Commitments and Contingencies	9 Months Ended
Sep. 30, 2016
Commitments and Contingencies
Commitments and Contingencies	16. Commitments and Contingencies Distribution Agreement with Actavis, Inc. In May 2005, the Company entered into an agreement to grant certain exclusive marketing rights for its enoxaparin product to Andrx Pharmaceuticals, Inc., or Andrx, which generally extends to the U.S. retail pharmacy market. To obtain such rights, Andrx made a non-refundable, upfront payment of $4.5 million to the Company upon execution of the agreement, which was classified as deferred revenues. Under the agreement, the Company is to be paid a fixed cost per unit sold to Andrx and also shares in the gross profits (as defined) from Andrx’s sales of the enoxaparin product in the U.S. retail pharmacy market. In November 2006, Watson Pharmaceuticals, Inc., or Watson, acquired Andrx and all of the rights and obligations associated with the agreement. In January 2013, Watson adopted Actavis, Inc. as its new global name. In March 2015, Actavis acquired Allergan plc and adopted Allergan plc as its new global name in June 2015. In January 2012, the Company launched its enoxaparin product, beginning the seven-year period during which Actavis has the exclusive marketing rights for the Company’s enoxaparin product in the U.S. retail pharmacy market and the start of the Company’s recognition of the $4.5 million deferred revenue over this period on a straight-line basis. Actavis has an option to renew the agreement for an additional three years. As of June 30, 2016 and December 31, 2015, the balance of the deferred revenue was $1.7 million and $2.0 million, respectively. On June 30, 2016, the Company and Actavis agreed to terminate the agreement upon the earlier of (i) January 1, 2017, and (ii) such earlier date that is 30 days after Actavis notifies the Company in writing that Actavis has less than 30 days inventory of the enoxaparin product remaining in its possession or scheduled to be delivered pursuant to the pending purchase orders. The Company recognizes the remaining balance of the deferred revenue over the period from July 1, 2016 through December 31, 2016, on a straight-line basis as a result of the revised estimate of the contractual period. As of September 30, 2016, the balance of the deferred revenue was $0.8 million. The Company manufactures its enoxaparin product for the retail market according to demand specifications of Actavis. Upon shipment of enoxaparin to Actavis, the Company recognizes product sales at an agreed transfer price and records the related cost of products sold. Based on the terms of the Company’s distribution agreement with Actavis, the Company is entitled to a share of the ultimate profits based on the eventual net revenue from enoxaparin sales by Actavis to the end user less the agreed transfer price originally paid by Actavis to the Company. Actavis provides the Company with a quarterly sales report that calculates the Company’s share of Actavis enoxaparin gross profit. The Company records its share of Actavis gross profit as a component of net revenue. Supply Agreement with MannKind Corporation On July 31, 2014, the Company entered into a supply agreement with MannKind Corporation, or MannKind, or the Supply Agreement, pursuant to which the Company agreed to manufacture for and supply to MannKind certain quantities of RHI for use in MannKind’s product, Afrezza®. Under the Supply Agreement, MannKind agreed to purchase annual minimum quantities of RHI in an aggregate amount of approximately €120.1 million, or approximately $146.0 million, over five years from calendar years 2015 through 2019. Specifically, the minimum annual purchase commitment was approximately €27.1 million in 2015, and approximately €23.3 million each year from 2016 through 2019. On July 31, 2014, upon entering into the Supply Agreement, MannKind paid a non-refundable prepayment to the Company in the amount of €11.0 million, or approximately $14.0 million. Under the Supply Agreement, the non-refundable prepayment was applied towards the 2015 annual commitment. The Company recorded the amount as deferred revenue in 2014, and it was recognized as net revenue in 2015 at the time the products were shipped. Unless earlier terminated, the term of the Supply Agreement expires on December 31, 2019, and can be renewed for additional, successive two-year terms upon 12 month’s written notice given prior to the end of the initial term or any additional two-year term. MannKind and the Company each have customary termination rights, including termination for material breach that is not cured within a specific time frame or in the event of liquidation, bankruptcy, or insolvency of the other party. In addition, MannKind may terminate the Supply Agreement upon two years’ prior written notice to the Company without cause or upon 30 days’ prior written notice to the Company if a controlling regulatory authority withdraws approval for Afrezza®; provided, however, in the event of a termination pursuant to either of these scenarios, the provisions of the supply agreement require MannKind to pay the full amount of all unpaid purchase commitments due over the initial term within 60 calendar days of the effective date of such termination. In January 2015, the Company entered into a supply option agreement with MannKind, or the Option Agreement, pursuant to which MannKind has the option to purchase RHI in excess of the minimum amounts specified in the Supply Agreement