"I agree, but we might have to wait for a filing."
Correct, from the 10-Q (March 31/23)
Novartis
In
March 2020,
the Company entered into a Collaboration and License Agreement (the
Novartis Agreement) with Novartis Institutes For Biomedical
Research, Inc. (Novartis) to collaborate on their research efforts
to discover and develop novel TCR-T therapies. At the inception
date of the Novartis Agreement, Novartis or its affiliates held an
ownership interest of more than
10%
in the Company, and at
March 31, 2023,
Novartis held less than
10%
of the common shares outstanding. Under the Novartis Agreement, the
Company will identify and characterize TCRs in accordance with a
research plan and transfer data arising from the research plan.
Novartis will have the option to license and develop TCRs for up to
three novel targets identified in performance of the collaboration
during the collaboration period of the Novartis Agreement. Novartis
will also have rights of first negotiation for certain additional
targets and TCRs identified in performance of the collaboration
during a defined collaboration period of the Novartis Agreement and
for
180 days
after such collaboration period ends (which collaboration period
ended in March 2023). If during such
180-day
right of first negotiation period, the Company notifies Novartis of
the Company’s intent to grant a third party a license to a target
or TCR identified in the collaboration, then Novartis may obtain
the exclusive right to negotiate a license to such target or TCR
for an additional 270 days by providing the Company with a term
sheet to license such target or TCR within 90 days of the Company’s
notice of such intent. The Novartis Agreement provides that the
Company will pay an upfront fee of $20.0
million, research funding totaling $10.0
million and potential milestone payments contingent on clinical,
regulatory and sales success. In addition to payments upon
achievement of certain clinical and regulatory milestones, Novartis
will pay the Company mid-single to low double-digit royalties on
net sales for each product directed to a target licensed by
Novartis. After the end of the collaboration period and the
expiration of Novartis’ first right of negotiation, the Company is
free to develop TCRs against targets not licensed by
Novartis.
The Company concluded that Novartis meets the definition of a
customer, as the Company is delivering research and development
activities and know-how rights. The Company identified performance
obligations for research and development activities, data reporting
and participation in joint steering and research committees. The
Company determined there is a single performance obligation due to
the services being highly interrelated and are therefore not
distinct in the context of the contract. The Company combined the
pre-option research services and data reporting into a single
performance obligation. Novartis has an exclusive option to obtain
a commercial license for up to
three
Targets (as defined in the Novartis Agreement) to pursue further
development and commercialization of the respective Target.
Pursuant to the Novartis Agreement, the option for Novartis to
license, develop, and commercialize Targets is not a performance
obligation at the outset of the Novartis Agreement as it is a
customer option that does not represent a material
right.
The Company looked to the promises in the arrangement to determine
the method of recognition that best coincided with the pattern of
delivery. The Company concluded that the performance of the
research services over the expected research term was the
predominant promise within the performance obligation. The Company
recognized the revenue associated with the performance obligation
using the input method, according to the actual costs incurred as a
percentage of total expected costs to complete the research
services. As costs were incurred, the Company recognized revenue
over time.
The Company determined that the $20.0
million upfront payment, together with the $10.0
million of estimated research costs to be reimbursed by Novartis,
to be the entirety of the consideration to be included in the
transaction price as of the outset of the arrangement. The
potential milestone payments that the Company is eligible to
receive were excluded from the transaction price, as all milestone
amounts were fully constrained based on the assessed probability of
achievement. At this time, the Company has recognized all
consideration in the contract as the performance obligations were
satisfied as of March 31, 2023 and the collaboration period ended.
The Company will continue to assess the probability of milestone
payments throughout the
180-day right of first negotiation period.
The Company recognized $5.8
million and $3.0
million of revenue associated with the Novartis Agreement based on
performance completed during that period for the
three months ended March 31, 2023 and 2022, respectively.
Additionally, the Company incurred $1.9
million and $1.0
million of costs associated with the Novartis Agreement that were
recorded within research and development expenses in the statements
of operations for the
three months ended March 31, 2023 and 2022, respectively. Finally,
as of March 31, 2023,
the Company had
no
deferred revenue as all performance obligations were
satisfied.
