Development and License Agreements	9 Months Ended
Sep. 30, 2023
Development And License Agreements
Development and License Agreements	6. Development and License Agreements Agreement with Innovative Medicines Initiative Joint Undertaking In March 2021, the Company entered into an agreement (the IMI JU Agreement) with the Innovative Medicines Initiative (IMI) funded consortium COMBACTE-NET to collaborate with other participants in a joint undertaking (the IMI JU) to combat bacterial resistance in Europe. The IMI JU Agreement facilitates a pan-European clinical trial network to test antibiotics and other drugs to prevent and treat various infections. This project commenced on January 1, 2013 with an initial duration of seven years. It has since been extended to October 31, 2023. The project has 46 participants including European Federation of Pharmaceutical Industries and Associations (EFPIA) companies, universities, research organizations, public bodies, non-profit groups, subject matter experts, and third parties. The Company’s primary role in the project is to help lead a Phase 3, randomized, double-blind, placebo-controlled trial to evaluate efficacy of suvratoxumab in the prevention of S. aureus Ventilator Associated Pneumonia (VAP) in mechanically ventilated Intensive Care Unit (ICU) patients. We are acting as study sponsor for Phase 3 clinical study to be conducted and assume responsibility for ensuring that all studies are conducted according to International Conference on Harmonization (ICH) Good Clinical Practice (GCP) guidelines. This study will be conducted in approximately 200 sites distributed globally across European Union (EU) and non-EU sites (50% EU and 50% non-EU). To help facilitate these trials, we make in-kind contributions of materials and services to the project at non-EU sites. The academic COMBACTE-NET consortium partners initially pay for all costs incurred at EU clinical sites and subsequently bills the Company for 25% of such costs. Specifically, we are billed for 25% of eligible costs during the entire fiscal year six to seven months following the fiscal year. The work at these sites is performed entirely by third-party subcontractors. As such, we reimburse the 25% at the passed-through invoice amounts. There is no reimbursement for costs incurred at non-EU sites. After October 31, 2023, the Company is committed to continuing the trials whether or not a renewal is executed with the IMI JU. If no renewal is executed, the trials will continue without any form of reimbursement. Under the IMI JU Agreement, the Company will own all results, findings, and intellectual property generated by the project and is entitled to receive any benefits these items bring. As such, these costs are deemed research and development expenditures. Considering our obligation to repay a portion of costs incurred, we determined this agreement is under the scope of ASC Subtopic 730-20, Research and Development Arrangements. Further, as the parties in the IMI JU Agreement are active participants and are exposed to significant risks and rewards dependent on the commercial success of the research, this agreement is also under the scope of ASC Topic 808, Collaborative Arrangements. Research and development costs incurred at non-EU sites are recognized as incurred. The Company recognized research and development expenses of $0.7 and $1.4 million for the three and nine months ended September 30, 2023, respectively, and approximately $5.5 million for the year ended December 31, 2022 at non-EU sites. Research and development costs incurred at EU sites are recognized as incurred for 25% of these costs. Research and development expenses of approximately $0 and $2.3 million were incurred at EU sites for the three and nine months ended September 30, 2023, respectively, and approximately $3.8 million for the year ended December 31, 2022. Of this gross expense amount, the EU contributed services of 75%, or $0 and $1.7 million for the three and nine months ended September 30, 2023, respectively, and $2.9 million for the year ended December 31, 2022. Thus, our liability presented on the accompanying condensed consolidated balance sheet is $0.6 million as of September 30, 2023 and $1.0 million as of December 31, 2022, and are presented within Accrued Liabilities on the accompanying condensed consolidated balance sheets. In-kind contributions we make to the program will be expensed as R&D at their fair value when made. If the fair value of an in-kind contribution we make to the IMI JU differs from its carrying amount, we will recognize a gain or loss on disposition. No gain or loss on disposition was recognized for the three and nine month periods ended September 30, 2023. Cystic Fibrosis Foundation Development Agreement In December 2016, the Company received an award from the Cystic Fibrosis Foundation (“CFF”), which was executed under the Development Program Letter Agreement (the “CFF Agreement”), for approximately $2.9 million. Under the CFF Agreement, CFF made an upfront payment of $200,000 and will make milestone payments to the Company as certain milestones defined in the agreement are met. The milestones relate to pre-clinical and clinical research activities. The agreement also specifies that we are obligated to cumulatively spend on the development program at least an equal amount that the Company receives from the CFF. In the event that we do not spend as much as we received under the agreement, we are obligated to return any overage to the CFF. In November 2018, the CFF increased the award to approximately $7.5 million. In December 2022, the CFF further increased the award to approximately $7.6 million by adding the “Additional Award Amount” of $150,000 with amendment no 2. As of the adoption date of ASC 606 on January 1, 2019 (the “Adoption Date”), the Company identified the following promises with regards to the clinical research activities under the CFF Agreement that represent an initial contract of: a) Phase 1 single ascending dose (“SAD”) clinical trial, which consists of the satisfied development-based milestones and one development-based milestone in progress which was accounted for as a single performance obligation; and contingent promises of: b) Phase 1 multiple ascending dose (“MAD”) clinical trial, which consists of one development-based milestone that had not yet been started, and c) Phase 2a clinical trial, which consists of four development-based milestones that had not yet been started. Of these promises, the Phase 1 SAD clinical trial was determined to be a distinct performance obligation as of the Adoption Date. For the clinical research activities related to the Phase 1 MAD clinical trial and the Phase 2a clinical trial that had not yet been started, the Company was contingently obligated to perform these clinical research activities only after the previous milestones, which