4. Revenue Recognition

Net Product Revenue

Product revenue, net was approximately $1.2 million for the three months ended June 30, 2025 from the U.S. sales of IBTROZI. We began shipping IBTROZI to our U.S. customers in June 2025.

Collaboration and License Agreements Revenue

The Company enters into collaborative arrangements for the research and development, and commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licensing of and options to out-license in-licensed compounds to other parties. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost reimbursement arrangements, product supply and royalty payments.

In-Licensing Arrangements with Daiichi Sankyo Company Ltd. ("DS")

The Company has in-licensed the rights to develop, manufacture and commercialize multiple development stage drug candidates globally or in specific territories. The development milestone payments are recognized when the achievement of the associated milestone becomes probable and estimable and have been expensed before regulatory approval has been obtained. In December 2024, a $2 million development milestone payment has been capitalized as an intangible asset upon regulatory approval in China. We reached two milestones in 2024, and the resulting $6 million in development milestone payments owed was paid to DS in March 2025. In June 2025, an $8 million milestone payment to DS is owed upon regulatory approval in the U.S. This milestone payment has been capitalized as an intangible asset.

Out-Licensing Arrangements

The Company's revenue related to its out-licensing collaborative agreements consist of product revenue, upfront license fees, royalty revenue and research and development services revenue from its collaboration agreements with Innovent Biologics Co. Ltd. ("Innovent") and Nippon Kayaku Co., Ltd. ("NK") for taletrectinib (also known as "AB-106").

Collaboration and License Agreement with Innovent

In May 2021, AnHeart entered into an agreement with Innovent, granting Innovent a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in the People's Republic of China and Taiwan (the "Innovent Territory"). AnHeart is responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development with Innovent responsible for commercialization. Under the agreement, AnHeart received a non-refundable upfront cash payment, $12.0 million for achievement of certain regulatory approval milestones, and is eligible to receive up to $17.0 million upon achievement of additional regulatory milestones, up to $105.0 million upon achievement of commercial milestones, and tiered percentage royalties ranging from mid-teen to low-twenties on annual net sales of taletrectinib in the Innovent Territory subject to certain adjustments.

For the three and six months ended June 30, 2025, the Company recognized research and development service revenue of $2.2 million and $4.1 million, sales of products supply of $0.9 million and $1.7 million, and royalties of $0.2 million and $0.5 million, respectively, under the Innovent agreement. As of June 30, 2025, the accounts receivable of Innovent was $1.2 million.

Collaboration and License Agreement with NK

In October 2023, AnHeart entered into an agreement with NK, granting NK a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in Japan (the "NK Territory"). AnHeart is responsible for funding ongoing clinical trials of AB-106 in the NK Territory, with NK responsible for funding regulatory submissions in the NK Territory. The Company also granted NK a sub-licensable, royalty-bearing, exclusive right and license to research, develop and commercialize any new indications of AB-106 in the NK Territory ("NK New Indication Right"). Under the agreement, AnHeart received a non-refundable upfront cash payment and is eligible to receive $25.0 million upon achievement of a regulatory milestone, up to $35.0 million upon achievement of commercial milestones, and a lower-mid double digit percentage royalty on net sales of taletrectinib in the NK Territory.

The Company recognized research and development service revenue of $0.2 million and $0.4 million, respectively, for the three and six months ended June 30, 2025. As of June 30, 2025, the accounts receivable of NK was $0.1 million.

Contract assets and contract liabilities

When the Company satisfies its performance obligations by providing services to a customer before the customer pays consideration and before payment is due, the Company recognizes its rights to consideration as a contract asset.

The Company did not recognize any contract assets as of June 30, 2025.

When a customer pays consideration before the Company provide services, the Company records its obligation as a contract liability. The Company expects to recognize all of this balance as revenue as research and development services are provided over the next 4 years.

The Company recognized $4.5 million of revenue for the six months ended June 30, 2025 that was included in the contract liability balance at December 31, 2024.

The balance of contract liabilities as of June 30, 2025 represents the transaction price allocated to the remaining performance obligations. The contract liability of $9.7 million is expected to be recognized within one year and the rest in the following five years.

The costs incurred to fulfill customer contracts were capitalized and amortized to cost of revenue on a systematic basis that is consistent with the transfer of research and development services to the customer to which the asset relates. For the three months ended June 30, 2025, $2.0 million of costs incurred to fulfill customer contracts were capitalized and expensed in the same period. There were no balances related to the costs incurred to fulfill customer contracts as of June 30, 2025.