License Revenue

6 Months Ended

Jun. 30, 2022

License Revenue [Abstract]

License Revenue

 4. License Revenue

On November 3, 2020, the Company entered into a License Agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). Pursuant to the South Korea Agreement, among other things, the Company granted the Licensee a license under certain patents and other intellectual property to develop and commercialize lenzilumab for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in the Territory.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

Since the provision of the license and the cooperation and assistance to be provided by the Company to the Licensee with regulatory authorities in the Territory and the Company’s obligation to serve on a joint steering committee (the “Services”) are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of withholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties, are being recognized as revenue ratably over the performance period through March 2023, the expected period over which the Company conservatively expects the Services to be performed (the “Performance Period”). Therefore, the Company recognized license revenue totaling approximately $1.0 million and $2.1 million in the three and six months ended June 30, 2022, respectively, and $1.0 million and $1.5 million in the three and six months ended June 30, 2021, respectively.

Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the product is transferred to Licensee.

Contract Liabilities

A contract liability of $3.1 million was recorded on the Condensed Consolidated Balance Sheets as deferred revenue as of June 30, 2022 related to the South Korea agreement. There were no contract asset or deferred contract acquisition costs as of June 30, 2022 associated with the South Korea agreement.

The following table presents changes in the Company’s contract liability for the six months ended June 30, 2022 (in thousands):

Balance at January 1, 2022	$	5,163
Deductions for performance obligations satisfied:
In current period		(2,072	)
Balance at June 30, 2022	$	3,091