Revenue Arrangements

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Arrangements

12. Revenue Arrangements

Astellas Gene Therapies

In January 2023, the Company entered into a License and Development Agreement, or the Astellas Agreement, with Audentes Therapeutics, Inc., doing business as Astellas. Under the Astellas Agreement, the Company granted Astellas an exclusive license to the Company’s IdeXork technology arising from Xork (defined below), to develop and commercialize Xork for use in Pompe disease in combination with an Astellas gene therapy investigational or authorized product. Xork, Genovis’ IgG Protease, is licensed by the Genovis Agreement, as described in Note 14 to these consolidated financial statements, Astellas paid a $10.0 million upfront payment to the Company upon signing of the Astellas Agreement, and the Company is entitled to receive up to $340.0 million in future additional payments over the course of the partnership that are contingent on the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales where Xork is used as a pre-treatment for an Astellas investigational or authorized product, and tiered royalty payments ranging from low to high single digits.

Pursuant to the Astellas Agreement, the Company will have the exclusive right and responsibility to complete research and development of Xork products and to conduct all preclinical studies and clinical trials for Xork for use in Pompe disease with an Astellas gene therapy investigational or authorized product, or the Xork Development Services. Astellas will reimburse the Company for 25% of all budgeted costs incurred to complete the development of Xork for use in Pompe disease with an Astellas gene therapy investigational or authorized product. The Company will have control and responsibility over regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications relating to the licensed product. Astellas will have the exclusive right and responsibility to research, develop, and commercialize Astellas products used in combination with Xork and will have control and responsibility over all regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications, relating to Astellas products and Astellas products used in combination with Xork.

The Company determined the Astellas Agreement represents a service arrangement under the scope of ASC 606. The Company determined that the sublicense of Xork to Astellas, the licensed know-how, and the Xork Development Services represent a single promise and performance obligation to be transferred to Astellas over time due to the nature of the promises in the contract. As such, the Company will recognize the transaction price as revenue utilizing the input method to measure the progress of satisfying the single performance obligation to Astellas.

In determining the transaction price, the Company concluded the upfront payment of $10.0 million and development cost reimbursements of $5.5 million will be included in the initial transaction price. All other development milestones will be fully constrained and will only be included in the transaction price when the applicable milestone is deemed probable of achievement. Each of these variable consideration items were evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt and timing of such development milestones is outside the control of the Company and probability of success criteria is estimated. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. In accordance with ASC 606, the Company will only recognize revenue associated with sales-based milestones and royalties when the subsequent sales thresholds are reached and underlying sales occur, respectively. The Company determined that a significant financing component does not exist in its arrangement with Astellas. The Company also determined the options to negotiate additional fields, enter into a clinical supply agreement, and enter into a commercial supply agreement do not represent material rights under the Astellas Agreement. Astellas has the right to terminate the Astellas Agreement in its entirety or on a field-by-field basis, upon 90 days’ written notice to the Company.

As of June 30, 2023, the Company recorded $4.2 million as a short-term contract liability and $4.9 million as a long-term contract liability, representing deferred revenue associated with the Astellas Agreement. As of June 30, 2023, the Company recorded a receivable of $0.3 million, representing billings for the Xork Development Services that are subject to reimbursement by Astellas. Revenue of $0.8 million and $1.4 million related to the Astellas Agreement was recognized during the three and six months ended June 30, 2023, respectively.

Takeda Pharmaceuticals USA, Inc.

License and Development Agreement

In October 2021, the Company entered into a License Agreement, or the Takeda Agreement, with Takeda Pharmaceuticals USA, Inc., or Takeda. Under the Takeda Agreement, the Company granted Takeda an exclusive license to the Company’s ImmTOR technology initially for two specified disease indications within the field of lysosomal storage disorders. Takeda paid a $3.0 million upfront payment to the Company upon signing of the Takeda Agreement, and the Company is entitled to receive up to $1.124 billion in future additional payments over the course of the partnership that are contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages. The Company is also eligible for tiered royalties on future commercial sales of any licensed products. A more detailed description of the Takeda Agreement and the Company’s evaluation of this agreement under ASC 606 can be found in Note 12 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

On March 9, 2023, the Company was notified by Takeda of the achievement of the milestone event related to the completion of a non-clinical milestone for one of the specified disease indications within the field of lysosomal storage disorders under the Takeda Agreement. Accordingly, the Company received a milestone payment of $0.5 million during the three months ended June 30, 2023.

In April 2023, the Company was notified by Takeda of its intention to terminate the Takeda Agreement effective July 25, 2023.

