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Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 8 — COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of the Company’s business activities. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material adverse effect on the Company’s consolidated financial statements.

 

Disagreement with Janssen

After reviewing the data from the Phase 2b trials already conducted, the Company is not in agreement with Janssen that Decision Point 4 under the Agreement has been reached. Under the Agreement, the Company’s cost-sharing obligations do not begin until Decision Point 4 has been reached. Following occurrence of Decision Point 4, Janssen is responsible for 60% of the cost of Phase 3 development in all indications except insomnia and the Company is responsible for 40%. The Company has the right to opt-out of the Agreement at any time after Decision Point 4, and if it opts-out, the Company will collect a royalty on worldwide sales of seltorexant in the mid-single digits with no further obligations to Janssen. In January 2020, Janssen invoiced the Company $3.4 million, representing the Company’s 40% portion of the Phase 3 development costs through December 31, 2019. In April 2020, Janssen invoiced the Company an additional $3.1 million, for a cumulative total through March 31, 2020 of $6.5 million. Janssen has previously indicated they may incur approximately $100 million in Phase 3 development costs in 2020. The Company has been conducting discussions with Janssen regarding this disagreement and the Company has not accrued any Phase 3 development costs incurred by Janssen.

Refer to Note 9 – Leases, for the Company’s current lease commitments.