing lenders.

As of December 31, 2009, we had $0.8 million in letters of credit issued against the revolving credit facility. Any borrowings under the revolving credit facility bear interest, at our election, at (a) LIBOR plus an increment of 2.00% to 2.50% or (b) ABR plus an increment of 1.00% to 1.50%, also based upon a leverage ratio as of the relevant date of determination. We pay a commitment fee of 0.50% per annum on the undrawn portion of the revolving facility and an all-in rate of 2.25% on outstanding letters of credit.

The Term Loan and revolving loans are secured by substantially all of our assets, including those presently owned or hereafter acquired and all of our intellectual property. The Credit Agreement requires us to maintain compliance with specified leverage ratios and annual limits on capital expenditures and has other customary restrictions. The maximum leverage ratio under the terms of our

Credit Agreement cannot exceed 4.25 and 5.0 as of December 31, 2009 and 2008, respectively. Our leverage ratio as of December 31, 2009 was 1.85. The Credit Agreement limits capital expenditures to $15.0 million per year. Our ability to comply with these ratios may be affected by certain events both within and beyond our control. As of December 31, 2009, we were in compliance with all required covenants. A failure to comply with the covenants under our existing credit facility could result in an event of default. In the event of an acceleration of amounts due under our credit facility as a result of an event of default or the occurrence of a mandatory prepayment event, we may not have sufficient funds or may not be able to arrange for additional financing to repay our indebtedness. The lenders could seek to enforce security interests in the collateral securing such indebtedness. Because of the covenants under our existing credit facility and the pledge of our assets as collateral, we may have a limited ability to obtain additional debt financing.

At December 31, 2009, we had federal net operating loss carryforwards of approximately $6.4 million, all of which are subject to limitation under Internal Revenue Code Section 382. At December 31, 2009 we had combined post apportionment state net operating loss carryforwards of approximately $3.4 million and foreign net operating loss carryforwards of $1.1 million. We also had federal research tax credit carryforwards of $7.5 million at December 31, 2009, of which $0.5 million are subject to limitation under Internal Revenue Section 382. The federal net operating loss carryforwards begin to expire in 2027 and the federal research credits begin to expire in 2025. The state net operating loss carryforwards begin to expire in 2019, and the foreign net operating loss carryforwards begin to expire in 2017.

The table below summarizes our contractual obligations as of December 31, 2009 that requires us to make future cash payments:

In June 2009, the Financial Accounting Standards Board, or FASB, amended the consolidation guidance that applies to variable interest entities, or VIEs, which requires ongoing reassessments of whether an enterprise is the primary beneficiary of the VIE. The guidance replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity's residual returns. It also requires enhanced disclosures about an enterprise's involvement in a VIE. This guidance is effective for fiscal years beginning after November 15, 2009 and the interim periods within that fiscal year. We do not expect the standard will have a material impact on our consolidated financial statements.

In October 2009, the FASB issued authoritative guidance that amends existing guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and provides guidance for allocating and recognizing revenue based on those separate deliverables. The guidance is expected to result in more multiple-deliverable arrangements being separable than under current guidance. This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We do not expect the standard to have a material impact on our consolidated financial statements other than additional disclosures.

In January 2010, the FASB issued guidance requiring additional disclosures related to transfers between levels in the hierarchy of fair value measurement. The standard is effective for interim and annual reporting periods beginning after December 15, 2009. The standard does not change how fair values are measured. Accordingly, we do not expect the standard will have an impact on our consolidated financial statements other than additional disclosures.

Except for standard operating leases, we do not have any off-balance sheet arrangements relating to the use of structured finance, special purpose entities or variable interest entities.

Our exposure to market risk is confined to our cash and cash equivalents, interest rates on our debt and foreign currency fluctuations. At December 31, 2009 we had cash and cash equivalents of $95.2 million, which consisted primarily of balances held in money market deposit accounts. Our cash is managed in accordance with our investment policy goals, which in order of priority, are preservation of capital, maintenance of sufficient liquidity and maximization of the after-tax return of the portfolio. We do not hold or issue financial instruments for trading purposes.

We are exposed to interest rate risk primarily through our borrowing activities, which are described in Note 8, Debt and Credit Facilities, of our consolidated financial statements included elsewhere in this prospectus. Since April 2007, we have managed interest rate risks through the use of derivative financial instruments. Our borrowings under the Term Loan and revolving facility are subject to a variable rate of interest. Pursuant to the Credit Agreement entered into on March 28, 2007, we were required to enter into one or more hedging agreements for the first two years of the Term Loan so that at least 50% of our aggregate principal amount outstanding was subject to a fixed or maximum interest rate to protect against exposure to interest rate fluctuations.

In April 2007, we entered into an interest rate collar agreement as required under the Credit Agreement to help manage our exposure to interest rate movements, economically hedging $117.5 million of our LIBOR-based floating rate term debt for a period of two years. As a result of entering into the agreement, the interest rate to be paid by us relating to the hedged portion of our

debt was based on a minimum three-month LIBOR rate of 4.09% and a maximum three-month LIBOR rate of 5.75%. During the years ended December 31, 2008 and 2007, we recorded a pre-tax loss of $0.3 million and $0.7 million, respectively, in interest expense resulting from the changes in the fair value of the interest rate collar. During 2009, there was an immaterial loss on the collar. The interest rate collar expired on April 30, 2009.

In May 2008, we entered into a two-year forward starting interest rate swap effective April 30, 2009, that converts the interest rate on a portion of our debt from floating rate to fixed rate using a cash flow hedge. The notional amount of the interest rate swap is $100.0 million from April 30, 2009 to April 30, 2010 and $80.0 million from April 30, 2010 to April 30, 2011. The swap had the economic effect of converting a portion of our three-month floating LIBOR interest rate base to a fixed interest rate base of 3.89% for a term of two years. At December 31, 2009, the estimated fair value of the swap was a liability of $4.0 million, and accumulated other comprehensive loss included a loss of $2.0 million, after tax, related to the swap.

As of December 31, 2009, we had outstanding floating rate debt of $175.7 million under our Term Loan. We also had $0.8 million in letters of credit issued against our revolving line of credit facility. If interest rates were to increase or decrease by one percentage point, the annual interest expense on our debt would increase or decrease by approximately $1.8 million. However, because of the interest rate swap agreement, which in effect converts $100.0 million of our floating rate debt to fixed rate debt as of December 31, 2009, the impact of a change in interest rates on the hedged portion of our debt would be offset by the impact of the change in the interest rates on our swap.

Most of our transactions are conducted in U.S. dollars. Approximately four percent of our net sales were denominated in Canadian dollars for the year ended December 31, 2009. We currently have a limited number of transactions in currencies other than the U.S. dollar. As such, we do not currently have a significant risk to foreign currency fluctuations, but we may in the future as we continue to expand our operations overseas.

We are a fully-integrated biotherapeutics company focused on developing and commercializing innovative therapeutics and interventions designed to meet the significant unmet medical needs of critically ill patients. We believe that this focus, combined with our strengths in research and development, manufacturing and sales and marketing, position us to be a leader in the critical care market.

We generated net sales of $274 million in 2009, all of which was from INOtherapy. Our annual net sales have increased to $274 million in 2009 from $207 million in 2007, representing a CAGR of approximately 15%. We had net income of $13 million in 2009. We generated adjusted EBITDA of $109 million in 2009, as compared to $92 million in 2007 and adjusted net income of $38 million in 2009, as compared to $22 million in 2007, representing a CAGR of approximately 9% and 31%, respectively. For reconciliations of adjusted EBITDA to net income and adjusted net income to net income, see the section entitled "Summary Consolidated Financial Data". Our net sales are generated from INOtherapy, our all-inclusive offering of drug product, services and technologies, which we first commercialized in 2000. INOtherapy includes our FDA-approved drug INOMAX (nitric oxide) for inhalation, INOcal calibration gases, use of our proprietary FDA-cleared drug-delivery system, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service.

We sell INOtherapy in the United States, Puerto Rico, Canada, Australia, Mexico and Japan. INOMAX, the drug included in our INOtherapy offering, is the only treatment approved by the FDA for HRF associated with pulmonary hypertension in term and near-term infants. HRF is a potentially fatal condition that occurs when lungs are unable to deliver sufficient oxygen to the body. Our customers use INOMAX in a variety of critical care conditions beyond HRF. We believe this additional use is driven by physicians' knowledge of the physiologic effects of inhaled nitric oxide, the scientific literature on the use of inhaled nitric oxide and the safety of INOMAX, and the inclusion of inhaled nitric oxide in published practice guidelines for certain conditions. In a survey we conducted, customers representing 16% of our 2008 U.S. net sales reported that approximately 80% of their aggregate INOMAX costs in 2008 related to uses other than for its approved indication. Based on the information collected in this survey, we believe that sales of INOMAX for unapproved uses relate (i) primarily to cardiac surgery and other conditions for which we are not currently planning to seek FDA approval, and (ii) to ARDS, and to a lesser extent BPD, conditions for which we are currently seeking FDA approval. We therefore continue to pursue clinical studies required for approval of potential uses of INOMAX in the critical care setting. Notably, we are conducting a Phase 3 clinical trial in support of an indication for INOMAX for prevention of BPD and, pending the outcome of preclinical studies, are planning additional clinical trials for use of INOMAX in treating ARDS. We plan to continue to grow our INOtherapy business by increasing penetration into our existing customer base, actively adding new U.S. customers, expanding in foreign markets, gaining additional FDA-approved indications for INOMAX and developing next-generation technologies for our drug-delivery systems.

Our success with INOtherapy has allowed us to use cash flow from net sales to fund our research and development efforts, to make targeted product acquisitions, to grow our commercial capabilities, and to build an infrastructure that supports further growth of INOtherapy as well as our pipeline of product candidates. We have built close relationships with and gained valuable insights from critical care professionals, which help us identify potential solutions to unmet medical needs. These solutions aim to optimize patient outcomes, whether through improvements to existing treatments, new treatments or disease-modifying therapies. We also leverage our extensive knowledge of the critical care market and our research and development expertise to reduce the risks of clinical development and to help ensure efficient spending on our product candidates.

To augment our revenue growth, leverage our existing infrastructure and further diversify our product and product candidate portfolios, we have pursued, and intend to continue to actively pursue, acquisitions and in-licensing opportunities. We harness our biologic expertise and clinical insight in the critical care market in order to identify, develop and commercialize our product candidates.

Product / Product Candidate	Active Pharmaceutical Ingredient / Mechanism of Action	Primary Indication(s)	Status	Commercialization Rights

INOtherapy / INOMAX	Nitric oxide / pulmonary vasodilator	Hypoxic respiratory failure	Marketed	Worldwide, excluding the EU and specified other countries(1)
		Bronchopulmonary dysplasia	Phase 3
		Acute respiratory distress syndrome-chronic lung disease	Phase 3 in planning stage
LUCASSIN	Terlipressin / vasopressin receptor agonist	Hepatorenal Syndrome Type 1	Pivotal Phase 3 expected to commence in 2010	United States, Canada, Mexico and Australia
IK-5001	Sodium alginate and calcium gluconate / mechanical support of infarcted heart muscle	Cardiac remodeling and subsequent congestive heart failure following acute myocardial infarction	Pivotal Phase 2/3 expected to commence in 2011	Worldwide
IK-1001	Sodium sulfide	Conditions characterized by tissue ischemia	Clinical program in planning stage	Worldwide
IK-6001	Fibrinogen Bb15-42 / anti-inflammatory	Conditions characterized by vascular leakage	Preclinical	Worldwide

LUCASSIN is being developed for the treatment of HRS Type 1, a rare and often fatal condition characterized by rapid onset of kidney failure for which there are no approved drugs in the United States. Terlipressin, the active pharmaceutical ingredient in LUCASSIN, is approved in France, Ireland, Spain and South Korea for the treatment of patients with HRS Type 1. In the United States, LUCASSIN has fast-track and orphan drug designations for use in HRS Type 1.

IK-5001 is being developed to prevent cardiac remodeling, the structural alteration of damaged heart muscle, and subsequent CHF resulting from a heart attack. IK-5001 is administered following a heart attack in liquid form by injection and is designed to flow into the damaged heart muscle where it forms a protective cast, or scaffold, to enhance the mechanical strength of the heart muscle during recovery and repair.

estimates that the total costs attributable to caring for critically ill patients exceeded $180 billion in 2006, of which we estimate over $20 billion was spent on pharmaceutical therapies.

The management of critically ill patients is typically provided in critical care units, which are frequently referred to as ICUs. ICUs can be subdivided based on specialty and include the neonatal intensive care unit, or NICU, medical intensive care unit, or MICU, surgical intensive care unit, or SICU, pediatric intensive care unit, or PICU, coronary care unit, or CCU, and burn unit. Monitors, intravenous, or IV, medication and/or hydration pumps, tubes, feeding tubes, catheters, ventilators and other equipment are commonly found in critical care units. While critically ill patients may recover, death is a significant possibility.

According to data from HCRIS, in 2005, there were more than 3,000 hospitals in the United States with over 90,000 ICU beds, of which we estimate that 80% of these ICU beds are located in 1,300 of these hospitals. Based on data from SDI Health, we estimate there were approximately 16 million admissions to critical care units in the United States in 2008. On average, critically ill patients require a higher level of care than most other hospitalized patients. Based on HCRIS data, it has been estimated that the average cost per critically ill patient is over $3,500 per day versus approximately $1,500 per day for other hospitalized patients.

Critical care involves close, constant attention by a team of specially-trained healthcare professionals. These teams include highly experienced physicians, nurses, respiratory therapists, pharmacists and other professionals who use their expertise, ability to interpret complex clinical information, and access to highly sophisticated equipment to optimize patient outcomes. An intensivist is a physician with subspecialty training, or equivalent qualifications, in critical care who directs the care of critically ill patients and works in collaboration with other healthcare professionals as necessary. The United States Department of Health and Human Services estimated that the aging of the population will increase demand for intensivist services by approximately 48% from 2000 to 2020.

Profitable INOtherapy Business with Significant Growth Potential—Our annual net sales have grown from $207 million in 2007 to $274 million in 2009, representing a CAGR of approximately 15%. We have been growing INOtherapy revenues, in part, through increased market penetration for the approved indication using our established sales team in the United States and Puerto Rico. We are conducting and planning clinical trials of INOMAX for additional indications and are developing advanced INOMAX drug-delivery systems. We also market INOtherapy in Canada, Australia, Mexico and Japan.

Established Infrastructure and Strength in Sales and Marketing—We have been selling INOtherapy since 2000, and, as a result, have an established infrastructure, including manufacturing and distribution capabilities, an installed base of drug-delivery systems, and an experienced sales and marketing team. We have an installed base and deployable inventory of approximately 4,500 wholly-owned, proprietary drug-delivery systems and have navigated the time-consuming and complex process of establishing the compatibility of our drug-delivery systems with more than 48 models of ventilators and anesthesia devices. As of April 30, 2010, we had 45 sales professionals in the United States and Puerto Rico, five professionals who educate customers on reimbursement options and 11 employees responsible for brand management, market research and sales operations. Under our current management, we doubled the size of our sales team and we believe we have the capability to further expand our sales and marketing infrastructure to the extent necessary to commercialize any additional products we may develop or acquire.

Sales Driven by Deep Relationships in Critical Care—INOtherapy is typically administered at the patient's bedside through a ventilator. In order to facilitate the use of INOtherapy, our medical and sales professionals provide critical care professionals with clinical and technical assistance and ongoing clinical training. In addition, we have a strong focus on customer satisfaction, which is demonstrated

through around-the-clock customer support and reflected in our customer satisfaction surveys and high customer retention rates. Our comprehensive and integrated offering provides us with meaningful access to critical care professionals and their patients. We believe this access, together with our focus on customer satisfaction, allows us to develop close relationships with, and respond to the needs and practices of, our customers as well as understand the roles of therapeutics, diagnostics and supportive care in the critical care setting.

Expertise in Critical Care and in Research and Development—We are able to identify unmet medical needs and opportunities through our extensive knowledge of the critical care market and ongoing interactions with thought leaders. Once we have identified a potential product candidate or indication, we rely on our expertise in understanding the pathophysiology and biology of the condition to determine the best clinical and scientific path to demonstrate pharmacological activity and proof of concept within an attractive timeframe and budget. For those product candidates with which we decide to move forward, we are able to rely on the expertise of our approximately 110 research and development personnel, over 60 of whom have experience administering clinical trials in critical care settings. We believe that a combination of the judicious use of clinically relevant biomarkers, and our experience with adaptive clinical trial design, which is modifying ongoing clinical trials based on accumulated trial data, can help identify the right dose and patient profile for our clinical studies. We believe that our expertise in critical care and in research and development, including our emphasis on early evaluation of potential product candidates, mitigates some of the risk usually associated with new product development.

Pipeline of Promising Product Candidates—We have a diversified and promising pipeline of product candidates, including two late-stage product candidates and a number in earlier clinical or preclinical development. We believe several of our product candidates target potentially large market opportunities. We intend to use our experience in critical care research and development to advance this pipeline and our knowledge and success in the critical care market to augment our pipeline through in-licensing.

Leadership Team with Proven Track Record of Operational Execution—Under our current management, we have successfully grown our annual INOtherapy revenues, expanded our commercial and research and development capabilities, and executed on our product acquisition and in-licensing strategy by acquiring rights to LUCASSIN, IK-5001 and the IK-600X portfolio. In addition, we have built a strong financial foundation which, combined with the experience and proven track record of our leadership team, positions us to capitalize on additional opportunities.

Our goal is to become a leader in developing and commercializing innovative therapeutics and interventions for the critical care market and, ultimately, advancing the practice of critical care medicine. The key elements of our strategy to achieve this goal include:

Enhancing Our INOtherapy Market Position—We are working to sustain and improve our current INOtherapy market position through our:

Pursuing Efficient and Informed Development of Product Candidates—We intend to harness our biologic expertise and clinical insight in the critical care market to further the clinical development of several of our in-licensed product candidates. We expect to commence a pivotal Phase 3 clinical trial of LUCASSIN in 2010 for the treatment of HRS Type 1. IK-5001 has recently completed a Phase 1/2 clinical trial in Europe, and we intend to move its development forward with a pivotal Phase 2/3 clinical trial for the prevention of cardiac remodeling and subsequent CHF following AMI.

In addition, we leverage our knowledge and expertise to help ensure prudent spending on development of our product candidates. We identify critical care market opportunities, determine the likely value to patients and physicians, and gauge our ability to develop a product candidate within a reasonable timeframe and budget. We then use clinically relevant biomarkers and adaptive clinical trial design, when appropriate, to help identify the right dose and patient profile for our clinical studies. In addition, we focus on acute diseases that require a short duration of therapy and usually have short clinical endpoints, allowing us to move quickly from proof of concept into clinical trials.

Building Our Product Portfolio through Targeted Business Development Efforts—We believe that acquisition and in-licensing opportunities in the critical care area are attractive because of the limited number of therapies approved for critical care indications and the high unmet need. We are positioned to identify these opportunities as a result of our knowledge of the market and our close relationships with critical care physicians and thought leaders, and to execute on them because of our financial position and experienced leadership team. We intend to actively pursue acquisitions and in-licensing opportunities to augment our growth, leverage our existing infrastructure and further diversify our product and product candidate portfolios. We believe that our experience in identifying acquisition and

in-licensing opportunities and consummating these transactions, industry expertise and relationships, clinical development and commercial capabilities, and available capital make us an ideal partner for such opportunities.

Focusing on Profitability While Investing to Expand Our Business—Our strong financial position allows us to invest in research and development activities and acquisition and in-licensing opportunities. We have a track record of steady revenue growth and are focused on maintaining our core profitability. We intend to continue to grow revenues and generate significant cash flow, with the goal of maintaining profitability while investing wisely in our product and product candidate pipeline.

INOtherapy is our all-inclusive offering of drug product, services and technologies. This includes INOMAX, INOcal calibration gases, use of our proprietary FDA-cleared delivery system, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service. We have the exclusive worldwide rights to market and sell INOMAX, except for in the European Union and other specified countries near the European Union.

Due to the fragile health of patients with HRF and other conditions for which physicians prescribe INOMAX, it is imperative that INOMAX be readily available when needed. In order to ensure this continuous access to INOMAX, we provide our customers with back-up INOMAX cylinders and extra drug-delivery systems, which are designed to be easily transportable. Providing continuous access also requires that we train hospital personnel on all shifts, including nights and weekends, that we provide live customer and technical support 24/7/365, and that emergency deliveries of our drug-delivery systems and INOMAX cylinders reach customers within hours.

INOMAX is typically administered at the patient's bedside through a ventilator. Patients remain on INOMAX for an average continuous duration of approximately five days; however, some may remain on INOMAX for a significantly longer period, depending on the patient's condition and the physician's discretion. Since its commercialization in 2000, we believe that approximately 360,000 patients have been treated with INOMAX worldwide.

Delivering and maintaining precise levels of INOMAX is a complex process. INOMAX is designed to be delivered through our wholly-owned proprietary drug-delivery system, the INOMAX DS, which is engineered to simplify the administration of INOMAX while ensuring safe and efficacious drug delivery. In addition to its small size and weight for use in transport situations, the INOMAX DS features an enhanced user interface for ease-of-use at the bedside and is fully compatible with more than 48 models of ventilators and anesthesia devices. The INOMAX DS also employs multiple back-up systems to ensure safe, consistent and reliable delivery and monitoring at any ventilation setting for all patients. The INOvent, our first-generation delivery system, is still used in some hospitals, but we are gradually upgrading the INOvents to INOMAX DS drug-delivery systems. Additionally, we are developing more technologically advanced drug-delivery systems, including the INOMAX DSIR and INOpulse DS, to enhance clinical benefit, patient safety and ease of use. All of our delivery systems monitor for nitrogen dioxide, which forms when nitric oxide mixes with oxygen in the air. Elevated levels of nitrogen dioxide can be toxic and lead to decreased pulmonary function, chronic bronchitis, chest pain and pulmonary edema.

We manufacture INOMAX at our Port Allen, Louisiana facility, which is the only FDA inspected site for manufacturing pharmaceutical-grade NO in the world. We design, develop, manufacture and globally distribute our drug-delivery systems through our FDA inspected facility in Madison, Wisconsin. We distribute our INOtherapy product offering directly to our U.S. customers from one of our seven regional service and distribution centers. We also own all of our installed base and deployable inventory of approximately 4,500 INOMAX drug-delivery systems and can move the systems between locations at

our discretion. We work directly with ventilator manufacturers through the time-consuming and complex process of ensuring that our drug-delivery systems are compatible with their new ventilator models. When we add compatibility with a new ventilator model, we have the new ventilator model cleared through a special 510(k), which contains compatibility validation reports and diagrams, and the new ventilator is added to the list of FDA-cleared devices in the operating manual for the INOMAX DS.

Customer service is a key value driver for our INOtherapy offering. We take a holistic view of our customers' needs. For that reason, we employ a team of 22 customer service professionals who provide around-the-clock support for all the needs of our customers. Our customer service team is the primary point of contact for the distribution chain and has responsibility for maintaining an adequate supply of our drug and drug-delivery systems. This team coordinates delivery of INOtherapy, the pick-up and replacement of INOMAX cylinders and emergency deliveries of both our drug and drug-delivery systems through one of our seven regional service and distribution centers. We have designed our distribution system and located our seven regional service and distribution centers in places that allow emergency deliveries to reach our U.S. customers in four hours or less in most cases. In addition to our regional service and distribution center operations, we also have third-party logistics and equipment service agreements in place with companies throughout the world, including in the United States, Puerto Rico, Canada, Australia, Mexico and Japan.

We currently have 45 sales professionals in the United States and Puerto Rico who promote INOMAX for HRF associated with pulmonary hypertension in term and near-term infants and have developed close relationships with neonatologists, nurses, respiratory therapists and other relevant healthcare professionals. They also manage the overall customer relationships and train customers on the use of our drug-delivery systems for delivery of INOMAX for its approved use. Additionally, we have five professionals who educate our customers on reimbursement. A 15-member, field-based medical affairs team addresses scientific and medical questions and provides expert guidance and education in the application, administration, and utilization of our drug and drug-delivery systems. This well-credentialed team consists of doctorate-level scientists, nurses, respiratory therapists, clinical specialists and pharmacists. On average, our entire field-based team interacts with and trains approximately 1,800 healthcare professionals each month. This training is driven by account expansion, the evolving needs of our customers, the addition of new clinical personnel, as well as our regular updates and improvements to our drug-delivery systems. We currently market INOtherapy in the United States, Puerto Rico, Canada, Australia, Mexico and Japan. Three sales professionals currently cover Canada, and we work with third parties to provide sales support for INOtherapy in Australia, Mexico and Japan.

We conduct annual customer satisfaction surveys to ensure that we continue to exceed our customers' expectations and make improvements along the way. In 2009, we conducted a comprehensive survey of approximately 175 customers (clinicians and hospital administrators) using a Net Promoter Score, or NPS, as a key performance metric for tracking customer satisfaction and brand equity. NPS involves quantitative measures by which companies can correlate the impact of their business and business practices on customer satisfaction and loyalty. Our NPS score demonstrated high overall satisfaction with and loyalty to our product, drug-delivery systems, people and company, as well as intent to recommend our product and company to colleagues. Nearly 70% of our customers were completely or very satisfied with our performance, while fewer than 5% were less than satisfied. Customer service and quality of our product and delivery systems were among our most highly rated attributes.

Historically, we offered INOtherapy at a fixed, hourly rate that was tied directly to the hours of INOMAX used. Each product cylinder is equipped with a meter, the INOmeter, that measures the number of hours and cumulative duration of usage on each cylinder. In addition, under our expense limitation program, we issued credits to customers for patients that exceeded specific durations of treatment. To apply for these credits, customers were required to track and submit patient data to us by

completing manual forms or entering data via an extranet site. This made the credit processing paperwork administratively burdensome for our customers. In addition, our customers often considered the list price of our product rather than the price net of credits, which made the perceived price higher than the effective price they paid. Because INOtherapy is used when patients are severely ill, our customers experience a fair amount of fluctuation from month to month in the use of this product, which caused significant budget variability for many customers.

In response to those concerns, in 2010 we implemented a new tier-based billing model and eliminated the expense limitation program. This model generally provides customers with the option of selecting one of four customized tiers of INOtherapy use. Three of these tiers are capped and have a different base fee and corresponding number of hours of use of INOMAX. The remaining tiered option provides unlimited access to INOtherapy for a fixed fee. There also is an hourly pricing model for those customers not wishing to select a tiered option. In effect, customers that elect one of the capped-tiered models now buy access to a fixed number of hours of use of INOMAX for a preset price, which removes many of the issues with the prior billing model. We believe the new billing model provides less budget variability and removes a significant administrative burden from our customers as they no longer are required to monitor and submit individual customer patient data to apply for credits. Finally, we believe the new billing model benefits us by providing revenue predictability and improving customer relationships.

We understand from our customers that reimbursement for the cost of INOMAX is typically provided through their receipt of DRG payments for patients who are covered by Medicare or Medicaid, or through similar reimbursement programs for patients who are covered by private third-party payors. As part of hospital billing, we believe that, when a hospital submits its summary bill for reimbursement, that bill includes all the line item costs captured in the patient's financial records. Under the DRG or similar reimbursement programs, hospitals are reimbursed based on the diagnosis of the patient and receive the same amount irrespective of the total length of stay or cost of services provided. However, hospitals are reimbursed at a higher rate for patients with the same diagnosis who have more complications.

We intend to leverage our existing infrastructure to provide INOtherapy in foreign markets with the same high-quality standards with which we operate in the United States. In Australia, Mexico and Japan, we operate in partnership with third parties to maintain our service and delivery system functions and operate local customer service centers. In Canada, we maintain our own service and delivery system functions, and provide customer service from the United States. We believe that certain foreign markets that we are targeting have favorable pricing and reimbursement environments.

In Japan, where INOMAX is known as INOflo, we have full reimbursement for up to six days at approximately $2,000 per day. Hospitals can be fully reimbursed for 100% of INOflo costs for approved uses. In Canada, where the federal government does not specifically reimburse the use of INOMAX, we charge approximately $100 per hour, which is paid out of local hospital budgets. In Mexico, there is currently no formal government reimbursement for INOMAX, and we are commercializing INOMAX within the private segment of the market only. We are in negotiations with multiple public hospitals in Mexico to secure budget allocations for INOMAX and are also actively pursuing government inclusion of INOMAX on Mexico's national drug formulary. In Australia, the government does not currently fund any use of INOMAX and all usage is paid for out of local hospital budgets. We are pursuing special reimbursement for INOMAX in Australia, but there is no guarantee that this will be successful.

The active substance in INOMAX is pharmaceutical grade NO. NO is a naturally occurring molecule produced by many cells of the body. Researchers found that NO is produced and released by

portions of the blood vessels and results in smooth muscle relaxation. In particular, NO controls muscle tone in blood vessels, and thus is an important factor in regulating blood pressure. As the muscles relax, blood flow increases, helping the heart and lungs to improve oxygenation and deliver more oxygenated blood to the body. Researchers discovered that NO has many critical roles in the body, not only in regulating blood pressure and blood flow, but also as: a neurotransmitter; protection against damage to tissue caused when blood supply returns after a period of restriction, known as ischemia reperfusion injury; protection against infection; a regulator for blood vessel growth; and a regulator of the function of the body's immune system. The scientific journal Science named NO Molecule of the Year in 1992. Additionally, the three researchers who discovered the role of NO as a signaling molecule in the cardiovascular system earned the Nobel Prize for Physiology or Medicine in 1998.

In 1991, Dr. Warren Zapol and his associates at the Massachusetts General Hospital discovered that inhaling NO in gas form could reduce high blood pressure in the lungs, a condition known as pulmonary hypertension. NO is a rapid and potent vasodilator, which means it quickly dilates, or widens, blood vessels. When inhaled, it quickly dilates blood vessels in the lungs, which reduces blood pressure in the lungs, strain on the right ventricle, and shunting of de-oxygenated blood away from the lungs. Because more blood can flow through the lungs, blood levels of oxygen improve. In addition, inhaled NO improves the efficiency of oxygen delivery, and because it is a gas, it goes only to the portions of the lung that are ventilated, or receiving air flow, and increases blood flow only in these areas. Thus, inhaled NO improves ventilation-perfusion matching, an important element of lung function involving the air that reaches the lungs, or ventilation, and the blood that reaches the lungs, or perfusion. Inhaled NO is quickly inactivated after contact with blood, and is selective for the lungs, meaning that it has minimal effects on blood pressure outside of the lungs, which is an important safety consideration. The INOMAX product label recognizes the fact that it is selective for the lungs.

INOMAX is the only treatment approved by the FDA for HRF associated with pulmonary hypertension in term and near-term infants. The FDA approved INOMAX for this indication in December 1999, and we commercially introduced it in 2000.

HRF is a potentially fatal condition that occurs when the lungs are unable to deliver enough oxygen to the body. In infants with HRF and pulmonary hypertension, there are regions in the lungs where the blood vessels are constricted, resulting in inadequate blood flow. Consequently, oxygen is unable to diffuse from the lungs into pulmonary blood vessels. This inadequately oxygenated blood returns to the heart and is pumped back to the body. If this condition persists, these infants are at risk for dying from inadequate oxygen delivery to their tissues.

Pulmonary hypertension occurs as a primary developmental defect or as a condition secondary to other diseases, including: meconium aspiration syndrome, which occurs when infants breathe their first stool, known as meconium, into their lungs during or before delivery; pneumonia; sepsis, an infection of the blood stream; and hyaline membrane disease or neonatal respiratory distress syndrome, which is due to immature lung development.

HRF severity is measured by oxygenation index, or OI. A higher OI is associated with more severe HRF. We estimate that approximately 25,000 term and near-term infants in the United States develop HRF each year, about 8,000 of whom have severe to very severe HRF (OI >25). According to our estimates, INOMAX currently is used to treat approximately 65% of the severe and very severe patients (OI > 25) and approximately 25% of all HRF patients.

Based on published estimates of the incidence of HRF among infants in the United States in 2001 and the population and birth rates in Japan, in Australia and in Canada in 2006 and in Mexico in 2005, we estimate that the number of infants eligible for INOMAX in the following countries, for the labeled indication in each country, are as follows: approximately 20,000 infants with HRF in Japan, approximately 3,000 term and near-term infants with HRF in Australia, approximately 30,000 term and near-term infants with HRF in Mexico and approximately 4,000 term and near-term infants with HRF in Canada.

Because INOMAX is already approved for the treatment of HRF, we have no further clinical development planned.

The FDA has not approved any therapies for treatment of HRF associated with pulmonary hypertension in term and near-term infants other than INOMAX. The current standard of care includes the use of oxygen and mechanical ventilation. Revatio, which recently became available in IV form, has been studied for the management of pulmonary hypertension in children, but is not approved for treatment of HRF. Prior to the introduction of INOMAX, extracorporeal membrane oxygenation, or ECMO, was the standard of care. ECMO is a highly invasive procedure in which an ECMO machine, which is similar to a heart-lung bypass machine, is used. It requires placing large tubes, known as catheters, into an artery and a vein to access the patient's blood and then continuously pumping it through a membrane oxygenator. This removes carbon dioxide and adds oxygen, and returns the oxygenated blood back to the patient. Because tubes are placed into the major blood vessels, ECMO carries the risks of bleeding and infection and clotting in the blood vessels, which could lead to stroke.

We are currently pursuing indications for INOMAX for the prevention of BPD and the treatment of ARDS.

We are investigating its use in the potential treatment of pre-term infants who are susceptible to BPD. Prior clinical trials of INOMAX in this area, conducted by us and others, varied considerably in dosing regimen, patient selection, treatment duration, and did not demonstrate consistent efficacy. Based on the design of a 582 patient clinical trial that demonstrated a greater benefit from INOMAX treatment at a high dose in a severely ill population, we began enrollment in a 380 patient Phase 3 clinical trial in December 2009 in the United States and Canada. We believe that this trial, if successful, in addition to data from previous trials, would be sufficient for FDA approval. INOMAX is not currently approved by the FDA for the prevention of BPD, and therefore our policies prohibit promotion and marketing of INOMAX for the prevention of BPD.

BPD is a respiratory condition related to lung injury in pre-term infants. Pre-term infants have underdeveloped, fragile lungs. With injury, the lung tissue becomes inflamed and may break down, resulting in scarring that can impair breathing and require oxygen for repair. Causes of lung injury include:

Infants with BPD often require prolonged support with mechanical ventilation and oxygen. Infants with BPD may be at increased risk for respiratory infection and may need to be re-hospitalized, resulting in significant additional medical costs. Infants with low birth weight have the highest chance of developing BPD, and the risk of BPD increases with decreasing birth weight. The Centers for Disease Control data for 2006 indicates that approximately 63,000 infants were born with very low birth weight (less than 1,500 grams) and would be at risk for BPD. We believe approximately half of all infants born with very low birth weight who are at risk for BPD could potentially be candidates for INOMAX.

INOMAX has been evaluated in several animal studies that suggest it may play a critical role in normal lung vascular growth and alveolarization, an increase in alveoli that exchange carbon dioxide and oxygen. Infants with BPD have larger and fewer alveoli, resulting in a less efficient transfer of oxygen from the lungs to the blood. Research into the interactions between the developing airspaces and the blood vessels has impacted the understanding of BPD. Damage to the developing alveolar epithelium, which is the cellular lining of the airspaces, may interrupt critical biological signaling and reduce capillary growth. As a result, blood vessels do not develop normally. We believe that interrupting blood vessel growth in the lungs may, in turn, halt the development of the alveoli.

Strategies focused on preventing lung injury and promoting normal maturation of alveoli may improve the outcomes of infants at risk of BPD in a few important ways:

The effectiveness of INOMAX in preventing BPD in pre-term infants has been investigated in a number of clinical trials.

The following table shows the size, time to initiation of therapy, dosing information and duration of the trials described above. All of these trials were double-blind, randomized, placebo-controlled trials, with the primary endpoint of survival without BPD at 36 weeks gestational age.

Trial	Sponsorship			Time to initiation of therapy	Starting INOMAX Concentration		Achievement of Primary Endpoint

Schreiber	University of Chicago	P2	207	< 72 hrs	10 ppm	7	Yes
Van Meurs	National Institute of Child Health and Human Development	P3	420	< 72 hrs	5 ppm	3	No
Kinsella II (INOT-25)	NHLBI	P3	793	< 48 hrs	5 ppm	21	No
EUNO (INOT-27)	INO Therapeutics	P3	800	< 24 hours	5 ppm	21	No
Ballard	NHLBI	P3	582	day 7-21	20 ppm	24	Yes

We are conducting an additional Phase 3 clinical trial (BPD-301) in pre-term infants at risk for BPD to explore our hypothesis that a higher dose of INOMAX, administered for a longer duration to the population of pre-term infants at very high risk for BPD, will result in a reduction in the incidence of BPD as compared to the control group. We began enrollment in this double-blind, randomized, placebo-controlled trial in December 2009, and we expect that it will include 380 infants at approximately 30 sites in the United States and Canada. The starting dose will be 20 ppm of INOMAX, starting between five and 14 days after birth and all infants will be treated for 24 days. The primary endpoint, survival without BPD at 36 weeks gestational age, is identical to the endpoint used in the prior successful NHLBI trial. Data regarding a secondary endpoint, patient outcome at one year of age, will be a required part of our sNDA submission for FDA approval for the BPD indication. The trial will also measure several other endpoints, including length of hospital stay and outcomes at two years.

The FDA has not approved any treatments specifically to prevent or treat BPD. We expect that INOMAX, if approved for the BPD indication, would be used in combination with other therapies, including:

Clinical trials have demonstrated that Vitamin A and caffeine may reduce the incidence of BPD, but these therapies are not approved for this use.

ARDS is a common and life-threatening condition for which no specific treatments are available. INOMAX has been studied for the treatment of ARDS. Although those trials were not adequate for FDA approval of this indication, physicians continue to use INOMAX to treat patients with severe ARDS. Based on the outcome of additional preclinical studies of INOMAX in treating ARDS, we are currently planning to conduct Phase 2 and Phase 3 clinical trials in this use. INOMAX is not currently approved by the FDA for the treatment of ARDS, and therefore our policies prohibit promotion or marketing of INOMAX for the treatment of ARDS.

Acute lung injury, or ALI, is characterized by inflammation of the lung tissues leading to impaired gas exchange with low oxygen levels and frequently results in multiple organ failure and death. This condition requires support with oxygen and mechanical ventilation. In its most severe form, it is called ARDS, but these conditions are often discussed as one condition, which we will refer to as ARDS/ALI. ARDS/ALI can be caused by direct lung injury, such as pneumonia, aspiration of gastric acid or smoke inhalation, or by indirect injury, such as trauma, sepsis or systemic conditions such as pancreatitis.

According to a published study, there are 190,600 cases of ALI in the United States per year, with an associated 74,500 deaths and 2.2 million days in ICUs. This study also estimates that out of the patients with ALI, approximately 141,500 patients would be classified as having ARDS, with an associated 59,000 deaths and 1.6 million days in ICUs. ALI patients, either with or without ARDS, spend a significant amount of time in the ICU with the average length of stay estimated at 11.3 and 11.6 days for all cases of ALI and ARDS, respectively.

INOMAX has been shown to be a selective pulmonary vasodilator with minimal systemic effects in patients with HRF. Additionally, INOMAX has also been shown to improve gas exchange both in animal models and in humans. The hypothesis for the use of INOMAX in ARDS is that it may increase oxygenation and decrease pulmonary arterial pressures by causing vasodilation in well-aerated areas of the lung, thereby improving oxygenation. This, in turn, is expected to allow for less toxic levels of oxygen and less ventilator support, thereby protecting the lungs from ventilator- and oxygen-induced injury.

In 1999, we conducted a randomized, double-blind, placebo-controlled, Phase 3 clinical trial in the ICUs of 46 U.S. hospitals to evaluate the efficacy of low-dose INOMAX (5 ppm) in 385 patients with ARDS. The primary endpoint of this trial was the number of days patients were alive and stayed off mechanical ventilation. In this trial, INOMAX had no significant benefit versus placebo. There was a significant increase in blood oxygen levels during the initial 24 hours of treatment, but no improvement in survival at 28 days, which was a secondary endpoint of the trial.

The major clinical complication of ARDS in survivors is the development of chronic lung disease as the injured lung tissue heals. We performed additional, prospectively defined analyses on this trial, which showed significant improvement in lung function in survivors who were treated with INOMAX, suggesting that INOMAX may have a protective effect against chronic lung disease. We therefore believe that there may be a clinically important effect of INOMAX other than improving survival.