achievement was uncertain, had been met. The Company determined that the consideration for the Phase 1 SAD clinical trial contract included several development-based milestones, which had been achieved as of the Adoption Date, totaling approximately $1.7 million, and the one development-based milestone in progress as of the Adoption Date of $1.0 million became probable during the quarter ended March 31, 2019. Additionally, the Company determined the consideration for the Phase 1 MAD clinical trial contract included one development-based milestone of $1.0 million which was achieved during the quarter ended June 30, 2020. The Company determined the consideration for the Phase 2a clinical trial contract totaled approximately $3.8 million which included four development-based milestones. With the increased grant funding in December 2022, bringing the Phase 2a clinical trial contract total to approximately $3.9 million, CFF introduced an additional development-based milestone. The Company determined the consideration for the Phase 2a clinical trial contract totals approximately $3.8 million which includes four development-based milestones. The milestones under the CFF Agreement are related to pre-clinical and clinical research activities and the realization of or recognition of revenue associated with the milestones as determined by the completion of the milestones and, if applicable, review and approval of the achievement by the CFF. Each development-based milestone payment has specific criteria that needs to be met, some examples of which include, the completion of certain study activities and approval to move to the next activity. At every reporting period, the Company evaluates the individual facts and circumstances of the development-based milestone to assess whether the revenue attributable to the development-based milestone in progress should be constrained. The constraint assessment by the Company includes an analysis of the key judgements and considerations used for each milestone which include, but are not limited to, the nature and amount of work to be performed, if the work is subject to the approval of the CFF, clinical data and uncertainty with regards to the results of the clinical studies, and the probability of successful clinical studies. The constraint will be removed once the Company achieves the development-based milestone or has determined that there is probable completion of the development-based milestone, and it has also concluded that it is not probable that revenue recognized attributable to the development-based milestone will result in a significant reversal of revenue in the future. The Company determined that the clinical research activities under the CFF Agreement should be recognized over time by calculating the amount of revenue to recognize in any given period by accumulating the total related costs incurred for the respective clinical research activities related to that distinct performance obligation using the input method (cost-to-cost) and applies that percentage of completion to the transaction price at each reporting period. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the clinical research activities are incurred. The Company determined that as of September 30, 2023, the transaction price for the Phase 2a clinical trial contract was $3.6 million based on the achievement of the three development-based milestones during the year ended December 31, 2022 and completion of the fourth milestone during the quarter ended September 30, 2023. The Company recognized grant revenue from the CFF Agreement of approximately $0.4 million and $1.3 million during the three and nine month periods ended September 30, 2023, respectively, and approximately $(0.1) million and $0.7 million during the three and nine month periods ended September 30, 2022, respectively. Gates Foundation Grant Agreement On October 15, 2021, the Company entered into an agreement with the Bill and Melinda Gates Foundation (“Gates Foundation” or “BMGF”) by executing a Grant Agreement identified as Investment ID INV-033376 (“Grant”). The goal of the Grant Agreement is to develop durable approaches to block the infection and transmission of pathogens. For providing research and development services under the Grant Agreement, the Gates Foundation has agreed to compensate the Company $1.93 million due upon execution of the Grant Agreement. In return, we agreed to conduct a proof-of-concept study seeking to demonstrate that inhaled neutralizing antibodies are effective for preventing viral infection and transmission. We are required to ensure global access which means that the knowledge and information gained from the project will be promptly and broadly disseminated, and that the products, technologies, materials, processes and other intellectual property resulting from the proof-of-concept study (collectively referred to as the Funded Developments) will be made available and accessible at an affordable price (i) to people most in need within developing countries or (ii) in support of the U.S. educational system and public libraries. Under the Grant Agreement, the Gates Foundation made an upfront payment of $1.93 million. The Agreement specifies that we may not use funds provided under the Grant Agreement for any purpose other than the project. The Company is required to repay any portion of the funds used or committed in material breach of the Grant Agreement. Any grant funds, plus any income, that have not been used for, or committed to, the Project upon expiration or termination of the Agreement, must be returned promptly to the Gates Foundation. The Company will conduct research and development services up until the proof-of-concept study is completed, at which point the Gates Foundation will determine whether to approve further grant funding for transmission studies or end the study in which case the Company will no longer provide any significant goods or services. The Company will partner with three main subcontractors to deliver the scope of work described in the investment document. The Grant Agreement is considered within the scope of ASC 606 as the parties have a customer/vendor relationship and are not exposed equally to the risks and rewards of the research and development services contemplated in the Grant Agreement. The Company identified the following promises under the Agreement: 1) research and development services, 2) global access commitment, 3) humanitarian license, 4) publication if requested by the Gates Foundation, and 5) intellectual property reporting upon request. The Company determined that these promises are not distinct from each other, and therefore represent one performance obligation. Since the Company is required to update the Gates Foundation on technical progress during each stage of the Funded Development, the ability to access research and development results represents the Gates Foundation’s consumption of the benefits from the Company’s research and development activities. As such, research and development services revenue are recognized over time. At each reporting period, the amount of revenue to recognize is calculated using the input method (cost-to-cost), by comparing cumulative costs incurred to the total estimated costs to perform the research and development services and applying that percentage of completion to the transaction price. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the research and development services are incurred. The Company recognized approximately $0 and $0.2 million in grant revenue related to the Grant Agreement for the three and nine month periods ended September 30, 2023 and approximately $0.4 million and $0.6 million in grant revenue for the three and nine month periods ended September 30, 2022, respectively. The Company eliminated the contract liability in deferred revenue, current, on its condensed consolidated balance sheet as of September 30, 2023, as all the grant funding had been consumed. Serum License Agreement In July 2019, the Company and Serum International B.V. (“SIBV”), an affiliate of Serum Institute of India Private Limited, entered into an option agreement which granted SIBV the option to license multiple programs from the Company and access the Company’s MabIgX® platform technology for asset identification and selection. The Company received an upfront cash payment of $5 million upon execution of this option agreement. In connection with the option agreement, SIBV made an equity investment whereby the Company issued 801,820 shares of its restricted common stock in a private placement to SIBV for total gross proceeds of $10 million. As a result of this transaction, SIBV and its affiliates, are considered related parties to the Company. In September 2019, the Company and Serum AMR Products (“SAMR”), a party under common ownership of SIBV, entered into a License, Development and Commercialization Agreement (the “License Agreement”). Pursuant to the License Agreement, the Company granted to SAMR exclusive licenses, and rights to sublicense, certain patent rights and technology related know-how to the Company’s products AR-301, AR-105, AR-101 (i.e. exclusive rights to, among other things, develop, distribute, market, promote, sell, import and otherwise commercialize) in (a) the country of India, and (b) all other countries of the world except the USA, Canada, EU Territory, UK, China, Australia, South Korea, Brazil, New Zealand, and Japan (products AR-105 and AR-101 countries do not exclude South Korea and Brazil) (the “Limited Territory”); and AR-201 (i.e. exclusive rights to, among other things, develop, manufacture, make, distribute, market, promote, sell, import and otherwise commercialize) in all countries of the world except China, Hong Kong, Macau and Taiwan (the “Worldwide Territory”) (the “licenses and know-how”). Further, the License Agreement grants SAMR an option for the Company to provide research services using its MabIgX® platform technology for the identification of up to five (5) candidates including product development of these identified candidates and an exclusive license to develop, manufacture, make, distribute, market, promote, sell, import and otherwise commercialize these development products in the Worldwide Territory (the “research and development option”). Pursuant to the License Agreement, the Company will provide development support related to the licensed products above in order to assist SAMR in its efforts to develop, receive regulatory approval, and manufacture and sell the licensed products in SAMR’s authorized territories which will be performed under the direction of a Joint Steering Committee (“JSC”) which the Company will participate in (collectively “development support services”). In addition, under the License Agreement, SAMR was granted an exclusive manufacturing license option as the initial license granted above for AR-301, AR-105 and AR-101 does not allow for manufacturing. This manufacturing option provides incremental rights related to these products beyond what is granted as part of the licensing discussed above (the “manufacturing rights option”). If this option is exercised, after SAMR has met certain requirements to exercise the option as defined in the License Agreement, it would provide for an exclusive license for use by SAMR to manufacture and supply the products for SAMR’s own use in the Limited Territory and to manufacture and supply these products to the Company, or their affiliates, for the Company’s use outside the Limited Territory. Should SAMR exercise the development and research option or the manufacturing rights option discussed above, SAMR and the Company shall negotiate in good faith the economic terms around these arrangements. If a third-party sublicensee of AR-301, AR-105 and AR-101 wishes to manufacture these products by itself for the territory for which it has a license from the Company, then the Company shall have the right to buy back the manufacturing rights for all territories outside of the Limited Territory by paying to SAMR $5 million. Under the License Agreement, the Company received upfront payments totaling $15 million, of which $5 million was received in July 2019 through the option agreement referred to above. Given the equity investment by SIBV was negotiated in conjunction with the option agreement, which resulted in the execution of the License Agreement, all arrangements were evaluated as a single agreement and amounts were allocated to the elements of the arrangement based on their fair value. The Company recorded approximately $5.0 million, which represented the fair value of the restricted common stock issued of $5.4 million, net of $441,000 of issuance costs, to stockholders’ equity within the Company’s consolidated balance sheet as of December 31, 2019. The Company allocated the net $4.6 million from the equity investment, after deducting commissions and offering costs, to the License Agreement. Therefore, the Company recorded approximately $19.6 million to deferred revenue based on the $15.0 million from upfront payments under the License Agreement and approximately $4.6 million from the equity allocation. The License Agreement is determined to be within the scope of ASC 606, as the transaction represents a contract with a customer where the participants function in a customer/vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated under the License Agreement. Using the concepts of ASC 606, the Company identified the following performance obligations under the License Agreement: 1) the transfer of licenses of the intellectual property for AR-301, AR-101, AR-105 and AR-201, inclusive of the related technology know-how conveyance (referred to as the license and know-how above); and 2) the Company to