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Collaboration and License Agreements
6 Months Ended
Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Collaboration and License Agreements

7.     Collaboration and License Agreements

Collaborative Arrangements

A collaborative arrangement is a contractual arrangement that involves a joint operating activity. These arrangements involve two or more parties who are (i) active participants in the activity, and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.

We have entered into the following collaborative arrangements with ImmunityBio, Inc., ImmunityBio, and/or its subsidiaries as described below. ImmunityBio is a related party, as it is an affiliate of NantWorks (Note 9).

Joint Development Agreement for COVID‑19

In May 2020, we entered into a binding term sheet with ImmunityBio for the joint development, manufacturing and marketing of a vaccine and various therapeutics for COVID‑19, or the Joint COVID-19 Collaboration, pursuant to which we and ImmunityBio will share equally in all costs relating to developing, manufacturing, and marketing of the product candidates globally, starting from and after the effective date of the definitive agreement, and the global net profits from the collaboration products will be shared 60%/40% in favor of the party contributing the product on which the sales are based. All net profits from sales of any combined collaboration products will be shared equally as further outlined below.

We are negotiating and finalizing a definitive agreement related to this term sheet and expect to complete this definitive agreement by late August 2020, and our current plans and operations assume that this definitive agreement will be executed to continue the Joint COVID‑19 Collaboration. Until the definitive agreement is finalized, any investments made by each entity are the responsibility of the contributing party. As of June 30, 2020, we have incurred operating expenses of $5.4 million, which includes allocated personnel costs, laboratory supplies, and other expenses related to readying and operating our GMP laboratory manufacturing facilities in El Segundo and Culver City, California, which has been included in research and development expense on the condensed consolidated statements of operations. These facilities and related laboratory equipment have been repurposed for the manufacture of two of the collaboration product candidates. In addition, we also incurred capital expenditures of $2.3 million related to laboratory equipment in connection with the Joint COVID-19 Collaboration, which has been included in property, plant and equipment on the condensed consolidated balance sheets. As of June 30, 2020, we have committed operating and capital expenditures of $4.5 million that we will incur in future periods. The incurred and committed expenditures are primarily associated with the company’s previously ongoing QUILT-COVID-19-MSC product candidate and ImmunityBio’s human adenovirus, or hAd5, vaccine candidate.

In this Joint COVID‑19 Collaboration, we contributed our QUILT‑COVID‑19‑MSC product candidate as a therapeutic candidate for patients with severe symptoms of COVID‑19, to modulate the immune system’s excessive response to COVID‑19 infection, thereby potentially reducing the debilitating and sometimes fatal effects of the disease; and our QUILT‑ceNK‑COVID‑19 product candidate as a therapeutic candidate for moderate-risk, hospitalized adults with moderate to severe symptoms of COVID‑19. ImmunityBio contributed its IL‑15 product candidate as a therapeutic candidate for patients with mild symptoms of COVID-19, for use prior to the onset of severe disease by potentially activating natural killer cells to mitigate viral replication; and human adenovirus, or hAd5, as a vaccine candidate for those individuals in an uninfected state, to prevent the onset of COVID‑19.

In addition to the above programs contributed by each party, we will contribute our manufacturing capabilities in the form of facilities, equipment, personnel and related know-how, including our GMP manufacturing facility in El Segundo, California, and ImmunityBio will contribute certain manufacturing equipment and related technology and know-how. To date, NantKwest and ImmunityBio have each prepared a GMP-ready manufacturing plant for COVID‑19 vaccine production, which we and ImmunityBio expect will have a combined estimated capacity to produce sufficient clinical supply for our phase I and II studies by year-end 2020. We have prepared one of our GMP manufacturing facilities previously used to manufacture product for our oncology trials to manufacture and produce the vaccine candidate and we have identified a new, well-equipped location to manufacture and produce clinical products for our oncology trials, which will result in additional facilities and related facility operating costs in future periods. We have established a clinical product inventory to continue to supply clinical product for our ongoing oncology trials. In addition, we have repurposed some of our manufacturing facility in Culver City, California, and personnel to support our QUILT‑COVID‑19‑MSC program and have repurposed some of our personnel overseeing quality of our oncology programs to support the Joint COVID‑19 Collaboration. We also expect to hire additional staff to support the Joint COVID‑19 Collaboration. We believe the Joint COVID‑19 Collaboration will have no material impact on our current oncology efforts and trials and we expect that we will be able to continue to manufacture adequate product to continue our ongoing oncology trials.

Additionally, with the sole exception of IL‑15 manufacturing, we will have primary responsibility for manufacturing and supplying the COVID‑19 collaboration products for clinical and commercial purposes. We will also have the primary responsibility in the U.S. for sales and marketing of the COVID‑19 collaboration products and the parties will share responsibility in the rest of the world for sales and marketing for the COVID‑19 collaboration products.

