Contract Manufacturing Agreements

9 Months Ended

Sep. 30, 2019

Long-term Commitment (Excluding Unconditional Purchase Obligation) [Abstract]

Contract Manufacturing Agreements

Contract Manufacturing Agreements

Lonza Manufacturing Services Agreement

In August 2017, we executed a Manufacturing Services Agreement with Lonza to develop our Gen 2 manufacturing process for Andexxa bulk drug substance. The manufacturing commitments included therein were contingent upon marketing approval by either the FDA or the EMA of Andexxa manufactured under the Gen 2 process and will remain in effect for a period of ten years. Additionally, the agreement provides Lonza with two separate rights to purchase shares of our common stock at a purchase price of $1.00 per share, contingent upon certain events. The first purchase right was earned by Lonza in the first quarter of 2019 upon the approval of the Gen 2 process and the commencement of process transfer activities to an additional new facility. The second purchase right will be earned by Lonza upon the approval of the drug substance manufactured at the new facility and the number of shares will be determined based on the achievement of specified performance metrics at the new facility. The number of shares subject to each of the first and the second purchase rights will be capped at the lesser of either: (1) the number of shares with an aggregate market value of $15.0 million based on a 20 day trailing market value average from the date such purchase right is earned by Lonza, or (2) 500,000 shares.

The first purchase right was earned by Lonza during the quarter ended March 31, 2019. The FDA approved Andexxa Gen 2 on December 31, 2018 and, in February 2019, Lonza commenced process transfer activities to an additional new facility. During the first quarter of 2019, Lonza exercised their right to purchase 500,000 shares of our common stock at $1.00 per share. We marked to market the liability-classified award up to the settlement date using the valuation assumptions described in Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements and recognized $5.8 million of non-employee stock based compensation expense classified as research and development expense during the nine months ended September 30, 2019.

As of September 30, 2019, we have not recognized any expense for the second tranche award because the related performance conditions were not considered probable.