Related Party Agreements | 9. Related Party Agreements The Company’s Chairman and CEO founded and has a controlling interest in NantWorks, which is a collection of multiple companies in the healthcare and technology space. As described below, the Company has entered into arrangements with NantWorks and certain affiliates of NantWorks to facilitate the development of new genetically modified NK cells for the Company’s product pipeline. Tensorcom, Inc. In April 2017, the Company entered into a sublease agreement with Tensorcom, Inc. (Tensorcom) related to its San Diego, California, research and development laboratory and office space, with an initial lease from May 1, 2017 through April 30, 2018. The Company’s Chairman and CEO indirectly owns all of the outstanding equity of Tensorcom. The sublease agreement converts to a month-to-month lease after the initial lease term, not to exceed the expiration of the lease agreement between the Company and the third party landlord. After the initial term, the sublease agreement can be terminated by either party by providing a thirty day written notice. The sublease includes a portion of the premises consisting of approximately 6,557 rentable square feet of space. The monthly base rent is $25,000 per month, with an annual 3% increase. For the three months ended June 30, 2017, the Company recognized $15,000 in other income in the condensed consolidated statement of operations under the sublease agreement. At June 30, 2017, there was no balance due between the parties. VivaBioCell S.p.A. In February 2017, the Company entered into a research grant agreement with VivaBioCell S.p.A. (VBC), an affiliated company of NantWorks, under which VBC will conduct research and development activities related to the Company’s NK cell lines using VBC’s proprietary technology. The Company paid $0.6 million to VBC, which is recognized in prepaid expenses and other current assets in the condensed consolidated balance sheet, and expects to benefit from the research and development activities over a one year timeframe. For the three and six months ended June 30, 2017, $0.1 million and $0.2 million, respectively, has been recognized in research and development expense in the condensed consolidated statement of operations and prepaid expenses and other current assets in the condensed consolidated balance sheet has been reduced by that amount. 605 Doug St. LLC In September 2016, the Company entered into a lease agreement with 605 Doug St. LLC, an entity owned by the Company’s Chairman and CEO, for approximately 24,250 square feet in El Segundo, California, which is to be converted to a research and development laboratory and a GMP laboratory. The lease runs from July 2016 through July 2023. The Company has the option to extend the lease for an additional three year term through July 2026. The monthly rent is $0.1 million with annual increases of 3% beginning in July 2017. See Note 8 – Build-to-suit Lease Altor In August 2016, the Company entered into a Co-Development Agreement with Altor as described in Note 7. The Company’s Chairman and CEO is also the Chairman of Altor. Altor is a wholly owned subsidiary of NantCell Inc. (NantCell), and the Company’s Chairman and CEO is also the Chairman and CEO of NantCell and holds a greater than 20% ownership interest in NantCell. No charges for supplies or milestones by Altor have been incurred in association with the above trial during the three and six months ended June 30, 2017. NantBioScience, Inc. In March 2016, NantBioScience, Inc. (NantBioScience), a NantWorks company, and the National Cancer Institute entered into a cooperative research and development agreement. The agreement covers NantBioScience and its affiliates, including the Company. Under the agreement, the parties will collaborate on the preclinical and clinical development of proprietary recombinant NK cells and monoclonal antibodies in monotherapy and in combination immunotherapies. The Company expects to benefit from the preclinical and clinical research conducted during the first and second year under this agreement and is providing the first and second year funding under the five-year agreement. In both April 2016 and April 2017, the Company paid $0.6 million to the National Cancer Institute as a prepayment for the first and second year of funding. The Company recognizes research and development expense ratably over a 12-month period for each funding year and recorded $0.2 million and $0.2 million of expense for the three months ended June 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million for the six months ended June 30, 2017 and 2016, respectively. NantWorks Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy and other support services, and the Company is charged for the services at cost plus reasonable allocations for indirect costs that relate to the employees providing the services. For the three months ended June 30, 2017 and 2016, the Company recorded $0.6 million and $0.7 million, respectively, and $1.3 million and $1.5 million for the six months ended June 30, 2017 and 2016, respectively, to selling, general and administrative expense. For the three months ended June 30, 2017 and 2016, the Company recorded $0.7 million and $0.5 million, respectively, and $1.5 million and $0.8 million for the six months ended June 30, 2017 and 2016, respectively, in research and development expense under this arrangement in the condensed consolidated statement of operations. In June 2016, the Company amended the existing shared services agreement with NantWorks whereby the Company can provide such support services to NantWorks and/or any of its affiliates. For the three months ended June 30, 2017 and 2016, the Company recorded expense reimbursements of $0.1 million and $42,000, respectively, and $0.2 million and $42,000 for the six months ended June 30, 2017 and 2016, respectively, to selling, general and administrative expense. For the three months ended June 30, 2017 and 2016, the Company recorded expense reimbursements of 0.1 million and $9,000, respectively, and $0.3 million and $9,000 for the six months ended June 30, 2017 and 2016, respectively, to research and development expense. The Company owed NantWorks a net amount of $2.1 million for all agreements between the two affiliates at June 30, 2017, which is included in due to related parties in the condensed consolidated balance sheet. In November 2015, the Company entered into a facility license agreement with NantWorks, which became effective May 2015, for approximately 9,500 square feet in Culver City, California, which has been converted to a research and development laboratory and a GMP laboratory. See Note 8 - Financing Lease Obligation NantOmics, LLC In June 2015, the Company entered into an agreement with NantOmics, LLC (NantOmics) to obtain genomic sequencing and proteomic analysis services, as well as related data management and bioinformatics services, exclusively from NantOmics. The Company is obligated to pay NantOmics a fixed, per sample fee, determined based on the type of services being provided. The agreement has an initial term of five years and renews automatically for successive one year periods, unless terminated earlier. For the three months ended June 30, 2017 and 2016, the Company recorded operating expense of $13,000 and $0, respectively, and $13,000 and $0.1 million for the six months ended June 30, 2017 and 2016, respectively, under the agreement to research and development expense in the condensed consolidated statement of operations. The Company owed NantOmics $13,000 at June 30, 2017. NantCell In June 2015, the Company also entered into a supply agreement with NantCell pursuant to which the Company has the right to purchase NantCell’s proprietary bioreactors, made according to specifications mutually agreed to with NantCell. The Company also has the right to purchase reagents and consumables associated with such equipment from NantCell. In September 2015, the Company made a $0.5 million nonrefundable, upfront payment to NantCell as required by the agreement, which upfront payment is creditable against the Company’s future development activities and equipment purchases under the agreement. The agreement has an initial term of five years and renews automatically for successive one year periods unless terminated earlier. The upfront payment was included in prepaid expenses in the condensed consolidated balance sheets. During the three and six months ended June 30, 2017, the Company recorded research and development expense of $33,000 and $0.3 million, respectively, in the condensed consolidated statement of operations, which consumed the remaining $0.3 million of the $0.5 million prepayment. At June 30, 2017, there is no balance due between the parties. |