10. Restructuring

In July 2018, the Company’s Board of Directors approved a restructuring plan to reduce operating costs and better align the Company’s workforce with the needs of its business following the June 27, 2018 announcement that its Phase 3 Leadership 301 clinical trial evaluating once-daily, oral rosiptor for the treatment of IC/BPS failed to meet its primary endpoint. The Company has halted all further development activities with rosiptor.

Under the restructuring plan, the Company reduced its workforce by 30 employees (approximately 53% of total employees) and closed its office in San Bruno, California. Affected employees are eligible to receive severance payments and outplacement services. The Company estimates that it will incur aggregate restructuring charges of approximately $9.2 million related to clinical trial closing costs, contract cancellations, closing of its office in San Bruno, severance payments and other employee-related costs. During the three months ended September 30, 2018, $3.3 million of the estimated restructuring charges was paid.

The charges that the Company expects to incur in connection with the restructuring are subject to a number of assumptions, and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring plan.

The Company accounts for the restructuring cost in accordance with ASC 420, Exit or Disposal Cost Obligations. ASC 420 specifies that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, except for a liability where employees are required to render service until they are terminated in order to receive termination benefits and will be retained to render service beyond the minimum retention period. A liability for such one-time termination benefits shall be measured initially at the communication date based on the fair value of the liability as of the termination date and recognized ratably over the future service period.

The following table shows the total amount expected to be incurred and the liability as at September 30, 2018:


(in thousands)	Total expenses
Clinical trial closing costs	$	5,703
One-time employee termination benefits		1,879
Contract termination costs		1,108
San Bruno office closing costs		465

Total restructuring costs expected to be incurred		9,155
Amounts to be incurred in the fourth quarter		(184	)
Amounts paid during the period		(3,340	)

Amounts accrued at September 30, 2018	$	5,631

Restructuring costs of $7.9 million is recorded in research and development expenses, $0.9 million in general and administrative expenses and $0.2 million in miscellaneous expenses. The majority of the amounts accrued will be paid by December 31, 2018.