12. Revenue Recognition

The Company primarily recognizes revenue under its license and collaboration agreements from (1) collaborative revenue from its share of the profit generated by KORSUVA injection sales in the United States; (2) commercial supply revenue from the Company’s sales of commercial product to CSL Vifor, which is subsequently sold to wholesalers; (3) royalty revenue from net sales of Kapruvia in Europe; and (4) sales-based or regulatory milestone payments, which could be earned in the future in accordance with certain licensing agreements. As of June 30, 2023, the Company has not earned any sales-based milestones under its collaboration agreements.

As of June 30, 2023, the Company had license and collaboration agreements with CSL Vifor, Maruishi and CKDP. The following table provides amounts included in the Company’s Condensed Statements of Comprehensive Loss as revenue for the three and six months ended June 30, 2023 and 2022, respectively:

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* Includes amounts earned from Vifor International prior to Vifor International’s assignment of its rights and obligations to Vifor Fresenius Medical Care Renal Pharma Ltd. in May 2022.

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Collaborative revenue

Beginning in April 2022, the Company began recording its share of the profit generated by KORSUVA injection sales by CSL Vifor to third parties in the United States. Under the license agreements with CSL Vifor, KORSUVA injection net sales are calculated by CSL Vifor which are net of discounts, rebates, and allowances. These amounts include the use of estimates and judgments, which could be adjusted based on actual results in the future. The Company records its share of the net profits from the sales of KORSUVA injection in the United States on a net basis (since the Company is not the primary obligor and does not retain inventory risk) and presents the revenue earned each period as collaborative revenue. During the three and six months ended June 30, 2023, the Company recorded $5,410 and $8,160, respectively, as collaborative revenue for its profit-share from the sales of KORSUVA injection in the United States. During each of the three and six months ended June 30, 2022, the Company recorded $8,003 as collaborative revenue for its profit-share from the sales of KORSUVA injection in the United States.

Commercial supply revenue

Under the Vifor International Supply Agreement, the Company’s only performance obligation is the delivery of KORSUVA injection to CSL Vifor in accordance with the receipt of purchase orders. Revenue from the sale of commercial supply product to CSL Vifor is recognized as delivery of the product occurs. The Company had commercial supply revenue of $1,400 and $4,591 for the three and six months ended June 30, 2023, respectively, with associated

COGS of $1,418 and $4,008, respectively. The Company had commercial supply revenue of $4,790 for the six months ended June 30, 2022, of which $2,295 was recognized in January 2022 with no associated COGS since these inventory costs were incurred prior to regulatory approval on August 23, 2021, and $2,495 was recognized in March 2022 with associated COGS of $2,081 since these inventory costs were capitalized as inventory subsequent to regulatory approval. There was no commercial supply revenue for the three months ended June 30, 2022.

Royalty revenue

Royalty revenue includes amounts related to the Company’s royalties earned from CSL Vifor on the net sales of Kapruvia in Europe, based on the amount of net sales in a licensed territory during a calendar year. Sales-based royalty payments related to a license of IP are recognized as revenue when the respective sales occur, and the net sales tier is achieved. During the three and six months ended June 30, 2023, the Company recorded $123 and $248, respectively, as royalty revenue based on net sales of Kapruvia. There was no royalty revenue for the three and six months ended June 30, 2022.

License and milestone fees revenue

Under Vifor Agreement No. 2, the Company’s performance obligations of granting a license to allow Vifor Fresenius Medical Care Renal Pharma Ltd. to commercialize difelikefalin injection worldwide, except in the United States, Japan and South Korea, which occurred at inception of the contract in May 2018, and performing R&D services by the Company to obtain sufficient clinical data which were shared with Vifor Fresenius Medical Care Renal Pharma Ltd. to allow them to receive regulatory approval to sell difelikefalin in the licensed territory, were not distinct, and were accounted for as a single performance obligation during the period the that the R&D services were rendered (see Note 11, Collaboration and Licensing Agreements).

Revenue related to achievement of milestone events is recognized when the Company has determined that it is probable that a milestone event will be achieved and there will not be a significant reversal of revenue in future periods. Upon probability of achievement of a milestone event, the most likely amount of variable consideration is included in the transaction price. Subsequent changes to the transaction price, after contract initiation, are allocated to the performance obligations in the contract on the same basis as at contract inception. Revenue for variable consideration is recognized in the same manner (point in time or over time) as for the performance obligations to which the payment amounts were allocated.

As a result of the European Commission’s regulatory approval of Kapruvia in April 2022, the Company achieved a $15,000 regulatory milestone payment from Vifor Fresenius Medical Care Renal Pharma Ltd. under Vifor Agreement No. 2, which was recorded as license and milestone fees revenue for each of the three and six months ended June 30, 2022. This regulatory milestone payment was considered variable consideration due to the uncertainty of occurrence of this event as specified at inception of the agreement. Therefore, this potential regulatory milestone payment was not included in the transaction price at the inception of the agreement.

Clinical compound revenue

The Company’s only performance obligation under the supply agreement with Maruishi is to deliver clinical compound to Maruishi in accordance with the receipt of purchase orders. During the six months ended June 30, 2023, the Company recognized clinical compound revenue of $99 from the sale of clinical compound to Maruishi. There were no sales of clinical compound during the three months ended June 30, 2023, and each of the three and six months ended June 30, 2022.

Contract balances

As of June 30, 2023 and December 31, 2022, respectively, the Company recorded accounts receivable, net – related party of $10,124 and $3,260 which primarily related to its profit-sharing revenue from sales of KORSUVA injection in the United States by CSL Vifor, its commercial supply of KORSUVA injection to CSL Vifor, and royalty revenue from CSL Vifor relating to sales of Kapruvia outside of the United States. There were no other contract assets or contract liabilities related to the CSL Vifor, Maruishi and CKDP agreements as of June 30, 2023 and December 31, 2022.

The Company routinely assesses the creditworthiness of its license and collaboration partners. The Company has not experienced any losses related to receivables from its license and collaboration partners as of June 30, 2023 and December 31, 2022.