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TABLE OF CONTENTS Prospectus
Index to Consolidated Financial Statements

As filed with the Securities and Exchange Commission on November 10, 2010

Registration No. 333-166792

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 7
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

IKARIA, INC.
(Exact name of registrant as specified in its charter)

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)

Copies to:

           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.

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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.

Subject to Completion. Dated November 10, 2010.

8,000,000 Shares

Common Stock

        This is an initial public offering of shares of common stock of Ikaria, Inc. All of the 8,000,000 shares of common stock are being sold by the company.

        Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $12.00 and $13.00. Our common stock has been approved for listing on The NASDAQ Global Select Market under the symbol "IKAR".

        See "Risk Factors" on page 15 to read about factors you should consider before buying shares of the common stock.

        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.

        To the extent that the underwriters sell more than 8,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 1,200,000 shares of common stock from Ikaria, Inc. at the initial offering price less the underwriting discount.

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

Prospectus dated            , 2010.

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Prospectus

        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.

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PROSPECTUS SUMMARY

        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.

IKARIA, INC.

Company Overview

        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 $237 million in 2008, representing growth of 16%, and net sales of $219 million in the first nine months of 2010, as compared to $199 million in the first nine months of 2009, representing growth of 10%. A price increase of approximately 5% in the fourth quarter of 2008 contributed approximately $10 million of the sales growth from 2008 to 2009, and a price increase of approximately 4.5% in the fourth quarter of 2009 contributed to the sales growth from the nine months ended September 30, 2009 to the comparable period in 2010. We generated net income of $13 million in 2009, as compared to $10 million in 2008, and adjusted net income of $38 million in 2009, as compared to $31 million in 2008, representing an annual growth rate of approximately 35% and 24%, respectively. We generated net income of $7 million in the first nine months of 2010, compared to $15 million in the first nine months of 2009, and adjusted net income of $28 million in the first nine months of 2010, compared to $30 million in the first nine months of 2009. Net income and adjusted net income for the first nine months of 2010 include $9 million of expenses, net of tax, primarily related to licensing payments and the implementation of a new billing model. For a reconciliation of net income to adjusted 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, use of our proprietary U.S. Food and Drug Administration, or FDA, cleared drug-delivery system, INOcal calibration gases, distribution, emergency delivery, technical and clinical assistance, quality maintenance, on-site training and 24/7/365 customer service. The INOcal calibration gases are used to calibrate the nitric oxide and nitrogen dioxide sensors in our drug-delivery systems. Our drug-delivery systems employ multiple, redundant systems to help ensure safe, consistent and reliable delivery and monitoring of INOMAX to patients. We sell INOtherapy in the United States, Canada, Australia, Mexico and Japan. Approximately 95% of our net sales for each of the last three years were from sales in the United States.

        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 a patient's 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

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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, as of September 30, 2010, approximately 394,000 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 pivotal Phase 3 clinical trial in support of an indication for INOMAX for the 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 and pulmonary arterial hypertension, or PAH, a life-threatening, progressive disorder. 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, seeking 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.

        Our product and product candidate pipeline is summarized in the table below.

(1)

AGA AB, an affiliate of Linde North America, Inc., one of our stockholders, has the exclusive right to market and sell INOMAX in the European Union and other specified countries near the European Union. We are required to offer AGA AB the exclusive right to distribute INOMAX in any country prior to retaining an exclusive third-party distributor to sell INOMAX in that country.

        We also have a number of programs in preclinical development, including (i) IK-1001, which is hydrogen sulfide, or H₂S, a naturally occurring molecule to be delivered as sodium sulfide for a range of critical care conditions characterized by tissue ischemia, and (ii) IK-600X, a portfolio of investigational compounds for a range of critical care conditions characterized by vascular leakage.

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Critical Care Market

        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, critical organ failure and severe cardiopulmonary conditions. 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. We estimate that the aggregate U.S. market for the uses for our current marketed product and for the expected uses of our late-stage product candidates is approximately $5 billion annually. We believe that the critical care market is substantially larger than the market for our current marketed product and product candidates, and our business development efforts are focused on expanding into other areas of the critical care market.

        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.

Our Competitive Strengths

        Profitable INOtherapy Business with Significant Growth Potential—Our annual net sales have grown from 2008 to 2009 at an annual growth rate of 16%. We have been growing INOtherapy revenues, in part, through increased market penetration for the approved indication using our established sales team. We are conducting and 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 5,200 wholly-owned, proprietary drug-delivery systems, as of September 30, 2010, 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.

        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 preclinical development. We believe several of our product candidates target potentially large market opportunities.

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        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.

Our Strategy

        Growing Our INOtherapy Business—We are seeking to grow our INOtherapy revenues by increasing sales 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 commenced a pivotal Phase 3 clinical trial of LUCASSIN in October 2010 for the treatment of hepatorenal syndrome Type 1, or HRS Type 1. A Phase 1/2 clinical trial of IK-5001 was recently completed in Europe, and we intend to move its development forward with a Phase 2 and a pivotal Phase 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 attractive 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.

New Credit Facility and Dividend

        We declared on May 10, 2010 and paid to our stockholders of record as of May 28, 2010 a special cash dividend of $130.0 million from the proceeds of our new term loan and cash on hand.

        On May 14, 2010, we entered into a new six-year, $250.0 million senior secured term loan, or the new term loan, and a senior secured revolving credit facility in an aggregate principal amount of up to $40.0 million and used the proceeds to repay $175.7 million, the entire amount outstanding under our then existing term loan, or the previous term loan, and to pay the special cash dividend of $130.0 million to our stockholders as described above. Amounts outstanding under the new term loan currently bear interest at the London Interbank Offered Rate, or LIBOR, plus 5.00% per annum, with a 2.00% LIBOR floor. Assuming (i) current interest rates, (ii) our application of $35.0 million of the net proceeds received by us in the offering to repay a portion of the outstanding principal and (iii) mandatory semi-annual principal payments beginning in May 2012, we estimate that we will incur approximately $73.4 million in interest costs from September 30, 2010 through the maturity date of the new term loan.