In addition, we and other investigators have performed pharmacokinetic and pharmacodynamic studies that, we believe, suggest that an alternative INOMAX dosing regimen (such as pulsed or intermittent dosing) may improve the effectiveness of INOMAX and reduce mortality in patients with ARDS. Therefore, we are planning two separate development paths for the use of INOMAX in ARDS: one to determine if an alternative dosing strategy will reduce 28 day mortality in patients with ARDS, and a second to examine the effectiveness of INOMAX in preventing chronic lung disease in survivors.

Pending the outcome of preclinical studies, we are planning a Phase 2 clinical trial to evaluate an alternative dosing strategy to determine if we can prolong the improved oxygenation effect and improve survival in ARDS. This alternative dosing strategy includes an evaluation of our new INOpulse DS technology, a drug-delivery system that may improve dosing of INOMAX to the injured lung. We believe that a successful alternative dosing regimen could lead to reduced requirements for high ventilatory and oxygen support in ARDS patients, thus improving survival at 28 days.

We are also planning a Phase 3 clinical trial of INOMAX in patients with ARDS using our INOpulse DS technology to evaluate the effects of INOMAX in the prevention or amelioration of chronic lung disease in survivors of ARDS. Since the previous trials in ARDS were conducted using the early-generation INOvent DS with constant delivery of INOMAX, we believe we will be required to provide "bridging data" between the two drug-delivery systems, and therefore we are starting studies to demonstrate equivalent bioavailability between the two systems.

The standard of care for ARDS includes support with oxygen and mechanical ventilation to keep the patient alive. Although patients with ARDS receive many supportive therapies, we are not aware of any therapy or combination of therapies that have been shown to improve survival from ARDS. We expect that INOMAX, if approved for this indication, would be used in combination with these other supportive therapies.

Cardiac surgery with cardiopulmonary bypass often is complicated by pulmonary hypertension in the immediate post-operative period. In the early post-operative period, pulmonary hypertension is characterized by a sudden rise in pulmonary vascular resistance, which initiates a cycle of right-ventricular failure and poor cardiac output. If left untreated, cardiac arrest and death may follow. INOMAX is now widely used for treating this condition, based on numerous published studies, textbooks and practice guidelines. INOMAX is not approved by the FDA for use in cardiac surgery, and therefore our policies prohibit promotion and marketing of INOMAX for use in cardiac surgery.

Significant post-operative pulmonary hypertension following repair of congenital heart disease is relatively uncommon, but very serious when it does occur. Certain high-risk populations may be identified pre-operatively. These high-risk populations include patients undergoing surgery for:

The American Heart Association, or AHA, estimates that there are approximately 36,000 babies born in the United States with congenital heart defects that are detected in the first year of life, of whom approximately 9,200 require an invasive procedure in the first year.

INOMAX is not FDA approved for hypertension following cardiac surgery to repair congenital heart disease and therefore our policies prohibit promotion and marketing of INOMAX for such use. However, based on data from clinical trials and clinical experiences documented in published practice guidelines, many physicians use INOMAX to treat this condition. For this reason, physicians are unwilling to conduct additional placebo-controlled trials that might harm patients in the control group who would not be receiving INOMAX. We have investigated various trial designs and conducted several face-to-face meetings with the FDA, but have been unable to agree with the FDA on an additional clinical trial that would be adequate for approval of this indication. As a result, we are exploring alternative development strategies, including an investigator-initiated clinical trial and a partnership with the National Institutes of Health for a consensus conference on the use of INOMAX for treating hypertension following cardiac surgery to repair congenital heart disease. Any clinical trial would be designed to address questions about the optimal use of INOMAX in this setting and would be intended to support the best use of the product, and the results may merit publication. However, it is unlikely that any of these paths would lead to future FDA approval of INOMAX for this indication.

There currently are no approved treatments for post-operative pulmonary hypertension or to shorten the time needed on mechanical ventilation following cardiac surgery to repair congenital heart disease. However, certain vasodilator drugs, such as Primacor and Revatio, and prostacyclin analogues, such as Flolan and Ventavis, sometimes are used in treating these patients. Asklepion Pharmaceuticals LLC is developing Citrupress for post-operative pulmonary hypertension in patients with congenital heart disease.

Patients with structural heart disease, such as valvular heart disease and cardiomyopathy, may, as a result, develop CHF, which may be further complicated by pulmonary hypertension and right ventricular dysfunction. For patients with end-stage CHF, the best option is a heart transplant. For patients who cannot wait or who are not eligible for a transplant, the alternative is to support the heart with a partial mechanical heart that provides a temporary treatment, known as LVAD. LVAD devices have improved survival rates; however, their insertion can create new problems, such as right ventricular failure and cardiovascular collapse, especially in patients with pulmonary hypertension who often have increased resistance to blood flow through the lungs, which is referred to as increased pulmonary vascular resistance, or PVR. This, in turn, may lead to the need for a right ventricular assist device, or RVAD, in addition to medical therapy, to improve right heart function following the LVAD insertion. One study reported that approximately 40% of patients with LVAD devices developed right heart failure after surgery.

There are approximately 2,000 heart transplants and approximately 2,300 LVAD insertions performed each year in the United States.

As is the case for patients having cardiac surgery to repair congenital heart disease, INOMAX is used in the management of post-operative pulmonary hypertension in patients undergoing heart transplants and LVAD insertions. Numerous published studies in a variety of types of cardiac surgery (including LVAD insertions, heart transplant and valve repair surgery) have suggested a potential for physiologic and clinical benefit from use of INOMAX. In 2008, we completed a 150 patient Phase 2 clinical trial in patients undergoing LVAD insertions designed to determine whether INOMAX could

reduce the incidence of right ventricular failure and shorten the time needed on mechanical ventilation. Because of the unexpectedly low event rate in the placebo arm, the trial was underpowered to meet its primary endpoint. Although the incidence of right ventricular failure was reduced (9.6% on INOMAX compared to 15.5% on placebo) and days on mechanical ventilation were reduced (median 2 days on INOMAX compared to 3 days on placebo) in patients treated with INOMAX, these results did not reach statistical significance.

INOMAX is not FDA approved for treatment of pulmonary hypertension following heart transplants and LVAD insertions, and therefore our policies prohibit promotion and marketing of INOMAX for these uses. Due to the current use of INOMAX in the management of post-operative pulmonary hypertension, physicians are generally unwilling to conduct placebo-controlled clinical trials and we have been unable to reach agreement with the FDA on an alternative trial design. In June 2009, we submitted a pre-sNDA briefing book to the FDA, citing five studies conducted in adults undergoing heart transplant or LVAD insertions, and six additional studies conducted in other types of cardiac surgery. However, the FDA declined to grant us a meeting. We have no plans to conduct another trial on the effects of INOMAX in treating pulmonary hypertension following surgery to insert LVAD devices or heart transplants.

There are currently no approved treatments that reduce the incidence of right ventricular failure or shorten the time needed on mechanical ventilation following LVAD procedures. However, certain vasodilator drugs, such as milrinone, Revatio, prostacyclin and prostacyclin analogues are used to treat these patients.

Under our agreement with Orphan, we have acquired the IND and NDA to LUCASSIN (terlipressin for injection) and have all rights necessary to develop, manufacture and commercialize LUCASSIN in the United States, Canada, Mexico and Australia. LUCASSIN is being developed for the treatment of HRS Type 1, which is a rare and often fatal condition characterized by rapid onset of renal failure with a high mortality rate. Terlipressin, the active pharmaceutical ingredient in LUCASSIN, is approved in France, Ireland, Spain and South Korea for the treatment of patients with HRS Type 1. In the United States, HRS Type 1 is an orphan-designated condition for which there currently are no approved drugs. An orphan drug is one that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease.

HRS is a condition of advancing kidney failure in patients with cirrhosis. Kidney failures associated with HRS may arise spontaneously or in response to changes in blood volume or fluid shifts within the body. In HRS, renal blood flow decreases due to abnormalities, including the narrowing of renal blood vessels. While the cause is unknown, it appears to be due to an imbalance between the mechanisms that expand and constrict renal blood vessels. Kidney problems in HRS result from poor liver function and a successful liver transplant currently is the only cure.

The two general categories of HRS are Type 1 and Type 2. HRS Type 1 is characterized by rapidly progressive renal failure in less than two weeks, while HRS Type 2 consists of renal impairment that progresses more slowly. We estimate that HRS impacts approximately 25,000 patients annually in the United States, approximately 3,000 of whom have HRS Type 1. HRS Type 1 has a poor prognosis with only 50% of patients surviving for more than two weeks and only 10% to 20% surviving for more than three months. HRS Type 2 has a slightly better survival rate with 50% of these patients still alive six

months after diagnosis with the condition. With no approved drugs to treat HRS Type 1, patients with this condition are at significant risk of death unless they receive a liver transplant. The average waiting time for a liver transplant is approximately one year. Additionally, patients with compromised renal function who undergo liver transplantation have a worse post-transplant outcome than those who have normal kidney function prior to transplantation. Thus, management of HRS Type 1 is an important bridging strategy to liver transplant.

Recent findings on the cause of HRS show that it results from progressive, inappropriate systemic widening of blood vessels in the intestines known as vasodilation. Medications that constrict the blood vessels, referred to as vasoconstrictors, have been studied as possible treatments.

Based upon preliminary studies, LUCASSIN appears to counteract the vasodilatation in the intestinal circulation and increase blood flow to the kidneys thereby improving renal function. In clinical trials, LUCASSIN increased the chance of HRS reversal by restoration of normal kidney function. In these trials, HRS patients treated with LUCASSIN before liver transplantation had similar survival and outcomes compared to patients without HRS who also underwent transplantation.

Orphan conducted a double-blind, randomized, placebo-controlled Phase 3 clinical trial in 112 patients with HRS Type 1 (OT-0401) which compared LUCASSIN in combination with albumin to placebo with albumin, the most commonly used supportive treatment for HRS Type 1. The primary endpoint of this trial was incidence of treatment success, which was defined as the percentage of patients alive with a reversal of HRS at day 14 following commencement of treatment. HRS reversal was defined as a serum creatinine level of less than or equal to 1.5 mg/dL without hemodialysis or recurrence of HRS in two separate measurements taken 48 hours apart and without recurrence of HRS until day 14. All patients were included in the analysis of the primary endpoint, including patients who were discharged from the hospital earlier than day 14, received hemodialysis or underwent liver transplant. Two patients reached their second confirmatory serum creatinine level of less than or equal to 1.5 mg/dL after day 14 but did not qualify as treatment success as defined by the protocol. Treatment success was demonstrated in 29.2% of qualified patients treated with LUCASSIN and albumin compared to 15.9% of qualified patients treated with placebo and albumin, although this was not a statistically significant difference (p=0.131). However, in a retrospective analysis of all patients, LUCASSIN achieved statistically significant HRS reversal (p = 0.008), defined as a single measurement of serum creatinine level of less than or equal to 1.5 mg/dL, in 33.9% of LUCASSIN and albumin-treated patients compared to 12.5% of placebo and albumin-treated patients.

As part of the LUCASSIN NDA, Orphan also submitted results from a second Phase 3 clinical trial (TAHRS) conducted by The Hospital Clinic, University of Barcelona, Spain. This trial was an open-label, randomized, multi-center clinical trial comparing LUCASSIN in combination with albumin to albumin alone in 46 patients with both HRS Type 1 and HRS Type 2. The co-primary endpoints of this trial were 90-day survival and HRS reversal. Unlike the OT-0401 trial that included only HRS Type 1 patients, the TAHRS trial included 34 Type 1 patients, who represented 74% of the total patients in the trial, as well as 12 Type 2 patients. In the TAHRS trial, HRS reversal was observed in 39.1% of LUCASSIN and albumin-treated patients compared to 8.7% of patients treated with albumin alone (p = 0.018). However, the study results were not statistically significant for 90-day survival. Because one of the two co-primary endpoints did not achieve statistical significance, the results of the combined co-primary endpoint were not statistically significant.

Orphan submitted data from these two trials in its rolling NDA seeking FDA approval of LUCASSIN for the treatment of HRS Type 1. In November 2009, the FDA issued a complete response letter requiring at least one additional adequate and well-controlled study with pre-specified endpoints

that achieves statistical significance and demonstrates the safety of LUCASSIN. In the complete response letter, the FDA requested additional safety information (i) to support the proposed use of LUCASSIN for up to 14 days and (ii) with regard to the adverse events and serious adverse events which occurred in the trials. The FDA noted in the complete response letter that while the total number of adverse events in the studies was small, some adverse events and serious events (including death) during the treatment period occurred somewhat more frequently in the LUCASSIN treatment groups than in the placebo groups. In order to demonstrate safety and efficacy of LUCASSIN to seek approval in the United States, we plan to begin an additional 150 patient double-blind, placebo-controlled, Phase 3 clinical trial of LUCASSIN for the treatment of HRS Type 1 in 2010.

In preparation for this new Phase 3 pivotal trial, we reanalyzed data from the OT-0401 trial using the definition of treatment success that we intend to use for the planned Phase 3 trial. This retrospective analysis, using an endpoint of two serum creatinine values of less than or equal to 1.5mg/dL at least 48 hours apart, without any intervening hemodialysis, transplant, or measurement of serum creatinine above a specified level, showed that 32.1% patients treated with LUCASSIN and albumin achieved this endpoint versus 12.5% of patients treated with placebo and albumin, which was statistically significant (p = 0.013). We have applied these learnings from the reanalysis of the OT-0401 trial data, as well as FDA comments regarding establishing endpoints, inclusion and exclusion criteria and data handling and statistical methods, to ensure optimal selection of a patient population that is likely to respond to LUCASSIN.

The Phase 3 pivotal trial we intend to conduct will compare LUCASSIN in combination with albumin to placebo with albumin, and will have a primary endpoint of HRS reversal, which is defined as two serum creatinine values of less than or equal to 1.5mg/dL taken at least 48 hours apart, without any intervening hemodialysis, transplant or elevation of serum creatinine above a pre-specified level. Patients will be treated for up to 14 days and serum creatinine measurements will be taken at least daily during the treatment period. Secondary endpoints in the trial will include change in renal function from baseline through end of treatment, transplant-free survival and overall survival. We have submitted and are corresponding with the FDA regarding a special protocol assessment, on which we expect to reach agreement shortly. Our agreement with the FDA will pertain to pre-specified endpoints, acceptable inclusion and exclusion criteria, setting an upper limit on serum creatinine levels, outcome measures and statistical methods for addressing missing data, and study randomization that is stratified by important baseline factors. By conducting this additional Phase 3 pivotal trial, we believe we will fulfill the FDA's requirements of two, well-controlled, well-designed clinical trials to support filing an NDA.

LUCASSIN has fast-track and orphan drug designations for use in HRS Type 1. Fast track is an FDA process-based designation designed to facilitate the development and expedite the review of drugs that treat serious diseases and fill an unmet medical need. Orphan designation qualifies the product sponsor for tax credit and marketing incentives. Specifically, a marketing application for a prescription drug product that has been designated as a drug for a rare disease or condition is not subject to a prescription drug user fee unless the application includes an indication other than for a rare disease or condition. Once the FDA has approved a marketing application with an orphan designation, it will not approve a subsequent application for the same drug product for the same indication for another seven years.

Patients diagnosed with HRS Type 1 currently are treated with supportive therapy until they can receive a liver transplant, which is the only known cure. While transplants are usually successful in these patients, the number of liver transplants in HRS Type 1 patients is low due to shortages in livers available for transplant. The critical issue for a patient with HRS Type 1 is survival until the time of transplant.

There are no FDA approved drug therapies to treat HRS Type 1. However, some physicians prescribe a combination of midodrine, a vasopressor, and octreotide, a vasodilation inhibitor. Patients

generally are put on hemodialysis to lower creatinine levels, which reduces symptoms of kidney failure, and some patients will have a stent placed between the portal and hepatic veins, which carry blood to and from the liver, to relieve high blood pressure in the portal vein in order to prevent bleeding.

Under our agreement with BioLine, we have an exclusive worldwide license to IK-5001, a product that will be developed through the medical device pathway and is designed to prevent the structural alteration of damaged heart muscle caused by acute myocardial infarction, or AMI. AMI, commonly known as heart attack, frequently causes an alteration in the structure and function of the heart, which is referred to as cardiac remodeling. Because a portion of the heart muscle can no longer function, the rest of the heart must compensate. Under this extra workload, the heart muscle eventually dilates, the walls of the heart thin and the heart further remodels thereby causing another cycle of dilation and overcompensation. This cardiac remodeling results in reduced heart function that typically leads to CHF. IK-5001 is administered following AMI and is designed to flow into the damaged heart muscle where it forms a protective cast, or scaffold, to enhance the mechanical strength of the heart muscle during recovery and repair, thereby preventing cardiac remodeling.

The AHA estimates that over 850,000 Americans will suffer from AMI annually, with approximately one-third estimated to suffer from the more serious ST-segment elevated AMI, or STEMI. An infarction refers to dead tissue that results from the loss of blood supply. Patients who have STEMI, particularly those with an infarction in the anterior left ventricular portion of the heart, are at significant risk of cardiac remodeling and CHF following AMI when the heart is too weak to pump enough blood to supply all of the demands of the body. A study estimates that approximately 40% of patients with AMI later suffer from CHF. In addition, the costs of treating AMI can be substantial. The AHA estimated that the direct and indirect cost of CHF in 2008 was $20 billion to $30 billion, and we estimate that about half of that was related to AMI. The costs of re-hospitalization and other long-term treatments for CHF can be significant, therefore we believe a treatment which would help prevent cardiac remodeling could generate significant medical cost savings.

Following treatment during the acute phase of AMI, which includes salvage of the heart muscle, known as the myocardium, a breakdown in the structural integrity of the heart, such as expansion of the original area of infarction, wall thinning and increased wall stress in the remaining heart muscle may occur. These processes can lead to molecular, cellular, and physiological responses that, in turn, can lead to cardiac remodeling and ultimately to CHF. If IK-5001 is found to be effective in reducing the impact of cardiac remodeling and is approved by the FDA, we believe that it could become a commonly used treatment for patients with AMI, particularly for patients with a STEMI who are at higher risk for subsequent CHF. We believe that IK-5001 would most often be used immediately after a coronary angioplasty procedure.

Alginates, which are complex sugars obtained from seaweed, have been used extensively in the food industry, as well as by the pharmaceutical and medical device industries. As medical devices, alginates have been used as wound dressings, as bone void fillers and to create dental impressions. Scientific journals have reported that alginates are not absorbed systemically after ingestion and that injected alginates are eliminated through the urine unchanged.

We expect to administer IK-5001, which is an injectable liquid containing sodium alginate and calcium, through the coronary artery during a coronary angioplasty procedure to the infarcted myocardial tissue using commercially available catheters approved for coronary intravascular use. IK-5001 is designed to be delivered through an injection in a high quantity, known as a bolus injection,

over a period of approximately 30 seconds. This delivery method is similar to the administration of contrast dye during coronary angiography. As IK-5001 enters the myocardium from the coronary artery, it crosses the capillary bed into the infarcted myocardium and fills the area outside of the existing cells, known as extracellular spaces. We believe that, while filling these extracellular spaces, IK-5001 binds with the calcium that has been released from the dead cells, creating a gel that causes the substance to thicken and form a protective cast, or scaffold, around the area of dead tissue, which is known as the infarct zone. We believe that IK-5001 will work as a temporary structural support while the damaged myocardium heals by replacing the dead tissue that would normally support the wall of the heart. As the infarction heals, calcium is no longer released from dying cells. As calcium levels return to normal, the IK-5001 gradually dissipates through excretion.

BioLine has conducted numerous preclinical studies of IK-5001 in animal models of AMI. Tissue samples have shown that IK-5001 settles in the area of the AMI and prevents cardiac remodeling. In these preclinical studies, injection of IK-5001 was well tolerated, did not gel in the artery, impede coronary blood flow or restrict the wall motion of the heart. In addition, in preclinical studies, virtually all of the material has been shown to have left the body six weeks after injection.

IK-5001 is biologically inert, and does not have any pharmacologic activity. In addition, IK-5001 is excreted unchanged through the kidneys and does not result in any absorption or metabolism within the body. For these reasons, we believe that IK-5001 will be designated a medical device, rather than a drug, by the FDA.

BioLine has completed a Phase 1/2 clinical trial in Europe in 27 patients with AMI, in which IK-5001 was safely administered in humans. We are planning to meet with the FDA in the second quarter of 2010 to discuss the development plans, including any U.S. regulatory requirement, for a pivotal Phase 2/3 clinical trial.

There are various therapies available to treat AMI, such as coronary angioplasty and opening blocked arteries by inserting a tube, or stent. Once blood flow has been restored, most patients receive ongoing therapies to reduce the workload on the heart in order to prevent future cardiac adverse events, including CHF. These therapies include drugs, such as angiotensin-converting enzyme inhibitors, known as ACE inhibitors, angiotensin receptor blockers, known as ARBs, beta blockers and diuretics. In the subset of patients with AMI who have abnormal heart rhythms, cardiac resynchronization may prevent or reverse remodeling. However, the FDA has not approved any of these treatments specifically for the prevention of cardiac remodeling following AMI.

We do not expect IK-5001 to replace current treatments for CHF following AMI, but rather will become part of the treatment regimen used in conjunction with other therapies, including those discussed above. In addition, because IK-5001 can be given in conjunction with a coronary angioplasty procedure, we do not believe it will directly compete with other remodeling devices that may be developed for administration during open heart surgery.

We are developing hydrogen sulfide, or H₂S, a naturally occurring molecule to be delivered as sodium sulfide, under the investigational code name IK-1001. IK-1001 has a variety of biologic effects that result in the protection of cells and tissues in conditions that cause stress to the human body. In particular, IK-1001 acts as an antioxidant, slowing or preventing an increase in oxygen and corresponding loss of electrons, and as an anti-inflammatory, reducing inflammation. While the reasons

for these biologic effects are not completely understood, they have been demonstrated in several animal models.

We are developing IK-1001 for acute, single administrations in critical care conditions characterized by tissue ischemia. We believe there are a number of potential clinical indications for IK-1001, including AMI, coronary artery bypass graft surgery, or CABG, and diabetic ulcer. The first indication for which we are pursuing development is in preventing damage to tissue caused when blood supply returns to the tissue following AMI.

To date, we have performed three Phase 1 trials involving the administration of IK-1001 in humans. We have completed two trials in healthy volunteers and another in patients with varying degrees of kidney failure. A total of 170 patients participated in these trials, with 137 receiving IK-1001 and 33 receiving placebo. The IK-1001 doses evaluated were up to 0.2 milligrams, or mg, per kilogram, or kg, administered as a one-minute IV bolus injection, and up to a 1.5 mg/kg/hour continuous IV infusion for a duration of six hours for a cumulative dose of 9.0 mg/kg. Most adverse events were of mild-to-moderate intensity and self-resolving and there have been no treatment-related serious adverse events. No efficacy data were collected during any of these trials. Subsequently, we also initiated a Phase 2 clinical trial in patients undergoing CABG surgery but terminated it based on a need to develop a rapid and reliable assay methodology for IK-1001. Once this assay is developed, we expect to resume Phase 2 clinical trials. A total of seven serious adverse events had been reported in that trial, none of which were treatment related.

Under our agreement with Fibrex, we have the exclusive worldwide license to a portfolio of investigational compounds for a range of critical care conditions characterized by vascular leakage. We identify these compounds in a series of IK6000s, which we refer to as IK-600X, with IK-6001 as the lead compound. The IK-600X compounds are fibrin-derived peptides, which are proteins based on naturally occurring molecules formed during normal blood clotting, that bind to proteins found in the blood vessel lining known as vascular endothelial cells. Proper functioning of the blood vessel walls, known as the endothelial barrier, prevents tissue damage after injury. When tissues are injured, the endothelial barrier allows for the flow of small molecules and even whole cells to pass through to reach the site of the injury thereby causing inflammation. This capacity of the blood vessel wall is referred to as vascular permeability and is an important step in the healing process. However, if this flow, or vascular leakage, becomes excessive it can cause damage to the tissue it is trying to help heal. Vascular leakage is common to many conditions.

In preclinical studies conducted outside of the United States by Fibrex, IK-6001 was shown in several animal models to preserve the function of blood vessel lining, prevent vascular leakage and inhibit white blood cell movement into tissues. Additionally, Fibrex conducted a Phase 2 clinical trial of patients with AMI. Although a numerical reduction in infarct size was observed in this trial (21%), the results were not statistically significant (p=0.207). We believe these results provide insight into the potential beneficial effects of IK-6001 in AMI. In this clinical trial, patients were treated with IK-6001 by bolus infusion. We are currently conducting a series of preclinical studies to determine the optimal dosing regimen. After we complete these preclinical studies and determine the optimal dosing regimen, we plan to resume clinical development of IK-6001. We believe that the compounds within the IK-600X series may have use in conditions characterized by vascular leakage and currently are evaluating them in preclinical studies for the treatment of AMI, acute lung injury and solid organ transplantation.

We rely on the expertise of our approximately 110 research and development personnel, over 60 of whom have experience administering clinical trials in critical care settings. In 2008 and 2009, we invested approximately 28% of net sales in organic research and development, as well as in research

and development activities arising from licensing and acquisitions. Moving forward, we intend to invest in research and development in the same manner in which we have historically invested.

We conduct some of our proof of concept studies in our preclinical research and development facility, which is equipped and staffed to conduct synthetic chemistry, analytical and bioanalytical chemistry, formulation, cell culture, pharmacology and pilot toxicology studies. These studies also serve to identify new potential indications, minimize potential pitfalls in the formal drug development stage, and create novel intellectual property positions. Only compounds and technologies that meet a set of stringent evaluation criteria move into formal preclinical development and later progress to clinical trials. We execute development programs with a defined set of goals and a series of development milestones by which we measure progress. We also actively sponsor independent investigator sponsored research into potential applications of INOMAX.

Our drug-development programs are focused on INOMAX, LUCASSIN, IK-5001, IK-1001, and a portfolio of investigational compounds known as IK-600X. Our INOMAX and IK-1001 compounds are the result of internal research and development activities. We currently have several other candidates in various stages of early development, including pro-drugs, which are drugs that are administered in an inactive form and then metabolized in the body into an active form, and different release formulations for NO and H₂S, as well as programs addressing different platform pathways and mechanisms.

We expect to begin more early-stage projects that will progress to later-stage development. We review our portfolio regularly to ensure a balanced mix of product candidates moving into later stages of development across therapeutic areas.

A key element of our business strategy is to build our product and product candidate portfolio through targeted business development efforts. We intend to actively pursue strategic acquisitions and in-licensing opportunities to augment our growth, capitalize upon our operating leverage and diversify our product and product candidate portfolios.

Our business development team has successfully negotiated the rights to products in various stages of development: LUCASSIN, a late-stage product candidate for which we expect to begin a pivotal Phase 3 clinical trial in 2010; IK-5001, a product that will be developed through the medical device pathway for which we expect to begin a pivotal trial in 2011; and IK-600X, a late-stage preclinical development portfolio of fibrin-derived peptides. We are continuing to evaluate multiple opportunities across several therapeutic categories with a focus on late-stage clinical development and marketed assets, and expect our business development activities to focus on significant transactions. As such, we may license or make acquisitions of products, solutions and technologies and enter into partnerships with and make acquisitions of businesses and companies. Our focus is, and will continue to be, to acquire and develop therapeutic products and product candidates that address the significant unmet needs of critically ill patients in the hospital setting.

We believe that attractive opportunities exist for acquisitions or in-licensing in the critical care market. We believe that our experience in identifying and consummating acquisitions and in-licensing opportunities, our industry expertise and relationships, clinical development and commercial capabilities, and available capital, make us an ideal partner for such opportunities.

In March 2007, in connection with our acquisition of INO Therapeutics, we obtained from AGA AB, an affiliate of Linde, or AGA, certain rights and obligations with respect to patent rights pertaining to INOMAX under a license agreement between AGA and MGH. Our rights under the

agreements with MGH and AGA include an exclusive license, subject to certain reserved rights, to research and develop products covered by such patent rights in countries where such patent rights are issued or pending and to manufacture and commercialize such products in the territory consisting of the United States, Puerto Rico, Canada, Australia, Japan and certain other non-European countries where such patent rights are issued or pending, which we refer to as the licensed territory. We are obligated (i) to use reasonable efforts to develop products covered by such patent rights in countries where such patent rights are issued or pending and to make available commercially viable products covered by the licensed patent rights for sale and distribution throughout the licensed territory, (ii) to achieve certain specified goals relating to the approval of such products for sale in the United States and Canada, and (iii) to pay MGH royalties at a single digit percentage on net sales in the licensed territory, if any, of any product covered by such patent rights, subject to specified reductions and exclusions. Our agreement with MGH states that our obligation to pay royalties to MGH expires on a country-by-country and product-by-product basis, with respect to specified types of products, on the date on which the product is no longer covered by a valid claim in the licensed patent rights or, with respect to other types of products, upon the later to occur of the expiration in such country of the last to expire of specified licensed patent rights by MGH and the date of regulatory approval of a generic version of such product. We and MGH each have the right to terminate the agreement for an uncured material breach by the other party. In the United States the patents covering INOMAX expire in January 2013.

In March 2007, in connection with our acquisition of INO Therapeutics, we entered into agreements with AGA under which we agreed to supply AGA with certain products, including bulk nitric oxide and nitric oxide delivery systems and related accessories. Those agreements also provide for certain cooperation between AGA and us with respect to the development of indications for INOMAX, as well in areas such as pharmacovigilence and product recalls. These supply and cooperation obligations remain in effect until March 2027. We and AGA have the right to terminate these obligations for an uncured material breach by the other party. We also have the right to terminate our supply and cooperation obligations if AGA breaches the parties' March 2007 agreements by selling products subject to the patent rights in any territory for which we obtained an exclusive license in the March 2007 transaction. AGA may terminate the agreement 18 months after we give them notice that we are discontinuing our commercial activities with respect to INOMAX. We may terminate the agreement six months after AGA gives notice that it is discontinuing its commercial obligations with respect to INOMAX. In order to induce our investment in the acquisition of INO Therapeutics, the agreements also include a provision which prevents Linde from commercializing INOMAX in North America until after March 27, 2013.

Under the 1998 sale and purchase agreement pursuant to which AGA acquired the INOMAX clinical program and related license rights, we are obligated to pay royalties at a single-digit percentage on net sales of INOtherapy to INO Holdings LLC, or INO Holdings, of which Datex-Ohmeda, Inc. and BDX INO LLC are the sole members, until we are no longer obligated to pay royalties to MGH on such sales. If we successfully achieve all remaining regulatory milestones in the agreement, we will be obligated to pay, in the aggregate, $4.0 million to INO Holdings. In 2008, we entered into a agreement with Datex-Ohmeda under which we purchased future royalty obligations on net sales of INOMAX and acquired certain intellectual property for a cash payment totaling $7.0 million.

See "Certain Relationships and Related Person Transactions—Business Agreements with Linde" for more information regarding our agreements with Linde.

Under our agreement with Orphan, we acquired the IND and NDA to LUCASSIN (terlipressin for injection) and all of Orphan's rights to develop, manufacture and commercialize LUCASSIN in the United States, Canada, Mexico and Australia. In August 2008, we paid Orphan Therapeutics

$17.5 million and on March 29, 2010, we paid Orphan an additional $5.0 million and reimbursed it for prior research and development costs it had incurred with respect to LUCASSIN. We are obligated to use commercially reasonable efforts to develop, market, commercialize and sell LUCASSIN.

If we successfully achieve all development, regulatory and commercialization milestones in the agreement, we will be obligated to pay Orphan, in the aggregate, an additional $27.5 million. In addition, we will be obligated to pay Orphan royalties at a percentage in the low double digits on net sales, if any, of LUCASSIN for as long as we sell LUCASSIN, subject to a 50% reduction following regulatory approval of specified competitive products and offsets for specified payments to third parties made in connection with LUCASSIN. We are also required to pay Orphan specified minimum royalties on our sales of LUCASSIN. We also assumed specified royalty obligations owed by Orphan to third parties in connection with sales of LUCASSIN.

If, prior to August 29, 2014, we sell or transfer LUCASSIN to a third party, or grant an exclusive license to develop, market and sell LUCASSIN in the United States to a third party, other than in connection with a change of control, we will be required to pay Orphan an amount based on a formula specified in the agreement. If we undergo a change of control prior to August 29, 2011, we will be required to pay Orphan a specified amount. In addition, if we undergo a change of control at any time, and we have not sold our rights to LUCASSIN or granted an exclusive license to LUCASSIN in the United States, the minimum royalties we are required to pay Orphan will be increased by a pre-agreed amount.

If we fail to use commercially reasonable efforts to develop, market, commercialize and sell LUCASSIN, Orphan has the right to terminate the agreement if we fail to use such efforts during the six months following notice from Orphan. Orphan also has the right to terminate the agreement within the six months that follow specified events of non-payment. We and Orphan each have the right to terminate the agreement if we elect to cease development, marketing, commercialization or sale of LUCASSIN in the United States, Canada, Mexico and Australia. If the agreement is terminated, our exclusive licenses from Orphan will terminate and Orphan will have the right to reacquire LUCASSIN from us, on pre-agreed terms.

In August 2009, acting through our wholly owned subsidiary, we entered into an agreement with BioLine, under which we obtained the worldwide exclusive rights to the compound we have designated as IK-5001. We are obligated to use commercially reasonable efforts to develop and commercialize at least one product containing IK-5001.

During 2009, we paid BioLine a $7.0 million upfront payment and accrued a $10.0 million milestone payment that we paid in 2010. If we successfully achieve all other development, regulatory and commercialization milestones in the agreement, we will be obligated to pay BioLine, in the aggregate, an additional $265.5 million. In addition, we will be obligated to pay BioLine a specified percentage of any upfront consideration we receive for sublicensing IK-5001, as well as royalties at a percentage in the low double digits on net sales, if any, of any approved product containing IK-5001, subject to offsets for specified payments to third parties made in connection with such product. Our obligation to pay BioLine royalties will expire on a product-by-product and country-by-country basis on the date on which the product is no longer covered by a valid claim in the licensed patent rights in the given country.

BioLine has the option, exercisable under specified circumstances, to manufacture any product containing IK-5001 for us pursuant to terms to be negotiated by the parties. If BioLine exercises this option, we would generally be obligated to purchase at least a specified percentage of our product requirements from BioLine at a price calculated using a pre-agreed methodology.

Except under specified circumstances, we may not directly or indirectly acquire more than a specified percentage of the equity or debt securities of BioLine, or urge, induce, entice or solicit any other party to acquire such securities.

We and BioLine have the right to terminate the agreement for an uncured material breach by the other party. In addition, we have the right to terminate the agreement if at any time we determine that further development of products containing IK-5001 is unwarranted.

In April 2005, our wholly owned subsidiary obtained from FHCRC, the exclusive worldwide rights to the products we have designated IK-1001 covered by specified patent rights or that use other specified technology owned by FHCRC, subject to certain reserved rights. We are obligated to pursue diligently the development of such products and to use commercially reasonable efforts to bring such products to market through a diligent program for exploitation of such patent rights and the marketing and commercialization of such products. In addition, we are obligated to achieve specified development and regulatory goals by specified dates or to pay extension fees of up to $1.25 million in the aggregate. These extension fees, if paid, are creditable against later development milestones.

During 2008, we paid FHCRC a $50,000 milestone payment. If we successfully achieve all development and regulatory milestones in the agreement, we will be obligated to pay FHCRC, in the aggregate, an additional $6.7 million. In addition, we will be obligated to pay FHCRC royalties at a single-digit percentage on net sales, if any, for the term in which a product licensed under the agreement is covered by a valid claim in the licensed patent rights, subject to offsets for specified payments to third parties made in connection with such product.

We and FHCRC have the right to terminate the agreement for an uncured material breach by the other party. We have the right to terminate the agreement with or without cause at any time on ninety days notice to FHCRC. FHCRC has the right to terminate the agreement in connection with our bankruptcy or insolvency or if we directly or indirectly oppose or dispute the validity of the licensed patent rights.

In July 2009, acting through our wholly owned subsidiary, we obtained from Fibrex the worldwide exclusive rights to an investigational portfolio of compounds we have designated as IK-600X. We are obligated to use commercially reasonable efforts to develop and commercialize at least one product containing an IK-600X compound in the United States and in specified other countries.

During 2009, we paid Fibrex a $5.25 million upfront payment. If we successfully achieve all development and regulatory milestones under the agreement, we will be obligated to pay Fibrex additional amounts, in the aggregate, of approximately $101 million. In addition, we will be obligated to pay Fibrex royalties at a single digit percentage on net sales, if any, of any approved product containing an IK-600X compound, subject to offsets for specified payments to third parties made in connection with such product. Our agreement with Fibrex states that our obligation to pay Fibrex royalties will expire on a product-by-product and country-by-country basis on the later of the date on which the product is no longer covered by a valid claim in the licensed patent rights in the given country and the date on which regulatory approval of a generic version of the product occurs in such country.

We and Fibrex have the right to terminate the agreement for an uncured material breach by the other party. In addition, we have the right to terminate the agreement on a product-by-product basis if at any time we determine that further development of such product is unwarranted. If Fibrex terminates the agreement for our uncured material breach, or if we terminate the agreement for one or more products because we determine that further development of such product(s) is unwarranted, our

exclusive licenses from Fibrex will terminate and Fibrex will have the right to acquire rights to any terminated product(s) from us on terms to be negotiated under specified guidelines.

As of April 30, 2010, we had 45 sales professionals in the United States and Puerto Rico and three sales professionals who cover Canada. We work with third parties to provide sales support for INOtherapy in Australia, Mexico and Japan. Additionally, we have five field-based reimbursement professionals and 11 employees who are responsible for brand management, market research, and sales operations in the United States. Additionally, we have general managers in Canada, Australia and Japan, and marketing staff in Australia and Japan.

As of April 30, 2010, we employed a team of 22 customer service professionals who provide around-the-clock support for all the needs of our customers.

As of April 30, 2010, we had a medical affairs team consisting of 24 professionals, of which 15 are field-based professionals who provide scientific and medical information regarding our INOtherapy offering and other related issues to the healthcare community. This group includes medical science liaisons who interact with physician thought leaders and clinical researchers to keep us abreast of the latest scientific discoveries and medical developments, as well as clinical specialists who provide expert guidance and education in the application, administration and utilization of our drug-delivery systems and technology.

We manufacture INOMAX at our facility in Port Allen, Louisiana. This facility, which we believe is operated in compliance with cGMP, is the only FDA inspected site for manufacturing pharmaceutical-grade NO in the world. The primary manufacturing activity is the commercial production of INOMAX. This includes the chemical synthesis of high-purity NO, which is the active pharmaceutical ingredient in INOMAX.

Our manufacturing operations are strictly governed by cGMP. The drug manufacturing, testing, packaging release and storage follow the strictest requirements for a safe product. Our documentation management systems record manufacturing procedures and data for all finished product lots with complete traceability throughout the supply chain. Our production capability includes commercial scale for sale to our customers and pilot-scale for use in clinical trials.

To support business outside of the United States, the Port Allen manufacturing facility has also successfully passed inspections by local agencies, the European Medicines Agency, or EMEA; Health Canada; the Pharmaceutical and Medical Devices Agency, or PMDA, of Japan; and the Korean FDA, or KFDA. The EMEA, the Health Protection Branch of Health Canada, KFDA and the PMDA of Japan operate similarly to the U.S. FDA in that they require submission of a dossier containing substantial evidence of safety and effectiveness prior to approval. Their monitoring of safety in a post-marketing setting also is similar.

INOcal is used to calibrate the nitrogen and nitrogen dioxide cells that are installed in both the INOvent and INOMAX DS drug-delivery systems. We continually evaluate additional manufacturing capabilities as we seek to leverage our knowledge base to develop the manufacturing capability and commercial partnerships for our product and product candidates.

