XML 38 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Legal Proceedings
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Legal Proceedings
Legal Proceedings
TheraVectys SA v. Immune Design Corp.
On October 17, 2016, we entered into a Settlement Agreement and a License Agreement with TheraVectys SA (TVS) obtaining certain present and future intellectual property rights and resolving the litigation that TVS initiated against us in the Chancery Court of the State of Delaware in July 2014, as well as related claims and counterclaims. In the proceeding, TVS had alleged that it had entered into a contractual relationship with Henogen SA (Henogen) in 2010 with respect to the production of lentiviral vector vaccines for TVS. Henogen is a contract manufacturing organization with which we contracted for the manufacture of our LV305 product candidate. TVS alleged that its contractual relationship with Henogen contained an exclusivity provision limiting Henogen’s ability to participate in the manufacturing process of a vaccine based on lentiviral DNA vectors for third parties, as well as a provision preventing Henogen from sharing or using certain TVS confidential technology for manufacturing processes developed by TVS with or for the benefit of others. TVS alleged that we entered into a contractual relationship with Henogen in 2012 to manufacture lentiviral vectors for vaccines, which TVS contends interfered with its contract with Henogen and resulted in the use of certain TVS confidential information and trade secrets. In addition, the complaint alleged that we obtained shipments of lentiviral vectors for vaccines from Henogen and conducted clinical trials with these lentiviral vectors. The complaint asserted four counts for relief: tortious interference with contractual relationship, unfair competition, misappropriation of trade secrets, and unjust enrichment. Claimed damages were not specified.
Under the Settlement Agreement, TVS agreed to dismiss all pending litigation brought by TVS against us and to withdraw patent opposition proceedings (EPO Proceeding) brought by TVS against our European Patent No EP 2 456 786 (EU Patent). Also under the Settlement Agreement, both parties agreed to a broad release of claims against one another based on acts or omissions arising out of the litigation, or the facts and circumstances giving rise to the litigation. Neither party made any admission of liability or wrongdoing under the Settlement Agreement.
As a non-contingent fee for a license to certain present and future intellectual property of TVS, and in consideration for the settlement of all claims and disputes between the parties, we paid $6.0 million into an escrow account (Escrowed Payment), and we also agreed to pay $1.25 million to TVS when we next raised $25.0 million, in the aggregate, through equity sales, debt or licensing revenue. The Escrowed Payment was to be disbursed to TVS as follows: (a) fifty percent (50%) when (i) Institut Pasteur consented to the granting by TVS to us of a sublicense to certain patents licensed by TVS (or to be licensed by TVS) from Institut Pasteur and (ii) the litigation in the United States and Belgium had been dismissed; and (b) fifty percent (50%) upon the final resolution of the EPO Proceeding if the scope of the EU Patent remained unchanged (Escrow Conditions); provided, that delays in satisfying the Escrow Conditions would potentially result in a reduction of the amount of the Escrowed Payment that would be disbursed to TVS.
In November 2017, we paid $1.25 million to TVS upon completion of an underwritten public offering in which we raised estimated net proceeds of approximately $86.6 million, after deducting underwriting discounts, commissions and offering expenses.

In February 2018, the parties came to an agreement on the timing and satisfaction of the Escrow Conditions, and the escrow agent disbursed $5.25 million of the Escrowed Payment to TVS and $750,000 of the Escrowed Payment to Immune Design. No additional payments are expected to be made under the terms of the Settlement Agreement (see Note 15).
In addition, the License Agreement provides us with a field limited, non-exclusive, sublicensable license for oncology uses to certain current and future intellectual property rights owned, controlled and licensed by TVS. For licensed products developed under the License Agreement, we would be obligated to pay certain development and commercial milestones and royalties.
We determined that the aggregate payment amount expected to be paid to TVS is $7.3 million and as such, the aggregate payment amount should be allocated between (1) dismissal of the litigation; and (2) license to current and future TVS intellectual property (IP). As we are not able to reliably estimate the fair value of the litigation dismissal, we assigned a fair value to the aggregate amount of the license to current and future TVS IP through the use of a benchmarking approach and determined the fair value of the license to current and future IP obtained from TVS by benchmarking this deal against similar recent (within the last 5 years) deals within our industry. The metrics we used in our benchmarking approach included similarities in industry, product type, therapeutic area, stage of product development and exclusivity. Based upon the results of our benchmark approach, we determined that the fair value assigned to the license to current and future TVS IP to be $1.4 million with the remaining residual amount of $5.9 million allocated to the dismissal of the litigation.
For the year ended December 31, 2016, the $5.9 million allocated to the dismissal of litigation is recorded as a general and administrative expense and the $1.4 million allocated to the license acquired for current and future TVS IP granted to us is recorded as a research and development expense on the consolidated statements of operations.
European Patent Opposition
In February 2013, a third party filed an opposition at the European Patent Office (EPO) requesting revocation of European Patent No. 2068918 directed to GLA formulations and uses. This patent is owned by Infectious Disease Research Institute (IDRI), and we hold an exclusive license to this patent in certain fields. The oral proceedings for this opposition were held in September 2016. At the oral proceedings, the EPO maintained the patent in an amended form, which continues to cover the GLAAS products being developed by us and our licensees. We and the opponent have appealed this decision. However, the outcome of an appeal to this proceeding will not be known for several years.