Revenue

9 Months Ended

Sep. 30, 2021

Revenue From Contract With Customer [Abstract]

Revenue

10. Revenue:

Revenue was as follows for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Neurocrine Biosciences:
Recognition of the transaction price	$	823	$	5,246	$	1,440	$	23,006
Research and development services		2,031		1,308		4,990		4,010
Milestone payments		5,270		—		5,270		—
Flexion:
Milestone payments		—		—		3,000		—
Total collaboration revenue	$	8,124	$	6,554	$	14,700	$	27,016

(a) Neurocrine Biosciences license and collaboration agreement:

In December 2019, the Company entered into the Neurocrine Collaboration Agreement with Neurocrine Biosciences. Pursuant to this agreement, the Company granted an exclusive license to XEN901, now known as NBI-921352, and an exclusive license to pre-clinical compounds for development, XEN393, XPC’535 and XPC’391 (collectively, the “DTCs”). The agreement also includes a two-year research collaboration to discover, identify and develop additional novel Nav1.6 and Nav1.2/1.6 inhibitors (“Research Compounds”) which has been extended to June 2022. The Company and Neurocrine Biosciences are collaborating on the conduct of two collaboration programs: (a) a joint research collaboration to discover, identify and preclinically develop Research Compounds (the “Research Program”) and (b) a collaborative development program for NBI-921352 and two DTCs selected by the joint steering committee (the “Initial Development Program”). 

At execution of the agreement, Neurocrine Biosciences paid the Company an upfront cash payment of $30,000 and a $20,000 equity investment in the Company. The equity investment was measured at fair value of $16,667 on the date of issuance and the resulting premium of $3,333, together with the upfront cash payment totaling $33,333, was the transaction price of the arrangement for allocation to the performance obligations.  The agreement includes the following performance obligations: (i) an exclusive license to NBI-921352 with associated technology and know-how transfer, (ii) an exclusive license to the DTCs with associated know-how transfer, (iii) a license to Research Compounds and research services under the Research Program, (iv) development services under the Initial Development Program for NBI-921352, and (v) development services under the Initial Development Program for the DTCs. The total transaction price of $33,333 was allocated to performance obligation (v) based on its estimated standalone selling price determined based on internal development plans and budget, with the balance allocated to performance obligations (i) and (ii) by the residual approach. The Company allocated the transaction price as follows: $28,807 to performance obligations (i) and (ii), completed as of December 2020, and $5,118, which includes $592 of variable consideration, to performance obligation (v), which is expected to be completed by Q1 2022.

The arrangement consideration related to the services under performance obligations (iii) and (iv) to be performed on behalf of Neurocrine Biosciences were excluded from the initial transaction price allocation because the consideration and performance are contingent upon Neurocrine Biosciences requesting performance of the services and these services are priced at an estimated fair value. None of the at-risk substantive performance milestones, including development, regulatory and sales-based milestones, were included in the transaction price at the inception of the agreement, as all milestone amounts are outside the control of the Company and contingent upon Neurocrine Biosciences’s efforts and success in future clinical trials.

In September 2021, based on the regulatory approval of a clinical trial application in Europe for NBI-921352 for focal-onset seizures in adults, the Company received an aggregate milestone payment of $10,000 in the form of $4,500 in cash and a $5,500 equity investment in the Company. The equity investment was measured at fair value of $4,730 on the date of issuance and the resulting premium of $770, with the cash payment of $4,500, was recognized as revenue in the period as the Company did not have any remaining performance obligations in relation to this milestone on the date it was achieved.  

The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

During the three and nine month periods ended September 30, 2021, the Company recognized $2,854 and $6,430 of revenue, respectively (three and nine months ended September 30, 2020 – $6,554 and $27,016 respectively), which comprised of $2,031 and $4,990, respectively (three and nine months ended September 30, 2020 – $1,308 and $4,010 respectively), for the research and development services under (iii) the Research Program and (iv) the Initial Development Program for NBI-921352; and $823 and $1,440, respectively (three and nine months ended September 30, 2020 – $348 and $824 respectively), for (v) development services under the Initial Development Program for the DTCs. During the three and nine months ended September 30, 2020, the Company also recognized revenue of $4,898 and $22,182, respectively, associated with (i) the exclusive license to NBI-921352 and (ii) the exclusive license to the DTCs. As of September 30, 2021, there is $2,052 of accounts receivable and $2,202 of deferred revenue related to the Neurocrine Collaboration Agreement, which is classified as current on the balance sheet based on the period the services are expected to be delivered.

The Company has an option to co-fund 50% of the development costs of NBI-921352 or another product candidate in the U.S., exercisable upon achievement of certain milestones, in exchange for increased U.S. royalties. The Company has not exercised this option as of September 30, 2021.     

(b) Flexion definitive agreement:

In September 2019, the Company entered into an agreement with Flexion Therapeutics Inc. (“Flexion”) pursuant to which Flexion acquired all rights with respect to XEN402, and a related compound (collectively “XEN402”), including certain regulatory documentation, intellectual property rights, reports, data and all quantities of XEN402, now known as FX301, owned or controlled by the Company. 

During the nine months ended September 30, 2021, the U.S. Food and Drug Administration cleared the first investigational new drug application for FX301 and Flexion initiated a Phase 1b clinical trial, resulting in milestone payments of $1,000 and $2,000 paid to the Company, respectively. Pursuant to terms of the agreement, the Company will also be eligible for a development milestone payment of $5,000 upon initiation of a Phase 2 proof-of-concept clinical trial. Following successful proof-of-concept, the Company may be entitled to future clinical development and global regulatory approval milestone payments of up to $40,750, commercial milestone payments of up to $75,000, as well as future royalties ranging from mid-single to low-double digit percentages. These additional amounts will be recognized as determinable.