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Collaboration, Licensing and Other Arrangements | 12 Months Ended
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Dec. 31, 2021
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Collaboration, Licensing and Other Arrangements | 8. Collaboration, Licensing and Other Arrangements Revenue from collaborations and services for the years ended December 31, 2021 and 2020 are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
UT License Agreement |  | $ | 34,145 |  |  | $ | 32,213 |
UT CSA Agreement |  |  | 267 |  |  |  | — |
Vertice Pharma Co-Promotion Agreement |  |  | 1,147 |  |  |  | — |
Receptor CLA |  |  | 245 |  |  |  | 250 |
Cipla License and Distribution Agreement |  |  | 147 |  |  |  | 147 |
Other |  |  | 323 |  |  |  | — |
UT Research Agreement |  |  | — |  |  |  | 210 |
Total revenue from collaborations and services |  | $ | 36,274 |  |  | $ | 32,820 |
The activity related to deferred revenue and the related revenue recognized for collaborations and services is as follows (in thousands):
|  | December 31, |
|  | 2021 |  |  | 2020 |
Deferred revenue: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 34,937 |  |  | $ | 40,847 |
Additions |  |  | 21,707 |  |  |  | 1,910 |
Upfront and milestone payments |  |  | — |  |  |  | 25,000 |
Revenue — collaborations and services |  |  | (36,274 | ) |  |  | (32,820 | )
Ending balance |  | $ | 20,370 |  |  | $ | 34,937 |
United Therapeutics License Agreement — In September 2018, the Company and UT entered into an exclusive global license and collaboration agreement (the “UT License Agreement”), pursuant to which UT is responsible for global development, regulatory and commercial activities with respect to Tyvaso DPI. The Company is responsible for manufacturing clinical supplies and commercial supplies of Tyvaso DPI. Under the terms of the UT License Agreement, the Company received an upfront payment of $45.0 million in October 2018 and four $12.5 million milestone payments between April 2019 and November 2020. The Company will also be entitled to receive low double-digit royalties on net sales of Tyvaso DPI as well as a manufacturing margin on commercial supplies of the product. 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. At the inception of the agreement, the Company identified one distinct, performance obligation. The Company determined that the key deliverables include the license, supply of product to be used in clinical development, and certain research services upon achievement of specified development targets (“R&D Services”). 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 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 upon exercise of the option. The Company expected to complete the activities specified in the initial development plan and to achieve the milestone event s by December 31, 2021 for total consideration of approximately $105.8 million, which included an upfront payment, four milestone payments, various pass-through costs and payments for clinical supplies. Revenue was allocated as follows:
Distinct Performance Obligation |  | Transaction Price |  |  | Allocation of Price |  |  | Recognition Method |  | Progress Measure |  | Recognition Period |
|  | (in millions) |  |  |  |  |  |  |  |  |  |  |  |
R&D Services and License |  | $ | 105.8 |  |  | 100% |  |  | Over time |  | Ratably |  | Sep 2018 - Dec 2021 | (1)
(1) | Recognition period represents the estimated period to satisfy the performance obligation.
In May 2021, UT and the Company updated the development plan under the UT License Agreement to provide for additional process-development and stability-testing activities as well as the expansion of the Company’s commercial manufacturing capacity. The activities and deliverables under the current development plan resulted in four distinct performance obligations which include: (1) the continued development and approval process for an NDA (“R&D Services”); (2) certain pre-commercial services in preparation for commercial launch of Tyvaso DPI “(Pre-Commercial Services”); (3) development activities for the next generation of Tyvaso DPI (“Next-Gen R&D Services”); and (4) certain design and construction activities in anticipation of expansion of the Company’s commercial manufacturing facility (“Facility Expansion Services”). The total consideration for the updated development plan of $50.9 million was allocated to the four distinct performance obligations based on management’s assessment of the stand-alone selling price of each performance obligation. Revenue was allocated as follows:
Description |  | Transaction Price |  |  | Allocation of Price(1) |  |  | Recognition Method |  | Progress Measure |  | Revenue Recognition |
|  | (in millions) |  |  |  |  |  |  |  |
Total transaction price |  | $ | 50.9 |  |  |  |  |  |  |  |  |  |  |  |
Distinct Performance Obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
R&D Services and License |  |  |  |  |  | $ | 18.4 |  |  | Over time |  | Ratably |  | May 2021 - Oct 2021 | (2)
Pre-Commercial Services |  |  |  |  |  | $ | 4.6 |  |  | Over time |  | Input |  | % of completion of costs | (3)
Next-Gen R&D Services |  |  |  |  |  | $ | 7.2 |  |  | Over time |  | Input |  | % of completion of costs | (3)
Facility Expansion Services(4) |  |  |  |  |  | $ | 20.7 |  |  | Point in time |  |  |  | Transfer of control | (5)
(1) | Allocation is based on management’s assessment of the stand-alone selling price of each performance obligation.
