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Collaboration Agreements
12 Months Ended
Dec. 31, 2021
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Collaboration Agreements

(10)

Collaboration Agreements

 

Roche Collaboration

 

In June 2021, the Company entered into a Pilot Collaboration and Option Agreement (the Roche Collaboration and Option Agreement) with F. Hoffmann-La Roche Ltd (Roche Basel) and Hoffmann-La Roche Inc. (Roche US, and together with Roche Basel, Roche). Under the terms of the Roche Collaboration and Option Agreement, the Company and Roche will seek to collaborate to research and pre-clinically develop Synthetic Biotic medicines for addressing an undisclosed novel target for the treatment of inflammatory bowel disease (the Product Candidate).

 

Pursuant to the Roche Collaboration and Option Agreement, Roche agreed to pay the Company, an upfront, nonrefundable technology access fee of $1.0 million, which the Company received in July 2021. In addition, the Company is eligible to receive up to $5.0 million in milestone payments upon the achievement of certain success criteria. Following the research period, Roche holds an exclusive option right (the Option) to negotiate a definitive Collaboration and License Agreement (CLA) for further development and commercialization of the Product Candidate.

 

Pursuant to the Roche Collaboration and Option Agreement, during the term of such agreement, each party has granted to the other party a non-exclusive, non-transferrable, non-sublicensable, royalty-free right and license to certain intellectual property and know-how controlled by such party, solely as necessary for the party to perform its obligations under the Roche Collaboration and Option Agreement. The parties will establish a Joint Research Committee (JRC) to oversee and manage the execution of the underlying study plan for the Roche Collaboration and Option Agreement.

 

The Roche Collaboration and Option Agreement includes various representations, warranties, covenants, indemnities, and other customary provisions. Roche may terminate the Roche Collaboration and Option Agreement without cause immediately upon written notice where certain success criteria have been met for parts of the study plan, or upon ninety (90) days’ prior written notice to the Company. Either party may terminate the Roche Collaboration and Option Agreement in the event of an uncured material breach of the other party.

 

The research and development will be performed by the Company for approximately 12 to 18 months according to three phases of research as defined in the research plan. The Company is eligible to receive milestone payments from Roche upon the achievement of success criteria for respective milestones.

 

The Company assessed this arrangement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that the contract counterparty, Roche, is a customer. The Company identified the following material promises made by the Company to Roche at the outset of the arrangement: (1) a non-exclusive royalty-free research and development license; (2) research and development services for pre-clinical activities under the research plan; (3) implicit renewal options created by Roche’s decision not to terminate the contract; (4) the Company’s participation on the JRC; and (5) an exclusive right to negotiate a definitive CLA for further development and commercialization of the Product Candidate. The Company determined that the license and research and development activities were not distinct from one another, as the license has limited value without the performance of research and development activities. The Company’s participation on the JRC was determined to be quantitatively and qualitatively immaterial and therefore is excluded from performance obligations. As such, the Company determined that the promises associated with the license and research and development services should be combined into a single performance obligation.

 

The Company next evaluated the milestone payments relating to the three phases of research as defined in the research plan and the option to negotiate and enter into the CLA, to determine whether they provide Roche with any material rights. The Company concluded that the option was not issued at a significant and incremental discount, and therefore do not provide material rights. As such, they were excluded as performance obligations at the outset of the arrangement. If Roche elects to exercise the options, the additional consideration will be added to the transaction price and allocated to the resulting performance obligations.

 

Based on these assessments, the Company identified one performance obligation at the outset of the Roche Collaboration and Option Agreement, which consists of: (1) the non-exclusive license and (2) the research and development activities.

 

At the outset of the arrangement, the transaction price included only the $1.0 million up-front consideration received and which was allocated to the single performance obligation. The milestone payments that may be received are excluded from the transaction price until each respective milestone has been achieved. The Company will reevaluate the transaction price at the end of each

reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

 

In June 2021, the Company began work on the research and development services for the first phase of the research plan and the $1.0 million upfront payment is being recognized over the time of the first phase of the research plan. In September 2021, the Company completed the research and development services for the first phase of the research plan and achieved a milestone payment of $1.0 million, which was paid by Roche in November 2021. At this time, the milestone payment was allocated to a new performance obligation consisting of the underlying research and development services to be performed over the second phase of the research plan. Upon the Company’s completion of these activities and subject to Roche’s termination right, the additional milestone payments based on the achievement of specific events outlined in the Roche Collaboration and Option Agreement will become due.

 

Revenue associated with performance obligations under the Roche Collaboration and Option Agreement are recognized as the research and development services are provided using an input method, according to the full-time equivalents incurred. The transfer of control occurs over time and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation. The amounts received that have not yet been recognized as revenue are recorded in deferred revenue on the Company’s consolidated balance sheet.

 

The Company recognized $1.5 million for the year ended December 31, 2021 as collaboration revenue in the Company’s consolidated statements of operations and comprehensive loss. Deferred revenue from the collaboration amounted to $0.5 million as of December 31, 2021, all of which is included in current liabilities.

 

Ginkgo Collaboration

 

In 2017, the Company established a technology collaboration with Ginkgo. In June 2019, in connection with the issuance to Ginkgo of an aggregate of 6,340,771 shares of common stock and Pre-Funded Warrants to purchase an aggregate of 2,548,117 common stock (See Note 8), the Company expanded its collaboration and entered into an agreement with Ginkgo for the research and development of engineered microbial therapeutic products. Under the 2019 expanded agreement, the Company made a prepayment to Ginkgo of $30.0 million for its foundry services that will be provided to the Company over an initial term of five years. The prepayment of foundry services is recorded in prepaid expenses and other current assets and prepaid research and development, net of current portion on the December 31, 2020 consolidated balance sheet. At December 31, 2021, the Company had remaining balances of $1.9 million and $9.3 million of current and non-current pre-paid research and development costs related to this transaction, respectively. Upon the expiration of such initial term and, if applicable, an additional period, any portion of the prepayment that has not been used to purchase services from Ginkgo will be retained by Ginkgo.

 

AbbVie Collaboration Agreement

 

In May 2020, we announced the termination of our collaboration with AbbVie to develop Synthetic Biotic medicines for the treatment of types of IBD, including Crohn’s disease and ulcerative colitis. Upon termination, we regained all rights to develop these and new IBD Synthetic Biotic medicines for all effectors targeting IBD. This allows us to fully leverage our expertise in strain engineering, quantitative biology, regulatory, and manufacturing to expand our wholly owned GI-based program portfolio to include IBD. We further regained the rights to partner these IBD programs.

The Company recognized the remainder of the deferred revenue when the agreement was terminated in 2020. For the year ended December 31, 2020, $0.5 million was recognized for services performed and payments received under the AbbVie collaboration.