XML 26 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Parties
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Related Parties

11. RELATED PARTIES

Intrexon Corporation

In September 2014, the Company entered into an Exclusive Channel Collaboration Agreement (the “Collaboration Agreement”) with Intrexon Corporation (“Intrexon”) to use Intrexon’s proprietary technology for the development and commercialization of allogeneic cell therapeutics (the “Collaboration Products”) to treat or repair damaged articular hyaline cartilage in humans. The term of the Collaboration Agreement commenced upon the effective date, September 30, 2014, and continues until either written notice of termination is given by the Company within ninety days, or if either party creates a material breach that cannot be remedied within sixty days.

Under the terms of the Collaboration Agreement, the Company is solely responsible for the costs to develop and commercialize any Collaboration Products with the following exceptions: (i) the establishment of certain manufacturing capabilities and facilities; (ii) the cost of basic research related to Intrexon’s proprietary technology outside of costs related to the Collaboration Products; (iii) payments related to certain in-licensed third party IP; (iv) the costs of filing, prosecution and maintenance of Intrexon patents; and (v) any other costs mutually agreed upon as being the responsibility of Intrexon. As partial consideration, the Company will pay commercialization milestones totaling $12 million, if and when achieved, and sales milestones totaling $22.5 million, if and when achieved. The milestone payments are payable in cash or shares of the Company’s common stock at the option of the Company. In the event the Company is sold prior to making any of these milestone payments and the Collaboration Agreement is transferred in the sale, the milestone payments would be payable in cash. The Company is also required to make low double digit royalty payments to Intrexon on any gross profit arising from the sale of Collaboration Products and to pay an intermediate double digit percentage of any sublicensing revenue it receives.

Under the terms of the Collaboration Agreement, the Company reimburses Intrexon for 50% of the product research and development costs with the remaining 50% due after acceptance by the FDA or equivalent regulatory authority of an Investigational New Drug Application or equivalent regulatory filing of a collaboration product or upon 90 day written notice of cancellation by the Company. There were no expenses incurred under the collaboration for the nine months ended September 30, 2017. For the nine months ended September 30, 2016, total incurred expenses were $2.3 million. The total accrued expenses due to Intrexon at September 30, 2017 and December 31, 2016 were $3.0 million and $3.0 million, respectively. These expenses were included in research and development in the consolidated statements of operations.

Purpose, Co.

In June 2012, the Company entered into an agreement with Purpose to amend its previous agreements. In the previous agreements, Purpose granted the Company a perpetual license to its patents related to its exogenous tissue processor which is used in the development of the Company’s products. In exchange, the Company granted Purpose a perpetual license to all of the Company’s biotechnology and biomaterial for use in Japan. The agreement provided for Purpose to manufacture and sell machinery to the Company for cost until the Company’s products become commercially viable. The Company also agreed to pay royalties on any third-party revenue generated using Purpose’s licensed technology.

Under the June 2012 amendment, the Company received exclusive rights to all of Purpose’s technology related to the exogenous tissue processor, continued supply of exogenous tissue processors during the Company’s clinical trials, and rights to manufacture the exogenous tissue processors at any location the Company chooses. In exchange for such consideration, the Company named Purpose the sole manufacturer of equipment and also clarified the geographic territories of the exclusive license that Purpose was granted for use of the Company’s technology. In addition, the Company agreed to reimburse Purpose for $0.3 million of development costs on a next generation tissue processer. Refer to the discussion under Note 5, Tissue Processor Sub-License.

In May 2016, the Company acquired the development and commercialization rights to NeoCart for the Japanese market from Purpose. Under the terms of the amended agreement, the Company assumes sole responsibility for and rights to the development and commercialization of NeoCart in Japan. In exchange for the transfer of development and commercialization rights, the Company will pay a success-based milestone to Purpose upon conditional approval of NeoCart in Japan, as well as commercial milestones and a low single digit royalty on Japanese sales of NeoCart, upon full approval, if any, in Japan.

The Company paid Purpose $0.1 million and $0.1 million in the nine months ended September 30, 2017 and 2016, respectively.

Board of Director Affiliates.

Affiliates of certain members of the Company’s Board of Directors participated in the Private Placement as described in Note 6.