Option and License Agreements	3 Months Ended
Mar. 31, 2020
Option and License Agreements
Option and License Agreements	10. Option and License Agreements Detailed description of contractual terms and the Company’s accounting for agreements described below were included in the Company’s audited financial statements and notes in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2020. AbbVie Agreement During the three months ended March 31, 2020, the Company continued to perform under its agreement with AbbVie, pursuant to which the Company recognizes revenues in proportion to the costs incurred. As a result, the Company will recognize the $100 million up-front payment as research and development services are performed, which is expected to be completed through 2024. During the three months ended March 31, 2020, the Company incurred $4.5 million in research and development costs and recognized revenue of $3.4 million. As of March 31, 2020, the Company had $82.5 million of deferred revenue, which is classified as either current or long-term deferred revenue in the accompanying condensed consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the aggregate amount of the transaction price allocated to the performance obligations that are partially unsatisfied as of March 31, 2020. On November 12, 2019, the Company announced that its selective oral αvβ6 - specific integrin inhibitor program for patients with fibrotic disease, MORF-720, conducted in collaboration with AbbVie, will require additional development activities, extending into the second half of 2020 based on feedback received during pre-IND interactions with the FDA, which increased the Company’s expected costs to complete the research and development services and had a corresponding decrease to revenue recognized to date that was recognized in the fourth quarter of 2019. As the Company progresses towards satisfaction of performance obligations under the AbbVie agreement, the estimated costs associated with the remaining effort required to complete the performance obligations may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to each performance obligation under the AbbVie agreement. Accordingly, revenue may fluctuate from period to period due to revisions to estimated costs, resulting in a change in the measure of progress for a performance obligation. Such changes can also impact the allocation of deferred revenue between current and long term based on changes in expected timing of the satisfaction of performance obligations. Janssen Agreement During the three months ended March 31, 2020, the Company continued to perform under its agreement with Janssen, pursuant to which the Company recognizes revenue in proportion to the costs incurred to date. The Company expects to provide research services and recognize through 2024. During the three months ended March 31, 2020, the Company incurred $1.7 million in research and development costs and recognized revenue of $2.2 million related to research services. The Company had $3.7 million and $3.5 million due from Janssen included in accounts receivable on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, $8.0 million of deferred revenue is classified as either current or long-term deferred revenue in the accompanying consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the portion of the upfront payment received allocated to the performance obligations that are partially unsatisfied as of March 31, 2020.

10. Option and License Agreements

Detailed description of contractual terms and the Company’s accounting for agreements described below were included in the Company’s audited financial statements and notes in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2020.

AbbVie Agreement

During the three months ended March 31, 2020, the Company continued to perform under its agreement with AbbVie, pursuant to which the Company recognizes revenues in proportion to the costs incurred. As a result, the Company will recognize the $100 million up-front payment as research and development services are performed, which is expected to be completed through 2024.

During the three months ended March 31, 2020, the Company incurred $4.5 million in research and development costs and recognized revenue of $3.4 million. As of March 31, 2020, the Company had $82.5 million of deferred revenue, which is classified as either current or long-term deferred revenue in the accompanying condensed consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the aggregate amount of the transaction price allocated to the performance obligations that are partially unsatisfied as of March 31, 2020.

On November 12, 2019, the Company announced that its selective oral αvβ6 - specific integrin inhibitor program for patients with fibrotic disease, MORF-720, conducted in collaboration with AbbVie, will require additional development activities, extending into the second half of 2020 based on feedback received during pre-IND interactions with the FDA, which increased the Company’s expected costs to complete the research and development services and had a corresponding decrease to revenue recognized to date that was recognized in the fourth quarter of 2019. As the Company progresses towards satisfaction of performance obligations under the AbbVie agreement, the estimated costs associated with the remaining effort required to complete the performance obligations may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to each performance obligation under the AbbVie agreement. Accordingly, revenue may fluctuate from period to period due to revisions to estimated costs, resulting in a change in the measure of progress for a performance obligation. Such changes can also impact the allocation of deferred revenue between current and long term based on changes in expected timing of the satisfaction of performance obligations.

Janssen Agreement

During the three months ended March 31, 2020, the Company continued to perform under its agreement with Janssen, pursuant to which the Company recognizes revenue in proportion to the costs incurred to date. The Company expects to provide research services and recognize through 2024. During the three months ended March 31, 2020, the Company incurred $1.7 million in research and development costs and recognized revenue of $2.2 million related to research services. The Company had $3.7 million and $3.5 million due from Janssen included in accounts receivable on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively.

As of March 31, 2020, $8.0 million of deferred revenue is classified as either current or long-term deferred revenue in the accompanying consolidated balance sheets based on the period over which the revenue is expected to be recognized. This deferred revenue balance represents the portion of the upfront payment received allocated to the performance obligations that are partially unsatisfied as of March 31, 2020.