Related-Party Transactions

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Related-Party Transactions

Note 14. Related Party Transactions

QIAGEN Agreement

In June 2017, the Company entered into the first statement of work (“SOW One”) under its Master Assay Development, Commercialization and Manufacturing Agreement (“Governing Agreement”) with QIAGEN Manchester Limited (“QML”), a wholly owned subsidiary of QIAGEN, N.V. QIAGEN North American Holdings, Inc., a wholly owned subsidiary of QIAGEN N.V., is a greater than 5% holder of the Company’s outstanding common stock.

SOW One addresses the initial activities of the Company and QML in support of the development and potential commercialization of a next generation sequencing-based companion diagnostic assay (the “PDP Assay”) that is the subject of a sponsor project agreement between QML and a biopharmaceutical company (“Pharma One”). The parties expect development activities for the PDP Assay to be the subject of more than one work plan under the sponsor project agreement and a corresponding number of statements of work under the Governing Agreement.

The Company has determined that SOW One is a collaborative arrangement under ASC 808 and a multiple-element arrangement under ASC 605-25. After reviewing the deliverables under the arrangement, the Company concluded that all of the fixed and determinable contract consideration should be allocated to the development services to be performed by the Company.

QML will pay the Company a monthly fee for development work performed by Company and its subcontractors (collectively, the “Monthly Fee”). The Monthly Fee is not contingent upon successful acceptance of project milestones by Pharma One; therefore, the Monthly Fee will be recognized as the respective payment amount becomes fixed or determinable and collectability from QML is reasonably assured. The Company and QML also will share any net profits resulting from performance of the development work as determined pursuant to the Governing Agreement. Such profit sharing payment(s) is deemed to be fixed or determinable upon completion of SOW One deliverables, acceptance of corresponding deliverables by Pharma One, and the calculation of net profit is mutually agreed by QML and the Company.

Revenue of $277,400 has been included in service revenue in the condensed statements of operations for the three and six months ended June 30, 2017 relating to SOW One Monthly Fees, and in accounts receivables in the condensed balance sheets as of June 30, 2017, and no profit sharing payments have been received or recognized as of June 30, 2017. Costs relating to SOW One of $222,200 have been included in research and development expense in the condensed statements of operations for the three and six months ended June 30, 2017. No costs or revenue relating to SOW One were included in the condensed statements of operations for the three and six months ended June 30, 2016 as SOW One was not established until June 2017.

SOW One will expire when all activities and deliverables have been completed by the respective responsible party and all payments from QML to the Company have been delivered, including any required profit sharing, unless terminated earlier in accordance with the terms of the Governing Agreement.

Contemporaneous with entry into SOW One, the Governing Agreement was amended to provide that neither the Company nor QML may terminate SOW One or the Governing Agreement to the extent it relates to SOW One in the event of a change of control.

Investor Rights Agreement

Effective June 2, 2017, the Company agreed with Novo Holdings A/S, formerly known as Novo A/S, a greater than 5% holder of the Company’s outstanding common stock, that notwithstanding the termination provisions of the Amended and Restated Investor Rights Agreement (“IRA”) dated May 11, 2015 between the Company and certain stockholders named therein, Novo Holdings A/S would be entitled to demand registration rights set forth in the IRA until the earlier of (a) May 11, 2018 and (b) such time as all registrable securities held by the holder may be sold under Rule 144 during any 90-day period.