Collaboration and License Agreements and Supply Agreements |
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Collaboration and License Agreements and Supply Agreements |
5. Collaboration and License Agreements and Supply Agreements The Company has entered into collaboration and license agreements and supply agreements with various pharmaceutical and biotechnology companies. See “Note 5. Collaboration and License Agreements and Supply Agreements” to the Company’s Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020, or as further described below, for additional information on each of our collaboration agreements. In accordance with the collaboration agreements, the Company recognized revenue as follows:
The Company’s balance of deferred revenue contains the transaction price from collaboration agreements allocated to performance obligations which are partially unsatisfied. The Company expects to recognize approximately $8.1 million of the deferred revenue over the next twelve months. The following table presents the changes in the Company’s deferred revenue balance from collaboration agreements during the six months ended June 30, 2021:
There have been no material changes to the Company’s collaboration agreements in the three and six months ended June 30, 2021, except as described below. Collaboration with BMS BMS Agreement In September 2014, the Company signed a Collaboration and License Agreement (the “BMS Agreement”) with BMS to discover and develop bispecific antibodies and/or antibody-drug conjugates (“ADCs”), focused primarily on the field of immuno-oncology, using the Company’s proprietary integrated cell-free protein synthesis platform, XpressCF®. In August 2017, the Company entered into an amended and restated collaboration and license agreement with BMS to refocus the collaboration on four programs that were advancing through preclinical development, including an ADC program targeting B cell maturation antigen (“BCMA ADC”). In May 2019, the U.S. Food and Drug Administration cleared the investigational new drug (“IND”) application for the BCMA ADC, which was discovered and manufactured by the Company and is the first collaboration program IND. BMS has worldwide development and commercialization rights with respect to the BCMA ADC. The Company will continue to be responsible for clinical supply manufacturing and certain development services for the BCMA ADC and is eligible to receive from BMS aggregate development and regulatory contingent payments of up to $275.0 million, if approved in multiple indications, and tiered royalties ranging from mid to high single digit percentages on worldwide sales of any resulting commercial products. As of both June 30, 2021 and December 31, 2020, there was zero balance in deferred revenue related to payments received by the Company under the BMS Agreement. 2018 BMS Master Services Agreement In March 2018, the Company entered into a Master Development and Clinical Manufacturing Services Agreement (the “2018 BMS Master Services Agreement”) with BMS, wherein BMS requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply. As of both June 30, 2021 and December 31, 2020, there was $1.2 million of deferred revenue under the 2018 BMS Master Services Agreement. Revenues under the BMS Agreement and the 2018 BMS Master Services Agreement were as follows:
Collaboration with Merck 2018 Merck Agreement In July 2018, the Company entered into an agreement (the “2018 Merck Agreement”) with Merck to jointly develop up to three research programs focusing on cytokine derivatives for cancer and autoimmune disorders with an initial transaction price of $60.0 million. Under ASC 606, the Company determined there was a financing component associated with the $60.0 million upfront payment and has calculated total interest expense of $7.4 million as of June 30, 2021 on the unearned revenue portion beyond one year from the effective date of the agreement, which amount is expected to be recognized as interest expense and revenue over the estimated service period for the first and second target programs. In March 2020, Merck exercised its option to extend the research term of the collaboration’s first cytokine-derivative program by one year, which, pursuant to the terms of the 2018 Merck Agreement, triggered a payment of $5.0 million. The $5.0 million was, in prior periods, considered to be a fully constrained variable consideration. Removal of the constraint on this variable consideration resulted in a change to the total transaction price, from $60.0 million to $65.0 million. The Company allocated the updated transaction price to all identified performance obligations on the same basis as the initial allocation upon inception of the 2018 Merck Agreement, with any adjustments recorded as a cumulative catch-up in the current period. In the second quarter of 2021, the Company earned a $15.0 million contingent payment for the initiation by Merck of the first IND-enabling toxicology study under the first cytokine-derivative program in the collaboration. The $15.0 million was, in prior periods, considered to be a fully constrained variable consideration. Removal of the constraint on this variable consideration resulted in a change to the total transaction price, from $65.0 million to $80.0 million. The Company allocated the updated transaction price to all identified performance obligations on the same basis as the initial allocation upon inception of the 2018 Merck Agreement, with any adjustments recorded as a cumulative catch-up in the current period. Based upon the adjusted transaction price, revenue allocated to the access to intellectual property rights was $9.4 million and incremental revenue of $1.6 million was recognized in the current period as this performance obligation was previously completed. Revenue allocated to the first and second target programs totaled $60.6 million, to be recognized on a proportion of performance basis, using the FTE cost as the basis of measurement, with such performance expected to occur over an estimated service period of three years for each target program. Incremental revenue of $9.1 million was recognized in the current period. The Company allocated $9.1 million of the adjusted transaction price to the material right associated with the contingent third program and incremental revenue of $3.2 million was recognized in the current period as this performance obligation was previously completed. As it pertains to the JSC performance obligation, the incremental transaction price allocation resulted in additional revenue of $0.1 million recognized in the current period. As a result of the change in transaction price, due to the $15.0 million contingent payment earned in the second quarter of 2021, the Company recorded a $14.0 million cumulative catch-up in revenue in the three months ended June 30, 2021. The Company is eligible to receive aggregate contingent payments of up to approximately $0.5 billion for each of the target programs selected by Merck, assuming the development and sale of the therapeutic candidate and all possible indications identified under the collaboration. If one or more products from each of the target programs are developed for non-oncology or a single indication, the Company will be eligible for reduced aggregate milestone payments. In addition, the Company is eligible to receive tiered royalties ranging from mid-single digit to low teen percentages on the worldwide sales of any commercial products that may result from the collaboration. As of June 30, 2021 and December 31, 2020, there was $6.1 million and $18.5 million, respectively, of deferred revenue related to the transaction price under the 2018 Merck Agreement. 2020 Merck Master Services Agreement In August 2020, the Company entered into a Pre-Clinical and Clinical Supply Agreement (the “2020 Merck Master Services Agreement”) with Merck, wherein Merck requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply, upon completion of the research programs under the 2018 Merck Agreement. As of both June 30, 2021 and December 31, 2020, there was no deferred revenue under the 2020 Merck Master Services Agreement. Revenues under the 2018 Merck Agreement and the 2020 Merck Master Services Agreement were as follows:
Collaboration with EMD Serono EMD Serono Agreements The Company signed a Collaboration Agreement and a License Agreement with EMD Serono in May 2014 and September 2014, respectively, which were entered into in contemplation of each other and therefore treated as a single agreement for accounting purposes. The Collaboration Agreement was subsumed into the License Agreement (the “MDA Agreement”), which agreement is to develop ADCs for multiple cancer targets. Under the MDA Agreement, a novel bispecific ADC product candidate targeting EGFR and MUC1, known as M1231, is undergoing development. The Company is eligible to receive up to $52.5 million for M1231 under the MDA Agreement, primarily from pre-commercial contingent payments. Relatedly, the Company earned a $2.0 million contingent payment in the second quarter of 2021 related to a patient enrollment achievement in the Phase 1 dose escalation portion of a study of M1231. In August 2020, the Company earned a $1.0 million clinical supply milestone payment under the MDA Agreement. In September 2019, the Company earned a $1.5 million contingent payment under the MDA Agreement upon designation by EMD Serono of a specific bispecific antibody drug conjugate as a clinical development candidate with their approval to advance it to IND-enabling studies. In addition, the Company is eligible to receive tiered royalties ranging from low-to-mid single digit percentages, along with certain additional one-time royalties, on worldwide sales of any commercial products that may result from the MDA Agreement. As of both June 30, 2021 and December 31, 2020, there was no deferred revenue related to payments received by the Company under the MDA Agreement. 2019 EMD Serono Supply Agreement In April 2019, the Company entered into an ADC Product Preclinical and Phase I Clinical Supply Agreement (the “2019 EMD Serono Supply Agreement”) with EMD Serono, wherein EMD Serono requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply. As of both June 30, 2021 and December 31, 2020, there was $1.0 million of deferred revenue related to payments received by the Company under the 2019 EMD Serono Supply Agreement. Revenues under the EMD Serono agreements were as follows:
Vaxcyte Supply Agreement In May 2018, the Company entered into a Supply Agreement (the “Supply Agreement”) with Vaxcyte, wherein Vaxcyte engaged the Company to supply extracts and custom reagents, as requested by Vaxcyte. The pricing is based on an agreed upon cost plus margin arrangement. During 2020, upon Vaxcyte’s request and their agreement to reimburse the related costs, the Company entered into agreements with third-party contract manufacturers (“CMOs”) to conduct process transfers to allow for such CMOs to manufacture and supply extract and custom reagents for Vaxcyte. The agreed-upon reimbursements by Vaxcyte of the costs associated with such arrangements, principally for pass-through costs from the CMOs, were accounted for by the Company as a reduction to research and development expense. Revenues under the Vaxcyte Supply Agreement were as follows:
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