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Risk Factors

        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:

•

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



•

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.



•

A significant portion of our revenues are derived from unapproved 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 unapproved uses, we could be subject to criminal penalties, substantial fines or other sanctions and damage awards.



•

The July 2010 voluntary recall of our INOMAX DS drug-delivery system might adversely affect our reputation for safety and might cause healthcare providers to perceive a safety risk when considering the use of INOtherapy, which could have an adverse effect on our business.



•

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.



•

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 Principal Equity Investors

        Our principal stockholders 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 September 30, 2010, the Controlling Entities collectively owned 8,043,750 shares of series A convertible preferred stock, which we refer to as the series A preferred stock, 74,175,836 shares of series B convertible preferred stock, which we refer to as the series B preferred stock, 100 shares of series C-1A special voting convertible preferred stock, 100 shares of series C-1B special voting convertible preferred stock and 100 shares of series C-1C special voting convertible preferred stock, 300 shares of series C-2 special voting convertible preferred stock, 300 shares of series C-3 special voting convertible preferred stock and 300 shares of series C-4 special voting convertible preferred stock, which we refer to collectively as our series C special voting convertible preferred stock, which shares of series A preferred stock, series B preferred stock and series C special voting convertible preferred stock represent approximately 88% of our outstanding capital stock on an as-converted to common stock basis.

        Upon the closing of this offering, all of the shares of our non-voting common stock outstanding as of September 30, 2010 will convert into 553,929 shares of our common stock, all of the outstanding shares of our series A preferred stock will convert into 4,177,683 shares of our common stock, and all of the outstanding shares of our series B preferred stock will convert into 28,306,961 shares of our common stock. Following the completion of this offering, the Controlling Entities will own 30,233,341 shares of our common stock and 1,200 shares of series C special voting convertible preferred stock, which collectively will represent approximately 71.3% of our outstanding common stock (or 69.3% of

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our outstanding common stock, if the underwriters exercise in full their option to purchase additional shares from us) and will be entitled to designate six members of our board of directors. See "Description of Capital Stock—Series C Special Voting Convertible 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 preferred stock 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 Select 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 Select Market.

Our Corporate Information

        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®, INOblender® 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.

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THE OFFERING

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        The number of shares of our common stock to be outstanding after this offering is based on 34,411,274 shares of our common stock outstanding on an as converted basis as of September 30, 2010 and excludes:

•

100 shares of our series C-1A special voting convertible preferred stock, 100 shares of our series C-1B special voting convertible preferred stock, 100 shares of our series C-1C special voting convertible preferred stock, 300 shares of our series C-2 special voting convertible preferred stock, 300 shares of our series C-3 special voting convertible preferred stock, and 300 shares of our series C-4 special voting convertible preferred stock, outstanding as of September 30, 2010;



•

3,954,105 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2010 at a weighted average exercise price of $16.60 per share;



•

503,166 shares of our common stock issuable upon settlement of restricted stock units outstanding as of September 30, 2010;



•

213,270 shares of our common stock issuable upon the exercise of stock options that will be granted on the first day our common stock is traded on The NASDAQ Global Select Market;



•

150,316 shares of our common stock available for future issuance as of September 30, 2010 under our 2007 stock plan;



•

732,956 shares of our common stock available for future issuance as of September 30, 2010 under our 2010 stock plan (excluding the "evergreen" provision providing for an annual increase in the number of shares available for issuance under the plan);



•

367,714 shares of our common stock approved by our board of directors and stockholders on October 24, 2010 and October 25, 2010, respectively, and available for future issuance as of October 25, 2010 under our 2010 stock plan;



•

367,714 shares of our common stock available for future issuance as of the closing of this offering under our 2010 Employee Stock Purchase Plan (excluding the "evergreen" provision providing for a biannual increase in the number of shares available for issuance under the plan); and



•

22,062 shares of our common stock issuable upon the exercise of a warrant outstanding as of September 30, 2010 held by SVB Financial Group at an exercise price of $2.72 per share.

        Unless otherwise indicated, all information in this prospectus assumes:

•

no exercise of the outstanding stock options or of the warrant held by SVB Financial Group and no settlement of the outstanding restricted stock units;



•

no exercise by the underwriters of their option to purchase up to 1,200,000 additional shares of our common stock;



•

the conversion of all of the outstanding shares of our non-voting common stock, series A preferred stock and series B preferred stock into common stock upon the closing of this offering;



•

all of the outstanding shares of our series C special voting convertible preferred stock remains outstanding;



•

a one-for-2.7195 reverse split of our voting common stock and non-voting common stock that was effected on October 25, 2010; and



•

the amendment and restatement of our certificate of incorporation and by-laws upon the closing of this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        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 consolidated financial data for the nine months ended September 30, 2009 and 2010 and the consolidated balance sheet data as of September 30, 2010 are derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements have been prepared on the same basis as the audited financial statements and notes thereto and, in the opinion of our management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the information for the unaudited interim periods. Our historical results for prior interim periods are not necessarily indicative of results to be expected for a full year or for any future period.

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

(i)

the conversion of all outstanding shares of our non-voting common stock, series A preferred stock and series B preferred stock into shares of common stock, as if the conversions had occurred as of January 1, 2009; and



(ii)

a net increase in interest expense of approximately $7.7 million, net of tax, as if the following events had occurred as of January 1, 2009:



(a)

the issuance of our new $250.0 million term loan, which bears interest at a rate equal to LIBOR plus 5.00% per annum, with a 2.00% LIBOR floor;



(b)

the incurrence of an original issue discount of $5.0 million on the new term loan, which is being amortized through maturity;



(c)

the incurrence of deferred financing costs of $3.3 million associated with the new term loan and revolving line of credit, which will be amortized through maturity;



(d)

the extinguishment of our previous outstanding term loan, which bore interest at a rate equal to LIBOR plus 2.25%; and



(e)

the discontinuation of cash flow hedge accounting on our interest rate swap, resulting in the recognition of changes in fair value in interest expense.

        The unaudited pro forma net income and net income per share data for the nine months ended September 30, 2010 reflect:

(i)

the conversion of all outstanding shares of our non-voting common stock and series A preferred stock and series B preferred stock into shares of common stock, as if the conversions had occurred as of January 1, 2009.



(ii)

a net increase in interest expense of approximately $2.3 million, net of tax, as if the following events had occurred as of January 1, 2009:



(a)

the issuance of our new $250.0 million term loan, which bears interest at a rate equal to LIBOR plus 5.00% per annum, with a 2.00% LIBOR floor;

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(b)

the incurrence of an original issue discount of $5.0 million on the new term loan, which is being amortized through maturity;



(c)

the incurrence of deferred financing costs of $3.3 million associated with the new term loan and revolving line of credit, which will be amoritized through maturity;



(d)

the extinguishment of our previous outstanding term loan, which bore interest at a rate equal to LIBOR plus 2.25%; and



(e)

the discontinuation of cash flow hedge accounting on our interest rate swap, resulting in the recognition of changes in fair value in interest expense; and



(iii)

the exclusion of the impact of the following non-recurring expenses related to the extinguishment and modification of our previous term loan that were recorded during the nine months ended September 30, 2010: (1) the reclassification of $1.5 million, net of tax, from accumulated other comprehensive loss to interest expense due to the discontinuation of cash flow hedge accounting on our interest rate swap and (2) loss on extinguishment and modification of debt of $2.2 million, net of tax.

        The unaudited pro forma balance sheet data at September 30, 2010 reflect the following events as if they occurred on September 30, 2010:

(i)

the conversion of all outstanding shares of our non-voting common stock, series A preferred stock and series B preferred stock into shares of common stock; and



(ii)

the reclassification of a warrant to purchase 60,000 shares of our series A preferred stock from other liabilities to stockholders' equity based on the warrant becoming exercisable for 22,062 shares of common stock upon the closing of this offering.

        The unaudited pro forma balance sheet data, as adjusted, further reflects the issuance and sale of 8,000,000 shares of our common stock in this offering at an initial public offering price of $12.50 per share, the midpoint of the range of the estimated initial public offering price between $12.00 and $13.00 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 $35.0 million 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 $280.0 million, and secured $235.0 million in financing from our previous term loan. With the proceeds from the private placement and the previous 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.

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(1)

Although the consolidated statement of operations for the Successor is presented for the year ended December 31, 2007, it was not commercially active prior to the acquisition date of March 28, 2007.

(2)

In determining our unaudited pro forma net income, we applied a blended statutory tax rate of 40% to our pro forma adjustments.

(3)

A ¹/8% variance in interest rates could impact interest expense by approximately $0.3 million on an annual basis. The unaudited pro forma net income for the year ended December 31, 2009 excludes the impact of the following non-recurring expenses related to the extinguishment and modification of our previous term loan: (a) the reclassification of $2.5 million, net of tax, from accumulated other comprehensive loss to interest expense due to the discontinuation of cash flow hedge accounting on our interest rate swap and (b) loss on extinguishment and modification of debt of $2.6 million, net of tax.

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(4)

Adjusted EBITDA and adjusted net income are presented in this prospectus as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. EBITDA is net income (loss) before interest expense (income), net, loss on extinguishment and modification of debt, expense (benefit) for income taxes, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude the expenses in the table below. Adjusted net income is net income (loss) adjusted to exclude the expenses in the table below.

Adjusted EBITDA and adjusted net income are included in this prospectus because they are key metrics used by management to assess our operating performance, and we believe they allow for a greater understanding of, and transparency into, the means by which management operates our company. In addition, we believe these measures enhance comparability of our results period-to-period and with peer companies. EBITDA, adjusted EBITDA and adjusted net income are not measures of our financial performance or liquidity under GAAP and should not be considered as alternatives to net income as a measure of operating performance, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. EBITDA and adjusted EBITDA do not consider certain cash requirements such as interest payments, tax payments, and cash costs to replace assets being depreciated and amortized. Adjusted net income does not consider certain cash costs to replace assets being amortized. Additionally, adjusted EBITDA and adjusted net income contain certain other limitations as they exclude certain costs that may recur in the future. Management compensates for these limitations by relying on GAAP results in conjunction with adjusted EBITDA and adjusted net income. These metrics have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our measures of adjusted EBITDA and adjusted net income are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

(5)

The net loss attributable to common stockholders and the net loss per common share for the nine months ended September 30, 2010 were impacted by the $122.7 million paid to preferred stockholders in connection with the dividend declared and paid during the period.

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RISK FACTORS

        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.

