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Collaboration and Licensing Arrangements | 12 Months Ended
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Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Collaboration and Licensing Arrangements | 8. Collaboration and Licensing Arrangements Revenue from collaborations and services for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
United Therapeutics Agreement |  | $ | 6,386 |  |  | $ | — |  |  | $ | — |
United Therapeutics Research Agreement |  |  | 3,758 |  |  |  | — |  |  |  | — |
Receptor Collaboration and License Agreement |  |  | 341 |  |  |  | 250 |  |  |  | — |
Cipla Distribution Agreement |  |  | 98 |  |  |  | — |  |  |  | — |
Sanofi License Agreement and Supply Agreement |  |  | — |  |  |  | — |  |  |  | 171,965 |
|  | $ | 10,583 |  |  | $ | 250 |  |  | $ | 171,965 |
United Therapeutics License Agreement – In September 2018, the Company and UT entered into an exclusive global license and collaboration agreement for the rights to the Company’s dry powder formulation of treprostinil and associated inhalation delivery devices. Under the UT License Agreement, UT will be responsible for global development, regulatory and commercial activities with respect to TreT. The Company will manufacture clinical supplies and initial commercial supplies of TreT, and long-term commercial supplies may be manufactured by UT. The UT License Agreement became effective on October 15, 2018 and under the terms of the agreement, the Company received an upfront payment of $45.0 million on October 16, 2018 and may receive potential milestone payments of up to $50.0 million upon the achievement of specified development targets. The Company will also be entitled to receive low double-digit royalties on net sales of TreT. UT, at its option, may expand the scope of the products covered by the UT License Agreement to include products with certain other active ingredients for the treatment of pulmonary arterial hypertension. Each such optioned product would be subject to UT’s payment to the Company of up to $40.0 million in additional option exercise and development milestone payments, as well as a low double-digit royalty on net sales of any such product. The Company, in accordance with the new revenue recognition requirements that become effective for the Company on January 1, 2018, recognized revenue on a ratable basis from October 16, 2018 through the estimated date when its performance obligation under UT License Agreement will be substantially completed December 31, 2021. During the year ended December 31, 2018, the Company recognized $6.4 million as revenue - collaborations and services. The $38.6 million balance of the upfront payment was deferred as follows: $30.5 million as deferred payments from collaborations – current and $8.1 million as deferred payment from collaboration – long term. Deferred revenue is classified as part of current or long-term liability in the accompanying consolidated balance sheets based on the Company’s estimate of the portion of the performance obligation regarding that revenue will be completed within the next 12 months. The Company has evaluated the agreement in accordance with the new revenue recognition requirements that became effective for the Company on January 1, 2018: At the inception of the agreement, the Company identified one distinct, performance obligation. The Company determined that the key deliverables include the license and certain research services upon achievement of specified development targets. Due to the specialized and unique nature of these services and their direct relationship with the license, the Company has determined that these deliverables represent one distinct bundle and thus, one performance obligation. The Company also determined that UT’s option to expand the scope of the products covered to include products with other active ingredients is not a material right, and thus, not a performance obligation at the onset of the agreement. The consideration for the option will be accounted for if and when they are exercised. The Company expected UT to complete development plan and the remaining milestone events totaling approximately $97.5 million which includes an upfront payment, four milestone event payments based on the achievement of development targets, and various pass-through costs. The Company has allocated the total $97.5 million transaction price to its one distinct, stand ready, performance obligation for the license and the associated services. Future commercial supply remains at UT’s option, is valued at a stand-alone selling price and is therefore not accounted for the current arrangement. The Company believes that this method best reflects the measure of progress toward complete satisfaction of the performance obligation. United Therapeutics Research Agreement – In September 2018, the Company and UT also entered into a Research Agreement for the conduct of research and consulting services in connection with multiple potential products, including evaluating the feasibility of preparing a dry powder formulation of a compound for the treatment of pulmonary hypertension outside the scope of the UT License Agreement. In addition, UT, at its option, may obtain a license to develop, manufacture and commercialize products based on specified compounds within the drug classes covered by the Research Agreement. Each specified compound advanced into development and commercialization under such a license would be subject to the payment to the Company of additional milestone payments of up to $30.0 million and a low double-digit royalty on net sales of such products. The Company received an upfront payment of $10.0 million, which it will recognize as revenue as the performance obligations under the Research Agreement are satisfied. During the year ended December 31, 2018, the Company recognized $3.8 million as revenue - collaborations and services; the $10.0 million payment received was deferred with $6.0 million as deferred payments from collaborations – current and $0.2 million as deferred payment from collaboration – long term. The Company has evaluated the agreement in accordance with the new revenue recognition requirements that became effective for the Company on January 1, 2018: At the inception of the agreement, the Company identified two distinct performance obligations. The Company determined that the key deliverables of each performance obligation include (i) the development of a product prototype (including a technical feasibility report); (ii) engineering consulting services. Due to the separately identifiable nature of these obligations, the Company has determined that these deliverables represent two distinct performance obligations. The Company also determined that UT’s option to expand the scope to include specific drug classes covered by the agreement is