deliver ongoing development support services related to the licensed products and the Company’s participation in the JSC (referred to as the development support services above); and identified the following material promises under the License Agreement: 3) SAMR was granted a research and development option of up to five identified product candidates for the Company to perform including specific development services (the research and development option referred to above); and 4) SAMR was granted an exclusive manufacturing license option which would provide for incremental manufacturing rights related to AR-301, AR-105 and AR-101 beyond what is granted in the License Agreement (the manufacturing rights option referred to above). The Company concluded that the performance obligations and material promises identified are separate and distinct from each other. The Company determined that the transaction price under the License Agreement was $19.6 million, consisting of the $15.0 million from upfront payments under the License Agreement and approximately $4.6 million from the equity allocation as noted above, which was allocated among the performance obligations and material promises based on their respective related standalone selling prices. The Company allocated the $19.6 million transaction price to the following: approximately $14.5 million to the licenses and know-how; approximately $79,000 to the development support services; approximately $892,000 to the research and development option; and approximately $4.1 million to the manufacturing rights option. On May 3, 2023, the Company sent written notice to Serum AMR Products stating that as of May 8, 2023, the License Agreement would terminate pursuant to Section 13.3(a) of the License Agreement for nonfulfillment of development obligations under the License Agreement. As a result of termination of the License Agreement, the Company recognized $0 and approximately $19.6 million in license revenue during the three and nine month periods ended September 30, 2023. No license revenue had previously been recognized in connection with the License Agreement. The Company has no remaining portion of the nonrefundable upfront payment as a contract liability on its condensed consolidated balance sheet as of September 30, 2023 and has no further obligations under the License Agreement due to the termination. Kermode Licensing and Product Discovery Agreement In February 2021, the Company entered into an out-licensing and product discovery agreement, and a statement of work, collectively (the “Kermode Agreement”), with Kermode Biotechnologies, Inc. (“Kermode”). Under the terms of this agreement, Kermode will fund for one year the discovery of product candidates for African Swine Fever Virus (“ASFV”) with an option to include the discovery of product candidates for swine influenza virus (“SIV”). Kermode also received exclusive rights to all mAbs and vaccines discovered for veterinary uses and rights to a non-exclusive license to use the Company’s ʎPEX technology platform for further development activities. The Company retained exclusive rights to mAbs and vaccines discovered for human uses. In March 2021, the Company received a nonrefundable upfront payment of $500,000 and received one milestone payment of $250,000 in December 2021. The Company will receive one more milestone payment of $250,000 from Kermode after certain research and development phases in the agreement are completed. The Kermode Agreement defines four phases of research and development activities. The Company is also entitled to royalty payments based on future net sales if Kermode is ultimately successful in commercializing product candidates. The Kermode Agreement is within the scope of ASC 606 as the parties have a customer/vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated in the Kermode Agreement. The Company identified the following promises under the Kermode Agreement: 1) research and development services, and 2) license rights of the ʎPEX Platform and mAbs and vaccines (“Program IP”). The Company determined that these promises are not distinct from each other, and therefore represent one performance obligation. As of March 31, 2022, the transaction price of the Kermode Agreement was $1,000,000, consisting of the nonrefundable upfront payment of $500,000 and the two milestone payments, totaling $500,000. Potential royalty payments were not included in the transaction price, as it was not probable that a significant reversal of cumulative revenue recognized would not occur if these amounts were included. At the end of each reporting period, the Company will update its assessment of whether the milestone payments and royalties are constrained by considering both the likelihood and magnitude of the potential revenue reversal. The Company determined that the one performance obligation under the Kermode Agreement should be recognized over time. At each reporting period, the amount of revenue to recognize will be calculated using the input method (cost-to-cost), by comparing cumulative costs incurred to the total estimated costs to perform all four phases of the research and development activities and applying that percentage of completion to the transaction price. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the research and development activities are incurred. The Company recognized approximately $0 and $0.1 million in grant revenue related to the Kermode Agreement for the three and nine month periods ended September 30, 2023 and approximately $0.1 million and $0.5 million in grant revenue for the three and nine month periods ended September 30, 2022, respectively. The Company has no remaining portion of the nonrefundable upfront payment as a contract liability on its condensed consolidated balance sheet as of September 30, 2023 as the statement of work was considered completed. National Institutes of Health / National Institute of Allergy and Infectious Diseases Grants In June 2023, the Company received a grant award from the National Institute of Allergy and Infectious Diseases division of the National Institutes of Health, in collaboration with researchers at Eitr Biosciences in San Diego, California, to develop pan-coronavirus human monoclonal antibody. The Company expects to commence work and receive funding under the collaboration in the fourth quarter of 2023. In August 2023, the Company received a grant award from the National Institute of Allergy and Infectious Diseases division of the National Institutes of Health, in collaboration with researchers at Emory University in Atlanta, Georgia, to apply the company’s APEXTM human monoclonal antibody (“mAb’) discovery and production platform technology to discover and develop antibacterial mAbs from patients. The Company expects to commence work and receive funding under the collaboration in the fourth quarter of 2023.

