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Collaboration and License Agreement | 6 Months Ended
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Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Collaboration and License Agreement | 7. Collaboration and License Agreements The following table presents revenue from collaboration agreements:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | (in thousands) |
Roche Collaboration and License Agreement |  | $ | 4,825 |  |  | $ | — |  |  | $ | 10,137 |  |  | $ | — |
Bristol Myers Squibb Collaboration and License Agreement |  |  | 14,951 |  |  |  | 679 |  |  |  | 15,317 |  |  |  | 1,087 |
Ono Collaboration Agreement |  |  | 10,473 |  |  |  | — |  |  |  | 10,473 |  |  |  | — |
Total revenue |  | $ | 30,249 |  |  | $ | 679 |  |  | $ | 35,927 |  |  | $ | 1,087 |
(a) Roche Collaboration and License Agreement In June 2022, the Company entered into a collaboration and license agreement (the “Roche Agreement”) with Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively, “Roche”) regarding the development and commercialization of the Company’s product candidate camonsertib (also known as RP-3500) and specified other Ataxia-Telangiectasia and Rad3-related protein kinase (“ATR”) inhibitors (the “Licensed Products”). The transaction was subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions, which were met on July 13, 2022 (the “Effective Date”). Pursuant to the Roche Agreement, the Company granted Roche a worldwide, perpetual, exclusive, sublicensable license to develop, manufacture, and commercialize the Licensed Products, as well as a non-exclusive, sublicensable license to certain related companion diagnostics. The Company has agreed to complete specified ongoing clinical trials in accordance with the development plan in the Roche Agreement, as well as ongoing investigator sponsored trials (together, the “Continuing Trials”) at the Company’s expense. Roche assumes all subsequent development of camonsertib with the potential to expand development into additional tumors and multiple combination studies. The Company retained the right to conduct specified clinical trials (the “Repare Trials”) of camonsertib in combination with the Company’s PKMYT1 compound (also known as lunresertib). The Roche Agreement also provides the Company, at its sole discretion, with the ability to opt-in to a 50/50 U.S. co-development and profit share arrangement, including participation in U.S. co-promotion if U.S. regulatory approval is received. If the Company chooses to exercise its co-development and profit share option, it will continue to be eligible to receive certain clinical, regulatory, commercial and sales milestone payments, in addition to full ex-U.S. royalties. The Roche Agreement was subsequently amended in October 2022 to extend the timeline to negotiate in good faith the parties’ rights and obligations with respect to the Repare Trials, as defined in the Roche Agreement, and to clarify indications included in the development plan that are subject to milestones. Under the terms of the Roche Agreement, the Company received an upfront, nonrefundable payment of $125.0 million in July 2022. The Company also received an additional payment of $4.0 million negotiated with Roche for revisions to the clinical development plan under the Roche Agreement as agreed to by the parties at the time of the Effective Date. The Company further received $5.6 million for the transfer of clinical trial material on hand to Roche, as agreed to pursuant to the Roche Agreement. In addition, in February 2023, the Company became entitled to receive an additional payment of $4.0 million, negotiated with Roche for additional revisions to the clinical development plan under the Roche Agreement, which was received in April 2023. The Company is eligible to receive up to $1.172 billion in potential clinical, regulatory, commercial and sales milestones, as well as royalties on global net sales ranging from high-single-digits to high-teens, subject to certain specified reductions. Royalties are payable by Roche on a product by product and country by country basis until the later of 12 years following the first commercial sale of a licensed product in such country or the expiration of certain exclusivity rights. The Roche Agreement will expire upon the last to expire royalty term or, as applicable, the end of the U.S. co-development and profit share arrangement. Additionally, Roche may terminate the agreement for convenience in its entirety or on a product by product or country by country basis subject to certain notice periods. Either party may terminate earlier upon the other party’s uncured material breach of the agreement or insolvency. Subject to the terms of the Roche Agreement, effective upon termination of the Roche Agreement, the Company is entitled to retain specified licenses to be able to continue to exploit the Licensed Products. The Company assessed the Roche Agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that Roche is a customer within the context of the agreement. At inception, the Company identified several performance obligations under the agreement, being (i) the combination of the exclusive perpetual license to the Licensed Products and the non-exclusive license to certain companion diagnostics, (ii) the research