Commitments

9 Months Ended

Mar. 31, 2022

Commitments

Commitments

Note 12. Commitments

Leases

At March 31, 2022 and June 30, 2021, the Company had a ROU lease asset of $10.0 million and $10.6 million, respectively, and an operating lease liability of $12.3 million and $13.1 million, respectively. The current balance of the operating lease liability at March 31, 2022 and June 30, 2021was $2.1 million and $2.0 million, respectively.

Components of lease cost are as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(In thousands)	2022		2021		2022		2021
Operating lease cost	$	456	$	463	$	1,361	$	1,342
Variable lease cost		63		37		120		119
Short-term lease cost		101		111		253		337
Total	$	620	$	611	$	1,734	$	1,798

Supplemental cash flow information related to our operating leases is as follows:

	Nine Months Ended
	March 31,
(In thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,606	$	1,405
Non-cash activity:
ROU assets obtained in exchange for new operating lease liabilities	$	—	$	2,275

Weighted-average remaining lease term and discount rate for our operating leases are as follows:

	Nine Months Ended
	March 31,
	2022		2021
Weighted-average remaining lease term	9	years	10	years
Weighted-average discount rate	8.5	%	8.5	%

Maturities of lease liabilities by fiscal year for our operating leases are as follows:

(In thousands)	Amounts Due
2022	$	532
2023		2,064
2024		2,083
2025		2,103
2026		2,124
Thereafter		8,513
Total lease payments		17,419
Less: Imputed interest		5,075
Present value of lease liabilities	$	12,344

Other Commitments

In Fiscal 2020, the Company executed a License and Collaboration Agreement with North South Brother Pharmacy Investment Co., Ltd. and HEC Group PTY, Ltd. (collectively, “HEC”) to develop an insulin glargine product that would be biosimilar to Lantus Solostar. Under the terms of the deal, among other things, the Company shall fund up to the initial $32.0 million of the development costs and split 50/50 any development costs in excess thereof. As of March 31, 2022, the Company has incurred approximately $7.3 million of development costs towards the $32.0 million commitment made by the Company. Lannett shall receive an exclusive license to distribute and market the product in the United States upon FDA approval under the 50/50 profit split for the first ten years following commercialization, followed by a 60/40 split in favor of HEC for the following five years. To date, the COVID-19 pandemic has not had a material impact on the development of the insulin glargine product. Although, as a result of stricter procedures required during the pandemic, there is expected to be a several month delay in completing our upcoming clinical trial. The timing of the product development and approval could be further delayed as the COVID-19 pandemic continues.

On February 8, 2021, the Company executed a License and Collaboration Agreement and a Supply Agreement with Sunshine Lake Pharma Co., Ltd. an HEC Group company (“Sunshine”) with respect to the development of a biosimilar insulin aspart product. Under the terms of the deal, among other things, the Company shall fund up to the initial $32.0 million of the development costs, provided that if total development and other costs paid by Lannett are less than $32.0 million then the difference will be paid to Sunshine over the first year of commercialization. As of March 31, 2022, the Company has incurred approximately $0.5 million towards the $32.0 million commitment made by the Company. The parties shall negotiate the sharing of any development costs in excess of $32.0 million. Lannett shall receive an exclusive license to distribute and market the product in the United States upon FDA approval under the 50/50 profit split for the first ten years following commercialization, followed by a 60/40 split in favor of Sunshine for the following five years.