| Commitments and Contingencies | 5. Commitments and Contingencies
Operating Leases
Prior to December 31, 2012, the Company entered into an
operating lease in New York, NY for office space. In accordance
with this agreement, the Company entered into a letter of credit in
the amount of $388 thousand, naming the Company’s landlord as
beneficiary. In January 2012, the Company amended the lease
agreement, adding additional office space. The collateral for the
letter of credit is restricted cash and recorded in other
non-current assets on the balance sheet as of June 30, 2016
and December 31, 2015. The lease for office space in New York,
NY expires in October 2018.
On October 17, 2013, the Company entered into a sublease
agreement to lease all of its New York office space to a subtenant.
The Company remains primarily liable to pay rent on the original
lease. The Company recorded a loss on the sublease in the amount of
$729 thousand for the year ended December 31, 2013,
representing the remaining contractual obligation of $2.3 million,
less $1.6 million in payments from its subtenant. The Company
retired assets as a result of this sublease with a net book value
of $392 thousand, and recorded a loss on disposal of fixed assets
for the same amount for the year ended December 31, 2013. The
Company continues to maintain the $388 thousand letter of credit in
respect of the New York office space included in other non-current
assets.
Prior to December 31, 2012, the Company entered into separate
operating lease agreements for various spaces in a building in
Boston, MA. In June 2012, the Company re-negotiated a master lease
for the entire Boston office space that incorporated all three
lease agreements under the same master agreement expiring in August
2016. On December 21, 2015 and April 15, 2016, we renewed
the sublease for the Company’s corporate headquarters in
Boston, MA through August 31, 2021. As of June 30, 2016
and December 31, 2015, a total security deposit of $128
thousand is included in deposits on the balance sheet.
On August 30, 2013, the Company entered into a sublease
agreement to lease a portion of its Boston office to a subtenant.
The Company remains liable to pay rent on the original lease. The
Company recorded a loss on the sublease in the amount of $42
thousand for the year ended December 31, 2013, representing
the remaining contractual obligation of $367 thousand, less $325
thousand in payments from its subtenant. This sublease tenant
vacated the leased premises in October 2014. At December 31,
2014, the Company applied the $20 thousand deposit received from
the sublease tenant against its outstanding rent obligation. On
March 31, 2015, the Company recorded a loss of $167 thousand
on the first floor sublease. On May 22, 2015, the Company
subleased the vacant office space for approximately $105 thousand
for the period of June 2015 through August 2016, and the tenant
provided a security deposit of $17 thousand. Since the prior lease
obligation has been fully expensed, rent received from the tenant
will reduce current rent expense.
Total rent expense was approximately $122 thousand and $477
thousand for the six months ended June 30, 2016 and 2015,
respectively.
The Company records rent expense on a straight-line basis over the
term of the lease. Accordingly, the Company has recorded a
liability for deferred rent at June 30, 2016 and
December 31, 2015 of $423 thousand ($223 thousand current and
$200 thousand long-term) and $661 thousand ($348 thousand current
and $313 thousand long-term), respectively, which is recorded in
deferred rent on the balance sheets.
License Agreements
Exclusive Channel Partner Agreement with Intrexon Corporation
for the Cancer Programs
On January 6, 2011, the Company entered into an Exclusive
Channel Partner Agreement, or the Channel Agreement, with Intrexon
that governs a “channel partnering” arrangement in
which the Company uses Intrexon’s technology to research,
develop and commercialize products in which DNA is administered to
humans for expression of anti-cancer effectors for the purpose of
treatment or prophylaxis of cancer, which the Company collectively
refers to as the Cancer Program. This Channel Agreement establishes
committees comprised of representatives of the Company and Intrexon
that govern activities related to the Cancer Program in the areas
of project establishment, chemistry, manufacturing and controls,
clinical and regulatory matters, commercialization efforts and
intellectual property.
The Channel Agreement grants the Company a worldwide license to use
patents and other intellectual property of Intrexon in connection
with the research, development, use, importing, manufacture, sale,
and offer for sale of products involving DNA administered to humans
for expression of anti-cancer effectors for the purpose of
treatment or prophylaxis of cancer, which is collectively referred
to as the ZIOPHARM Products. Such license is exclusive with respect
to any clinical development, selling, offering for sale or other
commercialization of ZIOPHARM Products, and otherwise is
non-exclusive. Subject to limited exceptions, the Company may not
sublicense these rights without Intrexon’s written
consent.
