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Collaboration and License Agreements | 9 Months Ended
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Sep. 30, 2024
Revenue from Contract with Customer [Abstract] |
Collaboration and License Agreements | Collaboration and License Agreements Vertex Agreement - Overview T he Company and Vertex closed their Strategic Collaboration and License Agreement in February 2023, as amended in October 2023 (the "Vertex Agreement"), pursuant to which the Company granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, the Company’s intracellular EEV-based therapeutic candidate for the treatment of myotonic dystrophy type 1 ("DM1"), as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of DM1 in the course of the parties’ global research collaboration. In October 2023, the Company and Vertex amended the Vertex Agreement to clarify a milestone and related payment terms. The Vertex Agreement provides for a four-year global research collaboration under which Entrada will continue to perform preclinical development of the Company's partnered candidate VX-670 pursuant to the mutually agreed-upon research plan (the "Research Plan"). The Research Plan is overseen by a Joint Research Committee ("JRC") as detailed in the Vertex Agreement. Pursuant to the terms of the Vertex Agreement, the JRC may amend the Research Plan to include additional DM1-related research activities with a goal of identifying other EEV-based therapeutic product candidates for the potential treatment of DM1. Vertex is obligated to reimburse the Company’s research expenses incurred in performing activities under the Research Plan. Pursuant to the Vertex Agreement, the Company received an upfront payment of $223.7 million, and Vertex made an equity investment of $26.3 million by purchasing 1,618,613 shares of the Company's common stock, pursuant to the Stock Purchase Agreement. Under the terms of the Vertex Agreement, the Company is eligible to receive up to $485.0 million upon the achievement of certain research, development, regulatory and commercial milestones. The Company will also receive tiered royalties, from the mid to high single digits based on potential future net sales of licensed products as set forth in the Vertex Agreement. In the fourth quarter of 2023, the Company achieved a milestone pursuant to the Vertex Agreement related to preclinical IND-enabling Good Laboratory Practices ("GLP") toxicology studies of VX-670 that triggered a $17.5 million milestone payment, which the Company received in the fourth quarter of 2023. In the first quarter of 2024, the Company achieved a milestone related to the clinical advancement of VX-670, which triggered a $75.0 million payment. The Company received this payment in the second quarter of 2024. The term of the Vertex Agreement will expire in its entirety upon expiration of the royalty term as set forth in the Vertex Agreement. Vertex may terminate the Vertex Agreement for convenience by providing adequate written notice to the Company. The Company may terminate the Vertex Agreement under certain specified circumstances, including in the event Vertex or any of its affiliates or sublicensees challenges directly or indirectly in a legal or administrative proceeding the patentability, enforceability, or validity of any licensed patent as set forth in the Vertex Agreement. Either party may terminate the Vertex Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. Neither party may assign the agreement without the prior written consent of the other party, except that a party may assign its rights and obligations to an affiliate or third party that acquires all or substantially all of the business or assets to which the Vertex Agreement relates and agrees in writing to be bound by the terms of the Vertex Agreement. Vertex Agreement - Accounting Analysis The Company determined that the Vertex Agreement should be accounted for in accordance with ASC 606 as Vertex was deemed to be a customer. The Company assessed the promised goods and services under the Vertex Agreement in accordance with ASC 606. At inception, the Vertex Agreement included one performance obligation which was the combination of the exclusive license and the performance of the research activities for VX-670 ("Performance Obligation One"). The Company concluded that the license is not distinct from the research and development services for VX-670 during the research collaboration as Vertex cannot fully exploit the value of the license without receipt of such services. The Company also determined that Vertex's ability to engage Entrada to perform work on additional EEV-based therapeutic candidates for the potential treatment of DM1 through the JRC represented customer options. The Company concluded that these customer options do not represent a material right as these services will be reimbursed by Vertex at a price that represents standalone selling price for such services. In the second quarter of 2023, pursuant to the terms of the Vertex Agreement, Vertex amended the Research Plan (the "Amended Research Plan") to engage the Company to perform work on additional EEV-based therapeutic candidates for the potential treatment of DM1 ("Performance Obligation Two"). Such work is treated as a separate contract for accounting purposes and represents a separate performance obligation as the activities are distinct from the research activities for VX-670. Determination of Transaction Price At the commencement of the arrangement, the Vertex Agreement had a fixed transaction price of $232.0 million, primarily consisting of the $223.7 million upfront fee plus a premium of $6.9 million related to the 1,618,613 shares sold to Vertex