Risks Relating to Our INOtherapy Business

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 and the nine months ended September 30, 2010. 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:

•

a change in perception of the critical care community of the safety and efficacy of INOMAX, both in an absolute sense and relative to that of competing products;



•

a negative development in a clinical trial of INOMAX;



•

the level and effectiveness of our sales and marketing efforts;



•

any unfavorable publicity regarding INOtherapy;



•

the introduction of new competitive products;



•

the initiation or threat of litigation or governmental inquiries or investigations by federal or state agencies relating to our conduct or to INOtherapy, including unapproved uses of INOMAX;



•

the price of INOtherapy relative to competing therapeutics or interventions;



•

any changes in government and other third-party payor reimbursement policies and practices;



•

regulatory developments affecting the manufacture, marketing or use of INOMAX, including changes to the label or changes with respect to the use of products for unapproved uses;



•

loss of our ability to obtain materials or products from third parties;



•

loss of key personnel; and



•

inability or delays in completing clinical trials of INOMAX for new indications.

        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,

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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, the treatment of ARDS and the treatment of PAH. 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 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 unapproved 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 unapproved uses, it is unlawful for drug and device manufacturers to market or promote a product for an unapproved 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

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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 the promotion of products for unapproved uses are complex and subject to substantial interpretation by the FDA and other government agencies. Promotion of a product for unapproved 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, unapproved 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 unapproved uses. We also cannot be sure that our employees will comply with company policies and applicable regulations regarding the promotion of products for unapproved uses. 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 the promotion of products for unapproved uses and other sales practices, including the Department of Justice and various U.S. Attorneys' 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 the promotion of products for unapproved uses, 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 the promotion of products for unapproved uses 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

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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. We have completed the construction of the Coppell facility and the facility is ready to manufacture INOMAX from our concentrated pre-mix. We currently intend to submit a supplement to our new drug application, or NDA, for INOMAX, known as a prior approval supplement, or PAS, to the FDA for approval of the Coppell facility in the first half of 2011. Typically, the review process for a PAS is four months, but we can not control the timing or outcome of the FDA's inspection or approval of our PAS. If our PAS is denied, we would not be permitted to manufacture INOMAX at our Coppell facility. 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.

Our drug-delivery systems are sophisticated electro-mechanical devices comprised of components that may deteriorate over time. If we experience problems with, failure of, or delays in obtaining such components or INOcal, our ability to provide our customers with INOtherapy would be adversely affected.

        Because our drug-delivery systems are sophisticated electro-mechanical devices, the parts which comprise the devices are subject to wear and tear, which may result in decreased function or failure of those parts over time. Although we perform scheduled, preventive maintenance on all of our drug delivery systems to limit device failures, and additional maintenance as needed whenever a customer reports a device malfunction, components of our devices may fail. For example, through our quality monitoring systems, we recently identified that an internal cable in certain of our INOMAX DS drug-delivery systems was malfunctioning due to wear on the electrical connectors at the end of the cable. When the cable malfunctions, delivery of our drug to the patient continues uninterrupted, but the device may show fluctuating nitric oxide concentrations. We are replacing the cable and related components in devices that are affected and taking other preventive maintenance steps to reduce the likelihood of similar malfunctions in the future.

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        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. While we believe there are alternative suppliers from which we could purchase most of 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 2014 upon notice by either party. 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 2014, 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.

The July 2010 voluntary recall of our INOMAX DS drug-delivery system might adversely affect our reputation for safety and might cause healthcare providers to perceive a safety risk when considering the use of INOtherapy, which could have an adverse effect on our business.

        In July 2010, we identified through our ongoing quality monitoring systems that a pressure switch within our INOMAX DS drug-delivery system that monitors when the INOMAX cylinder should be replaced was prematurely failing on some of the systems. As a result, we initiated a voluntary Class I recall of all impacted INOMAX DS drug-delivery systems following consultation with the FDA. We identified and validated a more robust alternative pressure switch and have begun replacing the switch in the drug-delivery systems. We also communicated to healthcare providers a reminder to utilize the prescribed back-up procedures for INOMAX DS drug-delivery systems to ensure minimal disruption of the flow of INOMAX in the event of system malfunctions, such as the pressure switch failure. We are aware that a small number of patients experienced adverse events due to interruptions in the flow of INOMAX. In most of the reported cases, the interruptions were a result of healthcare providers' ceasing INOMAX delivery after the pressure switch failed despite the prescribed back-up procedures outlined in the user manual and on which they are trained. This recall may adversely affect our reputation for safety and might cause healthcare providers to perceive a safety risk when considering the use of INOtherapy, which could have an adverse effect on our business. After the July 2010 voluntary recall, the FDA inspected our Madison, Wisconsin facility in August 2010. Following its inspection, the FDA issued a Form 483, which is a notice of inspection observations. We responded to the FDA regarding the inspectional observations and, where necessary, have implemented or are implementing corrective action. While we have revised, and are continuing to revise, our procedures and documentation and have conducted, and will in the future conduct, additional training to address FDA observations, we may be required to take additional steps to address FDA observations, which could be costly.

        We currently estimate that the out of pocket expenses related to the July 2010 voluntary recall will be approximately $1.1 million. Until we complete the recall, the use of INOtherapy may decline, which could result in an adverse effect on our revenue and operating results.

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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. MGH will have no material obligations to us under the license agreement once the patents expire in 2013. 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:

•

our customers' ability to obtain reimbursement for procedures using our products in foreign markets;



•

our inability to directly control commercial activities because we are relying on third parties who may not put the same priority on our products as we would;



•

the burden of complying with complex and changing foreign regulatory, tax, accounting, and legal requirements;



•

import or export licensing requirements;



•

longer accounts receivable collection times;



•

longer lead times for shipping;



•

language barriers for technical training;



•

reduced protection of intellectual property rights in some foreign countries;



•

foreign currency exchange rate fluctuations; and



•

the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

        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

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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.

        Among our various agreements with Linde, we have a commercial agreement that remains in effect until March 2027, pursuant to which we sell to Linde certain products, including bulk nitric oxide, nitric oxide delivery systems and related accessories. Although we have the right to terminate our supply obligations if, among other things, Linde sells the products covered under the commercial agreement in North America, Linde may produce or find an alternate supplier of such products and compete with us in North America after March 2013.