As the sole provider of FDA approved pharmaceutical-grade NO, we have implemented business continuity measures to mitigate the risk of an interruption in the supply of INOMAX. Such measures include, maintaining a reasonable inventory, consisting of at least ten weeks of finished product and 12 months of concentrated pre-mix at our regional service and distribution centers. We have also built a back-up cGMP facility at a second location in Coppell, Texas. We designed this facility to produce INOMAX from our concentrated pre-mix in compliance with cGMP in the event of any manufacturing interruption at the Port Allen facility. If there were a natural disaster or other business disruption at our Port Allen facility, we believe that our Coppell facility would be capable of serving as a backup facility for as long as our supply of concentrated pre-mix lasts, which we currently estimate to be approximately one year. We have applied to the FDA to approve the Coppell facility for the production of INOMAX from our concentrated pre-mix. In addition, we have stocked key back-up components of the Port Allen facility, including two reactor columns in our distribution center in Illinois, which we estimate will allow us to replace the reactor column at our Port Allen facility within six weeks in case of a catastrophic event or failure. We also maintain property insurance on our locations with a limit of $81 million per occurrence and business interruption insurance with a limit of $50 million.

We currently outsource the manufacture of our product candidates for use in clinical trials. If any of our late-stage product candidates are approved by the FDA, we will likely continue to outsource the manufacturing of such approved products to contract manufacturers. We expect that any contract manufacturer that we would use would be subject to cGMP requirements.

In 2008, we established a drug-delivery system manufacturing facility in Madison, Wisconsin, which is responsible for the design, engineering, assembly, packaging, and distribution of our drug-delivery systems. Our drug-delivery system development strategy is to focus on technologically advanced, systems that support our commercial and drug-development programs, and to continuously improve the customer's experience with the INOtherapy offering. As of April 30, 2010, we had an installed base and deployable inventory of approximately 4,500 of our wholly-owned drug-delivery systems with 3,800 in the United States and Puerto Rico. We intend to increase the worldwide number of our drug-delivery systems to approximately 5,800 by December 2011. The FDA recently cleared one of our next-generation drug-delivery systems, the INOMAX DSIR, which uses infrared technology to further improve safety parameters while enhancing ease of use. Enhancements to our INOtherapy delivery systems are ongoing. In addition, we are currently in the process of investigating a new drug-delivery system, the INOpulse DS. The INOpulse DS is optimized for spontaneously breathing patients and provides precise drug delivery, which may prove useful in certain indications. We intend to pursue FDA clearance of this new drug-delivery system following completion of associated clinical trials.

The process of NO delivery also requires calibration gases, known as INOcal, to ensure proper operation of NO and nitrogen dioxide sensors in the drug-delivery systems. We purchase the calibration gases from Air Liquide, in accordance with a multi-year supply agreement. Pursuant to this non-exclusive supply agreement, we have agreed to purchase certain minimum quantities of calibration gases from Air Liquide. Air Liquide has agreed that it will maintain a specified amount of inventory for the production of calibration gas. This supply agreement terminates on September 14, 2011.

We have seven regional service and distribution centers to handle warehousing, distribution and equipment servicing for INOtherapy in the United States. The regional service and distribution centers are located in Louisiana, New Jersey, Georgia, Illinois, Texas and two in California. In addition to our regional service and distribution center operations, we also have third-party logistics and equipment service agreements in place with companies in the United States, Puerto Rico, Canada, Australia, Mexico and Japan. Our U.S. regional service and distribution center operations are staffed, as of

April 30, 2010, by approximately 60 employees with expertise in pharmaceutical and medical device logistics and service.

Our regional service and distribution centers are licensed with the appropriate state wholesale pharmacy boards and carry out their activities in compliance with cGMP and the regulations of the Department of Transportation, Department of Homeland Security, Occupational Safety and Health Administration and International Air Transport Association, as may be applicable. Shipments to overseas destinations are made in accordance with the regulations of the International Maritime Organization, or IMO, the United Nations' specialized agency responsible for improving maritime safety and preventing pollution from ships, as may be applicable.

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities, and research organizations actively engaged in the research and development of products that may be similar to our products. In particular there are other biopharmaceutical companies, such as Cubist Pharmaceuticals, Inc., The Medicines Company and Talecris Biotherapeutics, Inc., focused on developing therapies for the critical care market. There are also hospital product companies, such as Baxter Healthcare Corporation, that also have pharmaceutical divisions and could potentially develop products competitive with ours. In addition, other companies are increasingly looking at critical care as a potential opportunity. It is possible that the number of companies seeking to develop products and therapies for the treatment of unmet needs in critical care will increase. In addition, companies, such as GeNO, LLC and GeNOsys Inc., are in the early stages of developing small, mobile devices that aim to manufacture NO at the location of delivery. Air Liquide currently manufactures and sells in the European Union an NO mixture in a pressurized canister. Before commercializing a competitive product in the United States, Air Liquide would need to obtain FDA approval for its NO mixture, obtain FDA clearance for a delivery device and manufacture its NO in a cGMP compliant, FDA inspected manufacturing facility.

Our competitors, either alone or with their strategic partners, may have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining approval for therapies and achieving widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs and advanced technologies become available.

For more information with respect to competition with respect to our product and our product candidates and each of the indications for which we are seeking approval, see the appropriate "Competition" section under the descriptions of our product and our product candidates included in "—Product and Product Candidates" above.

We pursue patent protection of our technology, products and product improvements both in the United States and in selected foreign countries. We also rely on trade secrets and technological innovations to develop and maintain our competitive position.

We have entered into a number of license and other arrangements under which we have obtained rights to manufacture and market products or potential products. For instance, a number of the therapeutic-based products that we are developing, such as IK-5001, incorporate proprietary technologies that we have licensed from third parties. Under our existing licenses, we are subject to commercialization, development, sublicensing, royalty, insurance and other obligations. If we fail to comply with any of these requirements, or otherwise breach a license agreement, the licensor may have

the right to terminate the license in whole or to terminate the exclusive nature of the license. In addition, upon the termination of the license, we may be required to license to the licensor any related intellectual property that we developed.

Our owned and licensed patents and patent applications cover the active pharmaceutical product, formulations of our product and product candidates, uses of our product and product candidates to treat particular conditions, drug-delivery technologies, delivery profiles relating to our product and product candidates and methods for producing our product and product candidates. However, patent protection is not available for the composition of matter of the active pharmaceutical ingredients in our product and most of our product candidates, including INOMAX and LUCASSIN. The actual protection afforded by the patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. The patents and patent applications that relate to our product and product candidates include the following:

INOMAX. We solely own or have exclusive rights to method of use patents claiming present FDA-approved uses and current clinical development targets of INOMAX in the licensed territory. These patents are listed in the FDA Orange Book and will expire in the United States on January 23, 2013. These patents have issued or are pending in ten other countries, including Australia, Canada, Europe and Japan, and will generally expire on December 5, 2011 in these countries. On January 28, 2010, the FDA agreed to issue a Pediatric Written Request based on previously completed clinical trials using INOMAX to prevent BPD in a pediatric patient population (INOT-27). On April 30, 2010, we received the Written Request from the FDA. We intend to submit the completed trial reports to the FDA, and if the FDA determines the trial reports meet all the requirements contained in the Written Request, INOMAX will be eligible for an additional six months of regulatory pediatric exclusivity in the United States. We filed a U.S. Patent application containing claims directed towards new inventions that led to amendments to the warnings and precautions section of the INOMAX prescribing information necessary for the safe and effective use of INOMAX. This patent application, if and when issued, would be eligible for listing in the FDA Orange Book and would expire on June 30, 2029. In Japan, INOMAX (sold under the brand name INOflo) has further been designated as an orphan drug by Japan's Ministry of Health, Labor and Welfare, or MHLW, thereby providing a statutory exclusivity period until July 16, 2018, during which time the MHLW will not approve any generic versions of INOMAX for HRF. In Australia, we are seeking confirmation of statutory data exclusivity for INOMAX that would provide statutory exclusivity until November 22, 2012. In addition, we solely own or have exclusive rights to the U.S. patents and patent applications, including their foreign counterparts, that contain claims associated with the delivery of INOMAX, including the drug-delivery systems we refer to as INOvent, INOMAX DS and INOpulse.

LUCASSIN. There are no patents claiming LUCASSIN. We have acquired all of Orphan's rights to develop, manufacture and commercialize LUCASSIN in the United States, Canada, Mexico and Australia. The FDA has granted LUCASSIN an orphan drug designation for use in HRS Type 1, and therefore, we will have seven years of statutory orphan drug exclusivity starting from the date of NDA approval for HRS Type 1, if such approval is granted.

IK-5001. We have exclusive worldwide rights to patents and patent applications claiming compounds and therapeutic methods for the use of IK-5001 in the treatment and prevention of complications arising from cardiac remodeling following AMI. These exclusive rights include two U.S. patent applications and rights to corresponding foreign patents and patent applications. Foreign counterparts of this patent application have been granted in Australia, China and India and are pending in other countries, including Europe, Japan, Canada, Korea, Mexico and Israel. Patents relating to IK-5001 will expire on various dates from May 2024 to March 2027.

IK-1001. We solely own or have exclusive rights to six U.S. patent applications claiming various delivery technologies, formulations and therapeutic methods for the use of IK-1001. In addition, we

own or have exclusive rights to the corresponding foreign patents associated with these patent families. These patents will expire on various dates from December 2023 to January 2030.

IK-600X. We have exclusive worldwide rights to patents and patent applications claiming specific compounds, formulations and therapeutic applications relating to an investigational portfolio of fibrin-derived peptide compounds for use in a range of critical care conditions. In the United States, these exclusive rights include 16 U.S. patents and patent applications. In addition, we have exclusive rights to the corresponding foreign patents and patent applications associated with these patent families. The patents will expire on various dates from December 2021 to November 2030.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent's term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in granting a patent, or may be shortened if a patent is terminally disclaimed over another patent.

The term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our pharmaceutical product candidates receive FDA approval, we expect to apply for patent-term extensions on patents covering those products. We believe that IK-5001, IK-1001 and the IK-600X portfolio may be subject to the Hatch-Waxman patent term extension provisions.

The patent positions of pharmaceutical and biotechnology firms can be uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, we do not know whether any of the applications we acquire or license will result in the issuance of patents or, if any patents are issued, whether they will provide significant proprietary protection or will be challenged, circumvented or invalidated. Because patent applications filed within the last 18 months are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention, or in opposition proceedings in a foreign patent office, either of which could result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that the patents, if issued, would be held valid by a court of competent jurisdiction. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using such technology.

The development of critical care hospital products is intensely competitive. A number of pharmaceutical companies, biotechnology companies, universities and research institutions have filed patent applications or received patents in the critical care field. Some of these applications could be competitive with applications we have acquired or licensed, or could conflict in certain respects with claims made under such applications. Such conflict could result in a significant reduction of the coverage of the patents we have acquired or licensed, if issued, which would have a material adverse effect on our business, financial condition and results of operations. In addition, if patents are issued to other companies that contain competitive or conflicting claims and such claims are ultimately

determined to be valid, no assurance can be given that we would be able to obtain licenses to these patents at a reasonable cost, or develop or obtain alternative technology.

We solely own or have exclusive rights to multiple trademarks that we consider important to our business. Ikaria®, the Ikaria logo, INOMAX®, INOtherapy®, INOmeter™, INOflo®, INOcal®, INOvent®, INOpulse™ and LUCASSIN® are registered or common law trademarks in the United States and/or other countries where we currently conduct business or may consider doing so in the future.

It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements generally provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and consultants, the agreements provide that all inventions conceived by the individual shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

The testing, manufacturing, labeling, advertising, promotion, distribution, export, and marketing of our product and product candidates are subject to extensive regulation by governmental authorities in the United States and in other countries. In the United States, the FDA, under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations, regulates pharmaceutical and medical device products. Failure to comply with applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending pre-market applications (e.g., NDAs, PMAs, 510(k)s), withdrawal of approval of approved products, warning letters, untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, civil penalties, and/or criminal prosecution.

The FDCA generally regulates the manufacture and importation of drugs and medical devices shipped via interstate commerce, including such matters as labeling, packaging, storage, and handling of such products. The Prescription Drug Marketing Act of 1987, which amended the FDCA, establishes certain requirements applicable to the wholesale distribution of prescription drugs, including the requirement that wholesale drug distributors be registered with the Secretary of Health and Human Services or be licensed in each state in which business is conducted in accordance with federally established guidelines on storage, handling, and records maintenance. The Safe Medical Devices Act of 1990 imposes certain reporting requirements on distributors in the event of an incident involving serious illness, injury, or death caused by a medical device. We are also required to maintain licenses and permits for the distribution of pharmaceutical products and certain medical devices under the laws of the states in which we operate.

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Pharmaceutical product development in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of a notice of claimed investigational exemption or an investigational new drug application or IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not commented on or questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations, good clinical practices, or GCP, as well as under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB's requirements, or may impose other conditions.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population, to determine the effectiveness of the drug for a particular indication or indications, dosage tolerance and optimum dosage, and identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting an NDA is substantial. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently exceeding $1,400,000, and the manufacturer and/or sponsor under an approved NDA are also subject to annual product and establishment user

fees, currently exceeding $79,000 per product and $450,000 per establishment. These fees are typically increased annually.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for non-priority drug products are reviewed within ten months while most applications for priority review drugs, that is, drugs that FDA determines represent a significant improvement over existing therapy, are reviewed in six months. The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission. Additionally, the FDA's review of applications frequently results in the issuance of action letters in which FDA requests additional data and information pertaining to the application which in turn can toll or start anew the review cycle. The FDA may also refer applications for novel drug products or drug products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with cGMP is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA's satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require substantial post-approval testing and surveillance to monitor the drug's safety or efficacy and may impose other conditions, including labeling restrictions that can materially affect the potential market and profitability of the drug. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent which claims the active ingredient, drug product or method of use covered by the application. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA, or a 505(b)(2) application. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug product, other than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as "generic equivalents" to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA's Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. A certification that the new product will not infringe the already approved product's listed patents or that such patents are invalid is called a Paragraph IV certification. If the ANDA applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired, with the exception of the method of use patent in which an ANDA applicant can obtain effective approval if the use for which it seeks approval is not covered by a listed patent, even though other uses are covered.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA sponsor and the patent holders once the ANDA has been accepted for filing by the FDA. The NDA sponsor and the patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing no previously approved active ingredients, during which ANDAs for generic versions of those drugs cannot be submitted unless the submission contains a Paragraph IV certification challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted by or for the NDA sponsor, during which FDA cannot grant effective approval of an ANDA based on that listed drug.

Once the FDA approves an NDA, the product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet and social media.

Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform to

cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Our regional service and distribution centers are licensed with the appropriate state wholesale pharmacy boards and carry out their activities in compliance with cGMP and the regulations of the Department of Transportation, Department of Homeland Security, Occupational Safety and Health Administration and International Air Transport Association, as may be applicable. Shipments to overseas destinations are made in accordance with the regulations of the IMO, the United Nations' specialized agency responsible for improving maritime safety and preventing pollution from ships, as may be applicable.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, it publicly discloses the generic identity of the drug and its potential orphan use. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. The first NDA applicant with FDA orphan drug designation for a particular active ingredient to receive FDA approval of the designated drug for the disease for which it has such designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

Under the Pediatric Research Equity Act of 2008, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.

Under Section 505A of the FDCA, six months of market exclusivity may be granted in exchange for the voluntary completion of pediatric studies in accordance with an FDA-issued "Written Request." The FDA may issue a Written Request for studies on unapproved or approved indications, where it determines that information relating to the use of a drug in a pediatric population, or part of the pediatric population, may produce health benefits in that population. To receive the six-month pediatric market exclusivity, we have to receive a Written Request from the FDA, and conduct the requested studies and submit reports of the studies in accordance with a written agreement with the FDA. If we receive a Written Request, but do not have a written agreement with FDA regarding the conduct of the studies, the studies must fairly respond to the Written Request, have been conducted in accordance with commonly accepted scientific principles and protocols, and meet filing requirements. There is no guarantee that the FDA will issue a Written Request for such studies or accept the reports of the studies.

The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new drug candidate may request the FDA to designate the drug candidate for a specific indication as a fast track drug concurrent with or after the filing of the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsor's request.

In addition to other benefits such as the ability to use surrogate endpoints and have greater interactions with the FDA, the FDA may initiate review of sections of a fast track drug's NDA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA's time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, the fast track designation may be withdrawn by the FDA if it believes that the designation is no longer supported by data emerging in the clinical trial process.

Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the safety and efficacy data of an existing product, or published literature, in support of its application.

505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon certain preclinical or clinical studies conducted for an approved product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. Thus approval of a 505(b)(2) NDA can be delayed until all applicable listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.

On September 27, 2007, the Food and Drug Administration Amendments Act, or the FDAAA, was enacted into law, amending both the FDCA and the Public Health Service Act. The FDAAA makes a number of substantive and incremental changes to the review and approval processes in ways that could make it more difficult or costly to obtain approval for new pharmaceutical products, or to produce, market and distribute existing pharmaceutical products. Most significantly, the law changes the FDA's handling of post-market drug product safety issues by giving the FDA authority to require post

approval studies or clinical trials, to request that safety information be provided in labeling or to require an NDA applicant to submit and execute a Risk Evaluation and Mitigation Strategy, or REMS.

The FDA regulates all labeling for products under its jurisdiction both prior to and after approval, as well as advertising for prescription drugs and medical devices. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Physicians may prescribe legally available drugs for uses that are not described in the drug's labeling and that differ from those tested by us and approved by the FDA. The amount of off-label uses varies among medical specialties. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers' communications regarding off-label uses. Failure to comply with applicable FDA requirements may subject a company to enforcement action by the FDA, Department of Justice, Office of the Inspector General, state attorneys general and other governmental agencies, adverse publicity, corrective advertising and the full range of civil and criminal penalties available.

We are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory authority is satisfied that we have presented adequate evidence of safety, quality and efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries. The time needed to secure approval may be longer or shorter than that required for FDA approval. The regulatory approval and oversight process in other countries includes all of the risks associated with regulation by the FDA and certain state regulatory agencies as described above.

Pre-market Pathways. In the United States, medical devices are regulated by the FDA Center for Devices and Radiological Health, or CDRH. Medical devices generally come to market as a result of an approved Premarket Approval Application, or PMA, or a cleared Pre-market Notification, or 510(k). As is the case with drug products, applications for medical devices are subject to user fees with PMAs being subject to relatively high user fees and 510(k)s being subject to relatively small user fees. There are also product and establishment user fees as well as fees for requesting the status of a device under the FDCA.

Pre-market approval is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices. Class III devices are those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Due to the level of risk associated with Class III devices, the FDA has determined that general and special controls alone are insufficient to ensure the safety and effectiveness of Class III devices. Therefore, these devices require a pre-market approval, or PMA, application under section 515 of the FDCA in order to obtain marketing clearance. PMA is the most stringent type of device marketing application required by the FDA. The applicant must receive FDA approval of its PMA application prior to marketing the device. PMA approval is based on a determination by the FDA that the PMA contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use or uses.

For a medical device that does not require a PMA, a 510(k) must be submitted to the FDA, unless the device is specifically exempted from 510(k) requirements of the FDCA. A 510(k) is a pre-market submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent, to a legally marketed device that is not subject to PMA. Submitters must compare their device to one or more similar legally marketed devices and make and support their substantial equivalency claims. A legally marketed device is a device that was legally marketed prior to May 28, 1976, for which a PMA is not required, or a device which has been reclassified from Class III to Class II or I, or a device which has been found to be substantially equivalent through the 510(k) process. The legally marketed device to which equivalence is drawn is commonly known as the "predicate." Although devices recently cleared under 510(k) are often selected as the predicate to which equivalence is claimed, any legally marketed device may be used as a predicate. Before marketing a device, each submitter must receive an order, in the form of a letter, from the FDA which finds the device to be substantially equivalent and states that the device can be marketed in the United States. This order "clears" the device for commercial distribution.

Investigational Device Exemptions. Clinical data are generally required to support a PMA, and less frequently a 510(k). An investigational device exemption, or IDE, allows the investigational device to be used in a clinical trial in order to collect safety and effectiveness data required to support a PMA application or a 510(k) submission to the FDA. Clinical trials are most often conducted to support a PMA. A relatively small percentage of 510(k)'s require clinical data to support the application. Investigational use also includes clinical evaluation of certain modifications or new intended uses of legally marketed devices. All clinical evaluations of investigational devices, unless exempt, must have an approved IDE before the study is initiated. An approved IDE permits a device to be shipped lawfully for the purpose of conducting investigations of the device without complying with other requirements of the FDCA that would apply to devices in commercial distribution. Sponsors need not submit a PMA or 510(k), register their establishment or list the device while the device is under investigation. Sponsors of IDEs are also exempt from the Quality System Regulations except for the requirements for design control.

Combination Products. A combination product is a product comprised of two or more regulated components (drug-device or biologic-device). Combination products are either combined as a single entity or labeled for use with a specified drug, device or biologic in which both are required to achieve the intended use, indication or effect. The FDA Office of Combination Products assigns review responsibility for combination products. If, for example, the Center for Drug Evaluation and Research, or CDER, is assigned primary jurisdiction, then the combination drug-device product clinical testing is conducted under the IND process already described, with the device evaluation conducted by the CDRH, consulting with CDER. The device documentation is provided to CDER in INDs and NDAs and forwarded to CDRH for review. A separate IDE for clinical testing is not required.

Quality System Regulations. The cGMP requirements set forth in the Quality System Regulations, or QSRs, are promulgated under section 520 of the FDCA. They require that domestic or foreign manufacturers have a quality system for the design, manufacture, packaging, labeling, storage, installation, and servicing of finished medical devices intended for commercial distribution in the United States. The regulation requires that various specifications and controls be established for devices; that devices be designed and manufactured under a quality system to meet these specifications; that finished devices meet these specifications; that devices be correctly installed, checked and serviced; that quality data be analyzed to identify and correct quality problems; and that complaints be investigated and appropriate corrective action be implemented. The QSRs are intended to help ensure that medical devices are safe and effective for their intended use. The FDA monitors device problem data and inspects the operations and records of device developers and manufacturers to determine compliance with the GMP requirements in the QS regulation.

Medical Device Reporting. The Medical Device Reporting, or MDR, regulation provides a mechanism for the FDA and manufacturers to identify and monitor significant adverse events involving medical devices. The goals of the regulation are to detect and correct problems in a timely manner. Manufacturers must report device-related deaths, serious injuries, and malfunctions to the FDA whenever they become aware of information that reasonably suggests that a reportable event occurred (one of their devices has or may have caused or contributed to the event). Each manufacturer must review and evaluate all complaints to determine whether the complaint represents an event which is required to be reported to the FDA. Although the requirements of the regulation can be enforced through legal sanctions authorized by the FDCA, the FDA generally relies on the goodwill and cooperation of all affected groups to accomplish the objectives of the regulation. In addition, the Safe Medical Devices Act, or SMDA, requires medical device manufacturers to certify to the FDA the number of MDR reports filed or that no reports have been filed.

Registration and Listing. Establishments involved in the production and distribution of medical devices intended for marketing or leasing in the United States are required to register with the FDA. Registration provides the FDA with the location of medical device manufacturing facilities and importers. The owner/operator of an establishment who is engaged in the manufacture, preparation, propagation, compounding, assembly or processing of a medical device intended for commercial distribution is required to register. This includes manufacturers, contract manufacturers and contract sterilizers that place the device into commercial distribution, specification developers, re-packagers or re-labelers, re-processors of single-use devices, remanufacturers, U.S. manufacturers of export-only devices and manufacturers of components or accessories that are ready to be used for any intended health-related purpose and are packaged or labeled for commercial distribution for such health-related purpose.

Establishments required to register with the FDA must also identify to the FDA the devices they have in commercial distribution including devices produced exclusively for export. The process is known as medical device listing and is a means of keeping FDA advised of the generic category(s) of devices an establishment is manufacturing or marketing. The owner/operator of an establishment engaged in the manufacture, preparation, propagation, compounding, assembly or processing of a medical device intended for commercial distribution is required to list its device with the FDA within 30 days of entering the device into commercial distribution in the United States. This includes manufacturers, re-packagers and re-labelers, specification developers, re-processors of single-use devices, remanufacturers, U.S. manufacturers of export-only devices and manufacturers of accessories and components that are ready to be used for any intended health-related purpose and are packaged or labeled for commercial distribution for such health-related purpose.

CE Marking. In order to enter the European market, and to help facilitate entry into other global markets such as Australia, our drug-delivery systems must be CE (Conformité Européene)-Marked. CE Marking involves a Notified Body, or NB, which, working together with a company, assesses the company's Quality Management System, or QMS. The company determines how it will comply with the Medical Device Directive, or MDD, in terms of its QMS. Council Directive 93/42/EEC, as amended by DIRECTIVE 2007/47/EC (MDD), sets forth the "Essential Requirements" for CE Marking.

The NB will also examine the design dossier and technical file for a medical device to judge compliance with Annex I of the MDD. Annex I details the Essential Requirements of the MDD for Medical Devices. The Technical File and Design Dossier contain or point to documents, reports, records, etc., that demonstrates compliance with each element of the Essential Requirements in Annex I of the MDD.

When the QMS has been certified, the Notified Body will issue the company a Quality Certificate and an MDD Certificate. If certified to Annex II, Full Quality System, the company can issue 'Declarations of Conformity" for additional products, based on their own assessment of the Technical

File for the new device. Once the Declaration of Conformity has been issued, the CE mark may be applied to the devices and the product can be distributed in the EU and in other countries where the CE Mark may be accepted.

We currently are ISO-13485:2003 certified and are certified under Annex II, Full Quality System. Our only delivery system currently carrying the CE Mark is the INOvent Delivery System, specifically the INOvent systems that were originally manufactured for the European market. The INOMAX DS will be CE Marked in 2010.

The NB usually conducts audits once per year to ensure the requirements of the Quality Management System continues to meet the requirements of ISO-13485:2003 and MDD Annex I continue to be met. Our last audit was conducted in December 2009, with a successful outcome.

In addition to regulation by the FDA and certain state regulatory agencies, we need to comply with other agencies that govern the way we conduct business.

Because our compressed gas products are packaged at pressures greater than 25 pounds of pressure per square inch gauge, or psig, they are classified as hazardous materials. The Department of Transportation, the International Air Transportation Association, the International Maritime Organization, the Environmental Protection Agency, and the Occupational Safety and Health Administration, impose various regulations pertaining to the way we manufacture, transport, store and handle our products.

Failure to comply with current and future regulations of these agencies could lead to a variety of sanctions, which could harm our business and financial condition.

We are subject to various federal and state laws pertaining to healthcare "fraud and abuse." The federal Anti-Kickback Statute makes it illegal for any person, including a pharmaceutical company (or a party acting on its behalf), to knowingly and willfully solicit, offer, receive or pay any remuneration, directly or indirectly, in exchange for, or to induce, the referral of business, including the purchase, order or prescription of a particular drug, or arranging for the purchase, ordering, or prescription of a particular drug for which payment may be made under federal healthcare programs such as Medicare and Medicaid. In 1996, under HIPAA, the Anti-Kickback Statute was expanded to be made applicable to most federal and state-funded healthcare programs. The definition of "remuneration" has been broadly interpreted to include any item or service of value, including but not limited to gifts, discounts, the furnishing of free supplies or equipment, commercially unreasonable credit arrangements, cash payments, waivers of payments or providing anything at less than its fair market value. Several courts have interpreted the Anti-Kickback Statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of business reimbursable by a federal healthcare program, the statute has been violated. Penalties for violations include criminal penalties, civil sanctions and administrative actions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federally-funded healthcare programs. In addition, some kickback allegations have been held to violate the federal False Claims Act, which is discussed in more detail below.

The federal Anti-Kickback Statute is broad and prohibits many arrangements and practices that may be lawful in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous and beneficial arrangements, Congress created several exceptions in the Social Security Act and has authorized the U.S. Department of Health and Human Services, or HHS, to publish regulatory "safe harbors" that exempt certain practices from

enforcement action under the Anti-Kickback Statute prohibitions. For example, there are safe harbors available for certain discounts to purchasers, personal services arrangements and various other types of arrangements. However, safe harbor protection is only available for transactions that satisfy all of the narrowly defined safe harbor provisions applicable to the particular remunerative relationship. Conduct and business arrangements that do not strictly comply with all the provisions of an applicable safe harbor, while not necessarily illegal, face an increased risk of scrutiny by government enforcement authorities and an ongoing risk of prosecution.

In addition, many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare services reimbursed by any third-party payor, not only the Medicare and Medicaid programs or other governmental payors. At least one state, California, also has adopted a law requiring pharmaceutical companies to implement compliance programs to prevent and deter conduct that may violate fraud and abuse laws that comply with the voluntary industry guidelines and Office of Inspector General, or OIG, compliance guidance. While we believe we have structured our business arrangements to comply with these laws, it is possible that the government could find that such arrangements violate these laws, which could have a material adverse effect on our business, results of operations and financial condition.

The PPACA imposes new reporting and disclosure requirements for pharmaceutical and device manufacturers with regard to payments or other transfers of value made to physicians and teaching hospitals, effective March 30, 2013. In addition, pharmaceutical and device manufacturers will also be required to report and disclose investment interests held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties of up to $150,000 per year (and up to $1 million per year for "knowing failures") for all payments, transfers of value or ownership or investment interests not reported in an annual submission. Further, the PPACA amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims laws.

If not preempted by federal law, several states require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual physicians in the states. Other states prohibit providing meals to prescribers or other marketing related activities. Still other states require the posting of information relating to clinical trials and their outcomes. In addition, certain states, such as California, Nevada, and Massachusetts, require pharmaceutical companies to implement compliance programs or marketing codes. Currently, several additional states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

HIPAA created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from federal and state healthcare programs such as Medicare and Medicaid. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment. Additionally, HIPAA granted expanded enforcement authority to HHS and the U.S. Department of Justice, or DOJ, and

provided enhanced resources to support the activities and responsibilities of the OIG and DOJ by authorizing large increases in funding for investigating fraud and abuse violations relating to healthcare delivery and payment.

Numerous federal and state laws and regulations, including HIPAA, govern the collection, dissemination, use and confidentiality of patient-identifiable health information. Through many of our operations, we encounter, collect, maintain, and transmit patient-identifiable health information. New health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant effect on the manner in which we handle healthcare related data and communicate with customers, payors, and others, and the cost of complying with these standards could be significant. If we do not comply with existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions.

In addition, federal law includes other provisions that specifically prohibit certain types of manipulative Medicare billing practices. Federal law also provides for minimum periods of exclusion from federal and state healthcare programs for certain offenses and frauds. Many states also have false claims and other healthcare fraud and abuse laws, which also may include civil and criminal penalties.

Pursuant to various federal and state false claims laws, the submission of false or fraudulent claims for payment may lead to civil money penalties, criminal fines and imprisonment, and/or exclusion from participation in Medicare, Medicaid and other federally funded healthcare programs. These false claims statutes include the federal False Claims Act, which allows the federal government or private individuals to bring suit alleging that an entity or person knowingly submitted, or caused another person or entity to submit, a false or fraudulent claim for payment to the federal government or knowingly used, or caused to be used, a false record or statement to obtain payment from the federal government. The federal False Claims Act may also be violated if a person files a false statement in order to reduce, avoid, or conceal an obligation to pay money to the federal government. Several pharmaceutical companies have settled claims based on the federal False Claims Act for conduct involving, among other examples, providing free product to purchasers with the expectation that federally-funded health programs would be billed for the product, or instances in which a manufacturer has marketed its product for off-label or non-reimbursable purposes. A person who files suit may be able to share in amounts recovered by the government in connection with such suits. Such suits, known as qui tam actions, have increased significantly in recent years and have increased the risk that a healthcare company will have to defend a false claims action, enter into settlements that may include corporate integrity agreements requiring disclosures to the federal government, pay fines or be excluded from the Medicare and/or Medicaid programs as a result of an investigation arising out of such an action. In addition, a number of states have enacted similar laws prohibiting the submission of false or fraudulent claims to a state government. We are not aware of any qui tam actions pending against us. However, no assurance can be given that such actions may not be filed against us in the future, or that any non-compliance with such laws would not have a material adverse effect on our business, results of operations and financial condition.

The foregoing description of laws and regulations affecting healthcare companies is not meant to be an all-inclusive discussion of aspects of federal and state regulation which may affect our business, results of operations and financial condition. Healthcare companies operate in a complicated regulatory environment. These or other statutory or regulatory initiatives may affect our revenues or operations. We have a compliance officer and retain, when necessary, special counsel for guidance on applicable laws and regulations, including fraud and abuse laws. However, no assurance can be given that our practices, if reviewed, would be found to be in compliance with applicable fraud and abuse laws (including false claims laws and anti-kickback prohibitions), as such laws ultimately may be interpreted, or that any non-compliance with such laws or government investigations of alleged non-compliance with

such laws would not have a material adverse effect on our business, results of operations and financial condition.

In both the United States and foreign markets, our ability to commercialize our products successfully, and to attract commercialization partners for our products, depends in significant part on the availability of adequate financial coverage and reimbursement from third party payors, including, in the United States, governmental payors such as the Medicare and Medicaid programs, managed care organizations, and private health insurers. Medicare is a federally funded program managed by the Centers for Medicare and Medicaid Services, or CMS, through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise uninsured that is both federally and state funded and managed by each state. The federal government sets general guidelines for Medicaid and each state creates specific regulations that govern its individual program. Each payor has its own process and standards for determining whether it will cover and reimburse a procedure or particular product. Private payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product. The competitive position of some of our products will depend, in part, upon the extent of coverage and adequate reimbursement for such products and for the procedures in which such products are used. Prices at which we or our customers seek reimbursement for our products can be subject to challenge, reduction or denial by the government and other payors.

CMS, as well as most other third-party payors, provide reimbursement for unapproved uses of FDA-approved products, but often limit coverage to drugs prescribed for a medically accepted indication. A drug's medically accepted indications include all FDA-approved indications as well as unapproved indications supported by listings in specified compendia. INOMAX is currently included in these compendia for a significant portion of the unapproved uses for which it is prescribed by physicians.

On March 23, 2010, President Obama signed into law a legislative overhaul of the U.S. healthcare system, the PPACA, which may have far reaching consequences for drug and device manufacturers like us. In particular, there are elements of this legislation that are aimed at promoting the greater use of comparative effectiveness research as well as various pilot and demonstration programs that have the potential to impact reimbursement and patient access for the company's products, and which may materially impact numerous aspects of our business. Additionally, the new legislation mandates fees on drug manufacturers totaling $2.5 billion in 2011, $2.8 billion in 2012 and 2013 and over $20 billion in the next ten years. These taxes represent a significant increase in the tax burden on the drug and device industries and may have a material and adverse impact on our operations and cash flow. Because this legislation is so recent, we do not yet know the full impact this legislation will have on our business.

In 2008, CMS implemented a new DRG system called Medicare-Severity DRG, or MS-DRG, with the goal of reducing the variability of per patient costs within each DRG. Within MS-DRG, patients are classified by similar diagnoses and procedures, as well as by three levels of severity, primarily due to complications. The addition of a severity classification has resulted in higher payments for critically ill patients. For example, the DRG for congenital heart surgery at the highest level of severity is paid at 190% of payment for the same procedure without complications. Similarly, major chest procedures are paid at 280% when severe versus similar procedures without complications. In addition, a required ICU stay in and of itself can qualify a patient for an increased severity classification due to the level of

monitoring necessary. As a result, it is expected that DRG payments for most patients in ICUs will be higher than under the previous classification system.

Reimbursement to major private third-party payors for treatment of hospitalized patients follow one of three methodologies: Percent-of-Charge, Per-Diem or Diagnosis-Related Group-based, which is known as DRG. In addition, incremental payments may be made through negotiated terms, such as carve-outs (fixed payments for certain treatments), outliers, or stop-loss payments (such as for high-cost patients who exceed a pre-set threshold of costs).

During the past several years, the major private third-party payors have substantially revised their reimbursement methodologies in an attempt to contain their healthcare reimbursement costs. Recently, payors have increased use of the DRG-based system, in which each inpatient discharge is assigned a DRG code that classifies patients with similar diagnoses and procedures. These payments are not dependent on the length of admission, treatments needed, or the actual costs to the hospital. Should a patient cost less to treat than the DRG payment, the hospital can retain the overage. Alternatively, if a patient costs are more than the DRG payment, the hospital will only recognize additional reimbursement if a calculated threshold is surpassed and it cannot bill for the difference.

Private third-party payors continue to increase their emphasis on managed care, which has led to an increased emphasis on the use of cost-effective medical interventions by healthcare providers. In addition, through their purchasing power, these payors often seek discounts, price reductions or other incentives from medical product suppliers.

Existing federal law requires pharmaceutical manufacturers to pay rebates to state governments, based on a statutory formula, on covered outpatient drugs reimbursed by the Medicaid program as a condition of having their drugs paid for by Medicaid. Rebate amounts for a product are determined by a statutory formula that is based on prices defined in the statute: average manufacturer price, or AMP, which must be calculated for all products that are covered outpatient drugs under the Medicaid program, and best price, which must be calculated only for those covered outpatient drugs that are innovator products, such as biologic products. Manufacturers are required to report AMP and best price for each of their covered outpatient drugs to the government on a regular basis. Additionally, some state Medicaid programs have imposed a requirement for supplemental rebates over and above the formula set forth in federal law, as a condition for coverage.

In addition to the Medicaid rebate program, federal law also requires that if a drug manufacturer wishes to have its outpatient drugs covered under Medicaid as well as under Medicare Part B, it must sign a "Master Agreement" obligating it to provide a formulaic discount of approximately 24% for drugs sold to the U.S. Departments of Defense and Veterans Affairs, and also provide Medicaid-like discounts under section 340B of the Public Health Service Act, for outpatient drugs sold to certain specified clinics and hospitals that are the recipients of federal assistance. These entities include, but are not limited to, disproportionate share hospitals, certain children's hospitals, federally-qualified health centers, certain family planning projects, Ryan White HIV clinics, state-operated AIDS Drug assistance programs, or ADAP, black lung clinics, comprehensive hemophilia diagnostic treatment centers, native Hawaiian health centers, and several others. The formula for determining the discounted purchase price under the 340B program is defined by statute and is based on the AMP and rebate amount for a particular product as calculated under the Medicaid drug rebate program, discussed above.

The recently signed PPACA includes a provision that raised the Medicaid minimum rebate from 15.1% to 23.1%, changed the rebate calculation for new formulations, and extended the rebate requirement for the first time to Medicaid managed care populations as well as to drugs provided to Medicare Part D full-benefit dual eligible individuals. Separately, the legislation also included a

provision which was removed shortly before enactment that would have expanded the 340B drug pricing program to include new entity types as well as inpatient drug purchases by covered entity hospitals. Although we are not currently required to pay Medicaid rebates or to participate in the other mandatory discount programs such as 340B, there are many scenarios and reform proposals which could change our status, exposing us to mandatory rebate and discount requirements, which would have a material adverse effect on our business, financial condition and results of operations.

As of April 30, 2010, we employed 463 full-time employees. Of this number, 111 employees are engaged in research and development, 100 employees are involved in manufacturing operations, 56 employees are involved in distribution, and 107 employees are engaged in commercial operations (sales, marketing, and customer service) while 89 individuals provide general and administrative support. Of our employees, approximately 24% have earned advanced degrees. The total workforce includes eight employees who hold a medical degree (M.D. or D.V.M), 28 who hold a doctorate degree (Ph.D.), and 73 employees with masters and other graduate degrees (M.S., M.A., M.B.A or J.D.). Our employees are not represented by a labor union or covered by a collective bargaining agreement.

Our corporate headquarters are located in Clinton, New Jersey, where we occupy approximately 60,000 square feet of office space. The lease expires in June 2011, but may be extended at our option for two additional, five-year terms. We also lease approximately 14,600 square feet of office space in Hampton, New Jersey. The lease expires in September 2011, but may be extended at our option for an additional, two-year term. Currently, we plan to lease one single location that will be able to support our growth for the next 10 years and will allow us to consolidate multiple leases into one corporate headquarters, which is located in the central New Jersey area.

We have established offices in Australia, Japan and Canada to support our growth in those countries. In Japan and Canada, these offices primarily perform sales and marketing functions, while the distribution and logistics functions are handled by third-party providers. In Australia, third-party providers perform sales and marketing, distribution and logistic functions. Each of our international offices is staffed by a general manager and support staff.

We own our drug-manufacturing plant in Port Allen, Louisiana, where we have approximately 49,000 square feet of office, warehouse, laboratory and manufacturing space. The buildings are situated on approximately five acres. We also own approximately 10 additional acres of adjacent land that provides flexibility for future expansion. We also lease approximately 5,000 square feet of additional office, warehouse and manufacturing space in Geismar, Louisiana. The fixed-lease term expires in August 2010. Our intent is to extend this lease for an additional one-year term while we evaluate our ability to consolidate this additional warehouse and manufacturing space into our Port Allen facility. We also are in the process of equipping our regional service and distribution center in Coppell, Texas, with the capability to blend INOMAX. This facility will act as a back-up to our primary facility in Port Allen to provide manufacturing and warehousing capabilities, if required.