The Joint COVID‑19 Collaboration binding term sheet outlines how development costs will be shared, how profits will be apportioned for any successfully marketed products, and the structure of the shared governance of the joint effort. Under the terms of the collaboration, we and ImmunityBio will share equally in all costs relating to developing, manufacturing, and marketing of the product candidates globally, starting from and after the effective date of the definitive agreement, and the global net profits from the collaboration products will be shared 60%/40% in favor of the party contributing the product on which the sales are based. All net profits from sales of combined COVID‑19 collaboration products will be shared equally. The Joint COVID‑19 Collaboration will be supervised by joint committees, comprised of an equal number of representatives from both companies. The term of the agreement will be five years and it is renewable for an additional five year period upon mutual agreement. Each party will also have a right to terminate in the event of material breach, bankruptcy, or insolvency. If the definitive agreement is not entered into by both parties on or prior to August 21, 2020, then either party may thereafter terminate the term sheet upon five business days’ notice.

Cost Sharing Agreement

In January 2020, we entered into a Cost Allocation Agreement with ImmunityBio and its subsidiaries. Under the Cost Allocation Agreement, which became effective on October 1, 2019, and related work order, the parties agreed to conduct a joint study for the clinical research trial being conducted pursuant to the protocol titled QUILT 3.063: A phase 2 study of combination therapy with an IL‑15 superagonist (N‑803), off-the-shelf CD16‑targeted natural killer cells (haNK), and avelumab without cytotoxic chemotherapy in subjects with Merkel Cell Carcinoma (MCC) that has progressed on or after treatment with a checkpoint inhibitor. The ImmunityBio study drug included in the joint study is ImmunityBio’s proprietary IL‑15 superagonist known as N‑803 and our study drug is our proprietary “off-the-shelf” CD16-targeted natural killer cell therapy known as haNK.

We will act as the sponsor of this joint study for purposes of regulatory matters, including submissions, correspondence, and communications. Additionally, we are designated as the contracting party to execute agreements with third and related parties relating to the joint study. We and ImmunityBio will split certain joint study costs equally in accordance with the terms of the Cost Allocation Agreement and related work order. Shared joint study costs include cost related to conducting the joint study development activities, such as personnel related costs, as well as all costs associated with regulatory matters. Costs and expenses incurred in connection with the development, manufacturing, supply, delivery, and pre-patient administration dosing mechanism of each party’s study drug, are excluded from the shared joint study costs.

Under the Cost Allocation Agreement, each of ImmunityBio and the company will receive exclusive rights to any new intellectual property developed that relates solely to its respective study drug, and the parties will have joint co-equal rights in any other intellectual property. The Cost Allocation Agreement expires on June 22, 2022 with the option to renew for additional successive one-year terms, but work orders for any joint studies still in process at the time of termination will continue until the applicable study is completed.

During the three and six months ended June 30, 2020, we incurred $29,700 and $0.1 million, respectively, in costs related to the joint study that are subject to joint cost sharing under the Cost Allocation Agreement which have been recorded as a reduction in research and development expense on the condensed consolidated statements of operations. At June 30, 2020, we have recorded a receivable of $29,700 from ImmunityBio related to ImmunityBio’s share of joint study costs under the Cost Allocation Agreement.

Exclusive Co-Development Agreement

In August 2016, we entered into an exclusive Co‑Development Agreement, or the Co‑Development Agreement, with Altor BioScience, LLC, or Altor. Altor is a related party, as it is a wholly owned subsidiary of ImmunityBio (Note 9). Under the Co‑Development Agreement, the parties agreed to exclusively collaborate on the development of certain therapeutic applications combining our proprietary NK cells with Altor's N‑801 and/or N‑803 products with respect to certain technologies and intellectual property rights as may be agreed between the parties for the purpose of jointly developing therapeutic applications of certain effector cell lines.

We are the lead developer for each product developed by the parties pursuant to the Co‑Development Agreement unless otherwise agreed to under a given project plan. Under the terms of the Co‑Development Agreement, both parties granted a co-exclusive, royalty free, fully paid-up, worldwide license, with the right to sublicense (only to a third-party contractor assisting with research and development activities under this Co‑Development Agreement and subject to prior consent, not to be unreasonably withheld), under the intellectual property, or IP, including the parties interest in the joint IP, solely to conduct any development activities agreed to by the steering committee as set forth in any development plan. Unless otherwise mutually agreed by the parties in the development plan for a project, we are responsible for all costs and expenses incurred by either party related to conducting clinical trials and other activities under each development program, including costs associated with patient enrollment, materials and supplies, third-party staffing and regulatory filings. Altor supplies free of charge, sufficient amounts of Altor products for all pre-clinical requirements and certain clinical requirements for up to 400 patients in phase I and/or phase II clinical trials, as required under the development plan for a project per the Co‑Development Agreement.

Each company owns an undivided interest in and to all rights, title and interest in and to the joint product rights. The Co‑Development Agreement expires upon the fifth anniversary of the effective date. We have dosed patients with N‑803, an IL‑15 superagonist, in several phase Ib/II trials. No charges for supplies by Altor were incurred in association with the above trials during the three and six months ended June 30, 2020 and 2019.