Strategic and License Agreements

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Strategic and License Agreements

Strategic and License Agreements

Fintepla (ZX008)

In October 2014, the Company acquired Brabant Pharma Limited (Brabant) in a business combination and obtained worldwide development and commercialization rights to Fintepla (ZX008; low-dose fenfluramine), its lead product candidate. Under the terms of the sale and purchase agreement, the Company agreed to make future milestone payments to the former owners of Brabant for up to $95.0 million in the event the Company achieves certain milestones with respect to Fintepla, consisting of $50.0 million in regulatory milestones and $45.0 million in sales milestones. In February 2019, the Company completed a rolling submission of a NDA with the FDA and submitted a MAA to the EMA for Fintepla for the treatment of seizures associated with Dravet syndrome. The EMA has accepted the MAA, which triggered a $10.0 million development milestone payment. An additional $10.0 million milestone payment shall become due and payable if the NDA is accepted by the FDA.

In addition, the Company has a collaboration and license agreement with the Universities of Antwerp and Leuven in Belgium (the Universities) that runs through September 2045. Under the terms of the agreement, the Universities granted the Company an exclusive worldwide license to use the data obtained from a study related to low-dose fenfluramine for the treatment of Dravet syndrome, as well as certain other intellectual property. The Company is required to pay a mid-single-digit percentage royalty on net sales of products containing low-dose fenfluramine for the treatment of Dravet syndrome or, in the case of a sublicense of products containing low-dose fenfluramine for the treatment of Dravet syndrome, a percentage in the mid-twenties of the sub-licensing revenues. The agreement may be terminated by the Universities if the Company: (a) does not use commercially reasonable efforts to (i) develop and commercialize products containing low-dose fenfluramine for the treatment of Dravet syndrome or related conditions stemming from infantile epilepsy, or (ii) seek approval of products containing low-dose fenfluramine for the treatment of Dravet syndrome in the United States; or (b) if the Company becomes insolvent or makes an assignment for the benefit of creditors or should any petition in bankruptcy, or similar relief, be filed by or against the Company. The Company can terminate the agreement upon specified prior written notice to the Universities.

Contract Manufacturing Supply Agreement with Endo and Associated Exit Activities

In May 2014, the Company completed the sale of its Sumavel DosePro business. Concurrently with the sale, the Company entered into the Supply Agreement to be the exclusive supplier of Sumavel DosePro to Endo. The Supply Agreement was terminated in September 2017. The Company recorded a charge of $2.2 million in inventory write-down to reflect its current net realizable value as a result the termination agreement in 2017 and also recorded an impairment charge of $2.0 million in 2016 to write off the remaining carrying amount of a prepaid royalty associated with the Supply Agreement. These additional charges reflected ongoing negotiations over the course of finalizing the termination of the Supply Agreement and were included as a cost of contract manufacturing and a component of operating expenses, respectively, in the consolidated statements of operations.

Pursuant to the termination agreement, the Company also received cash consideration of $1.5 million from Endo for reimbursement of a portion of the Company’s termination costs for its third-party suppliers and manufacturers related to Sumavel DosePro product. As part of the termination agreement, both parties also agreed to net settle outstanding accounts receivable of $4.7 million due from Endo and the Company’s remaining purchased raw materials and other costs of $2.3 million against the $7.0 million working capital advance note payable due to Endo. In connection with the Endo termination agreement, the Company also executed termination agreements with its third-party suppliers and manufacturers related to the Sumavel DosePro product and incurred contract termination costs of $2.5 million. Excluding the non-cash loss on extinguishment of debt due to the write-off of unamortized discount related to imputed interest (see Note 8), these termination agreements resulted in a net loss on contract termination of $0.5 million, which was  included in loss on contract termination within continuing operations in the consolidated statements of operations.

Other Asset Acquisitions

In October 2016, the Company paid $1.5 million to acquire the global rights to a preclinical development program for orphan CNS disorders in an asset acquisition. At the date of acquisition, the project had not yet reached technological feasibility, was deemed to have no alternative use, and was immediately charged to research and development expense. The asset purchase agreement provides for potential additional payments if certain development and sales milestones are achieved. Due to the preclinical stage of development and the nature of this arrangement, any future potential payments related to the attainment of the specified milestones over a period of several years are inherently uncertain.