Research and Development Collaborations

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Research and Development Collaborations

Research and Development Collaborations

(a)Genentech

In June 2003, the Company licensed its proprietary Hedgehog pathway antagonist technologies to Genentech for human therapeutic use. The primary focus of the collaborative research plan has been to develop molecules that inhibit the Hedgehog pathway for the treatment of various cancers. The collaboration is currently focused on the development of Erivedge, which is being commercialized by Genentech in the U.S. and by Genentech’s parent company, Roche, in several other countries for the treatment of advanced BCC. Pursuant to the agreement, the Company is eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, the Company has received $59.0 million in cash milestone payments as of September 30, 2022.

In addition to these payments and pursuant to the collaboration agreement, the Company is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5%. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances.

The Company recognized $2.8 million and $3.1 million in royalty revenue under the Genentech collaboration during the three months ended September 30, 2022 and 2021, respectively. The Company recognized $7.4 million and $7.6 million in royalty revenue under the Genentech collaboration during the nine months ended September 30, 2022 and 2021, respectively. The Company also recorded cost of royalty revenues within the costs and expenses section of its Condensed Consolidated Statements of Operations and Comprehensive Loss of $0.1 million during the three months ended September 30, 2022 and $0.2 million during the three months ended September 30, 2021. The Company recorded $0.2 million of costs of royalty revenues during the nine months ended September 30, 2022 and $0.4 million during the nine months ended September 30, 2021. Cost of royalty revenues is comprised of amounts due to third-party university patent licensors in connection with Genentech and Roche's Erivedge net sales.

The Company recorded receivables from Genentech under this collaboration for Erivedge royalties earned during the period. The receivable recorded in the Company's current assets section of its Condensed Consolidated Balance Sheets amounted to $2.9 million as of September 30, 2022 and $3.2 million as of December 31, 2021.

As previously discussed in Note 8, Liability Related to the Sale of Future Royalties, a substantial portion of royalty revenues received from Genentech on net sales of Erivedge will be paid to the Purchasers pursuant to the Oberland Purchase Agreement.

(b)Aurigene

In January 2015, the Company entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets, which was first amended in September 2016. Under the collaboration agreement, Aurigene granted the Company an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene. In February 2020, the collaboration agreement was further amended whereby Aurigene received rights to develop and commercialize CA-170 in Asia in addition to its existing rights in India and Russia, and the Company became entitled to receive royalty payments on potential future sales of CA-170 in Asia at percentage rates ranging from the high single digits up to 10% subject to specified reductions.

As of September 30, 2022, the Company has exercised its option to license the following four programs under the collaboration:

1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is emavusertib (CA-4948), an orally available small molecule inhibitor of IRAK4.

2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.

3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.

4.In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.

For each of the licensed programs (as described above) the Company is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the U.S., specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.

For each of the IRAK4, PD1/VISTA, and PD1/TIM3 programs, and the fourth immuno-oncology program: the Company has remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any. The Company has not recorded a liability for the aforementioned payments given the achievement of specified regulatory approval and commercial sales milestones is not probable as of the balance sheet date. The Company is further obligated to pay Aurigene tiered royalties on the Company's and its affiliates' annual net sales of products at percentage rates ranging from the high single digits up to 10%, subject to specified reductions. In addition, the Company agreed to make certain payments to Aurigene upon its entry into sublicense agreements on any program(s).

In addition to the collaboration agreement, the Company has entered into a master development and manufacturing agreement with Aurigene for the supply of drug substance and drug product. Under this agreement, the Company incurred less than $0.1 million in research and development expense during the three and nine months ended September 30, 2022. The Company incurred $0.5 million in research and development expense during the three months ended September 30, 2021 and $1.2 million during the nine months ended September 30, 2021 associated with this agreement. The Company recorded no prepaid expenses and less than $0.1 million in accrued expenses associated with this agreement as of September 30, 2022. The Company recorded no prepaid expenses and no accrued expenses associated with this agreement as of December 31, 2021.

(c)ImmuNext

In January 2020, the Company entered into an option and license agreement with ImmuNext (the “ImmuNext Agreement”). Under the terms of the ImmuNext Agreement, the Company agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1 clinical trial of CI-8993. In exchange, ImmuNext granted the Company an exclusive option, exercisable until the earlier of January 2024 or (b) 90 days after database lock for the first Phase 1 trial in which the endpoints are satisfied (the “Option Period”), to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.

During the Option Period, the Company is obligated to pay a semi-annual fee of $0.4 million to ImmuNext and will conduct the Phase 1 trial, and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1 trial. Additionally, the Company will assign to ImmuNext all right, title and interest in and to, inventions made by the Company alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement and any patent rights covering those inventions. If the option is exercised, ImmuNext will assign to the Company (i) all such inventions that were made solely by the Company and any patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by the Company and ImmuNext and patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period, except for any of those inventions that relates to certain compounds to which ImmuNext has retained exclusive rights. In addition, the Company has agreed to reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.

If the Company elects to exercise the option, the Company has agreed to pay to ImmuNext an option exercise fee of $20.0 million. ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from the Company. ImmuNext is also eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis,

at percentage rates ranging from high single digits to low double digits, subject to specified adjustments. In addition, the Company has agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by the Company or its affiliates.