(2) | Represents the estimated period when the R&D Services performance obligation will be substantially complete.
(3) | Pre-Commercial Services and Next-Gen R&D Services performance obligations will be satisfied over time using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.
(4) | The Company also acts as agent for the procurement of equipment for the manufacturing expansion for the UT Equipment. The Company received $5.0 million from UT for the UT Equipment, which was recognized as deposits from customer on the consolidated balance sheet and will be released as the title is transferred to UT.
(5) | The Facility Expansion Services performance obligation would be recognized as control of manufactured products is transferred to the customer.
On August 12, 2021, the Company and UT entered into a commercial supply agreement (the “CSA”), pursuant to which the Company is responsible for manufacturing and supplying to UT, and UT is responsible for purchasing from the Company on a cost-plus basis, Tyvaso DPI and BluHale inhalation profiling devices, as required for commercial distribution and sale by UT. In addition, UT is responsible for supplying treprostinil at its expense in quantities necessary to enable the Company to manufacture Tyvaso DPI as required by the CSA. Also pursuant to the CSA, UT will remit a reimbursement of certain pre-production costs incurred by the Company to support the manufacturing and supply of Tyvaso DPI. The activities and deliverables under the CSA and the current development plan resulted in three distinct performance obligations which include: (1) the license, supply of product to be used in clinical development, and continued development and approval support for Tyvaso DPI (“R&D Services and License”); (2) development activities for the next generation of Tyvaso DPI Next-Gen R&D Services; and (3) a material right associated with future commercial manufacturing and supply of product (“Manufacturing Services”). The total revised anticipated cash flows of $221.5 million from the transaction was allocated to the three distinct performance obligations as follows.
|  | Anticipated |  |  |  |  |  |  |  |
Description |  | Cash Flow |  |  | Revenue Allocation(1) |  |  | Recognition Method |  | Progress Measure |  | Revenue Recognition |
|  | (in millions) |  |  |  |  |  |  |  |
Total anticipated cash flow |  | $ | 221.5 |  |  |  |  |  |  |  |  |  |  |  |
Distinct Performance Obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
R&D Services and License(2) |  |  |  |  |  | $ | 6.0 |  |  | Over time |  | Ratably |  | Aug 2021 - Oct 2021 | (3)
Next-Gen R&D Services |  |  |  |  |  | $ | 8.8 |  |  | Over time |  | Input |  | % of completion of costs | (4)
Manufacturing Services |  |  |  |  |  | $ | 206.7 |  |  | Point in time |  |  |  | Transfer of control | (5)
(1) | Allocation is based on management’s assessment of the stand-alone selling price of each performance obligation.
(2) | The license for the Company’s IP was considered to be interdependent with the development activities to support approval of Tyvaso DPI. A sales-based royalty is promised in exchange for the IP license; therefore, the royalties associated with the license are excluded from the determination of the transaction price and the Company will recognize revenue as the sale of Tyvaso DPI to a patient occurs.
(3) | Represents the estimated period when the R&D Services performance obligation will be substantially complete.
(4) | The Next-Gen R&D Services performance obligation will be satisfied over time using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.