        In addition, companies, such as GeNO, LLC and GeNOsys Inc., are in the early stages of developing small, mobile devices that aim to manufacture nitric oxide at the location of delivery. Air Liquide Healthcare America Corporation, or Air Liquide, currently manufactures and sells a nitric oxide 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

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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.

Risks Related to Government Regulation

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. For example, our July 2010 voluntary recall may cause the use of INOtherapy to decline, and this decline could result in an adverse effect on our revenue and operating results. In addition, this recall may adversely affect our reputation for safety and might cause healthcare providers to perceive a safety risk when considering the use of INOtherapy, which could have an adverse effect on our business.

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:

•

the Federal Food, Drug and Cosmetics Act, which regulates manufacturing, labeling, marketing, distribution and sale of prescriptions drugs and medical devices;



•

the Prescription Drug User Fee Act, which governs the filing of applications for marketing approval of prescription drug products;



•

the Food and Drug Administration Amendment Act of 2008;



•

the Federal False Claims Act, which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government;

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•

the Federal False Statements Act, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with delivery of or payment for healthcare benefits, items or services;



•

the Federal Anti-Kickback Law, which prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid;



•

other Medicare and Medicaid laws and regulations that establish the requirements for coverage and payment of, among other things, prescription drugs, including the amount of such payment;



•

the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any healthcare benefit program, including private payors, and Health Information Technology for Economic and Clinical Health, or HITECH, Act, both of which require us to comply with standards regarding privacy and security of individually identifiable health information and conduct certain electronic transactions using standardized code sets;



•

the Deficit Reduction Act of 2005;



•

the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, or the PPACA;



•

state and foreign law equivalents of the foregoing; and



•

state food and drug laws, pharmacy acts and state pharmacy board regulations, which govern the sale, use, distribution and prescribing of prescription drugs.

        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 the promotion of products for unapproved uses 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

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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:

•

delay in approving or refusal to approve a product;



•

product recall or seizure;



•

suspension or withdrawal of an approved product from the market;



•

interruption of production;



•

operating restrictions;



•

warning letters;



•

injunctions;



•

fines and other monetary penalties;

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•

criminal prosecutions; and



•

unanticipated expenditures.

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.

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        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:

•

access, utilization and demand for any drug products or devices for which we may obtain regulatory approval;



•

our ability to set a price that we believe is fair for our products, or obtain necessary coding, coverage and payment;



•

our ability to generate revenues and achieve or maintain profitability;



•

the level of taxes that we are required to pay; and



•

the availability of capital.

Risks Relating to the Development of Our Product Candidates

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 an 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. 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, 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 clinical trial be conducted to supplement the existing data. We have reached agreement with the FDA on a special protocol assessment for an additional Phase 3 clinical trial of Lucassin, however the FDA retains substantial discretion in the approval process and there are no assurances of product approval even if the agreed upon endpoints of the additional phase three trial of Lucassin are met.

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

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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, INOMAX did not show a statistically significant benefit compared to treatment with the placebo. We believe this may be due to the unexpectedly positive results in the placebo arm. We had also initiated a Phase 2 clinical trial of IK-1001 in patients undergoing coronary artery bypass graft surgery, but terminated it based on a need to develop a reliable and sensitive bioanalytical assay for IK-1001 to support clinical investigation.

        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:

•

our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials which even if undertaken cannot ensure we will gain approval;



•

data obtained from preclinical testing and clinical trials may be subject to varying interpretations, which could result in the FDA or other regulatory authorities deciding not to approve a product in a timely fashion, or at all;



•

the cost of clinical trials may be greater than we currently anticipate;



•

if we are required to conduct overseas clinical trials, we may also be subject to financial risk based on foreign currency exchange rate fluctuations;



•

regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;



•

we, or the FDA or other regulatory authorities, might suspend or terminate a clinical trial at any time on various grounds, including a finding that participating patients are being exposed to unacceptable health risks; and



•

the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.

        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.

We may be required to suspend or discontinue clinical trials of INOMAX or our product candidates due to unexpected side effects and safety risks that could preclude or delay approval of our products and/or require us to revise our product label.

        Administering any pharmacologically active product candidate to humans may produce undesirable side effects. As a result, our clinical trials could be suspended at any time for safety-related reasons. We may voluntarily suspend or terminate our clinical trials if at any time we believe that our product candidates present an unacceptable risk to the clinical trial subjects. In addition, institutional review

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boards or regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials present an unacceptable safety risk to patients.

        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. During a diagnostic clinical trial of INOMAX in children with pulmonary hypertension completed in 2006, we unexpectedly discovered that the use of INOMAX could precipitate heart failure in children with pre-existing left heart dysfunction. Based on these findings, we added an additional warning to the INOMAX product labeling. In connection with granting approval for a product or after discovery of previously unknown problems, the FDA 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 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.

        In addition, upon expiration of the principal issued patents covering INOMAX in 2013, others may commercialize competitive nitric oxide therapies and, as a result, we may choose to reduce our prices of INOtherapy and/or we may lose a substantial portion of our INOtherapy sales. If either of these occurs, we may not be able to attract and retain qualified sales and marketing professionals and/or we may be forced to reduce our sales force. A reduced, less-qualified sales force could have an adverse effect on customer satisfaction and result in a further decline of INOtherapy sales and could adversely affect the commercialization of our other product candidates.

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Risks Related to Our Indebtedness

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

        As of September 30, 2010, our wholly owned subsidiary, Ikaria Acquisition Inc., or Ikaria Acquisition, had, and Ikaria, Inc. guaranteed, $250.0 million in principal amount of secured term loan debt, and up to $40.0 million borrowing availability under a revolving line of credit, against which $1.0 million in letters of credit were issued, and we, including our subsidiaries, had $36.9 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 agreement 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.

