Liability Related to the Sale of Future Royalties

6 Months Ended

Jun. 30, 2025

In March 2019, the Company and Curis Royalty entered into the Oberland Purchase Agreement with the Purchasers and Agent. The Company sold to the Purchasers a substantial portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. As upfront consideration for the purchase of the royalty rights, the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses.

The Oberland Purchase Agreement provides that after the occurrence of an event of default as defined under the security agreement by Curis Royalty, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase a portion of certain royalty and royalty related payments, excluding a portion of non-U.S. royalties retained by Curis Royalty (referred to as the “Purchased Receivables”), at a price (referred to as the “Put/Call Price”), equal to 250% of the sum of the upfront purchase price and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables. The Company concluded that this put option is an embedded derivative that requires bifurcation from the deferred royalty obligation and evaluates the fair value of the put option each reporting period. The estimated fair value of the put option is immaterial as of June 30, 2025 and December 31, 2024. Additionally, Curis Royalty shall have the option at any time to repurchase the Purchased Receivables at the Put/Call Price as of the date of such repurchase. No events of default have occurred as of June 30, 2025.

As a result of the obligation to pay future royalties to the Purchasers, the Company recorded the proceeds as a liability on its Condensed Consolidated Balance Sheets. It accounts for the liability and interest expense using the interest method over the expected life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company’s estimate of the interest rate under the Oberland Purchase Agreement is based on the amount of royalty payments expected to be received by the Purchasers over the life of the Oberland Purchase Agreement. The projected amount of royalty payments expected to be paid to the Purchasers involves the use of significant estimates and assumptions with respect to the revenue growth rate in the Company’s projections of sales of Erivedge. The Company periodically assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the current estimates or the timing of such payments is materially different than the original estimates, the Company prospectively adjusts the amortization of the liability.

The Company determined the fair value of the liability related to the sale of future royalties at the time of the Oberland Purchase Agreement to be $65.0 million, with a current effective annual imputed interest rate of 6.1%. The Company incurred $0.6 million of transaction costs in connection with the Oberland Purchase Agreement. These transaction costs are being amortized to imputed interest expense over the estimated term of the Oberland Purchase Agreement. The carrying value of the liability related to the sale of future royalties approximates fair value as of June 30, 2025 and is based on the Company’s current estimates of future royalties expected to be paid to the Purchasers over the life of the arrangement, which are considered Level 3 inputs.

The following table shows the activity with respect to the liability related to the sale of future royalties during the six months ended June 30, 2025.


(in thousands)
Carrying value of liability related to the sale of future royalties at December 31, 2024	$	34,174
Imputed interest expense	956
Other	31
Less: payments to the Purchasers	(5,004)
Carrying value of liability related to the sale of future royalties at June 30, 2025	30,157
Less current portion	7,353
Carrying value of liability related to the sale of future royalties at June 30, 2025, net of current portion	$	22,804