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Collaboration and license agreements
 6 Months Ended
Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Collaboration and license agreements Collaboration and license agreements
Roche Collaboration and License Agreement
In March 2016, the Company entered into a license agreement with Roche, which was amended in June 2016 and amended further in March 2017. The Company and Roche amended and restated that agreement (as so amended) in December 2018. This amended and restated agreement is referred to as the Roche Agreement. Under the Roche Agreement, the Company and Roche agreed to collaborate in the research, development, manufacture and commercialization of target-binding degrader medicines using the Company’s proprietary TORPEDO platform for the treatment of cancers and other indications. Under the Roche Agreement, the Company may elect to opt into certain co-development rights, in which case the Company will receive an increased royalty rate on future product sales from products directed to that target. In addition, if the Company opts into certain co-detailing rights, it is also entitled to reimbursement of certain commercialization costs. Upon entry into the Roche Agreement, the Company received additional upfront consideration of $40.0 million from Roche.
In November 2020, the Company signed a further amendment, the effect of which was to provide that the parties would develop up to five potential targets, with Roche maintaining its option rights to license and commercialize products directed to those targets. The November 2020 amendment also provides a mechanism through which the Company and Roche can mutually agree to terminate the Roche Agreement on a target-by-target basis by the entry into a Mutual Target Termination Agreement. Upon the entry into a Mutual Target Termination Agreement, the Roche Agreement provides that all rights and responsibilities for know-how and other intellectual property in support of products that use inhibition as their mode of action revert to Roche and all rights and responsibilities for know-how and other intellectual property in support of products that use degradation as their mode of action revert to the Company. In support of this allocation of rights, Roche provides the Company, and the Company provides Roche, with a perpetual irrevocable, fully paid up, exclusive (even as to party granting the license), sublicensable (including in multiple tiers) license to the patents and know-how that are allocated to a party under a Mutual Target Termination Agreement. As the research activities with Roche have progressed and evolved over time, there are now three targets on which the parties continue to collaborate, with Roche maintaining its option rights to license and commercialize products directed to those three targets.
Under the Roche Agreement, the Company receives annual research plan payments of $1.0 million for up to three years for each active research plan. For certain targets, Roche is required to pay the Company fees of $2.0 million and $3.0 million upon the progression of targets to the lead series identification achievement and good laboratory practice toxicology study phase, respectively. Finally, adjustments were made to the option exercise fees, whereby targets that have progressed through standard good laboratory practice, or GLP, toxicology studies at the time of exercise now have option exercise fees of $7.0 million to $12.0 million and those progressed through Phase 1 trials have option exercise fees of $20.0 million. For each target option exercised by Roche, the Company is eligible to receive milestone payments ranging from $260.0 million to $275.0 million upon the achievement of certain research, development and commercial milestones with respect to corresponding products, subject to certain reductions and exclusions based on intellectual property coverage. Roche is also required to pay the Company up to $150.0 million per target in one-time sales-based milestone payments upon the achievement of specified levels of net sales of a product directed to such target. Finally, Roche is required to pay the Company tiered royalties ranging from the mid-single digits to mid-teen percentages on net sales of products sold by Roche pursuant to its exercise of its option rights, subject to certain reductions. For sales of products for which the Company exercises its co-development right, the applicable royalty rates will be increased by a low-single digit percentage.
The collaboration is managed by a joint research committee. The Company has control over the joint research committee prior to Roche’s exercise of its option rights as to a particular target, with Roche assuming control of the joint research committee thereafter, and may terminate the Roche Agreement on a target-by-target or product-by-product basis under several scenarios, upon at least 90 days’ prior written notice.
Roche Agreement accounting
At commencement, the Company identified twelve performance obligations within the Roche Agreement, represented by the six potential research and development targets and the option rights held by Roche for each of the six targets. A non-exclusive royalty-free license to use the Company’s intellectual property to conduct research and development activities and participation on joint research committee were identified as promised services. However, the Company determined that the research and development license and research and development services were not distinct from one another, and participation on the joint research committee was determined to be quantitatively and qualitatively immaterial.
