5. Braeburn License

 

We are party to a license agreement with Braeburn Pharmaceuticals, Inc. (“Braeburn”) pursuant to which we have granted Braeburn the exclusive commercialization rights to Probuphine in the United States and its territories and Canada. Under the agreement (as amended to date, the “Agreement”), we received a non-refundable license fee of $15.75 million (approximately $15.0 million net of expenses) in December 2012 and are entitled to receive a $15.0 million milestone payment upon FDA approval of the Probuphine NDA and royalties on net sales of Probuphine ranging in percentage from the mid-teens to the low twenties. Upon receipt of such approval, our obligation will be fulfilled and we will recognize the full amount of the milestone payment in accordance with the milestone method of revenue recognition. The Agreement also provides for up to $165 million in sales milestones and $35 million in regulatory milestones. In addition, we are entitled to receive a low single digit royalty on sales by Braeburn, if any, of other competing continuous delivery treatments for opioid dependence as defined in the Agreement, and can also elect to receive a low single digit royalty on sales by Braeburn, if any, of other products in the addiction market in exchange for a similar reduction in our royalties on Probuphine. Following FDA approval, we will be reimbursed by Braeburn for any developments services and activities undertaken by us at Braeburn’s request.