under the Stock Purchase Agreement when measured at fair value on the date of issuance. The shares issued to Vertex pursuant to the Stock Purchase Agreement were unregistered and therefore considered restricted securities at the time of issuance. As a result, the fair value of the shares issued to Vertex of $19.4 million was calculated using the closing price of the Company's unrestricted shares of common stock on February 8, 2023, adjusted to reflect a discount for lack of marketability ("DLOM") due to the shares issued being unregistered and therefore subject to related sale restrictions. The Company is also entitled to reimbursement of costs incurred associated with the delivery of services under the Research Plan. The Company utilized the most likely amount approach to estimate the expected cost reimbursement. The Company concluded that these amounts do not require a constraint and are included in the transaction price at inception. The Company considers this estimate at each reporting date and updates the estimate based on information available. In the fourth quarter of 2023, the Company achieved a milestone related to preclinical IND-enabling GLP toxicology studies of VX-670, which triggered a $17.5 million payment. In the first quarter of 2024, the Company achieved a milestone related to the clinical advancement of VX-670, which triggered a $75.0 million payment. The Company received this payment in the second quarter of 2024. No additional milestones were deemed probable of being achieved as of September 30, 2024 and, therefore, all remaining milestone payments were fully constrained and excluded from the transaction price as of September 30, 2024. The Company re-evaluates the probability of achievement of development milestones and any related constraint at each period end, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment. Allocation and Recognition As of September 30, 2024, the transaction price for the combination of the exclusive license and the performance of the research activities for VX-670 primarily consists of (i) the upfront payment, (ii) the equity premium paid by Vertex (iii) the milestone achieved in the fourth quarter of 2023, (iv) the milestone achieved in the first quarter of 2024 and (v) reimbursement of costs incurred in connection with the delivery of services under the Amended Research Plan associated with VX-670. The transaction price for the work on additional EEV-based therapeutic candidates consists of the reimbursement of costs incurred in connection with the delivery of services under the Amended Research Plan associated with such work. The Company recognizes revenue associated with both performance obligations as the related research and development services are provided using an input method, according to the costs incurred as related to the respective research services and the costs expected to be incurred in the future to satisfy the performance obligations in accordance with the Amended Research Plan. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligations. The estimated costs associated with the remaining effort required to complete the performance obligations in accordance with the research plans may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to the performance obligations under the Vertex Agreement and records any necessary adjustment to revenue for the change in estimate. The amounts received that have not yet been recognized as revenue are deferred on the Company’s consolidated balance sheet and will be recognized over the remaining research and development period until the performance obligation is satisfied. The performance obligations have not been fully satisfied as of September 30, 2024. During the three months ended September 30, 2024, the Company recognized $19.6 million in revenue under the Vertex Agreement, including $2.6 million of cost reimbursements and $17.0 million from amounts that were recorded in deferred revenue as of June 30, 2024. During the nine months ended September 30, 2024, the Company recognized $172.4 million in revenue under the Vertex Agreement, including $12.2 million of cost reimbursements, $17.4 million related to a cumulative catch-up adjustment for the milestone achieved in the first quarter of 2024, and $142.8 million from amounts that were recorded in deferred revenue as of December 31, 2023. During the three months ended September 30, 2023, the Company recognized $43.7 million of revenue under the Vertex Agreement, including $3.9 million of cost reimbursements and $39.8 million from amounts recorded in deferred revenue as of June 30, 2023. During the nine months ended September 30, 2023, the Company recognized $87.2 million of revenue under the Vertex Agreement, including $12.3 million of cost reimbursements and $74.9 million of amounts that were recorded in deferred revenue at the inception of the agreement. The aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations recorded in deferred revenue at September 30, 2024 is $53.9 million. The Company will recognize the deferred revenue related to the research and development services based on a cost input method, over the remaining term of the Amended Research Plan.

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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -SubTopic 10 -Topic 808 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479402/808-10-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b) -SubTopic 10 -Topic 808 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479402/808-10-50-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 808 -Publisher FASB -URI https://asc.fasb.org/808/tableOfContent + Details
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