Collaboration and License Agreements	12 Months Ended
Dec. 31, 2022
Collaboration and License Agreements
Collaboration and License Agreements	C.Collaboration and License Agreements The Company has numerous collaboration and license agreements with third parties. These agreements typically provide the licensee with rights to use the Company’s ADC platform technology with its antibodies or related targeting vehicles to a defined target to develop products. The licensee is generally responsible for the development, clinical testing, manufacturing, registration, and commercialization of any resulting product candidate. As part of these agreements, the Company is generally entitled to receive upfront fees, potential milestone payments, royalties on the sales of any resulting products, and research and development funding based on activities performed at our collaborative partner’s request. See below for details regarding the Company’s collaboration and license agreements with activity in the financial statement periods presented. Roche In 2000, the Company granted Genentech, now a unit of Roche, an exclusive development and commercialization license to use the Company’s maytansinoid ADC technology with antibodies, such as trastuzumab, or other proteins that target HER2. Under the terms of this agreement, Roche has exclusive worldwide rights to develop and commercialize maytansinoid ADC compounds targeting HER2. Pursuant to this agreement, Roche developed and received marketing approval for its HER2-targeting ADC, KADCYLA, in the U.S., Japan, the European Union, and numerous other countries. Roche is responsible for the manufacturing, product development, and marketing of any products resulting from the agreement. The Company received a $2.0 million non-refundable upfront payment from Roche upon execution of the agreement. The Company is also entitled to receive up to a total of $44.0 million in development and regulatory milestone payments, plus royalties on the commercial sales of KADCYLA or any other resulting products. Through December 31, 2022, the Company had received and recognized $39.0 million in milestone payments related to KADCYLA. The Company receives royalty reports and payments related to sales of KADCYLA from Roche one quarter in arrears. In accordance with the Company’s revenue recognition policy, $29.3 million, $46.8 million, and $68.5 million of non-cash royalties on net sales of KADCYLA were recorded and included in royalty revenue for the years ended December 31, 2022, 2021, and 2020, respectively. The Company sold its rights to receive royalty payments on the net sales of KADCYLA through two separate transactions in 2015 and 2019. Following the 2019 transaction, OMERS, the defined benefit pension plan for municipal employees in the Province of Ontario, Canada, is entitled to receive all of these royalties. Roche, through its Genentech unit, also has licenses for the exclusive right to use the Company’s maytansinoid ADC technology with antibodies to four undisclosed targets, which were granted under the terms of a separate, now expired, 2000 right-to-test agreement with Genentech. For each of these licenses, the Company received a $1.0 million license fee and is entitled to receive up to a total of $38.0 million in development, regulatory, and sales-based milestone payments plus royalties on the sales of any resulting products. The Company has not received any milestone payments from these agreements through December 31, 2022. Roche is responsible for the development, manufacturing, and marketing of any products resulting from these licenses. Novartis The Company granted Novartis exclusive development and commercialization licenses to the Company’s maytansinoid and IGN ADC technology for use with antibodies to six specified targets under a now-expired right-to-test agreement established in 2010. The Company received a $45.0 million upfront payment in connection with the execution of the right-to-test agreement in 2010, $8.5 million in extension and amendment fees, and an exercise fee of $1.0 million for each of the six licenses taken. In May 2018, Novartis terminated one of its six licenses. In August 2022, Novartis terminated four of the remaining development and commercialization licenses. The Company had $2.8 million of deferred revenue associated with the terminated licenses related to the portion of the transaction price previously allocated to rights to future technological improvements. In consideration that no technological improvements would be provided to Novartis and, therefore, no unsatisfied obligations were remaining related to such licenses, the $2.8 million was recorded as revenue and is included in license and milestone fees for 2022. With respect to the remaining license, $0.8 million of deferred revenue related to the portion of the transaction price previously allocated to rights to future technological improvements continues to be amortized over the remaining estimated term of the license agreement, and we are entitled to receive up to a total of $199.5 million in potential milestone payments, of which $5.0 million has been received to date, plus royalties on the commercial sales of any resulting products. Novartis is responsible for the manufacturing, development, and marketing of any products resulting from these licenses. CytomX In 2016, the Company granted CytomX an exclusive development and commercialization license to the Company’s maytansinoid ADC technology for use with PROBODIES™ that target CD166 under a now expired reciprocal right-to-test agreement. The Company neither received nor made an upfront cash payment in connection with the execution of the right-to-test agreement or the license agreement. With respect to the development and commercialization license granted to CytomX, the Company is entitled to receive up to a total of $160.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. Through December 31, 2022, the Company had received and recognized an aggregate of $4.0 million in milestone payments under this agreement. In December 2019, the Company granted CytomX an exclusive development and commercialization license to maytansinoid and IGN ADC technology for use with PROBODIES™ that target EpCAM. Pursuant to the license agreement, in January 2020, the Company received a $7.5 million upfront payment. The Company is also entitled to receive up to a total of $355.