not a material right, and thus, not a performance obligation at the onset of the agreement. The consideration for the option will be accounted for if and when they are exercised. The Company determined a total transaction price of $10.0 million which includes an upfront, one-time non-refundable payment. The Company allocated the total $10.0 million transaction price to its two distinct performance obligations based on available observable market inputs, a transaction price of $9.0 million was allocated to the product prototype and a transaction price of $1.0 million was allocated to engineering consulting services. The revenue for the product prototype is recognized using a proportional performance method (based on an estimated percentage of the Company’s efforts required in relation toward overall satisfaction of the obligation). The Company believes that this method best reflects the measure of progress toward complete satisfaction of the performance obligation. The revenue for the engineering consulting services is recognized using a ratable method until the obligation is satisfied and the Company believes that this method best reflects the measure of progress toward complete satisfaction of the performance obligation. Receptor Collaboration and License Agreement — In 2016, the Company entered into a Collaboration and License Agreement (the “CLA”) with Receptor pursuant to which the Company performed initial formulation studies on compounds identified by Receptor and Receptor obtained the option to acquire an exclusive license to develop, manufacture and commercialize certain products that use the Company’s technology to deliver the compounds via oral inhalation. On December 30, 2016 Receptor exercised its option and paid the Company a $1.0 million nonrefundable option exercise and license fee. Under the Receptor License, the Company may also receive nonrefundable milestone payments upon the completion of certain technology transfer activities and the achievement of specified sales targets as well as royalties upon Receptor’s and its sublicensees’ sale of products. The $1.0 million license fee received in 2016 was recorded in deferred revenue from collaboration as of December 31, 2016 and is being recognized in net revenue — collaborations over four years, the estimated period over which the Company was required to satisfy the remaining performance obligations. The remaining performance obligations are to provide certain technology transfer activities and to maintain certain patents. Deferred payments from collaboration related to this contract was $0.5 million at December 31, 2018 of which $0.3 million was recorded in current liabilities. The additional payments referred to above represent variable consideration for which the Company has not recognized any revenue because it is uncertain that Receptor will be able to successfully develop, manufacture or sell product related to this license. Therefore, the receipt of such payments is highly susceptible to factors outside of the Company’s influence, the uncertainty regarding the receipt of these payments is not expected to be resolved for years, and the Company has limited experience with similar contracts. There was no change to the accounting for this contract as a result of the initial application of the new revenue guidance. See Note 1 – Description of Business and Summary of Significant Accounting Policies for additional information on the Company’s revenue recognition accounting policy. In 2017, the Company entered into a manufacturing and supply agreement with Receptor pursuant to which the Company will provide certain raw materials to Receptor and agreed to provide certain additional research and formulation consulting services to Receptor. For the year ended December 31, 2018 and 2017 the additional research and formulation services provided to Receptor were de minimis. Cipla Distribution Agreement — In May 2018, the Company and Cipla Ltd. (“Cipla”) entered into an exclusive agreement for the marketing and distribution of Afrezza in India and the Company received a $2.2 million nonrefundable license fee. Under the terms of the agreement, Cipla will be responsible for obtaining regulatory approvals to distribute Afrezza in India and for all marketing and sales activities of Afrezza in India. The Company is responsible for supplying Afrezza to Cipla. The Company has the potential to receive certain additional regulatory milestone payments, minimum purchase commitment revenue and royalties on Afrezza sales in India once cumulative gross sales have reached a specified threshold. The nonrefundable licensing fee was recorded in deferred revenue and is being recognized in net revenue – collaborations over 15 years, representing the estimated period to satisfy the performance obligation. The additional potential milestone payments represent variable consideration for which the Company has not recognized any revenue because of the uncertainly of obtaining market approval. The Company also recognized $0.2 million as income tax expense for a payment made to the India tax authority. Deferred payments from collaboration related to this contract was $2.1 million at December 31, 2018 of which $0.1 million was recorded in current liabilities. Biomm Supply and Distribution Agreement – In May 2017, the Company and Biomm S.A. entered into a supply and distribution agreement for the commercialization of Afrezza in Brazil. Under this agreement, Biomm is responsible for preparing and filing the necessary applications for regulatory approval of Afrezza in Brazil, including from the Agência Nacional de Vigilância Sanitária and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos. Upon satisfactory approval from these regulatory bodies, the parties will finalize the economic terms of the collaboration; thereafter, the Company will manufacture and supply Afrezza to Biomm, and Biomm will be responsible for promoting and distributing Afrezza within Brazil. The Company assessed the adoption of the new revenue guidance (Topic 606) compared to Topic 605 for all collaborations and services revenue as listed above and determined the impact to be de minimis. In 2016, the Company entered into a settlement agreement with Sanofi. The settlement was accounted for in 2016, except for a $30.6 million cash payment received under an insulin put option agreement which reduced the receivable from Sanofi in the first quarter of 2017. The amount of revenue recognized was the upfront payment of $150.0 million and two milestone payments of $25.0 million each, offset by $64.9 million of net loss share with Sanofi, as well as $17.5 million in sales of Afrezza and $19.4 million in sales of bulk insulin, both to Sanofi.

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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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