The total transaction price of the Roche Agreement is allocated to the performance obligations based on their relative standalone selling price. The allocated transaction price is recognized as revenue from collaboration agreements in one of two ways:
•Research and development targets: The Company recognizes the portion of the transaction price allocated to each of the research and development performance obligations as the research and development services are provided, using an input method, in proportion to costs incurred to date for each research development target as compared to total costs incurred and expected to be incurred in the future to satisfy the underlying obligation related to said research and development target. The transfer of control occurs over this period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.
•Option rights: The transaction price allocated to the options rights, which are considered material rights, is recognized in the period that Roche elects to exercise or elects to not exercise its option right to license and commercialize the underlying research and development target.
The following table summarizes the allocation of the total transaction price to the identified performance obligations under the Roche Agreement, and the amount of the transaction price unsatisfied as of June 30, 2022 (in thousands):
Transaction
Price
Allocated		Transaction
Price
Unsatisfied
Performance obligations:  
Research and development targets$61,074 $26,808 
Option rights6,748 2,502 
Total$67,822 $29,310 
Amounts due to the Company that have not yet been received are recorded as accounts receivable and amounts received that have not yet been recognized as revenue from collaboration agreements are recorded in deferred revenue on the Company’s condensed consolidated balance sheet.
Biogen Collaboration Research and License Agreement
In December 2018, the Company entered into a collaboration research and license agreement, or the Biogen Agreement, with Biogen MA, Inc., or Biogen. In February 2020, the Company and Biogen amended the Biogen Agreement to provide further clarity around Biogen’s ownership of target binding moieties (which are portions of molecules), and any related intellectual property that are directed at or bind to collaboration targets. This amendment further provided that Biogen licenses to the Company rights to use these Biogen target binding moieties and any related intellectual property as needed in order to conduct the research and development activities contemplated under the Biogen Agreement. Pursuant to the terms of the Biogen Agreement, the Company and Biogen agreed to collaborate on research activities to develop novel treatments for neurological conditions such as Alzheimer's disease and Parkinson's disease through medicines that rely on target protein degradation, or TPD, as their mode of action, all of which are created using the Company’s degrader technology. Under the terms of the Biogen Agreement, the Company will initially develop TPD therapeutics that utilize degrader technology for up to five target proteins over a period of 54 months, ending in June 2023. On a target-by-target basis, after successful completion of a defined target evaluation period, Biogen assumes full rights and responsibility to each degrader to meet certain criteria against a target. Biogen also has the option to pay an additional $62.5 million to extend the agreement for four additional years and select up to five additional targets for development.
In exchange for the non-exclusive research license from Biogen, as well as a $45.0 million nonrefundable upfront payment, the Company has granted a license to develop, commercialize and manufacture products related to each of the targets (which is contingent on not cancelling the agreement), performs initial research services for drug discovery, has provided a non-exclusive research and commercial license to its intellectual property and participates on the joint steering committee, or the Biogen JSC. The Company was also obligated to participate in early research activities for other potential targets or sandbox activities, at Biogen’s election up to a maximum amount; any work performed for these services is reimbursed by Biogen, and Biogen reimburses the Company for certain full-time equivalent, or FTE, costs. The Company’s obligations under the sandbox activities were completed as of August 31, 2021. For any target, following the achievement of development candidate criteria and prior to any IND-enabling study, Biogen will bear all costs and expenses of and will have sole discretion and decision-making authority with respect to the performance of further activities with respect to any degrader under development under the Biogen Agreement and all products that incorporate that degrader. Biogen is also required to pay the Company up to $35.0 million per target in development milestones and $26.0 million per target in one-time sales-based payments for the first product to achieve certain levels of net sales. In addition, Biogen is required to pay the Company royalties on a licensed product-by-licensed product basis, on worldwide net product sales. All milestone and sales-based payments are made after the Company has met the defined criteria in the joint research plan for that target, at which time Biogen will have control of the products related to the targets for commercialization; the receipt of these payments is contingent on the further development of products directed to the targets to commercialization by Biogen, without any additional research and development efforts from the Company.
