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License and Research Agreements
9 Months Ended
Sep. 30, 2024
Research Grant Agreement [Abstract]  
License and Research Agreements . License and Research Agreements

Kyowa Kirin Co., Ltd.

In August 2013, the Company entered into a collaboration and license agreement with Kyowa Kirin Co., Ltd., or KKC. Under the terms of this collaboration and license agreement, as amended, the Company and KKC collaborate on the development and commercialization of Crysvita in the field of orphan diseases in the U.S. and Canada, or the Profit-Share Territory, and in the European Union, United Kingdom, and Switzerland, or the European Territory, and the Company has the right to develop and commercialize such products in the field of orphan diseases in Mexico and Central and South America, or Latin America.

Development Activities

In the field of orphan diseases, except for ongoing studies being conducted by KKC, the Company was the lead party for development activities in the Profit-Share Territory and in the European Territory until the applicable transition date. The Company shared the costs for development activities in the Profit-Share Territory and the European Territory conducted pursuant to the development plan before the applicable transition date equally with KKC. In April 2023, which was the transition date for the Profit-Share Territory, KKC became the lead party and became responsible for the costs of the subsequent development activities. However, the Company will continue to equally share in the costs of the studies with KKC that commenced prior to the applicable transition date.

The collaboration and license agreements are within the scope of ASC 808, which provides guidance on the presentation and disclosure of collaborative arrangements.

Collaboration and Royalty Revenue for Sales in the Profit-Share Territory

The Company and KKC shared commercial responsibilities and profits in the Profit-Share Territory until April 2023. Under the collaboration agreement, KKC manufactured and supplied Crysvita for commercial use in the Profit-Share Territory and charged the Company a transfer price of 30% of net sales in 2023, and 35% prior to December 31, 2022. The remaining profit or loss after supply costs from commercializing products in the Profit-Share Territory was shared between the Company and KKC on a 50/50 basis until April 2023. In April 2023, commercialization responsibilities for Crysvita in the Profit-Share Territory transitioned to KKC. Thereafter, the Company is entitled to receive a tiered double-digit revenue share from the mid-20% range up to a maximum rate of 30%.

In 2022, the Company entered into an amendment to the collaboration agreement which granted the Company the right to continue to support KKC in commercial field activities in the U.S. through April 2024, subject to the limitations and conditions set forth in the amendment. The parties subsequently mutually agreed to extend the Company's right to continue to support KKC in commercial field activities in the U.S. through December 31, 2024, and as a result, the Company will continue to support commercial field efforts in the U.S. through a cost share arrangement through December 2024. After December 31, 2024, the Company’s rights to promote Crysvita in the U.S. will be limited to medical geneticists and the Company will solely bear its expenses for the promotion of Crysvita in the Profit-Share Territory.

As KKC was the principal in the sale transaction with the customer during the profit-share period, the Company recognized a pro-rata share of collaboration revenue, net of transfer pricing, in the period the sale occurred. The Company concluded that its portion of KKC’s sales in the Profit-Share Territory prior to April 2023 was analogous to a royalty and therefore recorded its share as collaboration revenue, similar to a royalty. Starting in April 2023, the Company began to record the royalty revenue as the underlying sales occurred.

In July 2022, the Company sold to OMERS its right to receive 30% of the future royalty payments due to the Company based on net sales of Crysvita in the U.S. and Canada, subject to a cap, beginning in April 2023, as further described in Note 9. The Company records this revenue as royalty revenue.

Product Sales Revenue for Other Territories

The Company is responsible for commercializing Crysvita in Latin America and Turkey. The Company is considered the principal in these territories as the Company controls the product before it is transferred to the customer. Accordingly, the Company records revenue on a gross basis for the sale of Crysvita once the product is delivered and the risk and title of the product is transferred to the distributor. KKC has the option to assume responsibility for commercialization efforts in Turkey from the Company, after a certain minimum period.

