On November 4, 2022, the Company entered into a Revenue Interest Financing Agreement (the “RIFA”) with NQ Entity, L.P. (“NovaQuest”), pursuant to which the Company granted a percentage interest in the Company’s future revenues under the Astellas Agreements, for a consideration of $50.0 million (“Investment Amount”) before advisory fees. The Company has evaluated the terms of the RIFA and concluded that the Investment Amount should be accounted for as debt because the risks and rewards to NovaQuest are limited by the terms of the transaction.

Under the terms of the Astellas Agreements, the Company is entitled to drug product revenue and milestone payments upon occurrence of certain events. See the Astellas Agreements section in Note 3, Collaboration Agreements, License Agreement and Revenue, for details.

Effective as of November 2022, the Company sold to NovaQuest 22.5% of its drug product revenue and 10.0% (20.0% for fiscal year 2028 and thereafter) of its revenue from milestone payments under the Astellas Agreements. The Company received $49.8 million from NovaQuest at an initial funding on November 17, 2022, representing the gross proceeds of $50.0 million (the “Initial Investment Amount”) net of initial issuance costs, and accounted for this transaction as long-term debt as of December 31, 2022.

The Company may prepay its obligations to NovaQuest in full at any time during the term of RIFA. The prepayment amount varies from $80.0 million to $125.0 million less any revenue interest payments made up to such prepayment date. Under the RIFA the Company shall pay to NovaQuest up to a specified maximum amount (“Payment Cap”) of (a) $100.0 million, if the payment is made on or before December 31, 2028; (b) $112.5 million, if the payment is made is on or after January 1, 2029, but on or before December 31, 2029; or (c) $125.0 million, if the payment is made after January 1, 2030.

After January 1, 2028, if the product (as defined) is not commercialized for a consecutive twelve-month period, then, the payments owed under the RIFA by the Company to NovaQuest for each fiscal year shall be the greater of: (i) the amount which would otherwise be due pursuant to revenue interest payments terms; or (ii) $10.0 million.

Before December 31, 2028, if the sum of all payments under the RIFA paid to NovaQuest, does not equal or exceed $62.5 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2029 (“True-Up Payment One”). If, by no later than December 31, 2030, the sum of all payments under the RIFA paid to NovaQuest does not equal or exceed $125.0 million, then the Company shall pay NovaQuest the difference of these two amounts by no later than March 1, 2031.

NovaQuest will retain this entitlement until it has reached the Payment Cap, at which point 100% of such revenue interest on future global net sales of Astellas will revert to the Company.

The payments to NovaQuest will be accounted for as a reduction of debt. The total debt discount and transaction costs of $1.7 million, will be amortized as interest expense based on the projected balance of the liability as of the beginning of each period. The Company estimated an effective annual interest rate of approximately 19.67% for the year ended December 31, 2022. Over the course of the RIFA, the effective interest rate will be affected by the amount and timing of drug product revenue and revenue from milestone payments recognized, the changes in the timing of forecasted drug product revenue and revenue from milestone payments, and the timing of the Company’s payments to NovaQuest. On a quarterly basis, the Company will reassess the expected total revenue and the timing of such revenue, recalculate the amortization of debt discount and transactions costs and effective interest rate, and adjust the accounting prospectively as needed.

As payments are made to NovaQuest, the balance of the liability related to sale of future revenues is being effectively repaid over the life of the RIFA.

During the year ended December 31, 2022, the Company recognized, under Astellas Agreements, license revenue of $22.6 million and development revenue of $2.4 million related to a $25.0 million regulatory milestone, and drug product revenue of $11.1 million. See Note 3, Collaboration Agreements, License Agreement and Revenue, for details. During the year ended December 31, 2022, the Company recognized the related non-cash interest expense of $1.0 million.

The table below shows the activity of the liability related to sale of future revenues for the year ended December 31, 2022:


	Year Ended December 31, 2022
Liability related to sale of future revenues - beginning balance	$	—
Proceeds from sale of future revenues, gross		50,000
Less: Initial issuance costs		(250	)
Less: Transaction costs		(1,453	)
Interest expense recognized		1,036
Liability related to sale of future revenues - ending balance		49,333
Less: Current portion classified within accrued and other current liabilities		—
Liability related to sale of future revenues, non-current	$	49,333

Based on the current estimates of drug product revenue and revenue from milestone payments under the Astellas Agreements, and taking into the consideration of the terms discussed above, the Company anticipates to reach a Payment Cap up to $125.0 million by 2031.