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Collaboration and Licensing Agreements | 12 Months Ended
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Dec. 31, 2021
Collaboration and Licensing Agreements [Abstract] |
Collaboration and Licensing Agreements | COLLABORATION AND LICENSING AGREEMENTS Kyowa Kirin Co., Ltd. (2019 KKC Agreement) In November 2019, we entered into a research collaboration and option agreement with KKC (the "2019 KKC Agreement”), to undergo research to identify two preclinical study-ready compounds for designation as development compounds, with one compound inhibiting the first undisclosed target (“Program 1”) and a second inhibiting the second undisclosed target (“Program 2”). Pursuant to the 2019 KKC Agreement, upon completion of the research and designation by the research steering committee of one or more development candidates (“DCs”), KKC has the right to execute one or more separate collaborative agreements relating to the development and commercialization of one or both DCs in certain specified territories. Under the terms of the 2019 KKC Agreement, KKC agreed to pay us a non-refundable, non-creditable upfront fee of $10.0 million, which was payable as follows: the first installment of $5.0 million within 30 days of the Effective Date, and the second installment of $5.0 million on the first anniversary of the effective date, unless the 2019 KKC Agreement was earlier terminated by KKC due to material breach by us. The term of the 2019 KKC Agreement commenced on November 11, 2019 (“the Effective Date”) and ends on the earliest of: (a) two years following the Effective Date, or (b) the nomination of a program DC for both programs, (c) or the nomination of one program DC and the decision by the parties to cease research for the other program, (d) or the decision by the parties to cease research for both programs. We assessed the 2019 KKC Agreement in accordance with ASC 606 and concluded that the contract’s counterparty, KKC, is a customer. Management also considered the modification guidance prescribed in ASC 606 and concluded that the 2019 KKC Agreement should be accounted for as a separate contract from the 2017 KKC Agreement, as defined and discussed below. We identified various promises in the 2019 KKC Agreement, including the grant of an initial research license, the Program 1 research, the Program 2 research, the right to obtain certain development and commercialization rights with Program 1 in certain territories and the right to obtain development and commercialization rights with Program 2 in certain territories, and participation in a joint steering committee (“the JSC”) and determined that KKC could not benefit from either of the research programs without the research license and participation in the JSC. As such, the combined license, research programs and participation in the JSC were deemed to be the highest level of goods and services that can be deemed distinct for each of the Program 1 research and Program 2 research. We concluded that the options to obtain additional development and commercialization rights that are exercisable by KKC under certain circumstances are not performance obligations of the contract at inception because the option fees reflect the standalone selling price of the options, and therefore, the options are not considered to be material rights. At the outset of the 2019 KKC Agreement, we determined that the initial transaction price was $10.0 million and that revenue associated with the combined performance obligations should be recognized as services are provided using the input method. Since transfer of control occurs over time, in management’s judgment this input method is the best measure of progress towards satisfying the performance obligations and reflects a faithful depiction of the transfer of goods and services. Revenue will be recognized over the Program 1 and Program 2 research periods. Management will re-evaluate the estimates related to the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjust the timing of revenue recognition as necessary. During the years ended December 31, 2021 and 2020, we recognized $4.2 million and $5.4 million, respectively, as revenue under the 2019 KKC Agreement in the statement of operations and comprehensive loss. The aggregate amount of the transaction price allocated to our partially unsatisfied performance obligations as of December 31, 2021 and 2020 was zero and $4.2 million, which was presented in the Balance Sheet as deferred revenue for each respective period. As of December 31, 2021, we have no material future obligations under the 2019 KKC Agreement. There were no significant changes in estimates associated with the 2019 KKC Agreement during the twelve months ended December 31, 2021. 