Under the collaboration agreement, KKC manufactures and supplies Crysvita, which is purchased by the Company for sales in Latin American territories and charges the Company a transfer price of 30% of net sales. The transfer price on these sales was 35% prior to December 31, 2022. The Company also pays to KKC a low single-digit royalty on net sales in Latin America.

Royalty Revenue for Sales in the European Territory

KKC has the commercial responsibility for Crysvita in the European Territory. In December 2019, the Company sold its right to receive royalty payments based on sales in the European Territory to Royalty Pharma, effective January 1, 2020, as further described in Note 9. Prior to the Company’s sale of the royalty, the Company received a royalty of up to 10% on net sales in the European Territory, which was recognized as the underlying sales occur. Beginning in 2020, the Company records the royalty revenue as non-cash royalty revenues.

Total Crysvita revenue was as follows (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue in Profit-Share Territory:

 

 

 

 

 

 

 

 

 

 

 

Royalty revenue

$

39,189

 

 

$

35,160

 

 

$

114,402

 

 

$

64,221

 

Non-cash royalty revenue

 

16,796

 

 

 

15,070

 

 

 

49,030

 

 

 

27,524

 

Collaboration revenue

 

 

 

 

 

 

 

 

 

 

69,705

 

Total revenue in Profit-Share Territory

 

55,985

 

 

 

50,230

 

 

 

163,432

 

 

 

161,450

 

Product sales

 

35,604

 

 

 

19,200

 

 

 

112,294

 

 

 

57,318

 

Non-cash royalty revenue in European Territories

 

6,258

 

 

 

5,473

 

 

 

18,376

 

 

 

15,171

 

Total Crysvita revenue

$

97,847

 

 

$

74,903

 

 

$

294,102

 

 

$

233,939

 

Collaboration Cost Sharing and Payments

Under the collaboration agreement, KKC and the Company share certain development and commercialization costs and as a result, the Company was reimbursed for these costs and operating expenses were reduced. Additionally, KKC is owed a transfer price fee and royalties on certain revenues and the Company recorded amounts owed to KKC in cost of sales. These amounts were recognized in the Company’s Condensed Consolidated Statements of Operations in connection with the collaboration agreement with KKC as follows (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Research and development

$

(841

)

 

$

(940

)

 

$

(2,779

)

 

$

(4,665

)

Selling, general and administrative

 

(898

)

 

 

(2,060

)

 

 

(3,184

)

 

 

(15,346

)

Cost of sales

 

12,044

 

 

 

4,661

 

 

 

37,952

 

 

 

14,189

 

Collaboration Receivable and Payable

The Company had accounts receivable from KKC in the amount of $55.9 million and $39.2 million from profit-share revenue and royalties, other receivables of $1.8 million and $1.1 million recorded in other current assets, and accrued liabilities of $11.7 million and $5.3 million from inventory, commercial, and development activity reimbursements, as of September 30, 2024 and December 31, 2023, respectively.

Mereo

In December 2020, the Company entered into a License and Collaboration Agreement with Mereo to collaborate on the development of setrusumab. Under the terms of the agreement, the Company leads future global development of setrusumab in both pediatric and adult patients with Osteogenesis Imperfecta, or OI. The Company was granted an exclusive license to develop and commercialize setrusumab in the U.S., Turkey, and the rest of the world, excluding the European Economic Area, United Kingdom, and Switzerland, or the Mereo Territory, where Mereo retains commercial rights. Each party is responsible for post-marketing commitments and commercial supply in their respective territories.

Upon the closing of the transactions under the License and Collaboration Agreement with Mereo in January 2021, the Company made a payment of $50.0 million to Mereo. In July 2023, the Company made a $9.0 million payment to Mereo upon the achievement of a clinical milestone. Going forward, the Company may be required to make payments of up to $245.0 million upon the achievement of certain clinical, regulatory, and commercial milestones. The Company will pay for all global development costs as well as tiered double-digit percentage royalties to Mereo on net sales in the U.S., Turkey, and the rest of the world, and Mereo will pay the Company a fixed double-digit percentage royalty on net sales in the Mereo Territory.