Development and License Agreements

9 Months Ended

Sep. 30, 2023

6. Development and License Agreements

Agreement with Innovative Medicines Initiative Joint Undertaking

In March 2021, the Company entered into an agreement (the IMI JU Agreement) with the Innovative Medicines Initiative (IMI) funded consortium COMBACTE-NET to collaborate with other participants in a joint undertaking (the IMI JU) to combat bacterial resistance in Europe. The IMI JU Agreement facilitates a pan-European clinical trial network to test antibiotics and other drugs to prevent and treat various infections. This project commenced on January 1, 2013 with an initial duration of seven years. It has since been extended to October 31, 2023. The project has 46 participants including European Federation of Pharmaceutical Industries and Associations (EFPIA) companies, universities, research organizations, public bodies, non-profit groups, subject matter experts, and third parties.

The Company’s primary role in the project is to help lead a Phase 3, randomized, double-blind, placebo-controlled trial to evaluate efficacy of suvratoxumab in the prevention of S. aureus Ventilator Associated Pneumonia (VAP) in mechanically ventilated Intensive Care Unit (ICU) patients. We are acting as study sponsor for Phase 3 clinical study to be conducted and assume responsibility for ensuring that all studies are conducted according to International Conference on Harmonization (ICH) Good Clinical Practice (GCP) guidelines. This study will be conducted in approximately 200 sites distributed globally across European Union (EU) and non-EU sites (50% EU and 50% non-EU). To help facilitate these trials, we make in-kind contributions of materials and services to the project at non-EU sites.

The academic COMBACTE-NET consortium partners initially pay for all costs incurred at EU clinical sites and subsequently bills the Company for 25% of such costs. Specifically, we are billed for 25% of eligible costs during the entire fiscal year six to seven months following the fiscal year. The work at these sites is performed entirely by third-party subcontractors. As such, we reimburse the 25% at the passed-through invoice amounts. There is no reimbursement for costs incurred at non-EU sites. After October 31, 2023, the Company is committed to continuing the trials whether or not a renewal is executed with the IMI JU. If no renewal is executed, the trials will continue without any form of reimbursement.

Under the IMI JU Agreement, the Company will own all results, findings, and intellectual property generated by the project and is entitled to receive any benefits these items bring. As such, these costs are deemed research and development expenditures. Considering our obligation to repay a portion of costs incurred, we determined this agreement is under the scope of ASC Subtopic 730-20, Research and Development Arrangements. Further, as the parties in the IMI JU Agreement are active participants and are exposed to significant risks and rewards dependent on the commercial success of the research, this agreement is also under the scope of ASC Topic 808, Collaborative Arrangements.

Research and development costs incurred at non-EU sites are recognized as incurred. The Company recognized research and development expenses of $0.7 and $1.4 million for the three and nine months ended September 30, 2023, respectively, and approximately $5.5 million for the year ended December 31, 2022 at non-EU sites.

Research and development costs incurred at EU sites are recognized as incurred for 25% of these costs. Research and development expenses of approximately $0 and $2.3 million were incurred at EU sites for the three and nine months ended September 30, 2023, respectively, and approximately $3.8 million for the year ended December 31, 2022. Of this gross expense amount, the EU contributed services of 75%, or $0 and $1.7 million for the three and nine months ended September 30, 2023, respectively, and $2.9 million for the year ended December 31, 2022. Thus, our liability presented on the accompanying condensed consolidated balance sheet is $0.6 million as of September 30, 2023 and $1.0 million as of December 31, 2022, and are presented within Accrued Liabilities on the accompanying condensed consolidated balance sheets.

In-kind contributions we make to the program will be expensed as R&D at their fair value when made. If the fair value of an in-kind contribution we make to the IMI JU differs from its carrying amount, we will recognize a gain or loss on disposition. No gain or loss on disposition was recognized for the three and nine month periods ended September 30, 2023.

Cystic Fibrosis Foundation Development Agreement

In December 2016, the Company received an award from the Cystic Fibrosis Foundation (“CFF”), which was executed under the Development Program Letter Agreement (the “CFF Agreement”), for approximately $2.9 million. Under the CFF Agreement, CFF made an upfront payment of $200,000 and will make milestone payments to the Company as certain milestones defined in the agreement are met. The milestones relate to pre-clinical and clinical research activities. The agreement also specifies that we are obligated to cumulatively spend on the development program at least an equal amount that the Company receives from the CFF. In the event that we do not spend as much as we received under the agreement, we are obligated to return any overage to the CFF. In November 2018, the CFF increased the award to approximately $7.5 million. In December 2022, the CFF further increased the award to approximately $7.6 million by adding the “Additional Award Amount” of $150,000 with amendment no 2.

As of the adoption date of ASC 606 on January 1, 2019 (the “Adoption Date”), the Company identified the following promises with regards to the clinical research activities under the CFF Agreement that represent an initial contract of: a) Phase 1 single ascending dose (“SAD”) clinical trial, which consists of the satisfied development-based milestones and one development-based milestone in progress which was accounted for as a single performance obligation; and contingent promises of: b) Phase 1 multiple ascending dose (“MAD”) clinical trial, which consists of one development-based milestone that had not yet been started, and c) Phase 2a clinical trial, which consists of four development-based milestones that had not yet been started. Of these promises, the Phase 1 SAD clinical trial was determined to be a distinct performance obligation as of the Adoption Date. For the clinical research activities related to the Phase 1 MAD clinical trial and the Phase 2a clinical trial that had not yet been started, the Company was contingently obligated to perform these clinical research activities only after the previous milestones, which achievement was uncertain, had been met.