and development activities related to the completion of the Continuing Trials, as well as (iii) the transfer of clinical trial materials on hand. The Company determined that the exclusive license to the Licensed Products and the non-exclusive license to certain companion diagnostics should be combined into one distinct performance obligation as they were not capable of being distinct from each other within the context of the agreement given both are highly interdependent of each other. The Company determined that the combined licenses, the completion of the Continuing Trials and the transfer of clinical trial materials were all capable of being distinct and were distinct within the context of the Roche Agreement given such activities are independent of each other and Roche could benefit from either separately. The Company determined that the transaction price at the onset of the agreement was $134.6 million, being the total non-refundable upfront payment received of $125.0 million, the additional $4.0 million payment received and the $5.6 million received for the transfer of clinical trial materials. Additional consideration is to be paid to the Company upon the achievement of multiple clinical, regulatory and sales milestones. The Company utilized the most likely method approach and concluded that these amounts were constrained based on the probability of achievement. As such, the Company excluded this additional consideration from the transaction price. The Company allocated the transaction price at the onset of the agreement of $134.6 million to each performance obligation based on the relative stand-alone selling price of each performance obligation at inception. The Company determined the estimated stand-alone selling price at contract inception of the combined licenses by applying a probability adjusted discounted cashflow model which forecasts future cash flows related to the licenses. The Company considered applicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating the agreement, probability of success, discount rate and the time needed to commercialize a product pursuant to the license. The Company determined the estimated stand-alone selling price at contract inception of the research and development activities required to complete the Continuing Trials based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin. Significant inputs used to determine the total costs to complete the Continuing Trials included the length of time required, the internal hours as well as external costs expected to be incurred, the number of patients and the number of clinical and investigator sponsored trials. The Company determined the stand-alone selling price of the clinical trial materials transferred based on the purchase price from external vendors, without applying a markup as the materials have a built-in margin from the external vendors. In February 2023, the Company received a further payment of $4.0 million negotiated with Roche for additional revisions to the clinical development plan. The Company determined that the scope and the price of the contract had increased as a result of these additional changes and thus reflected a contract modification under ASC 606. The additional services were assessed to be not distinct from the ongoing performance obligation related to the completion of the Continuing Trials but distinct from the other performance obligations. No adjustment was therefore made to the two previously completed performance obligations, being the combined licenses and the transfer of clinical trial materials. The transaction price was updated for the additional consideration of $4.0 million, which has been allocated to the completion of the Continuing Trials performance obligation. An adjustment to revenue previously recognized based on updated measures of progress related to the completion of the Continuing Trials has been recognized on a cumulative catch-up basis in the first quarter of 2023. Based on the relative stand-alone selling price, the allocation of the transaction price to the separate performance obligations is as follows:
Performance obligation |  | Transaction price |
|  | (in thousands) |
Combined licenses |  | $ | 105,327 |
Completion of Continuing Trials |  |  | 30,585 |
Transfer of clinical trial materials |  |  | 2,714 |
Total transaction price |  | $ | 138,626 |
Revenue associated with the combined licenses was recognized at a point in time upon the transfer of the licenses to Roche on the Effective Date of the Roche Agreement as the Company concluded that the combined licenses were a functional intellectual property license that Roche could benefit from as of the time of grant. Revenue associated with the transfer of clinical trial materials was recognized at a point in time upon delivery of the clinical trial materials to Roche in the year ended December 31, 2022. Revenue associated with the completion of the Continuing Trials has been deferred and will be recognized on a proportional performance basis over the period of time to complete the Continuing Trials, being estimated at within 24 months of the Effective Date, using input-based measurements of total costs of research and development incurred to estimate the proportion performed. Progress towards completion is remeasured at the end of each reporting period.