Under the Channel Agreement, and subject to certain exceptions, the
Company is responsible for, among other things, the performance of
the Cancer Program, including the development, commercialization
and certain aspects of manufacturing of ZIOPHARM Products. Intrexon
is responsible for establishing manufacturing capabilities and
facilities for the bulk manufacture of products developed under the
Cancer Program, certain other aspects of manufacturing and costs of
discovery-stage research with respect to platform improvements and
costs of filing, prosecution and maintenance of Intrexon’s
patents.
Prior to being amended pursuant to the Third Amendment to Exclusive
Channel Partner Agreement, or the 2016 ECP Amendment, discussed
below, and subject to certain expense allocations and other offsets
provided in the Channel Agreement, the Company was obligated to pay
Intrexon on a quarterly basis 50% of net profits derived in that
quarter from the sale of ZIOPHARM Products, calculated on a
ZIOPHARM Product-by- ZIOPHARM Product basis. The Company likewise
agreed to pay Intrexon on a quarterly basis 50% of revenue obtained
in that quarter from a sublicensor in the event of a sublicensing
arrangement. In addition, in partial consideration for each
party’s execution and delivery of the Channel Agreement, the
Company entered into a stock purchase agreement with Intrexon.
Upon termination of the Channel Agreement, the Company may continue
to develop and commercialize any ZIOPHARM Product that, at the time
of termination:
• Is being commercialized by the
Company;
• Has received regulatory
approval;
• Is a subject of an application for
regulatory approval that is pending before the applicable
regulatory authority; or
• Is the subject of at least an ongoing
Phase 2 clinical trial (in the case of a termination by Intrexon
due to an uncured breach or a voluntary termination by the
Company), or an ongoing Phase 1 clinical trial in the field (in the
case of a termination by the Company due to an uncured breach or a
termination by Intrexon following an unconsented assignment by the
Company or its election not to pursue development of a Superior
Therapy (as defined in the Channel Agreement)).
The Company’s obligation to pay 50% of net profits (now 20%
of net profits after the amendment pursuant to the 2016 ECP
Amendment, discussed below) or revenue described above with respect
to these “retained” products will survive termination
of the Channel Agreement.
Exclusive Channel Collaboration Agreement with Intrexon
Corporation for Graft-Versus-Host Disease (GvHD)
On September 28, 2015, the Company, entered into the GvHD
Agreement with Intrexon, whereby the Company will use
Intrexon’s technology directed towards in vivo
The exclusive collaboration, or the GvHD Program, will focus on the
pursuit of the following engineered cell therapy strategies, used
either separately or in combination, for the targeted treatment of
GvHD: (i) the infusion of regulatory T cells expressing
membrane-bound and/or soluble interleukin-2 and (ii) the
deployment of orally delivered, genetically modified L.
lactis
The GvHD Agreement grants the Company a worldwide license to use
specified patents and other intellectual property of Intrexon in
connection with the research, development, use, importing,
manufacture, sale, and offer for sale of products developed under
the GvHD Program, or the Products. Such license is exclusive with
respect to any clinical development, selling, offering for sale or
other commercialization of the Products, and otherwise is
non-exclusive. Subject to limited exceptions, the Company may not
sublicense the rights described without Intrexon’s written
consent.
Under the GvHD Agreement, and subject to certain exceptions, the
Company is responsible for, among other things, the performance of
the GvHD Program including development, commercialization and
certain aspects of manufacturing of the Products. Among other
things, Intrexon is responsible for the costs of establishing
manufacturing capabilities and facilities for the bulk manufacture
of the Products, certain other aspects of manufacturing, costs of
discovery-stage research with respect to platform improvements and
costs of filing, prosecution and maintenance of Intrexon’s
patents.
The Company paid Intrexon a technology access fee of $10.0 million
in cash in October 2015 and will reimburse Intrexon for all
research and development costs. Subject to certain expense
allocations and other offsets provided in the GvHD Agreement, the
GvHD Agreement also provides for equal sharing of the profits
derived from the sale of the Products.
