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Deferred Revenue
12 Months Ended
Dec. 31, 2014
Deferred Revenue

13.    Deferred Revenue

The following is a summary of changes in total deferred revenue for the years ended December 31, 2014 and 2013:

 

     Year Ended December 31,  

(in thousands)

   2014      2013  

Balance beginning of period

   $ 90,275       $ 117,064   

Deferred Fanapt® product sales

     174           

Licensing revenue recognized

     30,746         26,789   

Recognized as part of gain on arbitration settlement

     59,529           
  

 

 

    

 

 

 

Balance end of period

   $ 174       $ 90,275   
  

 

 

    

 

 

 

The Company entered into an amended and restated sublicense agreement with Novartis in 2009, pursuant to which Novartis had the right to commercialize and develop Fanapt® in the U.S. and Canada. Under the amended and restated sublicense agreement, the Company received an upfront payment of $200.0 million. The Company and Novartis established a Joint Steering Committee (JSC) following the effective date of the amended and restated sublicense agreement. The Company concluded that the JSC constitutes a deliverable under the amended and restated sublicense agreement and that revenue related to the upfront payment will be recognized ratably over the term of the JSC; however, the delivery or performance had no term as the exact length of the JSC is undefined. As a result, the Company deemed the performance period of the JSC to be the life of the U.S. patent of Fanapt®. Revenue related to the upfront payment was recognized ratably from the date the amended and restated sublicense agreement became effective (November 2009) through the expected duration of the Novartis commercialization of Fanapt® in the U.S. which was estimated to be through the expiry of the Fanapt® composition of patent, including a granted Hatch-Waxman extension (November 2016). During the years ended December 31, 2014, 2013 and 2012, the Company recognized revenue of $30.7 million, $26.8 million and $26.8 million, respectively, related to the license agreement.

 

In connection with the Settlement Agreement with Novartis, the Company recognized the remaining deferred revenue balance of $59.5 million as part of the gain on arbitration settlement. See Note 3, Settlement Agreement with Novartis, for further discussion.