In June 2022, the Company sold its equity interest in its partially-owned subsidiary, Cullinan Pearl, which has worldwide rights to zipalertinib (CLN-081/TAS6417), 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. 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 statements of operations and other comprehensive income (loss) for the nine months ended September 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 cash transferred of $2,898		277,898
Gain on sale of Cullinan Pearl	$	276,785

During the nine months ended September 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 the Company’s equity interest in Cullinan Pearl, the Company entered into a co-development agreement with an affiliate of Taiho, pursuant to which the Company will collaborate to develop zipalertinib (CLN-081/TAS6417) and will retain the option to co-commercialize zipalertinib (CLN-081/TAS6417) in the U.S. Development costs for zipalertinib (CLN-081/TAS6417) incurred after the sale of the Company’s equity interest in 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 zipalertinib (CLN-081/TAS6417).

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 zipalertinib (CLN-081/TAS6417). Payments made to or received from Taiho for zipalertinib (CLN-081/TAS6417) development activities after the sale are recorded within research and development expenses. For the nine months ended September 30, 2022, costs reimbursable by Taiho and reflected as a reduction to research and development expenses were $1.5 million, which had not been reimbursed by Taiho as of September 30, 2022. The Company also recorded research and development expense of $0.9 million related to its share of costs incurred by Taiho, which the Company had not yet reimbursed as of September 30, 2022. The net amount of $0.6 million due from Taiho was recorded within prepaid expenses and other current assets as of September 30, 2022.