The Company determined that the consideration for the Phase 1 SAD clinical trial contract included several development-based milestones, which had been achieved as of the Adoption Date, totaling approximately $1.7 million, and the one development-based milestone in progress as of the Adoption Date of $1.0 million became probable during the quarter ended March 31, 2019. Additionally, the Company determined the consideration for the Phase 1 MAD clinical trial contract included one development-based milestone of $1.0 million which was achieved during the quarter ended June 30, 2020. The Company determined the consideration for the Phase 2a clinical trial contract totaled approximately $3.8 million which included four development-based milestones. With the increased grant funding in December 2022, bringing the Phase 2a clinical trial contract total to approximately $3.9 million, CFF introduced an additional development-based milestone.

The Company determined the consideration for the Phase 2a clinical trial contract totals approximately $3.8 million which includes four development-based milestones. The milestones under the CFF Agreement are related to pre-clinical and clinical research activities and the realization of or recognition of revenue associated with the milestones as determined by the completion of the milestones and, if applicable, review and approval of the achievement by the CFF. Each development-based milestone payment has specific criteria that needs to be met, some examples of which include, the completion of certain study activities and approval to move to the next activity. At every reporting period, the Company evaluates the individual facts and circumstances of the development-based milestone to assess whether the revenue attributable to the development-based milestone in progress should be constrained. The constraint assessment by the Company includes an analysis of the key judgements and considerations used for each milestone which include, but are not limited to, the nature and amount of work to be performed, if the work is subject to the approval of the CFF, clinical data and uncertainty with regards to the results of the clinical studies, and the probability of successful clinical studies. The constraint will be removed once the Company achieves the development-based milestone or has determined that there is probable completion of the development-based milestone, and it has also concluded that it is not probable that revenue recognized attributable to the development-based milestone will result in a significant reversal of revenue in the future.

The Company determined that the clinical research activities under the CFF Agreement should be recognized over time by calculating the amount of revenue to recognize in any given period by accumulating the total related costs incurred for the respective clinical research activities related to that distinct performance obligation using the input method (cost-to-cost) and applies that percentage of completion to the transaction price at each reporting period. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the clinical research activities are incurred.

The Company determined that as of September 30, 2023, the transaction price for the Phase 2a clinical trial contract was $3.6 million based on the achievement of the three development-based milestones during the year ended December 31, 2022 and completion of the fourth milestone during the quarter ended September 30, 2023.

The Company recognized grant revenue from the CFF Agreement of approximately $0.4 million and $1.3 million during the three and nine month periods ended September 30, 2023, respectively, and approximately $(0.1) million and $0.7 million during the three and nine month periods ended September 30, 2022, respectively.

Gates Foundation Grant Agreement

On October 15, 2021, the Company entered into an agreement with the Bill and Melinda Gates Foundation (“Gates Foundation” or “BMGF”) by executing a Grant Agreement identified as Investment ID INV-033376 (“Grant”). The goal of the Grant Agreement is to develop durable approaches to block the infection and transmission of pathogens. For providing research and development services under the Grant Agreement, the Gates Foundation has agreed to compensate the Company $1.93 million due upon execution of the Grant Agreement. In return, we agreed to conduct a proof-of-concept study seeking to demonstrate that inhaled neutralizing antibodies are effective for preventing viral infection and transmission. We are required to ensure global access which means that the knowledge and information gained from the project will be promptly and broadly disseminated, and that the products, technologies, materials, processes and other intellectual property resulting from the proof-of-concept study (collectively referred to as the Funded Developments) will be made available and accessible at an affordable price (i) to people most in need within developing countries or (ii) in support of the U.S. educational system and public libraries.

Under the Grant Agreement, the Gates Foundation made an upfront payment of $1.93 million. The Agreement specifies that we may not use funds provided under the Grant Agreement for any purpose other than the project. The Company is required to repay any portion of the funds used or committed in material breach of the Grant Agreement. Any grant funds, plus any income, that have not been used for, or committed to, the Project upon expiration or termination of the Agreement, must be returned promptly to the Gates Foundation.

The Company will conduct research and development services up until the proof-of-concept study is completed, at which point the Gates Foundation will determine whether to approve further grant funding for transmission studies or end the study in which case the Company will no longer provide any significant goods or services. The Company will partner with three main subcontractors to deliver the scope of work described in the investment document.

The Grant Agreement is considered within the scope of ASC 606 as the parties have a customer/vendor relationship and are not exposed equally to the risks and rewards of the research and development services contemplated in the Grant Agreement. The Company identified the following promises under the Agreement: 1) research and development services, 2) global access commitment, 3) humanitarian license, 4) publication if requested by the Gates Foundation, and 5) intellectual property reporting upon request. The Company determined that these promises are not distinct from each other, and therefore represent one performance obligation.