Our drug-delivery system manufacturing facility is located in Madison, Wisconsin, where we lease approximately 15,000 square feet of manufacturing, research and development and warehouse space. The lease term expires in July 2013, but may be extended at our option for two additional three-year terms. We also lease approximately 1,100 square feet of additional office space in Madison, Wisconsin, which we plan to utilize to support future delivery system development and warehousing. The lease term expires in February 2012.

Our research and development facility is located in Seattle, Washington, where we lease approximately 8,000 square feet of laboratory and office space. The lease terminates on March 31, 2014.

Our seven regional service and distribution centers are located throughout the United States (Atlanta, Chicago, Dallas, Los Angeles, Port Allen, Somerset, New Jersey and San Francisco) to best support the immediate needs of our customers.

From time to time, we have been and may again become involved in legal or regulatory proceedings arising in the ordinary course of our business. We are not presently a party to any material litigation or regulatory proceeding and we are not aware of any pending or threatened litigation or regulatory proceeding against us that could have a material adverse effect on our business, operating results, financial condition or cash flows.

The following table sets forth the name, age and position of each of our executive officers and directors as of April 30, 2010.

Daniel Tassé has served as our President, Chief Executive Officer and a member of our board of directors since January 2008. Mr. Tassé was appointed Chairman in October 2009. Prior to joining us, from October 2004 to January 2008, Mr. Tassé served as General Manager of the Pharmaceuticals and Technologies Business Unit of Baxter International, Inc., a global diversified healthcare company. Baxter's Pharmaceuticals and Technologies Business Unit includes the Anesthesia and Critical Care business, the Hospital IV Drug business, the Contract Manufacturing business and the Formulation Technology business. From July 2001 to October 2004, Mr. Tassé served as Vice President and Regional Director for Australasia at GlaxoSmithKline, a healthcare company. Mr. Tassé holds a B.Sc. in biochemistry from the University of Montreal. As our President and Chief Executive Officer, Mr. Tassé provides a critical contribution to our board of directors as a result of his extensive track record of business building in the healthcare industry, his strong background within critical care, his global management experience, and his detailed knowledge of the pharmaceutical industry, our company, employees, client base and competitors.

Ralf Rosskamp, M.D. has served as our Executive Vice President, Research and Development since October 2007. Prior to joining us, from October 2003 to May 2007, Dr. Rosskamp served as Executive Vice President of Research and Development at Kos Pharmaceuticals, Inc., a specialty pharmaceutical company. From December 1999 to September 2003, Dr. Rosskamp served as Vice President of Global Therapeutic Research and Development for Endocrinology, Metabolism, Rheumatology and Bone at Aventis Pharmaceuticals, a global pharmaceutical company. Dr. Rosskamp holds an M.D. from the University of Bonn (Germany).

Matthew M. Bennett has served as our Senior Vice President, Legal and Corporate Development since July 2007. Prior to joining us, from October 2003 to July 2007, Mr. Bennett held several positions of increasing responsibility, including Executive Vice President, General Counsel and Chief Administrative Officer at Viasys Healthcare, Inc., a healthcare technology company, where he was responsible for legal matters, business development, quality, regulatory affairs and human resources.

From August 1997 to October 2003, Mr. Bennett was an attorney at Morgan, Lewis & Bockius LLP and was previously a litigator at Stradley, Ronon, Stevens & Young LLP. Mr. Bennett holds a B.A. in Political Science from Princeton University and a J.D. from Villanova University School of Law.

James Briggs has served as our Senior Vice President, Human Resources since August 2008. Prior to joining us, from March 2007 to August 2008, Mr. Briggs served as Director, Human Resources of Avaya Global Services, a global IP telephone products and services company. From April 2004 to March 2007, Mr. Briggs served as Vice President, Human Resources of General Electric's Access Distribution Unit, a global IT distributor. Prior to joining General Electric, he held several positions at Unilever, an international manufacturer of food, home care and personal care products, and The Pepsi Bottling Company, a manufacturer and distributor of Pepsi-Cola products. Mr. Briggs holds a B.A. in communications from the University of Illinois.

Michael Kennedy has served as our Senior Vice President, Engineering and Operations since October 2008. Prior to joining us, from August 2007 to October 2008, Mr. Kennedy served as Vice President, Technology Platform Development of the pharmaceuticals and technologies business of Baxter International, Inc., a global diversified healthcare company. From January 2005 to March 2007, Mr. Kennedy served as Chief Marketing Officer and Head of Product Development of Hollister, Incorporated, a chronic care medical products company. From March 1999 to January 2005, Mr. Kennedy served as General Manager of Comdisco Healthcare Group, which was acquired by General Electric, where he became Senior Vice President of Strategic Marketing for GE Healthcare Financial Services. Mr. Kennedy holds a B.S. in Chemical Engineering from the University of Washington and an M.B.A from Northwestern University's Kellogg School of Management.

Stephen Ross has served as our Senior Vice President, Commercial Operations since August 2008. Prior to joining us, from July 2007 to August 2008, Mr. Ross served as Senior Vice President, Sales and Marketing at Cytogen Corporation, a specialty pharmaceutical company. From October 2002 to June 2007, he held several positions, including Vice President, Specialty Business Units, at GlaxoSmithKline, a healthcare company. Mr. Ross holds a B.A. in economics from Brigham Young University and an M.B.A. from The Wharton School of the University of Pennsylvania.

Aldo E. Belloni, Ph.D. has served as a director since March 2007. Since 1980, Dr. Belloni has held several positions with Linde AG and its subsidiaries, and has served as a member of the Executive Board of Linde AG since January 2000. Dr. Belloni holds a Ph.D. in chemical engineering from the Milan Polytechnic Institute. We believe Dr. Belloni's qualifications to sit on our board of directors include his extensive experience in the industrial gas industry, including as a member of the Executive Board of Linde AG.

Michael T. Flaherman has served as a director since March 2007. Since 2003, Mr. Flaherman has served as a Managing Director, Investment Management Services, of New Mountain Capital, a private equity group. From March 2004 to April 2008, Mr. Flaherman served as a director of National Medical Health Card Systems, Inc., a publicly-traded healthcare company. Mr. Flaherman holds a B.A. in government from Harvard University and a master's degree in city planning from the Massachusetts Institute of Technology. We believe Mr. Flaherman's qualifications to sit on our board of directors include his experience as Chief Investment Officer of CalPERS, his financial expertise and his years of experience providing strategic advisory services across many industries.

Robert T. Nelsen has served as a director since March 2007. Since 1994, Mr. Nelsen has served as a Co-Founder, Assistant Secretary and Managing Director of ARCH Venture Partners, a venture capital firm focused on early-stage technology companies. Since 2000, Mr. Nelsen has served as a director of NeurogesX, Inc., a publicly-traded biopharmaceutical company focused on developing and commercializing pain management therapies. From 1994 to 2008, Mr. Nelsen served as a director of Adolor Corporation, a publicly-traded biopharmaceutical company. From 2002 to 2006, Mr. Nelsen also served as a director of Trubion Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company.

Mr. Nelsen also serves on the board of several privately held companies, including Sapphire Energy Corporation, Agios Pharmaceuticals, Inc., and Kythera Biopharmaceuticals, Inc. Mr. Nelsen holds a B.S. in biology and economics from the University of Puget Sound and an M.B.A. from the University of Chicago Graduate School of Business. We believe Mr. Nelsen's qualifications to sit on our board of directors include his extensive experience with pharmaceutical companies, his financial expertise and his years of experience providing strategic and financial advisory services to pharmaceutical and biotechnology organizations, including evaluating business plans involving clinical trials.

Howard Pien has served as a director since April 2010. Mr. Pien is the Principal of Howard Pien Consulting, LLC, a consulting and advisory company focusing on investment and business strategy in healthcare companies. From July 2007 to September 2009, Mr. Pien served as the Chief Executive Officer of Medarex, Inc. biotechnology company. Mr. Pien served as the President and Chief Executive Officer and a director of Chiron Corporation, a biopharmaceutical company, from April 2003 until Chiron's merger with Novartis AG in May 2006. Mr. Pien was elected Chairman of the Board of Directors of Chiron in May 2004. From December 2000 to March 2003, Mr. Pien worked at GlaxoSmithKline, a healthcare company, where he held several positions in GlaxoSmithKline's worldwide pharmaceuticals business, including President, Pharmaceuticals International. Mr. Pien previously held key positions in SmithKline Beecham's pharmaceuticals business in the United States, the United Kingdom, and North Asia, culminating in his tenure as President, Pharmaceuticals-North America. Prior to joining SmithKline Beecham, he worked six years for Abbott Laboratories and five years for Merck & Co. Mr. Pien currently serves as a director of ViroPharma Incorporated, a publicly-traded pharmaceutical development company, Vanda Pharmaceuticals Inc., a publicly-traded drug development company and ImmunoGen, Inc., a publicly-traded company engaged in anticancer therapeutic development. He is also a director of Arresto BioSciences, a privately held biotechnology company. Mr. Pien holds a B.S. from Massachusetts Institute of Technology and an M.B.A. from Carnegie-Mellon University. We believe Mr. Pien brings to our board of directors extensive experience in the pharmaceutical industry, including his management expertise as a chief executive officer of pharmaceutical and biotechnology companies and his extensive corporate governance expertise as a director of private and public companies.

Bryan E. Roberts, Ph.D. has served as a director since March 2007. Since 1997, Dr. Roberts has held several positions at Venrock, a venture capital firm, and currently serves as a Partner. Dr. Roberts also serves as a director of Ironwood Pharmaceuticals, Inc., a publicly-traded pharmaceutical company, and several private companies. Dr. Roberts has served on the board of directors of athenahealth, Inc., a publicly-traded healthcare company, XenoPort, Inc., a publicly-traded biopharmaceutical company and Sirna Therapeutics, Inc., a publicly-traded biotechnology company. Dr. Roberts holds a B.A. from Dartmouth College and a Ph.D. in chemistry and chemical biology from Harvard University. We believe Dr. Roberts' qualifications to sit on our board of directors include his extensive experience with healthcare, biopharmaceutical and biotechnology companies, his financial expertise and his years of experience providing strategic advisory services to diverse companies.

Alok Singh has served as a director since August 2006. Since September 2002, Mr. Singh has held several positions at New Mountain Capital, a private equity group, including Managing Director. Mr. Singh also serves on the boards of directors of Deltek Systems, Inc., a publicly-traded software company, and Validus Holdings, Ltd., a publicly-traded re-insurance company. Mr. Singh also serves on the boards of several privately held companies, including Overland Solutions, Inc., Appitis, Inc., Camber Corporation, EverBank Financial Corporation, and RedPrairie Holding, Inc. Mr. Singh holds a B.A. in economics from New York University and an M.B.A. in finance from New York University. We believe Mr. Singh's qualifications to sit on our board of directors include his financial expertise and his years of experience providing strategic advisory services to complex organizations, including as a public company director. As a Managing Director of New Mountain Capital, our largest stockholder, Mr. Singh has been instrumental in our growth since March 2007.

Randy H. Thurman has served as a director since November 2007. Since November 2007, Mr. Thurman has served as a Senior Advisor of New Mountain Capital, a private equity group. Since June 2008, Mr. Thurman has served as Chairman of the Board of CardioNet, Inc., a publicly-traded medical technology company, and he has served as CardioNet, Inc.'s President and Chief Executive Officer since March 2009. From March 2001 to July 2007, Mr. Thurman served as Chairman of the Board, President and Chief Executive Officer of Viasys Healthcare, Inc. a publicly-traded respiratory, neurological, orthopedics and medical/surgical company, which he founded in 2001. Prior to joining Viasys Healthcare Inc., Mr. Thurman was Chief Executive Officer of Strategic Reserves LLC, participated in various entrepreneurial ventures including the start-up of two medical device companies and two genomics companies, and was Chairman of the Board of Enzon Inc. Previously, Mr. Thurman was Chairman and Chief Executive Officer of Corning Life Sciences Inc., which subsequently was spun off as two NYSE companies. Earlier in his career, Mr. Thurman was with Rorer Pharmaceuticals Inc. and led its acquisition of Revlon Healthcare and subsequent merger with Rhône-Poulenc. At Rorer, Mr. Thurman served as President of Rorer Pharmaceuticals Inc. and subsequently Rhône-Poulenc Rorer Pharmaceuticals Inc. Mr. Thurman holds a B.S. in economics from Virginia Polytechnic Institute and an M.A. in economics from Webster University. Mr. Thurman's experience as a public company director, along with his experience as the chief executive officer of a public company, demonstrates his leadership capability and extensive knowledge of complex financial and operational issues that public companies face. In addition, his experience as a chief executive officer and/or president of multiple healthcare companies brings thorough understanding of our business and industry and business acumen to our board of directors. We believe Mr. Thurman's extensive experience in the pharmaceutical, biotechnology and healthcare industries provides valuable background and insight to our board of directors.

Lota S. Zoth has served as a director since December 2007. Prior to joining us, from August 2002 to July 2007, Ms. Zoth served as Senior Vice President and Chief Financial Officer of MedImmune, Inc., a pharmaceutical company. From August 2000 to June 2002, Ms. Zoth served as Senior Vice President and Corporate Controller for PSINet, Inc., a software company. In May 2001, during her tenure at PSINet, Inc., PSINet, Inc. filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. Since February 2008, Ms. Zoth has been a director of Hyperion Therapeutics, Inc., a privately held pharmaceutical company. Ms. Zoth holds a B.B.A. in accounting from Texas Tech University and is also a Certified Public Accountant. Because of Ms. Zoth's prior public company experience, including as Chief Financial Officer of MedImmune, Inc., and her financial experience and expertise, we believe Ms. Zoth is able to provide valuable input into our strategic and financial affairs as we begin operating as a publicly-traded company after completion of this offering. She also brings a thorough understanding of our business and industry.

All of our directors are elected annually for a one-year term until the next annual meeting of stockholders.

Following the completion of this offering, (i) the New Mountain Entities will be entitled to elect (a) three directors, for so long as they beneficially 15% or more of our outstanding common stock, (b) two directors, for so long as they beneficially own less than 15% but more than 5% of our outstanding common stock and (c) one director, for so long as they own less than 5% of our outstanding common stock but more than one share of common stock and (ii) each of ARCH, the Venrock Entities and Linde, each voting as a separate class will be entitled to elect one director for so long as such holder owns 5% or more of our outstanding common stock. Messrs. Flaherman, Singh and Thurman were appointed to our board of directors by the New Mountain Entities, Mr. Nelsen was appointed to our board of directors by ARCH, Dr. Roberts was appointed to our board of directors by

the Venrock Entities and Dr. Belloni was appointed to our board of directors by Linde. See "Description of Capital Stock—Series C Preferred Stock."

We will be deemed to be a "controlled company" under the rules established by The NASDAQ Global Market, and we will qualify for, and intend to rely on, the "controlled company" exception to the board of directors and committee composition requirements under the rules of The NASDAQ Global Market. Pursuant to this exception, we will be exempt from the rule that requires our board of directors to be comprised of a majority of "independent directors" and our compensation and nomination and governance committees to be comprised solely of "independent directors," as defined under the rules of The NASDAQ Global Market. The "controlled company" exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act and The NASDAQ Global Market rules, which require that our audit committee be composed of at least three members, each of whom will be independent within one year from the date of this prospectus.

We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape.

There are no family relationships among any of our directors or executive officers.

Our board of directors has established an audit committee, a compensation committee and a nominating and governance committee. The composition of each committee will be effective upon the closing of this offering.

The members of our audit committee are Dr. Belloni, Messrs. Pien and Singh and Ms. Zoth. Ms. Zoth chairs the audit committee. Upon the closing of this offering, our audit committee's responsibilities will include:

All audit and non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.

Our board of directors has determined that Ms. Zoth is an "audit committee financial expert" as defined in applicable SEC rules. We believe that the composition of our audit committee meets the requirements for independence under current NASDAQ and SEC rules and regulations.

The members of our compensation committee are Mr. Pien, Dr. Roberts and Mr. Singh. Mr. Singh chairs the compensation committee. Upon the closing of this offering, our compensation committee's responsibilities will include:

The members of our nominating and governance committee are Messrs. Nelsen, Singh and Thurman. Mr. Singh chairs the nominating and governance committee. Upon the closing of this offering, our nominating and governance committee's responsibilities will include:

Mr. Tassé serves as both chief executive officer and chairman of the board. Having one person serve as both chief executive officer and chairman of the board shows our employees, customers and other constituencies that we are under strong leadership, with a single person setting the tone and having primary responsibility for managing our operations. The board believes that this eliminates the potential for duplication of efforts and inconsistent actions and facilitates information flow between

management and the board of directors, which are essential to effective governance. The board believes that the combined role of chief executive officer and chairman of the board, together with a lead director having the duties described below, is in the interest of stockholders because it provides the appropriate balance between strategy development and independent oversight of management.

Mr. Singh will serve as lead director. The lead director has the responsibility of consulting with the chairman of the board on board and committee meeting agendas, acting as a liaison between management directors and non-management directors and facilitating teamwork and communications between the management and non-management directors. Mr. Singh is a non-independent lead director and, as such, does not have all of the responsibilities that an independent lead director would typically have. In particular, Mr. Singh will not preside over the board's executive sessions of the independent directors.

Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. While the board of directors has the ultimate oversight responsibility for the risk management process, various committees of the board of directors also have responsibility for risk management. In particular, the audit committee's purpose is to assist in the Board's oversight of the Company's accounting and financial reporting processes and the audits of our financial statements, with a particular focus on assessing and mitigating financial risk. In setting compensation, the compensation committee also strives to create incentives that encourage a level of risk-taking behavior consistent with our business strategy.

We currently have a code of business conduct and ethics. Prior to this offering, we plan to adopt a new code of business conduct and ethics that will apply to all of our employees, officers and directors and that includes provisions relating to accounting and financial matters. Upon the closing of this offering, our new code of business conduct and ethics will be available on our website at www.ikaria.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or compensation committee.

The following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plan and expectations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.

The purpose of the compensation discussion and analysis section is to discuss the principles underlying our compensation policies and decisions with respect to all of our executive officers, and specifically those who are named in the "Summary Compensation Table," or our "named executive officers," with a focus on the factors we rely upon most heavily in setting compensation for those individuals. Our named executive officers are:

The role of our compensation committee is to assist our board of directors in the discharge of its responsibilities relating to our executive compensation program. Our compensation committee is responsible for establishing and administering our policies governing the compensation for our executive officers, including determining base salaries, cash bonuses and equity incentive compensation. Our compensation committee also considers the recommendations of our chief executive officer when determining the appropriate levels of compensation for each of our executive officers, including our named executive officers. However, our chief executive officer does not provide input on his own compensation. The members of our compensation committee are Messrs. Pien and Singh and Dr. Roberts. Mr. Singh is the chairman of the compensation committee.

We have designed our executive compensation program to help attract talented individuals to manage and operate all aspects of our business, to reward those individuals based on corporate results and individual performance, and to retain those individuals who continue to meet our expectations. We also intend for our executive compensation program to make us competitive within the pharmaceutical and biotechnology industries, where there is significant competition for talented leaders who possess the skills and experience to build and deliver on long-term value creation. We believe that the compensation of our executive officers should incentivize them to focus on the achievement of both short- and long-term business objectives and strategies. The primary objectives of our executive compensation program are to:

To achieve these objectives, our compensation committee evaluates our executive compensation program at least annually, with the goal of setting the total target compensation opportunity for each executive officer at a level the compensation committee believes represents the value the executive officer contributes to our success, based on his or her performance, and maintains a competitive position with our peer group, described below. In addition, our executive compensation program ties a significant portion of the overall compensation of each executive officer to key strategic targets and stated financial goals of our company, which are established annually. We also provide a portion of our executive compensation in the form of stock-based awards that vest over time, which we believe helps to retain our executive officers and aligns their interests with those of our stockholders by allowing them to participate in the longer-term success of our company as reflected in stock price appreciation. Our 2010 long-term incentive plan, referred to as the 2010 plan, described below, includes provisions to utilize several forms of equity-based compensation, including stock options, restricted stock, restricted stock units, performance shares or units, and others. Our compensation committee evaluates the use of these forms of equity awards for our business and as a component of the total compensation package for each executive officer.

We target total compensation for each executive officer to be near the median range of total compensation for an executive in a similar position, based on benchmarking to the peer group described below. The compensation program for our executive officers consists of the following principal components:

Our board of directors and the compensation committee selected these elements of compensation because they believe each is necessary or useful in achieving the objectives of our executive compensation program as set forth above. The compensation committee, at the time of this offering, has not adopted a formal policy as to the weighting of each compensation component, but rather relies on relevant market data, discussed below, to assist in determining the appropriate mix of executive compensation components.

The compensation committee reviews and considers the recommendations of our chief executive officer in determining the appropriate compensation for each executive officer, other than for our chief executive officer. Our chief executive officer provides recommendations for specific levels of base salary, target levels for cash bonus payments, and equity compensation awards for each executive officer, other than himself, based on his review and assessment of each executive officer's individual performance and potential to contribute to our future success. In making his recommendations, our chief executive officer also considers the peer group data discussed below.

Our compensation committee applies the same factors in reviewing and determining the compensation of our chief executive officer as it does for the other executive officers. The compensation committee considers total compensation of chief executive officers of our peer group companies discussed below as a starting point for determining competitive compensation for our chief executive officer. Based on our chief executive officer's level of responsibility, experience, and our overall corporate performance, the compensation committee then recommends any changes to his base salary, payments under the annual cash bonus program and equity compensation award to our board of directors for approval. Our chief executive officer has historically received more compensation than our other executive officers because he has the broadest responsibility and accountability toward ensuring the success of our business. This is consistent with our philosophy of tying compensation to the level of responsibility and influence over our corporate results and performance.

Historically, reviews have been conducted intermittently based on market conditions and individual circumstances. Following this offering, we intend to conduct reviews at the end of each year.

In establishing total target compensation levels for our executive officers, the compensation committee determines the ranges of market compensation that it believes will enable us to effectively compete for high performing, qualified executives. The compensation committee considers benchmarking against peer companies to be a necessary point of reference, although it does not believe that peer data should be the sole determining factor.

As part of the compensation committee's process for determining executive compensation, we conduct an annual benchmark review of executive compensation based on two sources. These sources are: (i) a select group of publicly-traded biotechnology, pharmaceutical and life sciences companies with similar operating characteristics and market capitalization to us, which we refer to as our proxy peer group, and (ii) a subset of the companies in the Global Life Sciences survey published by Radford, an AON company, which reviews the compensation payments and practices of approximately 600 participating companies, primarily pharmaceutical and biotechnology companies, covering base salary, cash bonus and long-term incentives, which we refer to as our Radford survey group. We refer to our proxy peer group and our Radford survey group together as our peer group.

The information for our proxy peer group is compiled by us from proxy statements and other public reports filed by these companies. The companies within the proxy peer group, which we selected in consultation with Towers Watson & Co. (formerly known as Watson Wyatt Worldwide, Inc.), or

Towers Watson, an independent compensation consultant, were selected in 2008, reviewed by the compensation committee during 2009 and consist of:

In 2008, the compensation committee retained Towers Watson to assist in selecting the companies that comprise the proxy peer group, provide benchmark compensation data for executive officer positions and advise on our executive officer compensation plans generally. In 2009, the compensation committee retained Towers Watson to update benchmark data provided in 2008 and further advise on our executive officer compensation plans generally.

We use the information from our Radford survey group to supplement the information available for review from the proxy peer group. For our 2009 executive compensation, we benchmarked data for 22 companies within the Radford survey group with revenue and headcount similar to our company, including several firms included in our proxy peer group. Those companies are:


• Adams Respiratory Therapeutics, Inc.		• Myriad Genetics, Inc.
• Affymetrix, Inc.		• Nektar Therapeutics
• Alkermes, Inc.		• OSI Pharmaceuticals, Inc.
• Amylin Pharmaceuticals, Inc.		• PDL BioPharma, Inc.
• BioMarin Pharmaceutical Inc.		• Pharmion Corporation
• Caliper Life Sciences, Inc.		• Prometheus Laboratories Inc.
• Cubist Pharmaceuticals, Inc.		• Salix Pharmaceuticals, Ltd.
• Enzon Pharmaceuticals, Inc.		• Sciele Pharma, Inc.
• Gen-Probe Incorporated		• Sepracor Inc.
• Illumina, Inc.		• The Medicines Company
• MGI Pharma Inc.		• Vertex Pharmaceuticals Incorporated

As companies comprising our proxy peer group or Radford survey group change due to merger, acquisition, market capitalization or business model, the compensation committee will consider appropriate changes to both groups. Our goal is to ensure that we continue to measure our compensation practices against organizations from which we may recruit key executives, or otherwise consider as important benchmarks in our industry.

The following table sets forth the annual base salary rate of our named executive officers as of December 31, 2009:

Mr. Tassé's annual base salary in 2008 and 2009 was $425,000, which was his initial base salary when he became our chief executive officer in January 2008. In December 2009, the compensation committee recommended, and the board of directors subsequently approved, an increase to Mr. Tassé's annual base salary to $525,000, effective in January 2010. In making its recommendation to increase Mr. Tassé's base salary, our compensation committee considered two key factors: (i) Mr. Tassé's achievement of corporate goals over the prior two years, including for 2009, as discussed below under "—Cash Bonus Program" and (ii) the fact that Mr. Tassé's base salary was significantly below the median base salaries of chief executive officers at our peer group companies.

Ms. Larkin's annual base salary was $240,000 in 2007 and was increased to $250,000 in March 2008. In February 2009, the compensation committee increased Ms. Larkin's annual base salary to $275,000 to align her base salary more closely with those of executive officers of similar position at our peer group companies. Ms. Larkin's employment with us terminated in March 2010.

Dr. Rosskamp's annual base salary in 2007 and 2008 was $400,000. In May 2009, the compensation committee increased Dr. Rosskamp's annual base salary to $420,000, based on his individual performance and to align his base salary with those of executive officers of similar position at our peer group companies.

Mr. Bennett's annual base salary was $300,000 in 2007 and was increased to $315,000 in March 2008. The compensation committee increased Mr. Bennett's annual base salary to $335,000 in February 2009 and further increased it to $360,000 in February 2010, in each case based on his individual performance.

Mr. Kennedy's annual base salary for 2008 and 2009 was $300,000. In February 2010, the compensation committee increased Mr. Kennedy's annual base salary to $315,000, based on his individual performance and to align his base salary with those of executive officers of similar position at our peer group companies.

Cash Bonus Program. We have an annual cash bonus program under which cash bonuses may be paid annually to our executive officers, including our named executive officers, shortly after the end of each fiscal year.

The compensation committee believes that as an employee's level of responsibility increases, base salary as a percentage of the employee's total cash compensation should decrease and cash bonuses as a percentage of the employee's total cash compensation should increase. As such, executives with the greatest ability to impact our results have a greater cash bonus percentage target. For the year ended December 31, 2009, the target percentage and dollar amount for the annual cash bonus for each of our

named executive officers, based on 100% achievement of the metric targets discussed below, were as follows:


Name	Target Annual Cash Bonus as a Percentage of Base Salary		Target Annual Cash Bonus
Daniel Tassé, Chairman and Chief Executive Officer		100	%	$	425,000
Elizabeth Larkin, Former Senior Vice President and Chief Financial Officer		50	%	$	137,500
Ralf Rosskamp, Executive Vice President, Research and Development		50	%	$	210,000
Matthew Bennett, Senior Vice President, Legal and Corporate Development		50	%	$	167,500
Michael Kennedy, Senior Vice President, Engineering and Operations		50	%	$	150,000

Our compensation committee determines our annual cash bonus pool for our company first by calculating an initial aggregate amount based on financial performance and then second by adjusting this amount based on our performance compared to the strategic objectives described below.

The initial aggregate amount of the annual cash bonus pool is determined each year by our compensation committee based on two financial plan metrics: (i) achieving the revenue plan goal for the year and (ii) achieving the operating profit plan goal for the year. First, projected revenue and projected operating profit as a percentage of plan is calculated, establishing our percentage attainment. In 2009, when the compensation committee determined the amount of the annual cash bonus plan pool, our projected revenue was $272 million compared to a plan of $289 million, which resulted in 94% attainment, and our projected operating profit was $110 million compared to a plan of $95 million, which resulted in 116% attainment. The difference between the percentage attainment and 100% for each metric is multiplied by two, establishing our payout factor for each metric. These two payout factors are averaged to determine the initial bonus pool funding factor, which in 2009 was 110%.

In order to balance our focus on short- and long-term performance, our compensation committee has the discretion to increase or decrease the bonus pool funding factor by 20 percentage points to establish the final funding of the annual bonus pool. Our chief executive officer met with the compensation committee in December 2009 to discuss our actual and projected achievement compared to our 2009 strategic objectives. The compensation committee determined that the final funding of the 2009 cash bonus pool would be 100%, which is equal to $8.0 million. This determination was based on an analysis of the factors set forth in the table below.

Corporate Goals	Strategic Objectives	Performance

Enhance INOMAX market position	• Sign revised billing model agreements with a set of current INOtherapy customers • Launch INOMAX DS • Institute revised customer satisfaction survey	• Agreements with 100% of target customers were signed • INOMAX DS was launched • Instituted revised customer satisfaction survey • Achieved a high customer satisfaction score
Flawless commercial execution	• INOtherapy revenue attainment of $289 million • Add 60 new customers for INOtherapy	• Projected INOtherapy revenue attainment of $272 million • Projected addition of 68 new customers for INOtherapy
Continually enrich our portfolio of product candidates	• Add two IND candidates • License one compound that we expect to deliver revenue growth after 2013	• Added IK-5001 and the IK-600X portfolio
Build a culture of excellence	• Drive toward improved quality standards	• Implemented improved reporting, review and quality control systems

At the end of each year, the compensation committee assesses the chief executive officer's performance and contribution towards achieving our strategic objectives. Based on this assessment, the compensation committee recommends to our board of directors the amount of the chief executive officer's annual cash bonus. The board takes into account the compensation committee's recommendation in determining the final cash bonus to be paid but has discretion to increase or decrease the amount based on its evaluation of individual performance.

At the end of each year, our chief executive officer assesses each executive officer's performance and contribution towards achieving our strategic objectives. Based on this assessment, he recommends to the compensation committee the amount of each executive officer's annual cash bonus. The compensation committee takes into account his recommendation in determining the final cash bonus to be paid, but has discretion to increase or decrease the amount based on its evaluation of individual performance.

Mr. Tassé's cash bonus award for 2009 was $500,000, which represents 118% of his target bonus award. In addition to the achievement of the strategic objectives as described in the table above, his individual contributions included: (i) strong executive leadership with clear strategic vision and direction, (ii) improving our cash flow, (iii) improving the sustainability of our business, and (iv) preparation for our initial public offering.

Ms. Larkin's cash bonus award for 2009 was $110,000, which represents 80% of her target bonus award. Her individual objectives for 2009 included: (i) complete an information technology reorganization, (ii) lead effort to revise accounting policies to align with new billing model, (iii) operate within determined finance and information technology budgets, (iv) improve monthly and quarterly financial close processes, and (v) improve internal controls. Her individual contributions included improving finance and information technology functions and operating within budgets.

Dr. Rosskamp's cash bonus award for 2009 was $105,000, which represents 50% of his target bonus award. His individual objectives for 2009 included: (i) initiate proof of concept studies for IK-1001 and inhaled carbon monoxide, (ii) initiate Phase 3 INOMAX trial for BPD, (iii) operate within determined research and development budgets, and (iv) enrich our portfolio with the addition of two IND

candidates. His individual contributions included our in-licensing of IK-5001 and the IK-600X portfolio, initiating of a Phase 3 INOMAX trial for BPD and operating within budgets.

Mr. Bennett's cash bonus award for 2009 was $250,000, which represents 150% of his target bonus award. His individual objectives for 2009 included: (i) enrich our portfolio with the addition of two IND candidates, (ii) build a business development team, (iii) ensure the protection of key intellectual property, (iv) prepare and implement new customer contracts to support new billing model, and (v) operate within determined legal and business development budgets. His individual contributions included leading our licensing efforts for IK-5001, the IK-600X portfolio and other product candidates, building a business development team, establishing an intellectual property strategy, achieving all targets in support of our new customer billing model and operating within budgets.

Mr. Kennedy's cash bonus award for 2009 was $200,000, which represents 133% of his target bonus award. His individual objectives for 2009 included: (i) achieve INOMAX DS production levels, (ii) implement delivery system product development roadmap, (iii) achieve INOMAX production and quality levels, and (iv) operate within determined engineering and operations budgets. His individual contributions included surpassing target INOMAX DS production levels, implementing a robust product development roadmap and exceeding INOMAX production and quality levels while operating within budgets.

Other Bonuses. In addition to our cash bonus program described above, our compensation committee can, at its discretion, authorize the payment of cash sign-on bonus awards to executives in order to attract skilled talent to join us. The compensation committee did not approve any cash sign-on bonus awards to executive officers during 2009. However, on October 30, 2009, we paid Mr. Kennedy $100,000, which represented the second and final installment of his cash sign-on bonus award pursuant to his employment agreement.

Equity Incentive Awards. We also have an equity incentive award program intended to align our management and stockholder interests. Our compensation committee believes stock options and other equity-based awards reward executive officers based on our long-term performance.

We award stock options to our executives, including our named executive officers, in connection with the start of their employment and periodically thereafter. The size of equity awards granted to each executive officer is determined based on his or her level of responsibility and influence over our results, potential to contribute to our future success, and comparable value for similar positions in our peer group. Our compensation committee approves all equity awards to our executive officers, including our named executive officers, except for our chief executive officer. In the case of our chief executive officer, the compensation committee recommends equity awards to our board of directors for approval.

Historically, we have granted stock options to our executives, including named executive officers, that generally vest as to 25% of such awards on each anniversary of the date of grant for a period of four years following grant. The exercise price of each option is equal to the fair market value on the date of grant, which is determined by our board of directors.

In December 2009, the compensation committee granted stock options under our 2007 Stock Option Plan, referred to as the 2007 plan, to our executive officers, other than our chief executive officer, and recommended a stock option award for our chief executive officer, which was subsequently granted by our board of directors, as set forth in the table below for the named executive officers. Each stock option has a 10-year term and vests as to 25% of the shares underlying such option on each of December 14, 2010, 2011, 2012 and 2013. These stock options are not considered granted as of December 31, 2009 for accounting purposes. The grant date for accounting purposes is the date the exercise price is known and communicated to the employee, which was March 9, 2010 for purposes of the options approved by the board in December 2009. The per share exercise price for each of these options was $8.34.

The following table sets forth the number of shares underlying stock options granted to our named executive officers in December 2009:

Employment Agreements. Each of our named executive officers is a party to an employment agreement with us. These agreements, other than the agreement for our chief executive officer, have an initial term of one year and renew annually until terminated by us or by the executive officer with notice 90 days prior to any annual renewal date. The agreement for our chief executive officer has an initial term of two years and renews for additional two-year terms until terminated by us or by the chief executive officer with notice 90 days prior to any renewal date. The material terms of these employment agreements are described below.

Severance and Change in Control Benefits. Under their employment agreements, our named executive officers are entitled to certain severance and change in control benefits, the terms of which are described in detail below under "Executive Employment Agreements—Severance and Change in Control Arrangements."

We have reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and implemented across our company. It is our belief that our compensation programs do not encourage inappropriate actions by our executive officers. Specifically, we believe that our compensation plans and process avoid:

We believe that our current business process and planning cycle fosters the following behaviors and controls that would mitigate the potential for adverse risk caused by the action of our executives.

Our compensation committee is mindful of the potential impact on us of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, which prohibits public companies from deducting certain executive compensation in excess of $1,000,000 paid to the chief executive officer and the three other officers (other than the chief financial officer) whose compensation is required to be disclosed to stockholders by reason of being highly compensated. While reserving our right to offer such compensation arrangements as may from time to time be necessary to attract and retain top quality management, the committee generally intends to structure such arrangements, where feasible, to minimize or eliminate the impact of the limitations of Section 162(m) of the Code.

The following table sets forth information regarding compensation earned by our chief executive officer, former chief financial officer, and our three other most-highly compensated executive officers during the year ended December 31, 2009.

For a more detailed description of the compensation paid to our named executive officers please refer to:

Name and Principal Position

Daniel Tassé		2009	425,000	—		1,514,475	500,000	47,806	2,487,281
	Chairman and Chief Executive Officer
Elizabeth Larkin		2009	271,154	—		252,413	110,000	151,359	784,926
	Former Senior VP, Chief Financial Officer(4)
Ralf Rosskamp		2009	411,538	—		252,413	105,000	44,056	813,007
	Executive VP, Research and Development
Matthew Bennett		2009	331,923	—		673,100	250,000	45,464	1,300,487
	Senior VP, Legal and Business Development
Michael Kennedy		2009	300,000	100,000	(5)	420,688	200,000	44,624	1,065,312
	Senior VP, Engineering and Operations

The following table provides information with respect to all plan based awards granted to the named executive officers during the year ended December 31, 2009.

For a more detailed description of the plan-based awards to out named executive officers, please refer to:

Name

Daniel Tassé	n/a	n/a	425,000	—	—	—
	12/17/2009	3/9/2010	—	450,000	8.34	1,514,475
Elizabeth Larkin	n/a	n/a	137,500	—	—	—
	12/17/2009	3/9/2010	—	75,000	8.34	252,413
Ralf Rosskamp	n/a	n/a	210,000	—	—	—
	12/17/2009	3/9/2010	—	75,000	8.34	252,413
Matthew Bennett	n/a	n/a	167,500	—	—	—
	12/17/2009	3/9/2010	—	200,000	8.34	673,100
Michael Kennedy	n/a	n/a	150,000	—	—	—
	12/17/2009	3/9/2010	—	125,000	8.34	420,688

The following table sets forth information regarding all outstanding equity awards held by the named executive officers as of December 31, 2009. Certain of these equity awards are not considered outstanding as of December 31, 2009 for accounting purposes.

Name			Option Exercise Price ($)

Daniel Tassé	165,000	585,000	$	5.57	(1)	1/20/2018
		450,000	$	8.34	(2)	12/16/2019
Elizabeth Larkin	100,000	100,000	$	4.63	(3)	4/17/2017
		75,000	$	8.34	(2)	12/16/2019
Ralf Rosskamp	150,000	150,000	$	4.63	(4)	9/30/2017
		75,000	$	8.34	(2)	12/16/2019
Matthew Bennett	100,000	100,000	$	4.63	(5)	7/22/2017
		200,000	$	8.34	(2)	12/16/2019
Michael Kennedy	47,500	142,500	$	8.39	(6)	11/18/2018
		125,000	$	8.34	(2)	12/16/2019

The following table sets forth information regarding the vesting of stock during the year ended December 31, 2009 for each of our named executive officers. None of our named executive officers exercised any options during the year ended December 31, 2009.

We have employment agreements in place with each of our named executive officers. The agreement with our chief executive officer is for a two-year term, commencing June 1, 2009 and ending May 31, 2011, and automatically renews for additional two-year terms thereafter unless notice of termination is given 90 days prior to any renewal date. The agreements with our other named executive officers are for one-year terms, commencing June 1, 2009 and ending May 31, 2010, and automatically renew for additional one-year terms thereafter unless notice of termination is given 90 days prior to any renewal date. Pursuant to the agreements, each of our named executive officers is entitled to a base salary and certain benefits as previously described, and is eligible to earn an annual bonus in an amount equal to a certain percentage of his or her base salary, as previously described.

If any of our named executive officers, other than our chief executive officer, (i) is terminated for any reason other than for "cause", death or disability, (ii) terminates his or her employment during the agreement term for "good reason", or (iii) terminates his or her employment at the end of an agreement term after receiving notice from the company that his or her term will not be extended, then such executive officer will be entitled to:

If our chief executive officer (i) is terminated for any reason other than for "cause", death or disability, (ii) terminates his employment during the agreement term for "good reason", or (iii) terminates his employment at the end of an agreement term after receiving notice from the company that his term will not be extended, then he will be entitled to:

If any of our named executive officers is terminated for "cause" or by reason of death or disability, or terminates his or her employment other than for "good reason", such executive officer, or his or her estate or legal representative, will be entitled to a lump sum payment equal to his or her earned and accrued base salary, bonus, vacation and benefits through the date of termination.