The collaboration is managed by the Biogen JSC, which Biogen has control over, and Biogen may terminate the Biogen Agreement on a target-by-target or product-by-product basis under several scenarios, upon at least 90 days’ prior written notice.
Biogen Agreement accounting
The Company recognizes revenue from collaboration agreements under the Biogen Agreement from two types of services: 1) research and development services, and 2) sandbox activities, which are discovery-type research services.
•Research and development services: The Company identified one performance obligation at the outset of the Biogen Agreement, representing a combined performance obligation consisting of (1) the licenses, (2) the research activities for the target evaluation phase for all five targets and (3) the joint research plan phase for each target. The Company determined that the licenses and research activities were not distinct from one another, as the licenses have limited value without the performance of the research activities by the Company. Participation on the Biogen JSC to oversee the research activities and the technology transfer associated with the Biogen License Agreement were determined to be quantitatively and qualitatively immaterial and therefore are excluded from performance obligations. The Company recognizes the transaction price allocated to this performance obligation as the research and development services are provided, using an input method, in proportion to costs incurred to date for each research development target as compared to total costs incurred and expected to be incurred in the future to satisfy the underlying obligation related to said research and development target. The transfer of control occurs over this period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.
•Sandbox activities: Biogen had the option to fund sandbox activities in exchange for consideration at market rates, whereby the Company would perform discovery-type research at Biogen’s election to develop other potential targets that may be used as replacement targets for the initially nominated targets or two additional targets under the Biogen Agreement. Revenues earned under this option were recognized as services were performed and were not included in the transaction price allocated to the performance obligation described above. The Company recognized FTE reimbursement received for sandbox activities as revenue as incurred each quarter. As noted above, sandbox activities fully concluded on August 31, 2021.
As of June 30, 2022, total transaction price of the Biogen Agreement of $55.0 million is allocated to the research and development services performance obligation and $16.4 million of the allocated transaction price remains unsatisfied.
Amounts due to the Company that have not yet been received are recorded as accounts receivable and amounts received that have not yet been recognized as revenue from collaboration agreements are recorded in deferred revenue on the Company’s condensed consolidated balance sheet.
Calico Collaboration and License Agreement
In March 2017, the Company entered into a collaboration and license agreement, or the Calico Agreement, with Calico Life Sciences LLC, or Calico, whereby the Company and Calico agreed to collaborate to develop and commercialize small molecule protein degraders for diseases of aging, including cancer, for a five-year period ending in March 2022. In August 2021, the Company provided Calico with an option to extend the research term with respect to a certain program for up to a one-year period ending in March 2023. In September 2021, Calico exercised the option resulting in a $1.0 million extension payment to the Company. In addition, Calico will continue to reimburse the Company for a number of FTEs, depending on the stage of the research, at specified market rates.
Under the terms of the Calico Agreement, the Company will initially develop and commercialize small molecule protein degraders for up to five target proteins over the research term. Under the Calico Agreement, the Company is required to perform initial research and development activities for the nominated targets for drug discovery and preclinical development over the applicable research term, with the intent to provide a development candidate for each target to Calico once the agreed-upon research is complete. In addition, the Company provides Calico with a non-exclusive research and commercial license to its intellectual property and will participate on the Calico joint research committee, or the Calico JRC. Once Calico nominates a target and pays the applicable target initiation fee, the Company will commence research and development activities for that target. Calico is obligated to reimburse the Company for its research and development activities for each target at specified levels through the identification of a development candidate, after which time Calico shall assume full responsibility for candidate development and Calico is entitled to pursue commercial development of products related to that target.
Under the Calico Agreement, Calico paid an upfront amount of $5.0 million and certain annual payments totaling $5.0 million through June 30, 2020 and pays target initiation fees and reimburses the Company for a number of FTEs, depending on the stage of the research, at specified market rates. For each target, the Company is eligible to receive up to
$132.0 million in potential research, development and commercial milestone payments, on sales of all products resulting from the collaboration efforts. Calico is also required to pay the Company up to $65.0 million in one-time sales-based payments for the first product to achieve certain levels of net sales. In addition, Calico is required to pay the Company royalties, at percentages in the mid-single digits, on a licensed product-by-licensed product basis, on worldwide net product sales. All milestone and sales-based payments are made after the Company has met the defined criteria in the joint research plan for that target, at which time Calico will have control of the products related to targets for commercialization; the receipt of these payments by the Company is contingent on the further development of the targets to commercialized products by Calico, without any additional research and development efforts required by us.