(5) | The Manufacturing Services performance obligation will be recognized as control of manufactured products is transferred to the customer; therefore, no revenue associated with this obligation was recognized during the year ended December 31, 2021. The allocation of transaction price includes a material right related to manufacturing services. The total anticipated cash flow is based on the Company’s estimated production and the ultimate cash flows may vary as manufacturing purchase orders are received.
As amended by an amendment dated October 16, 2021, the term of the CSA continues until December 31, 2031 (unless earlier terminated) and is thereafter renewed automatically for additional, successive two-year terms unless (i) United Therapeutics provides notice to the Company at least 24 months in advance of such renewal that United Therapeutics does not wish to renew the CSA or (ii) the Company provides notice to United Therapeutics at least 48 months in advance of such renewal that the Company does not wish to renew the CSA. The Company and United Therapeutics each have normal and customary termination rights, including termination for material breach that is not cured within a specific timeframe or in the event of liquidation, bankruptcy or insolvency of the other party. The Company accounted for the contract modification as if it were part of the existing contract since the amendment modified the scope and price of the CSA by extending the term and increasing the occupancy rate. The effect of the modification on the transaction price and on the measure of progress is recognized as an adjustment to revenue as of the date of the modification. The modification did not result in a change the activities and deliverables under the CSA.
|  | Anticipated |  |  |  |  |  |  |  |
Description |  | Cash Flow |  |  | Revenue Allocation(1) |  |  | Recognition Method |  | Progress Measure |  | Revenue Recognition |
|  | (in millions) |  |  |  |  |  |  |  |
Total anticipated cash flow(2) |  | $ | 463.5 |  |  |  |  |  |  |  |  |  |  |  |
Distinct Performance Obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
R&D Services and License(3) |  |  |  |  |  | $ | — |  |  | Over time |  | Ratably |  | Aug 2021 - Oct 2021 | (4)
Next-Gen R&D Services(5) |  |  |  |  |  | $ | 4.8 |  |  | Over time |  | Input |  | % of completion of costs | (6)
Manufacturing Services(7) |  |  |  |  |  | $ | 458.7 |  |  | Point in time |  |  |  | Transfer of control | (8)
(1) | Allocation is based on management’s assessment of the stand-alone selling price of each performance obligation.
(2) | The total anticipated cash flow includes a transaction price of $64.3 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $399.2 million for future supply of Tyvaso DPI over the remaining term of the CSA.
(3) | The license for the Company’s IP was considered to be interdependent with the development activities to support approval of Tyvaso DPI. A sales-based royalty is promised in exchange for the IP license; therefore, the royalties associated with the license are excluded from the determination of the transaction price and the Company will recognize revenue as the sale of Tyvaso DPI to a patient occurs.
(4) | Represents the period when the revenue for the R&D Services performance obligation was recognized.
(5) | The standalone selling price (“SSP”) for the Next-Gen R&D Services performance obligation was based on industry ratios as well as the Company’s historical R&D projects. The transaction price for the Next-Gen R&D Services was based on fixed consideration which was allocated between performance obligations as discussed in note (2) above.
(6) | The Next-Gen R&D Services performance obligation will be satisfied over time using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.
(7) | Pre-production activities under the CSA, such as facility expansion services and certain other administrative services, were considered bundled services that are part of the Company’s Manufacturing Services performance obligation, given the nature of the Company’s contractual responsibilities and ASC 606 requirements.
(8) | The Manufacturing Services performance obligation will be recognized as control of manufactured products is transferred to the customer. The modification did not result in a cumulative catch-up adjustment as a result of the revenue being deferred for the performance obligations that were affected by the modification. The allocation of transaction price includes a material right related to manufacturing services in the amount of $144.5 million. The total anticipated cash flow is based on the Company’s estimated production and the ultimate cash flows may vary as manufacturing purchase orders are received.