Upon a "change in control", the unvested portion of any equity compensation granted to each of our named executive officers shall immediately become fully vested, whether or not a termination of employment occurs. If, within 18 months following a "change in control", any of our named executive officers, including our chief executive officer, (i) is terminated for any reason other than for "cause", death or disability, (ii) terminates his or her employment during the agreement term for "good reason", or (iii) terminates his or her employment at the end of an agreement term after receiving notice from the company that his or her term will not be extended, then, in addition to the severance payments described above, such executive officer will also be entitled to:

Our obligation to make the severance payments described above is conditioned upon the executive officer's continued compliance with the non-competition and confidentiality obligations set forth in his or her employment agreement and the executive officer's execution of a general release of claims against us. To the extent that any severance or compensation payment to any of our named executive officers, including our chief executive officer, constitutes an "excess parachute payment", within the meaning of Sections 280G and 4999 of the Internal Revenue Code, then such executive officer will be entitled to an additional gross-up payment equal to the sum of the amount of tax owed in connection with such "excess parachute payment" and any interest or penalties thereon. However, in the event that reducing such severance or compensation payments by 10% or less, but in any event not more than $250,000, would cause none of the severance or compensation payments to constitute "excess parachute

payments", such payments will be reduced accordingly. The entitlement to receive these gross-up benefits terminates for our executive officers, and named executive officers, on December 31, 2010.

Under the employment agreements, "cause" means: (i) disloyalty or dishonesty resulting in the material personal enrichment of the executive at the material expense of our company; (ii) fraudulent conduct in connection with the material business or affairs of our company; (iii) conviction of a felony or any crime involving moral turpitude; (iv) gross misconduct that materially and adversely affects us; (v) any breach or intended breach of any company policies or procedures causing a material violation of such policies or procedures and causing material harm to us; or (vi) failure to provide 30 days advance written notice of resignation.

Under the employment agreements, "good reason" means, without the executive officer's consent: (i) any material and adverse change in the executive's position, title or status, job duties, authority or responsibilities; (ii) any material and adverse change in the obligation that the executive report to the chief executive officer (or for our chief executive officer, to the chairman and our board); (iii) any material and adverse breach of the executive's employment agreement; (iv) relocation of our headquarters more than 50 miles from its present location; or (v) any material and adverse change in the executive's compensation or benefits.

Under the employment agreements, a "change in control" shall have occurred if: (i) any person or entity, other than the New Mountain Entities or any of their affiliates, becomes the beneficial owner of more than 50% of our voting capital stock, (ii) any person or entity, other than the New Mountain Entities, has or obtains the right to elect a majority of our board, or (iii) substantially all of our assets are sold in a single transaction or series of transactions. This offering does not constitute a change in control for purposes of these agreements.

The following table presents maximum payment amounts under the existing employment agreements for each individual named executive officer had he or she been terminated without cause or resigned for good reason on December 31, 2009 under the circumstances set forth below.

			Termination Without Cause or For Good Reason ($)		Termination Without Cause or For Good Reason ($)

Name		Benefit	(Absent a Change in Control)		(In connection with a Change in Control)
Daniel Tassé		Severance Payment(1)		1,275,000		1,700,000
	Chairman and Chief Executive	Bonus Awards(2)		500,000		500,000
	Officer	Value of Stock Vesting Upon Termination(3)		914,100		1,620,450
		Health and Welfare Benefits(4)		56,591		75,637
		Conditional 280G Gross-Up(5)		—		949,891

		Total		2,745,691		4,845,978

Elizabeth Larkin		Severance Payment		—		—
	Former Senior VP, Chief	Bonus Awards		—		—
	Financial Officer(6)	Value of Stock Vesting Upon Termination		—		—
		Long-Term Incentive Plan Awards		—		—
		Health and Welfare Benefits		—		—
		Conditional 280G Gross-Up		—		—

		Total		—		—

			Termination Without Cause or For Good Reason ($)		Termination Without Cause or For Good Reason ($)

Name		Benefit	(Absent a Change in Control)		(In connection with a Change in Control)
Matthew Bennett		Severance Payment(7)		502,500		753,750
	Senior VP, Legal and Business	Bonus Awards(2)		250,000		250,000
	Development	Value of Stock Vesting Upon Termination(3)		185,500		371,000
		Health and Welfare Benefits(8)		37,727		56,591
		Conditional 280G Gross-Up		—		—

		Total		975,727		1,431,341

Ralf Rosskamp		Severance Payment(9)		650,000		975,000
	Executive VP, Research and	Bonus Awards(2)		105,000		105,000
	Development	Value of Stock Vesting Upon Termination(3)		278,250		556,500
		Health and Welfare Benefits(8)		37,727		56,591
		Conditional 280G Gross-Up(5)		—		(43,695	)

		Total		1,070,977		1,649,396

Michael Kennedy		Severance Payment(7)		450,000		675,000
	Senior VP, Engineering and	Bonus Awards(2)		200,000		200,000
	Operations	Value of Stock Vesting Upon Termination(3)		0		0
		Health and Welfare Benefits(8)		37,727		56,591
		Conditional 280G Gross-Up		—		—

		Total		687,727		931,591

On April 3, 2010, we entered into a separation agreement with Elizabeth Larkin, our former senior vice president and chief financial officer, in connection with the termination of her employment on March 15, 2010. Under this separation agreement, (i) Ms. Larkin received base salary pursuant to her employment agreement until April 19, 2010 and $337,500, which was paid on April 30, 2010, representing (a) accrued and unpaid salary, pro-rata bonus, continued health insurance coverage for 12 months and a lump sum benefit payment that Ms. Larkin was entitled to under her employment agreement and (b) a supplemental payment of $243,979, (ii) Ms. Larkin will receive $412,500, to be paid in 12 monthly installments until April 2011 and (iii) Ms. Larkin agreed to a general release of claims against us. We also entered into a professional services agreement with Ms. Larkin on April 19, 2010, pursuant to which Ms. Larkin will provide advisory services regarding historical matters as they pertain to financial and information technology initiatives. Ms. Larkin will receive a monthly retainer of $2,500 a month for the term of the professional services agreement.

Our 2007 plan was adopted by our board of directors and approved by our shareholders in March 2007. A maximum of 11,058,834 shares of common stock are authorized for issuance under the 2007 plan. Stock options under the 2007 Plan have a contractual life of ten years and generally vest at 25% of such awards at the end of each year for a period of four years.

The 2007 plan provides for the grant of incentive stock option and non-statutory stock options. Prior to this offering, such stock options are exercisable for shares of our non-voting common stock. Upon the closing of this offering, all non-voting common stock shall automatically convert into shares of common stock, including shares issued or issuable upon exercise of stock options. Our officers, employees, consultants and directors, and those of any of our subsidiaries, are eligible to receive stock options under the 2007 plan; however, incentive stock options may only be granted to our employees. In accordance with the terms of the 2007 plan, the compensation committee administers the plan and, subject to any limitations in the 2007 plan, selects the recipients of stock options and determines:

Pursuant to the terms of the 2007 plan, in the event of a liquidation or dissolution of our company, each outstanding option under the 2007 plan will terminate immediately prior to the consummation of the action, unless the administrator determines otherwise. In the event of a merger or other reorganization event, each outstanding option will be assumed or an equivalent option or right

will be substituted by the successor entity, unless such successor entity does not agree to assume the award or to substitute an equivalent option or right in which case such option will terminate upon the consummation of the merger or reorganization event.

From and after May 6, 2010, the effective date of the 2010 plan described below, no further stock options under the 2007 plan will be issued or granted.

Our 2010 plan was originally adopted by our board of directors on February 26, 2010, amended and restated by our board of directors on May 4, 2010 and approved by our stockholders on May 6, 2010. The 2010 plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance units, performance share units, performance based restricted stock, share awards and cash incentive awards. Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2010 plan. Incentive stock options may be granted only to our employees. Upon the effective date, 2,793,062 shares of our common stock were reserved for issuance under the plan. In addition, our 2010 plan contains an "evergreen" provision, which provides for an annual increase in the number of shares available for issuance under the plan on the first day of each calendar year from 2011 through 2020. The annual increase in the number of shares will be equal to the sum of:

provided that the board of directors may reduce the size of the increase in any particular year. No more than 20,000,000 shares of our common stock may be made the subject of incentive stock options under our 2010 plan.

In accordance with the terms of the 2010 plan, our board of directors has authorized our compensation committee to administer the plan. Our compensation committee selects the recipients of awards and determines:

If our board of directors delegates authority to our chief executive officer, the chief executive officer has the power to grant options and awards, other than restricted stock, to all of our employees, except to our executive officers or as otherwise limited by Delaware law. Our board of directors will establish the terms of the awards to be granted by the chief executive officer, including the exercise price of such awards, and the maximum number of shares subject to awards that the chief executive officer may make.

Upon our liquidation, dissolution, merger or consolidation, each option or award will be (i) treated as provided in the agreement related to the transaction, or (ii) if not so provided in such agreement, each holder of an option or award will be entitled to receive, in respect of each share subject to outstanding options or awards, the same number of stock, securities, cash, property or other consideration that he or she would have received had he or she exercised such options or awards prior to the transaction. The stock, securities, cash, property or other consideration shall remain subject to all

of the conditions, restrictions and performance criteria which were applicable to the options and awards prior to any such transaction. If the consideration paid or distributed is not entirely shares of common stock of the acquiring or resulting corporation, the treatment of outstanding options and stock appreciation rights may include the cancellation of outstanding options and stock appreciation rights upon consummation of the transaction as long as the holders of affected options and stock appreciation rights, at the election of the compensation committee, either:

No award may be granted under the 2010 plan after February 25, 2020, but the vesting and effectiveness of awards granted before that date may extend beyond that date. Our board of directors may amend, suspend or terminate the 2010 plan at any time, except that stockholder approval will be required when necessary to comply with applicable law or stock market requirements. Any amendment, modification, suspension or termination that would impair or adversely alter any options requires the consent of the affected option holders. Our board may, without stockholder approval, take any action under the 2010 plan that constitutes a "repricing" within the meaning of the rules of The NASDAQ Global Market.

As of April 30, 2010, we have not awarded stock options or other stock-based equity awards from our 2010 plan.

Our severance pay plan, or the severance plan, which was adopted in March 2010 and amended and restated in May 2010 for all U.S.-based employees, provides for payment if the position of an employee is eliminated, if employment is involuntarily terminated for reasons other than work performance or inappropriate conduct, or if employment is involuntarily terminated and the plan administrator decides based on his or her discretion that severance benefits should be provided.

If an employee is eligible for severance payments based on the circumstances described above and signs the relevant severance agreement, then subject to conditions specified in the severance plan, the employee will receive severance payments equal to the greater of:

In no event will the severance benefits under the severance plan exceed two times the lesser of the following:

We maintain a tax-qualified retirement plan that provides all regular employees with an opportunity to save for retirement on a tax advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual Code limits. Pre-tax contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participant's directions. Employee elective deferrals are fully vested at all times. The 401(k) plan allows us to make matching contributions. For the period through December 31, 2009, we made matching contributions up to 5% of eligible annual compensation, with a maximum company match of $12,250 in 2009. Effective January 1, 2010, we increased the company matching contribution for all employees to 6% of eligible compensation, with a maximum company match of $14,700 in 2010.

As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, unless the employee designates his or her contributions as an after-tax Roth contribution, in which case all matching contributions are deductible by us, when made.

The Linde Group maintained a long-term incentive plan, which we refer to as the Linde plan, for employees and executive officers. This plan was discontinued in 2007, after which time no additional awards were granted. The awards granted under the Linde plan for prior years still remained active and eligible to be vested and paid, conditional on the employee remaining in active employment with us. Effective on termination or resignation, all unvested awards are forfeited.

Ms. Larkin was the only executive officer who received awards under the Linde plan. Prior to the termination of Ms. Larkin's employment with us in March 2010, an award vested on January 1, 2010 at a value of $99,602, which has been paid by us. Upon Ms. Larkin's termination, all remaining unvested awards were cancelled. There is no obligation for us to make further payments to Ms. Larkin under the Linde plan.

Our equity participation plan, which was adopted by our board of directors in June 2007 and which will terminate on the effective date of the registration statement of which this prospectus is a part, provides the opportunity for our executive officers, their direct reports and other select employees to purchase shares of our non-voting common stock. A maximum of 800,000 shares of non-voting common stock are authorized for purchase under the equity participation plan. Any person who purchases shares of our non-voting common stock pursuant to the equity participation plan must become a party to the common stockholders agreement. See "Certain Relationships and Related Person Transactions—Common Stockholders Agreement".

Our board of directors administers the equity participation plan and, subject to the limitations of the equity participation plan, has the authority to (i) construe and interpret the equity participation plan, (ii) prescribe, amend or rescind rules and regulations relating to the administration of the equity participation plan and (iii) determine who shall participate in the equity participation plan, how many shares will be sold to each participant and the price at which such shares shall be sold, which is intended to be the fair market value of the non-voting common stock as determined by our board of directors.

As of April 30, 2010, 671,956 shares of our non-voting common stock had been purchased under our equity participation plan, all of which were purchased for the fair market value of our non-voting common stock on the date of issuance.

Mr. Tassé, one of our directors, is also our chief executive officer and a named executive officer. Mr. Tassé does not receive any additional compensation as a director. See "Executive Compensation—Summary Compensation Table" above for disclosure relating to his compensation. In addition to Mr. Tassé, our board of directors consists of eight non-employee directors. Of these directors, six are associated with the investors who currently hold ownership in Ikaria. Our directors do not receive compensation for serving on the board of directors, with the exception of Mr. Pien, Mr. Thurman and Ms. Zoth. Pursuant to a letter agreement dated June 30, 2008, Mr. Thurman receives an annual option grant to purchase 7,500 shares of non-voting common stock and an annual retainer fee of $50,000. Pursuant to a letter agreement dated November 20, 2007, Ms. Zoth receives an annual option grant to purchase 7,500 shares of non-voting common stock, an annual retainer fee of $50,000 and an annual fee of $15,000 for serving as chair of the audit committee. Pursuant to a letter agreement dated May 5, 2010, Mr. Pien will receive an initial stock option grant to purchase 50,000 shares of non-voting common stock, which vests in four equal installments over four years. In addition, Mr. Pien receives an annual option grant to purchase 7,500 shares of non-voting common stock, an annual retainer fee of $50,000, an annual fee of $15,000 for serving as member of the compensation committee and an annual fee of $15,000 for serving as member of the audit committee.

Each member of our board of directors is entitled to reimbursement for reasonable travel and other expenses incurred in connection with attending board meetings and meetings for any committee on which he or she serves.

The following table sets forth information for the year ended December 31, 2009 regarding the compensation awarded to, earned by or paid to, our directors.

We anticipate adopting a new director compensation policy to become effective upon the closing of this offering.

Since January 1, 2007, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates or immediate family members of our directors, executive officers and holders of more than 5% of our voting securities. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.

In March 2007, we purchased Ikaria Research, Inc. and INO Therapeutics. In connection with these transactions:

The following table sets forth the number of shares of series A preferred stock that we issued to entities affiliated with our directors and to our 5% stockholders and their affiliates in the merger with Ikaria Research, Inc.

Steven Gillis, an employee of ARCH, served as acting Chief Executive Officer of Ikaria Research, Inc., from August 2006 to May 2007. Mr. Gillis received from Ikaria Research, Inc. for his service as Chief Executive Officer: cash compensation of approximately $110,000 from Ikaria Research, Inc. as well as options to purchase 126,666 shares of common stock of Ikaria Research, Inc. Such options were exchanged for an option to purchase shares of our common stock in connection with the Transaction.

In March 2007, we sold an aggregate of 60,408,484 shares of our series B preferred stock at a price per share of $4.6346 for an aggregate purchase price of approximately $280 million.

The following table sets forth the number of shares of our series B preferred stock purchased by entities affiliated with our directors and our 5% stockholders and their affiliates in March 2007. In addition, as part of the consideration for INO Therapeutics, we issued 15,918,669 shares of our series B preferred stock to Linde.

In December 2006 and January and February 2007, Ikaria Research, Inc. issued subordinated convertible secured promissory notes to some of our investors. The notes issued in December 2006 had an annual interest rate of 4.97%, the notes issued in January 2007 had an annual interest rate of 4.88% and the notes issued in February 2007 had an annual interest rate of 4.93%. The aggregate principal amount of the notes issued was $3.0 million. In March 2007, all of the principal and interest due under these promissory notes converted into an aggregate of 653,658 shares of our series B preferred stock in connection with our series B preferred stock financing. The following table sets forth the principal amount of the promissory notes that Ikaria Research, Inc. issued to entities affiliated with our directors and to our 5% stockholders and their affiliates and the number of shares of our series B preferred stock that each promissory note converted into.

On March 28, 2007, we entered into management rights letters with New Mountain Partners, Allegheny New Mountain, ARCH, Venrock IV, 5AM Ventures LLC, or 5AM Ventures, and 5AM Co-Investors LLC, or 5AM Co-Investors, pursuant to which they are entitled to routinely consult with, and advise, management regarding our operations and have the right to inspect our books and records. We are also required to deliver financial statements to New Mountain Partners, Allegheny New Mountain, ARCH, Venrock IV, 5AM Ventures and 5AM Co-Investors within 45 days after the end of each of the first three quarters of each fiscal year and 120 days after the end of each fiscal year and any other periodic reports as they become available. Each management rights letter terminates on the date New Mountain Partners, Allegheny New Mountain, ARCH, Venrock IV, 5AM Ventures or 5AM Co-Investors, as applicable, no longer holds any of our securities.

On March 28, 2007, we entered into an investor stockholders agreement, which will remain in effect following this offering, with the New Mountain Entities, ARCH, the Venrock Entities, Linde, 5AM Ventures, 5AM Co-Investors, Aravis Venture I L.P., or Aravis, Black Point Group, LP, or Black Point, and certain other persons, who we refer to collectively as the Preferred Investors. We refer to 5AM Ventures and 5AM Co-Investors collectively as the 5AM Entities. The investor stockholders agreement contains a voting agreement that provides, among other things, that the New Mountain

Entities, ARCH, the Venrock Entities and Linde are entitled to designate a certain number of members of the board of directors and that we are required to use our best efforts to cause the designated individuals to be nominated and elected as members of our board of directors. The holders of our series C-1 preferred stock, the New Mountain Entities, are entitled to elect three members of our board, the holder of our series C-2 preferred stock, ARCH, is entitled to elect one member of our board, the holders of our series C-3 preferred stock, the Venrock Entities, are entitled to elect one member of our board and the holder of our series C-4 preferred stock, Linde, is entitled to elect one member of our board.

At each stockholder meeting at which directors are to be elected, each Preferred Investor is required to take all necessary or desirable actions within their control to effect the terms of the voting agreement, including with respect to the election of directors.

If any member of our board of directors designated by the New Mountain Entities, ARCH, the Venrock Entities or Linde ceases to serve as a director for any reason, the resulting vacancy will be filled by a director nominated by the person or entity entitled to designate the director. In addition, no Preferred Investor will vote in favor of the removal of any designated director unless the person or entity having the right to designate the director to our board of directors recommends his or her removal. In such case, each Preferred Investor is required to vote in favor of the director's removal.

The voting agreement also requires that our certificate of incorporation and bylaws provide for indemnification of, advancement of expenses to and limitation of personal liability of the directors of our board of directors. Under this agreement, we are not permitted to amend, repeal or modify in a manner adverse to our directors any provision of our articles of incorporation until at least six years following the date that the New Mountain Entities, ARCH, the Venrock Entities and Linde are no longer entitled to designate directors to our board of directors and with respect to a director at least six years following the date such person ceases to serve as a director.

Following this offering, the investor stockholders agreement will require that we obtain the prior written approval of the New Mountain Entities to take certain actions including, among other things, actions to:

These approval rights of the New Mountain Entities terminate when the New Mountain Entities and their assignees beneficially own less than 15% of our outstanding capital stock. Following this offering, we expect the New Mountain Entities to hold % of our outstanding capital stock.

The investor stockholders agreement also provides that we will not enter into a transaction with any affiliate without the prior written approval of a majority of either (i) the disinterested members of our board of directors, or (ii) if stockholder approval is needed, a majority of the votes to be cast by disinterested holders of our capital stock or by the disinterested entities, as applicable, voting as a single class.

The investor stockholders agreement provides certain registration rights which include:

The investor stockholders agreement also provides that, to the extent requested by the managing underwriter, the Preferred Investors agree not to sell, distribute or otherwise dispose of shares of our common stock held by them, during the 180-day period following the effectiveness of this offering or the 90-day period following the effectiveness any other offering.

The investor stockholders agreement contains indemnification provisions in favor of the stockholders that are party to the agreement, each control person of the stockholders, and affiliates of the parties against any losses arising out of the registration of our securities, pursuant to the registration statement of which this prospectus is a part. We will reimburse these persons for any legal or other fees or expenses incurred in connection with investigating or defending any loss. We will not be liable to any of these persons if the loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to us by or on behalf of the person for use in any such registration statement, including this registration statement.

If the New Mountain Entities propose to sell (including by exchange, in a business combination or otherwise) at least 80% of their shares of our common stock issued upon conversion of the series B preferred stock to a third party in the same transaction or series of transactions (which would represent, together with any other shares of capital stock proposed to be transferred, more than 50% of our outstanding capital stock) or we propose to sell or otherwise transfer for value all or substantially all of our stock, assets or business (whether by merger, sale or otherwise) to a third party, then the New Mountain Entities at their option may require (i) in the case of a sale of capital stock by the New Mountain Entities, that each Preferred Investor (and its permitted transferees) sell a proportionate amount of such stockholder's shares of capital stock (which shall be the same proportion as the proportion of the aggregate number of shares sold by the New Mountain Entities to the aggregate number of shares owned by the New Mountain Entities), and waive any appraisal right that it may have in connection with the transaction and (ii) in any case, if stockholder approval of the transaction is required and our stockholders are entitled to vote thereon, that each Preferred Investor (and its permitted transferees) vote all of such stockholder's shares of our capital stock in favor of such transaction. Any sale of shares of our capital stock by a stockholder pursuant to these provisions will be for the same consideration per share, on substantially the same terms and subject to substantially the same conditions as the sale of shares of our capital stock owned by the New Mountain Entities. Following the completion of this offering, these rights will terminate when the New Mountain Entities and their assignees beneficially own less than 20% of our outstanding capital stock.

On February 22, 2007, we entered into a common stockholders agreement with the common stockholders of Ikaria Research, Inc. and, subsequently, certain holders of our common stock. Under the common stockholders agreement, which will remain in effect following the completion of this offering, each stockholder party to the agreement may participate proportionately in any public offering, including this offering, of our common stock pursuant to the registration rights of the Preferred Investors but only to the extent the managing underwriter advises us in writing that the sale of such additional shares would not adversely affect such public offering or require the Preferred Investors to reduce their participation in such offering and at a percentage no greater than the percentage of shares being sold by the Preferred Investors.

If the New Mountain Entities propose to sell (including by exchange, in a business combination or otherwise) at least 80% of their shares of common stock issued upon conversion of their series B preferred stock to a third party in the same transaction or series of transactions (which would represent, together with any other shares of capital stock proposed to be transferred, more than 50% of our outstanding capital stock) or we propose to sell or otherwise transfer for value all or substantially all of our stock, assets or business (whether by merger, sale or otherwise) to a third party, then the New Mountain Entities at their option may require (i) in the case of a sale of capital stock by the New Mountain Entities, that each stockholder party to the common stockholders agreement sell a proportionate amount of such stockholder's shares of capital stock (which shall be the same proportion as the proportion of the aggregate number of shares sold by the New Mountain Entities to the aggregate number of shares owned by the New Mountain Entities), and waive any appraisal right that it

may have in connection with the transaction and (ii) in any case, if stockholder approval of the transaction is required and our stockholders are entitled to vote thereon, that each stockholder party to the common stockholders agreement vote all of such stockholder's shares of our capital stock in favor of such transaction. Any sale of shares of our capital stock by a stockholder pursuant to these provisions will be for the same consideration per share, on substantially the same terms and subject to substantially the same conditions as the sale of shares of our capital stock owned by the New Mountain Entities. Following the completion of this offering, these rights will terminate when the New Mountain Entities and their assignees beneficially own less than 20% of our outstanding capital stock.

In addition, to the extent requested by the managing underwriter, stockholders that hold shares of our common stock immediately prior to our initial public offering, are prohibited from selling, distributing or otherwise disposing of the shares of our common stock held by them, during the 180-day period following the effectiveness of this offering.

We have the right to purchase all or any portion of the shares of our common stock then held by a stockholder who is party to the common stockholders agreement if:

If we exercise this right, the purchase price per share of the stockholder's common stock will be equal to the fair market value of the stockholder's common stock.

In connection with our acquisition of INO Therapeutics from Linde in March 2007, we entered into a number of agreements with affiliates of Linde for the principal purpose of permitting Linde and its affiliates to carry on their existing nitric oxide businesses in the European Union and other specified countries near the European Union, which we refer to as the Linde Territories. These agreements were entered into on March 28, 2007, and are summarized below.

We entered into a commercial agreement with AGA, pursuant to which we agreed to sell certain products, including bulk nitric oxide and nitric oxide delivery systems and related accessories, to AGA and its designated affiliates at prices specified in the agreement. We sold products and fixed assets to Linde or its affiliates in the amounts of $3.4 million, $3.0 million and $1.7 million in the years ended December 31, 2009, 2008 and 2007, respectively.

Pursuant to the commercial agreement, we also granted AGA the right to apply for any license, registration and/or approval that may be required by any regulatory authority for the manufacture, distribution, use or sale of INOMAX in the Linde Territories as such use or sale relates to new indications for the medical use of nitric oxide that are developed by us. If AGA, or a Linde affiliate, obtains a license, registration or approval for the European Union, France, Germany, Sweden or the United Kingdom, AGA may be required to pay us royalties on the amount by which gross proceeds from the sale of products for such new indication by Linde affiliates exceeds a specified amount in any 12-month period ending on March 31, June 30, September 30 or December 31.

Pursuant to the commercial agreement, in the event we wish to sell components of INOtherapy, other than bulk nitric oxide inhalation gas, to a third party distributor on an exclusive basis in any

territory for which there were no then-existing supply or distribution agreements, other than the Linde Territories or the United States, Canada and Mexico, we are required to first offer AGA, or a Linde affiliate, a right of first refusal to be such exclusive third party distributor. In addition, if AGA desires to sell all or substantially all of its inhaled nitric oxide business to a third party that is not a Linde affiliate, we have the right, but not the obligation, to purchase that business. The commercial agreement also provides for cooperation between AGA and us in areas such as pharmacovigilence and product recalls.

The commercial agreement lasts until March 28, 2027, unless terminated earlier in accordance with its terms, which include:

In March 2007, in connection with our acquisition of INO Therapeutics, we obtained from AGA certain rights and obligations with respect to patent rights pertaining to INOMAX under a license agreement between AGA and MGH. Our rights under the agreements with MGH and AGA include an exclusive license, subject to certain reserved rights, to research and develop products covered by such patent rights in countries where such patent rights are issued or pending and to manufacture and commercialize such products in the licensed territory. We are obligated to (i) use reasonable efforts to develop products covered by the patent rights in countries where the patent rights are issued or pending and to make available commercially viable products covered by the licensed patent rights for sale and distribution throughout the licensed territory, (ii) achieve specified goals relating to the approval of such products for sale in the United States and Canada, and (iii) pay MGH royalties at a single digit percentage on net sales in the licensed territory, if any, of any product covered by the patent rights, subject to specified reductions and exclusions. Our agreement with MGH states that our obligation to pay royalties expires on a country-by-country and product-by-product basis, with respect to some types of products, on the date on which the product is no longer covered by a valid claim in the licensed patent rights or, with respect to other types of products, upon the later to occur of the expiration in such country of the last to expire of specified licensed patent rights by MGH and the date of regulatory approval of a generic version of such product. We and MGH have the right to terminate the agreement for an uncured material breach by the other party.

We entered into a global assignment agreement with AGA pursuant to which AGA assigned to us all the right, title and interest in intellectual property, other than trademarks, owned by AGA, or any of its affiliates, which is used in our business or otherwise relates to the use of inhaled nitric oxide. AGA also assigned to us all trademarks owned by AGA, or any of its affiliates, which are used or intended to be used in our business outside of the Linde Territories. Pursuant to the global assignment agreement, we agreed to assign to AGA all the right, title and interest in to all trademarks in the Linde Territories that we own and which are used or intended to be used by AGA or its affiliates.

To permit AGA to continue its business in the Linde Territories, we entered into a patent and know-how license agreement with AGA pursuant to which we granted AGA licenses and sublicenses as they relate to the manufacture and distribution of inhaled nitric oxide. Under the patent and know-how license agreement we granted AGA exclusive, irrevocable, royalty free licenses and sub-licenses, except to the extent such license or sub-license is royalty-bearing, in which cases AGA is responsible for all royalties resulting from the exploitation of such license or sub-license.

The patent and know-how license agreement terminates when the last patent licensed or sub-licensed under the patent and know-how license agreement expires.

From April 2005 to May 2006, INO Therapeutics entered into distribution agreements with various AGA entities or other Linde affiliates in Argentina, Australia, Chile, Colombia and Uruguay, which we refer to collectively as the AGA Distributors. Pursuant to these agreements we granted the AGA Distributors the right to market, promote, distribute and sell INOMAX, and the right to utilize INO Therapeutics trademarks, in their respective territories. The AGA Distributors agreed to make all applications to their respective regulatory authorities to obtain all licenses, registrations and/or approvals that may be required by such regulatory authorities for the manufacture, distribution, use or sale of INOMAX, in their respective territories. The distribution agreements also provide the prices at which we shall supply INOMAX to the AGA Distributors and the extent to which we may raise such prices, and for profit-sharing in the event invoice prices exceed certain thresholds and payment of royalties at the rate of 6.5% of total net sales of INOMAX. The agreements each had a term of five years.

In connection with the acquisition of INO Therapeutics, we entered into an omnibus amendment of the distribution agreements with the AGA Distributors to extend their terms and to reduce payments to us pursuant to the profit-sharing provision in the agreements by 10%.

In 2009, we terminated our distribution agreement with the Linde affiliate in Australia. During the fiscal years 2009, 2008 and 2007, sales of INOtherapy through the AGA Distributors, including the affiliate in Australia prior to the termination of the agreement, amounted to $1.2 million, $1.2 million and $1.0 million, respectively.

We entered into a coexistence agreement with AGA. Under the coexistence agreement, AGA is permitted to use the "INO" brand, or the Brand, with respect the products, including INOMAX, listed on a schedule. We may not use the Brand, make or oppose any trademarks for the Brand or revoke or invalidate any registrations for the Brand in the Linde Territories without obtaining the prior written consent of AGA. AGA is not allowed to use the Brand, make or oppose any trademarks for the Brand or revoke or invalidate any registrations for the Brand in our territories, which includes all territories that are not Linde Territories, without obtaining our prior written consent. We may register domain names consisting of the Brand or variations of the Brand in our territories and AGA may do the same in the Linde Territories.

We entered into a transitional services agreement with Linde pursuant to which Linde agreed to provide us with certain administrative services following our acquisition of INO Therapeutics, including technology services, general accounting services, accounts payable services, tax reporting services, and human resources and payroll services. The last services provided by Linde under the transitional services agreement expired 180 days after September 24, 2007. Our payments to Linde for fiscal year

2007 are discussed below. No costs were incurred during fiscal years 2008 and 2009 under the transitional services agreement.

During 2009 and 2008, we purchased industrial gas supplies from Linde and reimbursed Linde for clinical trial support in Europe in the aggregate amount of $0.3 million and $0.6 million, respectively. During 2007, we purchased industrial gas supplies, reimbursed Linde for administrative support during a transition period and reimbursed Linde for clinical trial support in Europe in the aggregate amount of $1.1 million. Receivables from Linde were $0.8 million and $0.3 million at December 31, 2009 and 2008, respectively. The transactions with Linde and its affiliates were made in the ordinary course of business.

Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with our directors and officers.

In connection with this offering, our board of directors is adopting written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to as a "related person," has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a "related person transaction," the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the audit committee of our board of directors. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between audit committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person's interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:

The committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is in our best interests. The audit committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC's related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter.

We did not have a written policy regarding the review and approval of related person transactions prior to this offering. Nevertheless, with respect to such transactions, it was our policy for the audit committee to consider the nature of and business reason for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests. In addition, all related person transactions required prior approval, or later ratification, by the audit committee. However, we did not apply these policies to the financing transactions described above in which entities affiliated with our directors and our 5% stockholders and their affiliates participated. These interests were fully disclosed to the other members of our board of directors in connection with such financing transactions.

The following table sets forth information with respect to the beneficial ownership of our common stock as of April 30, 2010 by:

The column entitled "Percentage of Shares Beneficially Owned—Before Offering" is based on a total of 93,106,655 shares of our common stock outstanding as of April 30, 2010, assuming the conversion of all outstanding shares of our non-voting common stock and series A and series B preferred stock into 89,373,574 shares of our common stock upon the closing of this offering. The column entitled "Percentage of Shares Beneficially Owned—After Offering" is based on shares of our common stock to be outstanding after this offering, including the shares of our common stock that we are selling in this offering, but not including any additional shares issuable upon exercise of outstanding stock options.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares of our common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of April 30, 2010 are considered outstanding and beneficially owned by the person holding the options or warrants for the purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person. Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of the beneficial owner is c/o Ikaria, Inc., 6 State Route 173, Clinton, NJ 08809.

Following the completion of this offering, (i) the Controlling Entities will be entitled to designate six members of our board of directors, see "Description of Capital Stock—Series C Preferred Stock," and (ii) the New Mountain Entities, will continue to have approval rights over many corporate actions and the ability to require Preferred Investors to sell their shares in, or vote for a sale of, our company, see "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement." In addition, the Controlling Entities intend to report that they hold their shares of our stock as part of a group. The table below represents the number of shares owned by each stockholder included in the table (but without taking into account that certain stockholders may be part of a group) to provide investors information concerning the economic ownership of each stockholder.

For a description of the investor stockholder agreements and any other material relationships the selling stockholders have or have had with us, our predecessors or our affiliates or with the New Mountain Entities, see "Certain Relationships and Related Person Transactions".

			Percentage of Shares Beneficially Owned

	Shares Beneficially Owned Prior to the Offering		Percentage of Shares Beneficially Owned
	Shares Beneficially Owned Prior to the Offering		Before Offering			After Offering
Name and Address of Beneficial Owner	Number		Before Offering			After Offering
5% Stockholders
New Mountain Entities(1) 787 7th Avenue, 49th Floor New York, New York 10019		47,468,803		50.98	%		%
Linde(2) 575 Mountain Ave Murray Hill, New Jersey 07974		15,918,669		17.10	%		%
ARCH(3) 8725 W. Higgins Avenue, Suite 290 Chicago, IL 60631		9,431,682		10.13	%		%
Venrock Entities(4) 3340 Hillview Avenue Palo Alto, CA 94304		9,400,432		10.10	%		%
Directors and Named Executive Officers
Elizabeth A. Larkin(5)		332,750		*			%
Matthew M. Bennett(6)		140,000		*			%
Michael Kennedy(7)		48,500		*			%
Ralf Rosskamp(8)		171,600		*			%
Daniel Tassé(9)		330,000		*			%
Aldo E. Belloni, Ph.D.(10)		15,918,669		17.10	%		%
Michael T. Flaherman(11)		47,468,803		50.98	%		%
Robert T. Nelsen(12)		9,431,682		10.13	%		%
Howard Pien		0		*			%
Bryan E. Roberts, Ph.D.(13)		9,400,432		10.10	%		%
Alok Singh(14)		47,468,803		50.98	%		%
Randy H. Thurman(15)		47,483,803		50.99	%		%
Lota S. Zoth(16)		22,500		*			%
All executive officers and directors as a group (14 persons)(17)		83,059,145		88.48	%		%

The stockholders listed below have granted the underwriters an option to purchase up to an aggregate of additional shares. The following table sets forth certain information regarding the number of shares offered by such stockholders and the beneficial ownership of our capital stock by such stockholders assuming the underwriters exercise the option to purchase additional shares in full. Each of the persons listed below under "Other Selling Stockholders" is one of our employees.

We have agreed to pay all of the expenses of the stockholders selling shares in the event the underwriters exercise the option to purchase additional shares, other than underwriting discounts and commissions. In the event the underwriters' option to purchase additional shares is not exercised in full, the number of shares to be sold by the shareholders listed above will be reduced proportionally.

The following description of our capital stock and provisions of our certificate of incorporation and by-laws are summaries and are qualified by reference to the certificate of incorporation and the by-laws that will be in effect upon the closing of this offering. We have filed copies of these documents with the SEC as exhibits to our registration statement of which this prospectus forms a part. The description of the capital stock reflects changes to our capital structure that will occur upon the closing of this offering.

Upon the closing of this offering, our authorized capital stock will consist of shares of our common stock, par value $0.01 per share, and shares of our preferred stock, par value $0.01 per share, of which shares will be designated as series C-1 non-convertible preferred stock, shares will be designated as series C-2 non-convertible preferred stock, shares will be designated as series C-3 non-convertible preferred stock and shares will be designated as series C-4 non-convertible preferred stock.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, with the exception of certain amendments to the certificate of incorporation relating to outstanding preferred stock and the election of certain directors. Holders of our common stock do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders

of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of series C preferred stock, as described below, and the holders of shares of any series of preferred stock that we may designate and issue in the future.

Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock.

Under the terms of our certificate of incorporation, holders of our series C preferred stock are not entitled to vote on any matter submitted to a vote of the stockholders, except as set forth below. In connection with any right to vote as a single class, each holder of series C preferred stock is entitled to one vote for each share of the applicable series of series C preferred stock held.

Following the completion of this offering, the holders of our series C-1 non-convertible preferred stock, voting as a separate class, are entitled to elect (i) three directors, for so long as they beneficially own 15% or more of our outstanding common stock, (ii) two directors, for so long as they beneficially own less than 15% but more than 5% of our outstanding common stock and (iii) one director, for so long as they own less than 5% of our outstanding common stock but more than one share of common stock. All of the issued and outstanding shares of our Series C-1 non-convertible preferred stock are held by the New Mountain Entities. Upon the completion of this offering, we expect the holders of our series C-1 non-convertible preferred stock to beneficially own approximately % of our outstanding common stock.

Following the completion of this offering, holders of our series C-2, C-3 and C-4 non-convertible preferred stock, voting as a separate class, are each entitled to elect one director for so long as holders of such series owns 5% or more of our outstanding common stock. All of the issued and outstanding shares of our (i) series C-2 non-convertible preferred stock are held by ARCH, (ii) series C-3 non-convertible preferred stock are held by the Venrock Entities and (iii) series C-4 non-convertible preferred stock are held by Linde. Upon the completion of this offering, we expect the holders of our series C-2, C-3 and C-4 non-convertible preferred stock to beneficially own approximately %, % and % , respectively, of our outstanding common stock.

Individuals appointed to the board of directors by the holders of our series C preferred stock may only be removed without cause by the holders of the applicable series of series C preferred stock. Any

vacancies occurring in the office of any individual elected by the holders of series C preferred stock may only be filled by the applicable series of series C preferred stock.

We may not (i) amend, repeal or change the rights, preferences or privileges of the shares of the applicable series of series C preferred stock in any manner that would adversely affect the applicable series of series C preferred stock in a manner different from the effect on any other series of capital stock, or (ii) increase or decrease the total amount of authorized shares of the applicable series of series C preferred stock, without the consent of more than 50% of the issued and outstanding shares of the applicable series of series C preferred stock. We may not redeem any shares of series C perferred stock.

In the event of our liquidation or dissolution, the holders of series C preferred stock are entitled to receive, prior and in preference to any payments to holders of common stock, $1.00 for each share of series C preferred stock held by such holder. Holders of series C preferred stock have no preemptive, subscription, redemption or conversion rights and are not entitled to receive any dividends.

Following the completion of this offering, shares of our series C-1 non-convertible preferred stock representing the right to elect one director will be transferrable by the New Mountain Entities when transferred with at least 15,822,967 shares of our common stock issued upon conversion of the series B preferred stock originally purchased by the New Mountain Entities.

