Revenue from Contracts with Customers

The following table summarizes revenue from contracts with customers for the years ended

December 31, 2019,

2018

and

2017

into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (in thousands):

	December 31,
	201 9		201 8		201 7
Product sales:
DSUVIA	$	377	$	—	$	—
Zalviso		1,453		825		6,673
Total product sales		1,830		825		6,673
Contract and other collaboration:
DoD Contract revenue		—		838		852
Non-cash royalty revenue related to Royalty Monetization (See Note 8)		312		289		151
Royalty revenue		104		96		50
Other revenue		43		103		269
Total revenues from contract and other collaboration		459		1,326		1,322
Total revenue	$	2,289	$	2,151	$	7,995

For additional detail on the Company’s accounting policy regarding revenue recognition, refer to Note

“Organization and Summary of Significant Accounting Policies - Revenue from Contracts with Customers.”

Product Sales

The Company’s commercial launch of DSUVIA in the United States occurred in the

first

quarter of

2019.

Zalviso is sold in Europe by the Company’s collaboration partner, Grünenthal.

Contract and Other Collaboration

Amended License Agreement

Under the Amended License Agreement with Grünenthal, the Company is eligible to receive approximately

$194.5

million in additional milestone payments, based upon successful regulatory and product development efforts (

$28.5

million) and net sales target achievements (

$166.0

million). Grünenthal will also make tiered royalty and supply and trademark fee payments in the mid-teens up to the mid-twenties percent range, depending on the level of sales achieved, on net sales of Zalviso. A portion of the tiered royalty payment, exclusive of the supply and trademark fee payments, will be paid to PDL in connection with the Royalty Monetization. For additional information on the Royalty Monetization with PDL, see Note

“Liability Related to Sale of Future Royalties”. Unless earlier terminated, the Amended License Agreement continues in effect until the expiration of the obligation of Grünenthal to make royalty and supply and trademark fee payments, which supply and trademark fee continues for so long as the Company continues to supply the Product to Grünenthal. The Amended License Agreement is subject to earlier termination in the event the parties mutually agree, by a party in the event of an uncured material breach by the other party, upon the bankruptcy or insolvency of either party, or by Grünenthal for convenience.

Amended MSA

Under the terms of the Amended MSA with Grünenthal, the Company will manufacture and supply the Product for use in the Field for the Territory exclusively for Grünenthal. The Product will be supplied at prices approximating the Company’s manufacturing cost, subject to certain caps, as defined in the MSA Amendment. The MSA Amendment requires the Company to use commercially reasonable efforts to enter stand-by contracts with

third

parties providing significant supply and manufacturing services and, under certain specified conditions, permits Grünenthal to use a

third

-party back-up manufacturer to manufacture the Product for Grünenthal’s commercial sale in the Territory.

The Amended Agreements entitle the Company to receive additional payments upon the achievement of certain development milestones which relate to post approval product enhancements, expanded market opportunities and manufacturing efficiencies for Zalviso and require future research, development and regulatory activities. These payments are excluded from the transaction price as they are considered payments for optional additional services that Grünenthal

may

elect in the future. When these services are elected, they will be considered as a new contract under ASC Topic

606

and will

not

impact the revenue recognition of the performance obligations identified under Amended Agreements.

The Amended Agreements also include milestone payments related to specified net sales targets, totaling

$166.0

million. These payments are considered sales-based license royalties under ASC Topic

606

and will be recognized apart from the other contract consideration when the related sales occur.

The Company recognizes revenue from license rights when the customer can use and benefit from the license rights. The Company recognizes revenue from its services performance obligations over time using a cost-to-cost input method which best represents the incremental benefit that the customer receives as control is transferred.

DoD Contract

May 11, 2015,

the Company entered into an award contract (referred to as the DoD Contract) supported by the Clinical and Rehabilitative Medicine Research Program, or CRMRP, of the United States Army Medical Research and Materiel Command, or the USAMRMC, within the U.S. Department of Defense, or the DoD, in which the DoD agreed to provide up to

$17.0

million to the Company in order to support the development of DSUVIA. The DoD contract period of performance ended on

February 28, 2019.

Contract Liability

The Company has entered into the Amended Agreements with Grünenthal related to Zalviso. At

December 31, 2019,

approximately

$3.1

million of deferred revenue,

$0.3

million of which represented the current portion, was attributable to the significant and incremental discount on Zalviso manufacturing services for Grünenthal. This deferred revenue is being recognized on a straight-line basis over the period such discount is made available to Grünenthal, which is estimated to continue through

2029.

The following table presents changes in the Company’s contract liability for the year ended

December 31, 2019:

	Balance at Beginning of the Period		Additions		Deductions			Balance at the end of the Period
	(in thousands)
Contract liability:
Deferred revenue – Amended Agreements	$	3,463	$	—	$	(315	)	$	3,148
Deferred revenue – Other		—		96		—			96
Deferred revenue	$	3,463	$	96	$	(315	)	$	3,244

For the years ended

December

31,

2019

and

2018,

the Company recognized the following revenue from performance obligations satisfied (in thousands):

	Year ended December 31, 2019		Year ended December 31, 2018
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied – Amended Agreements	$	315	$	362
New activities in the period from performance obligations satisfied:
Performance obligations satisfied – Amended Agreements		1,181		566
Total revenue from performance obligations satisfied	$	1,496	$	928