AGREEMENT WITH GEDEON RICHTER	6 Months Ended
Dec. 31, 2014
Notes to Financial Statements
AGREEMENT WITH GEDEON RICHTER	In August 2014, the Company entered into a license, co-development and commercialization agreement with Gedeon Richter on bremelanotide for FSD in Europe and selected countries. The Company has the potential to receive up to €80 million ($97.1 million as of December 31, 2014) in regulatory and sales related milestones, and will receive low double-digit royalties on net sales in the licensed territory. Under the agreement, the Company will contribute, with Gedeon Richter, to the costs of co-development activities for obtaining regulatory approval in Europe. Gedeon Richter will exclusively market bremelanotide for FSD in the licensed territory, and will be responsible for all sales, marketing and commercial activities, including associated costs, in the licensed territory. The agreement remains in effect as long as Gedeon Richter is selling bremelanotide on which a royalty is owed. The agreement may be terminated by either party upon notice in the event of a material breach or insolvency. In the event Gedeon Richter terminates the agreement because the Company breached the agreement or is insolvent, Gedeon Richter’s license becomes fully paid-up, royalty free, perpetual and irrevocable. In the event that the Company terminates the agreement because Gedeon Richter breached the agreement or is insolvent, upon timely request, all regulatory approvals for bremelanotide in the licensed territory will be transferred to the Company or its designee. The Company views the delivery of the license for bremelanotide as a revenue generating activity that is part of its ongoing and central operations. The other elements of the agreement with Gedeon Richter are considered non-revenue activities associated with the collaborative arrangement. The Company believes the license has standalone value from the other elements of the collaborative arrangement because it conveys all of the rights necessary to develop and commercialize bremelanotide in the licensed territory. In August 2013, the Company received an initial payment of $1.0 million from Gedeon Richter as a non-refundable option fee on the license, co-development and commercialization agreement, and in September 2014, the Company received €6.7 ($8.8 million) on execution of the definitive agreement. During the six months ended December 31, 2014, the upfront payment of €7.5 million ($9.8 million) was recorded as license revenue in the consolidated statements of operations, of which $4.9 million was recorded in the three months ended September 30, 2014 for the non-refundable and non-contingent portion of the license fee and $4.9 million was recorded in the three months ended December 31, 2014 upon the initiation of the Phase 3 clinical trials when such portion became non-refundable per the agreement. During the three months ended December 31, 2014, the Company recorded revenue related to a milestone payment due of €2.5 million ($3.1 million) upon the initiation of the Company’s Phase 3 clinical trial program in the United States, which the Company initiated in December 2014. As a result of fluctuations in the conversion rates between the Euro and the U.S. Dollar between the transaction dates and the settlement dates, the Company has recorded a foreign exchange loss of $51,700 and $152,983 for the three and six months ended December 31, 2014, respectively.

AGREEMENT WITH GEDEON RICHTER

6 Months Ended

Dec. 31, 2014

In August 2014, the Company entered into a license, co-development and commercialization agreement with Gedeon Richter on bremelanotide for FSD in Europe and selected countries. The Company has the potential to receive up to €80 million ($97.1 million as of December 31, 2014) in regulatory and sales related milestones, and will receive low double-digit royalties on net sales in the licensed territory. Under the agreement, the Company will contribute, with Gedeon Richter, to the costs of co-development activities for obtaining regulatory approval in Europe. Gedeon Richter will exclusively market bremelanotide for FSD in the licensed territory, and will be responsible for all sales, marketing and commercial activities, including associated costs, in the licensed territory. The agreement remains in effect as long as Gedeon Richter is selling bremelanotide on which a royalty is owed. The agreement may be terminated by either party upon notice in the event of a material breach or insolvency. In the event Gedeon Richter terminates the agreement because the Company breached the agreement or is insolvent, Gedeon Richter’s license becomes fully paid-up, royalty free, perpetual and irrevocable. In the event that the Company terminates the agreement because Gedeon Richter breached the agreement or is insolvent, upon timely request, all regulatory approvals for bremelanotide in the licensed territory will be transferred to the Company or its designee.

The Company views the delivery of the license for bremelanotide as a revenue generating activity that is part of its ongoing and central operations. The other elements of the agreement with Gedeon Richter are considered non-revenue activities associated with the collaborative arrangement. The Company believes the license has standalone value from the other elements of the collaborative arrangement because it conveys all of the rights necessary to develop and commercialize bremelanotide in the licensed territory.

In August 2013, the Company received an initial payment of $1.0 million from Gedeon Richter as a non-refundable option fee on the license, co-development and commercialization agreement, and in September 2014, the Company received €6.7 ($8.8 million) on execution of the definitive agreement. During the six months ended December 31, 2014, the upfront payment of €7.5 million ($9.8 million) was recorded as license revenue in the consolidated statements of operations, of which $4.9 million was recorded in the three months ended September 30, 2014 for the non-refundable and non-contingent portion of the license fee and $4.9 million was recorded in the three months ended December 31, 2014 upon the initiation of the Phase 3 clinical trials when such portion became non-refundable per the agreement. During the three months ended December 31, 2014, the Company recorded revenue related to a milestone payment due of €2.5 million ($3.1 million) upon the initiation of the Company’s Phase 3 clinical trial program in the United States, which the Company initiated in December 2014.

As a result of fluctuations in the conversion rates between the Euro and the U.S. Dollar between the transaction dates and the settlement dates, the Company has recorded a foreign exchange loss of $51,700 and $152,983 for the three and six months ended December 31, 2014, respectively.