Annual report pursuant to Section 13 and 15(d)

Research and Development Collaboration Agreements

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Research and Development Collaboration Agreements
12 Months Ended
Dec. 31, 2017
Research And Development [Abstract]  
Research and Development Agreements

NOTE 4 — RESEARCH AND DEVELOPMENT AGREEMENTS

Related Party Collaboration Agreements - Takeda Pharmaceuticals, Inc.

Takeda Collaboration Agreement

In October 2016, Private Molecular entered into a collaboration and option agreement (the “Takeda Collaboration Agreement”) with Millennium Pharmaceuticals, Inc., a wholly owned subsidiary of Takeda, to discover and develop CD38-targeting engineered toxin bodies (“ETBs”), which includes MT-4019 for evaluation by Takeda. Under the terms of the Takeda Collaboration Agreement, Molecular is responsible for providing to Takeda (i) new ETBs generated using Takeda’s proprietary fully human antibodies targeting CD38 and (ii) MT-4019 for in vitro and in vivo pharmacological and anti-tumor efficacy evaluations. Molecular granted Takeda (1) a background IP license during the term of the Takeda Collaboration Agreement, and (2) an exclusive option during the term of the Takeda Collaboration Agreement and for a period of thirty days thereafter, to negotiate and obtain an exclusive worldwide license to develop and commercialize any ETB that may result from this collaboration, including MT-4019.

Molecular received an upfront payment of $2.0 million in technology access fees and cost reimbursement associated with the Company’s performance and completion of the Company’s obligations under the agreement.

The Company determined that the deliverables under the Takeda Collaboration Agreement were the background IP license, as well as the research and development services. The option to license ETBs is a substantive option, and not deemed a deliverable. The Company determined that there was one unit of accounting, since the background IP license did not have standalone value. Revenues are recognized over the period that the research and development services occur using the proportional performance model.

During the year ended December 31, 2017, the Company recorded collaboration revenue from Takeda of $1.9 million under the Takeda Collaboration Agreement. During the year ended December 31, 2016, the Company recorded no collaboration revenue from Takeda since no services were performed under the contract.    

Takeda Multi-Target Agreement

In June 2017, Molecular entered into a Multi-Target Collaboration and License Agreement with Takeda (“Takeda Multi-Target Agreement”) in which Molecular will collaborate with Takeda to identify and generate ETBs, against two targets designated by Takeda. Takeda will designate certain targets of interest as the focus of the research. Each party grants to the other nonexclusive rights in its intellectual property for purposes of the conduct of the research, and Molecular agrees to work exclusively with Takeda with respect to the designated targets.

Under the Takeda Multi-Target Agreement, Takeda has an option during an option period to obtain an exclusive license under Molecular’s intellectual property to develop, manufacture, commercialize and otherwise exploit ETBs against the designated targets. The option period for each target ends three months after the completion of the evaluation of such designated target.

Molecular received an upfront fee of $1.0 million and is entitled to receive an additional $2 million upon the designation of each of the two targets. Molecular may also receive an additional $25.0 million, in aggregate through the exercise of the option to license ETBs. Additionally, Molecular is entitled to receive up to approximately $547.0 million in additional milestone payments through preclinical and clinical development and commercialization. Molecular is also entitled to tiered royalty payments of a mid-single to low-double digit percentage of net sales of any licensed ETBs, subject to certain reductions.  

The Takeda Multi-Target Agreement will expire on the expiration of the option period (within three months after the completion of the evaluation of each designated target) for the designated targets if Takeda does not exercise its options, or, following exercise of the option, on the later of the expiration of patent rights claiming the licensed ETB or ten years from first commercial sale of a licensed ETB. Takeda Multi-Target Agreement may be sooner terminated by Takeda for convenience or upon a Molecular change of control, or by either party for an uncured material breach of the agreement.

The Company determined that the deliverables under the Takeda Multi-Target Agreement were the background IP license, the research and development services, and manufacturing know-how. The option to license ETBs is a substantive option, considered to be at fair value, and not deemed a deliverable. The Company determined that there was one unit of accounting, since the background IP license, and the manufacturing know-how did not have standalone value. Revenues are recognized over the period that the research and development services occur using the proportional performance model.

In connection with the execution of the Takeda Multi-Target Agreement. Takeda also entered into a stock purchase agreement with the Company (“Takeda Stock Purchase Agreement”), pursuant to which Takeda purchased approximately $20.0 million of shares of the Company’s common stock following the reverse-merger in the third quarter of 2017. See Note 12. Stockholders’ Equity, for further details. Since the Takeda Stock Purchase Agreement was contingent, it was not a deliverable under the Takeda Multi-Target Agreement.  

During the year ended December 31, 2017 the Company recorded no collaboration revenue under the Multi-Target Takeda Agreement, since no services had been performed under the project.

Other Collaboration Agreements

In September 2016, Private Molecular entered into a collaboration agreement an undisclosed pharmaceutical company (“Other Collaboration Agreement”), to generate engineered toxin bodies (“ETBs”), for evaluation. Under the terms of the Other Collaboration Agreement, Molecular is responsible for providing to the customer (i) new ETB generated using the customer’s materials and (ii) ETB study molecules for testing and evaluation. Molecular granted the customer a background IP license during the term of the AbbVie Agreement. This work was completed and accepted in March 2017, and $500,000 was recognized as revenue during the three months ended March 31, 2017.

The customer also received an option under the Other Collaboration Agreement for the manufacture of additional quantities of ETB molecules, which they exercised in November 2017. Molecular stands to receive an additional $250,000 under the Other Collaboration Agreement, upon delivery and acceptance of the additional quantities of ETB materials.

Grant Agreements

The Company receives funds from a state grant funding program, which is a conditional cost reimbursement grant and revenue is recognized as allowable costs are paid. In November 2011, Private Molecular was awarded a $10.6 million product development grant from CPRIT for its CD20-targeting ETB MT-3724. To date, Molecular has received $9.5 million in grant funds. The Company recognized approximately $1.0 million and $1.9 million in grant revenue under these awards during the years ended December 31, 2017 and 2016, respectively. Amounts collected in excess of revenue recognized are recorded as deferred revenue.