Deferred revenue pertaining to the Roche Agreement |  | Completion of Continuing Trials |
|  | (in thousands) |
Balance as of December 31, 2022 |  | $ | 17,957 |
Increase in collaboration revenue receivable |  |  | 4,000 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | (5,312 | )
Balance as of March 31, 2023 |  | $ | 16,645 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | (4,825 | )
Balance as of June 30, 2023 |  | $ | 11,820 |
Classified as short-term |  | $ | 11,125 |
Classified as long-term |  |  | 695 |
The Company recognized $4.8 million and $10.1 million as revenue for the three and six months ended June 30, 2023, respectively, and nil for the three and six months ended June 30, 2022, in recognition of research and development services performed towards the completion of the Continuing Trials under the Roche Agreement. As of June 30, 2023, there was $11.8 million (December 31, 2022 -$18.0 million) of deferred revenue related to the Roche Agreement, of which $11.1 million (December 31, 2022 - $15.3 million) was classified as current and $0.7 million (December 31, 2022 - $2.7 million) was classified as non-current in the condensed consolidated balance sheet based on the period the services to complete the Continuing Trials are expected to be performed. (b) Bristol-Myers Squibb Collaboration and License Agreement In May 2020, the Company entered into a collaboration and license agreement (the "BMS Agreement") with Bristol-Myers Squibb Company (“Bristol Myers Squibb”), pursuant to which the Company and Bristol Myers Squibb have agreed to collaborate in the research and development of potential new product candidates for the treatment of cancer. The Company is providing Bristol Myers Squibb access to a selected number of its existing screening campaigns and novel campaigns. The Company is responsible for carrying out early-stage research activities directed to identifying potential targets for potential licensing by Bristol Myers Squibb, in accordance with a mutually agreed upon research plan, and will be solely responsible for such costs. The collaboration consists of programs directed to both druggable targets and to targets commonly considered undruggable to traditional small molecule approaches. Upon Bristol Myers Squibb’s election to exercise its option to obtain exclusive worldwide licenses for the subsequent development, manufacturing and commercialization of a program, Bristol Myers Squibb will then be solely responsible for all such worldwide activities and costs. The collaboration term will expire 42 months after the effective date of the BMS Agreement. The BMS Agreement will expire, assuming that Bristol Myers Squibb has exercised at least one option for a program, on a licensed product-by-licensed product and country-by-country basis on expiration of the applicable royalty term and in its entirety upon expiration of the last royalty term. Either party may terminate earlier upon an uncured material breach of the agreement by the other party, or the insolvency of the other party. Additionally, Bristol Myers Squibb may terminate the BMS Agreement for any or no reason on a program-by-program basis upon specified written notice. Under the terms of the BMS Agreement, Bristol Myers Squibb paid the Company an initial nonrefundable upfront fee of $50.0 million in June 2020. The Company is also entitled to receive up to $301.0 million in total milestones on a program-by-program basis, consisting of $176.0 million in the aggregate for certain specified research, development and regulatory milestones and $125.0 million in the aggregate for certain specified commercial milestones. The Company is further entitled to a tiered percentage royalty on annual net sales ranging from high-single digits to low-double digits, subject to certain specified reductions. The Company assessed the BMS Agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that Bristol Myers Squibb is a customer based on the agreement structure. At inception, the Company identified several performance obligations under the BMS Agreement, being (i) research activities for each campaign over the collaboration term, as well as (ii) a selected number of material rights associated with options to obtain exclusive development, manufacturing, and commercial licenses to targets identified. The Company determined that the options to obtain the exclusive development, manufacturing and commercialization licenses were material rights under ASC 606 because there are minimal amounts to be paid to the Company upon exercise of such options. The Company determined that the transaction price at the onset of the BMS Agreement is the total non-refundable upfront payment received of $50.0 million. Additional consideration is to be paid to the Company upon the exercise of options