| Related Party Agreements | 8. Related-Party Agreements We conduct business with several affiliates under written agreements and informal arrangements. Below is a summary of outstanding balances and a description of significant relationships (in thousands):
June 30, 2021
December 31, 2020
(Unaudited)
Due from related party–NantBio
$
1,294
$
1,294
Due from related party–NantOmics
591
591
Due from related parties–Various
162
118
Total due from related parties
$
2,047
$
2,003
Due to related party–NantWorks
$
12,925
$
10,650
Due to related party–Duley Road
2,427
2,787
Due to related party–NantBio
943
943
Due to related party–Immuno-Oncology Clinic
229
271
Due to related party–Various
187
187
Total due to related parties
$
16,711
$
14,838
Our Executive Chairman, and principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of multiple companies in the healthcare and technology space. As described below, we have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new genetically modified NK cells for our product pipeline. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman. NantWorks Under the NantWorks shared services agreement executed in November 2015, but effective August 2015, NantWorks, a related party, provides corporate, general and administrative, manufacturing strategy, research and development, regulatory and clinical trial strategy, and other support services. We are charged for the services at cost plus reasonable allocations of employee benefits, facilities and other direct or fairly allocated indirect costs that relate to the employees providing the services. For the three months ended June 30, 2021 and 2020, we recorded $1.2 million and $2.4 million, respectively, in selling, general and administrative expense research and development expense selling, general and administrative expense research and development expense As of June 30, 2021 and December 31, 2020, we owed NantWorks a net amount of $12.9 million and $10.7 million, respectively, for all agreements between the two affiliates, which is included in due to related parties, prepaid expenses and other current assets In November 2015, we entered into a facility license agreement with NantWorks for approximately 9,500 square feet of office space in Culver City, California, which has been converted to a research and development laboratory and a current Good Manufacturing Practice (“cGMP”) manufacturing facility. The initial license was effective from May 2015 through December 2020. The base rent for the initial lease term was $47,000 per month, with annual increases of 3% beginning in January 2017. In September 2020, we amended this agreement to extend the term of this lease through December 31, 2021. Commencing January 1, 2021, the base rent increased by 3% to approximately $54,500 per month. Subsequent to December 31, 2021, the lease term will automatically renew on a month-to-month basis, terminable by either party with at least 30 days’ prior written notice to the other party. In addition, we have a one-time option to extend the lease term through December 31, 2022. If we exercise the option to extend the lease through December 31, 2022, or continue on a month-to-month basis, the base rent will increase by 3% annually commencing on January 1 of each year. On the date of amendment, we recorded an increase of $1.2 million in both operating lease right-of-use assets operating lease liabilities research and development expense Immuno-Oncology Clinic, Inc. Beginning in 2017, we entered into multiple agreements with Immuno-Oncology Clinic, Inc. (the “Clinic”) to conduct clinical trials related to certain of our product candidates. The Clinic is a related party as it is owned by an officer of the company and NantWorks manages the administrative operations of the Clinic. Prior to June 30, 2019, one of our officers was an investigator or sub-investigator for all of our trials conducted at the Clinic. In July 2019, we entered into a new agreement with the Clinic (the “Clinic Agreement”), which became effective on July 1, 2019. The Clinic Agreement, as amended on March 31, 2020, covers clinical trial and research-related activities on a non-exclusive basis relating to our existing clinical trials, commenced prior to July 1, 2019, and prospective clinical trials and research projects. The Clinic Agreement also specifies certain services and related costs that are excluded from the Clinic Agreement. Prior to commencing any work under the Clinic Agreement, the parties have agreed to execute written work orders setting forth the terms and conditions related to specific services to be performed, including financial terms. For clinical trials that commenced prior to July 1, 2019, fees incurred for services performed after July 1, 2019 are covered under the Clinic Agreement and applied towards the below-mentioned prepayments. The Clinic Agreement allows for automatic renewal and additional extensions beyond the initial one-year term. In consideration of the services to be performed under the Clinic Agreement, as amended on March 31, 2020, we agreed to make payments of up to $7.5 million to the Clinic, of which $3.75 million and $1.88 million were paid in July 2019 and October 2019, respectively. As amended, a conditional payment of $1.88 million shall be due and payable at such time, if any, that the payments made in July 2019 and October 2019 have been earned by the Clinic through the performance of services. On a quarterly basis, our prepayment is increased by a nominal interest credit computed in accordance with terms specified in the Clinic Agreement. To the extent any portion of the prepayments remain unearned by the Clinic on the third anniversary of the Clinic Agreement, we may elect at our sole discretion either to (i) not extend the term of the Clinic Agreement and have the Clinic reimburse us for the total amount of any remaining unused portion of the prepayments, or (ii) extend the term of the Clinic Agreement for up to three additional one year periods, at