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. The Company had not received any milestone payments under this agreement through December 31, 2022. CytomX is responsible for the manufacturing, product development, and marketing of any products resulting from these licenses. Viridian In October 2020, the Company entered into a license agreement with Viridian Therapeutics, Inc. pursuant to which the Company granted Viridian the exclusive right to develop and commercialize an insulin-like growth factor-1 receptor (IGF-1R) antibody for all non-oncology indications that do not use radiopharmaceuticals in exchange for an upfront payment, with the potential to receive up to a total of $143.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. Through December 31, 2022, the Company had achieved an aggregate $15.5 million in development milestone payments under the agreement, of which $10.0 million and $5.5 million was included in license and milestone fee revenue for the years ended December 31, 2022 and 2021, respectively. The $10.0 million milestone payment recorded in 2022 was included in accounts receivable as of December 31, 2022. Viridian is responsible for the manufacturing, development, and marketing of any products resulting from the license agreement. Huadong In October 2020, the Company entered into a collaboration and license agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (Huadong), a subsidiary of Huadong Medicine Co., Ltd. The collaboration and license agreement grants Huadong an exclusive, royalty-bearing, and sublicensable right to develop and commercialize ELAHERE (the Licensed Product) in the People’s Republic of China, Hong Kong, Macau, and Taiwan (collectively, Greater China). The Company retains exclusive rights to the Licensed Product outside of Greater China. Under the terms of the collaboration and license agreement, the Company received a non-refundable upfront payment of $40.0 million with the potential for approximately $265.0 million in development, regulatory, and sales-based milestone payments. In addition, the Company is entitled to receive tiered percentage royalties ranging from low double digits to high teens as a percentage of commercial sales of the Licensed Product, if approved, by Huadong in Greater China, subject to adjustment in specified circumstances. In December 2022 and December 2021, the Company received milestone payments of $10.0 million and $5.0 million, respectively, upon achievement of development and regulatory milestones. The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined the promised goods and services included the license to intellectual property and know-how and the clinical supply of the Licensed Product to Huadong for a specified period. The Company concluded that the license to intellectual property and know-how is not distinct from the clinical supply of the Licensed Product because the clinical supply is essential to the use of the license and an alternative source of clinical supply is not readily available in the marketplace. Accordingly, these two promised goods and services are considered a single combined performance obligation. The Company determined there were no options in the agreement that represented material rights. The transaction price was determined to consist of the upfront payment of $40.0 million and estimated payments to be received for clinical supply of the Licensed Product. At contract inception, future development and regulatory milestones were fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Huadong. The Company re-evaluates the transaction price, including its estimated variable consideration included in the transaction price and all constrained amounts, at each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company determined that revenue related to the agreement would be recognized as the clinical supply of the Licensed Product is delivered to Huadong, estimated to be completed over approximately two years. Accordingly, based on clinical supply delivered to Huadong during 2022 and 2021, the Company recorded $28.5 million and $16.5 million as license and milestone fee revenue in 2022 and 2021, respectively, related to $45.0 million of upfront and milestone payments previously received and deferred. The Company also recorded $10.0 million of license and milestone fee revenue related to a regulatory milestone achieved in 2022. Lilly In February 2022, the Company entered into a license agreement with Lilly, pursuant to which the Company granted Lilly worldwide exclusive rights to research, develop, and commercialize antibody-drug conjugates based on the Company’s novel camptothecin technology. Under the terms of the license agreement, the Company received a non-refundable upfront payment of $13.0 million, reflecting initial targets selected by Lilly. During 2022, pursuant to the terms of the agreement, Lilly selected additional targets for which the Company received an additional $13.0 million in non-refundable payments. Lilly may select a pre-specified number of additional targets, with the Company eligible to receive an additional $19.5 million in exercise fees if Lilly licenses the full number of remaining additional targets over a specified period following the effective date of the license agreement, with the potential for up to $1.7 billion in development and sales-based milestone payments if all targets are selected and all milestones are realized. In addition, the Company is entitled to receive tiered royalties, on a product-by-product basis, as a percentage of worldwide annual net sales by Lilly, based on certain net sales thresholds. Lilly is responsible for all costs associated with the research, development, and commercialization of any ensuing products. The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined the promised goods and services included an exclusive license to use the Company’s intellectual property and know-how to research, develop, and commercialize products related to each of the initial targets selected by Lilly. Each of these licenses is distinct, as Lilly can derive benefit from each license independent of any other initial target licenses. Accordingly, the license to each of the initial targets selected by Lilly represents a separate performance obligation. Lilly has the right to replace each of the initial licensed targets once during a specified term for no additional consideration. If Lilly fails to advance an initial or replacement target to a specified stage within a specified period from the date the target was selected, Lilly’s rights to the respective target will cease and will revert back to the Company. The Company determined Lilly’s right to a replacement target for each of the