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Collaborative Research and License Agreements | 6 Months Ended
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Jun. 30, 2021
Research and Development [Abstract] |
Collaborative Research and License Agreements | Collaborative Research and License Agreements AbbVie Collaboration Agreement Summary of Agreement On November 13, 2019 (the “Effective Date”), the Company entered into a Collaboration, Option and License Agreement (the “AbbVie Collaboration Agreement”), with a wholly-owned subsidiary of Allergan plc, Allergan. On May 8, 2020, Allergan plc, including Allergan was acquired by AbbVie. Pursuant to the AbbVie Collaboration Agreement, the Company granted to AbbVie exclusive access and options to license SNA based therapeutics arising from two collaboration programs related to the treatment of hair loss disorders (each, a “Collaboration Program”). Under each such license (obtained in connection with the exercise of an Option, as defined and discussed further below), the Company would grant to AbbVie exclusive, royalty-bearing, sublicensable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics. Under the AbbVie Collaboration Agreement, the Company will use commercially reasonable efforts to conduct two Collaboration Programs, each focused on one or more hair loss disorders to discover one or more SNA products that are directed to, bind to or inhibit one or more specific Collaboration Program targets (each, a “Program Target”). As of the Effective Date, the Company and AbbVie have agreed upon a development plan for each Collaboration Program that describes the development activities and timelines required to advance such Collaboration Program through first IND filing (each, a “Development Plan”). The activities described in the Development Plan are conducted under the supervision of the Joint Development Committee (the “JDC”) consisting of three members from each of the Company and AbbVie. The Company is primarily responsible for performing early stage discovery and preclinical activities (the “Initial Development Activities”) set forth in the Development Plan for each Collaboration Program and will be solely responsible for all costs and expenses related to the Initial Development Activities. AbbVie may elect, in its sole discretion and at its sole cost and expense, to conduct formulation assessment and in vivo testing as set forth in a Development Plan. Following the completion of all Initial Development Activities, the Company is required to deliver to AbbVie a report that describes the results of the Initial Development Activities and identifies at least one SNA-based compound that satisfies certain criteria for such Collaboration Program as determined by the JDC (the “Initial Development Report”). Following the delivery of the Initial Development Report for a Collaboration Program, AbbVie will have the ability for a defined period of time (the “Initial Option Exercise Period”) to exercise an option (each an “Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each a “Licensed Product”) that results from such Collaboration Program during the term of the AbbVie Collaboration Agreement. At AbbVie’s sole option, AbbVie may extend the Initial Option Exercise Period (the “Option Extension”) and require the Company to perform IND-enabling activities described in the Development Plan (the “IND-Enabling Activities”), subject to the payment of additional consideration (“Extension Exercise”). If AbbVie exercises the Option Extension, the Company would be responsible for conducting the IND-Enabling Activities and would be solely responsible for all costs and expenses associated with such activities. Upon completion of the IND-Enabling Activities, the Company is required to deliver a report that describes the results of the IND-Enabling Activities (the “IND-Enabling Activities Data Package”) to AbbVie. Following the delivery of IND-Enabling Activities Data Package, AbbVie will have the ability for a defined period of time (the “Extended Option Exercise Period”) to exercise an Option with respect to such Collaboration Program. After the exercise of an Option with respect to a Collaboration Program, AbbVie will be responsible for all development, manufacturing, and commercialization activities, and costs and expense associated with such activities in connection with Licensed Products arising from such Collaboration Program. The Company’s obligation to conduct the activities defined in the Development Plan under the AbbVie Collaboration Agreement commenced on November 13, 2019 and continues until the earlier of (i) the date AbbVie exercises an Option, (ii) the date AbbVie abandons a Collaboration Program and foregoes its Option to that Collaboration Program, or (iii) the fifth anniversary of the Effective Date (the “Research Term”). If the Initial Option Exercise Period or Extended Option Exercise Period is still in effect for a Collaboration Program or if the Company has not delivered a complete Initial Development Report or, if AbbVie made an Extension Exercise for a Collaboration Program, a complete IND-Enabling Activities Data Package for such Collaboration Program, as determined by the JDC, then the Research Term will automatically extend by one-year increments until such obligation is satisfied, but in no event past the seventh anniversary of the Effective Date. Under the terms of the AbbVie Collaboration Agreement, the Company received a $25,000 upfront, non-refundable, non-creditable cash payment (the “AbbVie Upfront Payment”) related to the Company’s research and development costs for conducting the Development Plan for two Collaboration Programs, each focused on one or more targets, and certain options to obtain exclusive, worldwide licenses under certain intellectual property rights owned or controlled by the Company to develop, manufacture and commercialize certain products resulting from each such Collaboration Programs. The option exercise fee during the Initial Option Exercise Period is $10,000 per Collaboration Program. If AbbVie elects to extend the Initial Option Exercise Period, AbbVie is required to pay an additional fee of $10,000. If AbbVie elects to exercise its option during the Extended Option Exercise Period, AbbVie must pay the Company the option exercise fee of $15,000. Following the exercise by AbbVie of an Option with respect to a Collaboration Program, AbbVie would be required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch, and commercial events, on a Licensed Product by Licensed Product basis. On a Licensed Product by Licensed Product basis, for the first Licensed Product to achieve the associated milestone event, the Company is eligible to receive up to an aggregate of $55,000 for development milestone payments and $132,500 for product approval and launch milestone payments. The Company is also eligible for up to $175,000 in sales milestone payments on a Collaboration Program by Collaboration Program basis, associated with aggregate worldwide sales. Certain product approval milestones are subject to certain reductions under specified circumstances, including for payments required to be made by AbbVie to obtain certain third-party intellectual property rights. In addition, to the extent there is any Licensed Product, the Company would be entitled to receive tiered royalty payments of mid-single digits to the mid-teens percentage on future net worldwide product sales of such Licensed Products, subject to certain reductions under specified circumstances. Royalties are due on a Licensed Product by Licensed Product and country by country basis from the date of the first commercial sale of each Licensed Product in a country until the latest to occur of: (i) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such Licensed Product in such country, (ii) the tenth anniversary of the first commercial sale of such Licensed Product in such country, and (iii) the expiration of regulatory exclusivity for such Licensed Product in such country. AbbVie may terminate the AbbVie Collaboration Agreement for any reason or no reason, either in its entirety or on a Collaboration Program by Collaboration Program basis, at any time on 90 days’ prior written notice to the Company. Unless earlier terminated, the term of the AbbVie Collaboration Agreement shall continue until (i) if both Option Exercise Periods expire without AbbVie exercising either Option, the expiration of the later to expire Option Exercise Period, and (ii) if either or both Options are exercised on a Licensed Product-by-Licensed Product and country-by-country basis, the expiration of the royalty term for such Licensed Product in such country. Either party may terminate the AbbVie Collaboration Agreement if the other party has materially breached or defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure period. Termination of the AbbVie Collaboration Agreement for any reason will not release either party from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination. In addition, termination of the AbbVie Collaboration Agreement will not preclude either party from pursuing any rights and remedies it may have under the agreement or at law or in equity with respect to any breach of the AbbVie Collaboration Agreement. If either party terminates the AbbVie Collaboration Agreement, the license and rights granted to AbbVie with respect to the terminated Collaboration Program or License Product shall terminate. Accounting Analysis The Company concluded that AbbVie is a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. Under the AbbVie Collaboration Agreement, the Company has identified a single performance obligation that includes (i) the research and development activities during the Research Term (the “AbbVie R&D Services”), and (ii) Joint Development Committee services during the Research Term (the “AbbVie JDC Services”). The Company has concluded that the AbbVie R&D Services is not distinct from the AbbVie JDC Services during the Research Term. The JDC provides oversight and management of the overall AbbVie Collaboration Agreement, and the members of the JDC from the Company have specialized industry knowledge, particularly as it relates to SNA technology. The JDC is meant to facilitate the early stage research being performed and coordinate the activities of both the Company and AbbVie. Further, the JDC services are critical to the ongoing evaluation of a Collaboration Program and the drafting and evaluation of the Initial Development Report and the IND-Enabling Data Package. Accordingly, the Company’s participation on the JDC is essential to AbbVie receiving value from the AbbVie R&D Services and as such, the AbbVie JDC Services along with the AbbVie R&D Services are considered one performance obligation (the “Collaboration Program Services”). In addition, the Company has concluded that the option to purchase two development and commercialization licenses is considered a marketing offer as the options did not provide any discounts or other rights that would be considered a material right in the arrangement, and thus, not a performance obligation at the onset of the agreement. The consideration for these options will be accounted for when they are exercised. As of the Effective Date of the AbbVie Collaboration Agreement, the total transaction price was determined to be $25,000, consisting solely of the AbbVie Upfront Payment. The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received. As of the Effective Date of the AbbVie Collaboration Agreement, there were no milestones included in the transaction price. The milestones were fully constrained due to the significant uncertainties surrounding such payments. The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or AbbVie. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur. As of June 30, 2021, the Company determined that any development, regulatory, or commercial milestones continue to be constrained and therefore the related milestone payments continue to be excluded from the transaction price at June 30, 2021. The Company will recognize revenue related to the Collaboration Program Services as the performance obligation is satisfied using an input method to measure progress. The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the research service. During the three and six months ended June 30, 2021, the Company recognized revenue under the AbbVie Collaboration Agreement of approximately $79 and $1,076, respectively. Revenue for the three and six months ended June 30, 2021 reflects events and conditions that occurred during that period that increased the number of hours estimated to be required to complete the services under the AbbVie Collaboration Agreement. These increased estimated efforts resulted in less progress occurring relative to the increased estimate of total projected hours to complete the research services (and thus limited revenue recognized) during the three and six months ended June 30, 2021 and compared to the amount of revenue recognized in the comparable periods. During the three and six months ended June 30, 2020, the Company recognized revenue under the AbbVie Collaboration Agreement of approximately $4,833 and $13,949, respectively. As of June 30, 2021 and December 31, 2020, there was $7,267 and $8,343 of deferred revenue related to the AbbVie Collaboration Agreement, which is classified as current on the unaudited condensed consolidated balance sheet. Dermelix Collaboration Agreement On February 17, 2019, Exicure entered into a License and Development Agreement with Dermelix (the “Dermelix Collaboration Agreement.”) Under the terms of the Dermelix Collaboration Agreement, Exicure received an upfront payment of $1,000, to be applied against the initial $1,000 of the Company’s development expenses. The Company initially recorded the upfront payment of $1,000 as deferred revenue related to its wholly unsatisfied performance obligation and reduced this balance to zero during 2019 by recognizing revenue as services were provided. The Company recognized no revenue under the Dermelix Collaboration Agreement during the three and six months ended June 30, 2021. The Company recognized $14 and $81 of revenue during the three months ended June 30, 2020 which reflected reimbursement by Dermelix for additional costs incurred by Exicure for early stage development costs beyond the initial $1,000 upfront payment.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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