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Collaboration, Licensing and Other Arrangements | 9 Months Ended
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Sep. 30, 2022
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Collaboration, Licensing and Other Arrangements | 10. Collaboration, Licensing and Other Arrangements Revenue from collaborations and services for the three and nine months ended September 30, 2022 and 2021 are as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
UT CSA Agreement(1) |  | $ | 9,916 |  |  | $ | — |  |  | $ | 15,795 |  |  | $ | — |
UT License Agreement(2) |  |  | 393 |  |  |  | 12,313 |  |  |  | 1,949 |  |  |  | 33,475 |
Vertice Pharma Co-Promotion Agreement |  |  | — |  |  |  | — |  |  |  | 325 |  |  |  | 1,147 |
Cipla License and Distribution Agreement |  |  | 37 |  |  |  | 37 |  |  |  | 110 |  |  |  | 110 |
Other |  |  | — |  |  |  | 77 |  |  |  | 200 |  |  |  | 161 |
Receptor CLA |  |  | — |  |  |  | 31 |  |  |  | 1 |  |  |  | 206 |
Total revenue from collaborations and services |  | $ | 10,346 |  |  | $ | 12,458 |  |  | $ | 18,380 |  |  | $ | 35,099 |
_________________________
(1) | Amount consists of revenue recognized for Manufacturing Services and sales of product to UT for the periods presented.
(2) | Amounts consist of revenue recognized for Next-Gen R&D Services and R&D Services and License for the periods presented.
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 the manufacturing of Tyvaso DPI.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
UT Revenue (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
UT CSA Agreement |  | $ | 9,916 |  |  | $ | — |  |  | $ | 15,795 |  |  | $ | — |
UT License Agreement |  |  | 393 |  |  |  | 12,313 |  |  |  | 1,949 |  |  |  | 33,475 |
Royalties — Collaborations (1) |  |  | 6,220 |  |  |  | — |  |  |  | 6,524 |  |  |  | — |
Total revenue from UT |  | $ | 16,529 |  |  | $ | 12,313 |  |  | $ | 24,268 |  |  | $ | 33,475 |
_________________________
(1) | Amount consists of royalties associated with the UT license Agreement. The current portion of contract assets related to the royalties is included in prepaid expense and other current assets in the condensed consolidated balance sheets.
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 is also 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. In August 2021, the Company and UT entered into a CSA, pursuant to which the Company is responsible for manufacturing and supplying to United Therapeutics, and United Therapeutics 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. Pursuant to the CSA, UT is obligated to reimburse 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 Next-Gen R&D Services; and (3) a material right associated with future commercial manufacturing and supply of product (“Manufacturing Services”). Following the FDA’s approval of Tyvaso DPI, UT began issuing the Company purchase orders for the supply of product, which represents distinct contracts and performance obligations under ASC 606. Revenue is recognized for the supply of product at a point in time, once control is transferred to UT. 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) UT provides notice to the Company at least 24 months in advance of such renewal that UT does not wish to renew the CSA or (ii) the Company provides notice to UT at least 48 months in advance of such renewal that the Company does not wish to renew the CSA. The Company and UT 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 to 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 UT. 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 the transaction price for the Manufacturing Services includes a material right related to the Company’s estimated production of product in the amount of $144.5 million. The Company will sell product to UT under individual purchase orders, which represent distinct performance obligations. The ultimate cash flows may vary as manufacturing purchase orders are received.
In April 2022, the Company and UT agreed to fund $2.3 million in capital improvements to support commercialization and continuous improvement activities and $0.7 million in the development of alternative manufacturing processes. The Company determined that the capital improvements and continuous improvements should be combined with the manufacturing services performance obligation and the alternative manufacturing processes should be combined with the Next-Gen R&D Services.
|  | Anticipated |  |  |  |  |  |  |  |
Description |  | Cash Flow |  |  | Revenue Allocation |  |  | Recognition Method |  | Progress Measure |  | Revenue Recognition |
|  | (in millions) |  |  |  |  |  |  |  |
Total anticipated cash flow(1) |  | $ | 483.2 |  |  |  |  |  |  |  |  |  |  |  |
Distinct Performance Obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
R&D Services and License |  |  |  |  |  | $ | — |  |  | Over time |  | Ratably |  | Aug 2021 - Oct 2021 |
Next-Gen R&D Services |  |  |  |  |  | $ | 5.9 |  |  | Over time |  | Input |  | % of completion of costs |
Manufacturing Services and Product Sales(2) |  |  |  |  |  | $ | 477.2 |  |  | Point in time |  |  |  | Transfer of control |
_________________________ Notes presented in the previous modification table above also apply to this modification table unless noted otherwise.
(1) | The total anticipated cash flow includes a transaction price of $71.5 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $411.7 million for future supply of Tyvaso DPI over the remaining term of the CSA.
(2) | The Manufacturing Services performance obligation will be recognized as control of manufactured products is transferred to UT. 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 the transaction price for the Manufacturing Services includes a material right related to the Company’s estimated production of product in the amount of $150.2 million. The Company will sell product to UT under individual purchase orders, which represent distinct performance obligations. The ultimate cash flows may vary as manufacturing purchase orders are received.
As of September 30, 2022, deferred revenue consisted of $32.2 million, of which $1.6 million was classified as current and $30.6 million was classified as long-term on the condensed consolidated balance sheet. Vertice Pharma Co-Promotion Agreement — In December 2020, the Company entered into a co-promotion agreement with Vertice Pharma pursuant to which the Company’s sales force promoted Thyquidity to adult endocrinologists, pediatric endocrinologists and other healthcare providers who treat hypothyroidism. Following the commercial launch of Thyquidity in February 2021, Vertice Pharma became obligated to pay fixed quarterly payments to the Company, as well as variable consideration based on gross profits resulting from all sales of Thyquidity. 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. As of December 31, 2021, the Company had fully reserved $0.8 million of revenue from the co-promotion of Thyquidity, which was recognized as allowance for credit losses and was included in accounts receivable, net in the condensed consolidated balance sheet. In June 2022, the Company and Vertice Pharma reached a final settlement of all obligations related to the termination of the co-promotion agreement of $0.3 million, which was recognized as revenue from collaboration and services in the Company’s condensed consolidated statement of operations and the balance was written off against the reserve. 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 condensed consolidated statements of operations. Biomm Supply and Distribution Agreement — In May 2017, the Company and 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 Agência Nacional de Vigilância Sanitária (“ANVISA”) and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos (“CMED”), both of which were received. Biomm commenced product sales in January 2020. There were no shipments of product to Biomm in 2021 or the first nine months of 2022. 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 September 30, 2022, the deferred revenue balance was $1.6 million, of which $0.2 million is classified as current and $1.4 million is classified as long term in the condensed consolidated balance sheets.

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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 https://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 https://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 https://asc.fasb.org/topic&trid=5833765 + Details
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