The Company has determined that the rights acquired in the GvHD
Agreement represent in-process research and development with no
alternative future use. Accordingly, the Company recorded a charge
of $10.0 million to research and development expense in 2015.
During the first 24 months after September 28, 2015, the GvHD
Agreement may be terminated by (i) either party in the event
of a material breach by the other, except for the failure of the
other party to use diligent efforts or to comply with any diligence
obligations set forth in the GvHD Agreement and (ii) Intrexon
under certain circumstances if the Company assigns its rights under
the GvHD Agreement without Intrexon’s consent. Following
such twenty-four month period, Intrexon may also terminate the GvHD
Agreement if the Company elects not to pursue the development of
the GvHD Program identified by Intrexon that is a “Superior
Therapy,” as such term is defined in the GvHD
Agreement. Also following such period, the Company may
voluntarily terminate the GvHD Agreement upon 90 days’
written notice to Intrexon.
Upon termination of the GvHD Agreement, the Company may continue to
develop and commercialize any Product that, at the time of
termination:
• is being commercialized by the
Company,
• has received regulatory
approval,
• is a subject of an application for
regulatory approval that is pending before the applicable
regulatory authority, or
• is the subject of at least an ongoing
Phase 2 clinical trial (in the case of a termination by Intrexon
due to a Company uncured breach or a voluntary termination by the
Company), or an ongoing Phase 1 clinical trial (in the case of a
termination by the Company due to an Intrexon uncured breach or a
termination by Intrexon following an unconsented assignment by the
Company or the Company’s election not to pursue development
of a Superior Therapy).
The Company’s obligation to pay 50% of net profits or revenue
with respect to these “retained” products will survive
termination of the GvHD Agreement.
Amendment of Collaborations with Intrexon
On March 27, 2015, the Company and Intrexon entered into an
Exclusive Channel Partner Amendment, or ECP Amendment, amending the
Channel Agreement. The ECP Amendment modifies the scope of the
parties’ collaboration under the Channel Agreement in
connection with the Ares Trading Agreement discussed below.
Pursuant to the ECP Amendment, the chimeric antigen receptor T cell
products to be developed and commercialized pursuant to the Ares
Trading Agreement shall be included within the Intrexon/ZIOPHARM
collaboration under the Channel Agreement. The ECP Amendment
provides that Intrexon will pay to the Company fifty percent of all
payments Intrexon receives for upfronts, milestones and royalties
under the Ares Trading Agreement.
On June 29, 2016, the Company entered into (1) the 2016 ECP
Amendment with Intrexon amending the Channel Agreement, and (2) an
Amendment to Exclusive Channel Collaboration Agreement with
Intrexon, which the Company refers to as the 2016 GvHD Amendment,
amending the existing Exclusive Channel Collaboration Agreement
with Intrexon, effective September 28, 2015, which the Company
refers to as the GvHD Agreement. The 2016 ECP Amendment reduced the
royalty percentage that the Company will pay to Intrexon under the
Channel Agreement on a quarterly basis from 50% to 20% of net
profits derived in that quarter from the sale of ZIOPHARM Products,
calculated on a ZIOPHARM Product-by-ZIOPHARM Product basis, subject
to certain expense allocations and other offsets provided in the
Channel Agreement. The 2016 GvHD Amendment reduced the royalty
percentage that the Company will pay to Intrexon under the GvHD
Agreement on a quarterly basis from 50% to 20% of net profits
derived in that quarter from the sale of Products (as defined in
the GvHD Agreement), subject to certain expense allocations and
other offsets provided in the GvHD Agreement. The reductions in the
royalty percentages provided by the 2016 ECP Amendment and the 2016
GvHD Amendment do not apply to sublicensing revenue or royalties
under the Channel Agreement and GvHD Agreement, nor do they apply
to any royalties or other payments made with respect to
sublicensing revenue from the Company’s existing
collaboration with Merck Serono, the biopharmaceutical business of
Merck KGaA.
In consideration for the execution and delivery of the 2016 ECP
Amendment and the 2016 GvHD Amendment, the Company agreed to issue
to Intrexon 100,000 shares of its newly designated Series 1
Preferred Stock. Each share of the Company’s Series 1
Preferred Stock has a stated value of $1,200, subject to
appropriate adjustment in the event of any stock dividend, stock
split, combination or other recapitalization, and certain other
rights, preferences, privileges and obligations (See note 8).