Although Mereo is a VIE, the Company is not the primary beneficiary as it does not have the power to direct the activities that would most significantly impact the economic performance of Mereo. Prior to the achievement of certain development milestones, all consideration paid to Mereo represents rights to potential future benefits associated with Mereo’s in-process research and development activities, which have not reached technological feasibility and have no alternative future use.

Regeneron

In January 2022, the Company announced a collaboration with Regeneron Pharmaceuticals, or Regeneron, to commercialize Evkeeza for HoFH outside of the U.S. Evkeeza is approved in the U.S., where it is marketed by Regeneron, and in the EEA and Japan as a first-in-class therapy for use together with diet and other low-density lipoprotein-cholesterol-lowering therapies to treat adults and adolescents aged 12 years and older with HoFH. Pursuant to the terms of the agreement, the Company received the rights to develop, commercialize and distribute the product for HoFH in countries outside of the U.S. The Company is obligated to pay up to $63.0 million in future milestone payments, contingent upon the achievement of certain regulatory and sales milestones. The Company may share in certain costs for global trials led by Regeneron and also received the right to opt into other potential indications.

The collaboration agreement is within the scope of ASC 808 which provides guidance on the presentation and disclosure of collaborative arrangements. As the Company would be the principal in future sale transactions with the customer, the Company recognizes product sales and cost of sales in the period the related sales occur and the related revenue recognition criteria are met. Under the collaboration agreement, Regeneron supplies the product and charges the Company a transfer price from the low 20% range up to 40% on net sales, which is recognized as cost of sales in the Company’s Condensed Consolidated Statement of Operations.

The Company paid Regeneron a $30.0 million upfront payment upon the closing of the transaction in January 2022, a $10.0 million regulatory milestone payment in January 2024, and a $2.5 million regulatory milestone payment in May 2024. As these payments are for the Company’s use of intellectual property for Evkeeza for HoFH, they were recorded as intangible assets.

Under the collaboration agreement, the Company recognized $0.3 million, net, in development expense for the three months ended September 30, 2024, and recognized an offset of $2.5 million, net, to development expense for the nine months ended September 30, 2024, respectively, recorded as an increase and offset, respectively, to research and development expense. The Company recognized $1.9 million, net, and $6.9 million, net, in development expense under this agreement for the three and nine months ended September 30, 2023, respectively, recorded as research and development expense. The Company had collaboration payables for this arrangement included in accrued liabilities of $2.5 million and $10.6 million as of September 30, 2024 and December 31, 2023, respectively. Additionally, Regeneron is owed a transfer price fee and royalties of $2.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively, and $0.2 million and $0.4 million for the three and nine months ended September 30, 2023, respectively, recorded in cost of sales in the financial statements.

Other Arrangements

The Company has also entered into several collaborations and/or licensing arrangements in prior periods. Except as disclosed above, there have been no material changes in these arrangements during the three and nine months ended September 30, 2024 as compared to those disclosed in "Note 8. License and Research Agreements" to the Consolidated Financial Statements in the Annual Report.

Under the financial terms of these arrangements, the Company may be required to make payments upon achievement of developmental, regulatory, and commercial milestones, which could be significant. Future milestone payments, if any, will be

reflected in the financial statements upon the occurrence of the contingent event. In addition, the Company may be required to pay royalties on future sales if products related to these arrangements are commercialized. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty.

As described in the Annual Report, the Company holds an equity interest in Solid in connection with its collaboration arrangement. The changes in the fair value of the Company’s equity investment in the common stock of Solid were as follows (in thousands):

 

Common stock

 

As of December 31, 2022

$

2,807

 

Change in fair value

 

397

 

As of December 31, 2023

 

3,204

 

Change in fair value

 

433

 

As of September 30, 2024

$

3,637