As of June 30, 2023 and December 31, 2022, the Company recorded no short-term contract liability and $0.1 million as a short-term contract liability, respectively, representing deferred revenue associated with the Takeda Agreement. Revenue of $0.1 million and $0.6 million related to the Takeda Agreement was recognized during the three and six months ended June 30, 2023, respectively. No revenue was recognized during the three months ended June 30, 2022, and revenue of $1.0 million related to the Takeda Agreement was recognized during the six months ended June 30, 2022.

Swedish Orphan Biovitrum AB (publ.)

License and Development Agreement

In June 2020, the Company and Sobi entered into a License and Development Agreement, or the Sobi License. Pursuant to the Sobi License, the Company agreed to grant Sobi an exclusive, worldwide (except as to Greater China) license to develop, manufacture and commercialize the Company’s SEL-212 drug candidate, which is currently in development for the treatment of chronic refractory gout. The SEL-212 drug candidate is a pharmaceutical composition containing a combination of pegadricase, or the Compound, and ImmTOR. Pursuant to the Sobi License, in consideration of the license, Sobi agreed to pay the Company a one-time, upfront payment of $75.0 million. Sobi has also agreed to make milestone payments totaling up to $630.0 million to the Company upon the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier. A more detailed description of the Sobi License and the Company’s evaluation of this agreement under ASC 606 can be found in Note 12 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023 and December 31, 2022, the Company recorded a total outstanding receivable of $5.1 million and $5.0 million, respectively, representing billings for the Phase 3 DISSOLVE program that are subject to reimbursement by Sobi. Additionally, as of June 30, 2023 and December 31, 2022, the Company recorded a total unbilled receivable of $1.1 million and $3.2 million, respectively, representing revenue earned but not yet billed for the Phase 3 DISSOLVE program. Revenue of $4.3 million and $8.7 million related to the Sobi License was recognized during the three and six months ended June 30, 2023, respectively. Revenue of $29.2 million and $52.9 million related to the Sobi License was recognized during the three and six months ended June 30, 2022, respectively.

Sarepta Therapeutics, Inc.

Research License and Option Agreement

In June 2020, the Company and Sarepta Therapeutics, Inc., or Sarepta, entered into a Research License and Option Agreement, or the Sarepta Agreement. Pursuant to the Sarepta Agreement, the Company agreed to grant Sarepta a license under the Company’s intellectual property rights covering the Company’s antigen-specific biodegradable nanoparticle encapsulating ImmTOR to research and evaluate ImmTOR in combination with Sarepta’s adeno-associated virus gene therapy technology, or gene editing technology, using viral or non-viral delivery, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle

Muscular Dystrophy subtypes, or the Indications. Sarepta initially had an option term of 24 months during which it could opt-in to obtain an exclusive license to further develop and commercialize the product to treat at least one indication, with a potential to extend the option term for an additional fee. The Company agreed to supply ImmTOR to Sarepta for clinical supply on a cost-plus basis under the Sarepta Agreement. A more detailed description of the Sarepta Agreement and the Company’s evaluation of this agreement under ASC 606 can be found in Note 12 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

On March 13, 2023, the Company was notified by Sarepta that Sarepta would not be exercising its exclusive option under the Sarepta Agreement. Therefore, the remaining deferred revenue balance as of December 31, 2022 of $0.5 million was recognized as revenue during the six months ended June 30, 2023. No revenue was recognized during the three months ended June 30, 2023. Revenue of $10.1 million and $10.2 million was recognized during the three and six months ended June 30, 2022, respectively.

Spark Therapeutics, Inc.

Spark License Agreement

In December 2016, the Company entered into a License and Option Agreement, or the Spark License Agreement, with Spark Therapeutics, Inc., or Spark, pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets utilizing the ImmTOR platform. The Spark License Agreement provides Spark with certain exclusive, worldwide, royalty bearing licenses to the Company’s intellectual property, allowing Spark to develop and commercialize gene therapies in combination with ImmTOR for Factor VIII, an essential blood clotting protein relevant to the treatment of hemophilia A, the initial target.

On January 18, 2022, both parties agreed to mutually terminate the Spark License Agreement. Therefore, the short-term contract liability of $9.2 million as of December 31, 2021 was recognized as revenue during the six months ended June 30, 2022. No revenue was recognized during the three months ended June 30, 2022.

Transaction Price Allocated to Future Performance Obligations

Remaining performance obligations represent the transaction price of contracts for which work has not been performed, or has been partially performed. As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $9.1 million.

Contract Balances from Contracts with Customers

The following table presents changes in the Company’s contract liabilities during the six months ended June 30, 2023 (in thousands):

	Balance at							Balance at
	beginning of period		Additions		Deductions			end of period
Six Months Ended June 30, 2023
Contract liabilities:
Deferred revenue	$	593	$	10,500	$	(1,996	)	$	9,097
Total contract liabilities	$	593	$	10,500	$	(1,996	)	$	9,097