which time the Clinic will reimburse us for the total amount of any remaining unused portion of the prepayments plus interest if reimbursement is not made within 60 days of expiration. The Clinic may terminate this agreement upon each anniversary date upon 60 days prior written notice and reimbursement in full to us of any outstanding unearned balance of the prepayments, provided that any such termination by the Clinic will not apply with respect to any work orders still in effect at the time of such termination. We executed a clinical trial work order under the Clinic Agreement for an open-label, Phase I study of PD‑L1.t‑haNK for infusion in subjects with locally advanced or metastatic solid cancers. In July 2020, but effective on June 22, 2020, we and NantCell executed a clinical trial work order under our existing master agreement with the Clinic for an open-label, randomized, comparative Phase II study of NantCell’s proprietary IL‑15 superagonist (“N‑803”) and aldoxorubicin hydrochloride (“Aldoxorubicin”) and our PD‑L1.t‑haNK with standard-of-care chemotherapy versus standard-of-care chemotherapy for first and second-line treatment of locally or advanced metastatic pancreatic cancer. In April 2021, ImmunityBio executed two work orders under an existing master agreement with the Clinic. Under these work orders, the parties agreed that the Clinic would serve as a site for the following multi-site clinical trials:
•
A Phase I study of the safety, reactogenicity, and immunogenicity of subcutaneously- and orally-administered supplemental spike & nucleocapsid-targeted COVID ‑ 19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use; and
•
A Phase I study of the safety, reactogenicity, and immunogenicity of a supplemental spike & nucleocapsid-targeted COVID ‑ 19 vaccine to enhance T cell-based immunogenicity in participants who have already received a vaccine authorized for emergency use. Based on a review of our updated clinical trial programs post-Merger, we updated our estimates of the investigator fees for the clinical trials currently underway or planned at the Clinic. As certain programs costs are excluded from and certain services are subject to credit adjustments under the Clinic Agreement, we determined the expected future fees for services to be performed are less than the carrying value of the prepaid asset on the condensed consolidated balance sheets. As a result, we partially wrote down the value of our prepayments under the Clinic Agreement and recorded approximately $1.9 million in research and development expense , on the condensed consolidated statements of operations for the three months ended June 30, 2021. In addition , we reclassified $0.9 million of prepaid assets from prepaid expenses and other current assets to other assets, on the condensed consolidated balance sheets as of June 30, 2021 based on the additional time expected for them to be realized than initially estimated . For the three months ended June 30, 2021 and 2020, we incurred $0.5 million and $0.1 million in research and development expense research and development expense NantBio, Inc. In March 2016, NantBio, Inc. (“NantBio”) and the NCI entered into a cooperative research and development agreement. The initial five-year agreement covered NantBio and its affiliates, including us. Under the agreement, the parties collaborated on the preclinical and clinical development of proprietary recombinant natural killer cells and monoclonal antibodies in monotherapy and combination immunotherapies. In each of the contractual years under the agreement we paid $0.6 million to the NCI as a payment for services under the agreement. We recognize expense related to this agreement ratably over a 12-month period for each funding year. We accrued $0.2 million in research and development expense prepaid expenses and other current assets In August 2018, we entered into a supply agreement with NantCancerStemCell, LLC (“NCSC”), a 60% owned subsidiary of NantBio (with the other 40% owned by Sorrento). Under this agreement, we agreed to supply VivaBioCell’s proprietary GMP-in-a-Box bioreactors and related consumables, made according to specifications mutually agreed to with both companies. The agreement has an initial term of five years and renews automatically for successive one-year terms unless terminated by either party in the event of material default upon prior written notice of such default and the failure of the defaulting party to remedy the default within 30 days of the delivery of such notice, or upon 90 days’ prior written notice by NCSC. We recognized revenue of $0.3 million for the six months ended June 30, 2021. We recorded $0.1 million and $0.3 million of deferred revenue for bioreactors that were delivered but not installed as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021 and December 31, 2020, we recorded $0.9 million in due to related parties In 2018, we entered into a shared service agreement, pursuant to which, we are charged for services at cost, without mark-up or profit for NantBio, but including reasonable allocations of employee benefits that relate to the employees providing the services. In April 2019, we agreed with NantBio to transfer certain NantBio employees and associated research and development projects, comprising the majority of NantBio’s business, to the company. After the transfer, NantBio continued to make payments on our behalf for certain employee benefits and vendor costs related to the research and development projects that were transferred to the company. In addition, we settled certain employee bonuses and benefits that were accrued by NantBio for 2018. As of June 30, 2021 and December 31, 2020, we recorded a net receivable from NantBio of $1.3 million, which included $1.0 million for employee bonuses and $0.3 million for vendor costs we paid on behalf of NantBio. NantOmics In 2019, we made a strategic decision and transferred certain employees from NantOmics, LLC (“NantOmics”), a related party that is controlled by our Executive Chairman, to the company. After the transfer, we settled certain employee bonuses and benefits that were accrued by NantOmics for the year ended December 31, 2020 and recorded a $0.6 million receivable from NantOmics as of June 30, 2021 and December 31, 2020. 