Collaboration and License Agreements

12 Months Ended

Dec. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Collaboration and License Agreements

11. Collaboration and License Agreements

SanReno Therapeutics

In November 2021, we entered into the China License Agreement, pursuant to which we granted SanReno exclusive licenses under certain intellectual property to develop, manufacture and commercialize for atrasentan and BION-1301 in the Territory. Refer to Note 9 “Investment in Equity Securities” for further details on the agreements executed with SanReno. We evaluated the China License Agreement under ASC Topic 606 and determined that the China License Agreement represents a contract with a customer. We identified the following performance obligations: (i) the licenses to develop, manufacture and commercialize atrasentan and BION-1301; (ii) our obligation to transfer know-how for the licensed product candidates (“Technology Transfers”); (iii) manufacturing and supply services; and (iv) opt-in global studies.

We determined that the preferred shares we received in SanReno of $40.0 million plus the warrant granted to us of $1.2 million constituted the entire consideration to be included in the total transaction price at the outset of the arrangement. Further, in determination of the performance obligations under the license agreements, the stand-alone selling prices of the performance obligations and our responsibility in the development activities have also been considered. Accordingly, the licenses, Technology Transfers, manufacturing and supply services, and opt-in global studies are all considered distinct performance obligations.

Since both licensed product candidates are in the later stages of development, we determined that both licenses have significant stand-alone functionalities as of contract inception. SanReno can begin deriving benefit from the licenses prior to the Technology Transfers being completed. The Technology Transfers will be completed upon request of SanReno and are separate from the transfer of the licenses, which occurred at contract inception. We also considered that we are not contractually obligated to perform research and development activities that significantly affect SanReno’s ability to benefit from the licensed product candidates, and SanReno has full use of the licenses.

The estimated standalone selling price for the Technology Transfers was determined by estimating the costs of satisfying the performance obligation, plus an appropriate margin for such services. Pursuant to the China License Agreement, SanReno will reimburse the manufacturing and supply services at cost plus a mark-up and will reimburse the opt-in global studies at cost, which represent pass-through fees from third-party vendors, including clinical research organization.

Revenue attributable to the licenses and Technology Transfers was recognized during fiscal year 2021 as the licenses were delivered upon contract inception and the amount of the total transaction price allocated to the Technology Transfers was not material. Revenue attributable to the manufacturing and supply services and opt-in global studies will be recognized as incurred.  

We are also eligible to receive a progress-dependent milestone payment of up to approximately $25.0 million with respect to BION-1301. Under the China License Agreement, SanReno is also obligated to pay Chinook royalty payments at a percentage in the low teens based on net sales of atrasentan in the Territory on the portion of annual net sales in excess of a pre-determined amount, which royalty will be payable until the expiration of all licensed patents covering the sale of atrasentan in the Territory. The China License Agreement expires on a licensed product-by-licensed product basis on the latest of: (i) the expiration of the royalty term for atrasentan, (ii) the expiration of the last valid claim of a licensed patent for BION-1301 in the Territory. The parties may terminate the China License Agreement pursuant to terms specified in the agreement. Chinook and SanReno also have reciprocal rights of first negotiation in their respective territories for certain future kidney disease products developed or in-licensed by either company. Chinook retains full rights to atrasentan and BION-1301 outside of the Territory.  

The potential progress-dependent cash milestone payment that we are eligible to receive was excluded from the total transaction price, as the milestone amount is fully constrained based on the probability of achievement. Accordingly, any future milestone payment received under the agreement will be recorded upon or over a period following receipt. Further, we will apply the exception under ASC Topic 606 for variable consideration related to sales-or-usage based royalties received in exchange for licensed intellectual property associated with atrasentan, therefore the royalties are not included in the transaction price until the licensee sells product.

During the year ended December 31, 2021, we recognized revenue of $41.2 million under the China License Agreement. No progress-dependent milestone payments and royalties were received during the year ended December 31, 2021.

AbbVie Ireland Unlimited Company

On December 16, 2019, we entered into a license agreement (the “License Agreement”) with AbbVie Ireland Unlimited Company (“AbbVie”), which granted us an exclusive license to develop and commercialize atrasentan, an endothelin receptor antagonist. Under the agreement, we assumed all global development and commercialization responsibilities for atrasentan. In consideration of the license and rights granted under the License Agreement, we made an upfront cash payment and issued 2.0 million shares of common stock for total consideration of $6.7 million to AbbVie. We concluded that this transaction should be accounted for as an asset purchase, and as such, recorded the associated expense within research and development expenses in the consolidated statements of operations and comprehensive loss, as the product has not reached technological feasibility and does not have alternative future use. Under the License Agreement, we are obligated to make contingent development, regulatory and commercial milestone payments, of up to a maximum of $135.0 million in the aggregate, as well as pay royalties on the worldwide net sales of licensed products ranging from upper-single-digit to high-teen percentages.

We did not recognize any milestone payments for the years ended December 31, 2021 and 2020. As of December 31, 2021 and 2020, we did not have any payable or receivable balances associated with the License Agreement.

Merck

In connection with Merger, we became party to an agreement with Merck. The agreement sets forth the parties’ respective obligations for development, commercialization, regulatory and manufacturing and supply activities for antibody product candidates. All performance obligations of Aduro were completed prior to the Merger. We are eligible to receive future contingent payments, including up to $287.0 million in potential development milestone payments, and up to $135.0 million in commercial and net sales milestones for a product candidate. In addition, we are eligible to receive royalties at percentages in the mid-single digits to low teens based on net sales of the product. Future milestone payments and royalties will be recognized as revenue when earned as we have no performance obligations under this agreement. Any such milestones and royalties earned prior to October 4, 2030 will be payable by us to the CVR holders, net of deductions permitted under the CVR Agreement, including taxes and certain other expenses. In the fourth quarter of 2021, we recognized revenue of $10.0 million upon notification of the achievement of a development milestone under the terms of the agreement with Merck, which is payable to the CVR holders, net of permitted deductions.

Eli Lilly and Company

In connection with the Merger, we assumed an ongoing research collaboration and exclusive license agreement with Eli Lilly and Company (“Lilly”) for the research and development of novel immunotherapies for autoimmune and other inflammatory diseases. Our only remaining performance obligation under the agreement was to perform research services through 2021, for which we were reimbursed up to a specified amount. We are eligible to receive future contingent milestone payments of up to approximately $464.9 million per licensed product and tiered royalties on net sales at percentages in the single digits. We determined that the potential milestone payments are not considered probable of being achieved and, accordingly, such milestones will be recognized as revenue when earned.

For the year ended December 31, 2021 and 2020, we recognized revenue of $0.4 million and $0.8 million, respectively, under the Lilly agreement.

Novartis Pharmaceuticals Corporation

In connection with the Merger, we assumed an ongoing collaboration and license agreement with Novartis Pharmaceuticals Corporation (“Novartis”) for the development and potential commercialization of product candidates in the field of oncology. On April 1, 2021, we received notice that Novartis terminated for convenience the Collaboration and License Agreement, dated March 12, 2015.  

As a result of the termination, the only remaining activity under this agreement is reimbursement resulting from development costs that are shared between us and Novartis. We record any amounts paid to Novartis under the agreement as research and development expenses and any amounts received from Novartis as an offset to research and development expenses. For the year ended December 31, 2021, the amounts recognized under the agreement with Novartis were not material.