Out-License of ZEVALIN in Certain Ex-U.S. Territories

12 Months Ended

Dec. 31, 2018

Out-License of ZEVALIN in Certain Ex-U.S. Territories

OUT-LICENSE OF MARQIBO, ZEVALIN, & EVOMELA IN CHINA TERRITORY

Overview of CASI Out-License

In September 2014, we executed three perpetual out-license agreements for ZEVALIN, MARQIBO, and EVOMELA (“CASI Out-Licensed Products”) with CASI, a publicly-traded biopharmaceutical company (NASDAQ: CASI) with a primary focus on the China market (collectively, the “CASI Out-License”). Under the CASI Out-License, we received CASI common stock and a secured promissory note; CASI gained the exclusive rights to distribute these drug products in greater China (which includes Taiwan, Hong Kong and Macau).

CASI is responsible for the development and commercialization of these drugs, including the submission of import drug registration applications to regulatory authorities and conducting any confirmatory clinical studies in greater China. We will provide CASI with future commercial supply of the CASI Out-Licensed Products under typical market terms.

CASI Ownership at December 31, 2018

Under certain conditions that expired in December 2017, we had a right to purchase additional shares of CASI common stock in order to maintain our post-investment ownership percentage. During 2017 and 2016, we acquired an additional 1.5 million and 4.6 million CASI common shares at par value, respectively. Our aggregate holding of 11.5 million common shares as of December 31, 2018, represented an approximate 12.1% ownership in CASI, with a fair market value of $46.4 million (see Note 3(a)).

Proceeds Received in 2014

The proceeds we received in 2014, and its fair value on the CASI Out-License execution date, consisted of the following:



CASI common stock (5.4 million shares)	$	8,649	(a)
CASI secured promissory note, net of fair value discount ($1.5 million face value and 0.5% annual coupon)	1,310		(b)
Total consideration received, net of fair value discount	$	9,959	(c)

(a) Value determined based on the September 17, 2014 closing price of 5.4 million shares of CASI common stock on the NASDAQ Capital Market of $1.60 per share.

(b) Value estimated using the terms of the $1.5 million promissory note, the application of a synthetic debt rating based on CASI’s publicly-available financial information, and the prevailing interest yields on similar public debt securities as of September 17, 2014. This promissory note has been reclassified in the accompanying Consolidated Balance Sheets as of December 31, 2018 to "other receivables" (presented within current assets) from "other assets" (presented within non-current assets) due to its maturity date (as amended) of September 17, 2019.

(c) Presented within “license fees and service revenue” in the accompanying Consolidated Statements of Operations for the year ended December 31, 2015 (see below).

In addition, CASI will be responsible for paying any royalties or milestones that we are obligated to pay to our third-party licensors resulting from the achievement of certain milestones and/or sales of CASI Out-Licensed Products, but only to the extent of the greater China portion of such royalties or milestones.

License Fee Revenue Recognized in 2015

The $9.7 million value of the upfront proceeds (undiscounted, and net of certain foreign exchange adjustments) from CASI were recognized in 2015 within “license fees and service revenue.” The delayed timing of this revenue recognition corresponded with the execution of certain supply agreements with CASI for ZEVALIN, MARQIBO, and EVOMELA. These agreements allow CASI to procure CASI Out-Licensed Products directly from approved third parties, and in such case, do not require our future involvement for its commercial supply.

Mundipharma [Member]

Other Commitments [Line Items]

Out-License of ZEVALIN in Certain Ex-U.S. Territories

OUT-LICENSE OF ZEVALIN IN CERTAIN EX-U.S. TERRITORIES

In November 2015, we entered into an out-license agreement with Mundipharma AG ("Mundipharma") for its commercialization of ZEVALIN in Asia (excluding India and Greater China), Australia, New Zealand, Africa, the Middle East, and Latin America (including the Caribbean). In return, we received $18 million (comprised of $15 million received in December 2015 and $3 million received in January 2016). Of these proceeds, $15 million was recognized and reported within "license fees and service revenue" in the fourth quarter of 2015, and the remaining $3 million payment was recognized in full by June 30, 2017.

In April 2018, we received $2 million due to Mundipharma’s achievement of a specified sales milestone which was recognized in the first quarter of 2018 and reported within “license fees and service revenue” on our accompanying Consolidated Statements of Operations for the year ended December 31, 2018 (see Note 5). Mundipharma is required to reimburse us for our payment of royalties due to Bayer Pharma AG (“Bayer”) from its ZEVALIN sales - see Note 17(b)(ii).