Commitments

3 Months Ended

Sep. 30, 2022

Commitments

Commitments

Note 11. Commitments

Leases

At September 30, 2022 and June 30, 2022, the Company had a ROU lease asset of $9.6 million and an operating lease liability of $11.8 million and $12.1 million, respectively. The current balance of the operating lease liability at September 30, 2022 was $2.1 million.

Components of lease costs are as follows:

	Three Months Ended
	September 30,
(In thousands)	2022		2021
Operating lease cost	$	466	$	461
Variable lease cost		38		41
Short-term lease cost (a)		84		69
Total	$	588	$	571

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(a) Not recorded on the Consolidated Balance Sheet

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

	Three Months Ended
	September 30,
(In thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	673	$	593

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

	Three Months Ended
	September 30,
	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
2023	$	1,559
2024		2,083
2025		2,103
2026		2,124
2027		2,145
Thereafter		6,368
Total lease payments		16,382
Less: Imputed interest		4,586
Present value of lease liabilities	$	11,796

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 September 30, 2022, the Company has incurred approximately $9.0 million of development costs towards the $32.0 million commitment made by the Company. As we have completed dosing of subjects in the clinical trial at this time, we expect development funding will be well less than $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 HEC for the following five years.

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 September 30, 2022, the Company has incurred approximately $1.8 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.

In conjunction with the HEC collaboration efforts to develop biosimilar insulin glargine and aspart, the Company also separately entered into two Customization and Supply Agreements with Ypsomed AG (“Ypsomed”) in October 2020 and July 2021 to develop, manufacture and supply an injection device to be used with both insulin products. In April 2022, the Company executed an amendment to the Customization and Supply Agreements to allow Ypsomed to expand their production capacity to meet the anticipated demand. Under the terms of the deal, the Company is required to pay 14 million Swiss Francs (“CHF”) to Ypsomed over various future milestone dates to fund the capacity expansion in exchange for a predetermined discount on future purchases of the injection device. In April 2022, The Company paid Ypsomed 4.0 million CHF, the equivalent of approximately $4.3 million, which is recorded in the other assets caption of the Consolidated Balance Sheet as of September 30, 2022. The remaining 4.0 million and 6.0 million CHF payments are to be paid in installments in calendar years 2023 and 2024, respectively.