Equity Method Investment

12 Months Ended

Dec. 31, 2023

Equity Method Investment

Equity Method Investment

5. Equity Method Investment

In August 2020, the Company established Angel Pharmaceuticals Co. Ltd. (“Angel”), a wholly-owned corporate venture in the People’s Republic of China (“China”) designed to develop, manufacture, and commercialize soquelitinib, ciforadenant and mupadolimab compounds for distribution within the countries of China, Taiwan, Macao, and Hong Kong (collectively, the “Territories”) based on intellectual property licenses to be contributed to Angel by the Company.

In October 2020, Angel raised financing from third-party investors, the licenses were entered into and the Company’s ownership interest was reduced to 53.2%. Under the license agreements, the Company is required to provide manufacturing supply services for future supply of drug products for use in clinical trials, research and development, operational support, and participate in the joint steering committee which oversees the development and commercialization of the compounds. Angel is not required to make any payments to the Company regarding the licensed compounds or the additional services outlined in the agreement. Pursuant to the terms of the agreement, during the Exclusive Grant Back Period, Angel grants to Corvus an exclusive, fully paid-up and sublicensable license for sole and jointly owned IP. After the 7 year Exclusive Grant Back Period, the licenses for sole and jointly owned IP that Angel grants to the company will be non-exclusive, fully paid, and sublicensable.

As a result of the financing, the Company reassessed its interest in Angel and determined that while Angel is a VIE, the Company is not considered the primary beneficiary of such VIE since Corvus does not have the power, through voting or similar rights and the license agreements, to direct the activities of Angel that most significantly impact Angel’s economic performance. Further, the Company determined that as it has a significant influence over Angel, and, therefore, it shall account for its investment in Angel using the equity method starting in October 2020, the date it lost control over Angel. At the date of loss of control, the Company derecognized all of Angel’s assets and liabilities from its balance sheet, recognized the retained equity interest at its fair value of $37.5 million, and recognized a gain of $37.5 million, which is included in gain on deconsolidation of Angel Pharmaceuticals on the consolidated statement of operations for the year ended December 31, 2020.

As of December 31, 2023, the Company’s ownership interest in Angel was approximately 49.7%, excluding 7% of Angel’s equity reserved for issuance under the Angel ESOP. The Company recognized its share of losses in Angel for the total amount of $5.3 million, $10.0 million and $4.8 million as loss from equity method investment on the consolidated statement of operations for the years ended December 31, 2023, 2022 and 2021, respectively. Since inception through December 31, 2023, Angel has not recorded any revenue.

The Company evaluates its equity method investment in Angel for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. For further discussion of the

Company’s impairment policy, see Note 2.

Summary Financial Information

Summary financial information for Angel Pharmaceuticals is as follows:

		As of		As of
Balance Sheet Data	December 31, 2023		December 31, 2022
	(in thousands)
Current assets	$	17,628	$	29,062
Non-current assets		1,427		1,652
Current liabilities		1,725		6,293
Non-current liabilities		648		985
Stockholders' equity		16,682		23,436

	Year Ended December 31,
Statement of Operations Data	2023		2022		2021
	(in thousands)
Revenue	$	—	$	—	$	—
Gross Profit		—		—		—
Net loss		6,213		(11,846)		(5,697)
Share of loss from investments accounted for using the equity method		(5,284)		(10,005)		(4,831)