Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

15. Commitments and Contingencies

License Agreement with Enteris Biopharma, Inc.

In August 2019, the Company entered into a non-exclusive license agreement, or the Enteris License Agreement, with Enteris Biopharma, Inc., or Enteris, pursuant to which Enteris granted to the Company a non-exclusive, royalty-bearing license, including the right to grant sublicenses, under certain proprietary technology and patent rights related to or covering formulations for oral delivery of peptide active pharmaceutical ingredients with functional excipients to enhance permeability and/or solubility, known as Enteris’s Peptelligence^® technology, to develop, manufacture and commercialize products using such technology worldwide, excluding Japan and South Korea.

As consideration for the licensed rights under the Enteris License Agreement, the Company paid an upfront fee equal to $8,000, consisting of $4,000 in cash and $4,000 in shares of the Company’s common stock pursuant to the Purchase Agreement with Enteris.

The Company is also obligated, pursuant to the Enteris License Agreement, to pay Enteris (1) milestone payments upon the achievement of certain development, regulatory and commercial milestones and (2) low-single digit royalty percentages on net sales of licensed products, subject to reductions in specified circumstances. Until the second anniversary of the entry into the Enteris License Agreement, the Company has the right, but not the obligation, to terminate its obligation to pay any royalties under the Enteris License Agreement in exchange for a lump sum payment in cash, or the Royalty Buyout. Subject to certain conditions, the Company may elect to pay 50% of the lump sum due under the Royalty Buyout in shares of the Company’s common stock pursuant to the Purchase Agreement. In June 2021, the Company paid a $10,000 milestone payment to Enteris based on a successful End of Phase 2 Meeting with the FDA in April 2021, which was recorded in R&D expense for the three and six months ended June 30, 2021. During the three and six months ended June 30, 2020, no milestone payments or royalties were paid to Enteris by the Company in relation to the Enteris License Agreement.

Manufacturing Agreement

In July 2019, the Company entered into a Master Manufacturing Services Agreement, or MSA, with Patheon UK Limited, or Patheon. The MSA governs the general terms under which Patheon, or one of its affiliates, will provide non-exclusive manufacturing services to the Company for the drug products specified by the Company from time to time. Pursuant to the MSA, the Company has agreed to order from Patheon at least a certain percentage of its commercial requirements for a product under a related Product Agreement. Each Product Agreement that the Company may enter into from time to time will be governed by the terms of the MSA, unless expressly modified in such Product Agreement.

In July 2019, the Company entered into two related Product Agreements under the MSA, one with each of Patheon and Patheon Manufacturing Services LLC, or Patheon Greenville, to govern the terms and conditions of the manufacture of commercial supplies of CR845/difelikefalin injection, the Company’s lead product candidate. Pursuant to the Product Agreements, Patheon and Patheon Greenville will manufacture commercial supplies of CR845/difelikefalin injection at the Monza, Italy and Greenville, North Carolina manufacturing sites, respectively, from active pharmaceutical ingredient supplied by the Company. Patheon and Patheon Greenville will be responsible for supplying the other required raw

materials and packaging components, and will also provide supportive manufacturing services such as quality control testing for raw materials, packaging components and finished product.

Leases

In December 2015, the Company entered into a lease agreement, or the Stamford Lease, for office space in Stamford, Connecticut, or the Premises, for the purposes of relocating its headquarters. The initial term of the Stamford Lease commenced in May 2016, or the Commencement Date, and ends in December 2023 and is renewable for one five-year term. The Stamford Lease requires monthly lease payments, including rent escalations and rent holidays, during the initial lease term. The Company began to make rental payments from the Commencement Date.

In connection with the signing of the Stamford Lease, the Company entered into a standby letter of credit agreement which serves as a security deposit for the Premises. The standby letter of credit is automatically renewed annually through November 2023. This standby letter of credit is secured with restricted cash in a money market account (refer to Note 6, Restricted Cash).

On January 1, 2019, the Company adopted FASB ASC 842: Leases, or ASC 842. Under ASC 842, since the Company adopted the practical expedients not to re-evaluate whether a contract is or contains a lease and to maintain the lease classification under ASC 840, the Stamford Lease continues to be accounted for as an operating lease.

Upon adoption of ASC 842, the Company was required to establish an operating lease right-of-use, or ROU, asset and operating lease liability for the Stamford Lease. In establishing the ROU asset, the operating lease liability of $5,198 was reduced by lease incentives relating to tenant improvements of $698 and deferred lease obligation of $864, which were outstanding upon adoption.

In June 2020, the Company entered into an amendment to the Stamford Lease to add additional office space, or the Lease Amendment. The term of the Lease Amendment began when renovation of the additional space was completed and the Company took possession of the additional space in October 2020, or the Amendment Commencement Date, and ends on December 31, 2023. The Lease Amendment is also renewable for one five-year term. The rent for the Lease Amendment is at market rate as of the signing of the Lease Amendment. The Lease Amendment requires monthly lease payments, including rent escalations, during the lease term. The Company began paying rent for the Lease Amendment on the Amendment Commencement Date.

In October 2020, the Company recorded an operating lease liability of $1,934 for the Lease Amendment as the sum of the present value of the future minimum lease payments over the term for the new lease. The Company also recorded a corresponding ROU asset of $1,934, as no lease incentives were identified in the Lease Amendment.

Under ASC 842, lease expenses on the Stamford Lease and Lease Amendment are recognized on a straight-line basis over the lease term. As a result, $406 and $236 of operating lease cost, or lease expense, was recognized for the three months ended June 30, 2021 and 2020, respectively, consisting of $284 relating to R&D lease expense and $122 relating to G&A lease expense for the Stamford Lease and Lease Amendment in the 2021 period, and $165 relating to R&D lease expense and $71 relating to G&A lease expense for the Stamford Lease in the 2020 period. For the six months ended June 30, 2021 and 2020, $812 and $470, respectively, of operating lease cost, or lease expense, was recognized, consisting of $568 relating to R&D lease expense and $244 relating to G&A lease expense for the Stamford Lease and Lease Amendment in the 2021 period, and $329 relating to R&D lease expense and $141 relating to G&A lease expense for the Stamford Lease in the 2020 period.

Other information related to the Stamford Lease and Lease Amendment was as follows:

	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows relating to operating leases	$	478		$	309		$	954		$	615
ROU assets obtained in exchange for new operating lease liabilities	$	—		$	—		$	—		$	—
Remaining lease term - operating leases (years)		2.5			3.5			2.5			3.5
Discount rate - operating leases		7.0	%		7.0	%		7.0	%		7.0	%

Future minimum lease payments under non-cancellable operating leases, as well as a reconciliation of these undiscounted cash flows to the operating lease liability as of June 30, 2021, were as follows:

Year Ending December 31,
2021 (Excluding the six months ended June 30, 2021)	$	967
2022		1,957
2023		1,992
Total future minimum lease payments, undiscounted		4,916
Less imputed interest		(421)
Total	$	4,495
Operating lease liabilities reported as of June 30, 2021:
Operating lease liabilities - current	$	1,677
Operating lease liabilities - non-current		2,818
Total	$	4,495