License Agreement

3 Months Ended

Mar. 31, 2020

License Agreement [Abstract]

License Agreement

License Agreement

Zai License Agreement

In June 2019, the Company entered into a License Agreement (the Zai License Agreement) with Zai Lab (Shanghai) Co., Ltd. (Zai), pursuant to which the Company granted Zai exclusive rights to develop and commercialize ripretinib, including certain follow-on compounds (the Licensed Products), in Greater China (the Territory). The Company retains exclusive rights to, among other things, develop, manufacture, and commercialize the Licensed Products outside the Territory.

Pursuant to the terms of the Zai License Agreement, the Company received an upfront cash payment of $20.0 million and became eligible to receive up to $185.0 million in potential development and commercial milestone payments, consisting of up to $50.0 million of development milestones and up to $135.0 million of commercial milestones. In addition, during the term of the

Zai License Agreement, Zai will be obligated to pay the Company tiered percentage royalties ranging from low to high teens on potential annual net sales of the Licensed Products in the Territory, subject to adjustments in specified circumstances.

Under the Zai License Agreement, the Company recognized revenue of $25.0 million during the second quarter of 2019, which consisted of the $20.0 million upfront payment and a $5.0 million INTRIGUE study-related development milestone payment, which the Company believed to be probable of achievement in the second quarter of 2019 and was achieved in July 2019.

No revenues were recognized under the Zai License Agreement during the three months ended March 31, 2020 or 2019.

Subject to the terms and conditions of the Zai License Agreement, Zai will be responsible for conducting the development and commercialization activities in the Territory related to the Licensed Products. Please read Note 3, License Agreement, to the consolidated financial statements in the Company's Form 10-K for the year ended December 31, 2019 for further details on the Zai License Agreement.

In February 2020, the Company entered into a Supply Agreement (the Zai Supply Agreement) with Zai, as required by terms in the Zai License Agreement, pursuant to which the Company will supply the Licensed Products to Zai for use in the Territory for clinical trials as well as commercial inventory, if ripretinib obtains regulatory approval in the Territory. Subject to the Zai Supply Agreement, costs incurred by the Company for external manufacturing services are reimbursed by Zai.

Under the Zai Supply Agreement, the Company recognized revenues of $0.1 million associated with external manufacturing services provided during the three months ended March 31, 2020. As of March 31, 2020, receivables of $0.1 million related to external manufacturing services were included within prepaid expenses and other current assets in the consolidated balance sheets.