License Agreement—The University of Texas MD Anderson
Cancer Center
On January 13, 2015, the Company, together with Intrexon,
entered into a License Agreement, or the MD Anderson License, with
The University of Texas MD Anderson Cancer Center, or MD Anderson.
Pursuant to the MD Anderson License, the Company and Intrexon hold
an exclusive, worldwide license to certain technologies owned and
licensed by MD Anderson including technologies relating to novel
chimeric antigen receptor (CAR) T cell therapies, non-viral gene
transfer systems, genetic modification and/or propagation of immune
cells and other cellular therapy approaches, Natural Killer, or NK
Cells and T cell receptors, or TCR’s arising from the
laboratory of Laurence Cooper, M.D., Ph.D., who became the Chief
Executive Officer of the Company on May 7, 2015 and was
formerly a tenured professor of pediatrics at MD Anderson and now
currently a visiting scientist under that institution’s
policies, as well as either co-exclusive or non-exclusive licenses
under certain related technologies.
Pursuant to the terms of the MD Anderson License, MD Anderson
received consideration consisting of $50.0 million in shares of the
Company’s common stock (or 10,124,561 shares), and $50.0
million in shares of Intrexon’s common stock, in each case
based on a trailing 20 day volume weighted average of the closing
price of the Company’s and Intrexon’s common stock
ending on the date prior to the announcement of the entry into the
MD Anderson License, collectively referred to as the License
Shares, pursuant to the terms of the License Shares Securities
Issuance Agreement described below. The License Shares were issued
to MD Anderson on March 11, 2015 pursuant to the terms of the
MD Anderson License.
On January 9, 2015, in order to induce MD Anderson to enter
into the MD Anderson License on an accelerated schedule, the
Company and Intrexon entered into a letter agreement, or the Letter
Agreement, pursuant to which MD Anderson received consideration of
$7.5 million in shares of the Company’s common stock (or
1,597,602 shares), and $7.5 million in shares of Intrexon’s
common stock, in each case based on a trailing 20 day volume
weighted average of the closing price of the Company’s and
Intrexon’s common stock ending on the date prior to the
execution of the Letter Agreement, collectively referred to as the
Incentive Shares, in the event that the MD Anderson License was
entered into on or prior to 8:00 am Pacific Time on
January 14, 2015. The Incentive Shares were issued to MD
Anderson on March 11, 2015 pursuant to the terms of the
Incentive Shares Securities Issuance Agreement described below.
On August 17, 2015, the Company, Intrexon and MD Anderson
entered into a research and development agreement, or the Research
and Development Agreement, to formalize the scope and process for
the transfer by MD Anderson, pursuant to the terms of the MD
Anderson License, of certain existing research programs and related
technology rights, as well as the terms and conditions for future
collaborative research and development of new and ongoing research
programs.
Pursuant to the Research and Development Agreement, the Company,
Intrexon and MD Anderson have agreed to form a joint steering
committee that will oversee and manage the new and ongoing research
programs. As provided under the MD Anderson License, the Company
will provide funding for research and development activities in
support of the research programs under the Research and Development
Agreement for a period of three years and in an amount of no less
than $15.0 million and no greater than $20.0 million per year.
During the quarter ended June 30, 2016, the Company made one
quarterly payment of $3.8 million and has paid an aggregate of
$18.8 million under this arrangement. As of June 30, 2016, MD
Anderson has used $1.7 million to offset costs incurred pursuant to
the MD Anderson License and the Research and Development Agreement.
The net balance of $17.1 million is included in other current
assets at June 30, 2016.