to license targets and future milestone payments. The Company utilized the most likely method approach and concluded that these amounts were constrained as they represent option fees and milestone payments that can only be achieved subsequent to option exercises. As such, the Company excluded this additional consideration from the transaction price. The Company has allocated the transaction price of $50.0 million to each performance obligation based on the relative stand-alone selling price of each performance obligation at inception, which was determined based on each performance obligation’s estimated stand-alone selling price. The Company has determined the estimated stand-alone selling price at contract inception of the research activities based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin. Significant inputs used to determine the total costs to perform the research activities included the length of time required, the internal hours expected to be incurred on the services and the number and costs of various studies that will be performed to complete the research plan. The Company determined the estimated stand-alone selling price at contract inception of the material rights associated with options to obtain exclusive licenses to druggable targets and undruggable targets based on the fees Bristol Myers Squibb would pay to exercise these options, the probability-weighted value of expected future cash flows associated with each license related to each target and the probability that these options would be exercised by Bristol Myers Squibb. In developing such estimates, the Company also considered applicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating the agreement, probability of success and the time needed to commercialize a product candidate pursuant to the associated license. Based on the relative stand-alone selling price, the allocation of the transaction price to the separate performance obligations was as follows:
Performance obligation |  | Transaction price |
|  | (in thousands) |
Research activities |  | $ | 6,405 |
Options to license druggable targets |  |  | 31,148 |
Options to license undruggable targets |  |  | 12,447 |
Total transaction price |  | $ | 50,000 |
Revenue associated with the options has been deferred and will be recognized at the point in time when options to license are exercised by Bristol Myers Squibb or upon expiry of such options. Revenue associated with the research activities has been deferred and will be recognized on a proportional performance basis over the period of service for research activities, being the collaboration term, using input-based measurements of total costs of research incurred to estimated proportion performed. Progress towards completion is remeasured at the end of each reporting period.
Deferred revenue pertaining to the BMS Agreement |  | Research activities |  | Options to license druggable targets |  | Options to license undruggable targets |  | Total |
|  | (in thousands) |
Balance as of December 31, 2022 |  | $ | 2,448 |  | $ | 12,459 |  | $ | 12,447 |  | $ | 27,354 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | (366 | ) |  | - |  |  | - |  |  | (366 | )
Balance as of March 31, 2023 |  | $ | 2,082 |  | $ | 12,459 |  | $ | 12,447 |  | $ | 26,988 |
Increase in collaboration revenue receivable |  |  | - |  |  | 1,250 |  |  | - |  |  | 1,250 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | (1,242 | ) |  | (13,709 | ) |  | - |  |  | (14,951 | )
Balance as of June 30, 2023 |  | $ | 840 |  | $ | - |  | $ | 12,447 |  | $ | 13,287 |
Classified as short-term |  | $ | 840 |  | $ | - |  | $ | 12,447 |  | $ | 13,287 |
Classified as long-term |  |  | - |  |  | - |  |  | - |  |  | - |
The Company recognized $1.2 million and $0.7 million as revenue for the three months ended June 30, 2023 and 2022. respectively, and $1.6 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively, in recognition of deferred revenue for research activities performed under the BMS Agreement. In May 2023, Bristol Myers Squibb exercised its option for a druggable target and in June 2023, Bristol Myers Squibb waived its rights to exercise an option for a druggable target. As a result, the Company recognized $12.7 million as revenue related to druggable targets for the three and six months ended June 30, 2023 (nil for the three and six months ended June 30, 2022), including the option fee of $0.25 million which was received in July 2023. In May 2023, Bristol Myers Squibb also triggered a $1.0 million further development election for a previously exercised druggable target. As such, the Company recognized this specified research milestone as revenue during the three and six months ended June 30, 2023 (nil for the three and six months ended June 30, 2022), which was received in July 