initial targets represented a material right. Each material right is therefore a separate performance obligation. Lilly’s right to select additional targets does not represent a material right as the target fee for each additional target is the same and is also consistent with the target fee for each of the initial targets selected by Lilly. Accordingly, each additional target selected by Lilly is accounted for as a separate arrangement. The transaction price related to the initial targets was determined to consist of the upfront payment of $13.0 million. Future development milestones have been fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Lilly. The transaction price of $13.0 million was allocated to the performance obligations based on their relative stand-alone selling prices. In consideration of each target being at the same stage of development at the time of the initial license or at the time of replacement and each target having approximately the same earnings potential, the Company allocated the $13.0 million transaction price equally across the initial target licenses and the corresponding material rights to obtain licenses to replacement targets, adjusted based on the probability that Lilly would exercise those rights. The Company considered pharmaceutical industry data of the probability of early-stage assets to advance to clinical stage in determining the probability that Lilly would exercise its option to a replacement target. Accordingly, $9.2 million and $3.8 million of the total transaction price was allocated to the initial targets and the material rights to obtain licenses to replacement targets, respectively. The license terms and accounting outlined above are the same for the additional target licenses selected. Accordingly, $9.2 million and $3.8 million of the $13.0 million transaction price was allocated to the targets selected and the material right to obtain a license to replacement targets, respectively. The Company re-evaluates the transaction price for each arrangement, including its estimated variable consideration included in the transaction price and all constrained amounts, at each reporting period and as uncertain events are resolved or other changes in circumstances occur. The transfer of intellectual property and know-how to Lilly to allow for Lilly to derive benefit from the initial and additional target licenses was completed during the three months ended March 31, 2022. As such, during 2022, the Company recognized $18.4 million of license and milestone fee revenue related to the portion of the transaction price allocated to the initial and additional target licenses. The $7.6 million allocated to the material rights to obtain licenses to replacement targets is included in long-term deferred revenue as of December 31, 2022 and will be recognized when the right is either exercised or expires. Magenta In November 2022, the Company granted Magenta an exclusive development and commercialization license to the Company’s IGN ADC technology to a specified target and a non-exclusive license to use intellectual property and know-how resulting from the collaboration to research, develop, and commercialize products directed to the specified target. Under the terms of the license agreement, the Company received non-refundable upfront payments totaling $6.0 million. The Company is also entitled to receive up to a total of $125.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined there was a single, combined performance obligation consisting of the license to use the Company’s intellectual property and know-how and the non-exclusive license to use intellectual property and know-how resulting from the collaboration. The transaction price was determined to consist of the upfront payments totaling $6.0 million. Future development and regulatory milestones have been fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Magenta. The single, combined performance obligation was satisfied during 2022, and as such, the Company recognized $6.0 million of license and milestone fee revenue in 2022. In February 2023, Magenta announced its decision to halt further development of its programs and conduct a comprehensive review of strategic alternatives focusing on maximizing shareholder value. As part of this review process, Magenta will explore potential strategic alternatives that may include, but are not limited to, an acquisition, merger, business combination, or other transaction. Terminated Agreements Jazz Pharmaceuticals In August 2017, the Company entered into a Collaboration and Option Agreement with Jazz Pharmaceuticals Ireland Limited (Jazz), a subsidiary of Jazz Pharmaceuticals plc, granting Jazz exclusive, worldwide rights to opt into development and commercialization of two early-stage, hematology-related ADC programs, as well as an additional program to be designated during the term of the agreement. Pursuant to the agreement, Jazz made an upfront payment of $75.0 million to the Company. Additionally, Jazz had also agreed to pay the Company up to $100.0 million in development funding over seven years to support the three ADC programs. In October 2019 and December 2020, Jazz exercised certain opt-out rights under the agreement, thereby relinquishing its development and commercialization options and restoring all rights to the ADC programs to the Company. The non-refundable, upfront arrangement consideration of $75.0 million was allocated to the three license options. In conjunction with the opt-outs, the Company recognized $60.5 million of the remaining deferred upfront fee as license and milestone fee revenue in the year ended December 31, 2020. Due to the involvement the Company and Jazz both had in the development and commercialization of the products, as well as both parties being part of the cost share agreement and exposed to significant risks and rewards dependent on the commercial success of the products, the arrangement was determined to be a collaborative arrangement within the scope of ASC 808. Accordingly, the Company separated the research and development activities and the related cost sharing arrangement with Jazz. Payments for such activities were recorded as research and development expense and reimbursements received from Jazz were recognized as an offset to research and development expense in the accompanying statement of operations during the development period. Included in research and development expense for each of the years ended December 31, 2021 and 2020 are $6.7 million of credits related to reimbursements from Jazz.

