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Condensed Consolidated Financial Statement Details | 3 Months Ended
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Mar. 31, 2024
Inventory Disclosure [Abstract] |
Condensed Consolidated Financial Statement Details | Note 3 — Condensed Consolidated Financial Statement Details Inventory Inventory consists of the following (in thousands):
|  | March 31, 2024 |  |  | December 31, 2023 |
Raw materials |  | $ | 1,936 |  |  | $ | 1,861 |
Work-in-process |  |  | 9,962 |  |  |  | 12,880 |
Finished goods |  |  | 4,340 |  |  |  | 1,360 |
Total inventory, net |  | $ | 16,238 |  |  | $ | 16,101 |
We manufacture finished goods inventory upon receipt of firm purchase orders, and we may manufacture certain intermediate work-in-process materials and purchase raw materials based on purchase forecasts from our partners. We include direct materials, direct labor, and manufacturing overhead in inventory and determine cost on a first-in, first-out basis for raw materials and on a specific identification basis for work-in-process and finished goods. We value inventory at the lower of cost or net realizable value, and we write down defective or excess inventory to net realizable value based on historical experience or projected usage. We expense inventory related to our research and development activities as manufactured by us or when purchased. As of March 31, 2024 and December 31, 2023, we recorded a provision of $2.4 and $2.0 million, respectively, for the net realizable value of our batches. Our manufacturing agreement with UCB Pharma (UCB) provides for a fixed selling price which we had negotiated in exchange for a higher royalty rate. Accordingly, when evaluating the net realizable value of our inventory for UCB, we include the negotiated increase of the royalties in our analysis, and the aggregate revenue has historically been greater than our manufacturing cost. Due to the decreases in the royalty rate for 2024 and 2025 as a result of a settlement agreement with UCB, the aggregate revenue is expected to be less than our manufacturing cost, and therefore we recorded a provision for net realizable value. Other Current Assets Other current assets consist of the following (in thousands):
|  | March 31, 2024 |  |  | December 31, 2023 |
Prepaid research and development expenses |  | $ | 4,767 |  |  | $ | 4,325 |
Non-trade receivables and other |  |  | 1,816 |  |  |  | 1,047 |
Other prepaid expenses |  |  | 4,160 |  |  |  | 4,407 |
Total other current assets |  | $ | 10,743 |  |  | $ | 9,779 |
Accrued Expenses Accrued expenses consist of the following (in thousands):
|  | March 31, 2024 |  |  | December 31, 2023 |
Accrued compensation |  | $ | 7,384 |  |  | $ | 5,553 |
Accrued clinical trial expenses |  |  | 4,233 |  |  |  | 4,321 |
Liability to collaboration partners |  |  | 1,310 |  |  |  | 2,678 |
Accrued contract termination costs |  |  | 3,043 |  |  |  | 3,020 |
Other accrued expenses |  |  | 8,311 |  |  |  | 6,590 |
Total accrued expenses |  | $ | 24,281 |  |  | $ | 22,162 |
Liabilities Related to the Sales of Future Royalties In 2012 and 2020, we sold to RPI Finance Trust (RPI) and HCR, respectively, our rights to receive royalties under our license and manufacturing agreements with certain pharmaceutical partners under the 2012 Purchase and Sale Agreement and the 2020 Purchase and Sale Agreement, respectively. We account for these transactions as debt and recognize non-cash royalty revenue and non-cash interest expense to amortize the proceeds over the lives of the respective arrangements. We periodically update our prospective non-cash interest rate based on our estimates of future royalties. As of March 31, 2024, our imputed interest rates for the arrangements with RPI and HCR were 30% and 19%, respectively. The original 2020 Purchase and Sale Agreement was to expire -- and wherein the right to receive royalties would revert to us -- if HCR received aggregate royalties of $210.0 million on or prior to December 31, 2025 (the 2025 Threshold), or, if the 2025 Threshold was not achieved by December 31, 2025, when HCR received aggregate royalties of $240.0 million. On March 4, 2024, Nektar and HCR amended the original 2020 Purchase and Sale Agreement (the Amendment), pursuant to which the parties agreed to remove our reversionary rights in the royalties in exchange for a $15.0 million payment from HCR. Accordingly, HCR will receive all future royalties of the products, and none of these royalties will return to Nektar. We concluded that we should account for the Amendment as a modification of the existing arrangement, and therefore recorded the $15.0 million proceeds as an increase to the liability. We included the effects of the Amendment in determining our imputed interest rate of 19% as of March 31, 2024. The following is a reconciliation of the changes in our liabilities related to the sales of future royalties for the three months ended March 31, 2024 (in thousands):
|  | Three Months Ended March 31, 2024 |
|  | 2012 Purchase and Sale Agreement |  |  | 2020 Purchase and Sale Agreement |  |  | Total |
Liabilities related to the sales of future royalties, net – beginning balance |  | $ | 24,217 |  |  | $ | 88,408 |  |  | $ | 112,625 |
Non-cash royalty revenue |  |  | (6,944 | ) |  |  | (8,564 | ) |  |  | (15,508 | )
Non-cash interest expense |  |  | 1,831 |  |  |  | 3,700 |  |  |  | 5,531 |
Amortization of transaction costs |  |  | — |  |  |  | 209 |  |  |  | 209 |
Proceeds from the Amendment |  |  | — |  |  |  | 15,000 |  |  |  | 15,000 |
Liabilities related to the sales of future royalties, net – ending balance |  | $ | 19,104 |  |  | $ | 98,753 |  |  | $ | 117,857 |

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- Definition The entire disclosure for inventory. Includes, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the classes of inventory, and the nature of the cost elements included in inventory. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 330 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//330/tableOfContent + Details
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