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Advanced Cell Technology (ACTC) wasn't the only company to resolve some legal questions this week.

Mannkind Corp (MNKD) announced on Tuesday the resolution of the arbitration process with one of its former employees who had previously filed a lawsuit against the company alleging wrongful termination and a cover-up of key data behind one of the clinical trials for Afrezza, a developmental inhaled insulin product for diabetics that was denied approval by the FDA earlier this year, pending a new trial testing the company's next-generation inhaler.

The lawsuit filed by Mr. John Arditi, who was heavily involved in the clinical development of Afrezza, was dropped shortly after it was filed due to terminology in his contract that called for arbitration in all cases relating to wrongful termination.

Tuesday's announcement puts an end to the legal drama between Mannkind and its former employee.

According to a press release issued by the company, neither party received monetary compensation to put the issue to rest and Mr. Arditi withdrew his claims against Mannkind.

Additionally, Mr. Arditi added the following statement:

“I do not believe there was fraud or scientific misconduct on the part of investigators nor do I believe there is any question regarding the reliability and integrity of the data collected in MannKind’s clinical trials while I was employed. I am proud that I was part of a team that achieved full GCP compliance with respect to the AFREZZA new drug application during my employment."

Looks like Mannkind comes out on top with the resolution of this issue.

Next up is the Phase III trial that will be necessary to bring Afrezza before the FDA for approval once again. While results turned out positive from the Phase III trial used to support the last request for approval, the trial was conducted using a different inhaler than what Mannkind intended to use for commercialization.

The upcoming Phase III will put the new generation inhaler to the test, and CEO Alfred Mann - who personally invested nearly a billion dollars into the company already - is confident that the next time up with the charm for Afrezza, and the product will ultimately be approved.

After sporting a year of significant stock declines, Mannkind is looking for a turnaround in 2012.

In addition to conducting a new trial, speculation has it that Mannkind might be looking to land a partner to ease the financial burdens of bringing Afrezza to market. Such a move would most likely ease investor concerns about financing and possibly spark a bout of short covering.

With the short percentage being roughly thirty five percent of the float, there's a good chance that a quick move higher could materialize should those shorts have to cover in a hurry.

That'll be a situation to watch moving into 2012.

Another key percentage is the forty percent of shares owned by insiders. A recent round of insider buying supports the confidence that Mr. Mann and his staff have in the ultimate rebound of the MNKD share price and eventual approval of Afrezza.

The arbitration process with Mr. Arditi came to a solid end for the company this week, and now attention will be on the latest Afrezza trial. But all the short interest and significant insider ownership adds an intriguing variable to the mix moving into the new trading year. 

Disclosure: Long MNKD call options.

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