Collaboration Arrangement

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Collaboration Arrangement

Collaboration Arrangement

Nippon Shinyaku Co., Ltd

In March 2019, we entered into an agreement (Shinyaku Agreement) with Nippon Shinyaku Co., Ltd. (Shinyaku) for the exclusive distribution of Fintepla in Japan for the treatment of Dravet syndrome and LGS. No development rights or intellectual property licenses were transferred. As part of the Shinyaku Agreement, we are responsible for completing the global clinical development and all regulatory approval activities for Fintepla to support the submission of new drug applications in Japan for Dravet syndrome and LGS. Upon regulatory approval of Fintepla in Japan, Shinyaku will act as our exclusive distributor for Fintepla and will be responsible for the commercialization activities including the promotion, marketing, sale and distribution of Fintepla in Japan.

Shinyaku has agreed to support development and regulatory approval of Fintepla in Japan by actively participating in the design of non-clinical, clinical and manufacturing requirements needed for regulatory submission, actively planning and participating in product labeling decisions and discussions with the Japanese Ministry of Health, Labor and Welfare (MHLW) and obtained distribution exclusivity through the payment of an initial fixed consideration. The collaborative activities under the Shinyaku Agreement prior to regulatory approval are within the scope of the accounting guidance related to collaborative arrangements.

Pursuant to the terms of the agreement, Shinyaku agreed to make aggregate fixed payments of $20.0 million in scheduled installments over a two-year period from the date of the agreement. As of March 31, 2021, all fixed consideration has been received. In addition, we can earn up to $66.0 million from Shinyaku for the achievement of certain regulatory milestones for the treatment of Dravet syndrome and LGS. At contract inception and through March 31, 2021, the regulatory milestone variable consideration was fully constrained as the achievement of the events tied to these regulatory milestone payments was highly dependent on factors outside our control.

We can earn up to an additional $42.5 million tied to the achievement of certain net sales milestones by Shinyaku through the term of the agreement, which generally expires in 2045. Shinyaku will only become a customer and subject to revenue from contracts from customers accounting guidance after regulatory approval of Fintepla in Japan occurs and Shinyaku places purchase orders with us. To date, Shinyaku has not provided us with any purchase orders and thus no revenue has been recognized for the supply of Fintepla.

For the three months ended March 31, 2021 and 2020, collaboration revenue under this arrangement was $1.3 million and $1.2 million, respectively. As of March 31, 2021, the deferred revenue balance of $11.0 million was classified as either current or net of current portion in the accompanying condensed consolidated balance sheets

based on the period over which the collaboration revenue is expected to be recognized. We expect to recognize collaboration revenue related to these collaborative activities through the end of 2023.