in calendar years 2016 through 2019. In the event MannKind elects not to exercise its minimum annual purchase option for any year under the Option Agreement, MannKind is obligated to pay the Company a specified capacity cancellation fee. In 2015, the sales of RHI to MannKind were €17.1 million, or approximately $20.8 million, and the unfulfilled 2015 commitment under the Supply Agreement was €6.0 million as of December 31, 2015. The Company and MannKind mutually, verbally agreed that MannKind could delay a portion of the minimum contractually obligated quantities of RHI for 2015 and purchase the remaining unfulfilled 2015 commitment in 2016. No other aspects of the Supply Agreement were modified and the commitments for calendar years 2016 through 2019 as specified in the Supply Agreement remain binding and enforceable. In October 2015, MannKind informed the Company that it was not exercising the option to purchase additional quantities of RHI for 2016 under the Option Agreement and paid the Company the specified capacity cancellation fee of $0.8 million. Such capacity cancellation fee was recorded as net revenue in the Company’s consolidated statements of operations for the year ended December 31, 2015. In the nine months ended September 30, 2016, sales of RHI to MannKind totaled $6.8 million, which fulfilled the remaining unfulfilled 2015 commitment of RHI under the Supply Agreement. MannKind had no unfulfilled purchase obligations under the Supply Agreement as of September 30, 2016, although it has not yet purchased any of its 2016 minimum purchase commitment. The Company is currently in discussions with MannKind regarding the timing of fulfillment of its minimum purchase commitment of RHI under the Supply Agreement and its purchase of additional quantities under the Option Agreement. The Company anticipates that these discussions may result in reductions in the capacity cancellation fees, as well as extensions of the timing of MannKind's purchase commitments under the Supply Agreement. Collaboration Agreement with a Medical Device Manufacturer The Company has entered into a collaboration agreement with a medical device manufacturer to develop a drug delivery system to be used by the Company for one of its pipeline products. As of September 30, 2016, the Company has paid an upfront payment of $0.5 million and $0.7 million in milestone payments under this agreement, which were classified as research and development expense. The Company is obligated to pay up to an additional $1.3 million if certain milestones are met. As of September 30, 2016, no such obligation existed. Pursuant to the collaboration agreement, if the medical device manufacturer is successful in the development of this drug delivery system and the Company’s pipeline products receive appropriate regulatory approval, the Company is obligated to enter into a commercial supply agreement with such medical device manufacturer for a minimum purchase of 1.0 million units during the first 12 months. Operating Lease Agreements The Company leases real and personal property, in the ordinary course of business, under various non-cancelable operating leases. The Company, at its option, can renew a substantial portion of its leases, at the market rate, for various renewal periods ranging from one to six years. Rental expense under these leases for the three and nine months ended September 30, 2016, was approximately $0.8 million and $2.5 million, respectively, compared to $0.8 million and $2.5 million for the three and nine months ended September 30, 2015, respectively. Purchase Commitments As of September 30, 2016, the Company has entered into commitments to purchase equipment and raw materials for an aggregate of $17.9 million. The Company anticipates that most of these commitments will be fulfilled by 2017. The Company entered into agreements with a Chinese governmental entity to acquire land-use rights to real property in Nanjing, China. Under the terms of these agreements, the Company committed to invest capital in its wholly-owned subsidiary, ANP, and to develop these properties as an API manufacturing facility for the Company’s pipeline products. In conjunction with these agreements, ANP modified its business license on July 3, 2012 to increase its authorized capital. As of September 30, 2016, the Company had invested approximately $49.0 million in ANP out of its registered capital commitment of $61.0 million. The Company has committed to invest the remaining $12.0 million in ANP by December 2017. This investment in ANP will result in cash transfers from the U.S. parent company to ANP. Per these agreements, in January 2010, the Company acquired certain land-use rights with a carrying value of $1.2 million. In addition, the Company purchased additional land-use rights in November 2012 for $1.3 million. The Company committed to spend approximately $15.0 million in land development. The agreements require the construction of fixed assets on the property and specified a timetable for the construction of these fixed assets. The current pace of development of the property is behind the schedules described in the purchase agreements and, per the purchase agreement, potential monetary penalties could result if the development is delayed or not completed in accordance with the guidelines stated in the purchase agreements. The Company is in discussions with the Chinese government regarding the development and believes that the likelihood of incurring any penalty is remote.