Collaboration and License Agreements

12 Months Ended

Dec. 31, 2022

Collaboration and License Agreements

C.Collaboration and License Agreements

The Company has numerous collaboration and license agreements with third parties. These agreements typically provide the licensee with rights to use the Company’s ADC platform technology with its antibodies or related targeting vehicles to a defined target to develop products. The licensee is generally responsible for the development, clinical testing, manufacturing, registration, and commercialization of any resulting product candidate. As part of these agreements, the Company is generally entitled to receive upfront fees, potential milestone payments, royalties on the sales of any resulting products, and research and development funding based on activities performed at our collaborative partner’s request. See below for details regarding the Company’s collaboration and license agreements with activity in the financial statement periods presented.

Roche

In 2000, the Company granted Genentech, now a unit of Roche, an exclusive development and commercialization license to use the Company’s maytansinoid ADC technology with antibodies, such as trastuzumab, or other proteins that target HER2. Under the terms of this agreement, Roche has exclusive worldwide rights to develop and commercialize maytansinoid ADC compounds targeting HER2. Pursuant to this agreement, Roche developed and received marketing approval for its HER2-targeting ADC, KADCYLA, in the U.S., Japan, the European Union, and numerous other countries. Roche is responsible for the manufacturing, product development, and marketing of any products resulting from the agreement. The Company received a $2.0 million non-refundable upfront payment from Roche upon execution of the agreement. The Company is also entitled to receive up to a total of $44.0 million in development and regulatory milestone payments, plus royalties on the commercial sales of KADCYLA or any other resulting products. Through December 31, 2022, the Company had received and recognized $39.0 million in milestone payments related to KADCYLA.

The Company receives royalty reports and payments related to sales of KADCYLA from Roche one quarter in arrears. In accordance with the Company’s revenue recognition policy, $29.3 million, $46.8 million, and $68.5 million of non-cash royalties on net sales of KADCYLA were recorded and included in royalty revenue for the years ended December 31, 2022, 2021, and 2020, respectively. The Company sold its rights to receive royalty payments on the net sales of KADCYLA through two separate transactions in 2015 and 2019. Following the 2019 transaction, OMERS, the defined benefit pension plan for municipal employees in the Province of Ontario, Canada, is entitled to receive all of these royalties.

