8. Collaboration Arrangements

Cipla Distribution Agreement — On May 8, 2018, the Company and Cipla Ltd. (“Cipla”) entered into an exclusive agreement for the marketing and distribution of Afrezza in India and received a $2.2 million nonrefundable license fee. Under the terms of the agreement, Cipla will be responsible for obtaining regulatory approvals to distribute Afrezza in India and for all marketing and sales activities of Afrezza in India. The Company is responsible for supplying Afrezza to Cipla. In addition to the $2.2 million nonrefundable payment, the Company has the potential to receive certain additional regulatory milestone payments, minimum purchase commitment revenue and royalties on Afrezza sales in India once cumulative gross sales have reached a specified threshold.

The nonrefundable licensing fee was recorded in deferred revenue and is being recognized in net revenue – collaboration over fifteen years, representing the estimated period to satisfy the performance obligation. The additional potential milestone payments represent variable consideration for which the Company has not recognized any revenue because of the uncertainly of obtaining market approval. The Company also recognized $0.2 million as income tax expense as payment made to the India tax authority.

Biomm Supply and Distribution Agreement – In May 2017, the Company and Biomm S.A. entered into a supply and distribution agreement for the commercialization of Afrezza in Brazil. Under this agreement, Biomm is responsible for preparing and filing the necessary applications for regulatory approval of Afrezza in Brazil, including from the Agência Nacional de Vigilância Sanitária and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos. Upon satisfactory approval from these regulatory bodies, the parties will finalize the economic terms of the collaboration; thereafter, MannKind will manufacture and supply Afrezza to Biomm, and Biomm will be responsible for promoting and distributing Afrezza within Brazil.

Receptor Collaboration and License Agreement — In 2016 the Company entered into a Collaboration and License Agreement (the “CLA”) with Receptor Life Sciences, Inc. (“Receptor”) pursuant to which Receptor obtained the option to acquire an exclusive license to develop, manufacture and commercialize certain products that use the Company’s technology to deliver the compounds via oral inhalation.

On December 30, 2016 Receptor exercised its option and paid the Company a $1.0 million nonrefundable option exercise and license fee. Under the CLA, the Company may receive the following additional payments:

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Nonrefundable milestone payments upon the completion of certain technology transfer activities and the achievement of specified sales targets;

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Royalties upon Receptor’s and its sublicensees’ sale of the product; and

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Milestones upon total worldwide sales reaching certain agreed upon levels.

The $1.0 million license fee received in 2016 was recorded in deferred revenue from collaboration as of December 31, 2016 and is being recognized in net revenue — collaboration over four years, the estimated period over which the Company was required to satisfy the remaining performance obligations. The remaining performance obligations are to provide certain technology transfer activities and to maintain certain patents. Deferred payments from collaboration related to this contract was $0.7 million at June 30, 2018 of which $0.3 million was recorded in current liabilities.

The additional payments referred to above represent variable consideration for which the Company has not recognized any revenue because it is uncertain that Receptor will be able to successfully develop, manufacture or sell product related to this license. Therefore, the receipt of such payments is highly susceptible to factors outside of the Company’s influence, the uncertainty regarding the receipt of these payments is not expected to be resolved for years, and the Company has limited experience with similar contracts. There was no change to the accounting for this contract as a result of the initial application of the new revenue guidance. See Note 1 – Description of Business and Summary of Significant Accounting Policies for additional information on the Company’s revenue recognition accounting policy

In 2017, the Company entered into a Manufacturing and Supply Agreement with Receptor pursuant to which the Company will provide certain raw materials to Receptor and agreed to provide certain additional research and formulation consulting services to Receptor. For the three and six months ended June 30, 2018 and 2017 the additional research and formulation services provided to Receptor were de minimis.

Sanofi License Agreement and Sanofi Supply Agreement — In 2014 the Company entered into a license and collaboration and supply agreement (the “Sanofi License Agreement”) with Sanofi-Aventis U.S. LLC. (“Sanofi”), pursuant to which Sanofi was responsible for global commercial, regulatory and development activities for Afrezza. In 2016, the agreements were terminated and the Company assumed responsibility for the worldwide development and commercialization of Afrezza from Sanofi.

Also in 2016, the Company entered into a settlement agreement with Sanofi. The settlement was accounted for in 2016, except for a $30.6 million cash payment received under an insulin put option agreement which reduced the receivable from Sanofi in the first quarter of 2017.