The term of the MD Anderson License expires on the last to occur of
(a) the expiration of all patents licensed thereunder, or
(b) the twentieth anniversary of the date of the License;
provided, however, that following the expiration of the term of the
MD Anderson License, the Company and Intrexon shall then have a
fully-paid up, royalty free, perpetual, irrevocable and
sublicensable license to use the licensed intellectual property
thereunder. After ten years from the date of the MD Anderson
License and subject to a 90-day cure period, MD Anderson will have
the right to convert the MD Anderson License into a non-exclusive
license if the Company and Intrexon are not using commercially
reasonable efforts to commercialize the licensed intellectual
property on a case-by-case basis. After five years from the date of
the MD Anderson License and subject to a 180-day cure period, MD
Anderson will have the right to terminate the MD Anderson License
with respect to specific technology(ies) funded by the government
or subject to a third party contract if the Company and Intrexon
are not meeting the diligence requirements in such funding
agreement or contract, as applicable. MD Anderson may also
terminate the agreement with written notice upon material breach by
the Company and Intrexon, if such breach has not been cured within
60 days of receiving such notice. In addition, the MD Anderson
License will terminate upon the occurrence of certain insolvency
events for both the Company and Intrexon and may be terminated by
the mutual written agreement of the Company, Intrexon and MD
Anderson.
In connection with the License and the issuance of the License
Shares and the Incentive Shares, on January 13, 2015, the
Company and MD Anderson entered into a Registration Rights
Agreement, or the Registration Rights Agreement, pursuant to which
the Company agreed to file a “resale” registration
statement, or the Registration Statement, registering the resale of
the License Shares, the Incentive Shares and any other shares of
the Company’s common stock held by MD Anderson on the date
that the Registration Statement is filed Under the Registration
Rights Agreement, the Company is obligated to maintain the
effectiveness of the Registration Statement until all securities
therein are sold or are otherwise can be sold pursuant to Rule 144,
without any restrictions. A prospectus supplement under the
Company’s already effective registration statement on Form
S-3 (File No. 333-201826) was filed on April 1, 2015 in
satisfaction of the Company’s obligations under the
Registration Rights Agreement.
The Company has determined that the rights acquired in the MD
Anderson License represent in process research and development with
no alternative future use. Accordingly, the Company recorded a
charge of $67.3 million to research and development expense in
2015, representing the fair value of the 11,722,163 shares of its
common stock on the date the MD Anderson License was executed.
Ares Trading License and Collaboration Agreement
On March 27, 2015, the Company and Intrexon signed a worldwide
License and Collaboration Agreement, or the Ares Trading Agreement,
with Ares Trading S.A., or Ares Trading, a subsidiary of the
biopharmaceutical business of Merck KGaA, Darmstadt, Germany,
through which the parties established a collaboration for the
research and development and commercialization of certain products
for the prophylactic, therapeutic, palliative or diagnostic use for
cancer in humans.
Under the collaboration, Ares Trading has elected two
CAR + +
Intrexon is entitled to receive $5.0 million payable in equal
quarterly installments over two years for each identified product
candidate, which will be used to fund discovery work. The Company
will be responsible for costs exceeding the quarterly installments
and all other costs of the preclinical research and
development.
Ares Trading paid a non-refundable upfront fee of $115.0 million to
Intrexon as consideration for entry into the Ares Trading
Agreement. Pursuant to the ECP Amendment, the Company was entitled
to receive 50% of the upfront fee, or $57.5 million, which the
Company received from Intrexon in July 2015.
The Ares Trading Agreement provides for up to $413.0
million of potential payments for certain development and
commercial milestones for each product candidate, and royalties
ranging from the lower-single digits to the low-teens of net sales
derived from the sale of products developed under agreement. The
Ares Trading Agreement also provides for up to $50.0
million of payments upon the achievement of certain technical
milestones. Intrexon will pay 50% of all milestone and royalty
payments that it receives under the Ares Trading Agreement to the
Company pursuant to the ECP Amendment.
The term of the Ares Trading Agreement commenced in May 2015 and
may be terminated by either party in the event of a material breach
as defined in the agreement and may be terminated voluntarily by
Ares Trading upon 90 days written notice to the Company.
The Company considered FASB Accounting Standards Codification
605-25, Multiple-Element Arrangements
Patent and Technology License Agreement—The University of
Texas MD Anderson Cancer Center and the Texas A&M University
System.
On August 24, 2004, the Company entered into a patent and
technology license agreement with MD Anderson, which the Company
refers to, collectively, as the Licensors. Under this agreement,
the Company was granted an exclusive, worldwide license to rights
(including rights to U.S. and foreign patent and patent
applications and related improvements and know-how) for the
manufacture and commercialization of two classes of organic
arsenicals (water- and lipid-based) for human and animal use. The
class of water-based organic arsenicals includes darinaparsin.
