Annual report pursuant to Section 13 and 15(d)

License and Collaboration Agreements

License and Collaboration Agreements
12 Months Ended
Dec. 31, 2021
Revenue from Contract with Customer [Abstract]  
License and Collaboration Agreements License and Collaboration Agreements
Riptide License
As discussed in Note 1, on August 17, 2021, AUR300 (M2 macrophage modulation via CD206 binding) was secured through a global licensing and research agreement with Riptide Bioscience, Inc. (Riptide), a private company. As part of the agreement, the Company paid Riptide an upfront license fee of $6.0 million and accrued for a milestone payment deemed probable which were expensed as R&D on the consolidated statement of operations. Additional milestone payments are due upon certain development, clinical and regulatory milestones, and royalties will be payable upon commercialization which will be accrued when deemed probable. It is anticipated that clinical development for AUR300 will commence during the first half of 2023.
In 2020, Aurinia made an aggregate upfront payment of $750 thousand to the shareholders of Thunderbolt and will be responsible for future regulatory milestones upon investigational new drug (IND) acceptance by the United States’ Food and Drug Administration (FDA) or any equivalent authority. Additionally, Thunderbolt shareholders will receive low single digit royalties on any future net sales. AUR200, a recombinant Fc fusion protein designed to specifically block B-cell Activating Factor, known as BAFF, and A Proliferation-Inducing Ligand, known as APRIL, is currently undergoing pre-clinical development with projected submission of an IND to the FDA in 2023.
Otsuka Contract
On December 17, 2020, the Company entered into a collaboration and license agreement with Otsuka Pharmaceutical Co., Ltd. (Otsuka) for the development and commercialization of oral LUPKYNIS for the treatment of adult patients with active LN in the European Union (EU), Japan, as well as the United Kingdom, Russia, Switzerland, Norway, Belarus, Iceland, Liechtenstein and Ukraine.
As part of the agreement, Aurinia received in 2020 an upfront cash payment of $50.0 million for the license agreement, and has the potential to receive up to $50.0 million in additional regulatory and reimbursement milestones. Aurinia will receive tiered royalties on future sales ranging from 10 to 20 percent (dependent on achievement of sale milestones) on net sales upon commercialization, along with additional milestone payments based on the attainment of certain annual sales by Otsuka. In addition, we are currently negotiating a supply agreement.
The Company evaluated the Otsuka Agreement under ASC 606. Based on that evaluation, the license transferred was determined to be functional intellectual property (IP) that has significant standalone functionality. That is, the treatment of LN and other diseases provides significant benefit to Otsuka at the point of transfer, and it is not expected that the utility of the IP
will substantively change as a result of any remaining clinical trials or ongoing activities of Aurinia. The Company determined the upfront fee of $50.0 million is fixed consideration for the transfer of the license and is recognized as revenue upon transfer of the license in December 2020.
The remaining forms of consideration are variable because they are dependent on achieving milestones or are based on aggregate future net sales for the regions. None of the regulatory, reimbursement, or sales-based milestones have been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considers numerous factors, including the magnitude of a potential reversal of revenue, uncertainty about if or when the milestone related performance obligations might be achieved and that receipt of the milestones are outside the control of the Company since they are dependent on efforts to be undertaken by Otsuka and regulatory approval by various foreign government agencies. Any consideration related to sales-based royalties (and sales-based milestones) will be recognized as license revenue when the related sales occur.
As of December 31, 2021, there has been no additional consideration earned or received since the upfront payment of $50.0 million during the fourth quarter of 2020.