In December 2022, the Company entered into the Kite Collaboration Agreement with Kite, a Common Stock Purchase Agreement with Gilead (Gilead SPA) and a Standstill Agreement with Gilead (Standstill Agreement). Upon closing in January 2023, Kite made an upfront payment of $225.0 million and obtained a license to co-develop and co-commercialize anito-cel, and next-generation autologous and non-autologous CAR-T cell therapy products that use the same D-domain BCMA binder used in anito-cel, in each case for the treatment of multiple myeloma. The Company also granted Kite the ability to negotiate a development and commercialization license for the inclusion of a limited number of pre-specified additional autologous CAR-T-cell therapy products for the treatment of multiple myeloma, which can only be exercised by Kite after the Company provides to Kite a phase 1 clinical study report.

In November 2023, the Company entered into an amendment to its Kite Collaboration Agreement, a common stock purchase agreement with Gilead (the “Second Gilead SPA”) and an amended and restated standstill and stock restriction agreement with Gilead (the “Amended Standstill Agreement”). Upon closing in December 2023, Kite made an upfront payment of $85.0 million and commenced negotiation of a license for the Company’s ARC-SparX program, ACLX-001, in multiple myeloma. The Company and Kite have also expanded the scope of the collaboration for the Company’s anito-cel to include lymphomas, which is subject to further negotiation by both parties in order to be developed and is therefore not a performance obligation at contract inception.

Under the Kite Collaboration Agreement and its amendment, the Company will be eligible to receive clinical, regulatory, and commercial milestone payments of up to $598.3 million, $935.0 million and $507.5 million, for anito-cel, each next-generation autologous CAR-T cell therapy product, and each non-autologous CAR-T cell therapy product, respectively. In the United States, the Company and Kite will equally share profits and losses from the commercialization of anito-cel and any next-generation autologous CAR-T cell therapy product for which the Company has exercised its option to co-promote with Kite (collectively, the Co-Promote Products). The Company has the option to designate next-generation autologous CAR-T therapy product as a Co-Promote Product after Kite provides the first phase 1 clinical study report for such product with the proposed core development plan and budget. For Co-Promote Products outside of the United States and for any other products worldwide that are not a Co-Promote Product (Non-Co-Promote Products), including any next-generation autologous CAR-T cell therapy product for which the company has opted out of designating as a Co-Promote Product, the Company will be eligible for tiered royalties in the low to mid teen percentages. The Company and Kite will jointly develop the Co-Promote Products in accordance with mutually agreed development plans and development budgets. On a Co-Promote Product-by-Co-Promote Product basis, the Company may, upon advance written notice to Kite, opt out of sharing development costs and profits and losses from the commercialization of such Co-Promote Product (for example, anito-cel), in which case, it will become a Non-Co-Promote Product and eligible for tiered royalties in the low to mid teen percentages.

Other than certain items expressly set forth in the Kite Collaboration Agreement and its amendment, the out-of-pocket development costs for activities conducted in the United States for Co-Promote Products will be shared equally by the Company and Kite. In the United States, the Company and Kite will be jointly responsible for commercialization of the Co-Promote Products. The out-of-pocket development costs for activities conducted outside the United States as part of a global clinical trial for Co-Promote Products will be borne 60% (for ex-U.S. patients) by Kite and 40% (for U.S. patients) by the Company, however Kite will be solely responsible for the costs for country-specific clinical trials outside the United States and chemistry, manufacturing and control (CMC) commercial readiness. Kite will be solely responsible for the conduct of development and commercialization of the Non-Co-Promote Products at its sole cost. Kite will manufacture the licensed products and bear the CMC commercial readiness costs and capital expenses, except that the Company is responsible for manufacturing anito-cel prior to transferring the manufacturing process to Kite during which the cost of manufacturing clinical trial material will be shared.

Unless earlier terminated, the Kite Collaboration Agreement and its amendment will continue in effect until no licensed products are being developed or commercialized. The Kite Collaboration Agreement and its amendment is subject to termination provisions including termination by a party for the other party’s uncured, material breach. In the event of certain terminations of the Kite Collaboration Agreement and its amendment, the Company is entitled to certain reversionary rights, including access to and continuity of manufacturing, with respect to the terminated products.

In connection with the Kite Collaboration Agreement and upon its closing in January 2023, Gilead made an equity investment of $100.0 million by purchasing 3,478,261 shares of Arcellx common stock at a fixed per share price of $28.75 pursuant to the Gilead SPA, which represented a $15.3 million discount on the sale of the Company’s common stock based on the share price on the date of closing.

In connection with the amendment to the Kite Collaboration Agreement and upon its closing in December 2023, Gilead made an equity investment of $200.0 million by purchasing 3,242,542 shares of Arcellx common stock at a fixed per share price of $61.68 pursuant to the Second Gilead SPA, which represented a $15.6 million premium on the sale of the Company’s common stock based on the share price on the date of closing.

The Company evaluated the Kite Collaboration Agreement and determined that the obligation to co-develop the anito-cel license and the Company’s research and development obligations to develop anito-cel were within the scope of ASC 606 because these activities are ordinary Company activities and Kite meets the definition of a customer with respect to this combined performance obligation. The revenue to be recognized will be recorded on a cost-to-cost percentage of completion basis over the period of time the Company is performing the research and development activities. The Company evaluated the amendment to the Kite Collaboration Agreement and determined that the contract modifications should be accounted for as changes to the original contract, as the services to be provided after the contract modification are not distinct from those services already provided.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if there is a significant benefit of financing. The Company assessed the collaboration agreements and concluded that no significant financing components were present. As of December 31, 2023, the transaction price of $310.5 million comprises the following:

The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company’s promises under the Kite Collaboration Agreement include development, manufacture, and commercialization licenses, research and development activities, manufacturing activities, and the transfer of manufacturing know-how to Kite (collectively, the research and development services). These promises represent a single combined performance obligation as the promises are not distinct from each other. The Company determined that the license and research and development services are combined based on the specialized nature of the Company’s know-how and manufacturing process.

The Company recognizes revenue over time using a cost-to-cost input measure of progress. In applying the cost-to-cost input measure of progress, the Company used actual costs incurred relative to total budgeted costs expected to be incurred for the combined performance obligation.

The anito-cel therapy product is intended to be developed through research and development and clinical trial programs, iMMagine-1 and a Phase 3 clinical trial, where the Company’s research and development obligations under the Kite Collaboration Agreement, other than certain items expressly set forth in the Kite Collaboration Agreement and Amendment, includes a co-share of 50/50 (with respect to the iMMagine-1 trial) and 40/60 (with respect to certain aspects of our Phase 3 trial) of the joint development costs associated with anito-cel and any other Co-Promote Products. Kite will be conducting and paying for all activities relating to the Phase 3 clinical trial and the Company will reimburse Kite from 40% to 50% of these costs. Reimbursement costs expected to be received from Kite or paid to Kite represent variable consideration and is included in the estimated transaction price. The Company uses the expected value method to estimate variable consideration and updates estimates at each reporting date.

As of December 31, 2023, the balances in contract liability were as follows (in thousands):


Contract liability
Beginning balance at January 1, 2023	$	—
Cash received		331,231
Impacts from Gilead SPA and Second SPA		294
Less: revenue recognized		(110,319	)
Ending balance at December 31, 2023		221,206
Less: current portion		50,533
Noncurrent portion	$	170,673