The Company enters into collaborative arrangements for the research and development, and commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licenses of and options to out-license and in-license compound to other parties. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost reimbursement arrangements and royalty payments.

The Company has in-licensed the rights to develop, manufacture and, if approved, commercialize multiple development stage drug candidates globally or in specific territories. These arrangements typically include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments and royalty payments. All upfront and development milestones were expensed in research and development expense as incurred. We have reached two milestones in 2024, which require payments of $6.0 million to DS under the arrangement.

The Company's revenue related to its out-licensing collaborative agreements consist of upfront license fees and research and development services revenue from its collaboration agreements with Innovent Biologics Co. Ltd. ("Innovent") and Nippon Kayaku Co., Ltd. ("NK") for Taletrectinib ("AB-106").

The following table summarizes total revenue recognized for the years ended December 31, 2024 and 2023 (in thousands):


	Year Ended December 31, 2024
Revenue
License revenue		2,086
Research and development service revenue		5,787
Total	$	7,873

There was no revenue for 2023 since the acquisition of AnHeart completed in the second quarter of 2024.

In July 2020, AnHeart entered into an agreement with NewG Lab. under which they will grant a sub-licensable, royalty-bearing, exclusive right and license to NewG Lab to develop and commercialize AB-106 in Korea (the " NewG Lab Territory"), with NewG Lab responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development and for commercialization upon regulatory approvals. They also granted NewG Lab the option to obtain the same aforementioned rights to AB-106 in Malaysia (the "NewG Lab Option").

In May 2021, AnHeart entered into an agreement with Innovent, granting Innovent a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in the People's Republic of China and Taiwan (the "Innovent Territory"). AnHeart is responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development with Innovent responsible for commercialization upon regulatory approvals. They also granted Innovent the option to obtain a license to commercialize AB-329 once they provide proof of concept behind the compound in a region in the Innovent Territory (the "Innovent Option"). Under the agreement, AnHeart received a non-refundable upfront cash payment, is owed $12.0 million for achievement of certain regulatory approval milestones, and is eligible to receive up to $17.0 million upon achievement of additional regulatory milestones, up to $105.0 million upon achievement of commercial milestones, and tiered percentage royalties ranging from mid-teen to low-twenties on annual net sales of taletrectinib in the Innovent Territory subject to certain adjustments.

AnHeart determined that the license represents a single performance obligation. The research and development services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Innovent. They concluded that, at the inception of the agreement, the Innovent Option did not constitute a material right as it does not represent a discount to the fair value of the exclusive license that Innovent would not have received without entering into the agreement and is therefore not considered a distinct performance obligation.

The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed. The portion of the transaction price allocated to the research and development services was deferred and is being recognized as research and development service revenue using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The China NMPA approvals for first and second line indications of ROS1+ NSCLC represent achievement of two regulatory milestones. As such, the Company is owed $12.0 million in milestone payments under the agreement, of which the Company recognized $2.1 million of license revenue at a point in time and the remaining $9.9 million of the milestone payments is deferred and recognized as research and development service revenue using an input method. For the year ended December 31, 2024, the Company recognized license revenue of $2.1 million and research and development service revenue of $3.1 million under the Innovent agreement. As of December 31, 2024, the accounts receivable of Innovent was $12.6 million.

In October 2023, AnHeart entered into an agreement with NK, granting NK a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in Japan (the "NK Territory"). AnHeart is responsible for funding ongoing clinical trials of AB-106 in the NK Territory, with NK responsible for funding regulatory submissions in the NK Territory. The Company also granted NK a sub-licensable, royalty-bearing, exclusive right and license to research, develop and commercialize any new indications of AB-106 in the NK Territory ("NK New Indication Right"). Under the agreement, AnHeart received a non-refundable upfront cash payment and is eligible to receive $25.0 million upon achievement of a regulatory milestone, up to $35.0 million upon achievement of commercial milestones, and a lower-mid double digit percentage royalty on net sales of taletrectinib in the NK Territory.

The portion of the transaction price allocated to the research and development services was deferred and is being recognized as research and development service revenue using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized research and development service revenue of $2.7 million for the year ended December 31, 2024. As of December 31, 2024, the accounts receivable of NK was $0.1 million.

When the Company satisfies its performance obligations by providing services to a customer before the customer pays consideration and before payment is due, the Company recognizes its rights to consideration as a contract asset.

When a customer pays consideration before the Company provide services, the Company records its obligation as a contract liability. The Company expects to recognize all of this balance as revenue as research and development services are provided over the next 4 years.

The contract liabilities of the Company as of December 31, 2024 is listed in the table below.


	December 31, 2024
	(In thousands)
Research and development service revenue		26,689

The Company recognized $0.2 million of revenue in 2024 that was included in the contract liability balance recorded upon the acquisition of AnHeart.

The balance of contract liabilities as of December 31, 2024 represents the transaction price allocated to the remaining performance obligations. The contract liability of $11.1 million is expected to be recognized within one year and the rest in the following three years.

The costs incurred to fulfill customer contracts were capitalized and amortized to cost of revenue on a systematic basis that is consistent with the transfer of research and development services to the customer to which the asset relates. For the year ended December 31, 2024, $7.1 million of costs incurred to fulfill customer contracts were capitalized and expensed in the same period. There were no balances related to the costs incurred to fulfill customer contracts as of December 31, 2024.