605 Doug St, LLC In September 2016, we entered into a lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman, for approximately 24,250 square feet in El Segundo, California, which has been converted to a research and development laboratory and a cGMP manufacturing facility. The lease runs from July 2016 through July 2023. We have the option to extend the lease for an additional three-year research and development expense prepaid expenses and other current assets other assets Duley Road, LLC In February 2017, Altor BioScience Corporation (succeeded by our wholly-owned subsidiary Altor BioScience, LLC), through its wholly-owned subsidiary, entered into a lease agreement with Duley Road, LLC (“Duley Road”), a related party that is indirectly controlled by our Executive Chairman, for approximately 12,000 square feet of office and cGMP manufacturing facility space in El Segundo, California. The lease term is from February 2017 through October 2024. We have the option to extend the initial term for two consecutive five-year research and development expense Effective in January 2019, we entered into two lease agreements with Duley Road for a second building located in El Segundo, California. The first lease is for the first floor of the building with approximately 5,650 square feet. The lease has a seven-year term commencing in September 2019. The second lease is for the second floor of the building with approximately 6,488 square feet. The lease has a seven-year term commencing in July 2019. Both floors of the building are used for research and development and office space. We have options to extend the initial terms of both leases for two consecutive five-year As of June 30, 2021 and December 31, 2020, we recorded $0.9 million and $0.7 million of leasehold improvement payables, respectively, and $0.4 million and $1.1 million of lease-related payables to Duley Road, which were included in due to related parties research and development expense other assets 605 Nash, LLC In February 2021, but effective on January 1, 2021, we entered into a lease agreement with 605 Nash, LLC, a related party, whereby we leased approximately 6,883 square feet (the “Initial Premises”) in a two story mixed use building containing approximately 64,643 rentable square feet on 605-607 Nash Street in El Segundo, California. This facility is used primarily for pharmaceutical development and manufacturing purposes. The lease term commenced in January 2021 and expires in December 2027, and includes an option to extend the lease for an three-year During the three months ended June 30, 2021, we completed the build out of certain facility space in connection with this lease and transferred costs totaling $8.2 million from construction in progress to leasehold improvements. For the three and six months ended June 30, 2021, we recorded rent expense of $0.1 million, which is reflected in research and development expense, on the condensed consolidated statements of operations. In May 2021, but effective on April 1, 2021, we entered into an amendment to our Initial Premises lease with 605 Nash, LLC. The amendment expanded the leased square feet by approximately 57,760 rentable square feet (the “Expansion Premises”). The lease term of the Expansion Premises commenced in April 2021 and expires in March 2028, whereby the company has the option three years seven month $0.5 other assets Related-Party Notes Payable As of June 30, 2021 and December 31, 2020, related-party notes payable consist of the following (in thousands):
Total Notes and Interest Payable
Note
Outstanding
Interest
June 30, 2021
December 31, 2020
Related-Party Notes Payable
Year
Advances
Rate
(Unaudited)
Nant Capital (1)
2015
$
55,226
5.0
%
$
59,908
(2)
$
58,482
(2)
Nant Capital (1)
2020
50,000
6.0
%
52,252
(3)
50,764
(3)
Nant Capital (4)
2021
40,000
6.0
%
40,000
(4)
—
NantMobile (1)
2019
55,000
3.0
%
57,502
(5)
56,660
(5)
NantWorks (1)
2017
43,418
5.0
%
52,791
(6)
51,546
(6)
NCSC (1)
2018
33,000
5.0
%
37,799
(7)
36,901
(7)
Total related-party notes payable
$
276,644
$
300,252
$
254,353
(1)
All outstanding advances and accrued and unpaid interest is due and payable on September 30, 2025. Interest on related-party notes payable is compounded annually. We may prepay the outstanding principal at any time without premium, penalty or the prior consent of the issuer. All outstanding amounts under the notes become due and payable upon certain bankruptcy and insolvency-related events. There are no equity or equity-linked convertible rights related to these promissory notes.
(2)
Accrued and unpaid interest on this note totaled $4.7 million and $3.3 million as of June 30, 2021 and December 31, 2020, respectively.
(3)
Accrued and unpaid interest on this note totaled $2.3 million and $0.8 million as of June 30, 2021 and December 31, 2020, respectively.
(4)
The outstanding principal is due and payable on September 30, 2025. Interest on this related-party note is compounded annually and payable quarterly commencing on June 30, 2021. We paid $0.8 million in interest on this loan during the three months ended June 30, 2021. All outstanding amounts under the note become due and payable upon certain bankruptcy and insolvency-related events. There are no equity or equity-linked convertible rights related to this promissory note.
(5)
Accrued and unpaid interest on this note totaled $2.5 million and $1.7 million as of June 30, 2021 and December 31, 2020, respectively.
(6)
Accrued and unpaid interest on this note totaled $9.4 million and $8.1 million as of June 30, 2021 and December 31, 2020, respectively.
(7)
Accrued and unpaid interest on this note totaled $4.8 million and $3.9 million as of June 30, 2021 and December 31, 2020, respectively. |