16. Commitments and Contingencies

Distribution Agreement with Actavis, Inc.

In May 2005, the Company entered into an agreement to grant certain exclusive marketing rights for its enoxaparin product to Andrx Pharmaceuticals, Inc., or Andrx, which generally extends to the U.S. retail pharmacy market. To obtain such rights, Andrx made a non-refundable, upfront payment of $4.5 million to the Company upon execution of the agreement, which was classified as deferred revenues. Under the agreement, the Company is to be paid a fixed cost per unit sold to Andrx and also shares in the gross profits (as defined) from Andrx’s sales of the enoxaparin product in the U.S. retail pharmacy market. In November 2006, Watson Pharmaceuticals, Inc., or Watson, acquired Andrx and all of the rights and obligations associated with the agreement. In January 2013, Watson adopted Actavis, Inc. as its new global name. In March 2015, Actavis acquired Allergan plc and adopted Allergan plc as its new global name in June 2015.

In January 2012, the Company launched its enoxaparin product, beginning the seven-year period during which Actavis has the exclusive marketing rights for the Company’s enoxaparin product in the U.S. retail pharmacy market and the start of the Company’s recognition of the $4.5 million deferred revenue over this period on a straight-line basis. Actavis has an option to renew the agreement for an additional three years. As of June 30, 2016 and December 31, 2015, the balance of the deferred revenue was $1.7 million and $2.0 million, respectively. On June 30, 2016, the Company and Actavis agreed to terminate the agreement upon the earlier of (i) January 1, 2017, and (ii) such earlier date that is 30 days after Actavis notifies the Company in writing that Actavis has less than 30 days inventory of the enoxaparin product remaining in its possession or scheduled to be delivered pursuant to the pending purchase orders. The Company recognizes the remaining balance of the deferred revenue over the period from July 1, 2016 through December 31, 2016, on a straight-line basis as a result of the revised estimate of the contractual period. As of September 30, 2016, the balance of the deferred revenue was $0.8 million.

The Company manufactures its enoxaparin product for the retail market according to demand specifications of Actavis. Upon shipment of enoxaparin to Actavis, the Company recognizes product sales at an agreed transfer price and records the related cost of products sold. Based on the terms of the Company’s distribution agreement with Actavis, the Company is entitled to a share of the ultimate profits based on the eventual net revenue from enoxaparin sales by Actavis to the end user less the agreed transfer price originally paid by Actavis to the Company. Actavis provides the Company with a quarterly sales report that calculates the Company’s share of Actavis enoxaparin gross profit. The Company records its share of Actavis gross profit as a component of net revenue.

Supply Agreement with MannKind Corporation

On July 31, 2014, the Company entered into a supply agreement with MannKind Corporation, or MannKind, or the Supply Agreement, pursuant to which the Company agreed to manufacture for and supply to MannKind certain quantities of RHI for use in MannKind’s product, Afrezza®. Under the Supply Agreement, MannKind agreed to purchase annual minimum quantities of RHI in an aggregate amount of approximately €120.1 million, or approximately $146.0 million, over five years from calendar years 2015 through 2019. Specifically, the minimum annual purchase commitment was approximately €27.1 million in 2015, and approximately €23.3 million each year from 2016 through 2019.

On July 31, 2014, upon entering into the Supply Agreement, MannKind paid a non-refundable prepayment to the Company in the amount of €11.0 million, or approximately $14.0 million. Under the Supply Agreement, the non-refundable prepayment was applied towards the 2015 annual commitment. The Company recorded the amount as deferred revenue in 2014, and it was recognized as net revenue in 2015 at the time the products were shipped.

Unless earlier terminated, the term of the Supply Agreement expires on December 31, 2019, and can be renewed for additional, successive two-year terms upon 12 month’s written notice given prior to the end of the initial term or any additional two-year term. MannKind and the Company each have customary termination rights, including termination for material breach that is not cured within a specific time frame or in the event of liquidation, bankruptcy, or insolvency of the other party. In addition, MannKind may terminate the Supply Agreement upon two years’ prior written notice to the Company without cause or upon 30 days’ prior written notice to the Company if a controlling regulatory authority withdraws approval for Afrezza®; provided, however, in the event of a termination pursuant to either of these scenarios, the provisions of the supply agreement require MannKind to pay the full amount of all unpaid purchase commitments due over the initial term within 60 calendar days of the effective date of such termination.