2023. As of June 30, 2023, there was $13.3 million (December 31, 2022 - $27.4 million) of deferred revenue related to the BMS Agreement, which was classified as current in the condensed consolidated balance sheet based on the period the services are expected to be performed, the expected timing of potential option exercises for undruggable targets, and the expected expiry of the BMS Agreement. (c) Ono Collaboration Agreement In January 2019, the Company entered into a research services, license and collaboration agreement, or the Ono Agreement, with Ono Pharmaceutical Company Ltd., or Ono, pursuant to which the Company and Ono agreed to collaborate in the research of potential product candidates targeting Polθ and the development of the Company’s small molecule Polθ inhibitor program. The Company was primarily responsible for carrying out research activities to identify a product candidate, to be licensed to Ono, in accordance with a mutually agreed upon research plan during a research term that will end upon the earlier of the date of the first submission of an Investigational New Drug application (“IND”) in the United States or Japan, or the end of the research term. In the event that Ono elected to collaborate on the subsequent development and commercialization of the proposed product candidate, Ono would then have been responsible for such activities in Japan, South Korea, Taiwan, Hong-Kong, Macau and the Association of Southeast Asian Nations (collectively, the “Ono territory”), and the Company would have then been responsible for all such activities in the rest of the world outside the Ono territory, including the United States, Canada and European Union. In such instance, Ono would have been responsible for a specified percentage of research and developments costs for the IND-enabling studies of the selected product candidate. In October 2021, the Company and Ono entered into an amendment to the Ono Agreement whereby the research term, as defined in the Ono Agreement, was extended by one year. In January 2023, the Company and Ono entered into a second amendment to the Ono Agreement whereby the Research Term, as defined in the Ono Agreement, was extended until July 31, 2023. Pursuant to the terms of the Ono Agreement, the Company received initial upfront payments of ¥900 million ($8.1 million). These upfront payments were recorded as deferred revenue and were to be recognized as revenue at the point in time when a product candidate was licensed to Ono pursuant to the terms of the agreement, reflecting the single performance obligation under the Ono Agreement in accordance with the Company’s assessment of the arrangement under ASC 606. In addition, in connection with the research activities to be conducted pursuant to the Ono Agreement, the Company was eligible to receive additional research service payments of up to an aggregate of ¥750 million ($6.5 million) upon the occurrence of certain specified research triggers. In October 2021 and December 2022, the Company achieved specified research triggers amounting to ¥100 million ($0.9 million) and ¥200 million ($1.5 million), respectively, as research service payments provided for in the Ono Agreement. These amounts were added to the transaction price under the arrangement and were recorded as deferred revenue. The Company was further entitled to receive clinical, regulatory and commercial milestone payments of up to ¥17.21 billion ($149.5 million) in the aggregate, plus a tiered percentage royalty on annual net sales in Ono’s Territory ranging from high-single digits to low teens, subject to specified reductions.
Deferred revenue pertaining to the Ono Agreement |  | Research activities |
|  | (in thousands) |
Balance as of December 31, 2022 |  | $ | 10,473 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | - |
Balance as of March 31, 2023 |  | $ | 10,473 |
Recognition as revenue, as the result of performance obligations satisfied |  |  | (10,473 | )
Balance as of June 30, 2023 |  | $ | - |
In June 2023, the Company and Ono determined not to further extend the Term of the Ono Agreement. As a result, no product candidate will be licensed to Ono pursuant to the terms of Agreement. The Company recognized $10.5 million as revenue for the three and six months ended June 30, 2023 (nil for the three and six months ended June 30, 2022) with regards to the performance obligation under the Ono Agreement. In July 2023, Ono provided the Company with a formal notice to terminate the Ono Agreement without cause as defined in the Ono Agreement. As a result of this termination, all rights to the Polθ program have reverted to the Company.

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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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