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Collaborations
12 Months Ended
Dec. 31, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Collaborations

11. Collaborations  

Chong Kun Dang Pharmaceutical Corporation

In April, 2012, the Company entered into a license agreement with CKDP, or the CKDP Agreement, that provides CKDP with the exclusive rights to develop, manufacture and commercialize products containing CR845/difelikefalin in South Korea. At inception of the CKDP 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/difelikefalin. The Company is accounting for the milestones under ASC 605-28 Revenue Recognition – Milestone Method. At the time of execution of the CKDP 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.    

During the year ended December 31, 2015, the Company met the milestone criteria, as set forth in the CKDP Agreement, for the completion of both a Phase 1b trial of Oral CR845/difelikefalin in the United States and a Phase 2 trial of I.V. CR845/difelikefalin in uremic pruritus patients in the United States. Both milestones were considered to be substantive and, therefore, the total amount of the milestone payments earned, $626 (net of South Korean withholding tax of $124), was recognized as milestone revenue upon achievement of the milestones. The next potential milestone that the Company could be entitled to receive under the CKDP Agreement will be a clinical development milestone for the completion by the Company in the United States of a Phase 3 trial of CR845/difelikefalin in uremic pruritus. 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, or the Maruishi Agreement, under which the Company granted Maruishi an exclusive license to develop, manufacture, and commercialize drug products containing CR845/difelikefalin for acute pain and uremic pruritus in Japan. Maruishi has the right to grant sub-licenses in Japan, which entitles the Company to receive sub-license fees, net of prior payments made by Maruishi to the Company. 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/difelikefalin in the United States and Japan, respectively. In addition, the Company provided Maruishi specific clinical development services for CR845/difelikefalin used in Maruishi’s field of use between 2013 and 2015.

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/difelikefalin 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 from the outset of the arrangement.

As a result, the total value of the arrangement was allocated between the two units of accounting based upon their relative standalone selling prices. 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/difelikefalin 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 the Maruishi Agreement, the management of the Company determined that the license and the R&D services deliverables had estimated selling prices of $10,200 and $6,200, respectively.

The resulting percentage allocations were applied to the total consideration. The amount assigned to the license deliverable was recognized immediately as license revenue. 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.

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/difelikefalin in acute post-operative pain, which constituted achievement of one of the milestones specified in the Maruishi 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 of $20, 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/difelikefalin 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 license and milestone revenue and $641 as collaborative revenue in connection with achievement of this milestone.

The next potential milestones that the Company could be entitled to receive under the Maruishi Agreement will be a clinical development milestone for the completion by the Company of the first Phase 3 trial of CR845/difelikefalin in acute pain in the United States and the initiation by Maruishi of a Phase 3 clinical trial of CR845/difelikefalin in Japan for uremic pruritus. If achieved, these milestones will result in payments of $1,000 and $2,000, respectively, before contractual foreign currency exchange adjustments, being due to the Company.  

The Maruishi Agreement includes a requirement for the Company to negotiate in good faith with the counterparty, after the execution of the Maruishi Agreement, a separate agreement to supply it with CR845/difelikefalin clinical compound or, at Maruishi’s election, CR845/difelikefalin drug substance. However, the Company has no obligation to execute a supply agreement. Furthermore, Maruishi may choose instead to manufacture its own requirements of CR845/difelikefalin drug product and/or drug substance by entering into agreements with contract manufacturing organizations that have the ability to manufacture CR845/difelikefalin. In fact, the parties have never negotiated a master supply agreement.  

The Company did not identify the potential supply agreement as a unit of accounting within the overall Maruishi Agreement since the significant terms of the supply agreement had not been negotiated between the parties and no executed agreement exists with designated responsibilities.  The Company views this aspect of the Maruishi Agreement as a substantive option subject to negotiation that is separate and independent of the Maruishi Agreement and should not be considered a deliverable. In the event that a supply agreement is negotiated, the price to be paid is 110% of the Company’s fully-burdened cost of manufacturing CR845/difelikefalin. The Company concluded that this price does not represent a significant and incremental discount because it is consistent with the amount that other third parties would charge Maruishi. In the absence of a master supply agreement, the Company and Maruishi entered into separate supply agreements for the Company to supply Maruishi with CR845/difelikefalin. Thus, the only deliverable under these separate supply agreements was the delivery of CR845/difelikefalin clinical compound.

The Company had previously entered into manufacturing and service agreements with third parties to manufacture CR845/difelikefalin. Payments made by the Company to third parties based on firm and fixed commitments by Maruishi to purchase CR845/difelikefalin from the Company are capitalized as prepaid expense. During the manufacturing process, title and risk of loss remains with the third party until the Company paid in full for the material. Once the Company has title to the CR845/difelikefalin and has delivered it to Maruishi, prepaid expense related to that CR845/difelikefalin is reduced with an offset to R&D expense. At that time, Maruishi reimburses the Company for its external and internal costs for purchasing CR845/difelikefalin and processing the sale to Maruishi and the Company recognizes clinical compound revenue for the reimbursement amount. Deposits received from Maruishi prior to delivery of CR845/difelikefalin are recorded as deferred revenue.  During the years ended December 31, 2017, 2016 and 2015, the Company recognized clinical compound revenue of $68, $86 and $0, respectively.

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 sub-license fees (subject to certain credits for milestone payments already made) if Maruishi enters into a sub-license agreement regarding the product candidates.

In March 2017, Maruishi entered into a sub-license agreement with Kissei Pharmaceutical Co. Ltd. for the development and sales/marketing of CR845/difelikefalin (called MR13A9 by Maruishi) for the treatment of uremic pruritus in dialysis patients in Japan. Consequently, during the year ended December 31, 2017, the Company recognized revenue of $843 related to the sub-license fee. The Company allocated the amount of the sub-license fee to each of the two identified deliverables in the same proportion as the upfront license fee that the Company received at inception of the Maruishi Agreement. Accordingly, $530 was recognized as license and milestone fees revenue and $313 was recognized as collaborative revenue.

The Company incurred R&D expense related to the Maruishi Agreement of $61, $78 (both related to the cost of clinical compound sold to Maruishi) and $1,583 (consisting of clinical trial costs related to the R&D services deliverable) during years ended December 31, 2017, 2016 and 2015, respectively.