As of April 30, 2010, we had an outstanding warrant to purchase an aggregate of 60,000 shares of our series A preferred stock at an exercise price of $1.00 per share held by SVB Financial Group. Upon the closing of this offering, such warrant will remain outstanding for the purchase of 60,000 shares of our common stock. This warrant provides for adjustments in the event of specified mergers, reorganizations, reclassifications, stock dividends, stock splits or other changes in our corporate structure. This warrant also provides for cashless exercise and expires on January 31, 2016.

As of April 30, 2010, options to purchase 9,902,298 shares of our common stock at a weighted average exercise price of $5.70 per share were outstanding.

If the New Mountain Entities propose to sell at least 80% of their shares of our common stock issued upon conversion of their series B preferred stock to a third party (which would represent, together with any other shares of capital stock proposed to be transferred, more than 50% of our outstanding capital stock) or we propose to sell or otherwise transfer for value all or substantially all of our stock, assets or business to a third party, then the New Mountain Entities at their option may require (i) in the case of a sale of capital stock by the New Mountain Entities, that each of our current stockholders sell a proportionate amount of such stockholder's shares of capital stock and waive any appraisal right that it may have in connection with the transaction and (ii) in any case, if stockholder approval of the transaction is required and our stockholders are entitled to vote thereon, that that each of our current stockholders vote all of such stockholder's shares of our capital stock in favor of such transaction. Following the completion of this offering, these rights will terminate when the New Mountain Entities and their assignees beneficially own less than 20% of our outstanding capital stock. See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement" and "—Common Stockholders Agreement" included elsewhere in this prospectus.

We have entered into an investor stockholders agreement with holders of our preferred stock, including our 5% stockholders and their affiliates and entities affiliated with our directors. Upon the closing of this offering, holders of a total of 88,342,061 shares of our common stock as of April 30, 2010 that are issuable upon conversion of our series A preferred stock and series B preferred stock will have the right to require us to register these shares under the Securities Act under specified circumstances. We refer to such shares of common stock as registrable shares. After registration pursuant to these rights, these registrable shares will become freely tradable without restriction under the Securities Act.

Demand Registration Rights. At any time after the closing of this offering, subject to specified limitations, the holders of a majority of our currently outstanding common stock, which were issued upon conversion of our series B preferred stock upon the closing of this offering, may demand that we register all or a portion of their registrable shares under the Securities Act up to five times and the holders of a majority of our currently outstanding common stock, which were issued upon conversion of our series A preferred stock upon the closing of this offering, may demand that we register all or a portion of their registrable shares under the Securities Act up to two times.

Incidental Registration Rights. If, at any time after the closing of this offering, we propose to register shares of our common stock under the Securities Act, the holders of registrable shares will be entitled to notice of the registration and, subject to specified exceptions, have the right to require us to register all or a portion of the registrable shares then held by them. In the event that any registration in which the holders of registrable shares participate pursuant to our investor stockholders agreement is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited due to market conditions.

Expenses. Pursuant to the investor stockholders agreement, we are required to pay all registration expenses, including the reasonable fees and expenses of one counsel to represent the selling stockholders, other than any underwriting discounts and commissions, related to any demand or incidental registration. We are also required to indemnify each participating holder with respect to each registration of registrable shares that is effected.

Under the common stockholders agreement, each stockholder party to the agreement may participate proportionately in any public offering of our common stock pursuant to the registration rights of the Preferred Investors but only to the extent the managing underwriter advises us in writing that the sale of such additional shares would not adversely affect such public offering or require the Preferred Investors to reduce their participation in such offering and at a percentage no greater than the percentage of shares being sold by the Preferred Investors.

We have applied to have our common stock listed on The NASDAQ Global Market under the symbol "IKAR."

We, and our subsidiary Ikaria Acquisition Inc., entered into a first lien credit facility, or the Credit Facility, on March 28, 2007, pursuant to the terms of the Credit Agreement, with Credit Suisse Securities (USA) LLC as administrative and collateral agent for the financial institutions party to the Credit Agreement as lenders from time to time, or the Credit Agreement. This summary is not a complete description of all of the terms governing the Credit Facility. The Credit Agreement will be filed as an exhibit to the registration statement of which this prospectus forms a part, and it should be consulted for the precise terms governing the credit extended to us under the Credit Facility.

The Credit Facility consists of (i) the Term Loan in an aggregate principal amount of $235.0 million (subject to increase upon the satisfaction of certain conditions by an additional principal amount of up to $100.0 million), which matures on March 28, 2013 and (ii) a senior secured revolving credit facility in an aggregate principal amount of up to $40.0 million, or the Revolving Facility, which matures on March 28, 2012, including a swingline facility in an aggregate principal amount of up to $10.0 million and a letter of credit facility of up to $10.0 million. The Term Loan is payable in quarterly installments in the amount of $587,500, as may be adjusted in accordance with the Credit Agreement, with the remaining Term Loan payable in full on March 28, 2013. As of April 30, 2010, $175.3 million was outstanding under the Credit Facility.

The obligations under the Credit Facility are, subject to the terms and conditions of the Credit Agreement and a guarantee and collateral agreement between us and Credit Suisse dated as of March 28, 2007, or the Guarantee and Collateral Agreement, guaranteed by us and our current and future subsidiaries (subject to certain exceptions as set forth in the Credit Agreement and the Guarantee and Collateral Agreement). Our and our subsidiaries' obligations under the Credit Facility and the guarantees are secured on a first-priority basis by security interests (subject to certain permitted liens) in substantially all the assets owned by us and each of our subsidiaries, as applicable, subject to certain exceptions as set forth in the Credit Agreement and the Guarantee and Collateral Agreement.

Borrowings under the Credit Facility bear interest at a rate equal to (i) in the case of the Term Loan, at our option (a) the greater of (x) the prime rate, or (y) the federal funds rate plus 0.50% per annum, (such greater rate, the Base Rate), and in each case plus a percentage that is either 1.25% or 1.50% per annum depending on our leverage ratio, or (b) LIBOR plus a percentage that is either 2.25% or 2.50% per annum depending on our leverage ratio; (ii) in the case of the Revolving Facility, at our option (a) the Base Rate plus a percentage that is either 1.00%, 1.25% or 1.50% per annum depending on our leverage ratio, or (b) LIBOR plus a percentage that is either 2.00%, 2.25% or 2.50% per annum depending on our leverage ratio; and (iii) in the case of swingline loans, the Base Rate plus a percentage that is either 1.00%, 1.25% or 1.50% per annum depending on our leverage ratio. If we fail to pay when due any amount due under the Credit Facility, we will be obligated to pay default interest. In addition to paying interest under the Credit Facility, we are also required to pay certain fees in connection with the Credit Facility, including a commitment fee equal to 0.50% per annum on the daily unused amount of revolving credit commitments, certain letter of credit fees and certain administrative fees.

We are required to use all or a portion of the net cash proceeds we receive from asset sales, the incurrence of indebtedness for borrowed money other than debt obligations permitted under the Credit Agreement and excess cash flow, to prepay term loan borrowings under the Credit Facility (or, in the case of asset sales, to reinvest such proceeds in productive assets), subject to the terms and conditions of the Credit Facility. We have the right, at our option, to prepay the obligations under the Credit Facility at any time upon specified notice.

The Credit Facility requires us to maintain a maximum leverage ratio and limits our maximum annual capital expenditures. The Credit Agreement contains a number of affirmative and restrictive

covenants including reporting requirements, limitations on restricted payments and restrictive agreements, limitations on liens and sale-leaseback transactions, limitations on loans and investments, limitations on debt, the issuance of disqualified capital stock, guarantees and hedging arrangements, limitations on mergers, acquisitions and asset sales, limitations on transactions with our affiliates, limitations on changes in business, limitations on amendments and waivers of certain agreements, and limitations on waivers and payments of debt that is subordinate to our obligations under the Credit Facility.

The Credit Facility contains events of default which could trigger the acceleration of the obligations, including default arising from the inaccuracy of representations and warranties, payment default, breach of the provisions of the Credit Agreement and related documents, cross-default provision with respect to other material indebtedness, bankruptcy and insolvency, judgment default, default based on ERISA events, default based on the unenforceability, invalidity or revocation of a guarantee, any applicable subordination agreement or any security interests, and the occurrence of a change in control (as defined in the Credit Agreement).

Prior to this offering, there has been no market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options and warrants, or the anticipation of these sales, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sales of equity securities.

Upon the closing of this offering, we will have outstanding shares of our common stock, after giving effect to the issuance of shares of our common stock in this offering and the automatic conversion of all outstanding shares of our series A and B preferred stock and non-voting common stock into an aggregate of 89,373,574 shares of our common stock, and assuming no exercise of options outstanding after , and no exercise of the warrant outstanding as of April 30, 2010 held by SVB Financial Group.

Of the shares to be outstanding immediately after the closing of this offering, shares to be sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining shares of our common stock are "restricted securities" under Rule 144. Substantially all of these restricted securities will be subject to the 180-day lock-up period described below.

After the 180-day lock-up period, these restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act.

In general, a person who has beneficially owned shares of our common stock for at least six months would be entitled to sell their shares of common stock in the public market provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are and have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and have filed all required reports during that time period. In addition, a person who has beneficially owned shares of our common stock for at least 12 months would be entitled to sell their shares of common stock in the public market provided that such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale. Persons who have beneficially owned shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of either of the following:

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and have filed all required reports during that time period. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

Approximately shares of our common stock that are not subject to the lock-up agreements described below will be eligible for sale immediately upon the closing of this offering.

Upon expiration of the 180-day lock-up period described below, approximately shares of our common stock will be eligible for sale under Rule 144, including shares eligible for resale immediately upon the closing of this offering as described above. We cannot estimate the number of shares of our common stock that our existing stockholders will elect to sell under Rule 144.

In general, under Rule 701 of the Securities Act, any of our employees, consultants or advisors, other than our affiliates, who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell these shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the various restrictions, including the availability of public information about us, holding period and volume limitations, contained in Rule 144. Subject to the 180-day lock-up period described below, approximately shares of our common stock will be eligible for sale in accordance with Rule 701.

We and each of our directors and executive officers and holders of approximately % of our outstanding common stock, including the selling stockholders, who collectively own shares of our common stock, based on shares outstanding as of April 30, 2010, have agreed that, without the prior written consent of representatives of the underwriters on behalf of the underwriters, we and they will not, subject to limited exceptions, during the period ending 180 days after the date of this prospectus, subject to extension in specified circumstances:

The lock-up restrictions, specified exceptions and the circumstances under which the 180-day lock-up period may be extended are described in more detail under "Underwriting."

We are party to a number of agreements that provide for registration rights for certain of our stockholders (including both demand and incidental registration rights). See "Certain Relationships and Related Person Transactions—Investor Stockholders Agreement" and "—Common Stockholders Agreement" included elsewhere in this prospectus.

Following this offering, holders of an aggregate of 93,166,655 shares of our outstanding common stock and common stock issuable upon conversion of our outstanding warrant and series A preferred stock and series B preferred stock, will have the right to require us to register these shares under the Securities Act under specified circumstances. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. See "Description of Capital Stock—Registration Rights" for additional information regarding these registration rights.

As of April 30, 2010, we had outstanding options to purchase 9,902,298 shares of our common stock, of which options to purchase 5,862,672 shares were vested. Following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all of the shares of our common stock subject to outstanding options and options and other awards issuable pursuant to our stock plans. See "Executive Compensation—Stock Option and Other Compensation Plans" for additional information regarding these plans. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open market, subject to Rule 144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares.

Upon the closing of this offering, and after giving effect to the conversion of our series A preferred stock into common stock, the warrant to purchase an aggregate of 60,000 shares of our common stock at an exercise price of $1.00 per share by SVB Financial Group will remain outstanding. Any shares purchased pursuant to the cashless exercise features of this warrant will be freely tradable under Rule 144, subject to the 180-day lock-up period described above.

The following is a general discussion of certain material U.S. federal income and estate tax considerations applicable to non-U.S. holders with respect to their purchase, ownership and disposition of shares of our common stock. This discussion is for general information only and is not tax advice. Accordingly, all prospective non-U.S. holders of our common stock should consult their own tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock. In general, a non-U.S. holder means a beneficial owner of our common stock who is not, for U.S. federal income tax purposes:

This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing and proposed U.S. Treasury Regulations promulgated thereunder, current administrative rulings and judicial decisions, in effect as of the date of this prospectus, all of which are subject to change or to differing interpretation, possibly with retroactive effect. Any change could alter the tax consequences to non-U.S. holders described in this prospectus. We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset, generally property held for investment.

This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder's individual circumstances nor does it address any aspects of U.S. state, local or non-U.S. taxes. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder and does not address the special tax rules applicable to particular non-U.S. holders, such as:

In addition, this discussion does not address the tax treatment of partnerships or persons who hold their common stock through partnerships or other pass-through entities for U.S. federal income tax

purposes. A partner in a partnership or other pass-through entity that will hold our common stock should consult his, her or its own tax advisor regarding the tax consequences of the acquisition, holding and disposing of our common stock through a partnership or other pass-through entity, as applicable.

There can be no assurance that the Internal Revenue Service, which we refer to as the IRS, will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, an opinion of counsel with respect to the U.S. federal income or estate tax consequences to a non-U.S. holder of the purchase, ownership or disposition of our common stock.

Distributions on our common stock generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the non-U.S. holder's investment, up to such holder's tax basis in the common stock. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in "Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock."

Dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder's country of residence. If we determine, at a time reasonably close to the date of payment of a distribution on our common stock, that the distribution will not constitute a dividend because we do not anticipate having current or accumulated earnings and profits, we intend not to withhold any U.S. federal income tax on the distribution as permitted by U.S. Treasury Regulations. If we or another withholding agent withholds tax on such a distribution, a non-U.S. holder may be entitled to a refund of the tax withheld which the non-U.S. holder may claim by timely filing a U.S. tax return with the IRS.

Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States and, if an applicable income tax treaty so requires, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and disclosure requirements. However, such U.S. effectively connected income, net of specified deductions and credits, is taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code). Any U.S. effectively connected income received by a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder's country of residence.

A non-U.S. holder of our common stock who claims the benefit of an applicable income tax treaty between the United States and such holder's country of residence generally will be required to provide a properly executed IRS Form W-8BEN (or successor form) and satisfy applicable certification and other requirements. Non-U.S. holders are urged to consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

A non-U.S. holder that is eligible for a reduced rate of U.S. withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing a U.S. tax return with the IRS.

In general, a non-U.S. holder will not be subject to any U.S. federal income tax or withholding tax on any gain realized upon such holder's sale, exchange or other taxable disposition of shares of our common stock unless:

Shares of our common stock that are owned or treated as owned at the time of death by an individual who is not a citizen or resident of the United States, as specifically defined for U.S. federal estate tax purposes, are considered U.S. situs assets and will be included in the individual's gross estate for U.S. federal estate tax purposes. Such shares, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax or other treaty provides otherwise.

Pursuant to recently enacted tax legislation and subject to future guidance, dividends and any gross proceeds realized upon the sale or other disposition of common stock paid to a non-U.S. holder after December 31, 2012 will be subject to a 30% withholding tax unless the non-U.S. holder complies with new requirements. Among other requirements, we would be required to obtain certain information from each non-U.S. holder to determine whether such non-U.S. holder is in compliance with (or meets

an exception from) the requirements mandated by the legislation and any future guidance issued with respect thereto. The scope of the requirements remains unclear and potentially subject to material changes resulting from any future guidance. Non-U.S. holders are urged to consult their own advisors about the new requirements and the effect that such new requirements may have on the non-U.S. holders.

Subject to the discussion in the preceding paragraph, we must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions on our common stock paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. holders may have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup withholding at the applicable rate, currently 28% and scheduled to increase to 31% for taxable years 2011 and thereafter, with respect to dividends on our common stock. Dividends paid to non-U.S. holders subject to the U.S. withholding tax, as described above in "Distributions on Our Common Stock," generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.

Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder's U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.

The company, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and Morgan Stanley are the representatives of the underwriters.

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional shares from the selling stockholders. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by the company and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part.

The company and its officers, directors, and holders of approximately % of the company's common stock, including the selling stockholders, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing

through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to any existing employee benefit plans. See "Shares Available for Future Sale" for a discussion of certain transfer restrictions.

The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period the company issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, the company announces that it will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

Prior to the offering, there has been no public market for the shares. The initial public offering price has been negotiated among the company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be the company's historical performance, estimates of the business potential and earnings prospects of the company, an assessment of the company's management and the consideration of the above factors in relation to market valuation of companies in related businesses.

An application has been made to list the common stock on The NASDAQ Global Market under the symbol "IKAR".

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Shorts sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares from the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. "Naked" short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the company's stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on The NASDAQ Global Market, in the over-the-counter market or otherwise.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed

that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

For the purposes of this provision, the expression an "offer of shares to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

The company and the selling stockholders estimate that their share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $ .

The company and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the issuer, for which they received or will receive customary fees and expenses. An affiliate of Goldman, Sachs & Co. served as joint bookrunner, joint lead arranger and syndication agent under our credit agreement. Credit Suisse Securities (USA) LLC served as joint bookrunner and joint lead arranger and an affiliate of Credit Suisse Securities (USA) LLC serves as administrative agent, collateral agent, swingline lender and issuing bank under our credit agreement.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the issuer.

Lazard Frères & Co. LLC referred this offering to Lazard Capital Markets LLC and will receive a referral fee from Lazard Capital Markets LLC in connection therewith.

The validity of the shares of common stock offered hereby is being passed upon for us by Wilmer Cutler Pickering Hale and Dorr LLP, Boston, Massachusetts. Ropes & Gray LLP, Boston, Massachusetts, is acting as counsel for the underwriters in connection with this offering.

The consolidated financial statements of Ikaria, Inc. and subsidiaries (Successor) as of December 31, 2009 and 2008, and for each of the years in the three-year period ended December 31, 2009, and the financial statements of INO Therapeutics, LLC (Predecessor) for the period January 1, 2007 through March 27, 2007, and related financial statement schedule, have been included herein and in the registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock we are offering to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits, schedules and amendments to the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and to the exhibits and schedules to the registration statement. Statements contained in this prospectus about the contents of any contract, agreement or other document are not necessarily complete, and, in each instance, we refer you to the copy of the contract, agreement or other document filed as an exhibit to the registration statement. Each of theses statements is qualified in all respects by this reference.

You may read and copy the registration statement of which this prospectus is a part at the SEC's public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, DC 20549. You can request copies of the registration statement by writing to the Securities and Exchange Commission and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC's public reference room. In addition, the SEC maintains an Internet website, which is located at http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC's Internet website. Upon completion of this offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934, and we will file reports, proxy statements and other information with the SEC.

We have audited the accompanying consolidated balance sheets of Ikaria , Inc. and subsidiaries (Successor) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders' deficit, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009 (Successor periods) and the statements of operations, changes in members' equity, comprehensive income (loss), and cash flows of INO Therapeutics LLC (Predecessor) for the period January 1, 2007 through March 27, 2007 (Predecessor period). These Successor consolidated financial statements and Predecessor financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these Successor consolidated financial statements and Predecessor financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Successor consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ikaria, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the Successor periods in conformity with U.S. generally accepted accounting principles. Further, in our opinion, the Predecessor financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of INO Therapeutics LLC for the Predecessor period in conformity with U.S. generally accepted accounting principles.

IKARIA, INC.

Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

				December 31, 2009			Unaudited Pro Forma December 31, 2009(1)			December 31, 2008

Assets
Current assets:
	Cash and cash equivalents			$	95,226		$	95,226		$	51,651
	Accounts receivable, net of allowances of $22,843 and $25,593, respectively				54,842			54,842			44,416
	Due from related parties				783			783			282
	Inventories				8,007			8,007			7,684
	Prepaid expenses and other current assets				5,668			5,668			11,569
	Deferred tax assets				8,769			8,769			8,295

			Total current assets		173,295			173,295			123,897
	Property, plant and equipment, net				43,933			43,933			41,183
	Intangible assets, net				133,570			133,570			164,290
	Deferred tax assets				114,474			114,474			108,384
	Other assets				2,933			2,933			3,815

			Total assets	$	468,205		$	468,205		$	441,569

Liabilities, Redeemable Preferred Stock and Stockholders' (Deficit) Equity
Current liabilities:
	Current portion of long-term debt			$	1,807		$	1,807			15,843
	Accounts payable				9,850			9,850			9,865
	Income taxes payable				4,268			4,268			—
	Dividend payable				—			130,000			—
	Other current liabilities				42,028			42,028			25,786

			Total current liabilities		57,953			187,953			51,494
	Long-term debt				173,914			173,914			175,720
	Other liabilities				3,615			3,161			6,807

			Total liabilities		235,482			365,028			234,021
Commitments and contingencies (Note 21)
Redeemable preferred stock, $0.01 par value per share:
	Series A convertible preferred stock, 11,421 shares authorized, 11,361 shares issued and outstanding at December 31, 2009 and 2008, liquidation value of $11,361; and zero shares outstanding on a pro forma basis				32,152			—			32,152
	Series B convertible preferred stock, 76,981 shares authorized, 76,981 shares issued and outstanding at December 31, 2009 and 2008, liquidation value of $356,775; and zero shares outstanding on a pro forma basis				356,777			—			356,777
	Series C preferred stock, 1 shares authorized, issued and outstanding at December 31, 2009 and 2008, liquidation value of $1 and 1 shares outstanding on a pro forma basis				1			1			1

			Total redeemable preferred stock		388,930			1			388,930
Stockholders' (deficit) equity:
	Common stock, $0.01 par value per share:
			Voting common stock, 103,929 and 103,194 shares authorized at December 31, 2009 and 2008, respectively, 3,733 shares issued and outstanding at December 31, 2009 and 2008; 93,102 shares outstanding on a pro forma basis		37			931			37
			Non-voting common stock, 11,860 and 11,125 shares authorized, 1,027 and 960 shares issued and outstanding at December 31, 2009 and 2008, respectively; and zero shares outstanding on a pro forma basis		10			—			10
	Common stock warrant				—			454			—
	Additional paid-in capital				32,795			290,840			21,225
	Accumulated deficit				(187,150	)		(187,150	)		(200,129	)
	Accumulated other comprehensive loss				(1,899	)		(1,899	)		(2,525	)

		Total stockholders' (deficit) equity			(156,207	)		103,176			(181,382	)

			Total liabilities, redeemable preferred stock and stockholders' (deficit) equity	$	468,205		$	468,205		$	441,569

IKARIA, INC.

Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)



			Successor									Predecessor
			Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007(1)			January 1 through March 27, 2007
Revenues:
	Net sales		$	274,342		$	236,731		$	158,479		$	48,270
	Other revenue			250			63			2,450			—

		Total revenues		274,592			236,794			160,929			48,270

Operating costs and expenses:
	Cost of sales			52,380			51,572			102,753			10,566
	Selling, general and administrative			83,879			61,844			33,507			8,498
	Research and development			75,421			68,538			35,202			8,763
	Acquisition-related in-process research and development			—			—			271,637			—
	Amortization of acquired intangibles			30,720			30,452			22,187			—
	Other operating (income) expense, net			(410	)		356			(66	)		(57	)

		Total operating expenses		241,990			212,762			465,220			27,770

Income (loss) from operations				32,602			24,032			(304,291	)		20,500
Interest (expense) income:
	Interest income			385			229			187			63
	Interest expense			(9,248	)		(13,378	)		(14,725	)		—

		Interest (expense) income, net		(8,863	)		(13,149	)		(14,538	)		63

Income (loss) before income taxes				23,739			10,883			(318,829	)		20,563
Income tax (expense) benefit				(10,760	)		(1,288	)		109,105			(8,517	)

		Net income (loss)	$	12,979		$	9,595		$	(209,724	)	$	12,046

Net income (loss) attributable to common stockholders			$	660		$	479		$	(209,724	)
Net income attributable to series A and B preferred stockholders				12,319			9,116			—

		Net income (loss)	$	12,979		$	9,595		$	(209,724	)

Net income (loss) per common share:
	Basic net income (loss) per share		$	0.14		$	0.10		$	(65.28	)
	Weighted average shares—Basic			4,735			4,643			3,213
	Diluted net income (loss) per share		$	0.14		$	0.10		$	(65.28	)
	Weighted average shares—Diluted			95,871			94,813			3,213
Unaudited pro forma net income per common share: (Note 17)
	Basic net income per share		$
	Weighted average shares—Basic
	Diluted net income per share		$
	Weighted average shares—Diluted

IKARIA, INC.

Consolidated Statements of Changes in Stockholders' Deficit
for the Years Ended December 31, 2009, 2008 and 2007 (Successor) and

Statement of Changes in Members' Equity
for the Period January 1, 2007 through March 27, 2007 (Predecessor)

(Amounts in thousands)

									Non-Voting Common Stock

					Voting Common Stock
					Voting Common Stock													Accumulated Other Comprehensive Income (Loss)
		Members' Equity			Shares		Par Value		Shares		Par Value		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Predecessor
Balance at January 1, 2007		$	153,510
	Net income		12,046
	Dividend		(101,783	)

Balance at March 27, 2007		$	63,773

Successor
Balance at January 1, 2007						—	$	—		—	$	—	$	—	$	—		$	—		$	—
	Net loss					—		—		—		—		—		(209,724	)		—			(209,724	)
	Common stock and options issued for the acquisition of Ikaria Research, Inc.					3,733		37		—		—		12,354		—			—			12,391
	Exercise of stock options					—		—		240		2		36		—			—			38
	Common stock issued under the equity participation plan					—		—		637		7		2,940		—			—			2,947
	Stock-based compensation					—		—		—		—		2,012		—			—			2,012

Balance at December 31, 2007						3,733	$	37		877	$	9	$	17,342	$	(209,724	)		—		$	(192,336	)
	Net income					—		—		—		—		—		9,595						9,595
	Exercise of stock options					—		—		71		1		162		—			—			163
	Stock-based compensation					—		—		—		—		3,621		—			—			3,621
	Common stock issued under the equity participation plan					—		—		12		—		100		—			—			100
	Unrealized loss on interest rate swap, net of $1,683 tax benefit					—		—		—		—		—		—			(2,525	)		(2,525	)

Balance at December 31, 2008						3,733	$	37		960	$	10	$	21,225	$	(200,129	)	$	(2,525	)	$	(181,382	)
	Net income					—		—		—		—		—		12,979			—			12,979
	Exercise of stock options					—		—		44		—		5		—			—			5
	Stock-based compensation					—		—		—		—		11,283		—			—			11,283
	Tax benefit from stock option exercises					—		—		—		—		82		—			—			82
	Common stock issued under the equity participation plan					—		—		23		—		200		—			—			200
	Foreign currency translation gain, net of $81 tax expense					—		—		—		—		—		—			143			143
	Unrealized gain on interest rate swap, net of $340 tax expense					—		—		—		—		—		—			483			483

Balance at December 31, 2009						3,733	$	37		1,027	$	10	$	32,795	$	(187,150	)	$	(1,899	)	$	(156,207	)

The accompanying notes are an integral part of these consolidated financial statements.

IKARIA, INC.

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands)

The accompanying notes are an integral part of these consolidated financial statements.



			Successor									Predecessor
			Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007(1)			January 1 through March 27, 2007
Cash flows from operating activities:
	Net income (loss)		$	12,979		$	9,595		$	(209,724	)	$	12,046
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Amortization of intangible assets			30,720			30,452			22,187			—
	Depreciation			10,316			10,526			7,082			1,966
	Amortization of deferred financing costs			921			784			907			—
	Acquisition-related in-process research and development			—			—			271,637			—
	Stock-based compensation and warrants, net			11,209			3,852			2,169			—
	Loss on interest rate collar			—			304			742			—
	Gain on disposal of property, plant and equipment, net			(392	)		(400	)		—			(163	)
	Deferred taxes			(6,986	)		(219	)		(109,650	)		7,158
	Other items, net			(451	)		(63	)		—			—
	Changes in operating assets and liabilities, net of acquisitions:
		Accounts receivable, net		(10,336	)		2,316			(4,974	)		(3,357	)
		Due from related parties		(501	)		2,684			(2,498	)		6,182
		Inventories		(282	)		(1,617	)		68,056			28
		Prepaid expenses and other current assets		5,866			4,946			(12,963	)		(1,370	)
		Accounts payable and other current liabilities		15,076			5,245			9,958			(1,703	)
		Income taxes payable		4,268			—			—			—
		Other liabilities		(973	)		(883	)		588			(1,211	)

Net cash provided by operating activities				71,434			67,522			43,517			19,576

Cash flows from investing activities:
	Acquisition of INO Therapeutics LLC			—			—			(505,082	)		—
	Acquisition of Ikaria Research, Inc.			—			—			(5	)		—
	Additions to property, plant and equipment			(13,715	)		(13,858	)		(5,545	)		(1,286	)
	Purchases of intangible assets			—			(5,126	)		—			—
	Proceeds from the sale of property, plant and equipment			1,115			930			—			198

Net cash used in investing activities				(12,600	)		(18,054	)		(510,632	)		(1,088	)

Cash flows from financing activities:
	Proceeds from issuance of series B preferred stock			—			—			279,971			—
	Proceeds from exercise of stock options and issuance of common stock			205			263			2,985			—
	Tax benefit on the exercise of stock options			82			—			—			—
	Borrowings under bank debt			—			—			235,000			—
	Repayment of debt			(15,843	)		(1,950	)		(41,487	)		—
	Payment of debt issuance costs			—			—			(5,484	)		—
	Increase in loan to related party			—			—			—			(17,209	)

Net cash (used in) provided by financing activities				(15,556	)		(1,687	)		470,985			(17,209	)

Effect of exchange rates on cash				297			—			—			—

Net increase in cash and cash equivalents				43,575			47,781			3,870			1,279
Cash and cash equivalents, at beginning of period				51,651			3,870			—			236

Cash and cash equivalents, at end of period			$	95,226		$	51,651		$	3,870		$	1,515

Supplemental disclosure of cash flow information:
	Interest paid		$	10,164		$	10,455		$	13,151		$	—
	Income taxes paid (refunded), net		$	5,226		$	(490	)	$	11,331		$	3
Supplemental disclosure of non-cash investing and financing activities:
	Stock issued for the acquisition of INO Therapeutics LLC		$	—		$	—		$	73,777		$	—
	Stock, options and a warrant issued for the acquisition of Ikaria Research, Inc.		$	—		$	—		$	47,714		$	—
	Conversion of loan to related party into dividend		$	—		$	—		$	—		$	101,783

Ikaria, Inc., formerly known as Ikaria Holdings, Inc., referred to herein as Ikaria, includes the following wholly-owned subsidiaries: INO Therapeutics LLC, or INO, a specialty pharmaceutical company, Ikaria Research, Inc., formerly known as Ikaria, Inc., a development-stage biotechnology company, and Ikaria International, Inc., which has subsidiaries in Australia, Canada and Japan. The term Company refers to INO prior to March 28, 2007, also referred to as the Predecessor, and to Ikaria and its consolidated subsidiaries, also referred to as the Successor.

The accompanying consolidated balance sheets, statements of operations, changes in stockholders' deficit, and members' equity, comprehensive income (loss) and cash flows are presented for both Successor and Predecessor periods. Financial information for the Successor periods relate to Ikaria and financial information for the Predecessor periods relate to INO. The consolidated financial statements of Ikaria and the financial statements of INO are both presented and referred to herein as consolidated financial statements for ease of reference.

Ikaria was initially incorporated on August 18, 2006 and established for the purpose of acquiring INO and Ikaria Research, Inc. From August 18, 2006 through March 27, 2007, Ikaria did not conduct any commercial operations or issue any shares of stock. On March 28, 2007, Ikaria closed a private offering of its series B convertible preferred stock, which resulted in proceeds of approximately $280.0 million, and secured $235.0 million in financing from a term loan. With the proceeds from the private placement and term loan and the issuance of stock, options and a warrant, the Company acquired the sole membership interest of INO and all of the outstanding equity of Ikaria Research, Inc. on March 28, 2007, referred to herein as the Transaction.

The Company, headquartered in New Jersey, provides products for and conducts research in the critical care market. The Company's current product offering includes the drug INOMAX (nitric oxide) for inhalation approved for the treatment of hypoxic respiratory failure, or HRF, associated with pulmonary hypertension in term and near-term infants, by the U.S. Food and Drug Administration, or FDA, and INOcal calibration gases, use of a proprietary FDA-cleared delivery system, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service. INOMAX is manufactured and packaged at the Company's manufacturing facility in Louisiana. The Company distributes INOtherapy to its customers in the United States through its seven regional service and distribution centers in the United States and in Canada, Australia and Mexico through third-party logistics services providers.

Although the consolidated financial statements of Ikaria reflect the operations of the Company for the year ended December 31, 2007, it was not commercially active prior to the Transaction.

The Company is subject to risks common to companies in similar industries and stages of development, including, but not limited to, competition from larger companies, reliance on a significant portion of revenue from one product, new technological innovations, the ability to acquire or license new products, reliance on one manufacturing site, dependence on key personnel, reliance on third-party service providers and vendors, protection of proprietary technology, and compliance with government regulations.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The accounts of all wholly-owned subsidiaries are included in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and the disclosure of contingent assets and liabilities. Estimates are used for, among other things, the valuation of assets acquired, valuation of common and preferred stock and stock-based compensation, unbilled revenue and customer credits, and the valuation of deferred taxes. Estimates are also used to determine the remaining economic lives and recoverability of fixed assets and intangible assets. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

The consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform with the current year presentation.

The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents.

Accounts receivable are primarily due from hospitals. Accounts receivable include allowances for doubtful accounts and credits to customers for patients that exceed certain durations of INOtherapy in a 30-day period. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company evaluates the collectibility of its receivables based on historical experience and the length of time the receivable is past due. Account balances are charged against the allowance after reasonable means of collection have been exhausted and the potential for recovery is considered remote. The allowance for per patient credits is estimated based on historical experience.

Inventories primarily consist of finished goods inventories. Finished goods inventories are stated at the lower of cost or market using the first-in, first-out method. The Company periodically reviews inventory quantities on hand in order to identify excess and obsolete inventory and writes down inventories for the difference between the carrying value of the inventory and its estimated market value.

Property, plant and equipment are recorded at acquisition cost, which for internally developed assets include labor, materials and overhead. Additions and improvements that increase the value or extend the life of an asset are capitalized. Repairs and maintenance costs are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives described below:

Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is shorter.

Long-lived assets, such as property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are no longer depreciated and would be separately presented in the balance sheet at the lower of the carrying amount or fair value less costs to sell.

Intangible assets with indefinite lives (trademarks and trade names) are not amortized; rather they are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. In order to test intangible assets with indefinite lives for impairment, the fair value of the asset is compared to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The Company estimates the fair value of its trademarks and trade names based on the relief from royalty method, which takes into consideration estimates of future cash flows. As of December 31, 2009, the Company completed its required impairment test and determined that the carrying value of trademarks and trade names was not impaired.

Intangible assets that have finite useful lives are amortized over their estimated useful lives. The Company periodically evaluates the reasonableness of the useful life of these intangible assets. In addition, intangibles with a finite useful life are reviewed for impairment when circumstances indicate that the carrying value of those assets may not be recoverable.

The Company recognizes the fair value of stock-based compensation as expense over the requisite service period of the individual grantees, which generally equals the vesting period. See Note 14, Stock Plans, and Note 15, Long-Term Incentive Awards, for a discussion of stock-based compensation expense.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. The liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within 12 months of the reporting date.

Through March 8, 2007, INO was considered a multiple-member limited liability company because its member, Linde Gas LLC, had multiple members. Therefore, INO was not subject to federal income taxes and did not recognize deferred tax assets or liabilities. The taxable income of INO flowed through to its ultimate members as defined in the Linde Gas LLC partnership agreement. The Company was and is subject to state taxes depending upon the states in which it conducts business.

On January 1, 2009, the Company prospectively adopted Accounting Standards Codification, or ASC, guidance related to disclosures about derivative instruments and hedging activities. This guidance expands derivative disclosures by requiring an entity to disclose an understanding of: (i) how and why an entity uses derivatives, (ii) how derivatives and related hedged items are accounted for and (iii) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. The adoption of this standard had no impact on the Company's consolidated financial statements, other than additional disclosure.

The Company carries derivative instruments on the balance sheet at their fair value. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a fair-value hedge along with changes of the fair-value of the hedged asset or liability that are attributable to the hedged risk are recorded in current-period results. Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash-flow hedge are recorded in accumulated other comprehensive income, or AOCI, and reclassified into earnings in the same period the hedged transaction affects earnings. Any hedge ineffectiveness is included in current-period results. In certain circumstances, the Company may enter into a derivative contract that does not qualify as a hedge or

may choose not to designate it as a fair-value or a cash-flow hedge; in such cases, changes in fair value are recorded in current-period results.

INOtherapy consists of multiple elements, but is accounted for as a single unit of accounting, since the elements are not sold separately on a stand-alone basis. The Company recognizes revenue based on hours of INOMAX used by a patient, in accordance with customer contracts. Each product cylinder is equipped with an INOmeter that measures the number of hours and cumulative duration of INOMAX usage on each cylinder. The Company estimates revenues for INOtherapy that has been used but not yet billed based on historical experience. Included in accounts receivable at December 31, 2009 and 2008 were unbilled revenues of $33.4 million and $25.6 million, respectively. Credits are issued on a per patient basis, as applied for by the hospital, for patients who exceed certain durations in a 30-day period. These credits are recorded as a reduction of revenue. An allowance for estimated credits that relate to INOtherapy delivered is recorded based on assumptions using historical data. At December 31, 2009 and 2008, the allowances for credits were $22.6 million and $25.2 million, respectively.

Taxes collected from customers and remitted to governmental authorities are presented on a net basis and, thus, are excluded from revenues.

From time to time, the Company enters into contracts for which it receives reimbursement for certain research and development activity. The Company recognizes research and development revenue when the reimbursable costs are incurred and collection is reasonably assured.

Revenue from milestone payments for which the Company has no continuing performance obligations is recognized upon achievement of the related milestone. When the Company has continuing performance obligations, the milestone payments are deferred and recognized as revenue over the term of the arrangement as the Company completes its performance obligations.

In 2009, the Company established subsidiaries in Canada, Australia and Japan. The local currencies of these subsidiaries have been determined as the functional currencies. Results of operations are translated from the functional currency into U.S. dollars using the average currency rate for the period, which approximates the results that would be obtained using actual currency rates on the dates of individual transactions. Assets and liabilities are translated to their U.S. dollar equivalents at the rate in effect at the balance sheet date. Adjustments resulting from translation are excluded from the results of operations and are recorded as a component of AOCI.

Foreign currency transaction gains and losses arise from receivables and payables that are denominated in a currency other than the functional currency. Transaction gains and losses included in other operating expense (income), net in the Company's results of operations were a net gain of $0.3 million in 2009, a net loss of $0.3 million in 2008, a net gain of $0.3 million in 2007, and a net loss of $0.1 million for the Predecessor period from January 1, 2007 to March 27, 2007.

(m) Research and Development and Acquisition-Related In-Process Research and Development Charges

Prior to January 1, 2009, when recording acquisitions, the Company expensed amounts related to acquired in-process research and development, or IPR&D, in Acquisition-related in-process research and development. IPR&D acquired after January 1, 2009, as part of a business combination, is capitalized as an identifiable intangible asset. IPR&D acquired as part of an asset acquisition is expensed as incurred.

Research and development costs are expensed as incurred. These expenses include the costs of the Company's proprietary research and development efforts, as well as costs incurred in connection with certain licensing arrangements. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties upon or subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the related product. Amounts capitalized for such payments are included in intangible assets, net of accumulated amortization. The Company also expenses the cost of purchased technology and equipment in the period of purchase if it believes that the technology or equipment has not demonstrated technological feasibility and it does not have an alternative future use. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. These amounts are recognized as research and development expense as the related goods are delivered or the related services are performed.

The following accounting standards were issued by the Financial Accounting Standards Board, or FASB, but have not yet been adopted by the Company.

In June 2009, the FASB amended the consolidation guidance that applies to variable interest entities, or VIEs, and requires ongoing reassessments of whether an enterprise is the primary beneficiary of the VIE. The guidance replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity's residual returns. It also requires enhanced disclosures about an enterprise's involvement in a VIE. This guidance is effective for fiscal years beginning after November 15, 2009 and the interim periods within that fiscal year. The standard is not expected to have a material impact on the Company's consolidated financial statements.

have a material impact on the Company's consolidated financial statements other than additional disclosures.

In January 2010, the FASB issued guidance requiring additional disclosures related to transfers between levels in the hierarchy of fair value measurement. The standard is effective for interim and annual reporting periods beginning after December 15, 2009. The standard does not change how fair values are measured. Accordingly, the standard will not have an impact on the Company's consolidated financial statements other than additional disclosures.

