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Commitments and Contingencies
12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

7. Commitments and Contingencies

 

Eversana Agreement

 

On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for the potential commercialization of lenzilumab.

 

Under the Eversana Agreement, Eversana will provide the Company with services in connection with the potential launch of lenzilumab. Eversana services during 2021 comprised marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.

 

On September 21, 2021, the Company notified Eversana that due to the Emergency Use Authorization (“EUA”) status in the US, it was terminating the initial statement of work related to commercialization support of lenzilumab for the treatment of COVID-19 in the United States. Eversana is disputing the termination notice and has requested payment of approximately $4.5 million it has asserted the Company owes for services rendered from April 1, 2021 to September 30, 2021. The Company has disputed this assertion and Eversana has filed for arbitration to resolve this dispute. See Note 11 below for more information on this dispute.

 

Manufacturing Agreements

 

The Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to manufacture bulk drug substance (“BDS”) and to provide fill/finish services or drug product (“DP”) for lenzilumab for a potential launch of lenzilumab in anticipation of an EUA or CMA. The Company has also entered into agreements for packaging of the drug. These agreements include upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and payments for technology transfer. The Company has amended, and in some cases canceled, certain of these agreements. In addition, the Company has sought to mitigate its financial commitments by ceasing additional manufacturing of lenzilumab in connection with its realignment plan, and more recently, it has settled its disputes with two of its CMOs. See Note 11 below for more information on these settlement agreements. As of December 31, 2022, the Company estimates that its commitments remaining to be incurred under its CMO agreements are approximately $2.6 million for 2023 with no significant commitments thereafter.

 

In connection with the Company’s realignment to deemphasize the deployment of certain resources for the development of lenzilumab for COVID-19, with the exception of one lenzilumab batch in process at one of its CMOs, Catalent Pharma Solutions, LLC (“Catalent”), the Company has discontinued the manufacturing of lenzilumab and is consolidating the remaining inventory of lenzilumab bulk drug substance and drug product in a central location for potential future use. The Company believes it has sufficient drug product for its currently planned clinical trials. If the Company is unable to obtain regulatory approval for lenzilumab prior to the expiration of the shelf life at that time, the remaining inventory will not be available for commercial use.

 

There is significant drug product that was in production at one of the Company’s other CMOs, Thermo Fisher Scientific, Inc. (“Thermo”), for which material has not yet been released by the Company because the batches produced are out of specification. Nonetheless, Thermo has notified the Company that they have stopped production and have recently filed a lawsuit against the Company in Delaware Superior Court for $25.9 million. The Company has filed a countersuit against Thermo for breach of contract seeking more than $37.5 million. The Company denies Thermo’s claims and assertions and intends to vigorously defend against them. See Note 11 below for more information on this dispute.

 

Operating Leases

 

On September 1, 2021, the Company entered into a one-year lease for a small office a building in Burlingame, California for $1,200 per month which expired on August 31, 2022. On September 1, 2022, the Company entered into a new one-year lease with one-month free rent for a small office in the same building in Burlingame, California for $1,200 per month which will expire on September 30, 2023. On February 3, 2022, the Company entered into an eighteen-month lease for an office in Short Hills, New Jersey for approximately $300 per month which will expire on August 31, 2023. Management determined the lease term for each of the leases to be less than 12 months, or immaterial, including renewals, and therefore did not record a right-of-use asset and corresponding liability under the short-term lease recognition exemption.

 

Lease costs for the years ended December 31, 2022 and 2021 totaled approximately $20 thousand and $14 thousand, respectively, and are included in the Consolidated Statements of Operations. As of December 31, 2022, the Company had future minimum lease payments of approximately $15 thousand.

 

Indemnification

 

The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented.