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Collaborations
12 Months Ended
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Collaborations

14. Collaborations

Chong Kun Dang Pharmaceutical Corporation

In April, 2012, the Company entered into a license agreement with CKD (the “CKD Agreement”) that provides CKD with the exclusive rights to develop, manufacture and commercialize products containing CR845 in South Korea. Under the CKD Agreement, the Company received a non-refundable and non-creditable amount of $1,000 and is eligible to receive milestone payments totaling $3,750, relating to pre-defined clinical development ($2,250) and regulatory events ($1,500), as well as royalties on sales of any marketed products containing CR845. The Company has accounted for the milestones under ASC 605 Revenue Recognition – Milestone Method. At the time of execution of the CKD Agreement, there was significant uncertainty as to whether the stated milestones would be achieved. In conjunction with this uncertainty, the Company has determined that the milestones are substantive in nature as they are commensurate with the enhancement of value of the delivered license because they relate to clinical success and advancement within the FDA drug development platform. The milestones also relate solely to past performance and monetary investment of the Company to achieve the clinical advancement.

In exchange for the $1,000, the Company provided CKD with the license for CR845 and issued CKD 173,611 shares of Junior Preferred Stock. The Company recorded the issuance of the 173,611 shares of Junior Preferred Stock as a capital transaction for $354, which represented the shares’ estimated fair value as of the transaction date. The remaining proceeds of $646 were recorded as license revenue as the license was the only deliverable within the agreement that had stand-alone value and was determined to be a separate unit of accounting under ASC 605-25, Revenue Recognition Multiple – Element Arrangements.

In July 2015, the Company met the milestone criteria, as set forth in the CKD Agreement, for completion of a Phase 1b trial of Oral CR845 in the United States. As a result, in August 2015, the Company received a milestone payment of $209 (net of South Korean withholding tax of $41) from CKD. In September 2015, the Company met the milestone criteria, as set forth in the CKD Agreement, for completion of a Phase 2 trial of CR845 in uremic pruritus patients in the United States. As a result, in October 2015, the Company received a milestone payment of $417 (net of South Korean withholding tax of $83) from CKD. Both milestones were considered to be substantive and the full amount of the milestone payments was recognized as milestone revenue when the milestones were achieved.

The next potential milestone that the Company could be entitled to receive under the CKD Agreement will be a clinical development milestone for completion of a Phase 3 trial of CR845 in uremic pruritus in the United States. If achieved, this milestone will result in a payment of $750, before South Korean withholding taxes, being due to the Company.

Maruishi Pharmaceutical Co., Ltd

In April 2013, the Company entered into a license agreement with Maruishi (the “Maruishi Agreement”) under which the Company granted Maruishi an exclusive license to develop, manufacture, and commercialize drug products containing CR845 for acute pain and uremic pruritus in Japan. Under the Maruishi Agreement, the Company and Maruishi are required to use commercially reasonable efforts, at their own expense, to develop, obtain regulatory approval for and commercialize CR845 in the United States and Japan, respectively. In addition, the Company provided Maruishi specific clinical development services for CR845 used in Maruishi’s field of use.

Under the terms of the agreement, the Company received an upfront non-refundable, non-creditable license fee of $15,000. As indicated in Note 2, Summary of Significant Accounting Policies – Revenue Recognition, the Company accounts for arrangements of this type under ASC 605-25, Revenue Recognition - Multiple Element Arrangements. The Company has identified two deliverables under this guidance: (1) the license; and (2) the R&D services specific to the uremic pruritus field of use. The Company has determined that the license has standalone value because Maruishi has the right to sublicense and manufacture CR845 in Japan. The second deliverable is the R&D services, which also have standalone value as similar services are sold separately by other vendors. Since both license and R&D services separability criteria have been met, they are being accounted for as separate units of accounting at the outset of the arrangement.

As a result, the total value of the arrangement of $15,337 (consisting of the $15,000 upfront payment, plus the additional amount assigned to these deliverables as a result of the Junior A Preferred Stock premium, see below) was allocated between the two units of accounting. The Company used its best estimate of the selling price of these units of accounting, since, as described in Note 2 Summary of Significant Accounting Policies – Revenue Recognition, neither VSOE nor TPE was available. To determine these estimates, the Company used a discounted cash flow method that forecasted and analyzed CR845 in the Japanese market, the phase of clinical development as well as considering recent similar license arrangements within the same phase of clinical development, therapeutic area, type of agreement, etc. As a result, at inception of this license agreement, the management of the Company determined that the license and the R&D services had estimated selling prices of $10,200 and $6,200, respectively. The resulting percentage allocations were applied to the $15,337 of total consideration, which resulted in $9,637 being assigned to the license unit of accounting, which was recognized immediately as license revenue, while $5,700 was assigned to the R&D services unit of accounting. The amount assigned to the R&D services unit of accounting was initially recorded as deferred revenue and was recognized as collaborative revenue as the services were provided through July 2015. As of December 31, 2015 and 2014, the Company had $0 and $1,452, respectively, of deferred revenue pursuant to the R&D services deliverable under the Maruishi Agreement.

