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COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2019
Commitments And Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES

Manufacturing Obligations

Brammer Bio MA, LLC

The Company entered into a Development, Commercial Manufacturing and Supply Agreement (the “Brammer Manufacturing Agreement”) and, subsequently, entered into the first amendment (the “Amendment”) to Brammer Manufacturing Agreement (collectively, “Brammer Supply Agreements”) with Brammer Bio MA, LLC (“Brammer”) in June 2018 and May 2019, respectively. Pursuant to the terms of the Brammer Supply Agreements, Brammer agreed to provide the Company with access to clinical and commercial manufacturing capacity for its gene therapy programs. For more information related to the Brammer Manufacturing Agreement, please read Note 21, Commitments and Contingencies of the Annual Report on the Form 10-K for the year ended December 31, 2018.

As a result of the Amendment: (i) the Company now has access to substantially all of the related facility’s capacity, subject to certain minimum and maximum volume limitations, (ii) the Company was required to make a $6.0 million advance payment to Brammer upon execution of the Amendment, and (iii) the quarterly capacity access fee payments due to Brammer throughout the term of the agreement increased from $10.0 million to $13.3 million, starting January 1, 2020. However, through December 31, 2019, a reduced quarterly capacity access fee will be in effect as Brammer works towards achieving full capacity at its facility.

Upon execution of the Amendment, the Company determined that the Brammer Supply Agreements contain an embedded lease because the Company now has the right to direct the use of the facility and related equipment therein.  Further, the Company determined that it does not control the facility or related equipment during construction and, thus, the lease does not fall in the scope of “build-to-suit” accounting. The lease has not commenced as of June 30, 2019.  Accordingly, total cumulative payments made to Brammer of $55.0 million have been recorded as other assets and will be considered in the initial measurement of the cost of the right-of-use asset at the lease commencement date.

Paragon Bioservices, Inc.

In October 2018, the Company entered into a manufacturing collaboration agreement (the “Collaboration Agreement”) with Paragon Bioservices, Inc. (“Paragon”). Pursuant to the terms of the Collaboration Agreement, Paragon agreed to provide the Company with two dedicated clean room suites and an option to reserve two additional clean room suites for its gene therapy programs. On February 22, 2019, the Company entered into a manufacturing and supply agreement (the “Paragon Supply Agreement”) with Paragon. The Paragon Supply Agreement consists of two periods: the pre-launch period and the post-launch period. During the pre-launch period, the Company is obligated to purchase a minimum amount of $4.0 million of batches per quarter per clean room. During the post-launch period, on an annual basis, the Company is obligated to purchase a minimum number of batches per clean room. Both the Collaboration Agreement and the Supply Agreements will expire on December 31, 2024.

The following table summarizes the aggregate non-cancelable contractual obligations arising from the Company’s manufacturing obligations:

 

 

 

As of

June 30, 2019

(in thousands)

 

2019 (July - December)

 

$

147,352

 

2020

 

 

194,195

 

2021

 

 

55,990

 

2022

 

 

55,204

 

2023

 

 

55,244

 

Thereafter

 

 

161,001

 

Total manufacturing commitments

 

$

668,986

 

 

Additionally, should the Company obtain regulatory approval for any drug product candidate produced as a part of the Company’s manufacturing obligations above, it may be subject to additional minimum batch requirements with the respective manufacturing parties.

Litigation

In the normal course of business, the Company may from time to time be named as a party to various legal claims, actions and complaints, including matters involving securities, employment, intellectual property, effects from the use of therapeutics utilizing its technology, or others. As of June 30, 2019, there are no such material legal claims, actions or complaints where the Company is named.