Collaboration and License Agreements

12 Months Ended

Dec. 31, 2024

Collaboration and License Agreements

Collaboration and License Agreements

6. Collaboration and License Agreements

License Agreement with Gilead Sciences, Inc.

In March 2024, Xilio Development entered into a license agreement with Gilead Sciences, Inc. (“Gilead”), pursuant to which it granted Gilead an exclusive global license to develop and commercialize XTX301, the Company’s tumor-activated IL-12 product candidate, and specified other molecules directed to IL-12.

Xilio Development is responsible for conducting clinical development for XTX301 in the ongoing Phase 1 clinical trial through an initial planned Phase 2 dose expansion clinical trial. Following the delivery by Xilio Development of a specified clinical data package for XTX301 related to the Phase 1 clinical trial and planned Phase 2 clinical trial, Gilead can elect to transition responsibilities for the development and commercialization of XTX301 to Gilead, subject to the terms of the license agreement and payment by Gilead of a $75.0 million transition fee.

In connection with the execution of the license agreement, in March 2024, the Company also entered into a stock purchase agreement with Gilead. Under the stock purchase agreement, Gilead purchased an aggregate of $25.0 million of the Company’s common stock and prefunded warrants in three private placements. In March 2024, the Company initially issued and sold 6,860,223 shares of common stock to Gilead at a purchase price of $1.97 per share, and the Company received approximately $13.5 million in aggregate gross proceeds. In April 2024, the Company issued and sold an additional 485,250 shares of its common stock at a purchase price of $0.76 per share and prefunded warrants to purchase up to an aggregate of 3,882,450 shares of its common stock at a purchase price of $0.7599 per prefunded warrant, and the Company received approximately $3.3 million in aggregate gross proceeds. In December 2024, the Company issued and sold an additional 1,759,978 shares of its common stock at a purchase price of $1.04 per share and prefunded warrants to purchase up to an aggregate of 6,092,816 shares of its common stock at a purchase price of $1.0399 per prefunded warrant, and the Company received approximately $8.2 million in aggregate gross proceeds. The prefunded warrants are exercisable any time at an exercise price of $0.0001 per share, subject to Gilead not being deemed a beneficial owner of greater than 19.9% of the Company’s common stock upon the exercise of the prefunded warrants.

As of December 31, 2024, the Company has received $55.0 million in payments under the Gilead agreements, consisting of the $30.0 million upfront cash payment under the license agreement and $25.0 million in gross proceeds from private placements under the stock purchase agreement. As of December 31, 2024, the Company is eligible to receive up to $592.5 million in additional contingent payments, which consist of the $75.0 million transition fee and up to $517.5 million in specified development, regulatory and sales-based milestones. Prior to the potential transition fee, $17.5 million of the total additional contingent payments are related to a near-term development milestone. In addition, the Company is eligible to receive tiered royalties ranging from high single digits to mid-teens on annual global net product sales.

The Company considered the ASC 606 criteria for combining contracts and determined the license agreement and the stock purchase agreement should be combined into a single contract because they were negotiated and entered into in contemplation of one another. The Company concluded the initial private placement and the additional private placements do not represent freestanding financial instruments as such instruments are not legally detachable due to contractual transfer restrictions. The Company accounted for the common stock issued to Gilead in the initial private placement based on the fair market value of the common stock on the date of issuance. The fair market value of the common stock issued to Gilead in the initial private placement was $4.4 million, based on the closing price of the Company’s common stock on the date of issuance, resulting in a $9.1 million premium. The Company determined that the premium paid by Gilead for the common stock purchased in the initial private placement should be attributed to the transaction price of the license agreement.

The Company determined that the license agreement represents a contract with a customer within the scope of ASC 606 and identified two promises under the license agreement: (i) the exclusive licenses granted to Gilead related to the Company’s IL-12 program and (ii) the provision by Xilio Development and its affiliates of development services related to ongoing and planned clinical trials for XTX301 through an initial planned Phase 2 clinical trial. The Company determined that the exclusive license and development services were not capable of being distinct on the basis that the development services to be provided by Xilio Development are specialized in nature, specifically with respect to its specialized expertise related to XTX301, the IL-12 program and the Company’s proprietary platform for tumor-activated biologics. Accordingly, the Company concluded that there is a single identified combined performance obligation consisting of the exclusive license and the development services.

For purposes of ASC 606, the transaction price of the license agreement at the outset of the arrangement was determined to be $39.1 million, which consisted of the upfront cash payment of $30.0 million under the license agreement and the $9.1 million premium on the sale of common stock to Gilead in the initial private placement, which was allocated to the single combined performance obligation. The Company used the most likely amount method to estimate variable consideration. All contingent payments are fully constrained as of December 31, 2024, as the achievement of the milestones underlying such contingent payments is uncertain and highly susceptible to factors outside of the Company’s control. Accordingly, all such contingent payments are excluded from the transaction price. The Company reevaluates the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and may adjust the transaction price as necessary. Sales-based royalties, including milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company plans to recognize such revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Revenue associated with the combined performance obligation is recognized as services are provided as control is transferred over time. The Company measures progress based on the amount of costs incurred relative to the total costs expected to fulfill the combined performance obligation. In management’s judgment, this input method is the best measure of progress towards satisfying the combined performance obligation and reflects a faithful depiction of the transfer of goods and services.