On March 28, 2007, Ikaria consummated a series of transactions whereby it acquired INO Therapeutics, LLC, a specialty pharmaceutical company, and Ikaria Research, Inc., a development stage biotechnology company. The transactions, valued in the aggregate at approximately $628.7 million, were financed by a group of private equity and venture capital investors and a $235.0 million term loan from a syndicate of banks. The results of operations of INO and Ikaria Research, Inc. have been included in the Company's consolidated statements of operations since the completion of the acquisitions on March 28, 2007.

The Company acquired the sole membership interest of INO from The Linde Group, or Linde, for approximately $580.4 million, including $506.6 million in cash including transaction costs and the issuance of 15.9 million shares of the Company's series B preferred stock valued at $73.8 million. The fair value of the series B preferred stock issued was based on the price per share paid by the investors in Ikaria's private offering of its series B convertible preferred shares on the same date.

The total cost of the acquisition of INO has been allocated to the assets acquired and the liabilities assumed based on their respective estimated fair values. The fair value of tangible and intangible assets acquired and liabilities assumed was established based upon appraisals as well as estimates of fair value utilizing projections of sales, costs and an appropriate discount rate among other assumptions. The fair value of inventory was valued based on the estimated selling prices less direct costs to sell and distribute the inventory and a reasonable profit margin on those costs. The fair value of core developed technology was based on the discounted cash flow method. The IPR&D was based on estimates of discounted future cash flows associated with various projects less estimated costs to

develop the technologies. Acquired trademarks and trade names were valued using the relief from royalty method. The purchase price has been allocated as follows (in thousands):

Of the $580.4 million purchase price, $230.0 million was attributable to IPR&D, including $213.4 million related to INOMAX and $16.6 million related to inhaled carbon monoxide. The IPR&D projects acquired for INOMAX relate to the development of the product for bronchopulmonary dysplasia in premature infants, various perioperative indications, and the treatment of acute pain crisis due to sickle cell disease. The IPR&D project acquired for inhaled carbon monoxide relates to its use in delayed graft function in solid organ transplantation. The acquired IPR&D represents products that were under development and had not yet achieved regulatory approval for marketing. Because the Company has no assurance that these efforts will reach technological feasibility or develop into products that can be marketed profitably, the IPR&D was expensed upon acquisition. The $230.0 million is included in acquisition-related IPR&D expense and is deductible for tax purposes over 15 years. Core developed technology of $170.2 million comprises the marketed product INOtherapy, which includes the drug INOMAX, the INOvent delivery system and INOcal calibration gas. INOMAX is currently marketed for the treatment of HRF associated with pulmonary hypertension in term and near-term infants.

On March 28, 2007, the Company also acquired 100% of the equity interests in Ikaria Research, Inc., a development-stage biotechnology company focused on developing breakthrough products for critical care. The Company acquired the net assets of Ikaria Research, Inc. in a tax-free exchange of equity interests. Under the terms of the agreement, each share of Ikaria Research, Inc. common stock, series A preferred stock, stock options and a warrant for series A preferred stock were exchanged for an equal number of shares of Ikaria common stock, series A preferred stock, stock options and a warrant for series A preferred stock, respectively. Replacement options to purchase the Company's common stock have terms equivalent to the Ikaria Research, Inc. options being replaced. In addition, as part of the acquisition, a $3.0 million bridge loan payable by Ikaria Research, Inc. to certain stockholders of Ikaria Research, Inc. was converted into shares of series B preferred stock of the Company valued at $4.63 per share.

Because Ikaria Research, Inc. was considered a development stage enterprise and did not qualify as a business, the acquisition was accounted for as a purchase of assets using relative fair values. As a result, no amount of the purchase price was allocated to goodwill. The value of the transaction was determined using both a market approach and an income approach. An option-pricing model was also applied to the aggregate equity value to derive the value of the various shares issued. The fair value of the options granted was derived using the Black-Scholes valuation method. The following table summarizes the consideration paid for Ikaria Research, Inc. (dollars in thousands, except per share amounts):

The estimated relative fair values of assets acquired and liabilities assumed are as follows (in thousands):

The fair value of IPR&D, which reflects preclinical development efforts of a sodium sulfide compound, known as IK-1001, was based on estimates of future discounted cash flows associated with this product less estimated costs to complete. The IPR&D for IK-1001 relates to its use in cardiovascular indications. In connection with the acquisition of Ikaria Research, Inc., the Company recorded $41.6 million in acquisition-related IPR&D charges. This expense was not deductible for tax purposes.

Property, plant and equipment and accumulated depreciation consist of the following (in thousands):

Depreciation expense was $10.3 million, $10.5 million and $7.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Depreciation expense for the Predecessor was $2.0 million for the period January 1 through March 27, 2007. Depreciation expense included accelerated depreciation of $0.2 million and $1.1 million in 2009 and 2008, respectively, relating to the planned replacement of certain equipment utilized in the delivery of INOtherapy, resulting in a shorter remaining useful life for the equipment.

As a result of the acquisitions of INO and Ikaria Research, Inc., the Company recorded purchased intangible assets of $170.2 million of core developed technology and $0.3 million of assembled workforce, which are being amortized on a straight-line basis over their estimated useful lives. The $41.3 million in purchased trademarks and trade names primarily relates to the INO brand name and was established as an indefinite-lived intangible asset.

On June 27, 2008, the Company entered into agreements with Datex Ohmeda, Inc. whereby the Company purchased certain of its future royalty obligations on net sales of INOMAX in the United States and Canada and purchased the patents and trademarks to the INOvent technology for a combined cash payment totaling $7.0 million. The Company recorded an intangible asset of $4.6 million for the estimated fair value of the royalty interest that will be amortized on a straight-line basis over 4.75 years, which is the period the asset is expected to contribute directly or indirectly to the Company's cash flows. The estimated fair value of $2.4 million related to the acquisition of the patents and trademarks of INOvent for the use of the technology in an integrated device module was recorded as research and development expense since technological feasibility was not yet established for this application at the time of acquisition.

On July 16, 2008, the Company received marketing approval for INOMAX (sold under the brand name INOflo in Japan) by Japan's Ministry of Health, Labor and Welfare, thereby providing a statutory exclusivity period until July 16, 2018. As a result of the marketing approval, the Company made a milestone payment of $0.5 million to former owners of INO under an existing license agreement. The $0.5 million was capitalized as an intangible asset and is being amortized on a straight-line basis over a period of ten years, which is the period the asset is expected to contribute directly or indirectly to the Company's cash flows.

Amortization expense was $30.7 million, $30.5 million and $22.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. The estimated future amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands):

Other current liabilities consist of the following accrued expenses (in thousands):

In 2009, accrued research and development expenses include a $10.0 million milestone payment due to BioLine Rx Ltd. for the completion of a Phase 1/2 clinical trial of IK-5001. See Note 18, Product Acquisitions and Other Agreements, for further discussion. Other accrued liabilities include amounts relating to the interest rate swap, accrued interest on debt and other operating expense accruals.

On March 28, 2007, the Company entered into a credit agreement, referred to as the Credit Agreement, with a group of financial institutions under which the Company borrowed $235.0 million pursuant to a senior secured term loan, or Term Loan. The proceeds from the Term Loan were used to pay cash consideration for the purchase of INO, to pay transaction costs, and to provide approximately $2.0 million in cash on hand. The Term Loan has a floating interest rate which is based on LIBOR plus an increment depending upon the Company's leverage ratio. As of December 31, 2009 and 2008, the interest rates on the Term Loan were 2.51% and 5.67%, respectively.

Under the Credit Agreement, $40.0 million in senior secured revolving loans is available to the Company. The proceeds of loans under the revolving credit facility are for general corporate purposes. The revolving facility matures, and the commitments thereunder terminate, on March 28, 2012. As of December 31, 2009, the Company had $0.8 million in letters of credit issued against the revolving credit for certain state bonding requirements. The Company must pay a commitment fee of 0.50% per year

on the undrawn portion of the revolving credit facility, which was $39.2 million as of December 31, 2009. These fees are recorded in interest expense on the consolidated statements of operations.

The Term Loan and revolving loans are secured by substantially all of the Company's assets. The Credit Agreement also contains certain restrictions and covenants relating to leverage ratios, acquisitions, capital expenditures, sale of assets, dividend payments, share repurchases and the incurrence of additional indebtedness.

Upon entering into the Credit Agreement, the Company incurred debt issuance costs of $5.5 million, which are included in other assets and are being amortized using the effective-interest method as a component of interest expense over the term of the Credit Agreement. The Term Loan matures in amounts equal to 1% of the original principal amount in each year of the loan term with the remainder maturing on March 28, 2013. The facility requires mandatory prepayments of 25% to 50% of excess cash flow, as defined in the Credit Agreement, if the Company's leverage ratio is greater than 2.0 as of year end. In 2009, the Company made mandatory principal payments totaling $15.8 million. Based on the anticipated mandatory prepayments and maturity of the debt, principal payments under the Credit Agreement for each of the four years following December 31, 2009 are estimated as follows: $1.8 million in 2010, $1.8 million in 2011, $1.8 million in 2012, and $170.3 million in 2013.

Under the terms of the Credit Agreement, the Company has an incremental term loan feature that gives the Company the ability to obtain commitments from the existing or other lenders to borrow up to an additional $100.0 million without having to get the consent of the existing lenders. If the amount of discount, fee or margin paid on the incremental term loan is more than 0.50% greater than the margin paid on the existing Term Loan, then the existing Term Loan lenders would be paid the differential above the 0.50%.

The Company is subject to the risk of fluctuating interest rates in the normal course of business. The Company's policy is to manage interest rate risks through the use of derivative financial instruments. In April 2007, the Company entered into an interest rate collar agreement, as required under the Credit Agreement, to help manage its exposure to interest rate movements for a period of two years from April 30, 2007 through April 30, 2009, economically hedging $117.5 million of its floating rate term debt. The interest rate collar was not designated as a qualifying cash flow hedge and, thus, any changes in fair value were reported in current period results. The interest rate collar expired on April 30, 2009.

In May 2008, the Company entered into a forward interest rate swap for a period of two years, from April 30, 2009 through April 30, 2011. Similar to the interest rate collar, the objective of the forward swap is to reduce the Company's exposure to rising interest rates by entering into a hedging agreement that converts the interest rate on a portion of the Company's debt from floating rate to fixed rate using a cash flow hedge. The interest rate swap is on $100.0 million of the outstanding principal amount of the Company's floating rate debt from April 30, 2009 to April 30, 2010 and on $80.0 million of the outstanding principal from April 30, 2010 to April 30, 2011. The hedge has the economic effect of swapping a portion of the Company's three-month floating interest rate base to a

fixed interest rate for a term of two years. The Company designated the interest rate swap at inception as a qualifying cash flow hedge and, thus, it is recorded at estimated fair value in the balance sheet, with changes in fair value being reported in AOCI. Gains or losses initially reported as a component of AOCI are reclassified to earnings in the period when the hedged transaction affects earnings. There was no ineffectiveness on the interest rate swap in 2009 and 2008.

The following table presents the pre-tax amounts of derivative instruments affecting the consolidated statements of operations and AOCI for the year ended December 31, 2009 (in thousands):

The Company expects to reclassify an estimated $2.9 million of pre-tax losses on the interest rate swap from AOCI to earnings during 2010.

In conjunction with the March 28, 2007 acquisition of Ikaria Research, Inc., the Company exchanged a warrant held by a financial institution to purchase 60,000 shares of Ikaria Research, Inc. series A preferred stock at $1.00 per share with a warrant to purchase an equal number of Ikaria, Inc. series A convertible preferred stock at an exercise price of $1.00 per share. The warrant is exercisable through January 31, 2016. The fair value of the warrant is recorded as a liability and adjusted at each reporting date to reflect changes in the estimated fair value of the underlying series A convertible preferred stock.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the ASC established a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels are:

The interest rate collar and interest rate swap are measured at fair value using standard industry models that consider observable interest rates, forward yield curves at commonly quoted intervals and volatility from various market sources. The Company considers the impact of credit risk on the fair value of derivative contracts. These are considered Level 2 valuations. Where independent pricing services provide fair values, the Company has validated the inputs to market data from observable and corroborated sources.

The series A preferred stock warrant is valued using a standard industry model and is classified as Level 3. A significant input is the value of the Company's series A preferred stock, which is based largely on the Company's projections of future revenues, earnings and cash flows. The fair value of the Term Loan is based on market bid and ask prices on similar instruments and is classified as Level 2.

The following table summarizes certain fair value information at December 31, 2009 and 2008 for assets and liabilities measured at fair value on a recurring basis and financial liabilities carried at historical cost at December 31, 2009 (in thousands):

			Fair value measurements using

	Carrying value		Fair value measurements using
Financial Liabilities Carried at Fair Value	Carrying value		Level 1		Level 2		Level 3
December 31, 2009
Interest rate swap(1)—in other current liabilities and other liabilities	$	3,993	$	—	$	3,993	$	—
Stock warrant—in other liabilities	$	454	$	—	$	—	$	454
December 31, 2008
Interest rate swap(1)—in other current liabilities and other liabilities	$	4,208	$	—	$	4,208	$	—
Interest rate collar(2)—in other current liabilities	$	1,046	$	—	$	1,046	$	—
Stock warrant—in other liabilities	$	527	$	—	$	—	$	527
Financial Liabilities Carried at Historical Cost
December 31, 2009
Long-term debt—in current and long-term debt	$	175,721	$	—	$	165,178	$	—

The following table summarizes activity for the years ended December 31, 2009 and 2008 for the series A preferred stock warrant, which is classified as Level 3 (in thousands):

Credit risk represents the loss that would be recognized if counterparties failed to completely perform as contracted. At December 31, 2009, financial instruments that subject the Company to credit risk consist principally of cash and cash equivalents and accounts receivables. The Company maintains cash and cash equivalents with major banks and financial institutions, the majority of which is in money market funds rated Aaa by Moody's Investors Services and AAAm by Standard & Poors. These funds invest in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, high-quality commercial paper, municipal obligations and other debt securities. In addition, a portion of the Company's cash is maintained in operating and interest bearing accounts with a major bank. Hospitals account for a substantial portion of accounts receivable and collateral is not required. The risk associated with this concentration is mitigated by the Company's ongoing credit review procedures. Furthermore, no customer individually represented more than 10% of accounts receivables at any period-end.

Through March 8, 2007, INO was considered a multiple-member limited liability company because its member, Linde Gas LLC, had multiple members. As a result, INO was not subject to federal income taxes and did not recognize deferred tax assets or liabilities. The taxable income of INO flowed through to its ultimate members as defined in the Linde Gas LLC partnership agreement. INO was and is subject to state taxes depending upon the states in which it conducts business.

On March 9, 2007, Linde Gas LLC and Linde Gas Inc. entered into a reorganization that effectively changed INO's tax status from a multiple-member limited liability company to a single-member limited liability company. As a result of this change in tax status on March 9, 2007, INO was required to record deferred taxes to reflect the tax effect of its cumulative temporary differences. INO recognized deferred income tax expense and a net deferred tax liability of approximately $6.7 million as a result of the change in tax status. Additionally, INO recognized current and deferred income tax expense during the period March 9, 2007 through March 27, 2007.

The income (loss) before income taxes and the related tax provision (benefit) are as follows (in thousands):



				Successor									Predecessor
				Year ended December 31, 2009			Year ended December 31, 2008			Year ended December 31, 2007			January 1 through March 27, 2007
Income (loss) before income
	Domestic			$	25,141		$	10,883		$	(318,829	)	$	20,563
	Foreign				(1,402	)		—			—			—

		Total income (loss) before income taxes		$	23,739		$	10,883		$	(318,829	)	$	20,563

Current taxes:
	Federal			$	11,437		$	442		$	—		$	1,067
	State				5,960			1,066			545			292
	Foreign				348			—			—			—

		Total current tax expense			17,745			1,508			545			1,359
Deferred taxes:
	Federal				(5,857	)		(467	)		(96,990	)		6,304
	State				(1,128	)		247			(12,660	)		854

		Total deferred tax (benefit) expense			(6,985	)		(220	)		(109,650	)		7,158

			Total income tax expense (benefit)	$	10,760		$	1,288		$	(109,105	)	$	8,517

A reconciliation of the statutory federal income tax rate to the Company's effective tax rate for the years ended December 31, 2009, 2008 and 2007 and the period January 1 through March 27, 2007 is as follows:



	Successor									Predecessor
	Year ended December 31, 2009			Year ended December 31, 2008			Year ended December 31, 2007			January 1 through March 27, 2007
U.S. federal statutory rate		35.0	%		35.0	%		(35.0	)%		35.0	%
State and local taxes, net of federal tax effect		9.4			11.1			(3.9	)		5.4
In-process research and development		—			—			4.6			—
Research tax credit		(11.8	)		(38.4	)		(0.1	)		—
Change in tax status		—			—			—			32.3
Impact of tax-free flow through period		—			—			—			(31.4	)
License payments		3.1			—			—			—
Foreign tax differential		1.2			—			—			—
Change in valuation allowance		1.8			—			—			—
Incentive stock options		3.3			5.5			0.1			—
Other		3.3			(1.4	)		0.1			0.1

		45.3	%		11.8	%		(34.2	)%		41.4	%

Orphan drug and research and development tax credits of approximately $4.4 and $6.3 million were generated, offset by the requirement to permanently add back expenses included in the calculation of the credit, which impacted the effective tax rate for the years ended December 31, 2009 and 2008, respectively. Annual studies are performed that support the availability of these orphan drug and research and development tax credits.

Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Significant components of the deferred tax assets (liabilities) at December 31, 2009 and 2008 are as follows (in thousands):

		December 31, 2009						December 31, 2008

		Assets			(Liabilities)			Assets		(Liabilities)
Net operating loss carryforwards		$	2,891		$	—		$	5,386	$	—
Tax credit carryforwards			7,464			—			7,799		—
Inventories			1,375			—			579		—
Allowance for doubtful accounts			90			—			156		—
Fixed assets			408			(5,501	)		—		(3,009	)
Intangible assets			111,662			(3,004	)		102,390		(1,974	)
Derivative instruments			1,585			—			2,099		—
Deferred income			273			—			374		—
Accrued expenses			444			—			166		—
Stock-based compensation and LTIP			5,755			—			2,444		—
Currency translation adjustment			—			(81	)		—		—
Other			511			(142	)		269		—

	Subtotal		132,458			(8,728	)		121,662		(4,983	)
Valuation allowance			(487	)		—			—		—

	Total deferred taxes		131,971		$	(8,728	)		121,662	$	(4,983	)

	Net deferred tax assets	$	123,243					$	116,679

At December 31, 2009 and 2008, deferred tax assets (liabilities) were classified on the Company's balance sheet as follows (in thousands):

At December 31, 2009, the Company had federal net operating loss carryforwards of approximately $6.4 million, all of which are subject to an annual limitation under Internal Revenue Code Section 382 of $2.0 million due to the ownership change of Ikaria Research, Inc. At December 31, 2009, the Company had combined post-apportionment state net operating losses of approximately $3.4 million and foreign net operating loss carryforwards in the amount of approximately $1.1 million. The federal net operating loss carryforwards begin to expire in 2027, the state net operating loss carryforwards begin to expire in 2019 and the foreign net operating loss carryforwards begin to expire in 2017. At December 31, 2009, the Company had federal research tax credit carryforwards of approximately $7.5 million, of which approximately $0.5 million is limited under Internal Revenue Code Section 382. The federal research tax credit carryforwards begin to expire in 2025.

Prepaid federal and state income taxes were $0.5 million and $8.7 million at December 31, 2009 and 2008, respectively, included in prepaid expenses and other current assets on the consolidated balance sheets.

The Company assesses the realizability of the deferred tax assets at each balance sheet date based on actual and forecasted operating results in order to determine the proper amount, if any, required for a valuation allowance. As a result of this assessment, the Company has determined that since its foreign operations are start-up in nature, have currently only generated net operating losses, and do not yet have a history of profits, significant negative evidence exists such that a valuation allowance of approximately $0.5 million has been recorded as of December 31, 2009. The Company believes that it is more likely than not, given the weight of available evidence, that all other deferred tax assets will be realized. The Company will continue to assess the realizability of the deferred tax assets at each balance sheet date in order to determine the proper amount, if any, required for a valuation allowance.

No provision is made for foreign withholding or income taxes associated with the cumulative undistributed earnings of foreign subsidiaries, except for those considered disregarded entities for U.S. federal income tax purposes. The cumulative undistributed earnings, if any, are expected to be reinvested in working capital and other business needs indefinitely. The earnings would be taxable upon repatriation in the form of dividends or otherwise. A determination of the amount of the unrecognized deferred tax liability with respect to such earnings is not practicable.

The following is a reconciliation of unrecognized tax benefits for the year ended December 31, 2009 (in thousands):

As of December 31, 2009, the Company had unrecognized tax benefits of $0.3 million, which, if recognized, would be reflected as a component of the income tax (benefit) provision. The Company's unrecognized tax benefits are a result of foreign tax exposure. In 2009, the Company recorded interest and penalties of $0.1 million related to these unrecognized tax benefits. The Company believes that it is reasonably possible that the unrecognized tax benefit related to the foreign tax exposures may be reversed in 2010. During the years ended December 31, 2008 and 2007 and the period January 1

through March 27, 2007, the Company did not have any uncertain tax positions and did not accrue any related interest or penalties.

The Company files income tax returns in U.S. federal, state and certain international jurisdictions. For federal and certain state income tax purposes, the Company's 2004 through 2009 tax years remain open for examination by the tax authorities under the normal statute of limitations. For certain international income tax purposes, the Company's 2008 and 2009 tax years remain open for examination by the tax authorities under the normal statute of limitations.

The Company has designated six series of preferred stock, which were issued in connection with the original capitalization of Ikaria, Inc. and the acquisitions of INO and Ikaria Research, Inc. All series have a par value of $0.01 per share and were recorded at their fair value at the date of issuance. A summary of the preferred stock at December 31, 2009 and 2008 is as follows:

The rights, preferences and restrictions of series A, series B and series C preferred stock are as follows:

Conversion—The series A and series B preferred stock are convertible into a number of shares of voting common stock based on a conversion ratio, subject to certain anti-dilution adjustments, at any time at the option of the holders. In the event of an initial public offering, the shares of series A preferred and series B preferred stock will automatically convert into shares of voting common stock if holders of at least 75% of the outstanding series B preferred stock vote in favor of conversion. The conversion ratios of the series A and series B preferred stock are currently one-to-one and are subject to change based on items such as stock dividends, stock splits and issuances of additional securities at less than the stated values. The shares of series C preferred stock are not convertible.

Dividends—In the event the board of directors declares any dividends for the common stock, the holders of series A and series B preferred stock are entitled to share in such dividends with the common stockholders based on their equivalent common shares. However, the Credit Agreement prevents the payment of cash dividends as long as any amounts are payable under the agreement.

Liquidation Preference—In the event of any voluntary or involuntary liquidation of the Company, the holders of preferred stock would be entitled to receive, prior and in preference to any payments to holders of common stock, cash equal to their respective liquidation preferences. Distributions to the preferred stockholders upon liquidation would be made in the following order: (1) Liquidation value of series B preferred stock, (2) Liquidation value of series A preferred stock, and (3) Liquidation value of series C preferred stock. The holders of series A and series B preferred stock are entitled to receive the greater of (i) the stated value per share (series A stated value is $1.00 and series B stated value is $4.63) plus any declared and unpaid dividends or (ii) the amount that would be payable upon liquidation if the preferred stock outstanding were converted into voting common stock. The holders of series C preferred stock are entitled to $1.00 per share upon liquidation.

Redemption—In the event of any liquidation or dissolution of the Company, including a sale of substantially all of the assets, or a merger with another entity in which the beneficial owners of the Company's outstanding stock own less than 50% of the surviving entity, the preferred stockholders are entitled to receive their respective liquidation preferences described above. The preferred stockholders, who hold the majority of the voting shares and control a majority of the board of directors' seats, have the ability to initiate a merger or deemed liquidation event. Because these events could trigger redemption and are not solely within the control of the Company, the preferred shares are classified as redeemable preferred stock outside of permanent equity.

Voting Rights—The holders of the series A and series B preferred stock are entitled to vote with the holders of the voting common stock as if they were a single class on all matters submitted to a vote, except where a separate vote is required by law. Certain special voting rights apply to the series A and series B preferred stock. Each share of voting common stock is entitled to one vote, and each share of series A and series B preferred stock is entitled to the number of votes equal to the number of shares of voting common stock into which such shares are then convertible. The holders of C-1 preferred stock, voting separately as a class, are entitled to elect a total of three individuals to the board of directors. The holders of C-2 preferred, C-3 preferred and C-4 preferred stock, each voting separately as a class, are each entitled to elect one individual to the board of directors.

Voting Common Stock—The Company is authorized to issue up to 103,929,200 shares of voting common stock, $0.01 par value per share. At December 31, 2009, there were 3,733,081 shares of voting common stock issued and outstanding. Each holder of issued and outstanding shares of voting common stock is entitled to one vote for each share on each matter submitted to a vote of stockholders, with the exception of certain amendments to the Certificate of Incorporation relating to the outstanding preferred stock and the election of certain directors. Subject to the preferential rights of the preferred stockholders, the voting common stockholders are entitled to receive ratably dividends that are declared by the board of directors.

Non-voting Common Stock—The Company is authorized to issue up to 11,859,900 shares of non-voting common stock, $0.01 par value per share. At December 31, 2009, there were 1,026,513 shares of non-voting common stock issued and outstanding. Holders of non-voting common stock are not entitled to vote. Subject to the preferential rights of the preferred stockholders, the non-voting common stockholders are entitled to receive ratably dividends that are declared by the board of

directors. All shares of non-voting common stock will automatically convert into an equal number of shares of voting common stock upon the consummation of an initial public offering by the Company.

Shares Reserved for Future Issuance—At December 31, 2009, the Company had reserved shares of voting common stock for future issuance for the following purposes:

The Company has a 401(k) savings plan, which is an Employee Retirement Income Security Act, or ERISA, defined contribution plan. Under the plan, participating employees may elect to contribute up to 60% of their annual compensation, subject to annual Internal Revenue Service dollar limits, and the Company will match 100% of the first 4% contributed and 50% of the next 2% contributed. The Company's contribution expense for the years ended December 31, 2009, 2008 and 2007 was $1.7 million, $1.2 million and $0.4 million, respectively.

INO participated with Linde Gas LLC in a defined benefit pension plan, which covered substantially all full-time employees. INO recorded its pension expense based on an intercompany charge from Linde Gas LLC. The intercompany charge for the period January 1, 2007 through March 27, 2007 was $0.1 million.

INO employees also participated in Linde Gas LLC defined contribution plans. INO's employer contribution expense for the period January 1, 2007 through March 27, 2007 was $0.2 million.

Ikaria's 2007 Stock Option Plan, referred to as the 2007 Plan, provides for the grant of incentive stock options and non-qualified stock options to purchase non-voting common shares to employees, directors and consultants. The purpose of the 2007 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and to promote the success of the Company. There are options to purchase 11,058,834 shares of non-voting common stock authorized for grant under the 2007 Plan. As of December 31, 2009, there were 1,877,285 shares available for issuance of future awards under the 2007 Plan. The Company issues previously unissued shares for the exercise of stock options.

The 2007 Plan is administered by the compensation committee of the Company's board of directors, which determines the individuals to whom stock options are awarded, the number of shares subject to each award, the exercise price, vesting terms and other terms and conditions of the awards. Stock options granted under the 2007 Plan are generally granted with an exercise price equal to the fair market value of a share of non-voting common stock on the date of the grant. Stock options have a contractual life of 10 years and a vesting term of generally four years.

In determining the exercise prices for stock options granted, the Company's board of directors has considered the fair value of the common stock as of the date of grant. The fair value of the common stock has been determined by the board of directors after considering a broad range of factors, including, but not limited to, the prices for the Company's redeemable convertible preferred stock sold to outside investors in arm's-length transactions, the rights, preferences and privileges of that redeemable convertible preferred stock relative to those of the Company's common stock, the Company's operating and financial performance, the hiring of key personnel, the introduction of new products, the stage of development of the Company's product candidates and the likelihood of regulatory approval, the Company's revenue growth, the lack of an active public market for the Company's common and preferred stock, industry information such as market growth and volume, the performance of similarly situated companies in the Company's industry, the execution of strategic and development agreements, the risks inherent in the development and expansion of the Company's products and services, and the likelihood of achieving a liquidity event, such as an initial public offering, given prevailing market conditions and the nature and history of the Company's business.

A summary of stock options as of December 31, 2009, 2008 and 2007 and changes during the years then ended is presented in the table and narrative below:

				Weighted average exercise price			Aggregate intrinsic value(a) (in thousands)

Outstanding at January 1, 2007		—			—
Options exchanged in Ikaria Research, Inc. acquisition		1,504,088		$	0.13
	Granted	7,690,729			4.64
	Exercised	(240,392	)		0.16		$	1,106
	Forfeited and cancelled	(523,875	)		3.20

Outstanding at December 31, 2007		8,430,550			4.05	8.9	$	13,551
	Granted	2,682,250			7.04
	Exercised	(70,625	)		2.30		$	294
	Forfeited and cancelled	(2,178,837	)		4.62

Outstanding at December 31, 2008		8,863,338			4.83	8.3	$	42,090
	Granted	715,000			9.60
	Exercised	(43,540	)		0.12		$	413
	Forfeited and cancelled	(707,806	)		4.08

Outstanding at December 31, 2009		8,826,992		$	5.30	7.6	$	27,703

Vested and expected to vest(b) at December 31, 2009		7,575,834		$	5.12	7.5	$	25,008
Exercisable at December 31, 2009		5,194,096		$	4.37	7.1	$	20,643

In conjunction with the acquisition of Ikaria Research, Inc. on March 28, 2007, all outstanding options to purchase Ikaria Research, Inc. common stock, originally granted under the Ikaria Research, Inc. 2004 Stock Option Plan, were substituted for an equal number of options to purchase Ikaria non-voting common stock at the same exercise price and over the same vesting period. There were 1,504,088 stock options exchanged in this transaction with exercise prices ranging from $0.03 per share to $1.50 per share. These options had an average fair value of $2.71 per share at the exchange date using the Black-Scholes option pricing model. The weighted average assumptions used in determining the underlying fair value of each option on the date of grant were as follows: risk-free rate of return, 4.5%; expected term, 3.8 years; expected volatility, 40%; and expected dividend yield, 0.0%. The purchase price of Ikaria Research, Inc. includes the fair value of the vested stock options and a portion of the fair value of the unvested stock options representing the extent to which services had been provided as of the date of the acquisition.

Subsequent to the acquisition of INO and Ikaria Research, Inc., the weighted average grant date fair value of stock options granted to employees and directors and the weighted average assumptions used to estimate the grant date fair value of the options using the Black-Scholes option pricing model were:

Because the Company is not publicly traded and has limited operating history, the expected volatility is based on the median historic volatility for publicly traded industry peers. In addition, the Company has minimal historical information to develop expectations about future exercise patterns for its stock option grants. As a result, the expected term is based on an average of the expected term of options granted by the Company's publicly traded industry peers. The risk-free interest rate is based on the implied yield on U.S. Treasury zero coupon bonds for periods commensurate with the expected term of the options. The dividend yield on the Company's common stock is estimated to be zero as the Company has not paid and did not intend to pay dividends during the expected term of its stock options.

Compensation expense for stock options granted to employees and directors is based on the estimated grant date fair value of options recognized over the requisite service period on a straight line expense attribution method. Compensation expense for options granted to non-employees is based on the fair value of options, which are revalued each reporting period as the stock options vest and are recognized as expense over the service period. During the years ended December 31, 2009, 2008 and 2007, the Company recognized compensation expense for stock options granted to employees, directors and consultants as follows (in thousands):

In October 2009, a member of the Company's board of directors resigned, but was granted the right to exercise certain stock options through the expiration date of the options, or for an additional 6.5 years. The Company also accelerated the vesting of certain of the unvested stock options of the award. In conjunction with these option modifications, the Company recognized $7.3 million of stock-based compensation expense in selling, general and administrative expense.

As of December 31, 2009, there was approximately $6.2 million of unrecognized compensation cost related to employee and director stock options, which is expected to be recognized over a weighted average period of 2.4 years.

The following table summarizes information about stock options outstanding at December 31, 2009:

In connection with the acquisition of Ikaria Research, Inc. on March 28, 2007, the Company assumed 658,644 stock options that had been granted to consultants and advisors of Ikaria Research, Inc. During the period from March 28, 2007 to December 31, 2009, stock options to purchase 3,500 shares of non-voting common stock were granted to consultants, 129,166 options were exercised, 396,784 options were forfeited and 12,500 were converted from employee to non-employee options. At December 31, 2009, non-employee stock options to purchase 148,694 shares of non-voting common stock are outstanding and vested at exercise prices from $0.03 to $0.20 per share, with a weighted average exercise price of $0.10 per share.

In January 2008, the Company granted 90,000 restricted stock units to an officer of the Company, which vested in eighteen months and were settled for $0.9 million in cash in 2009 based on the value of the Company's common stock on the date of settlement. The restricted stock units were classified as liability awards and were remeasured each reporting period based on the valuation of the Company. During the years ended December 31, 2009 and 2008, the Company recognized $0.4 million and $0.5 million, respectively, in selling, general and administrative expense related to the restricted stock units.

Ikaria's Equity Participation Plan, or EPP, provides the opportunity for eligible management of the Company to purchase shares of the Company's non-voting common stock. The EPP is administered by the Company's board of directors and is approved for an aggregate of 800,000 shares of non-voting common stock to be issued. The EPP is intended to provide management of the Company with the opportunity to participate in the potential future appreciation of the Company and, therefore, align their interest with the Company's stockholders. Under the EPP, the purchase price of the Company's non-voting common stock is intended to be the fair value of the non-voting common stock as determined by the board of directors, and any eligible employees who purchase common stock under

the EPP become a party to the Company's Common Stockholder's Agreement, which covers all common stock issued by Ikaria. The following table summarizes the shares of non-voting common stock purchased under the EPP during the years ended December 31, 2009, 2008, and 2007.

Prior to the acquisition of INO on March 28, 2007, INO issued units under a Long-Term Incentive Plan, or LTIP, to all of its employees. The units provide the participants the opportunity to receive a cash payment when the units vest, based on the appreciation in value of INO over a five-year vesting period. The value of these LTIP units (variable units), which are classified as liability awards, is remeasured each reporting period based on the valuation of INO at December 31 of each year.

Annual grants of LTIP units to employees were made each February with an effective date of January 1 of that year. The number of LTIP units awarded to an individual employee was based on Company and individual performance. LTIP units vest after five calendar years from the effective date of the grant. After the acquisition of INO, the Company ceased awarding units under the LTIP. In October 2007, the Company allowed participants to elect an alternative payout for LTIP units equal to the appreciation of a unit at September 30, 2007 plus accrued interest upon vesting, referred to as the

fixed alternative. Changes in LTIP units for the years ended December 31, 2009, 2008 and 2007 were as follows:



Predecessor
Outstanding at January 1, 2007		1,998,800
	Granted	366,700
	Forfeited	(5,500	)
	Vested	(367,400	)

Outstanding at March 27, 2007		1,992,600

Successor
	Granted	—
	Forfeited	(251,030	)
	Vested	(217,170	)

Outstanding at December 31, 2007		1,524,400
	Granted	—
	Forfeited	(192,100	)
	Vested	(354,300	)

Outstanding at December 31, 2008		978,000
	Granted	—
	Forfeited	(138,900	)
	Vested	(241,000	)

Outstanding at December 31, 2009		598,100

At December 31, 2009, there were 598,100 LTIP units outstanding, 364,800 of which have been converted to the fixed alternative payout and 233,300 of which are variable units. The variable units are valued using the intrinsic value method. As of December 31, 2009 and 2008, the Company's LTIP liability was $2.2 million and $3.7 million, respectively, which was included in other current liabilities and other liabilities on the consolidated balance sheets. As of December 31, 2009, there was approximately $0.3 million of unrecognized cost related to the fixed and variable units, based on the December 31, 2009 unit value, which is expected to be recognized over a weighted average period of 1.5 years.

LTIP payments and expenses for the years ended December 31, 2009, 2008 and 2007 and the period January 1, 2007 through March 28, 2007 are summarized below (in thousands):

Net income (loss) per share is determined in accordance with the two-class method. This method is used for computing basic net income (loss) per share when companies have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company. Under the two-class method, net income (loss) is allocated between common shares and other participating securities based on their participating rights in both distributed and undistributed earnings. The Company's series A preferred and series B preferred stock are participating securities, since the stockholders are entitled to share in dividends declared by the board of directors with the common stock based on their equivalent common shares.

Basic net income (loss) per share is computed by dividing net income (loss) available (attributable) to common stockholders by the weighted average number of shares of common stock outstanding during the period. Because the holders of the participating preferred stock are not contractually required to share in the Company's losses, in applying the two-class method to compute basic net loss per common share, no allocation to preferred stock was made for the year ended December 31, 2007.

Diluted net income (loss) per share is calculated by dividing net income (loss) available (attributable) to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of common stock and dilutive common stock outstanding during the period. Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options and a warrant (using the treasury stock method) and the conversion of the shares of series A and series B preferred stock (using the more dilutive of the (a) as converted method or (b) the two-class method). Potential common shares in the diluted net income (loss) per share computation are excluded to the extent that they would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share for the years ended December 31, 2009, 2008 and 2007 (in thousands, except per share amounts):

		Year ended December 31, 2009		Year ended December 31, 2008		Year ended December 31, 2007

Numerator
	Net income (loss) attributable to common stockholders	$	660	$	479	$	(209,724	)
	Net income attributable to series A and B preferred stock		12,319		9,116		—

	Net income (loss)	$	12,979	$	9,595	$	(209,724	)
Denominator
	Weighted average shares of common stock outstanding—basic		4,735		4,643		3,213
	Dilutive effect of convertible series A and B preferred stock		88,342		88,342		—
	Dilutive effect of stock options		2,740		1,777		—
	Dilutive effect of warrant		54		51		—

	Weighted average shares of common stock outstanding—diluted		95,871		94,813		3,213
Net income (loss) per share
	Basic net income (loss) per share of common stock	$	0.14	$	0.10	$	(65.28	)
	Diluted net income (loss) per share of common stock	$	0.14	$	0.10	$	(65.28	)

The following weighted average common shares associated with preferred stock, stock options and the preferred stock warrant were excluded from the calculations as their effect would be anti-dilutive for the years ended December 31, 2009, 2008 and 2007 (in thousands):

The Predecessor was a limited liability company and had no shares outstanding for purposes of calculating net income or loss per share.

In the event of an initial public offering, or IPO, the non-voting common stock and, assuming holders of at least 75% of the series B preferred stock consent, the series A and series B preferred stock, will convert into common stock on a one-for-one basis. The unaudited pro forma balance sheet as of December 31, 2009 reflects the conversion of all outstanding shares of series A and series B preferred stock into an aggregate of 88,342,061 shares of common stock and the conversion of all outstanding shares of non-voting common stock into 1,026,513 shares of common stock, as if the conversion had occurred as of December 31, 2009. In addition, the warrant to purchase 60,000 shares of series A preferred stock will convert to a warrant to purchase 60,000 shares of common stock and

the classification of the warrant would change from liability to equity, which is also reflected in the pro forma balance sheet.

Subject to the closing of the refinancing described in Note 23, the Company plans to pay a cash dividend on the capital stock in the aggregate amount of $130.0 million. The planned dividend has been reflected in the unaudited pro forma balance sheet as of December 31, 2009.

The unaudited pro forma basic and diluted weighted average number of shares for the year ended December 31, 2009 reflects the conversion of all outstanding shares of series A and series B preferred stock and all non-voting common stock into shares of common stock as if the conversion had taken place on January 1, 2009. Because the planned dividend exceeds net income in the current year, the pro forma effect of the dividend in excess of earnings is included in the earnings per share calculation as follows (in thousands):

If the total dividend distribution in excess of earnings was assumed to be paid from the net proceeds of the offering, approximately shares would be issued for this purpose, which is included in the pro forma weighted average shares of common stock outstanding.

