Quarterly report pursuant to Section 13 or 15(d)

License and Collaboration Agreements

v3.21.2
License and Collaboration Agreements
6 Months Ended
Jun. 30, 2021
License Collaboration And Manufacturing Agreements [Abstract]  
License and Collaboration Agreements

6.

License and Collaboration Agreements

Bayer

Research, Development and License Agreement

In December 2020, we entered into the Bayer License Agreement to develop mesothelin-directed CAR T-cell therapies for the treatment of solid tumors, pursuant to which we granted to Bayer an exclusive, field-limited license under the applicable patents and know-how owned or controlled by us and our affiliates covering or related to ATA2271 and ATA3271 (the “Licensed Products”).

Under the terms of the Bayer License Agreement, we will be responsible at our cost for all mutually agreed preclinical and clinical activities for ATA2271 through the first in human Phase 1 clinical study in collaboration with MSK, following which Bayer will be responsible for the further development of ATA2271 at its cost. Bayer will be responsible for the development of ATA3271 at Bayer’s cost, except for certain mutually agreed preclinical, translational, manufacturing and supply chain activities to be performed by us relating to ATA3271. Bayer will also be solely responsible for commercializing the Licensed Products at its cost.

In December 2020, we received an upfront cash payment of $45.0 million from Bayer for the exclusive license grant, net of applicable withholding taxes, which we believe are recoverable, and an additional $15.0 million reimbursement payment for certain research and process development activities to be performed by us. We are also entitled to receive (i) up to an additional $5.0 million for additional, specified translational activities under the Bayer License Agreement, of which we have invoiced and received $1.3 million, and (ii) an aggregate of up to $610.0 million in milestone payments upon achieving certain development, regulatory and commercial milestones relating to the Licensed Products. In addition, we are eligible to receive from Bayer tiered royalties at percentages up to low double digits on worldwide net product sales of the Licensed Products on a country-by-country and product-by-product basis until the later of 12 years after the first commercial sale in such country or the expiration of specified patent rights in such country, subject to certain reductions and aggregate minimum floors.

Bayer and we have formed a joint steering committee (“JSC”) that will provide oversight, decision making and implementation guidance regarding the collaboration activities covered under the agreement.

We assessed this arrangement in accordance with ASC 606 and concluded that the promises in the Bayer License Agreement represent transactions with a customer. We concluded that the Bayer License Agreement contains the following promises: (i) a development and commercialization license; (ii) performance of early-stage research and development (“R&D”) services, including technology transfer services; (iii) JSC participation; and (iv) chemistry, manufacturing and control (“CMC”) services. In accordance with ASC 606, we determined that the license, early-stage R&D and CMC services were not distinct from each other, as the license, early-stage R&D and CMC services are highly interdependent upon one another. Participation on the JSC to oversee the research and development activities are combined into the single performance obligation as these activities are highly interdependent with the other R&D and CMC services. Accordingly, we determined that these promises should be combined into a single performance obligation.

The transaction price at inception consisted of a $45.0 million upfront payment for the license, $15.0 million for certain research and process development activities and the $5.0 million for additional specified translational activities, and this amount was allocated to the single performance obligation. The potential development and commercial milestone payments that we are eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained based on the probability of achievement. None of the future royalty and sales-based milestone payments were included in the transaction price, as the potential payments represent sales-based consideration. We will reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust our estimate of the transaction price.

Technology Transfer Agreement

In March 2021, we entered into a Technology Transfer Agreement with Bayer (the “Bayer Tech Transfer Agreement”), which was contemplated as part of the Bayer License Agreement, to transfer to Bayer the ATA3271 manufacturing process being developed as part of the CMC services in the Bayer License Agreement. Upon entering into the agreement, we invoiced Bayer 20 percent, or $3.1 million, of the total fee of $15.3 million under the Bayer Tech Transfer Agreement, which we received in the second quarter of 2021. The remainder of the fee will be billed as follows: (i) 40 percent on January 1, 2022, (ii) 20 percent on January 1, 2023 and (iii) 20 percent upon the technology transfer completion.

We assessed this arrangement in accordance with ASC 606 and concluded that the promises in the Bayer Tech Transfer Agreement represent transactions with a customer. We concluded that the Bayer Tech Transfer Agreement should be combined with the Bayer License Agreement and accounted for as a modification of that agreement and that the Bayer Tech Transfer Agreement contains the following promises: (i) technology transfer services and (ii) supply of materials required for the technology transfer services. In accordance with ASC 606, we determined that the technology transfer services and supply of materials required for the technology transfer services were not distinct from each other, as they are highly interdependent upon one another. In addition, we concluded that the technology transfer services and supply of materials required for the technology transfer services were highly interdependent with the license, early-stage R&D and CMC services identified in the Bayer License Agreement. Accordingly, we determined that these promises should be combined into a single performance obligation.