As of December 31, 2021, deferred revenue consisted of $18.6 million, of which $0.6 million was classified as current and $18.0 million was classified as long-term on the consolidated balance sheet. Vertice Pharma Co-Promotion Agreement — In December 2020, the Company entered into a co-promotion agreement with Vertice Pharma where the Company’s sales force will promote Thyquidity to adult endocrinologists, pediatric endocrinologists and other healthcare providers who treat hypothyroidism. Following the commercial launch of Thyquidity, in consideration of the sales and promotional activities provided by the Company’s sales force, Vertice Pharma is obligated to pay fixed quarterly payments to the Company, as well as variable consideration based on gross profits resulting from all sales of Thyquidity. Vertice Pharma launched Thyquidity in collaboration with the Company in February 2021. At inception of the agreement, the Company identified a single performance obligation that the Company will satisfy over time. The Company estimates the total transaction price is approximately $6.3 million, consisting of fixed consideration and the unconstrained amount of estimated variable consideration, which is based on gross profit applied to defined revenue benchmarks. The amount of variable consideration is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur and the payments will be received. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. The total transaction price will be recognized over a two-year period. the period over which the Company is required to satisfy its performance obligation, using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. In July 2021, the Company and Vertice Pharma entered into an amendment to the Vertice Pharma Co-Promotion Agreement that modifies the terms of payment where 50% of the previously fixed consideration will be subject to certain promotional conditions, resulting in variable consideration. In September 2021, the Company and Vertice Pharma mutually agreed that the Company would cease promotional activities under the co-promotion agreement effective September 30, 2021, other than certain transitional activities that continued until October 15, 2021. The Company and Vertice Pharma are currently negotiating a final settlement of all obligations related to the termination of the co-promotion agreement. As of December 31, 2021, the Company fully reserved $0.8 million of revenue from the co-promotion of Thyquidity, which was recognized as allowance for credit losses – collaborations and services, which is included in accounts receivable, net in the consolidated balance sheet. In addition, the Company recognized an impairment on contract assets of $0.1 million related to variable consideration from gross profits which was recognized during the year ended December 31, 2021. Thirona Collaboration Agreement — In June 2021, the Company and Thirona entered into a collaboration agreement to evaluate the therapeutic potential of Thirona’s compound for the treatment of pulmonary fibrosis. If initial studies are promising, the Company can exercise certain rights to seek a full license to the compound for clinical development and commercialization. The parties will perform their respective obligations and provide reasonable support for research, clinical development and regulatory strategy. The collaboration agreement will be accounted for under ASC 808, Collaborative Agreements; however, no consideration will be exchanged between the parties. The Company will expense the costs incurred as research and development in the consolidated statements of operations. Biomm Supply and Distribution Agreement — In May 2017, the Company and Biomm S.A. (“Biomm”) entered into a supply and distribution agreement for the commercialization of Afrezza in Brazil. Under this agreement, Biomm was responsible for pursuing regulatory approvals of Afrezza in Brazil, including from the ANVISA and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos (“CMED”), both of which have now been received. Biomm commenced product sales in January 2020. During the year ended December 31, 2020, the Company sold $0.2 million of product to Biomm. No shipments of product were made to Biomm during the year ended December 31, 2021. Cipla License and 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 is 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 an additional regulatory milestone payment, 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 milestone payments represent variable consideration for which the Company has not recognized any revenue because of the uncertainty of obtaining marketing approval. As of December 31, 2021, the deferred revenue balance was $1.7 million, of which $0.1 million is classified as current and $1.6 million is classified as long term in the consolidated balance sheets. AMSL Distribution Agreement — In May 2019, the Company entered into an exclusive marketing and distribution agreement with Australasian Medical & Scientific Ltd. (“AMSL”) for the commercialization of Afrezza in Australia. Under the terms of this agreement, AMSL is responsible for obtaining regulatory and reimbursement approvals to distribute Afrezza in Australia. On August 1, 2021, Dexcom, Inc. acquired all of the outstanding shares of AMSL. As a result, on November 4, 2021, the Company exercised its right under the marketing and distribution agreement to terminate such agreement.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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