In December 2018, the Company entered into a collaboration and license agreement (Collaboration) with Endo, for the further development and commercialization of generic Sabril

(vigabatrin) tablets through Endo’s U.S. Generic Pharmaceuticals segment, doing business as Par Pharmaceutical (Par). Under the Collaboration, Endo assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the collaboration, while the Company is responsible for exercising commercially reasonable efforts to develop, or cause the development of, a final finished, stable dosage form of generic Sabril

tablets.

Under the terms of the Collaboration, the Company has received an

up-front

payment, and will receive a milestone payment, and a sharing of defined net profits upon commercialization from Endo consisting of a

mid-double

digit percent of net sales of generic Sabril

. The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms, the collaboration continues in effect until the date that is ten years following the commercial launch of the product.

The Company evaluated the license agreement with Endo to determine whether it is a collaborative arrangement for purposes of Topic 808. As the Company shares in the significant risks and rewards, the Company has concluded that this is a collaborative arrangement. As developing a final finished dosage form of a generic product in exchange for consideration is not an output of the Company’s ongoing activities, Endo does not represent a contract with a customer. However, Topic 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties. The Company concluded that ASC Topic 730,

Research and Development

, should be applied by analogy to payments between the parties during the development activities and Topic 606 for the milestone payment and sharing of defined net profits upon commercialization.

The collaborative agreement included a nonrefundable upfront license fee that was recognized upon receipt following execution of the collaborative arrangement for vigabatrin tablets.

The collaborative agreement provides for a $2.0 million milestone payment on the commercial launch of the product by Endo/Par. As of September 30, 2023 and 2022, no milestone payments have been earned.

See Note 17 (Subsequent Events).

There were no revenues from this collaborative arrangement for the three and nine months ended September 30, 2023 or 2022. There were no expenses incurred, net, in connection with the collaborative arrangement for the three and nine months ended September 30, 2023 or 2022.

Under the agreement, Catalyst granted KYE an exclusive license to commercialize and market FIRDAPSE

in Canada. KYE assumes all selling and marketing costs under the collaboration, while the Company is responsible for supply of FIRDAPSE

based on the collaboration partner’s purchase orders.

Under the terms of the agreement, the Company will receive an

up-front

payment, received payment upon transfer of Marketing Authorization and delivery of commercial product, received payment for supply of FIRDAPSE

, will receive milestone payments, and a sharing of defined net profits upon commercialization from KYE consisting of a

mid-double-digit

percent of net sales of FIRDAPSE

This agreement is in form identified as a collaborative agreement and the Company has concluded for accounting purposes that it also represents a contract with a customer. This is because the Company grants to KYE a license and provides supply of FIRDAPSE

in exchange for consideration, which are outputs of the Company’s ongoing activities. Accordingly, the Company has concluded that this collaborative arrangement will be accounted for pursuant to Topic 606.

The collaborative agreement included a nonrefundable upfront license fee that was recognized upon transfer of the license based on a determination that the right is provided as the intellectual property exists at the point in time in which the license is granted.

Under the arrangement, the Company will receive profit-sharing reports within nine days after quarter end from KYE. Revenue from sales of FIRDAPSE

by KYE is recognized in the quarter in which the sales occurred.

Revenues

from the arrangement with KYE for the three and nine months ended September 30, 2023 and 2022 were

material. Revenue is included in product revenue, net and license and other revenue in the accompanying consolidated statements of operations and comprehensive income (loss). Expenses incurred, net have been included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Under the agreement, DyDo has joint rights to develop FIRDAPSE

, and exclusive rights to commercialize the product, in Japan. DyDo is responsible for funding all clinical, regulatory, marketing and commercialization activities in Japan, while the Company is responsible for clinical and commercial supply based on purchase orders, as well as providing support to DyDo in its efforts to obtain regulatory approval for the product from the Japanese regulatory authorities.

Under the terms of the agreement, the Company has earned an

up-front

payment and may earn further development and sales milestones for FIRDAPSE

, as well as revenue on product supplied to DyDo.

The Company has concluded that this license agreement will be accounted for pursuant to Topic 606. The agreement included a nonrefundable upfront license fee that was recognized upon the effective date of the agreement as the intellectual property exists at the point in time in which the right to the license is granted. The Company determined the granting of the right to the license is distinct from the supply of FIRDAPSE

and represents a separate performance obligation in the agreement.

The agreement includes milestones that are considered a sales-based royalty in which the license is deemed to be the predominant item to which these milestones relate. Revenue will be recognized when the later of (a) the subsequent sale occurs, or (b) the performance obligation to which the sales-based royalty has been allocated has been satisfied. Additionally, the agreement includes regulatory milestone payments which represent variable consideration, and due to uncertainty are fully constrained and only recognized when the uncertainty is subsequently resolved. For clinical and commercial supply of the product, the Company will recognize revenue when the Customer obtains control of the Company’s product, which will occur at a point in time which is generally at time of shipment.

There

were $0 and $0.5 million in revenue from the arrangement with DyDo for the three and nine months ended September 30, 2023, respectively, which is included in product revenue, net in the accompanying consolidated statements of operations and comprehensive income (loss). There were revenues of $0 and $0.5 million from the arrangement with DyDo for the three and nine months ended September 30, 2022, which is included in product revenue, net in the accompanying consolidated statements of operations and comprehensive income (loss). As of September 30, 2023, no milestone payments have been earned.