        The following terms and/or consequences of our new term loan combined with the substantial amount of our debt and other financial obligations could materially adversely affect our business and operations:

•

limits our ability to take various actions that could be in the interests of our stockholders, including our ability to incur additional debt, pay dividends and make distributions, make certain investments (including licensing transactions and acquisitions), merge or consolidate and sell assets;



•

requires us to dedicate a substantial portion of cash flow from operations after December 31, 2011 to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;



•

increases our vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;



•

limits the costs and expenses we may incur for new drug development;



•

limits our flexibility in planning for, or reacting to, changes in our business and our industry; and



•

places us at a competitive disadvantage compared to our competitors that have less debt.

        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. 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.

Our business may not generate sufficient cash flow from operations, or cash flow from other sources may not be available to us in an amount sufficient, to enable us to repay our indebtedness.

        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. Failure to satisfy our current and future debt obligations could result in an event of default and, as a result, the lenders could seek to enforce security interests in the collateral securing such indebtedness.

Our failure to comply with the covenants contained in our credit agreement, including as a result of events beyond our control, could result in an event of default which could materially and adversely affect our operating results and our financial condition.

        Our credit agreement 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

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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 credit agreement 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 credit agreement and the pledge of our assets as collateral, we have a limited ability to obtain additional debt financing.

Risks Related to Our Financial Position and Capital Requirements

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. Our future funding requirements, which may be significantly greater than we expect, will depend upon many factors.

        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:

•

the progress, timing, and success of our research and development activities related to our clinical trials;



•

the timing of any future payments we may be required to make under our license agreements;



•

the cost, timing and outcomes of regulatory submissions, reviews and approvals;



•

the cost of any investigation or litigation related to the promotion or marketing of INOMAX for unapproved uses;



•

the extent to which INOtherapy continues to be commercially successful;



•

the cost of any corrective actions or product recalls;



•

the continued acceptance of our new billing model;



•

the success of sales of INOMAX in foreign markets;



•

the size, cost and effectiveness of our sales and marketing programs and efforts;



•

the status of competitive products;



•

our ability to enforce and defend our intellectual property rights;



•

our establishment of additional strategic or licensing arrangements with other companies;



•

our ability to obtain additional debt financing; and



•

our acquisition of businesses, products or product candidates.

        We are currently conducting two pivotal Phase 3 clinical trials and are planning four additional late-stage clinical trials, each of which will require significant resources. Clinical trials, especially Phase 3 clinical trials, are expensive and time-consuming. They often require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. The larger the trial and the more difficult it is to enroll patients, the more expensive and time consuming it will be.

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        Our ability to enroll sufficient numbers of patients in our clinical trials depends on many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, the eligibility criteria for the trial, competing clinical trials and the availability of approved effective drugs. For these reasons, enrollment of our 380-patient pivotal Phase 3 clinical trial of INOMAX for BPD may take longer than we expect. For the LUCASSIN clinical trial, in which we intend to investigate the safety and efficacy of terlipressin in the treatment of HRS Type 1, the incidence of qualified patients with the disease in transplant centers will be a key factor in meeting enrollment targets.

        In addition to our ongoing pivotal Phase 3 clinical trial of INOMAX for BPD and our pivotal Phase 3 clinical trial for LUCASSIN, during 2011, we plan to enroll patients in a (i) Phase 2 clinical trial and a pivotal Phase 3 clinical trial for IK-5001, in each of which we intend to enroll hundreds of patients over the clinical trial term, (ii) Phase 2 clinical trial of INOMAX for the treatment of PAH and (iii) Phase 2 clinical trial of INOMAX for ARDS. Regarding the IK-5001 clinical trial, there are many other ongoing studies investigating the treatment and/or prevention of CHF, which will impact our ability to enroll patients for this study.

        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.

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 September 30, 2010, we had $36.9 million of cash and cash equivalents, consisting of cash and money market deposit account balances. No assurance can be given that further deterioration in

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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.

Risks Relating to Product Acquisitions and In-Licenses

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 and IK-5001 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:

•

manufactured or produced economically;



•

protected by adequate intellectual property rights;



•

successfully commercialized; or



•

widely accepted in the marketplace.

        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.

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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 and certain preclinical assets, including 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.

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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.

Risks Related to Our Business and Industry

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:

•

design, develop and commercialize products that are superior to other products in the market;



•

attract qualified scientific, medical, sales and marketing, engineering and commercial personnel;



•

obtain patent and/or other proprietary protection for our processes and product candidates; and



•

obtain required regulatory approvals.

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.

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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 the contributions of our executive officers, as well as our most senior clinicians and scientists. The loss of services of any key employees could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of our product candidates. Although we have entered into employment agreements with these individuals, setting forth certain salary, severance and other terms, the agreements do not require continued employment and we or the employee may terminate the relationship at any time. We do not carry "key person" insurance covering any of our employees.

        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.

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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

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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 based on allegations that our drug-delivery system fails to provide adequate warnings. For example, although no suits have been brought to date, it is possible that a suit could be brought as a result of issues relating to the July 2010 voluntary recall. A suit may also be brought against us if our drug-delivery system is alleged to 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:

•

decreased demand for INOtherapy or other products that we may develop;



•

injury to our reputation;



•

withdrawal of clinical trial participants, trial sites and investigators;



•

costs to defend the related litigation;



•

a diversion of management's time and our resources;



•

substantial monetary awards to trial participants or patients;



•

product recalls or withdrawals;



•

labeling, marketing or promotional restrictions;



•

loss of revenue;



•

the inability to commercialize our product candidates; and



•

a decline in our stock price.

