Revenue and Cost of Revenue

12 Months Ended

Dec. 31, 2023

Revenue Recognition and Deferred Revenue [Abstract]

Revenue and Cost of Revenue

14. Revenue and Cost of revenue

Ultragenyx Partnership

On January 25, 2021, the Company’s license and collaboration agreement with Ultragenyx for the development and commercialization of setrusumab for OI became effective. Under the terms of the agreement, the Company received an upfront payment of $50 million and was eligible to receive up to $254 million in development, regulatory and commercial milestones and tiered double digit percentage royalties on net sales outside of Europe and pay a fixed double digit percentage royalty to Ultragenyx on net sales in Europe. The license and collaboration agreement grants Ultragenyx an exclusive license to develop and commercialize setrusumab in the US and rest of the world, excluding Europe where the Company retains commercial rights.

Two distinct performance obligations were identified as part of the license and collaboration agreement: (i) a promise to grant the license to develop and commercialize setrusumab, and (ii) provision of subsequent clinical supply of setrusumab.

In the year ended December 31, 2023, the Company recognized milestone proceeds of $9 million as revenue under the license and collaboration agreement with Ultragenyx for setrusumab following achievement of a development milestone. The milestone payments constitute a change in transaction price for the Ultragenyx agreement, to which revenue was first recorded in the year ended December 31, 2021. Pursuant to the terms of the agreement, the Company is entitled to receive milestone payments from Ultragenyx upon achievement of certain development, regulatory and sales based milestones. The variable consideration relating to future milestones and sales royalties are recognized in the statement of comprehensive income when achievement of the milestones are probable or the underlying commercial sales are made, in the event regulatory approval is achieved. No revenues were recognized in respect of this agreement in the year ended December 31, 2022.

As a consequence of the milestone received by the Company under the license and collaboration agreement with Ultragenyx, and in accordance with the terms of the 2015 asset purchase agreement with Novartis which requires payment of a percentage of the proceeds received, subject to certain deductions, the Company also recognized cost of revenue of $2.4 million.

In 2021, the Company received a $50.0 million upfront payment from Ultragenyx which triggered a $13.3 million obligation to Novartis under our 2015 agreement with them. An amount of $3.3 million was deferred from this obligation to reflect future costs that were expected to be incurred. Accordingly, the Company recognized cost of revenue of $13.3 million to reflect both the $10.0 million payment made to Novartis and the recognition of a liability within Other current liabilities for this deferral. This liability was subsequently reduced through a credit to cost of revenue as the costs were incurred. Cost of revenue for 2022 was a credit of $1.1 million.

ReproNovo Partnership

On December 13, 2023, the Company and ReproNovo SA. (“ReproNovo”) announced a global licensing agreement for the development and commercialization of leflutrozole. Under the terms of the global licensing agreement, ReproNovo will receive an exclusive worldwide license to develop and commercialize leflutrozole. The Company received an upfront payment of $1.0 million in December 2023. ReproNovo will be responsible for all future research, development and commercialization of leflutrozole. Additionally, the Company will be eligible to receive up to $64.3 million in future clinical, regulatory and commercial milestones, tiered royalties ranging from the low-to-mid-single digits on global annual net sales of leflutrozole, as well as a negotiated percentage of sublicensing revenues from certain sublicenses. A single performance obligation was identified in this agreement which is the promise to grant the license to develop and commercialize leflutrozole. As the upfront payment is fixed and non-refundable, and therefore does not represent variable consideration, the performance obligation is satisfied and revenue of $1.0 million was recognized at the point in time that ReproNovo gained the right to access the license. The additional potential future milestone and royalty payments represent variable consideration that will be recognized when achievement is determined to be probable.

As a consequence of the milestone proceeds paid to the Company under the license and collaboration agreement with ReproNovo, and in accordance with the terms of the 2015 asset purchase agreement with Novartis, the Company is also obligated to pay a proportion of cash milestone payments received after deduction of costs, charged and expenditures. The Company therefore accrued for a payment to Novartis of $0.1 million at December 31, 2023. No revenues were recognized in respect of this agreement in the year ended December 31, 2022.

The Company's revenue is attributed to the operations of the Company in the U.K.