The Calico Agreement is managed by the Calico JRC. Calico has control over the Calico JRC and may terminate the Calico Agreement on a target-by-target or product-by-product basis under several scenarios, upon prior written notice.
Calico Agreement accounting
The Company identified one performance obligation at the outset of the Calico Agreement, which consists of: (1) the non-exclusive license and (2) the research activities for the target evaluation phase for five targets and the joint research plan phase for two targets. The Company determined that the license and research activities were not distinct from one another, as the license has limited value without the performance of the research activities by the Company.
The transaction price consists of the upfront amount, the committed anniversary payments, the target initiation fees related to the targets nominated at the execution of the Calico Agreement, and the extension payment upon exercise of the extension option discussed above. Initially, the Company amortized the transaction price on a straight-line basis over the initial five-year term of the Calico Agreement. Beginning in September 2021, as a result of the extension of the research term for one program and Calico’s obligation to pay an additional $1.0 million in transaction price, the Company now amortizes the revised transaction price on a straight-line basis over the six-year term of the Calico Agreement. Straight-line amortization of the transaction price was considered the best measure of progress because the customer has access to research and development services throughout the period. Incremental fees for research and development services are paid at agreed upon FTE rates and recognized in the period incurred.
As of June 30, 2022, total transaction price of the Calico Agreement of $13.0 million is allocated to the research and development services performance obligation and $1.6 million of the allocated transaction price remains unsatisfied.
Amounts due to the Company that have not yet been received are recorded as accounts receivable and amounts received that have not yet been recognized as revenue from collaboration agreements are recorded in deferred revenue on the Company’s condensed consolidated balance sheet.
Summary of revenue recognized from collaboration agreements
Revenue from collaboration agreements for the three and six months ended June 30, 2022 and 2021 in the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue from collaboration agreements:  
Roche Agreement$2,550 $2,893 $3,673 $5,086 
Biogen Agreement9,534 2,940 14,250 4,820 
Calico Agreement1,750 3,948 3,565 7,301 
Total revenue from collaboration agreements$13,834 $9,781 $21,488 $17,207 
Financial information related to the collaboration and license agreements consisted of the following in the Company’s condensed consolidated balance sheet as of June 30, 2022 (in thousands):
 Accounts
Receivable		Deferred Revenue,
Current		Deferred Revenue,
Net of Current		Deferred Revenue,
Total
Supplemental information:    
Roche Agreement$500 $4,153 $17,991 $22,144 
Biogen Agreement— 16,392 — 16,392 
Calico Agreement1,209 1,625 — 1,625 
Total$1,709 $22,170 $17,991 $40,161 
Financial information related to the collaboration and license agreements consisted of the following in the Company’s condensed consolidated balance sheet as of December 31, 2021 (in thousands):
 Accounts
Receivable		Deferred Revenue,
Current		Deferred Revenue,
Net of Current		Deferred Revenue,
Total
Supplemental information:    
Roche Agreement$1,215 $5,601 $17,215 $22,816 
Biogen Agreement3,000 24,032 6,611 30,643 
Calico Agreement1,501 2,167 542 2,709 
Total$5,716 $31,800 $24,368 $56,168 
Supplemental financial information related to the collaboration and license agreements for the three and six months ended June 30, 2022 and 2021 are (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue recognized that was included in the contract liability at the beginning of the period$12,122 $5,535 $18,488 $10,054 
Revenue recognized from performance obligations fully or partially satisfied in previous periods$503 $713 $518 $713 
As of June 30, 2022, the aggregate amount of the transaction price allocated to performance obligations under the Roche Agreement, the Biogen Agreement, and the Calico Agreement that are partially unsatisfied was $47.3 million.