Under the terms of the Maruishi Agreement, the Company is also entitled to receive aggregate milestone payments of $8,000 for events performed by Maruishi in Japan and $2,500 for events performed by the Company in the United States. At the time of execution of the Maruishi Agreement, there was significant uncertainty as to whether the stated milestones would be achieved. In conjunction with this uncertainty, the Company has determined that the milestones achieved in the United States are substantive in nature as they are commensurate with the enhancement of value of the delivered license as they relate to clinical success and advancement within the FDA drug development platform. The Company accounts for those milestone payments under ASC 605-28 Revenue Recognition – Milestone Method. However, the milestones achieved by Maruishi in Japan are not substantive and are accounted for in accordance with the multiple-element arrangement guidance in ASC 605-25.

During June 2014, Maruishi completed a Phase 1 clinical trial in Japan related to CR845 in acute post-operative pain, which constituted achievement of one of the milestones specified in the license agreement and was considered not to be substantive. Accordingly, the Company allocated the non-refundable payment of $480, net of a contractual foreign currency exchange adjustment, to the two deliverables in the same proportion as the initial upfront payment had been allocated. The portion of the payment allocated to the previously delivered license deliverable ($302) was recognized as license revenue entirely at the time of achievement of the milestone. A portion of the payment allocated to the R&D services deliverable ($88) was recognized as collaborative revenue at the time of achievement of the milestone to the extent of R&D services provided through that date and the remainder ($90) was deferred and was recognized as collaborative revenue through July 2015, which was the period during which the Company provided R&D services to Maruishi.

In September 2015, Maruishi initiated a Phase 2 clinical trial of CR845 in Japan for uremic pruritus, which triggered a $1,725 milestone payment (net of contractual foreign currency exchange adjustments of $275) to the Company. At the time of achievement of the milestone, the Company had delivered all deliverables under the Maruishi Agreement. Since the milestone was achieved in Japan, it was deemed not to be substantive. Accordingly, the Company recognized $1,084 as milestone revenue and $641 as collaborative revenue in connection with achievement of this milestone.

The next potential milestone that the Company could be entitled to receive under the Maruishi Agreement will be a clinical development milestone for the completion of the first Phase 3 pivotal trial of CR845 in acute pain in the United States. If achieved, this milestone will result in a payment of $1,000, before contractual foreign currency exchange adjustments, being due to the Company.

Along with the R&D services performed by the Company for Maruishi, the Company supplied Maruishi with CR845 clinical material as an accommodation. The Company had previously entered into manufacturing and service agreements with third parties to manufacture CR845. Payments made by the Company to third parties based on firm and fixed commitments by Maruishi to purchase CR845 from the Company were capitalized as prepaid expense. During the manufacturing process, title and risk of loss remained with the third party until the Company paid in full for the material.

Once the Company had title to the CR845 and had delivered it to Maruishi, prepaid expense related to that CR845 was reduced with an offset to R&D expense. At that time, Maruishi reimbursed the Company for its external and internal costs for purchasing CR845 and processing the sale to Maruishi and the Company recognized clinical compound revenue for the reimbursement amount. During the years ended December 31, 2015, 2014 and 2013, the Company recognized clinical compound revenue of $0, $674 and $102, respectively. Deposits received from Maruishi prior to delivery of CR845 were recorded as deferred revenue.

The Company is also eligible to receive tiered, low double digit royalties with respect to any sales of the licensed product sold in Japan by Maruishi. Additionally, the Company can receive sublicense fees (subject to certain credits for milestone payments already made) if Maruishi enters into a sublicense agreement regarding the product candidates.

Also, in conjunction with entering into this arrangement, Maruishi purchased 2,105,263 shares of Junior A Preferred Stock of the Company pursuant to a stock purchase agreement for a purchase price of $3.80 per share, for total consideration of $8,000. These shares have been recorded at their fair value of $7,663 or $3.64 per share. As a result, the premium of $337 was allocated to the arrangement consideration (see above).

The Company incurred R&D expense related to the Maruishi Agreement of $1,583 (consisting of clinical trial costs related to the R&D services deliverable), $3,558 (consisting of $3,000 of clinical trial costs related to the R&D services deliverable and $558 related to cost of clinical compound sold to Maruishi) and $2,452 (consisting of $2,420 of clinical trial costs related to the R&D services deliverable and $32 related to cost of clinical compound sold to Maruishi) during years ended December 31, 2015, 2014 and 2013, respectively.