The following table shows the unaudited pro forma effects on the basic and diluted net income per share for the year ended December 31, 2009 (in thousands, except per share amounts) as if the conversion and dividend occurred on January 1, 2009:

		Year ended December 31, 2009

Numerator:
	Net income	$	12,979
Denominator:
	Weighted average shares of common stock outstanding		4,735
	Number of shares issued to fund the dividend in excess of earnings
	Shares issued upon conversion of outstanding series A and B preferred stock		88,342
	Pro forma weighted average shares of common stock outstanding—Basic
	Dilutive effect of stock options		2,740
	Dilutive effect of warrant		54
	Pro forma weighted average shares of common stock outstanding—Diluted
Pro Forma Net income per share:
	Unaudited pro forma basic and diluted net income per common share	$

Excluded from the computation of pro forma diluted net income per common share for the year ended December 31, 2009 were 1.8 million stock options, because including them would have had an anti-dilutive effect. The assumed conversion of the series A and series B preferred stock as of

January 1, 2009 had no effect on the basic and diluted net income per share because the series A and series B preferred stockholders share equally with the common stockholders in the earnings of the Company.

The Company has and expects to continue to enter into agreements to develop and commercialize drug candidates, which may include research and development, marketing and selling, manufacturing, and distribution. These agreements often require milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements. Revenues from these agreements are recorded in other revenue. Costs incurred pursuant to these agreements are reported in their respective expense line item in consolidated statements of operations.

On August 29, 2008, the Company entered into an agreement with Orphan Therapeutics LLC, or Orphan, in which it acquired the North American rights to LUCASSIN, or terlipressin, a potential treatment for advancing kidney failure in patients with cirrhosis. As part of the agreement, in 2008, the Company made an upfront cash payment of $17.5 million, which was recorded as research and development expense on the consolidated statements of operations since technological feasibility had not been established for LUCASSIN. Under this agreement, the Company was responsible for a portion of the development costs prior to regulatory approval, a milestone payment upon approval of a New Drug Application, or NDA, by the FDA, certain sales-based milestones and royalties on sales, if any, relating to LUCASSIN. In March 2010, the terms of this agreement were amended. See Note 23, Subsequent Events, for further discussion.

On August 26, 2009, the Company entered into an agreement with BioLineRx Ltd., or BioLine, to obtain a worldwide exclusive license to a compound being developed to treat ventricular remodeling following a heart attack. At the time of the agreement, the compound was in a Phase 1/2 clinical trial. In 2009, the Company paid a $7.0 million upfront payment and accrued a $10.0 million milestone payment for the completion of the Phase 1/2 clinical trial, which have been recorded in research and development expense in the consolidated statements of operations. The Company is responsible for completing clinical development and commercialization efforts. As part of this agreement, the Company may make additional payments to BioLine upon the achievement of various milestones that could aggregate up to $265.5 million. In addition, the Company agreed to pay royalties should the product be approved for commercialization.

On July 17, 2009, the Company entered into an agreement with Fibrex Medical, Inc., or Fibrex, to obtain the worldwide exclusive license to an investigational portfolio of compounds for use in a range of critical care conditions. The compounds are fibrin-derived peptides that bind to certain proteins on the inner lining of blood vessels, preserving the normal barrier function of these cells and preventing tissue injury. The compounds are in various stages of development. In 2009, the Company made a $5.25 million upfront payment which is classified as research and development expense in the

consolidated statements of operations. The Company will be responsible for completing clinical development and commercialization efforts. As part of this agreement, the Company is required to make additional payments to Fibrex of approximately $101 million, in the aggregate, upon the achievement of various milestones associated with the development and regulatory approval of the compound with respect to potential indications. The Company is also required to pay royalties based on sales should products be approved for commercialization.

In October 2008, the Company entered into a distribution and logistics services agreement with Air Water Inc., or AWI, and Sumitomo Seika Chemicals, or SSC, to promote and distribute INOtherapy in Japan. AWI/SSC is the exclusive distributor for the products and will take primary responsibility to commercialize the product in Japan. AWI also serves as logistics provider and assumes certain sales and marketing responsibilities in coordination with the Company. In connection with the agreement, the Company received a $1.0 million milestone payment from AWI/SSC, which has been deferred and is being recognized on a straight-line basis over the four-year initial term of the agreement.

The Company operates in one reportable segment and, accordingly, no segment disclosures have been presented.

The Company attributes net sales to an individual country based upon the location of its customer. The sales in other foreign countries represent sales in Australia, Mexico and to Linde in several South American countries. The Company's long-lived assets are primarily located in the United States.

As a result of the acquisition of INO, Linde owns 15.9 million shares of series B preferred stock, or approximately 17% of the Company's outstanding capital stock at December 31, 2009. Under the INO purchase and sale agreement, Linde is also entitled to representation on the board of directors. The Company sold products and fixed assets to Linde or its affiliates in the amounts of $3.4 million, $3.0 million and $1.3 million in the years ended December 31, 2009, 2008 and 2007, respectively.

During 2009 and 2008, the Company purchased industrial gas supplies from Linde and reimbursed Linde for clinical trial support in Europe in the aggregate amount of $0.3 million and $0.6 million, respectively. During 2007, the Company purchased industrial gas supplies, reimbursed Linde for administrative support during a transition period and reimbursed Linde for clinical trial support in Europe in the aggregate amount of $1.1 million. Receivables from Linde were $0.8 million and $0.3 million at December 31, 2009 and 2008, respectively. The transactions with Linde and its affiliates were made in the ordinary course of business.

Prior to the acquisition of INO on March 27, 2007, Linde provided and billed administrative services to INO. In addition, the Company had other payables to Linde, including amounts related to certain common costs, such as pension, 401(k) plan and research and development costs. INO, in the normal course of business, entered into various purchase and sale transactions with other Linde affiliated companies. Transactions with Linde and its affiliated companies for the period January 1, 2007 through March 27, 2007 included $0.4 million in sales, $0.1 million in interest income and $0.7 million in allocated expenses.

During the period January 1, 2007 through March 27, 2007, all intercompany balances between INO and Linde were settled, resulting in a $101.8 million non-cash dividend paid by INO to Linde. In anticipation of intercompany dividends to be paid by INO to Linde between January 1, 2007 and March 27, 2007, Linde suspended accruing intercompany interest on INO's loan receivable.

The Company leases certain facilities and equipment, principally machinery, buildings, and vehicles, under non-cancelable operating leases, expiring at various dates through 2016, some of which are renewable. Many of the leases provide that the Company will pay operating expenses, which may include common area charges, insurance and taxes and contain provisions to allow the Company to purchase the assets at their fair market value.

Minimum rent commitments by year, under non-cancelable operating leases, as of December 31, 2009 are as follows (in thousands):

Total rental expense on all operating leases was $3.9 million, $3.5 million and $2.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Total rental expense for the Predecessor on all operating leases was approximately $0.9 million for the period January 1, 2007 through March 27, 2007.

The Company has an exclusive license from Massachusetts General Hospital, or MGH, to develop, manufacture, market, distribute and sell INOMAX in the U.S. market and certain other jurisdictions for a term expiring upon the earlier of the date of expiration of the last patent covered by the license (subject to earlier termination under certain circumstances) or one year after the last commercial sale. The principal U.S. patent covering INOMAX under the license agreement will expire on January 23, 2013. The INOMAX patents have been issued or are pending in 10 other countries, including Australia, Canada and Japan (where INOMAX is known as INOflo), and will generally expire on December 5,

2011 in these countries. The Company is required to pay royalties to MGH on net sales relating to INOMAX.

In connection with the acquisition of INO, the Company assumed certain obligations due to a former owner. These obligations include royalties on net sales relating to the use of inhaled nitric oxide in certain indications as well as contingent payments upon the achievement of development milestones. During the year ended December 31, 2008, the Company paid $0.5 million relating to the achievement of the milestone for marketing approval in Japan. Refer to Note 6, Intangible Assets, for further discussion.

On April 21, 2005, Ikaria Research, Inc. entered into a license agreement with Fred Hutchinson Cancer Research Center, or FHCRC, under which Ikaria Research, Inc. received the worldwide right and exclusive license to patents and patent applications claiming therapeutic uses of hydrogen sulfide and derivatives thereof (i.e., sodium sulfide) for a term expiring on the expiration of the last to expire patent or patent application covered by the license, which currently is June 25, 2028. The Company assumed this agreement in the acquisition of Ikaria Research, Inc. and is required to pay royalties on net sales of products that utilize the licensed technology and in further consideration will make milestone payments on the first five separately approvable indications, which may total $6.7 million if a new drug application, or NDA, is filed with the FDA for each of the first five indications, of which $50,000 was achieved during the year ended December 31, 2007. In addition, failure by the Company to meet certain development milestones could result in payment liabilities of up to $1.25 million for milestone extensions, such extension payments being creditable against future development milestone described above. The Company has a right to terminate the license with or without cause at any time on 90 days written notice to FHCRC. The Company also has a sponsored research agreement with FHCRC, which expires on April 21, 2010, with the option to extend for an additional one year until April 21, 2011, at a cost of $0.6 million.

The development of inhaled carbon monoxide is subject to two independent license agreements with Columbia University, or Columbia, and a consortium of Universities, known as BIDMC.

On September 1, 2003, INO entered into a license agreement with BIDMC for an exclusive worldwide license to patents and patent applications claiming various therapeutic uses of carbon monoxide for a term expiring upon the earlier of the date of expiration of the last to expire patent, which currently is June 20, 2023. The Company assumed this agreement in the acquisition of INO and is obligated to make milestone payments upon the occurrence of certain regulatory achievements that in the aggregate total $0.5 million, of which INO paid $50,000 and $25,000 during the year ended December 31, 2007 and 2006, respectively. The Company is also required to pay royalties on annual net sales in connection with the licensed technology. If the Company fails to file an NDA for approval of a product using the licensed technology by March 1, 2012, the Company will be required to pay $0.2 million on that date and each anniversary thereafter until commencement of the first commercial sale of a licensed product or termination of the license agreement.

On December 18, 2002, INO entered into a license agreement with Columbia for an exclusive worldwide license relating to patents and patent applications claiming therapeutic use of inhaled carbon monoxide with respect to organ transplant, for a term ending upon the expiration of the last to expire patent or patent application covered by the license, which currently is September 27, 2019. Under the agreement, the Company is obligated to make certain payments upon the achievement of various milestones that in the aggregate total $0.8 million, of which INO achieved $0.2 million and $0.1 million

during the years ended December 31, 2007 and 2006, respectively. In addition, a milestone payment of $0.3 million is payable by the Company for each additional indication approved by the FDA or European Medicines Agency. The Company is also required to pay royalties on annual net sales relating to inhaled carbon monoxide. If the Company fails to file Marketing Authorization of a Product (with the FDA or EMEA) using the licensed technology by June 18, 2011, the Company will be required to pay $0.1 million for the first year of delay and $0.2 million for the second year of delay.

The Company periodically becomes subject to legal proceedings and claims arising in connection with its business. The ultimate legal and financial liability of the Company in respect to all claims, lawsuits and proceedings cannot be estimated with any certainty. As of this report, any outcome, either individually or in the aggregate, is not expected to be material to the Company's financial position or results of operations.

The Company sells its products in various jurisdictions and is subject to federal, foreign, state and local taxes including, where applicable, sales and use tax. While the Company believes that it has properly paid or accrued for all such taxes based on its interpretation of applicable law, tax laws are complex and interpretations differ. Periodically, the Company may be audited by taxing authorities, and it is possible that additional assessments may be made in the future.

Changes, net of tax, in accumulated other comprehensive income (loss) are (in thousands):

The Company has evaluated events from the balance sheet date through April 22, 2010, the date at which the consolidated financial statements were available to be issued.

On March 29, 2010, the Company acquired the NDA and investigational new drug, or IND, application for LUCASSIN, assuming all future development and ownership of the drug in North America and Australia. Upon executing the amended agreement, the Company made an upfront payment of $5.0 million to Orphan and may make additional payments in the aggregate of $27.5 million upon the achievement of certain milestones. In addition, the Company agreed to a reduction in royalties if the product is approved for commercialization.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law. These laws are a legislative overhaul of the U.S. healthcare system which may have far reaching consequences for drug and medical device manufacturers. In particular, there are elements of this legislation that are aimed at promoting the greater use of comparative effectiveness research as well as various pilot and demonstration programs that have the potential to impact reimbursement and patient access for the Company's products, and which may materially impact numerous aspects of the business. The legislation has the potential to significantly increase the tax burden on the drug and medical device industries and may have a material and adverse impact on the Company's operations and cash flow. The Company does not yet know the full impact this new legislation will have on the Company's business.

The Company also evaluated subsequent events from April 23, 2010 through May 12, 2010.

On May 10, 2010, the Board of Directors approved a new credit facility consisting of a $250.0 million term loan and a $40.0 million line of credit, at an interest rate of LIBOR plus 5.0% with a 2.0% LIBOR floor. The Company expects the new credit facility to close in the second quarter of 2010. Assuming consummation of the new credit facility, the Company expects to use a portion of the proceeds from the term loan to repay the entire outstanding balance on the existing Term Loan. The Company does not expect to draw down the line of credit at the time the new credit facility closes. On May 10, 2010, the Board of Directors also declared a cash dividend of $130.0 million, in the aggregate, contingent on the closing of the new credit facility, which is expected to be paid to holders of capital stock in the second quarter of 2010. The Company will pay this dividend from the remaining proceeds of the new term loan in addition to cash on hand.

The following table sets forth the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by the Registrant. All amounts are estimates except the Securities and Exchange Commission registration fee and the Financial Industry Regulatory Authority, Inc. filing fee.

Section 102 of the Delaware General Corporation Law permits a corporation to eliminate the personal liability of its directors or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation provides that no director shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Court of Chancery or such other court shall deem proper.

Our certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful.

Our certificate of incorporation also provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If we don't assume the defense, expenses must be advanced to an Indemnitee under certain circumstances.

We have entered into indemnification agreements with our directors. In general, these agreements provide that we will indemnify the director to the fullest extent permitted by law for claims arising in his or her capacity as a director of our company, in any capacity with respect to any of our employee benefit plans or in connection with his or her service at our request for another corporation or entity. The indemnification agreements also provide for procedures that will apply in the event that the director makes a claim for indemnification and establish certain presumptions that are favorable to the director.

Our employment agreements with our executive officers provide that we will indemnify the executive officer for any claims that a third party brings against him based on any alleged act or omission related to the executive officer's employment by us to the maximum extent permitted by law.

We maintain a directors and officers liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.

The underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain conditions, our directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering.

Set forth below is information regarding shares of common stock and preferred stock issued, and options and warrants granted, by the Registrant within the past three years that were not registered under the Securities Act of 1933, as amended. Also included is the consideration, if any, received by the Registrant for such shares, options and warrants and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.

In March 2007, in connection with the Transaction, (i) each issued and outstanding share of Ikaria Research, Inc.'s common stock became one share of the Registrant's voting common stock and (ii) each issued and outstanding share of Ikaria Research, Inc.'s series A preferred stock became one share of the Registrant's series A preferred stock. The Registrant issued a total of 3,733,081 shares of voting common stock and 11,361,250 shares of series A preferred stock to the holders of Ikaria Research, Inc.'s capital stock. A warrant issued to SVB Financial Group for 60,000 shares of Ikaria Research, Inc.'s series A preferred stock became a warrant for the same number of shares of the Registrant's series A preferred stock.

In December 2006 and January and February 2007, Ikaria Research, Inc. issued subordinated convertible secured promissory notes to entities affiliated with the Venrock Entities, ARCH and the 5AM Entities. The notes issued in December 2006 had an annual interest rate of 4.97%, the notes issued in January 2007 had an annual interest rate of 4.88% and the notes issued in February 2007 had an annual interest rate of 4.93%. The aggregate principal amount of the notes issued was $3,000,000. In March 2007, all of the principal and interest due under these promissory notes converted into an aggregate of 653,658 shares of the Registrant's series B preferred stock in connection with the Registrant's series B preferred stock financing.

In March 2007, the Registrant sold an aggregate of 60,408,484 shares of series B preferred stock at a price per share of $4.6346 to the New Mountain Entities, ARCH, the Venrock Entities and Linde for an aggregate purchase price of $280.0 million. The Registrant also issued a total of 15,918,669 shares of series B preferred stock to Linde as part of the consideration for INO Therapeutics LLC. Additionally, as further consideration to enter into the Transaction, in March 2007, the Registrant issued an aggregate of 400 shares of series C preferred stock to New Mountain Entities, ARCH, the entities affiliated with the Venrock Entities and Linde.

No underwriters were involved in the foregoing issuances of securities. The securities described in this section (a) of Item 15 were issued to investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and, in certain cases, Regulation D promulgated thereunder, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.

Between July 2007 and November 2007, the Registrant sold an aggregate of 636,595 shares of common stock at a purchase price per share of $4.63 to certain members of its management pursuant to its equity participation plan. In December 2008, the Registrant sold an aggregate of 11,959 shares of common stock at a purchase price per share of $8.39 to certain members of its management pursuant to its equity participation plan. In January 2009, the Registrant sold an aggregate of 20,271 shares of common stock at a purchase price per share of $8.39 to certain members of its management pursuant to its equity participation plan. In March 2009, the Registrant sold 3,131 shares of its common stock at a purchase price of $9.58 per share to one of its managers pursuant to its equity participation plan.

The shares of common stock issuable pursuant to the equity participation plan as described in this section (b) of Item 15 were issued pursuant to written compensatory plans or arrangements with the Registrant's employees in reliance on the exemption provided by Rule 701 promulgated under Section 3(b) of the Securities Act, or pursuant to Section 4(2) under the Securities Act and, in certain cases, Regulation D promulgated thereunder, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.

Since inception, the Registrant has issued options under its 2007 stock plan to certain directors, employees and consultants to purchase an aggregate of 13,912,067 shares of common stock as of April 30, 2010. In connection with the Transaction, in March 2007, the Registrant granted options to purchase an aggregate of 1,504,088 shares of common stock with exercise prices ranging from $0.03 to $1.50 per share in exchange for outstanding options originally granted under the Ikaria Research, Inc. stock plan. Between April 2007 and April 2010, the Registrant granted options to purchase an aggregate of 12,407,979 shares of common stock with exercise prices ranging from $4.63 to $9.62 per share. As of April 30, 2010, the Registrant issued an aggregate of 359,557 shares of common stock at prices ranging from $0.10 to $4.63 per share to certain of its employees and consultants pursuant to the exercise of stock options for an aggregate purchase price of $206,237. As of April 30, 2010, options to purchase 3,650,212 shares of common stock had been forfeited or cancelled and options to purchase 9,902,298 shares of common stock remained outstanding at a weighted average exercise price of $5.70 per share.

The stock options and the common stock issuable upon the exercise of such options as described in this section (c) of Item 15 were issued pursuant to written compensatory plans or arrangements with the Registrant's employees, directors and consultants, in reliance on the exemption provided by Rule 701 promulgated under Section 3(b) Securities Act, or pursuant to Section 4(2) under the Securities Act and, in certain cases, Regulation D promulgated thereunder relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.

All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

The exhibits to the registration statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.

All other schedules have been omitted because the information required to be presented in them is not applicable or is shown in the consolidated financials statements or related notes.

SCHEDULE II
IKARIA, INC. VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

			Beginning Balance		Additions (Recoveries) charged to Expense or Sales			Deductions			Ending Balance

Predecessor
	January 1 to March 27, 2007
		Allowance for doubtful accounts	$	275	$	(63	)	$	(1	)	$	211
		Allowance for customer credits		12,345		48,608			(43,511	)		17,442
Successor
	Year ended December 31, 2007
		Allowance for doubtful accounts	$	211	$	546		$	(13	)	$	744
		Allowance for customer credits		17,442		133,494			(131,780	)		19,156
	Year ended December 31, 2008
		Allowance for doubtful accounts	$	744	$	(126	)	$	(225	)	$	393
		Allowance for customer credits		19,156		216,445			(210,401	)		25,200
	Year ended December 31, 2009
		Allowance for doubtful accounts	$	393	$	(102	)	$	(64	)	$	227
		Allowance for customer credits		25,200		247,618			(250,202	)		22,616

Note: Charges or recoveries of the allowance for doubtful accounts are reflected in expense. Charges for the allowance for customer credits are reflected in net sales.

Under date of April 22, 2010, we reported on the consolidated balance sheets of Ikaria, Inc. and subsidiaries (Successor) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders' deficit, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, and the statements of operations, changes in members' equity, comprehensive income (loss), and cash flows of INO Therapeutics LLC (Predecessor) for the period January 1, 2007 through March 27, 2007, which are included in the prospectus. In connection with our audits of the aforementioned Successor consolidated financial statements and Predecessor financial statements, we also audited the related financial statement schedule in the registration statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.

In our opinion, such financial statement schedule, when considered in relation to the basic Successor consolidated financial statements and Predecessor financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

(a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clinton, State of New Jersey, on this 13^th day of May, 2010.

We, the undersigned officers and directors of Ikaria, Inc., hereby severally constitute and appoint Daniel Tassé and Richard Wichansky, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any other registration statement for the same offering pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.

Exhibit Number			Description of Exhibit

	1.1*		Underwriting Agreement
	2.1+**		Sale and Purchase Agreement among Linde Gas Inc., Linde AG, Ikaria, Inc., Ikaria Acquisition Inc. and Ikaria Research, Inc., dated as of February 22, 2007
	2.2+**		Amended and Restated Asset Purchase Agreement between Orphan Therapeutics, LLC, and Ikaria Therapeutics LLC, dated as of March 29, 2010
	2.3+**		Sale and Purchase Agreement among INO Holdings LLC, AGA Gas, Inc., and INOCO, Inc., and for the purposes of certain sections, AGA AB, Becton, Dickinson and Company and Instrumentarium Corporation, dated as of July 20, 1998
	3.1		Restated Certificate of Incorporation of Ikaria, Inc.
	3.2*		Form of Restated Certificate of Incorporation of Ikaria, Inc., to be effective upon the closing of the offering
	3.3		Restated Bylaws of Ikaria, Inc.
	3.4*		Form of Amended and Restated Bylaws of Ikaria, Inc., to be effective upon the closing of the offering
	4.1*		Specimen Certificate evidencing shares of common stock
	4.2		Common Stockholders Agreement among Ikaria, Inc. and the stockholders listed on the signature pages thereto, dated as of February 22, 2007
	4.3		Investor Stockholders Agreement among Ikaria, Inc., New Mountain Partners II, L.P., New Mountain Affiliated Investors II, L.P., Allegheny New Mountain Partners, L.P., ARCH Venture Fund VI, L.P., Venrock Partners, L.P., Venrock Associates IV, L.P., Venrock Entrepreneurs Fund IV, L.P., 5AM Ventures LLC, 5AM Co-Investors LLC, Aravis Venture I L.P., Black Point Group, LP, Linde Gas Inc. and certain other signatories thereto, dated as of March 28, 2007
	4.4		Restated Warrant to Purchase Stock held by SVB Financial Group, dated March 28, 2007
	4.5		Form of Management Rights Letter
	5.1*		Opinion of Wilmer Cutler Pickering Hale and Dorr LLP
	10.1*		Credit Agreement among Ikaria, Inc., Ikaria Acquisition Inc., the Lenders Party Thereto and Credit Suisse, dated as of March 28, 2007
	10.2*		Guarantee and Collateral Agreement among Ikaria Acquisition Inc., Ikaria, Inc., the Subsidiaries of Ikaria, Inc. and Credit Suisse, dated as of March 28, 2007
	10.3		Amended and Restated Ikaria, Inc. 2010 Long Term Incentive Plan
	10.4		Ikaria, Inc. 2007 Stock Option Plan, as amended
	10.5		Form of Notice of Stock Option Grant and Stock Option Agreement used to evidence option grants under the 2007 Stock Option Plan
	10.6		INO Therapeutics Long Term Incentive Plan
	10.7		INO Therapeutics Long Term Incentive Plan Grant Certificate awarded to Elizabeth Larkin on January 1, 2006

Exhibit Number			Description of Exhibit

	10.8		Ikaria, Inc. Amended and Restated Severance Pay Plan
	10.9		Ikaria, Inc. Equity Participation Plan
	10.10		Form of Stock Purchase Agreement used to evidence stock purchases under the Equity Participation Plan
	10.11		Lease Agreement between Premiere Development L.L.C. and INO Therapeutics, Inc., dated February 28, 2000, as amended by the First Amendment to Lease Agreement, dated as of July 12, 2000, the Second Amendment to Lease Agreement, dated as of April 6, 2001, and the Third Amendment to Lease Agreement, dated as of November 30, 2005
	10.12		Lease Agreement between Dairy Drive, LLC and INO Therapeutics LLC dated April 24, 2008
	10.13		Amended and Restated Employment Agreement between Ikaria, Inc. and Matthew Bennett, dated as of June 1, 2009
	10.14		Amended and Restated Employment Agreement between Ikaria, Inc. and James Briggs, dated as of June 1, 2009
	10.15		Amended and Restated Employment Agreement between Ikaria, Inc. and Michael Kennedy, dated as of June 1, 2009
	10.16		Amended and Restated Employment Agreement between Ikaria, Inc. and Stephen Ross, dated as of June 1, 2009
	10.17		Amended and Restated Employment Agreement between Ikaria, Inc. and Ralf Rosskamp, dated as of June 1, 2009
	10.18		Amended and Restated Employment Agreement between Ikaria, Inc. and Daniel Tassé, dated as of June 1, 2009
	10.19		Separation Agreement between Ikaria, Inc. and Elizabeth Larkin dated as of March 27, 2010
	10.20		Form of Indemnification Agreement between Ikaria, Inc. and each of its directors
	10.21+		Supply Agreement between Air Liquide Healthcare America Corporation, assignee of Scott Medical Products, Inc., and INO Therapeutics LLC, effective as of September 15, 1999, as amended by the First Amendment to Supply Agreement and Assignment, effective as of November 23, 2004, the Second Amendment to Supply Agreement, effective as of March 11, 2008, and the Third Amendment to Supply Agreement, effective as of October 1, 2008
	10.22+		Commercial Agreement among INO Therapeutics, Ikaria, Inc. and AGA AB, dated as of March 28, 2007
	10.23		MGH Partial Assignment Agreement between AGA AB and INO Therapeutics LLC, dated as of March 28, 2007
	10.24		Transitional Services Agreement between Linde Gas Inc. and INO Therapeutics LLC, dated as of March 28, 2007
	10.25+		Form of Distribution Agreement between INO Therapeutics LLC and AGA entities in South America, as amended by Existing ROW Agreement Amendment

Exhibit Number			Description of Exhibit

	10.26+		Amended and Restated License and Commercialization Agreement among Ikaria Development Subsidiary One LLC, BioLineRx Ltd. and BioLine Innovations Jerusalem L.P., dated as of August 26, 2009, as amended by the Payment Date Extension Amendment and the Amendment to the Amended and Restated License and Commercialization Agreement effective as of April 21, 2010
	10.27+		License Agreement among Ikaria Development Subsidiary Two LLC, Fibrex Medical, Inc. and Fibrex Medical Research & Development GesmbH, dated as of July 17, 2009
	10.28+		License Agreement between Fred Hutchinson Cancer Research Center and Ikaria Research, Inc., effective April 21, 2005, as amended by Amendment No. 1 to License Agreement, dated as of July 21, 2005, the Letter Amendment to License Agreement, accepted and agreed to on September 1, 2005, and Amendment No. 2 to License Agreement, dated as of February 29, 2008
	10.29+		Amended License Agreement between The General Hospital Corporation d/b/a Massachusetts General Hospital and AGA AB, effective as of December 31, 1999, as amended by the Amendment to the License Agreements, effective January 1, 2000
	10.30+		Purchase and Assignment Agreement between INO Therapeutics LLC and Datex-Ohmeda, Inc., dated as of June 27, 2008
	21.1*		Subsidiaries of Ikaria, Inc.
	23.1		Consent of KPMG LLP
	23.2*		Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1)
	24.1		Power of Attorney (included on signature page)


Large Accelerated Filer o		Accelerated Filer o		Non-accelerated Filer ý (Do not check if a smaller reporting company)		Smaller Reporting Company o

Title of Each Class of Securities To Be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee(2)




Common Stock, $0.01 par value per share	$200,000,000	$14,260

	Price to Public	Underwriting Discounts and Commissions	Proceeds to Ikaria, Inc.

Per Share	$	$	$
Total	$	$	$


Goldman, Sachs & Co.		Morgan Stanley
Credit Suisse		Lazard Capital Markets
Cowen and Company		Wedbush PacGrow Life Sciences

Number of Shares and % of Total Outstanding		Date Available for Sale into Public Market

Shares, or %		On the date of this prospectus
Shares, or %		90 days after the date of this prospectus
Shares, or %		180 days after the date of this prospectus, subject to the requirements of the federal securities laws, and subject to extension in specified instances, due to lock-up agreements between the holders of these shares and the underwriters; however, the representative of the underwriters can waive the provisions of these lock-up agreements and allow these stockholders to sell their shares at any time


Delaware (State or other jurisdiction of incorporation or organization)		2834 (Primary Standard Industrial Classification Code Number)		20-8617785 (I.R.S. Employer Identification Number)


Steven D. Singer, Esq. Lia Der Marderosian, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000		Matthew M. Bennett, Esq. Senior Vice President, Legal and Corporate Development Ikaria, Inc. 6 State Route 173 Clinton, NJ 08809 (908) 238-6600		Patrick O'Brien, Esq. Ropes & Gray LLP One International Place Boston, Massachusetts 02110 (617) 951-7000

		Page

Prospectus Summary		1
Risk Factors		13
Special Note Regarding Forward-Looking Statements		47
Use of Proceeds		48
Dividend Policy		49
Capitalization		50
Dilution		52
Selected Consolidated Financial Data		54
Management's Discussion and Analysis of Financial Condition and Results of Operations		56
Business		80
Management		127
Executive and Director Compensation		134
Certain Relationships and Related Person Transactions		157
Principal and Selling Stockholders		168
Description of Capital Stock		173
Description of Indebtedness		177
Shares Eligible for Future Sale		179
Certain Material U.S. Federal Tax Considerations		182
Underwriting		186
Legal Matters		190
Experts		190
Where You Can Find More Information		190
Index to Consolidated Financial Statements		F-1


Assumed initial public offering price per share			$
	Historical net tangible book value per share as of	$
	Increase attributable to the conversion of outstanding preferred stock

	Pro forma net tangible book value per share as of
	Increase in net tangible book value per share attributable to new investors

Pro forma net tangible book value per share after this offering

Dilution per share to new investors			$

	Shares Purchased				Total Consideration

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percentage			Amount	Percentage			Average Price Per Share
Existing stockholders				%	$			%	$
New investors

Total			100	%	$		100	%

Product / Product Candidate	Active Pharmaceutical Ingredient / Mechanism of Action	Primary Indication(s)	Status

INOtherapy / INOMAX	Nitric oxide / pulmonary vasodilator	Hypoxic respiratory failure Bronchopulmonary dysplasia Acute respiratory distress syndrome-chronic lung disease	Marketed Phase 3 Phase 3 in planning stage
LUCASSIN	Terlipressin / vasopressin receptor agonist	Hepatorenal Syndrome Type 1	Pivotal Phase 3 expected to commence in 2010
IK-5001	Sodium alginate and calcium gluconate / mechanical support of infarcted heart muscle	Cardiac remodeling and subsequent congestive heart failure following acute myocardial infarction	Pivotal Phase 2/3 expected to commence in 2011
IK-1001	Sodium sulfide	Conditions characterized by tissue ischemia	Clinical program in planning stage
IK-6001	Fibrinogen Bb15-42 / anti-inflammatory	Conditions characterized by vascular leakage	Preclinical



Grants Made During the Quarter Ended:
	March 31, 2008	810,000	5.57
	June 30, 2008	606,250	6.20
	September 30, 2008	—	—
	December 31, 2008	1,266,000	8.39
	March 31, 2009	445,000	9.58
	June 30, 2009	—	—
	September 30, 2009	270,000	9.62
	December 31, 2009	—	—

	Total	3,397,250



Valuation Assumptions:
	Risk-free rate	2.03%	2.61%
	Expected volatility	45.5%	45.5%
	Expected term	5.32 yrs	5.25 yrs
	Dividend yield	—	—

(000's)	As of December 31, 2009		As of December 31, 2008

Current portion of Term Loan	$	1,807	$	15,843
Long-term portion of Term Loan		173,914		175,720

Total outstanding Term Loan	$	175,721	$	191,563

Contractual Obligations(1) (000's)	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years

Long-term debt obligations	$	175,721	$	1,807	$	3,614	$	170,300	$	—
Operating lease obligations(2)		8,985		3,692		4,109		1,093		91
Research and development agreements(3)		9,530		2,808		5,041		1,681		—
Inventory supply agreements(4)		692		692		—		—		—

Total contractual obligations	$	194,928	$	8,999	$	12,764	$	173,074	$	91

Name		Position

Daniel Tassé	50	Chairman, Chief Executive Officer, President and Director
Ralf Rosskamp, M.D.	57	Executive Vice President, Research and Development
Matthew M. Bennett	39	Senior Vice President, Legal and Corporate Development
James Briggs	38	Senior Vice President, Human Resources
Michael Kennedy	52	Senior Vice President, Engineering and Operations
Stephen Ross	44	Senior Vice President, Commercial Operations
Aldo E. Belloni, Ph.D.(1)	60	Director
Michael T. Flaherman	45	Director
Robert T. Nelsen(3)	46	Director
Howard Pien(1)(2)	52	Director
Bryan E. Roberts, Ph.D.(2)	43	Director
Alok Singh(1)(2)(3)	56	Director
Randy H. Thurman(3)	60	Director
Lota S. Zoth(1)	50	Director

Name	Medical		Dental		Life Insurance		AD&D		Long Term Disability		401(k) match		Annual Financial Planning		Total

Daniel Tassé	$	18,225	$	1,239	$	480	$	120	$	870	$	12,250	$	14,622	$	47,806
Elizabeth Larkin	$	11,690	$	692	$	380	$	96	$	764	$	8,864	$	14,622	$	37,108
Ralf Rosskamp	$	18,225	$	1,239	$	480	$	120	$	870	$	8,500	$	14,622	$	44,056
Matthew Bennett	$	18,225	$	1,239	$	464	$	116	$	870	$	11,781	$	12,769	$	45,464
Michael Kennedy	$	18,225	$	1,239	$	422	$	106	$	851	$	11,025	$	12,756	$	44,624

	Stock Awards

Name	Number of Shares Acquired on Vesting (#)			Value Realized on Vesting ($)
Daniel Tassé		90,000	(1)		865,800	(2)
Elizabeth Larkin		—			—
Ralf Rosskamp		—			—
Matthew Bennett		—			—
Michael Kennedy		—			—

Name

Aldo Belloni	—		—	—
Michael Flaherman	—		—	—
Robert Nelsen	—		—	—
Howard Pien	—		—	—
Bryan Roberts	—		—	—
Alok Singh	—		—	—
Daniel Tassé	—		—	—
Randy Thurman	50,000	(2)	31,186	81,186
Lota Zoth	65,000	(3)	31,186	96,186

Name(1)		Shares of Series B Preferred Stock Purchased

New Mountain Entities(2)			47,468,803
ARCH(3)			5,143,877
Venrock Entities(4)			5,145,815
Black Point Group, L.P.(5)			647,302

	Shares Beneficially Owned Prior to the Offering			Percentage of Shares Beneficially Owned After Offering

	Shares Beneficially Owned Prior to the Offering		Number of Shares Option to Purchase Additional Shares	Percentage of Shares Beneficially Owned After Offering
Name and Address of Beneficial Owner	Number	Percentage	Number of Shares Option to Purchase Additional Shares	Number	Percentage
5% Stockholders:
Directors and Named Executive Officers
Other Selling Stockholders

Underwriters			Number of Shares

Goldman, Sachs & Co
Morgan Stanley & Co. Incorporated
Credit Suisse Securities (USA) LLC
Lazard Capital Markets LLC
Cowen and Company, LLC
Wedbush Securities Inc.

	Total

		Page

Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2009 and 2008		F-3
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007 (Successor), and the period January 1, 2007 through March 27, 2007 (Predecessor)		F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years ended December 31, 2009, 2008 and 2007 (Successor) and Statement of Changes in Members' Equity for the period January 1, 2007 through March 27, 2007 (Predecessor)		F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2009, 2008 and 2007 (Successor) and the period January 1, 2007 through March 27, 2007 (Predecessor)		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 (Successor), and the period January 1, 2007 through March 27, 2007 (Predecessor)		F-7
Notes to Consolidated Financial Statements		F-8

Asset description		Estimated useful life (years)

Buildings and improvements			5 - 25
Machinery, equipment and furniture			3 - 15


Cash and cash equivalents		$	1,515
Accounts receivable			42,228
Inventories			74,123
Other current assets			2,372
Property, plant and equipment			38,766
Core developed technology			170,226
Trademarks and trade names			41,288
In-process research and development			230,020

	Total assets acquired		600,538
Total liabilities assumed			(20,165	)

	Net assets acquired	$	580,373


Common stock (3,733,081 shares at $2.82 per share)		$	10,527
Series A preferred stock (11,361,250 shares at $2.83 per share)			32,152
Stock options (1,504,088 options)			1,865
Conversion of bridge loan to series B preferred stock (653,661 shares at $4.63 per share)			3,030
Warrant (60,000 shares of series A preferred stock at $2.34 per share)			140
Acquisition-related costs			654

	Total purchase price	$	48,368


Cash and cash equivalents		$	649
Property, plant and equipment			1,150
In-process research and development			41,618
Assembled workforce			289
Deferred tax asset			5,126
Other assets			202

	Total assets acquired		49,034
Total liabilities assumed			(666	)

	Net assets acquired	$	48,368

	December 31,

	2009			2008
Land and improvements	$	929		$	929
Building and improvements		8,149			7,927
Machinery, equipment and furniture		58,934			46,976
Construction in progress		2,694			2,786

		70,706			58,618
Less accumulated depreciation		(26,773	)		(17,435	)

	$	43,933		$	41,183

December 31, 2009			Useful life (years)	Gross carrying amount		Accumulated amortization			Net carrying amount

Non-amortizable intangibles:
	Trademarks and trade names		Indefinite	$	41,288	$	—		$	41,288
Amortizable intangibles:
	Core developed technology		5.75		170,226		(81,368	)		88,858
	Assembled workforce		3.75		289		(212	)		77
	Royalty interest		4.75		4,626		(1,704	)		2,922
	License agreement		10.0		500		(75	)		425

		Total		$	216,929	$	(83,359	)	$	133,570

		December 31,

		2009		2008
Employee compensation and benefits		$	12,694	$	9,668
Royalties			8,105		6,630
Research and development			14,630		2,263
Other accrued liabilities			6,599		7,225

	Total	$	42,028	$	25,786

		Loss recognized in AOCI (effective portion)			Income statement classification	Loss reclassified from AOCI to income (expense)			Loss recognized in income (expense)

Interest rate swap(1)		$	(1,374	)	Interest expense	$	(2,197	)	$	—
Interest rate collar(2)			—		Interest expense		—			(9	)

	Total derivatives	$	(1,374	)		$	(2,197	)	$	(9	)

		Preferred stock warrant

		2009			2008
Liability at beginning of period		$	527		$	298
	Other operating (income) expense		(73	)		229

Liability at end of period		$	454		$	527

			December 31, 2009			December 31, 2008

Current:
	Current deferred tax assets		$	8,910		$	8,295
	Current deferred tax liabilities			(141	)		—

Net current deferred tax assets				8,769			8,295
Non-current:
	Non-current deferred tax assets			123,061			113,367
	Non-current deferred tax liabilities			(8,587	)		(4,983	)

Net non-current deferred tax assets				114,474			108,384

		Net deferred tax assets	$	123,243		$	116,679

		2009

Balance at January 1,		$	—
	Increase related to prior year tax positions		348

Balance at December 31,		$	348

			Liquidation value		Carrying value

Series A redeemable, convertible preferred stock, stated value $1.00 per share	11,421,300	11,361,250	$	11,361,250	$	32,152,338
Series B redeemable, convertible preferred stock, stated value $4.63 per share	76,980,900	76,980,811	$	356,775,267	$	356,776,663
Series C-1 redeemable, nonconvertible preferred stock, par value $0.01 per share	100	100	$	100	$	282
Series C-2 redeemable, nonconvertible preferred stock, par value $0.01 per share	100	100	$	100	$	282
Series C-3 redeemable, nonconvertible preferred stock, par value $0.01 per share	100	100	$	100	$	282
Series C-4 redeemable, nonconvertible preferred stock, par value $0.01 per share	100	100	$	100	$	282