Roche, through its Genentech unit, also has licenses for the exclusive right to use the Company’s maytansinoid ADC technology with antibodies to four undisclosed targets, which were granted under the terms of a separate, now expired, 2000 right-to-test agreement with Genentech. For each of these licenses, the Company received a $1.0 million license fee and is entitled to receive up to a total of $38.0 million in development, regulatory, and sales-based milestone payments plus royalties on the sales of any resulting products. The Company has not received any milestone payments from these agreements through December 31, 2022. Roche is responsible for the development, manufacturing, and marketing of any products resulting from these licenses.

Novartis

The Company granted Novartis exclusive development and commercialization licenses to the Company’s maytansinoid and IGN ADC technology for use with antibodies to six specified targets under a now-expired right-to-test agreement established in 2010. The Company received a $45.0 million upfront payment in connection with the execution of the right-to-test agreement in 2010, $8.5 million in extension and amendment fees, and an exercise fee of $1.0 million for each of the six licenses taken. In May 2018, Novartis terminated one of its six licenses. In August 2022, Novartis terminated four of the remaining development and commercialization licenses. The Company had $2.8 million of deferred revenue associated with the terminated licenses related to the portion of the transaction price previously allocated to rights to future technological improvements. In consideration that no technological improvements would be provided to Novartis and, therefore, no unsatisfied obligations were remaining related to such licenses, the $2.8 million was recorded as revenue and is included in license and milestone fees for 2022. With respect to the remaining license, $0.8 million of deferred revenue related to the portion of the transaction price previously allocated to rights to future technological improvements continues to be amortized over the remaining estimated term of the license agreement, and we are entitled to receive up to a total of $199.5 million in potential milestone payments, of which $5.0 million has been received to date, plus royalties on the commercial sales of any resulting products. Novartis is responsible for the manufacturing, development, and marketing of any products resulting from these licenses.

CytomX

In 2016, the Company granted CytomX an exclusive development and commercialization license to the Company’s maytansinoid ADC technology for use with PROBODIES™ that target CD166 under a now expired reciprocal right-to-test agreement. The Company neither received nor made an upfront cash payment in connection with the execution of the right-to-test agreement or the license agreement. With respect to the development and commercialization license granted to CytomX, the Company is entitled to receive up to a total of $160.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. Through December 31, 2022, the Company had received and recognized an aggregate of $4.0 million in milestone payments under this agreement.

In December 2019, the Company granted CytomX an exclusive development and commercialization license to maytansinoid and IGN ADC technology for use with PROBODIES™ that target EpCAM. Pursuant to the license agreement, in January 2020, the Company received a $7.5 million upfront payment. The Company is also entitled to receive up to a total of $355.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. The Company had not received any milestone payments under this agreement through December 31, 2022. CytomX is responsible for the manufacturing, product development, and marketing of any products resulting from these licenses.

Viridian

In October 2020, the Company entered into a license agreement with Viridian Therapeutics, Inc. pursuant to which the Company granted Viridian the exclusive right to develop and commercialize an insulin-like growth factor-1 receptor (IGF-1R) antibody for all non-oncology indications that do not use radiopharmaceuticals in exchange for an upfront payment, with the potential to receive up to a total of $143.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product. Through December 31, 2022, the Company had achieved an aggregate $15.5 million in development milestone payments under the agreement, of which $10.0 million and $5.5 million was included in license and milestone fee revenue for the years ended December 31, 2022 and 2021, respectively. The $10.0 million milestone payment recorded in 2022 was included in accounts receivable as of December 31, 2022. Viridian is responsible for the manufacturing, development, and marketing of any products resulting from the license agreement.

