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Development Liability | 3 Months Ended
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Mar. 31, 2024
Research and Development [Abstract] |
Development Liability | 6. Development Liability On February 28, 2019, the Company entered into a development funding agreement with SFJ (the “SFJ agreement”), under which SFJ agreed to provide funding to the Company to support the development of pegcetacoplan for the treatment of patients with PNH. Pursuant to the SFJ agreement, SFJ paid the Company $60.0 million following the signing of the agreement and agreed to pay the Company up to an additional $60.0 million in the aggregate in three equal installments upon the achievement of specified development milestones with respect to the Company’s Phase 3 program for pegcetacoplan in PNH and subject to the Company having cash resources at the time sufficient to fund at least 10 months of the Company’s operations. In June 2019 the Company amended the SFJ agreement to include an additional $20.0 million funding payment. SFJ paid the Company $80.0 million under the amended SFJ agreement between June 2019 and January 2020. Under the SFJ agreement, following regulatory approval by the FDA in May 2021 for the use of systemic pegcetacoplan as a treatment for PNH, the Company became obligated to pay SFJ an initial payment of $4.0 million and then an additional $226.0 million in the aggregate in six additional annual payments with the majority of the payments being made from the third anniversary to the sixth anniversary of regulatory approval. The Company paid SFJ the initial payment of $4.0 million in June 2021, its first annual payment of $11.5 million in May 2022 and its second annual payment of $24.5 million in May 2023. The subsequent annual payments remaining are due and payable in May of each year from 2024 through 2027. Following regulatory approval of systemic pegcetacoplan for the treatment of PNH by the European Medicines Agency (“EMA”) in December 2021, the Company became obligated to pay SFJ an initial payment of $5.0 million and then an additional $225.0 million in the aggregate in six additional annual payments with the majority of the payments being made from the third anniversary to the sixth anniversary of regulatory approval. The Company paid SFJ the initial payment of $5.0 million in January 2022 its first annual payment of $18.0 million in December 2022 and its second annual payment of $31.0 million in December 2023. The subsequent annual payments are due and payable in December of each year from 2024 through 2027. The Company has paid SFJ a total of $94.0 million as of March 31, 2024. The Company is obligated to pay SFJ $37.5 million in May 2024 and $61.3 million in December 2024. Additionally, the Company granted a security interest to SFJ in all of its assets, excluding intellectual property and license agreements to which it is a party. In connection with the grant of the security interest, the Company agreed to certain affirmative and negative covenants, including restrictions on its ability to pay dividends, incur additional debt or enter into licensing transactions with respect to its intellectual property, other than specified types of licenses. From December 15, 2021 to the final annual payment due in December 2027, the development liability will be accreted from its initial carrying amount to the total payment amount using the effective interest rate method over the remaining life of the SFJ agreement. The difference between the carrying amount and the total payment amount is presented as a discount to the development liability. The accretion is recorded as interest expense in the unaudited condensed consolidated statement of operations. The following table summarizes the development liability (in thousands):
|  | March 31, 2024 |  |  | December 31, 2023 |  |  | Effective Interest Rate |
Development liability |  | $ | 366,000 |  |  | $ | 366,000 |  |  |  | 7.91 | %
Less: Unamortized discount to development liability |  |  | (44,287 | ) |  |  | (50,353 | ) |  |  |
Less: Current portion of development liability, net of discount |  |  | (77,287 | ) |  |  | (75,830 | ) |  |  |
Total long-term development liability |  | $ | 244,426 |  |  | $ | 239,817 |  |  |  |
For the three months ended March 31, 2024 and 2023 interest expense of $6.1 million and $6.6 million were recorded for the accretion of the development liability. Future minimum SFJ payments as of March 31, 2024 is as follows (in thousands):
2024 | $ |  | 98,750 |
2025 |  |  | 103,000 |
2026 |  |  | 109,000 |
2027 |  |  | 55,250 |
Total future minimum payments |  |  | 366,000 |

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