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Related-Party Transactions
12 Months Ended
Dec. 31, 2016
Related Party Transactions [Abstract]  
Related-Party Transactions

Note 16. Related-Party Transactions

Merck Non-Exclusive License Agreement

In June 2012, the Company entered into a non-exclusive license agreement with Merck Sharp & Dohme Cor. (“Merck”) whereby the Company agreed to sublicense certain intellectual property related to breast cancer biomarkers with the intent to develop, manufacture and commercialize a diagnostic test utilizing this technology. Merck is an affiliate of Merck Capital Ventures, LLC, which had a 9.9% and 11.1% beneficial ownership in the Company’s common stock as of December 31, 2016 and 2015, respectively. A member of the Company’s Board of Directors, who resigned in May 2015, was an affiliate of Merck. The Company agreed to pay Merck certain contingent milestone payments between $50,000 and $1,000,000 and future royalties of 3%-6% of sales derived from such products developed that utilize the licensed technology. No amounts have been accrued or paid under this agreement as the Company has not achieved any of the milestone targets or developed any products that utilize the licensed technology.

QIAGEN Agreement

In November 2016, the Company entered a Master Assay Development, Commercialization and Manufacturing Agreement (“Governing Agreement”) with QIAGEN Manchester Limited (“QML”), a wholly owned subsidiary of QIAGEN N.V. The Governing Agreement creates a framework for QMS and the Company to combine their technological and commercial strengths to offer biopharmaceutical companies a complete NGS-based solution for the development, manufacture and commercialization of companion diagnostic assays. Under the Governing Agreement, the parties will jointly seek companion diagnostic programs with biopharmaceutical companies, QML will contract with interested biopharmaceutical companies for specified projects (each a “Project”), and QML and the Company will enter into a statement of work under the Governing Agreement, which sets forth the rights and obligations of QML and the Company with respect to each Project.

The parties’ relationship under the Governing Agreement is exclusive in the oncology field. Such exclusivity in the oncology field may be lost and become non-exclusive if certain performance targets are not met. Projects may be undertaken in non-oncology fields at each party’s discretion on a non-exclusive basis.  

QML and the Company will share net profits under each statement of work, based on whether development of particular assays under a statement of work are primarily based on HTG or QML intellectual property. Each statement of work will provide additional financial terms for the corresponding Project, which terms will depend on the respective development and/or commercialization activities of the parties.

The Governing Agreement will continue for a five-year term. However, either party may terminate the agreement upon (i) the other party’s uncured material breach, bankruptcy or insolvency, (ii) specified events affecting all statements of work, or (iii) a change of control by either party. In the event a party terminates the Governing Agreement for its own change of control, a $2.0 million termination payment will be payable to the non-terminating party.

Pursuant to a stock purchase agreement, entered concurrent with the Governing Agreement, QIAGEN North American Holdings, Inc. (“QNAH”), another wholly owned subsidiary of QIAGEN N.V., purchased 833,333 shares of the Company’s common stock on November 17, 2016 at $2.40 per share, for a total purchase price of $2.0 million. QNAH agreed to purchase up to an additional $2.0 million of the Company’s common stock (subject to any applicable limitations under the rules of the NASDAQ Stock Market) upon the sale by the Company of at least $12.0 million of common or preferred stock in a financing transaction that occurs prior to May 16, 2017, or such other mutually agreeable date (a “Qualified Financing”). The price per share payable by QNAH in a second tranche closing will be equal to the price per share at which shares are sold in a Qualified Financing.

The purchase price for the shares of common stock purchased by QNAH in the first tranche closing reflected the parties’ agreement as to the fair market value of the shares. However, the portion of the purchase price per share that exceeded the most recently reported closing price of the Company’s common stock, or $175,000 in the aggregate, was attributed to the Governing Agreement and recorded as deferred revenue. This deferred revenue is being recognized on a straight-line basis over the Governing Agreement’s five-year term. For the year ended December 31, 2016, the Company recognized $4,375 of this consideration as revenue. The price QNAH will pay for the shares of the Company’s common stock to be purchased in the second tranche closing, if any, will be determined by the price paid by the other investors in the Qualified Financing, and, as such, is expected to represent fair value. Therefore, no value has been given to this financial instrument in the Company’s financial statements as of December 31, 2016.