License and patent agreements

12 Months Ended

Dec. 31, 2019

14. License and patent agreements

The Company has an exclusive license agreement with the University of Washington, or UW, under which UW (on behalf of itself and Stanford University) granted the Company an exclusive worldwide license under certain patent rights, to make, have made, use, offer to sell, sell, offer to lease or lease, import, export or otherwise offer to dispose of licensed products in all fields of use, and a nonexclusive worldwide license to use certain

know-how.

The foregoing licenses are sublicensable by the Company without UW’s consent, subject to certain limited conditions.

As consideration for the licensed rights, the Former Neoleukin issued 536,813 shares of common stock to UW. These shares were exchanged for 188,974 shares of common stock of the Company and 4,197 shares of

non-voting

convertible preferred stock on the completion of the Merger. Pursuant to the agreement, the Company also granted to UW an assignable right to participate in any future sale of equity securities by the Company, subject to certain exclusions.

Furthermore, the Company is required to pay; (i) an annual maintenance fee starting in January 2022 (but excluding any year in which minimum annual royalties are paid); (ii) up to $0.9 million in combined development and regulatory milestone payments with respect to each distinct class of licensed product; (iii) up to $10.0 million in combined commercial milestone payments based on cumulative net sales of licensed products within each distinct class of licensed products, beginning when cumulative net sales of the class of licensed products equals or exceeds $100.0 million, with the majority payable when cumulative net sales of the class of licensed products equals or exceeds $1.0 billion; (iv) a low single-digit royalty on net sales of licensed products sold by the Company and its sublicensees, which may be subject to reductions, and subject to minimum annual royalty payments following the first commercial sale of a licensed product; (v) a certain percentage of any sublicense consideration (other than royalties) the Company receives from sublicensees, based on the stage of development at the time the sublicense is executed; and (vi) a certain percentage of consideration the Company receives from an acquisition of the Company or its assets based on the stage of development at the relevant time. The Company is obligated to pay royalties on a

country-by-country

basis until the expiration of the last valid claim within the licensed patent rights in such country.

The agreement will expire upon the expiration of the last valid claim within the licensed patent rights. The Company may terminate the agreement upon prior written notice to UW. UW may terminate the agreement by a specified number of days’ notice if the Company permanently ceases operations, becomes insolvent or similar, or if the Company challenges the validity of the licensed patent rights. In addition, UW may terminate the agreement for material breach that is not cured within a specified number of days, which cure period is to be at least doubled if the Company is proceeding diligently to cure the default.

The Company has an agreement with Biolipox AB of Sweden for patent rights relating exclusively or principally to a specific class of compounds, which include rosiptor. The terms of the agreement required the Company to pay CAD $50,000 immediately, CAD $250,000 in shares of common stock upon the first submission to the FDA of an Investigational New Drug (IND) for a compound from the acquired class of compounds, and CAD $3.0 million upon the advancement of one of the compounds from the acquired class of compounds into a Phase 3 clinical trial. Certain other milestone payments, totaling CAD $1.5 million are payable upon the first commercial sale following regulatory approval of the first compound in each of the United States, Europe and Japan. There are no royalty payments due under this agreement. In June 2014, the Company issued 19,762 shares of common stock to Biolipox AB as payment for achievement of the milestone related to the first submission to the FDA of an IND for rosiptor. A CAD $3.0 million milestone payment was paid in November 2016 as a result of the advancement of rosiptor into a Phase 3 clinical trial. As all research and development activities related to rosiptor have been suspended, the Company does not currently have any product candidates under development that are covered by this agreement.

The Company has an exclusive license agreement with the University of British Columbia (“UBC”) for a worldwide license to certain small molecule compounds and pharmaceutical compositions that are modulators of SHIP1 activity. The agreement expires at the earlier of the last expiry of any patent obtained related to the technology or through enactment of one of the termination clauses stipulated in the agreement. The Company paid annual maintenance fees of CAD $1,000 related to this agreement for the year ended December 31, 2019 (December 31, 2018

—

CAD $1,000) and have contingent payments totaling up to CAD $2.2 million for the first drug product and CAD $1.5 million for each subsequent drug product plus low single-digit royalties. The Company does not currently have any product candidates under development that are covered by the UBC license agreement. On February 14, 2020, the Company and UBC entered into an agreement to terminate this license agreement. Upon the termination of this license agreement, the Company has no further obligations under this license agreement.

The Company has an agreement with the British Columbia Cancer Agency and StemCell Technologies, Inc. for the assignment to the Company of certain patents to technology relating to SHIP1 in return for low single-digit royalty payment on product sales or low double-digit percentage of sublicense revenue. The agreement is to expire at the later of 20 years from the effective date of the agreement or upon the expiration of the last patent covered by the license. The Company incurred maintenance fees of CAD $5,000 related to this agreement during the years ended December 31, 2019, 2018 and 2017. The Company does not currently have any product candidates under development that are covered by this agreement.