With an approval of its inhaled insulin, Afrezza, and a partnership with Sanofi (NASDAQ:SNY) set up to sell the device, MannKind's (NASDAQ:56400P706) third-quarter earnings was more about the future launch of Afrezza and where the company goes from here than about the third-quarter revenue and earnings.

(For the record, MannKind had $0 in revenue and lost $36.5 million in the third quarter on a GAAP basis.)

Source: MannKind.

Despite getting $150 million upfront as part of its deal with Sanofi, MannKind can't book the revenue because accounting rules say that the company has to amortize it over the life of the profitable partnership. Until Afrezza launches and MannKind can make a reasonable guess as to how long profits will last, it can't book the revenue.

But GAAP accounting isn't particularly useful for evaluating a biotech. If it was, there would be no way investors would let MannKind rack up a nearly $2.5 billion loss over the past 13 years.

What is important is having enough of a nest egg to get to cash flow-positive, and despite not being able to book the $150 million payment, MannKind still has that cash from Sanofi in the bank. It also got $40 million as part of its deal with Deerfield and another $17.3 million from the exercising of warrants and stock options in the third quarter.

All told, MannKind ended the third quarter with $172.5 million. Add in another $70 million in potential borrowing from Deerfield and $30 million line of credit from CEO Al Mann, and MannKind is sitting on a nice nest egg.

And it gets even better. Part of the deal with Sanofi includes manufacturing milestones broken into three parts worth $25 million each. It appears the first one of those milestones might be paid soon.

And once the launch happens, much of the manufacturing costs, which are currently captured in research and development expenses, will be reimbursed by the partnership, so MannKind won't have to use incur those expenses. And since it's already purchased insulin to manufacture the devices, the transfer of the expenses off its expense report will result in a cash gain for the company.

The partnership won't be profitable for a while, but that won't affect MannKind's nest egg -- at least not for a while. Sanofi will cover the first $175 million of MannKind's 35% portion of the partnership's loss in the form of a line of credit.

So what's MannKind going to do with the cash? It's working on a new manufacturing design that could lower cost and make higher dosage strength of insulin. There's also the potential to use its inhalation technology, Technosphere, to deliver other drugs into blood stream via the lungs thereby avoiding injections, reducing gastrointestinal side effects, and/or increasing the onset of the drug. MannKind is remaining mum on exactly which drugs those might be, but it did specifically mention pain medications where rapid onset would be a welcome relief.