Under the Bayer Tech Transfer Agreement, in order to evaluate the appropriate transaction price, we determined that the $15.3 million fee constituted the entire consideration to be included in the transaction price, and this amount was allocated to the single performance obligation as identified under the Bayer License Agreement.

We utilize a cost-based input method to recognize revenue based on the amount of actual costs incurred relative to the total budgeted costs expected to be incurred for the combined performance obligation.

Manufacturing and Supply Agreement

In March 2021, we entered into a Manufacturing and Supply Agreement with Bayer (the “Bayer Manufacturing Agreement”), which was contemplated as part of the Bayer License Agreement, to manufacture Phase 1 and 2 allogeneic mesothelin-directed CAR T-cell therapies for Bayer to use in clinical trials at a price based on our costs plus a margin, which is consistent with our standalone selling price. Under the Bayer Manufacturing Agreement, we will also provide storage and distribution services to Bayer at a price that is consistent with our standalone selling price for these services.

Upon entering into the Bayer Manufacturing Agreement, Bayer submitted, and we approved, a binding purchase order for manufacturing services and storage services. Any fees for the manufacturing services will be invoiced as follows: (i) 50 percent upon written acceptance by us of the binding purchase order, and (ii) the remainder upon delivery of the certification of analysis of such lots to Bayer. Storage and distribution services are billed monthly as those services are provided to Bayer.

In March 2021, we invoiced Bayer 50 percent of the total estimated supply price of $13.1 million for manufacturing services under the initial purchase order for the supply of six lots, or $6.6 million, which we received in the second quarter of 2021. The remainder of the supply price will be billed upon the release of the lots ordered by Bayer.

We assessed this arrangement in accordance with ASC 606 and concluded that the promises in the manufacturing and supply agreement represent transactions with a customer. We concluded that the Bayer Manufacturing Agreement contains the following promises: (i) manufacturing services; (ii) storage services provided on a month-to-month basis, and (iii) distribution services. In accordance with ASC 606, we determined that the manufacturing services for the initial purchase order of six lots, that are expected to be provided prior to completion of the technology transfer, are not distinct as they are highly interdependent on the manufacturing process being developed and transferred under the Bayer License Agreement and the Tech Transfer Agreement. Accordingly, we determined that these promises should be combined into a single performance obligation. We also determined that each of the other services were distinct and separate performance obligations. We determined that the initial binding order for the manufacture and supply of six lots should be combined with the Bayer License Agreement and accounted for as a modification of that agreement along with the Bayer Tech Transfer Agreement. We also concluded that a binding purchase order from Bayer, together with the Bayer Manufacturing Agreement, form the contract for manufacturing services and storage services and a shipping order from Bayer forms the contract for distribution services. We also determined that the storage services provided on a month-to-month basis and distribution services are distinct and separate performance obligations. All the performance obligations identified above are priced at their standalone selling price.

Under the Bayer Manufacturing Agreement, in order to evaluate the appropriate transaction price, we determined that the $13.1 million fee constituted the entire consideration to be included in the transaction price, and this amount was allocated to the single performance obligation as identified under the Bayer License Agreement. Revenue for the manufacturing services for the initial six lots will be recognized based on the amount of actual costs incurred relative to the total budgeted costs expected to be incurred for the combined performance obligation. Revenue for the storage services will be recognized over time as those services are provided. Revenue for the distribution services will be recognized at a point in time when the product is delivered to a clinical site designated by Bayer.

We utilize a cost-based input method to recognize revenue based on the amount of actual costs incurred relative to the total budgeted costs expected to be incurred for the combined performance obligation. For the three and six months ended June 30, 2021, we recognized license and collaboration revenue of $3.9 million and $7.4 million, respectively, under the Bayer License Agreement, Bayer Tech Transfer Agreement and Bayer Manufacturing Agreement, collectively, the Bayer Agreements. We did not recognize any license and collaboration revenue in 2020 under Bayer License Agreement. Deferred revenue related to the Bayer Agreements aggregated to $63.4 million and $61.3 million as of June 30, 2021 and December 31, 2020, respectively. The $63.4 million of deferred revenue as of June 30, 2021, of which $41.0 million is included in current liabilities and $22.4 million is included in long-term liabilities, is expected to be recognized over approximately the next three years. No development or sales-based milestone payments have been received through June 30, 2021.