        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.

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        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:

•

a covered benefit under its health plan;



•

safe, effective and medically necessary;



•

appropriate for the specific patient;



•

cost-effective; and



•

neither experimental nor investigational.

        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

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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.

Risks Relating to Dependence on Third Parties

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 suppliers and manufacturers to produce and deliver 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 supplier or manufacturer to produce or deliver supplies for us may delay or impair our ability to complete our clinical trials or commercialize our product candidates.

        We currently rely, and expect to continue to rely, on third parties for supply of the active pharmaceutical ingredients in some of our product candidates. The suppliers of our product candidates are, and any future third-party suppliers with whom we enter into agreements will likely be, our sole suppliers of our product candidates for a significant period of time. These suppliers are commonly referred to as single-source suppliers. If our suppliers fail to deliver materials and provide services needed for the production of our product candidates in a timely and sufficient manner, or if they fail to comply with applicable regulations, clinical development or regulatory approval of our product candidates or commercialization of our products could be delayed, depriving us of potential additional product revenue.

        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

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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.

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        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.

Risks Related to Patents, Licenses and Trade Secrets

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.

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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:

•

obtain and maintain U.S. and foreign patents, including defending those patents against adverse claims;



•

protect trade secrets;



•

operate without infringing the proprietary rights of others; and



•

prevent others from infringing our proprietary rights.

        We may not have any additional patents issued from any patent applications that we own or license. For example, we recently filed U.S. patent applications 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 these patents, and the patents 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.

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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

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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.

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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:

•

Others may be able to develop and commercialize treatments that are similar to our product or product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed.



•

We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed.



•

We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions.



•

Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.



•

It is possible that our pending patent applications will not lead to issued patents.



•

Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.



•

Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.



•

We may not develop additional proprietary technologies that are patentable.



•

The patents of others may have an adverse effect on our business.



•

Another party may be granted orphan exclusivity for an indication that we are seeking before us or may be granted orphan exclusivity for one of our products for another indication.

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.

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Risks Related to this Offering and Ownership of our Common Stock

You will not have the same protections available to other stockholders of NASDAQ-listed companies because we are a "controlled company" within the meaning of The NASDAQ Global Select 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 Select 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:

•

a majority of the board of directors consist of independent directors;



•

compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee that is composed entirely of independent directors; and



•

director nominees be selected or recommended for election by a majority of the independent directors or by a nominating committee that is composed entirely of independent directors.

        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 stockholders of other companies that are subject to all of The NASDAQ Global Select 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:

•

fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;



•

changes in estimates of our financial results or recommendations by securities analysts;



•

changes in market valuations of similar companies;



•

success of competitive products;



•

changes in our capital structure, such as future issuances of securities or the incurrence of debt;



•

clinical or regulatory developments with respect to our product or product candidates or those of our competitors;



•

announcements by us or our competitors of significant acquisitions or strategic alliances;

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•

regulatory developments in the United States, foreign countries or both;



•

litigation involving our company, our general industry or both;



•

corrective actions, product recalls or similar actions;



•

additions or departures of key personnel;



•

investors' general perception of us; and



•

changes in general economic, industry and market conditions.

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 42,411,274 shares of common stock outstanding based on the number of shares outstanding as of September 30, 2010, of which 8,000,000 shares are being sold in this offering and will be freely tradeable and 34,411,274 shares, or 81.1% of our outstanding shares after this offering, are currently restricted as a result of securities laws and lock-up agreements but will be able to be sold, subject to any applicable volume limitations under federal securities laws, after expiration of, or release from, the 180-day lock-up period. Of these shares, 34,135,665 shares will be subject to a 180-day contractual lock-up with the underwriters, subject to extension in specified instances, and 275,609 shares will be subject to a 180-day contractual lock-up with us. The representatives of the underwriters can waive the provisions of the underwriters' lock-up at any time.

        In addition, as of September 30, 2010, there were 4,457,271 shares subject to outstanding options and restricted stock units 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 34,433,335 shares of our outstanding common stock and common stock issuable upon conversion of our outstanding warrant, series A preferred stock and series B preferred stock as of September 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.

Because we do not currently intend to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on your investment unless you sell your common stock for a price greater than that which you paid for it.

        Although we declared on May 10, 2010 and paid a special cash dividend of $130.0 million to our stockholders of record as of May 28, 2010, we currently intend to retain future earnings, if any, for future operation, expansion and debt repayment and do not intend to pay any additional cash dividends for the foreseeable future. Any decision to declare and pay cash dividends in the future will be made at the direction of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay cash dividends is limited by covenants of our and our subsidiaries' outstanding indebtedness, including our senior secured credit

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facilities. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

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 41.2% of our outstanding common stock (40.0% if the underwriters exercise in full their option to purchase additional shares). 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 each of its directors will be transferrable by the New Mountain Entities when transferred with at least one-third of the aggregate number of shares of our common stock issued upon conversion of the series B preferred stock originally purchased by the New Mountain Entities.

        The New Mountain Entities will also retain the benefit of certain 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 (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 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 common stock (as set forth as outstanding on the cover of our then most recently filed annual report on Form 10-K or quarterly report on Form 10-Q). 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 81.1% of our outstanding common stock (78.9% if the underwriters exercise in full their option to purchase additional shares).

        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."