In January 2015, the Company entered into a supply option agreement with MannKind, or the Option Agreement, pursuant to which MannKind has the option to purchase RHI in excess of the minimum amounts specified in the Supply Agreement in calendar years 2016 through 2019. In the event MannKind elects not to exercise its minimum annual purchase option for any year under the Option Agreement, MannKind is obligated to pay the Company a specified capacity cancellation fee.

In 2015, the sales of RHI to MannKind were €17.1 million, or approximately $20.8 million, and the unfulfilled 2015 commitment under the Supply Agreement was €6.0 million as of December 31, 2015. The Company and MannKind mutually, verbally agreed that MannKind could delay a portion of the minimum contractually obligated quantities of RHI for 2015 and purchase the remaining unfulfilled 2015 commitment in 2016. No other aspects of the Supply Agreement were modified and the commitments for calendar years 2016 through 2019 as specified in the Supply Agreement remain binding and enforceable.

In October 2015, MannKind informed the Company that it was not exercising the option to purchase additional quantities of RHI for 2016 under the Option Agreement and paid the Company the specified capacity cancellation fee of $0.8 million. Such capacity cancellation fee was recorded as net revenue in the Company’s consolidated statements of operations for the year ended December 31, 2015.

In the nine months ended September 30, 2016, sales of RHI to MannKind totaled $6.8 million, which fulfilled the remaining unfulfilled 2015 commitment of RHI under the Supply Agreement. MannKind had no unfulfilled purchase obligations under the Supply Agreement as of September 30, 2016, although it has not yet purchased any of its 2016 minimum purchase commitment.

The Company is currently in discussions with MannKind regarding the timing of fulfillment of its minimum purchase commitment of RHI under the Supply Agreement and its purchase of additional quantities under the Option Agreement. The Company anticipates that these discussions may result in reductions in the capacity cancellation fees, as well as extensions of the timing of MannKind's purchase commitments under the Supply Agreement.

Collaboration Agreement with a Medical Device Manufacturer

The Company has entered into a collaboration agreement with a medical device manufacturer to develop a drug delivery system to be used by the Company for one of its pipeline products. As of September 30, 2016, the Company has paid an upfront payment of $0.5 million and $0.7 million in milestone payments under this agreement, which were classified as research and development expense. The Company is obligated to pay up to an additional $1.3 million if certain milestones are met. As of September 30, 2016, no such obligation existed. Pursuant to the collaboration agreement, if the medical device manufacturer is successful in the development of this drug delivery system and the Company’s pipeline products receive appropriate regulatory approval, the Company is obligated to enter into a commercial supply agreement with such medical device manufacturer for a minimum purchase of 1.0 million units during the first 12 months.

Operating Lease Agreements

The Company leases real and personal property, in the ordinary course of business, under various non-cancelable operating leases. The Company, at its option, can renew a substantial portion of its leases, at the market rate, for various renewal periods ranging from one to six years. Rental expense under these leases for the three and nine months ended September 30, 2016, was approximately $0.8 million and $2.5 million, respectively, compared to $0.8 million and $2.5 million for the three and nine months ended September 30, 2015, respectively.

Purchase Commitments

As of September 30, 2016, the Company has entered into commitments to purchase equipment and raw materials for an aggregate of $17.9 million. The Company anticipates that most of these commitments will be fulfilled by 2017.

The Company entered into agreements with a Chinese governmental entity to acquire land-use rights to real property in Nanjing, China. Under the terms of these agreements, the Company committed to invest capital in its wholly-owned subsidiary, ANP, and to develop these properties as an API manufacturing facility for the Company’s pipeline products. In conjunction with these agreements, ANP modified its business license on July 3, 2012 to increase its authorized capital. As of September 30, 2016, the Company had invested approximately $49.0 million in ANP out of its registered capital commitment of $61.0 million. The Company has committed to invest the remaining $12.0 million in ANP by December 2017. This investment in ANP will result in cash transfers from the U.S. parent company to ANP.

Per these agreements, in January 2010, the Company acquired certain land-use rights with a carrying value of $1.2 million. In addition, the Company purchased additional land-use rights in November 2012 for $1.3 million. The Company committed to spend approximately $15.0 million in land development. The agreements require the construction of fixed assets on the property and specified a timetable for the construction of these fixed assets. The current pace of development of the property is behind the schedules described in the purchase agreements and, per the purchase agreement, potential monetary penalties could result if the development is delayed or not completed in accordance with the guidelines stated in the purchase agreements. The Company is in discussions with the Chinese government regarding the development and believes that the likelihood of incurring any penalty is remote.