Company also estimated the standalone selling price for each of the material rights within the Antengene Transfer Options, and determined that such amounts were insignificant, and, therefore,
immaterial for purposes of allocation. Accordingly, the Company allocated the $11,703 transaction price amongst the Antengene Combined License Obligations as follows: $9,363 for selinexor, $1,053 for eltanexor, $1,053 for
KPT-9274,
and $234 for verdinexor. The Company believes that a change in the assumptions used to determine its best estimate of the stand-alone selling prices for any of the identified performance obligations would
not have a significant effect on the allocation of the underlying transaction price to the performance obligations.
Upon execution of the
Antengene License Agreement, the only fixed component of the transaction price included the $11,703
up-front
payment owed to the Company. As referenced above, the Company is eligible to receive additional
payments of up to $105,000 in milestone payments if certain development goals are achieved and up to $45,000 in milestone payments if certain sales milestones are achieved, as well as a high single-digit to low double-digit royalty on future net
sales of the Antengene Licensed Compounds in the Antengene Territory. In addition, the Company would receive cost reimbursement in connection with Antengenes election to receive additional clinical supply for the Antengene Licensed Compounds
in the future. The future regulatory milestones and cost reimbursement for providing additional clinical supply of the Antengene Licensed Compounds, both of which represent variable consideration, were evaluated under the most likely amount method,
and were not included in the transaction price at contract inception and/or through March 31, 2019, because the amounts were fully constrained as of March 31, 2019. As part of its evaluation of the constraint, the Company considered
numerous factors, including that receipt of such amounts is outside the control of the Company. Separately, any consideration related to sales-based milestones, as well as royalties on net sales upon commercialization by Antengene, will be
recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property licenses granted to Antengene and, therefore, have also been excluded from the transaction price in accordance with the sales-based
royalty exception, as well as the Companys accounting policy. The Company will
re-evaluate
the transaction price in each reporting period, as uncertain events are resolved, or as other changes in
circumstances occur.
Through March 31, 2019, the Company has recognized no revenue under the Antengene License Agreement. Revenue
will be recognized for the Antengene Combined License Obligation for selinexor once the initial clinical supply of selinexor is delivered, which is currently expected to occur before June 30, 2019. Revenue will be recognized for (the Antengene
Combined License Obligation for eltanexor, the Antengene Combined License Obligation for
KPT-9274,
and the Antengene Combined License Obligation for verdinexor once the Companys promise to provide
initial clinical supply of the Antengene Licensed Compound in the future is fulfilled. The Company currently expects such promises to be fulfilled within the next twelve months, except for the initial clinical supply of eltanexor, which is expected
to occur in the second quarter of 2020. Accordingly, and as of March 31, 2019, the entire $11,703 upfront payment represents a contract liability, (i) $10,650 of which was included in deferred revenue and is classified as a current
liability in the condensed consolidated balance sheet and (ii) $1,053 of which was included in deferred revenue and is classified as a
non-current
liability in the condensed consolidated balance sheet.
Biogen Asset Purchase Agreement
On January 24, 2018, the Company entered into an Asset Purchase Agreement (the APA) and Letter Agreement with Biogen MA Inc.,
a Massachusetts corporation and subsidiary of Biogen, Inc. (Biogen).
Under the terms of the APA and Letter Agreement, the
Company sold to Biogen exclusive worldwide rights to develop and commercialize the Companys oral SINE compound
KPT-350
and certain related assets with an initial focus in amyotrophic lateral sclerosis
(ALS) (the Transfer of IP), and also granted Biogen: (i) an exclusive worldwide license under certain of the Companys intellectual property to manufacture or have manufactured
KPT-350
(the Manufacturing License), (ii) a technology transfer package, consisting of information and the Companys
know-how
regarding the
manufacture of
KPT-350
(the Manufacturing Technology Transfer), (iii) a right, at Biogens request, to have the Company provide transition assistance regarding manufacturing and other
matters (the Transition Assistance), (iv) existing inventory of
KPT-350
(the Inventory), (v) an initial supply of
KPT-350
(the
Initial Supply), and (vi) a right, at Biogens request, to have the Company manufacture and supply the active pharmaceutical ingredient for an additional supply of
KPT-350
(the
Additional Supply). In consideration for these rights, the Company received an upfront payment of $10,000, and is eligible to receive additional payments of up to $142,000 based on the achievement by Biogen of future specified
development milestones, and up to $65,000 based on the achievement by Biogen of future specified commercial milestones. The Company will also be eligible to receive tiered royalty payments that reach low double-digits based on future net sales until
the later of the tenth anniversary of the first commercial sale of the applicable product and the expiration of specified patent protection for the applicable product, determined on a
country-by-country
basis.
The Company and Biogen have
made customary representations and warranties and agreed to customary covenants in the APA, including covenants requiring Biogen to use commercially reasonable efforts to develop
KPT-350
in specified
neurological indications, including ALS, in any of the United States, United Kingdom, France, Spain, Germany or Italy. The APA will continue in effect until the expiration of all royalty obligations, provided that the APA may be terminated earlier
by Biogen, subject to the requirements that Biogen (i) negotiate in good faith with the Company regarding an assignment or license back to the Company of the purchased assets and (ii) not transfer or license the purchased assets to a third
party unless such third party assumes Biogens obligations to the Company under the APA.
12