The Company issued options to purchase 50,222 shares outside of the
Company’s stock option plans following the successful
completion of certain clinical milestones, of which 37,666 have
vested. The remaining 12,556 shares vested upon enrollment of the
first patient in a multi-center pivotal clinical trial i.e. a human
clinical trial intended to provide the substantial evidence of
efficacy necessary to support the filing of an approvable New Drug
Application, or NDA. An expense of $87 thousand was charged to
R&D expense for the vesting event which occurred in March 2016.
This trial was initiated by Solasia Pharma K.K., or Solasia, on
March 28, 2016 and triggered a $1.0 million milestone payment
to the Company from Solasia which was received in May 2016. An
equivalent milestone payment of $1.0 million was made to M.D.
Anderson. In addition, the Licensors are entitled to receive
certain milestone payments. The Company may be required to make
additional payments upon achievement of certain other milestones in
varying amounts which on a cumulative basis could total up to an
additional $4.5 million. In addition, the Licensors are entitled to
receive single digit percentage royalty payments on sales from a
licensed product and will also be entitled to receive a portion of
any fees that the Company may receive from a possible sublicense
under certain circumstances.
Collaboration Agreement with Solasia Pharma K.K.
On March 7, 2011, the Company entered into a License and
Collaboration Agreement with Solasia. Pursuant to the License and
Collaboration Agreement, the Company granted Solasia an exclusive
license to develop and commercialize darinaparsin in both IV and
oral forms and related organic arsenic molecules, in all
indications for human use in a pan- Asian/Pacific territory
comprised of Japan, China, Hong Kong, Macau, Republic of Korea,
Taiwan, Singapore, Australia, New Zealand, Malaysia, Indonesia,
Philippines and Thailand.
As consideration for the license, the Company received an upfront
payment of $5.0 million to be used exclusively for further clinical
development of darinaparsin outside of the pan-Asian/Pacific
territory, and will be entitled to receive additional payments of
up to $32.5 million in development-based milestones and up to $53.5
million in sales-based milestones. The Company will also be
entitled to receive double digit royalty payments from Solasia
based upon net sales of licensed products in the applicable
territories, once commercialized, and a percentage of sublicense
revenues generated by Solasia. The $5.0 million upfront payment
received in March 2011 was amortized over the period of the
Company’s research and development effort, which was
completed in March 2016.
On July 31, 2014, the Company entered into an amendment and
restatement of the License and Collaboration Agreement granting
Solasia an exclusive worldwide license to develop and commercialize
darinaparsin, and related organoarsenic molecules, in both
intravenous and oral forms in all indications for human use. In
exchange, the Company will be eligible to receive from Solasia
development-and sales-based milestones, a royalty on net sales of
darinaparsin, once commercialized, and a percentage of any
sublicense revenues generated by Solasia.
Solasia will be responsible for all costs related to the
development, manufacturing and commercialization of darinaparsin.
The Company’s Licensors, as defined in the agreement, will
receive a portion of all milestone and royalty payments made by
Solasia to the Company in accordance with the terms of the
Company’s license agreement with the Licensors.
On March 28, 2016, Solasia initiated a multi-center pivotal
clinical trial intended to provide substantial evidence of efficacy
necessary to support the filing of an application for an NDA for
darinaparsin in certain of the territories assigned to Solasia. The
initiation of the trial on March 28, 2016 triggered a $1.0
million milestone payment from Solasia to the Company which was
received in May 2016. The Company subsequently made an equivalent
payment to MD Anderson as the ultimate licensor of
darinaparsin.
License Agreement with Baxter Healthcare S.A.
On November 3, 2006, the Company entered into a definitive
Asset Purchase Agreement for indibulin and a License Agreement to
proprietary nanosuspension technology with affiliates of Baxter
Healthcare S.A. The purchase included the entire indibulin
intellectual property portfolio as well as existing drug substance
and capsule inventories. The terms of the Asset Purchase Agreement
included an upfront cash payment and an additional payment for
existing inventory. No payments were made during the six months
ended June 30, 2016 and 2015. The Company is not actively
pursuing the development of indibulin. |