Since the Company is required to update the Gates Foundation on technical progress during each stage of the Funded Development, the ability to access research and development results represents the Gates Foundation’s consumption of the benefits from the Company’s research and development activities. As such, research and development services revenue are recognized over time. At each reporting period, the amount of revenue to recognize is calculated using the input method (cost-to-cost), by comparing cumulative costs incurred to the total estimated costs to perform the research and development services and applying that percentage of completion to the transaction price. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the research and development services are incurred.

The Company recognized approximately $0 and $0.2 million in grant revenue related to the Grant Agreement for the three and nine month periods ended September 30, 2023 and approximately $0.4 million and $0.6 million in grant revenue for the three and nine month periods ended September 30, 2022, respectively. The Company eliminated the contract liability in deferred revenue, current, on its condensed consolidated balance sheet as of September 30, 2023, as all the grant funding had been consumed.

Serum License Agreement

In July 2019, the Company and Serum International B.V. (“SIBV”), an affiliate of Serum Institute of India Private Limited, entered into an option agreement which granted SIBV the option to license multiple programs from the Company and access the Company’s MabIgX® platform technology for asset identification and selection. The Company received an upfront cash payment of $5 million upon execution of this option agreement. In connection with the option agreement, SIBV made an equity investment whereby the Company issued 801,820 shares of its restricted common stock in a private placement to SIBV for total gross proceeds of $10 million. As a result of this transaction, SIBV and its affiliates, are considered related parties to the Company.

In September 2019, the Company and Serum AMR Products (“SAMR”), a party under common ownership of SIBV, entered into a License, Development and Commercialization Agreement (the “License Agreement”). Pursuant to the License Agreement, the Company granted to SAMR exclusive licenses, and rights to sublicense, certain patent rights and technology related know-how to the Company’s products AR-301, AR-105, AR-101 (i.e. exclusive rights to, among other things, develop, distribute, market, promote, sell, import and otherwise commercialize) in (a) the country of India, and (b) all other countries of the world except the USA, Canada, EU Territory, UK, China, Australia, South Korea, Brazil, New Zealand, and Japan (products AR-105 and AR-101 countries do not exclude South Korea and Brazil) (the “Limited Territory”); and AR-201 (i.e. exclusive rights to, among other things, develop, manufacture, make, distribute, market, promote, sell, import and otherwise commercialize) in all countries of the world except China, Hong Kong, Macau and Taiwan (the “Worldwide Territory”) (the “licenses and know-how”). Further, the License Agreement grants SAMR an option for the Company to provide research services using its MabIgX® platform technology for the identification of up to five (5) candidates including product development of these identified candidates and an exclusive license to develop, manufacture, make, distribute, market, promote, sell, import and otherwise commercialize these development products in the Worldwide Territory (the “research and development option”).

Pursuant to the License Agreement, the Company will provide development support related to the licensed products above in order to assist SAMR in its efforts to develop, receive regulatory approval, and manufacture and sell the licensed products in SAMR’s authorized territories which will be performed under the direction of a Joint Steering Committee (“JSC”) which the Company will participate in (collectively “development support services”).

In addition, under the License Agreement, SAMR was granted an exclusive manufacturing license option as the initial license granted above for AR-301, AR-105 and AR-101 does not allow for manufacturing. This manufacturing option provides incremental rights related to these products beyond what is granted as part of the licensing discussed above (the “manufacturing rights option”). If this option is exercised, after SAMR has met certain requirements to exercise the option as defined in the License Agreement, it would provide for an exclusive license for use by SAMR to manufacture and supply the products for SAMR’s own use in the Limited Territory and to manufacture and supply these products to the Company, or their affiliates, for the Company’s use outside the Limited Territory. Should SAMR exercise the development and research option or the manufacturing rights option discussed above, SAMR and the Company shall negotiate in good faith the economic terms around these arrangements. If a third-party sublicensee of AR-301, AR-105 and AR-101 wishes to manufacture these products by itself for the territory for which it has a license from the Company, then the Company shall have the right to buy back the manufacturing rights for all territories outside of the Limited Territory by paying to SAMR $5 million.

Under the License Agreement, the Company received upfront payments totaling $15 million, of which $5 million was received in July 2019 through the option agreement referred to above.

Given the equity investment by SIBV was negotiated in conjunction with the option agreement, which resulted in the execution of the License Agreement, all arrangements were evaluated as a single agreement and amounts were allocated to the elements of the arrangement based on their fair value. The Company recorded approximately $5.0 million, which represented the fair value of the restricted common stock issued of $5.4 million, net of $441,000 of issuance costs, to stockholders’ equity within the Company’s consolidated balance sheet as of December 31, 2019. The Company allocated the net $4.6 million from the equity investment, after deducting commissions and offering costs, to the License Agreement. Therefore, the Company recorded approximately $19.6 million to deferred revenue based on the $15.0 million from upfront payments under the License Agreement and approximately $4.6 million from the equity allocation.

