Revenue Recognition

3 Months Ended

Mar. 31, 2023

Revenue Recognition

Revenue Recognition

12. Revenue Recognition

The Company primarily recognizes revenue under its license and collaboration agreements from (1) collaborative revenue from its share of the profit generated by KORSUVA injection sales in the United States; (2) commercial supply revenue from the Company’s sales of commercial product to CSL Vifor, which is subsequently sold to wholesalers; (3) royalty revenue from net sales of Kapruvia in Europe; (4) sales-based or regulatory milestone payments, which could be earned in the future in accordance with certain licensing agreements. As of March 31, 2023, the Company has not earned any sales-based milestones under its collaboration agreements.

As of March 31, 2023, the Company had license and collaboration agreements with CSL Vifor, Maruishi and CKDP. The following table provides amounts included in the Company’s Condensed Statements of Comprehensive Loss as revenue for the three months ended March 31, 2023 and 2022, respectively:

	Three Months Ended March 31,
	2023		2022
Collaborative revenue
CSL Vifor (KORSUVA injection profit sharing)	$	2,750	$	—
Total collaborative revenue	$	2,750	$	—
Commercial supply revenue
CSL Vifor* (KORSUVA injection)	$	3,191	$	4,790
Total commercial supply revenue	$	3,191	$	4,790
Royalty revenue
CSL Vifor (Kapruvia ex U.S.)	$	125	$	—
Total royalty revenue	$	125	$	—
Clinical compound revenue
Maruishi	$	99	$	—
Total clinical compound revenue	$	99	$	—

_____________________________

* Includes amounts earned from Vifor International prior to Vifor International’s assignment of its rights and obligations to Vifor Fresenius Medical Care Renal Pharma Ltd. in May 2022.

Collaborative revenue

Beginning in April 2022, the Company began recording its share of the profit generated by KORSUVA injection sales by CSL Vifor to third parties in the United States. Under the license agreements with CSL Vifor, KORSUVA injection net sales are calculated by CSL Vifor which are net of discounts, rebates, and allowances. These amounts include the use of estimates and judgments, which could be adjusted based on actual results in the future. The Company records its share of the net profits from the sales of KORSUVA injection in the United States on a net basis (since the Company is not the primary obligor and does not retain inventory risk) and presents the revenue earned each period as collaborative revenue. During the three months ended March 31, 2023, the Company recorded $2,750 as collaborative revenue for its profit-share from the sales of KORSUVA injection in the United States. There was no profit share revenue recorded during the three months ended March 31, 2022.

Commercial supply revenue

Under the Vifor International Supply Agreement, the Company’s only performance obligation is the delivery of KORSUVA injection to CSL Vifor in accordance with the receipt of purchase orders. Revenue from the sale of commercial supply product to CSL Vifor is recognized as delivery of the product occurs. The Company had commercial supply revenue of $3,191 for the three months ended March 31, 2023 with associated COGS of $2,590. The Company had commercial supply revenue of $4,790 for the three months ended March 31, 2022, of which $2,295 was recognized in January 2022 with no associated COGS since these inventory costs were incurred prior to regulatory approval on August 23, 2021, and $2,495 was recognized with associated COGS of $2,081 since these inventory costs were capitalized as inventory subsequent to regulatory approval.

Royalty revenue

Royalty revenue includes amounts related to the Company’s royalties earned from CSL Vifor on the net sales of Kapruvia in Europe, based on the amount of net sales in a licensed territory during a calendar year. Sales-based royalty payments related to a license of IP are recognized as revenue when the respective sales occur, and the net sales tier is achieved. During the three months ended March 31, 2023, the Company recorded $125 as royalty revenue based on net sales of Kapruvia. There was no royalty revenue during the three months ended March 31, 2022.

Clinical compound revenue

The Company’s only performance obligation under the supply agreement with Maruishi is to deliver clinical compound to Maruishi in accordance with the receipt of purchase orders. During the three months ended March 31, 2023, the Company recognized clinical compound revenue of $99 from the sale of clinical compound to Maruishi. There were no sales of clinical compound to Maruishi during the three months ended March 31, 2022.

Contract balances

As of March 31, 2023 and December 31, 2022, respectively, the Company recorded accounts receivable, net – related party of $6,066 and $3,260 which primarily related to its profit-sharing revenue from sales of KORSUVA injection in the United States by CSL Vifor and its commercial supply of KORSUVA injection to CSL Vifor. There were no other contract assets or contract liabilities related to the CSL Vifor, Maruishi and CKDP agreements as of March 31, 2023 and December 31, 2022.

The Company routinely assesses the creditworthiness of its license and collaboration partners. The Company has not experienced any losses related to receivables from its license and collaboration partners as of March 31, 2023 and December 31, 2022.