Huadong

In October 2020, the Company entered into a collaboration and license agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (Huadong), a subsidiary of Huadong Medicine Co., Ltd. The collaboration and license agreement grants Huadong an exclusive, royalty-bearing, and sublicensable right to develop and commercialize ELAHERE (the Licensed Product) in the People’s Republic of China, Hong Kong, Macau, and Taiwan (collectively, Greater China). The Company retains exclusive rights to the Licensed Product outside of Greater China. Under the terms of the collaboration and license agreement, the Company received a non-refundable upfront payment of $40.0 million with the potential for approximately $265.0 million in development, regulatory, and sales-based milestone payments. In addition, the Company is entitled to receive tiered percentage royalties ranging from low double digits to high teens as a percentage of commercial sales of the Licensed Product, if approved, by Huadong in Greater China, subject to

adjustment in specified circumstances. In December 2022 and December 2021, the Company received milestone payments of $10.0 million and $5.0 million, respectively, upon achievement of development and regulatory milestones.

The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined the promised goods and services included the license to intellectual property and know-how and the clinical supply of the Licensed Product to Huadong for a specified period. The Company concluded that the license to intellectual property and know-how is not distinct from the clinical supply of the Licensed Product because the clinical supply is essential to the use of the license and an alternative source of clinical supply is not readily available in the marketplace. Accordingly, these two promised goods and services are considered a single combined performance obligation. The Company determined there were no options in the agreement that represented material rights.

The transaction price was determined to consist of the upfront payment of $40.0 million and estimated payments to be received for clinical supply of the Licensed Product. At contract inception, future development and regulatory milestones were fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Huadong. The Company re-evaluates the transaction price, including its estimated variable consideration included in the transaction price and all constrained amounts, at each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company determined that revenue related to the agreement would be recognized as the clinical supply of the Licensed Product is delivered to Huadong, estimated to be completed over approximately two years. Accordingly, based on clinical supply delivered to Huadong during 2022 and 2021, the Company recorded $28.5 million and $16.5 million as license and milestone fee revenue in 2022 and 2021, respectively, related to $45.0 million of upfront and milestone payments previously received and deferred. The Company also recorded $10.0 million of license and milestone fee revenue related to a regulatory milestone achieved in 2022.

Lilly

In February 2022, the Company entered into a license agreement with Lilly, pursuant to which the Company granted Lilly worldwide exclusive rights to research, develop, and commercialize antibody-drug conjugates based on the Company’s novel camptothecin technology. Under the terms of the license agreement, the Company received a non-refundable upfront payment of $13.0 million, reflecting initial targets selected by Lilly. During 2022, pursuant to the terms of the agreement, Lilly selected additional targets for which the Company received an additional $13.0 million in non-refundable payments. Lilly may select a pre-specified number of additional targets, with the Company eligible to receive an additional $19.5 million in exercise fees if Lilly licenses the full number of remaining additional targets over a specified period following the effective date of the license agreement, with the potential for up to $1.7 billion in development and sales-based milestone payments if all targets are selected and all milestones are realized. In addition, the Company is entitled to receive tiered royalties, on a product-by-product basis, as a percentage of worldwide annual net sales by Lilly, based on certain net sales thresholds. Lilly is responsible for all costs associated with the research, development, and commercialization of any ensuing products.

The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined the promised goods and services included an exclusive license to use the Company’s intellectual property and know-how to research, develop, and commercialize products related to each of the initial targets selected by Lilly. Each of these licenses is distinct, as Lilly can derive benefit from each license independent of any other initial target licenses. Accordingly, the license to each of the initial targets selected by Lilly represents a separate performance obligation. Lilly has the right to replace each of the initial licensed targets once during a specified term for no additional consideration. If Lilly fails to advance an initial or replacement target to a specified stage within a specified period from the date the target was selected, Lilly’s rights to the respective target will cease and will revert back to the Company. The Company determined Lilly’s right to a replacement target for each of the initial targets represented a material right. Each material right is therefore a separate performance obligation.

Lilly’s right to select additional targets does not represent a material right as the target fee for each additional target is the same and is also consistent with the target fee for each of the initial targets selected by Lilly. Accordingly, each additional target selected by Lilly is accounted for as a separate arrangement.

