Note I - Supply Arrangement

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Collaborative Arrangement Disclosure [Text Block]

I. Supply Arrangement

As of

December 31, 2019

and

2018

,

the Company has

one

manufacturing arrangement that involves

potential future expenditures related to research and development.

In

November 2009,

the Company entered into a supply agreement (the “

Supply Agreement”) with Johnson Matthey Inc. (“JMI”) whereby JMI has agreed to supply the Company with all of the benzhydrocodone necessary for clinical trials and commercial sale for a price equal to JMI’s manufacturing cost and to provide process optimization and development services for benzhydrocodone. The Company’s FDA-approved drug, APADAZ, contains benzhydrocodone. Expense of

$3.2

 million and

$3.6

million was recorded under this agreement for the year ended

December 31, 2019

, respectively. The Company must purchase all of its U.S. benzhydrocodone needs from JMI and JMI cannot supply benzhydrocodone to other companies. The term of the Supply Agreement extends as long as the Company holds a valid and enforceable patent for benzhydrocodone or until the

tenth

anniversary of a commercial launch of a FDA-approved drug incorporating benzhydrocodone, whichever date is later. Upon the expiration of such term, the agreement will automatically renew for a period of

two

years unless either party provides

12

months prior notice of its intent

not

to renew. Under the agreement, JMI will receive a tiered-based royalty share on the net sales on the commercial sale of a FDA-approved drug incorporating benzhydrocodone.

No

reliable estimate of the future payments can be made at this time.