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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 at an assumed initial public offering price of $12.50 per share, which is the midpoint of the price range listed on the cover page of this prospectus, you will incur immediate dilution of $10.30 in net tangible book value per share from the price you paid and, following this offering, purchasers in the offering will have contributed 20% 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 September 30, 2010, 124,280 shares of common stock were issuable upon exercise of stock options with exercise prices ranging from $0.08 to $0.27 and 1,743,296 shares of common stock were issuable upon exercise of stock options with an exercise price of $12.59. Additionally, on the first day our common stock is traded on The NASDAQ Global Select Market, we will grant stock options to purchase 213,270 shares of our common stock. To the extent that these outstanding options and restricted stock units 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 a portion of our indebtedness, costs we expect to incur in connection with the consolidation of two of our existing facilities to create a new corporate headquarters and working capital and other general corporate purposes, including acquisition and in-licensing opportunities. 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

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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 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.

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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:

•

establishing a classified board of directors so that not all members of our board are elected at one time;



•

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;



•

limiting the liability of, and providing indemnification to, our directors and officers;



•

limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;



•

requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;



•

controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;



•

providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings; and



•

limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office.

        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 stockholders who acquired shares of our stock prior to this offering, who will own approximately 81.1% of our outstanding common stock following this offering on an as-converted to common stock basis, to sell their shares of our stock in connection with, and/or vote their 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.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        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:

•

continued growth and acceptance of INOtherapy;



•

our ability to obtain additional indications for INOMAX;



•

our ability to comply with laws and government regulations;



•

the success of our new billing model;



•

our ability to fund operations with cash flow from net sales;



•

our ability to acquire and develop additional product candidates or approved products;



•

the success and timing of our product and product candidate development activities and clinical trials;



•

our ability to obtain and maintain regulatory approvals for our product and product candidates;



•

our ability to successfully commercialize additional products;



•

our ability to manage growth and successfully expand operations;



•

our ability to complete the voluntary recall and replacement of our INOMAX DS drug-delivery systems;



•

our ability to penetrate foreign markets;



•

the performance of our collaborators, single source-suppliers and manufacturers;



•

the success of competing treatments and interventions;



•

our ability to obtain and maintain intellectual property protection for our product and product candidates;



•

the loss of key personnel;



•

regulatory developments in the United States and foreign countries;



•

our use of the proceeds from this offering; and



•

the accuracy of our estimates regarding revenues, expenses, capital requirements and needs for additional financing, and our ability to obtain additional financing.

        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.

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USE OF PROCEEDS

        We estimate that the net proceeds to us from our issuance and sale of 8,000,000 shares of our common stock in this offering will be approximately $86.5 million, assuming an initial public offering price of $12.50 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. If the underwriters exercise in full their option to purchase additional shares, we estimate that the net proceeds from this offering will be approximately $100.5 million, assuming an initial public offering price of $12.50 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.

        A $1.00 increase (decrease) in the assumed initial public offering price of $12.50 per share, which is the midpoint of the price range listed on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $7.4 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 payable by us.

        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 $35.0 million to repay a portion of our indebtedness;



•

approximately $11.0 million for costs we expect to incur in connection with the consolidation of two of our existing facilities to create a new corporate headquarters, including for leasehold improvements, telecommunications equipment, furniture and fixtures; and



•

the remainder for working capital and other general corporate purposes, including acquisition and in-licensing opportunities.

        As of September 30, 2010, we had $245.6 million outstanding on our new term loan, net of original issue discount. The new term loan currently bears interest at LIBOR plus 5.00% per annum, with a 2.00% LIBOR floor. The new term loan matures on May 14, 2016. We used the proceeds of the new term loan to repay the outstanding balance on our previous term loan and to pay the special cash dividend to our stockholders. After application of approximately $35.0 million of the net proceeds from this offering to repay a portion of our indebtedness under our new term loan, we expect that approximately $215.0 million will be outstanding under the new term loan.

        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. We currently intend to continue to use cash flow from net sales of INOtherapy to fund our research and development efforts, including the late-stage clinical trials and other clinical trials we may conduct, over the next few years. Through the end of 2013, inclusive of milestone payments, we currently estimate that we will spend approximately $11.1 million on the development of INOMAX for the prevention of BPD, approximately $10.9 million on the development of INOMAX for the treatment of ARDS and approximately $19.3 million on the development of INOMAX for the treatment of PAH. In addition, through the end of 2013, we currently estimate that we will spend approximately $23.1 million on the development of LUCASSIN and approximately $114.9 million on the development of IK-5001, which are our later stage product candidates.

        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.

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DIVIDEND POLICY

        We declared on May 10, 2010 and paid to our stockholders of record as of May 28, 2010 a special cash dividend of $130.0 million from the proceeds of our new credit facility and cash on hand. Our executive officers received an aggregate dividend amount of approximately $74,000. None of our directors received the dividend. The stockholders affiliated with our directors received an aggregate dividend amount of $114.2 million.

        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, do not intend to pay any additional cash dividends to our stockholders in the foreseeable future.

        The terms of our new credit agreement permitted the special cash dividend described above, but otherwise restrict payment of cash dividends on our capital 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.

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CAPITALIZATION

        The following table sets forth our cash, cash equivalents and capitalization as of September 30, 2010:

•

on an actual basis;



•

on a pro forma basis to give effect to:



(i)

the conversion of all outstanding shares of our non-voting common stock, series A preferred stock and series B preferred stock into 33,038,573 shares of common stock; and



(ii)

the reclassification of a warrant to purchase shares of series A preferred stock from other liabilities to stockholders' equity based on the warrant becoming exercisable for 22,062 shares of common stock upon the closing of this offering; and



•

on a pro forma as adjusted basis to give effect to (i) the issuance of 8,000,000 shares of our common stock in this offering, (ii) the receipt of the estimated net proceeds from this offering based on an assumed initial public offering price of $12.50 per share, the midpoint of the price range reflected on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and (iii) the application of $35.0 million of such net proceeds to repay a portion of our indebtedness.

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        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.