The transaction price related to the initial targets was determined to consist of the upfront payment of $13.0 million. Future development milestones have been fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Lilly. The transaction price of $13.0 million was allocated to the performance obligations based on their relative stand-alone selling prices. In consideration of each target being at the same stage of

development at the time of the initial license or at the time of replacement and each target having approximately the same earnings potential, the Company allocated the $13.0 million transaction price equally across the initial target licenses and the corresponding material rights to obtain licenses to replacement targets, adjusted based on the probability that Lilly would exercise those rights. The Company considered pharmaceutical industry data of the probability of early-stage assets to advance to clinical stage in determining the probability that Lilly would exercise its option to a replacement target. Accordingly, $9.2 million and $3.8 million of the total transaction price was allocated to the initial targets and the material rights to obtain licenses to replacement targets, respectively.

The license terms and accounting outlined above are the same for the additional target licenses selected. Accordingly, $9.2 million and $3.8 million of the $13.0 million transaction price was allocated to the targets selected and the material right to obtain a license to replacement targets, respectively.

The Company re-evaluates the transaction price for each arrangement, including its estimated variable consideration included in the transaction price and all constrained amounts, at each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The transfer of intellectual property and know-how to Lilly to allow for Lilly to derive benefit from the initial and additional target licenses was completed during the three months ended March 31, 2022. As such, during 2022, the Company recognized $18.4 million of license and milestone fee revenue related to the portion of the transaction price allocated to the initial and additional target licenses. The $7.6 million allocated to the material rights to obtain licenses to replacement targets is included in long-term deferred revenue as of December 31, 2022 and will be recognized when the right is either exercised or expires.

Magenta

In November 2022, the Company granted Magenta an exclusive development and commercialization license to the Company’s IGN ADC technology to a specified target and a non-exclusive license to use intellectual property and know-how resulting from the collaboration to research, develop, and commercialize products directed to the specified target. Under the terms of the license agreement, the Company received non-refundable upfront payments totaling $6.0 million. The Company is also entitled to receive up to a total of $125.0 million in development, regulatory, and sales-based milestone payments plus royalties on the commercial sales of any resulting product.

The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined there was a single, combined performance obligation consisting of the license to use the Company’s intellectual property and know-how and the non-exclusive license to use intellectual property and know-how resulting from the collaboration. The transaction price was determined to consist of the upfront payments totaling $6.0 million. Future development and regulatory milestones have been fully constrained. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Magenta. The single, combined performance obligation was satisfied during 2022, and as such, the Company recognized $6.0 million of license and milestone fee revenue in 2022.

In February 2023, Magenta announced its decision to halt further development of its programs and conduct a comprehensive review of strategic alternatives focusing on maximizing shareholder value. As part of this review process, Magenta will explore potential strategic alternatives that may include, but are not limited to, an acquisition, merger, business combination, or other transaction.

Terminated Agreements

Jazz Pharmaceuticals

In August 2017, the Company entered into a Collaboration and Option Agreement with Jazz Pharmaceuticals Ireland Limited (Jazz), a subsidiary of Jazz Pharmaceuticals plc, granting Jazz exclusive, worldwide rights to opt into development and commercialization of two early-stage, hematology-related ADC programs, as well as an additional program to be designated during the term of the agreement. Pursuant to the agreement, Jazz made an upfront payment of $75.0 million to the Company. Additionally, Jazz had also agreed to pay the Company up to $100.0 million in development funding over seven years to support the three ADC programs.

In October 2019 and December 2020, Jazz exercised certain opt-out rights under the agreement, thereby relinquishing its development and commercialization options and restoring all rights to the ADC programs to the Company. The non-refundable, upfront arrangement consideration of $75.0 million was allocated to the three license options. In conjunction with the opt-outs, the Company recognized $60.5 million of the remaining deferred upfront fee as license and milestone fee revenue in the year ended December 31, 2020.

Due to the involvement the Company and Jazz both had in the development and commercialization of the products, as well as both parties being part of the cost share agreement and exposed to significant risks and rewards dependent on the commercial success of the products, the arrangement was determined to be a collaborative arrangement within the scope of ASC 808. Accordingly, the Company separated the research and development activities and the related cost sharing arrangement with Jazz. Payments for such activities were recorded as research and development expense and reimbursements received from Jazz were recognized as an offset to research and development expense in the accompanying statement of operations during the development period. Included in research and development expense for each of the years ended December 31, 2021 and 2020 are $6.7 million of credits related to reimbursements from Jazz.