2017 KKC Agreement In November 2017, we entered into an exclusive license agreement with KKC (the "2017 KKC Agreement") for the development, commercialization and distribution of tenapanor in Japan for cardiorenal indications. We granted KKC an exclusive license to develop and commercialize certain sodium hydrogen exchanger 3 ("NHE3") inhibitors, including tenapanor in Japan for the treatment of cardiorenal diseases and conditions, excluding cancer. We retained the rights to tenapanor outside of Japan, and also retained the rights to tenapanor in Japan for indications other than those stated above. Pursuant to the License Agreement, KKC is responsible for all of the development and commercialization costs for tenapanor in treatment of cardiorenal diseases and conditions, excluding cancer in Japan. Under the 2017 KKC Agreement, we are responsible for supplying the tenapanor drug product for KKC’s use in development and during commercialization until KKC has assumed such responsibility. Additionally, we are responsible for supplying the tenapanor drug substance for KKC’s use in development and commercialization throughout the term of the 2017 KKC Agreement, provided that KKC may exercise an option to manufacture the tenapanor drug substance under certain conditions We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, KKC, is a customer. Under the terms of the 2017 KKC Agreement, we received $30.0 million in up-front license fees which was recognized as revenue when the agreement was executed. Based on our assessment, we identified that the license and the manufacturing supply services were our material performance obligations at the inception of the agreement, and as such each of the performance obligations are distinct. Additionally, on January 1, 2018, we recorded unbilled revenue under current assets of $5.0 million and an increase in uncharged license fees under current liabilities of $1.0 million related to the first milestone under the 2017 KKC Agreement that KKC achieved in February 2019, reflecting revenues and cost of revenue, respectively, that would have been recognized in the fourth quarter 2017 if we had adopted ASC 606 prior to January 1, 2018. On KKC’s achievement of the milestone in February 2019, the balance related to unbilled revenue was adjusted to zero. Correspondingly, the $1.0 million balance related to uncharged license fees that we owed to AstraZeneca was reclassified to accounts payable during the first quarter of 2019, and subsequently paid to AstraZeneca during the second quarter of 2019. In addition to the up-front license fee received of $30.0 million, we may be entitled to receive up to $55.0 million in total development milestones, of which $10.0 million has been received to date, ¥8.5 billion Japanese yen for commercialization milestones, or approximately $73.9 million at the currency exchange rate on December 31, 2021, as well as reimbursement of cost, plus a reasonable overhead for the supply of product and high-teen royalties on net sales throughout the term of the agreement. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at December 31, 2021. For the years ended December 31, 2021 and 2020, $0.9 million and $1.4 million, respectively, of product supply revenue was recorded for manufacturing supply of tenapanor and other materials to KKC for product development and clinical trials in Japan, in accordance with our agreement with KKC, including $0.5 million accounts receivable as of December 31, 2021 For the years ended December 31, 2021 and 2020, $5.0 million and zero, respectively, of licensing revenue was recorded. The 2021 licensing revenue was recorded upon the initiation of phase 3 clinical studies by KKC in Japan to evaluate tenapanor for hyperphosphatemia. During the twelve months ended December 31, 2021, we received a $3.2 million prepayment from KKC for the manufacturing of tenapanor drug substance. In addition, we have unbilled prepayments of $1.5 million from KKC for the manufacturing of tenapanor drug product reflected within prepaid and other current assets. Both amounts are reflected within our deferred revenue, non-current on our balance sheet as of December 31, 2021. Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. , or Fosun Pharma In December 2017, we entered into an exclusive license agreement with Fosun Pharma (the "Fosun Agreement") for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C. We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, Fosun Pharma, is a customer. Under the terms of the Fosun Agreement, we received $12.0 million in up-front license fees which was recognized as revenue when the agreement was executed. Based on our assessment, we identified that the license and the manufacturing supply services were its material performance obligations at the inception of the agreement, and as such each of the performance obligations are distinct. In addition, we may be entitled to additional development and commercialization milestones of up to $110.0 million, as well as reimbursement of cost plus a reasonable overhead for the supply of product and tiered royalties on net sales ranging from the mid-teens to 20%. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at December 31, 2021 and 2020. For the years ended December 31, 2021 and 2020, no revenue was recorded related to the Fosun Agreement. Knight Therapeutics, Inc. In March 2018, we entered into an exclusive license agreement with Knight Therapeutics, Inc., (the "Knight Agreement") for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C. We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, Knight, is a customer. Based on our assessment, it identified that the license and the manufacturing supply services were its material performance obligations at the inception of the agreement, and as such each of the performance obligations are distinct. Under the terms of the agreement, we received a $2.3 million nonrefundable, one-time upfront payment in March 2018 and are eligible to receive additional development and commercialization milestone payments worth up to CAD22.2 million, or $17.4 million at the currency exchange rate on December 31, 2021, reimbursement of supply costs on a schedule specifying cost per tablet, with a reasonable mark up for overhead, as well as tiered royalty rates on net sales ranging from the mid-single digits to the low twenties. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at December 31, 2021 and 2020. For the years ended December 31, 2021 and 2020, $13 thousand and $0.7 million of licensing revenue was recorded, respectively, related to the Knight Agreement. For the years ended December 31, 2021 and 2020, zero and $0.1 million product supply revenue was recorded, respectively, related to the Knight Agreement. Pursuant to the AstraZeneca Termination Agreement, $1.0 million and $0.1 million of cost of revenue was recorded during 2021 and 2020, respectively. Xuanzhu (HK) Biopharmaceutical Limited, or XuanZhu In November 2019, we entered into a license agreement with XuanZhu (“the XuanZhu Agreement") for a license to certain specific patent and patent applications. We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, XuanZhu, is a customer. Under the terms of the XuanZhu Agreement, we recognized $1.5 million in license fees when the agreement was executed, of which, $0.8 million was received upfront in November 2019 and achievement for the second $0.8 million payment was determined to be not materially at risk and probable of achievement and it was included in the transaction price as the amount was not probable of revenue reversal. Based on our assessment, we determined that we had one combined performance obligation, which is the license and the specific patent grant. In addition to the license fee of $1.5 million, we may be entitled to receive milestone payments. The variable consideration related to the remaining milestone payments has not been included in the transaction price as these were fully constrained at December 31, 2021 and 2020. For the years ended December 31, 2021 and 2020, no license revenue was recorded related to the XuanZhu Agreement. AstraZeneca In June 2015, we entered into a termination agreement with AstraZeneca (the "AstraZeneca Termination Agreement") pursuant to which we remain liable to pay AstraZeneca license fees for (i) future royalties at a royalty rate of 10% of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20% of non-royalty revenue received from a licensee of tenapanor or certain other NHE3 inhibitors, up to a maximum of $75.0 million in aggregate for (i) and (ii). To date in aggregate, we have recognized $11.6 million of the $75.0 million, recorded as cost of revenue, as follows (in thousands):
| Cost of Revenue
| Recognized |  | Amount Paid
Year 2017 | $ | 9,400 |  | * | $ | 6,000 |
Year 2018 | 466 |  |  | 2,864 |
Year 2019 | 600 |  |  | 1,002 |
Year 2020 | 145 |  |  | 742 |
Year 2021 | 1,000 |  |  | 1,003 |
Total | $ | 11,611 |  |  | $ | 11,611 |
Maximum payment per termination agreement |  |  | 75,000 |
Remaining potential commitment |  |  | $ | 63,389 |
* Includes $1.0 million adjustment recorded pursuant to the adoption of ASC 606, as discussed in Note 2. Deferred Revenue The following tables present changes in our current and non-current deferred revenue balances during the reporting period. The current deferred revenue balance is attributable entirely to the 2019 KKC Agreement and the non-current deferred revenue balance is attributable entirely to the 2017 KKC Agreement (in thousands):
Deferred revenue - current | 2021 |  | 2020
Balance at Balance at January 1, | $ | 4,177 |  |  | $ | 4,541 |
Decreases due to revenue recognized in the period for which cash has been received | (4,177) |  |  | (364) |
Balance at Balance at December 31, | $ | — |  |  | $ | 4,177 |
Deferred revenue - non-current | 2021 |  | 2020
Balance at Balance at January 1, | $ | — |  |  | $ | — |
Increases due to cash received during the period | 3,242 |  |  | — |
Increase due to unbilled prepayments recorded during the period | 1,485 |  |  | — |
Balance at Balance at December 31, | $ | 4,727 |  |  | $ | — |

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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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