During the year ended December 31, 2024, the Company recognized license revenue of $6.3 million under the license agreement and the stock purchase agreement. As of December 31, 2024, the Company recorded deferred revenue of $32.8 million, of which $13.5 million was recorded as a current liability on the Company’s consolidated balance sheet. The deferred revenue is expected to be recognized as license revenue through at least 2027 depending on the timing of certain clinical development activities.

Summary of Contract Assets and Liabilities

The following table presents changes in the balances of the Company’s contract liabilities:

	Deferred
	Revenue
Deferred revenue as of December 31, 2023	$	—
Additions		39,124
License revenue recognized		(6,344)
Deferred revenue as of December 31, 2024	$	32,780

Clinical Trial Collaboration with F. Hoffmann-La Roche

In July 2023, the Company and F. Hoffmann-La Roche Ltd. (“Roche”) entered into a clinical trial collaboration (the “Roche Clinical Collaboration”) pursuant to a clinical supply agreement to evaluate vilastobart (XTX101) in combination with atezolizumab (Tecentriq®) in a Phase 1/2 clinical trial consisting of a Phase 1 dose escalation cohort assessing the combination in patients with advanced solid tumors and a Phase 2 clinical trial assessing the combination in patients with microsatellite stable colorectal cancer.

Under the clinical supply agreement, the Company is eligible to receive specified cost-sharing payments from Roche, and each company will supply its respective anti-cancer agent to support the Phase 1/2 clinical trial. The Company is responsible for conducting the Phase 1/2 clinical trial and retains global development and commercialization rights to vilastobart.

The Company concluded that the cost-sharing payments from the Roche Clinical Collaboration are not in the scope of ASC 606 because the Company does not consider performing research and development services for reimbursement to be part of its ongoing major or central operations. Therefore, the Company applied a reasonable, rational, and consistently applied accounting policy election to record the cost-sharing payments from the Roche Clinical Collaboration as a reduction of research and development expenses in the consolidated statements of operations and comprehensive loss for the period in which a study development event is achieved. The Company recognized a reduction of research and development expenses of $4.0 million and $2.0 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, $2.0 million of earned but unpaid cost-sharing payments were recorded in prepaid expenses and other current assets on the Company’s consolidated balance sheet.

Amended and Restated Exclusive License Agreement with City of Hope

In August 2016, Xilio Development entered into an amended and restated exclusive license agreement with City of Hope pursuant to which City of Hope granted Xilio Development an exclusive worldwide license to specified patent rights related to the Company’s anti-CTLA-4 monoclonal antibody program.

Under the agreement, the Company issued 24,019 shares of common stock to City of Hope. For the first three licensed products or licensed services to achieve specified development and regulatory milestones, Xilio Development is obligated to pay City of Hope up to $10.3 million in the aggregate per licensed product or licensed service. To date, the Company has made an aggregate of $0.8 million in specified development and regulatory milestone payments to City of Hope related to its anti-CTLA-4 monoclonal antibody program. In addition, subject to specified conditions, Xilio Development is obligated to pay City of Hope tiered royalties in the low single digits on aggregate annual net sales of licensed products or licensed services on a country-by-country basis until the expiration of the last-to-expire patent or patent application licensed from City of Hope covering the applicable licensed product or licensed service in such country. Xilio Development is also obligated to pay City of Hope a portion of any consideration Xilio Development receives for the grant of sublicenses under the agreement in an amount equal to a low double digit percentage of such consideration, subject to specified conditions under that agreement at the time that Xilio Development grants any such sublicense.

The Company incurred costs of $0.5 million related to the payment of specified development milestones under the agreement during the year ended December 31, 2024. The Company incurred no costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2023. Any additional payments that are contingent upon achievement of development and regulatory milestones or upon sales of licensed products will not be recognized until it becomes probable that the Company will be required to make such payments.

CTLA-4 Monoclonal Antibody License Agreement with WuXi Biologics

In September 2016, the Company entered into a license agreement with WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), as amended in December 2017, pursuant to which WuXi Biologics granted the Company an exclusive worldwide license to specified monoclonal antibodies and patent rights and know-how controlled by WuXi Biologics, including certain patent rights related to the Company’s anti-CTLA-4 monoclonal antibody program.

For each product that exploits the rights licensed under the agreement, the Company is obligated to pay WuXi Biologics up to approximately $25.8 million in the aggregate for specified development and regulatory milestones. To date, the Company has made an aggregate of $5.8 million in specified development and regulatory milestone payments to WuXi Biologics related to its anti-CTLA-4 monoclonal antibody program. In addition, subject to specified conditions, the Company is obligated to pay WuXi Biologics tiered royalties in the low to mid-single digits on aggregate annual worldwide net sales of licensed products during the applicable royalty term.

The Company incurred costs of $4.0 million related to specified development milestones under the agreement during the year ended December 31, 2024, of which $3.0 million was recorded in accrued expenses on the Company’s consolidated balance sheet as of December 31, 2024. The Company incurred no costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2023. Any additional payments that are contingent upon the achievement of development and regulatory milestones or sales of licensed products will not be recognized until it becomes probable that the Company will be required to make such payments.