In June 2022, the Company sold its partially owned-subsidiary, Cullinan Pearl, which has worldwide rights to CLN-081 excluding Japan and Greater China, to Taiho for an upfront payment of $275.0 million, with an increase to the purchase price in the amount of $2.9 million for cash held by Cullinan Pearl that was transferred with the sale. As of June 30, 2022, $5.0 million of the upfront payment was held in escrow. The escrow amount was classified within prepaid expenses and other current assets on the consolidated balance sheets and will be released to the Company once the Company and Taiho finalize any post-sale net working capital adjustment, which is not expected to be material. Pursuant to the share purchase agreement with Taiho, the Company is also eligible to receive an additional $130.0 million tied to epidermal growth factor receptor exon20 non-small-cell lung cancer regulatory milestones.

The Company concluded the transaction was a sale of non-financial assets, which comprised mainly of intellectual property rights and related intangible assets, and that it transferred control of the non-financial assets at the closing of the sale. The Company recognized a gain on sale of Cullinan Pearl of $276.8 million within income from operations in its consolidated statement of operations and other comprehensive income (loss) for the three and six months ended June 30, 2022. The table below sets forth the book value of the Cullinan Pearl assets and liabilities sold along with the calculation of the gain on sale based on the cash consideration received.


	(in thousands)
Book value of assets sold
Cash	$	2,898
Prepaid expenses and other current assets		619
Amounts attributable to assets sold		3,517
Book value of liabilities sold
Accrued expenses and other current liabilities		2,404
Amounts attributable to liabilities sold		2,404
Total identifiable net assets sold		1,113
Upfront consideration, inclusive of $5,000 escrow and cash transferred of $2,898		277,898
Gain on sale of Cullinan Pearl	$	276,785

During the six months ended June 30, 2022, Cullinan Pearl issued $2.2 million of convertible notes to an affiliate of Taiho. The Company repaid these convertible notes at the closing of the Cullinan Pearl sale.

In June 2022, concurrently with the closing of the sale of Cullinan Pearl, the Company entered into a co-development agreement with an affiliate of Taiho, pursuant to which the Company will collaborate to develop CLN-081 and will retain the option to co-commercialize CLN-081 in the U.S. Taiho has the exclusive right to commercialize CLN-081 in territories outside the U.S., excluding Greater China. Development costs for CLN-081 incurred after the sale of Cullinan Pearl shall be shared equally between Taiho and the Company with each party receiving 50% of any future pre-tax profits from potential U.S. sales of CLN-081.

The Company concluded that the co-development agreement with Taiho is a collaborative arrangement because the Company is an active participant in the development of CLN-081. Payments made to or received from Taiho for CLN-081 development activities after the sale are recorded within research and development expenses.