The License Agreement is determined to be within the scope of ASC 606, as the transaction represents a contract with a customer where the participants function in a customer/vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated under the License Agreement. Using the concepts of ASC 606, the Company identified the following performance obligations under the License Agreement: 1) the transfer of licenses of the intellectual property for AR-301, AR-101, AR-105 and AR-201, inclusive of the related technology know-how conveyance (referred to as the license and know-how above); and 2) the Company to deliver ongoing development support services related to the licensed products and the Company’s participation in the JSC (referred to as the development support services above); and identified the following material promises under the License Agreement: 3) SAMR was granted a research and development option of up to five identified product candidates for the Company to perform including specific development services (the research and development option referred to above); and 4) SAMR was granted an exclusive manufacturing license option which would provide for incremental manufacturing rights related to AR-301, AR-105 and AR-101 beyond what is granted in the License Agreement (the manufacturing rights option referred to above). The Company concluded that the performance obligations and material promises identified are separate and distinct from each other.

The Company determined that the transaction price under the License Agreement was $19.6 million, consisting of the $15.0 million from upfront payments under the License Agreement and approximately $4.6 million from the equity allocation as noted above, which was allocated among the performance obligations and material promises based on their respective related standalone selling prices. The Company allocated the $19.6 million transaction price to the following: approximately $14.5 million to the licenses and know-how; approximately $79,000 to the development support services; approximately $892,000 to the research and development option; and approximately $4.1 million to the manufacturing rights option.

On May 3, 2023, the Company sent written notice to Serum AMR Products stating that as of May 8, 2023, the License Agreement would terminate pursuant to Section 13.3(a) of the License Agreement for nonfulfillment of development obligations under the License Agreement.

As a result of termination of the License Agreement, the Company recognized $0 and approximately $19.6 million in license revenue during the three and nine month periods ended September 30, 2023. No license revenue had previously been recognized in connection with the License Agreement. The Company has no remaining portion of the nonrefundable upfront payment as a contract liability on its condensed consolidated balance sheet as of September 30, 2023 and has no further obligations under the License Agreement due to the termination.

Kermode Licensing and Product Discovery Agreement

In February 2021, the Company entered into an out-licensing and product discovery agreement, and a statement of work, collectively (the “Kermode Agreement”), with Kermode Biotechnologies, Inc. (“Kermode”). Under the terms of this agreement, Kermode will fund for one year the discovery of product candidates for African Swine Fever Virus (“ASFV”) with an option to include the discovery of product candidates for swine influenza virus (“SIV”). Kermode also received exclusive rights to all mAbs and vaccines discovered for veterinary uses and rights to a non-exclusive license to use the Company’s ʎPEX technology platform for further development activities. The Company retained exclusive rights to mAbs and vaccines discovered for human uses. In March 2021, the Company received a nonrefundable upfront payment of $500,000 and received one milestone payment of $250,000 in December 2021. The Company will receive one more milestone payment of $250,000 from Kermode after certain research and development phases in the agreement are completed. The Kermode Agreement defines four phases of research and development activities. The Company is also entitled to royalty payments based on future net sales if Kermode is ultimately successful in commercializing product candidates.

The Kermode Agreement is within the scope of ASC 606 as the parties have a customer/vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated in the Kermode Agreement. The Company identified the following promises under the Kermode Agreement: 1) research and development services, and 2) license rights of the ʎPEX Platform and mAbs and vaccines (“Program IP”). The Company determined that these promises are not distinct from each other, and therefore represent one performance obligation.

As of March 31, 2022, the transaction price of the Kermode Agreement was $1,000,000, consisting of the nonrefundable upfront payment of $500,000 and the two milestone payments, totaling $500,000. Potential royalty payments were not included in the transaction price, as it was not probable that a significant reversal of cumulative revenue recognized would not occur if these amounts were included. At the end of each reporting period, the Company will update its assessment of whether the milestone payments and royalties are constrained by considering both the likelihood and magnitude of the potential revenue reversal.

The Company determined that the one performance obligation under the Kermode Agreement should be recognized over time. At each reporting period, the amount of revenue to recognize will be calculated using the input method (cost-to-cost), by comparing cumulative costs incurred to the total estimated costs to perform all four phases of the research and development activities and applying that percentage of completion to the transaction price. The Company believes this method best depicts the transfer of control to the customer, which occurs as the costs related to the research and development activities are incurred.

The Company recognized approximately $0 and $0.1 million in grant revenue related to the Kermode Agreement for the three and nine month periods ended September 30, 2023 and approximately $0.1 million and $0.5 million in grant revenue for the three and nine month periods ended September 30, 2022, respectively. The Company has no remaining portion of the nonrefundable upfront payment as a contract liability on its condensed consolidated balance sheet as of September 30, 2023 as the statement of work was considered completed.

National Institutes of Health / National Institute of Allergy and Infectious Diseases Grants

In June 2023, the Company received a grant award from the National Institute of Allergy and Infectious Diseases division of the National Institutes of Health, in collaboration with researchers at Eitr Biosciences in San Diego, California, to develop pan-coronavirus human monoclonal antibody. The Company expects to commence work and receive funding under the collaboration in the fourth quarter of 2023.

In August 2023, the Company received a grant award from the National Institute of Allergy and Infectious Diseases division of the National Institutes of Health, in collaboration with researchers at Emory University in Atlanta, Georgia, to apply the company’s APEXTM human monoclonal antibody (“mAb’) discovery and production platform technology to discover and develop antibacterial mAbs from patients. The Company expects to commence work and receive funding under the collaboration in the fourth quarter of 2023.